Floating losses, which often happen to traders of major currency pairs, are one of the trading situations we least want to see or face. Today we will talk about the topic of "floating loss".
How did the floating loss arise?
Here is the daily chart. Prices found support after a long bearish move, creating a bullish engulfing pattern. Using the daily H4 combo, traders should tune to the H4 chart for consolidation and get a bullish reversal candle well above the last swing high.
At this point you may quickly take control measures. A huge bullish engulfing candle followed by an inside bearish candle may tempt you to go long on another bullish engulfing candle, at which point the chart may produce a signal candle at any time.
But it does not generate signal candles immediately. After a while it produces a bullish engulfing candle that closes above the last swing high. This is an A+ trade setup as far as daily H4 chart combo trading is concerned. The price performs a deep consolidation and subsequently produces a signal candle. This is what breakout traders like to see. A long entry may be triggered after the last candle closes.
This must be painful for us. The trade setup looked pretty good, but things didn't work out as expected. In this case, should we continue to let the market go or close the transaction manually?
If you choose to close your trades manually, I personally think it's a bad decision. Once the transaction is floating on the loss, let it go according to your trading strategy to improve. If it hits the stop loss, let it stop the loss. This is the risk you should take.
When encountering floating losses, we generally have the following psychology:
1. I set a stop loss. I am afraid that the market will sweep the losses, and I am even more afraid that the market will turn back after sweeping the stop loss!
2. If you don't set a stop loss, you will worry about what to do if the market continues like this? If the market outlook is unilateral, wouldn't the loss be more?
3. Always feel that the market may come back, wait and see!
4. I often hesitate, is the stop loss set now appropriate? Do you want to change it?
5. There are so many floating losses, just cut it off, in case of more losses, cut it off in advance before sweeping the stop loss!
In fact, it is very normal to have these mentalities, and I often commit them. Now that we have found the problem, we have to solve it, so how to overcome the bad psychology of floating and losing?
First analyze the reasons for floating losses.
1. Does the floating loss order follow the trend? Which cycle trend is it following?
2. Trading pays attention to following the trend, so should you pay attention to "following" or "doing"?
3. The trend is correct, what is the reason for the floating loss?
4. Is the stop loss setting reasonable?
5. How to set the stop loss if it is unreasonable? According to which period setting?
Then fix it.
1. Determine the trend cycle and the order cycle
The trend is irreversible, as long as the trend is correct, everything is easy to say. After determining the trend, it is very important to analyze what cycle to use when placing an order. For example: I use the daily chart to analyze the market, determine the trend, enter the market according to the hourly chart, and then the account is contrary to my analysis, and there is a floating loss. Looking back at the analysis, I found that the trend of the daily chart has not changed. The reason for the floating loss appears on the hourly chart, and the market just rebounded in the hour, so how do I deal with this problem? If the trend is correct, I will check the stop loss. If the stop loss setting is also reasonable, stick to my principle, and if the loss is swept, it means that I have not entered the market well and admit defeat. If it is found that there is no trend, it is just a rebound on the hourly chart, and the market returns to the trend of the daily chart, then decisively cut it off! This is the small trend conforming to the big trend.
2. Don't look at the cycle randomly, if there are too many, there will be chaos
When there is a floating loss, it is very important to judge the market again. The K-line chart changes with time. Your technical analysis may only be suitable for placing an order. It does not mean that the market will follow your path. It is necessary to adjust your analysis appropriately. But a word of caution: don't look at this cycle, then look at that cycle!
The time span of the large-cycle trend is large (less clutter), and there are many small trends (more clutter). There is an hourly trend in 1 hour, and a 4-hour trend in 4 hours. 1 and 4 are not necessarily the same, of course they are the same as the big cycle The trend is not necessarily the same, so when analyzing again, you must figure out the principles of your analysis.
3. Don’t put your eyes on the jumping float
Floating and staring at that number is the dumbest thing to do. I used to do this often, in fact, it was creating pressure on myself. A general psychology: when you are in a good mood, your trading success rate will increase; when you are in a bad mood, the probability of making mistakes will increase. Your own strategy is correct, just look at the market trend.
There should be other floating loss psychology and coping skills. I can only summarize so much for the time being. If you have a good method, you can share it. Let's discuss it together and make progress together.
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