What Is A Good Or A Bad Trade In Forex?
A good trade is simply a position that was taken and managed according to your trading plan and is not measured by the income or loss.
It is possible to have winning trades that are bad as well as losing trades that are good.
A Good Losing Trade
Let's say that your system requires a long position in a support and a hammer or a doji candle. You watch market movements being eager to jump in, however, you expect that your system gives a signal before executing a trading order.
Finally, the system gives you the green light and you take a long on the EUR USD pair. The trade works for you for a while, but during the transaction, the currency pair finally hits your stop loss.
Do not worry my friend. You just had a good losing trade! It cost you a little money, but you can be proud, because you have been disciplined in following your trading rules.
A Poor Winning Trade
Now, suppose your trading plan states that you can not risk more than 5% on a single trade. You see a pattern on USD / CHF which appears to be an excellent opportunity. The trade is so bright that you can not resist, you end up taking a 20% risk to your account.
The trade is a winner and you're sitting on a wad of cash!
It is not necessary to celebrate this "victory", as you just had a bad winning trade. It may have led to huge profits, but you did not follow your rules. You were lucky! Keep in mind that in the world of forex, luck does not last very long in general.
What to do With Your Good Trades?
If you follow your trading rules with discipline, give yourself a pat on the back! Remember that at the end of the day, traders strive to be consistent in the implementation and the process of trading, your decision to follow the rules is a step in the right direction.
As I mentioned earlier, even if you were not able to make profits with your trade, you just need to learn from this experience by analyzing the course of your trade. You may be able to decide if you need to make adjustments next time. This learning experience can even help you to improve your trading performance later!
What to do With Your Bad Trades?
If you do not follow your rules and your position is still open, close the position while there is still time!
When you're in the middle of a bad trade, do not lose hope just yet. Remember that it is still possible to remedy this situation. For example, if you did not follow your risk management rule which requires you to stop back in slowly, you can always correct your trade by adding a trailing stop according to your predetermined rules.
However, if you have a bad trade, do not feel bad now. We are human beings and contrary to forex robot (Expert Advisor), we make mistakes. However, remember not to make the same trading decisions in the future. All your forex trades must be recorded and filed in a trading journal to keep a track of your progress.
Finally, the key to being a successful forex trader is to focus on the process and not the profits. Each trading decision must be consistent and established according to a trading plan that leaves no room for improvisation.
Learn more about forex trading.