Life Cycle of a Winning Trade

Focus: FOREX

James Stanley Image James Stanley Trading Instructor, DailyFX Education

James Stanley of DailyFX.com walks through a single setup on the EUR/USD, as it was managed while the trade was moving in the trader's favor. He illustrates scaling-in, scaling-out, and stop movement in an effort to properly manage risk in a heavy news environment.

Trading can be a difficult sport to master. Not only are markets unpredictable, but can also, at times, almost seems as if human nature were working directly against us.

The common advice to 'learn from our mistakes' can often help educate us to what NOT to do, but how are we ever going to learn what we want unless we have any solid examples of successfully managed positions?

In the DailyFX Traits of Successful Traders research series, The Number One Mistake that FX Traders make is taking too large of a loss when they are wrong compared to the small wins they usually make when they are right. This disparity is so huge-that even if traders were able to win in 70% of instances in some pairings, they would still be losing money, on average.

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Is this because these traders line into positions willing to lose $2 for every $1 that they might gain?