The Beauty of Losing Trades

I have a trade which sets up most days and regardless of rain, wind, shine, NFP data or anything else, if it’s there, I take it.

Of course, it doesn’t always work out, in fact it frequently loses and on some days it even hits my stop loss. In fact, in the last two weeks it hasn’t done too well at all (you may suspect the August doldrums but it’s not – it made 7.8% last August), but with each passing losing day I get a little bit more excited.

You see, looking through my trade journal, I can see that its profit to loss ratio is 1.71 to 1, that is, it for every trade it loses, it wins 1.71 times. That wouldn’t be any good if the losing trades outstripped the winners, but the average winner is 20.5 pips, the average loser 21.3, so the 1.71 ratio is OK. In fact it’s good enough to yield an average of 3.56% per month – that may not excite you, but for 5 minutes work each day, it pays the bills.

So why do I get excited when I have a string of losers? Because I know I’m due a string of winners any time now,  so as I count the losers, I’m getting closer to the money.

You may not like keeping a record of your trades, but it’s those kind of stats that you need when you’re going through a draw-down because without it you’d be tearing your hair out!

Happy Trading
Adam – TheDayTrader 

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