To be able to improve the trading skills, you certainly need to do an evaluation, especially in bad trading positions. However, the question is, how to distinguish the good and bad of a trading position? Are every trading positions that make a profit is good, while the losers are bad? A trading transaction can be said to be good if it has been planned carefully. Besides, it has a clear strategy and objectives based on the trading plan. By doing that way, you might feel a good losing trade or even a bad winning trade.
Then, How can You Determine Your Trade is Good or Bad?
How to recognize a trade is a good trade even if the trade ends loss? You can imagine it as follows.
Suppose you have done a fundamental analysis and found that the value of the EUR has the potential to strengthen greatly against the USD. Next, you formulate the best entry and exit strategies and prices based on the results of your analysis. When the price moves to the entry point, you open a BUY transaction and wait for the price to rise to the target profit.
Unfortunately, market conditions suddenly changed. Prices that had slowly risen suddenly dropped dramatically and cause your position to suffer losses to the point of stop loss. Under these conditions, this trading position certainly is a losing position that makes you lose.
Don’t worry, you have just experienced a good losing position. Because the losses that you get are in a matter of maturity that you have previously planned. In other words, you have successfully applied the principles of good trading by following all the trading procedures and strategies that you have made before.
According to Guru Trade, the trading plan will help the trader to identify the goals, systematize the trader market research and trading activities, decide when to take a position and in what direction, and manage the trader emotions and trading risk
Conversely, imagine that you start trading without preparation. Then, you see an opportunity that arises in one currency pair. Your confidence in the profits that might arise then makes you invest up to 50% of the total capital you have in that position.
Furthermore, with a very small remaining margin, you expect your position to win and make a profit. After a while, your expectations come true, prices move according to estimates and you achieve an abundant profit.
Even though it does look good, this can be said to be a bad winning trading position. Therefore, the victory that you get is almost entirely luck and not from planning and implementing a measured trading strategy.
By doing this kind of trading, you have undermined your trading discipline while making it difficult for you to evaluate the trading strategy that is applied. In fact, luck is very unreliable, especially in forex trading which is full of unexpected changes.
By understanding the two examples above, you can easily recognize the characteristics of good and bad trading activities. Furthermore, by applying self-discipline to always make good trades, the process of learning your online forex trading will be better and more directed. Moreover, you will also more quickly find the best forex trading method that suits your personality and financial goals.
Writer: Fenda Agustina
Read more: Trading Plan, Should We Make It?