When you trade the financial markets, and especially the Forex market, you will experience some losses along the way. Losses are painful for every trader in the world. You can’t avoid them, but you can reduce the number of losing trades.
How can you reduce the losing trades?
We had an experience with the USD ($DXY) index last year. In the first half of the year from January until the late October days, we had a situation like the USD will fall and break the range to the downside as you can see in the marked area of the chart below.
At the time our Trading desk was also looking for USD fall and we have missed some great trading opportunities for entering long trades, however, when we identified medium uptrend continuation we have changed our strategy to buying USD. If you are searching for reversal in the strong trend, then you will experience increased number of loosing trades.
We see a similar situation with USD now and most of the traders are searching for a top instead of entering the trades in direction of prevailing trend, which is an uptrend, and you should be buying USD in the cases of a pullback like we had last week. Friday reversal could be a wake-up call for the traders. Although we could experience another dip for $DXY index in the 100-100.500 zone that doesn’t change the structure of the market and medium term uptrend.
One of the pairs that are strongly affected by USD strength is the GBP/USD. And look what happened on Friday, as shown in the chart below. Everybody are searching for a base in the GBP/USD, and just when it is near the break of moving averages to the upside it get sold off. That was the case in early December with 100 SMA (red line) and that was the case on Friday with 34 SMA (green line), and additionally a hold off from a falling trend line.
So in the case you did bought the GBP/USD you are now near a losing trade or you have already lost the money if you are stopped, or in the best case scenario you got the 1:1 RR (risk to reward) on the long trade if you bought it on Tuesday and you took the profit on Friday high.But look at the one who sold the GBP/USD at 1.2764 level, December 2016 high, they are deep in the money already and they can lock the profit and add new positions in the case of a new rally to 1.2500 or a break below 1.2200.
The conclusion is, when you trade within the direction of identified trend, you will have better RR and you will have less losing trades. Identifying the trend is easy when you learn to use the tools for that, but keep trading within the trend is the area of a trader discipline. It is always tempting and always will be to try to catch the trend reversal, but it could be bad for your capital
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