(Last Updated On: January 18, 2018)

This is a guest post by Daniel Huang from DanielHuangTrades.com. This article originally appeared here and is shared here with permission from the author.

Note: The content structure and images from the original article might have been reformatted in this blog to provide ease of reading to our readers.

Are you still trading with losses?

You have spent money on learning the best strategies taught by gurus or you spent hours of researching on trading tips on the internet, but whenever you trade, you still make losses.

How can that be possible?

Perhaps you have not been following the correct trading method, or the method does not suit you.

Or it could be just YOU.

I had the same problem and was losing a lot of money while trying to trade profitably.

Thankfully, I corrected a few of my mistakes and started to profit.

Hence, I decided to share these tips to help you turn your losses into profits.


1. Stop Overtrading


One of the main causes of breaking your account is overtrading. Many people I have talked to have this problem.

The main reason for overtrading is due to:

  • either trying to chase back the profit they have lost or
  • they wanted to make money as soon as possible.
  • they do not have the skills to trade in smaller timeframes, yet they want to do it.

If you identify you are having these symptoms, reduce your trade, look for more quality trades, move to larger timeframes or just stop trading for the day.


2. Have a good strategy that suits you


In trading, you are trading either with or against the best players in the world, including the banks and government with huge or unlimited amount of money.

It is best to follow what the best players are doing.

However, you will not know fully what the big players are doing as they are trained to mask their tracks.

In order to profit, you need to have a good strategy that allows you have an edge over other 90% of retail traders.

What strategy you ask?

There are hundreds of strategies that are available, some use news trading, some are pure technical trading, some use macro economic trading.

Here are some tips that I learnt on getting a good strategy:

1. Minimise the use of Technical indicators/Oscillators

Too many indicators mess up your charts and prevent you from getting a clear view of price movements. If you come across trading courses that teach you to use many technical indicators, stay away.

Check out my article on Why you should not use MACD to trade Forex.

2. Learn about Macroeconomics

Learn about how certain actions in the world cause price movements. Certain changes in country’s policy can affect how the game is being played.

3. Read critically on news articles

Learn to read critically on news articles. Some articles in newspapers or financial websites are written to deliberately trick you into buying or selling.

“If you don’t read the newspaper, you’re uninformed. If you read the newspaper, you’re misinformed.” – Mark Twain

One of the best strategies that I use to profit is written in my book “The Secret Forex Strategy”, where readers can implement it in their trading and profit big.


3. Have good money management


Do you calculate the number of lots to enter whenever you enter a trade?

If you have not done so, you have already made a big mistake in your trading journey.

I had the same problem in the past, I can make huge amount of money from trading, but these profits were given back to the market almost immediately.

Once I learnt about money management, my profits began to soar quickly!

In money management, one should strive to minimise the risk to your account value.

A good amount to risk is about 2% of your trading account for Forex for every trade.

It might not seem a lot, but it can accumulate with the number of losses you take.

So the lesser risk you take, the better. After that, you will need to balance it with a good risk reward ratio.

In trading, the bigger account you have, the more profits you can make when you have good money management.

Money management involves calculation.

However, you can use the free position calculator to calculate the number of lots to enter in your Forex trade.


4. Have a good risk-reward ratio


Within good money management is having a good risk-reward ratio.

What is a risk-reward ratio?

This is the amount of risk you take in order to get an expected amount of reward.

A 1:1 risk reward ratio means that you if risk, for example, losing $100, your expected reward you get is $100.

A 1:2 risk reward is that you risk $100, then your expected reward is $200.

The higher the risk-reward, the higher chance of your account surviving the next few trades.

So if you have a 1:2 risk-reward ratio, you can afford to lose twice for every profit you make.

Risk-reward ratio is a variable component for different traders with different styles of trading.

A general guide is a 1:2 ratio.

Trend traders usually have 1:3 ratio or bigger as trends can ride for a very long time.

Day traders have smaller risk-reward ratio as they trade more times.

However, the smaller the risk-reward ratio, your chance of losing a trade must be smaller in order to continue making a profit.


5. Control your emotions and be patient


Trading can be a very emotional thing for many of us as it involves money.

We need money to pay our bills and losing money can be a very painful experience for us.

Have you experienced seeing a losing trade and then you decided to cut loss, the next thing you see, the trade that you cut with losses suddenly went into huge profit and you kicked yourself for exiting that trade?

Or you took a small profit when you see your trade move to the right direction, then you see it move even further up and you enter the trade again. The next thing the trade moves in the opposite direction and you lost all your profit you just made.

Many traders made these mistakes because they are driven by fear and greed.

It’s how you manage these emotions which will give you advantage over the other traders.

One way is to have good stop losses and good profit target.

This is interlinked with a good strategy as you have to get a sweet spot for profit target and stop losses.

Too far a profit target and your prices won’t reach and hit your stop loss.

Too far a stop loss and you lose a good risk-reward ratio.

Get the sweet spot.

Another thing you need to learn is, you have to be patient.

In trading, it takes time for prices to move and it takes greater patience to wait for a signal to enter your trade.

If you think you can’t handle the emotions yet, start small.

Trade with a smaller account first to try out and then scale up with your profits.


6. Have a trading discipline


Finally, trading profitably is something not a lazy person will achieve.

If you think that you can make profits instantly by learning from a guru, then you are wrong.

Trading involves a lot of training of discipline and good habits.

Many people failed because they fail to follow the rules properly.

Most successful traders in the world have practiced a lot in their trades to become one of the best.

The skills and practice they have learnt gave them the experience to trade profitably anywhere, anytime.

To be like them you have to sacrifice part of your time and leisure.

Are you willing to wake up 6.30am in the morning to look at the market?

Are you willing to spend time to research good strategies for your style?

Are willing to spend time practicing on your trades?

Are you willing to spend some money to learn the best way to trade?

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