It helps to understand how to read the price action and the footprint of money on the charts so that you can identify when a market is really trending powerfully and might be ripe for pyramiding. One of the biggest culprits of early trade exits is traders risking too much money per trade. If you havent already done so, check out my article on recency bias in trading to learn more. You might think by exiting at breakeven youre avoiding a loss, but you are also potentially avoiding a win! You have to ignore the temptation to exit a trade for a small profit just because you see a 1 hour pin bar against your position. The bottom line, is that to trade successfully you need to look inward and really become a student of not just the markets, but of yourself, and then you need to master both.
Why You Exit Trades Too Early How To Stop
Having some trading affirmations that you read regularly will also help to remind you of the core principles you need to follow as well as work to train your brain in proper trading psychology and procedures. Dont be swayed by the intraday price movement and tempted to close the trade out early just because your emotions are getting the better of you. You cant be afraid and think yourself out of big, profitable moves in the market. The Four Main Contributing Factors to Early Trade Exits. Belief Systems and Past Experiences in Life Many traders come into the market almost expecting it to not work out for them. You have no idea where the market will go once your trade is live, you only know that you had a trade idea and that idea represents your edge. You need 2R winners, 3R winners and a few home runs in the mix to really have a chance at long-term trading success. Im willing to bet its been more than a few. The foundation of my trading style is built upon the premise that if a high probability trade is entered, then 90 of the work is done, and I must leave it to the universe to decide the fate of that.
What we are concerned with here is how recent losses in trading or even other negative recent experiences can work to reinforce overly-conservative or defensive feelings in the market, in other words, they can make you fearful. Avoiding common early trade exit scenarios Next, I want to drill-down and get a bit more specific by discussing some common problems that affect traders in regards to exiting trades too soon and provide some insight that might help. If you are a very skeptical or negative type of person or someone who doesnt believe that people should make money through speculation (for whatever reason) then you will have a hard time letting your trades roll into big winners. You cannot let negative thoughts infect your mindset or they will lead to negative emotions and poor trading habits that result in more losing! This doesnt even have to be a conscious thing, it can be something subconscious that is affecting your decisions in the market. The most common types of premature trade exits that lead to regret are the following: Exiting a trade at break even constantly due to fear of loss, only to watch a large portion of these trades become winners. Trading Psychology (mindset not having the right mindset about trading and not understanding key realities of how markets move, is something that will definitely contribute to exiting trades too early.
One good winner like this year can literally be the difference between a losing year or a very lucrative year for many traders. You cannot predict which trades will be big winners, but by letting the market take you out, you will position yourself to take advantage of big moves when they occur. You need to come into trading as an empty slate and not be skeptical of those who are teaching you or who seem to know more than live forex trading room reviews you. But, they can and do happen and you need to really take advantage of them to build your account and put yourself ahead. The best way to avoid exiting trades too early is to have a trading plan that lays out your trade exit strategy and then sticking to it, no matter what. It may be due to your trading process, trading psychology (mindset personal belief systems, recency bias or some combination of those.
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Exiting a trade for a small profit but well before your planned profit target because you fear the market will reverse, only to watch the trade go on to hit your initial target and more. Many traders struggle with these moves because they seem almost unreal or live forex trading room reviews too good to be true. Like it or not, what you believe about many different topics can and will have an influence on how you think about money, trading and wealth, and of course that can negatively influence your trade exits. You get up a decent amount of money and you think I really should take this profit so this trade is a winner. So, it all starts with having and maintaining the proper trading mindset. You need to reduce your dollar risk per trade until your emotions are in-check and you are able to fall asleep without worrying about your trades. By letting the market take you out of your trades you are trading in-line with the market and not fighting it or trying to control. Sure, it feels better than taking a bigger or standard 1R loss, but when you manually close out a trade for a small loss, before it has reached your stop loss, what you are also doing is voluntarily eliminating the opportunity. Now, this isnt a perfect science, so keep that in mind, but I am trying to help you by sharing what I have learned over 18 years in the markets Scenario: Exiting a trade a break even constantly due to fear of loss. Youve got to accept that slow and steady wins the race and that a low frequency trading approach is how you making money fast. Now, that isnt to say there isnt a time and place for a 1R winner, because certainly it may make sense sometimes.
If you are over-involved with your trades, sitting there all day and night staring at the charts, youre probably going to end up screwing up the exits. They think self-deprecating things like Well, Ive always been poor so I will probably keep being poor, especially after they have a losing trade or two. Dont panic and dont take small winners all the time because live forex trading room reviews small winners are easily erased by normal sized 1R losing trades. Yes, there is a proper and improper way to lose trades, read the previously linked text if you dont yet know the difference. Well, behavior is the result of mindset. Youre going to have a losing trades, that is a given.
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By taking advantage of those rare times when one of your favorite markets is really trending strongly. Its important to remember that trades go further than you think, generally speaking. Once the trade is live, you say OK, I am fine if I lose because I am comfortable potentially losing the amount Ive risked and I know for me to possibly win I have to leave. But in the grand scheme of things, you wont survive on just little winners, even 1R winners arent enough to really make money over the long-run. I know for me, this was one of the most difficult trading mistakes to overcome. Solution: I get it,. I can help you with the former but the latter is truly in your hands (I cant force you to be disciplined). Then why are you looking at the 1 hour to exit?! Scenario: Inability to pyramid into positions (add to winning positions fearing the market will reverse. Your mindset influences your habits and your habits essentially are what make or break you in the market.
Find a distraction, get a hobby, etc. You have to have patience if you want to hit big winning trades, you need to give every trade room and time to grow. Likewise, if you dont master your trading strategy and truly get in-tune with the markets you trade, you will also not make money trading. What time frame did you take the trade on? Solution: How do you create real wealth from trading? You imagine every move against you is the end and every move in your favor is money you need to secure; hence resulting in exiting too early!