The Four? Types of Forex Trades

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We start blaming the market or the ‘big boys’ for taking our money when in reality either…

  1. We don’t have a plan to follow and therefore are just taking BAD trades based on emotion…
  2. We do have a plan and are not following it…
  3. We do have a plan but it needs improved upon…
  4. We do have a plan and we followed it but suffered a loss.

No. 1 and No. 2 are problems with US the trader and are ‘BAD’ trades. Either we are not disciplined enough to make a set of rules to trade by or we simply are not disciplined enough to follow it. Either way, the problem is with Discipline.

No. 3 and 4 may or may not be problems with the plan, NOT problems with the trader. No. 3 is something that we can only know after taking many trades using this plan and not coming out ahead in the long run. Even the best of plans may only be right 50% of the time. That is where good reward to risk is a major part of our plan. When we win, we win much more than when we lose. Or… if our strategy is so good that it is right… over time… greater than 50% of the time, we can use a smaller R:R in out trades.
It may be that our strategy is a good one and we only need to add a rule about only taking trades that present a better R:R thereby filtering out many losing trades. Or, it may be that our strategy is a bad one and no amount of R:R will help.