All forex trades are based on probability. The single trades do not matter; instead what really matters is the overall weekly or even monthly results. Every forex trader loses trades and it doesn’t make you an awful trader. Loosing trades is simply the part of probability averages doing their magic.
Let’s consider an example where the trading system has win/loss ratio of 75% (which is, by the way, exaggeratingly sufficient), in the long run you are a winner. Here is a broader explanation:
1) Let’s call this first trader “Jason”. Jason risks $200 and then takes profit at $50. His forex trading risk/reward ratio is 4 to 1. This also means that in the long run, 80% of his trades need to be correct in order to just break even. That is a lot to ask, don’t you think?!
2) Our second trader is “Odysseus”, who risks $150 but wins it back at some point. His forex trading risk/reward ratio is 1 to 1. With a bit of calculations, you can see that in order to break even Odysseus needs to be correct 50% of the time. Ahhh… much lower responsibility now, right?!
3) Now, our next experimental trader is called “Theseus”. Let’s say that Theseus risks $350 but over time profits with $700. His forex trading risk/reward ratio is 1 to 2. To beak even in this case Theseus needs to be correct only 33 % of all trades. I guess, you see where I am heading to!
4) Lastly, “Hercules” - the trader with risk/reward ratio of 1 to 3, risks $200 and makes a wooping profit of $600. In this example, Hercules will only have to be right 25% of a time.
Now, here is an interesting question. Who, out of 4 Greek mythology heroes presented in the above trading example will achieve something in the long run? Less responsibility means less pressure! Theseus and Hercules are much more relaxed about getting high probability of winning trades and therefore, in the long run, these two are the ones that will make most money.
Every trader is different. There are plenty ways to trade and abundant trading plans to follow. Your responsibility is to build a trading plan and to follow it consistently.
Online forex trading has not been around too long to be considered a common activity. The strategies used in forex to deal with one situation or another can be called unusual, uncomfortable and unknown to many. This is not only because of the emotional issues related to forex trading, but also the ability to understand what forex market is all about.
Forex trading is different from other things we encounter on daily basis. In most cases we are comfortable only when we know exactly what to expect and what it takes to succeed. Therefore, in order to become successful trader, it is important to reach a comfortable zone in forex trading, to figure out strategies that work for you, understand whether losses are really trading mistakes or they are the necessary circumstances, even if it means the decrease in your funds in the short run. Forex trading is unusual and your adaptation is crucial for the survival.