How Can You Lose Money Trading Forex Winning 80-90% of Your Trades?
As a new trader you may be thinking winning all your trades is important, it can be difficult to understand why winning 80-90% of your trades isn’t important especially with a lot of companies claiming these success rates. The sooner you come to realise that losing trades is part of the game the better! In fact, losing 50% of your trades is normal and we will go on to talk about this later on.
Winning and Being Right!
Winning and being right are things we associate with people being profitable and successful. If i told you i’m wrong 50/60% of the time you’d probably have the opinion that i’m a bad trader but if i told you i’m almost always right and only lose 10% of my trades you’d think i’m a fantastic trader. The irony in all of this is that professional traders have worked out winning, and more specifically their overall win percentage, has almost nothing to do with how profitable or unprofitable they are in the market. Sounds confusing doesn’t it!!
Example’s
One of the most important rules of trading is RISK MANAGEMENT , what does this mean? It means ensuring your winners are bigger than you losers. For example lets take someone claiming a win percent of 90 and a starting bank of £10000 risking 3% (£300) per trade:
| Trade 1 | Win | £50 | £10050 |
| Trade 2 | Win | £25 | £10075 |
| Trade 3 | Win | £40 | £10115 |
| Trade 4 | Win | £15 | £10130 |
| Trade 5 | Win | £50 | £10180 |
| Trade 6 | Win | £30 | £10210 |
| Trade 7 | Win | £10 | £10220 |
| Trade 8 | Win | £15 | £10225 |
| Trade 9 | Win | £25 | £10250 |
| Trade 10 | Loss | -£300 | £9950 |
Can you see now how having a win rate without a good risk:reward would end in a loss? As you can see, the winning trades are less than the amount you are risking (bad risk:reward).
Lets take a look at someone with a 50% win rate and a starting bank of £10000 risking 3% (£300) per trade:
| Trade 1 | Win | £350 | £10350 |
| Trade 2 | Win | £400 | £10750 |
| Trade 3 | Loss | -£300 | £10450 |
| Trade 4 | Win | £500 | £10950 |
| Trade 5 | Loss | -£300 | £10650 |
| Trade 6 | Loss | -£300 | £10350 |
| Trade 7 | Win | £450 | £10900 |
| Trade 8 | Win | £325 | £11225 |
| Trade 9 | Loss | -£300 | £10925 |
| Trade 10 | Loss | -£300 | £10625 |
From the above chart you can see by ensuring our winners are bigger than the amount we are risking per trade the outcome is a profit. You can learn more about risk:reward here.
Keep Risk Constant
One of the biggest mistakes traders make early-on in their careers is to vary their risk amount on each trade depending on the previous trade’s outcome. The reason this is a mistake, is because the next trade’s outcome is completely independent of the previous trade, that is if you are sticking to your trading plan and trading off logic and not emotion.
Be the master of your trading strategy, this will give you the best chance of being profitable. When I look at a chart, I am looking for very specific price action setups formed at certain levels in the market. There’s no “guessing” or doubt in my trading anymore…because I have mastered price action trading. When we trade in this manner, combined with proper money management, your winning percentage really doesn’t matter. The key here is being methodical and picky in how you enter the market; don’t enter unless your trading strategy is actually telling you to. When you combine this trading strategy with the money management principles discussed in today’s article, it really will only be a matter of time before you make money in the markets.
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