When I first started out trading, I was content to take 10 to 20 pips a trade. I could get in a few trades a day and do well, often making 2 to 4 percent on my account daily (woohoo!). I was doing fairly well. Then I noticed a slight ‘issue’. The issue was that I was leaving a lot of pips on the table. Sometimes I would get out with 10 pips of profit, but the currency would run for another 50 or even 100 pips. I started noticing other traders who were able to capture those profits while I was stuck on the sidelines. Well I tell you I was not about to stand for that. One of the things that I had heard about losing traders is that they will ride a losing trade until it kills them, but they will get out of a good trade too quickly with only a small amount of profit. Of course I wanted to be a winning trader and so I started to ride my winners and instead of taking profit at 10 to 20 pips I was now going to wait to see them run for the 50 to 100 pips, or even better, lock in on a trending market and have positions open (and in the profits) for weeks at a time. What a genius idea!
Well unfortunately my genius idea wasn’t genius at all; it was, however, a great strategy for losing money. You see instead of taking profits when I should have, I held onto trades that would have paid out, but then after paying, reversed the other direction. This meant that I not only did I not make my profit of 10 to 20 pips, but I would often take a loss of over 50 pips.
Now I’m not saying that you should never ride a winning trade, however since I was a newbie trader, I didn’t have the knowledge or experience to know when a trade would likely turn into a runner and there were definitely trades that in hindsight I should have known were going to reverse and go against me. If I would have just stuck to my plan and not compared myself to those around me I would have not lost on so many trades. I had no business comparing myself with other traders as some of them have been trading for years and not only have more experience, but also have a different style as well as a bankroll that allows them to trade with stops that are in the hundreds of pips.
Now I have to continually remind myself that I must have a good reason to stay in a trade or make sure that I can lock in profits so that my account is not at risk. That way I can keep money in my pocket instead of giving it away, and live to trade another day.
~Paul
