What Happens When Traders Start Winning?
In our blog about slippage, we discussed that, for a market to exist it must have a buyer, a seller and a price at which they agree to trade.
So, as there must be a seller for every buyer, it follows that for every winner of a trade there must be a loser.
Let’s say that you’ve developed a trading plan, but it isn’t bringing you the results you’d hoped for. If that’s the case, you’d want to change your approach, perhaps by considering a different rule about where you put your stop-losses.
We’re no different at Trade Nation. We sit in the middle of buyers and sellers, providing prices that they can trade at. We may review how we trade in the same way that our customers will. But any changes we make to the way we manage our risk will never adversely affect the service we give you. Our customers, whether they win or lose, are able to trade all the markets we offer, receive the same prices, the same speed and quality of trade execution and the highest level of customer service.
We’ll have losing trades in the same way that our customers will. How we choose to manage these trades will affect our profitability. But did you know that, statistically, retail traders place more winning trades than losing ones?* Yet why is it that all the brokers have risk warnings showing a high ratio of losing customers? The answer lies in the human emotion that drives the decision-making process and how difficult it can be to let go of a trade that is not working for us.
Recognising, understanding and successfully dealing with these emotions will help every trader to better manage the trades that do not go as planned. A disciplined approach to risk management is essential. This will help you to capitalise on the statistical reality that retail traders make more winning trades than losing ones. Running profitable trades and closing losers quickly will help you enjoy a successful trading career.