Top Trading Lessons: The Critical Task of Learning to Lose Gracefully

The Critical Task of Learning to Lose Gracefully

The major lesson I learned this year was fine-tuning my risk-reward strategy. In the first half of 2019, I was allowing losses to exceed acceptable parameters, reducing the effectiveness of wins. I adopted a stricter policy with better-placed stops that defined the most I was willing to lose per trade. Thus, in the second half of this past year, my losing trades were on average 41.5% smaller as a percentage of equity than those during the front-end of 2019.

In order to implement this strategy, I undertook an absolute worst-case approach for exit points using technical analysis. That is when I place stops at prices where I believe there is the most longer-term risk of a major trend reversal. This did require more time and effort on my part when I planned out trades, but it ultimately saved me from larger-than-expected losses. Better to learn this now than risk eating through large winners in the new year.

--- Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

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