You are capable of making complex decisions. You can identify patterns. You can enter excellent trades.
This is also bad. Between your ears is a narcotics factory that will put Heisenberg's mobile meth lab to shame.
You've entered a trade. This is it. The BIG one. A one-way ticket to infinite infinity pools.
Adrenaline dilates your pupils and switches off your digestive system. Suddenly you're not hungry anymore. Endorphins, stronger than morphine, are spewed out of the pituitary gland. Dopamine released from the middle of your brain means you can no longer hold in your excitement. This trade's a winner!Anandoline kicks in, you're hungry again. There's some the leftover beef bourguigion in the fridge. Who needs speed when you've got PEA? Shit, the trade's gone sour! Suddenly you're anxious. It must be the serotonin.
Being Human is something we can't get away from.
But we can learn to master our mind.
A recent study by DailyFX analyzed 43 million real trades to measure trader performance. They found that across 15 most traded currency pairs, the majority of trades were successful.
Yet traders are still losing.
Why? They lose more money on their losing trades than they make on their winning trades.
So if you're reading this and it applies to you, you're probably very good at identifying profitable trading opportunities. Over 50% of your trades may well be profitable. Because you're Human and you're awesome.
So how can we be more profitable?
If your trading strategy has a high strike rate, then a low risk-reward ratio will suit - but you have to let the trades play out. If you don't do this, it will ruin your trading edge. If you fall into this category, then a 1:1 or 1:2 trade will suit you fine. remember to give the trade enough room to breath. I've seen traders make amazing calls, yet they place a stop loss 10-20 pips away from their entry. This is simply not enough.
If you're not so confident with your trading strategy and you've not been consistently making winning calls, you first might want to learn from people that know more than you. Knowledge is power! The second thing you might want to do is have a slightly higher risk-reward ratio (1:2 or 1:3, even 1:4). If you fall into this category, try identifying excellent setups on the Daily or even Weekly charts. Trading on the hourly charts and expecting 1:4 trades to come in every time simply won't work.
Set your stop and take, and leave it alone.
Close your laptop and enjoy a caipirinha by the pool.
Happy trading everyone,