5/29 Analysis: How to Avoid Losing Trades
Most traders starting out focus almost entirely on making money in the market. They don’t look at risk management nor do they realize that avoiding losses is just as important. If you make $100 in the market one day and then lose $150 the next, you will not be a profitable trader long term.
Knowing when to stay out of the market is an important lesson to learn and will allow you to avoid many bad trades that would have eaten away at your previous gains.
You only want to enter the market when there are easy profits to pick up. When market conditions are difficult, you want to stay out. Looking at individual currencies is the best way to know if the market conditions are easy or difficult.
So right off the NY open, you can see that all of the weak currencies are turning up and the strong currencies are trending down. You would have to be patient and wait these market conditions out.
Let’s now fast forward to 15 minutes into the NY session:
You can see that market conditions have not improved. Strong currencies are trending down toward the center line and the weak currencies are trending up toward the center line. This market is a mess right now and when you are unsure, you simply stay out.
If we then fast forward an hour into the session:
Two things to point out here. The large drop in the CAD was due to news coming out. Avoid this at all costs. The best practice is to look up news on an announcement calendar and stay out during major news releases (and up to 10 minutes after to avoid any volatility).
In addition, look at how flat the rest of the market is. All the currencies are going completely sideways.
There is nothing to trade in this market whatsoever.
Watch the entire video analysis below:
You can see that our Currency Strength Indicator is an effective tool for picking out the highest probability, lowest risk trade set ups while avoiding market conditions that aren’t favorable. If you keep using this tool every day along with our daily Forex analysis, you will increase your win rate and be on your way to becoming a profitable trader long term.
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