Nobody likes to lose. However, in any game there is always a winner and a loser. Even in Forex Trading, when you win, you are ultimately taking money from someone that lost it. And if you have any good sense, you want to be on the winning side of that transaction.

Losing, however, is inevitable. During your journey through Forex you will lose countless times. This is a fact that you need to accept early on. Losses are just a part of the equation.

As mentioned before, no one wants to be a loser. Traders tend to take losses personally. They get upset or frustrated. Such adverse emotions can do even more damage in your trading plan. You are more susceptible to making a revenge trade.

I say embrace losing. If you know it is going to happen, there is no good sense in getting all upset over it. If anything, think of losing as learning a lesson. You put money into the market and are making an educated prediction on what the market will do. And when you were wrong, you paid for that lesson. Nevertheless, if you were wise, you would have learned from your loss.

Losing is educational. With every loss you are granted the opportunity to learn from it and develop yourself into a better trader. Now, that’s the important part. You have to learn from it.

It is commonly said that the definition of insanity is doing the same thing over and over again and expecting different results. If you have a trading system that has been shown to repeatedly having losses after losses after losses, perhaps it is time to reevaluate your plan.

If you are losing money there is always a reason as to why. It is up to you to discover that reason. Perhaps you are risking too much into the market. Or maybe you are getting in to late. Perhaps your risk/reward doesn’t justify the win rate of your trading system to make it profitable. Whatever the leak is, fix it.

By no means am I proposing that you should lose to learn. Nor am I saying that by learning from your losses you will eventually stop losing. What I am saying is that be educating yourself on your losses, you can put yourself into a position to keep them at a minimum.

Every trading system has losses, even the very best available. The FX Trading Network has recommended signal providers and trading systems that have continued to provide profits over the years. However, they also are not without their losses.

Embrace your inevitable losses and develop yourself into the profitable trader you ultimately will become.

I recently saw a poll on renowned trader Edward Revy’s website.  He asked the question, “How long do you plan to trade Forex Demo Account before investing real money?”

The results were as followed:

33% said they would demo trade 1-2 months.

35% said they would demo trade 3-6 months.

17% said they would demo trade about a year.

6% said they would demo trade for 2 years or more.

8% said they had no need for demo.

These were some interesting statistics, largely because the majority of traders fail in their venture. A CEO of a reputable broker was once quoted in saying that he would be surprised if even 15% of his clients were profitable. So what are the other 85% doing that’s causing them to lose money. Well if this poll has anything to do with it, people simply are not practicing enough.

Forex is a serious business. It’s neither a hobby nor a game. It’s a multitrillion-dollar a day industry that can reward you with riches or take every single penny from you. It is sheer folly to think that 8% of traders think there is no need for demo. Knowing the mechanics of placing a trade, and actually pulling a profit from a trade are two different things all together.

If you wanted to be a doctor, you couldn’t just walk right into an operating room and get to work on some guy’s chest cavity. Oh no. Years of education are required even before you are even given the title of “Doctor”. And even after that the education continues throughout the entire career.

Now I’m not saying you need to set aside years of demo trading. But you most certainly need to demo trade before ever risking your money in the market. Demo trading is a remarkable concept. It allows you to trade with actual figures to see where you would stand in the marketplace. Why would you not want to take advantage of that opportunity? The greatest thing about it is that demo trading is free.

Do not fool yourself. Granted, once you have the system in place, demo trading will be greatly reduced. However, you still need to be fully aware of the market. You need to ensure you are placing your trades properly, and more importantly you need to be absolutely certain that you have the discipline to follow all the rules.

A trader’s education never ceases. Once you know the mechanics of trading, the rest is up to the trader. The main priority in Forex should not be to make huge profits. Rather the focus should be on plugging every leak in the strategy that causes the trader to lose money. Many times a trader might make the same mistake over and again and never realize it, thus the importance of maintaining a trade journal. Writing your thoughts out help a trader put things into perspective. It also gives a trader an opportunity to re-think through their decisions. If you find that what you have been working on has stopped working, you have an opportunity to look back at the journal to see if it was the market that changed or the trader.

Allow me to give you an example of  journal entries.

August 13, 2007

SELL GBP/USD @2.2000

Thank God the weekend if over. The kids had me running around from place to place and my two days off didn’t feel much like days off at all. Steve called and said that he is closing on his house. Great news. Might have a new spot for the weekly poker game with the boys.

Anywho…

I had a look at the charts today and what did I see? A nice huge bearish pattern was looking dead at me. Price broke the bottom of the Bollinger Band and the very next candle kept on rolling down. After price bumped off the 21 MA like it did, I had a suspicion it was going to keep going down. I put in my market order just as price was crossing 2.2000. Time to make some sweet profits.

August 14, 2007

Dammit! Price bounced back up. I sat there at the computer for hours waiting for it to come back down. But it never did. I should have pulled profit when I had the chance. I could be celebrating with a 100-pip victory now. I knew I should have placed a stop loss and profit target. Sometimes I get overconfident in a trade. I see a pattern develop and just think it will keep going my way.

I read on the forum today that you should always move your stop to break even when you have a sufficient chance. Makes enough sense. The trade is still a bit in the positive so I suppose I have nothing to lose by moving the stop to even. I’m going to go ahead and put in a 20 pip trailing stop loss as well. That way if it does head back down I’ll catch a piece of something in the end.

August 15, 2007

Well, I got stopped out. Managed to yank 28 pips out of the market as price moved back to my trailed stop. Looking back, I’m going to make sure I always have a stoploss. That kinda freaked me out yesterday watching price move against my profits like it did. Same with take profit. Had I just set a respectable profit target, I would not have to concern myself with the stresses I put myself through.

Can you see the value in keeping a trading journal? Our fictional trader here was able to assess his emotions better by realizing what had went wrong. By writing it out he was able to focus. Do you see in the beginning of the week how his mind was on everything else other than trading? It’s good write outside influences as well as that can play a part of one’s trading psychology. Perhaps that losing streak is indirectly being caused by problems at work. Or you tend to have better successes after you had some good downtime.

The FX Trading Network has provided an area in the Forum for traders to keep an active journal. Keeping a public journal can also give traders an opportunity to hear from experienced traders. Odds are what you are going through, someone else has been and they know how to remedy it.