IS LOSING 70 PERCENT OF YOUR TRADES BAD?

                               What would you think if I told you I lost money on 70 percent of my trades?
Would you scoff at my trading performance? Would you think I’m a bad
trader? Or would you be interested in knowing how much I made on the 30
percent of trades on which I made money? Traders tend to focus on winning
and taking profits because nobody likes to lose money and everybody

BE CONSERVATIVE WITH TRAILING STOPS

                   To move or not to move my stop order—that is the question. Emotions are
a powerful thing to overcome when you are watching the market move
against a profitable trade. Many traders live by the advice “Never let a
winner turn into a loser,” and use trailing stop losses to protect profit

MANAGE RISK CONSISTENTLY

                         Since we are on the topic of position sizing and risk percentages, traders
often make the mistake of risking inconsistent amounts. Either they believe
in one trade more than another or they are just terrible at calculating

MANAGING RISK THROUGH POSITION SIZE

                                   Managing risk is all about controlling the amount of money you lose when
a trade doesn’t go your way. Many traders make the mistake of sizing their
positions too large and losing more money than they should on a single
trade. To determine position size, you first need to decide how much money

STOP THINKING ABOUT LOSSES IN PIPS

                           Whenever I do a presentation about trading long-term charts, I’m always
asked how many pips I risk on each trade. Many traders assume that trading
a daily or weekly chart requires risking a tremendous number of pips
on each trade, and they can’t afford that risk. This is a logical assumption
because many traders are conditioned by lessons on day trading to risk
a small number of pips when trading a smaller timeframe. The notion is

REDUCING YOUR TRANSACTION COSTS

                                        In terms of risk, another reason I promote long-term trading is to reduce
transaction costs. Currency dealers are very good at marketing the notion
that somehow the currency market is cheaper to trade because there are

BEWARE OF OVERTRADING

                  Without capital in your account, you’re dead as a trader; therefore, protecting
your trading capital should be your top priority. Anytime you open
a trade you are placing capital at risk, so it is important to select only the

ALWAYS USE A STOP ORDER

                       I get at least one e-mail each month from a trader who has let a bad trade
get away from him. Usually the trader did not place a stop order on his
trade and the market moved against him, creating a significant loss. Closing

Managing Risk

           Losing is part of trading, and sooner or later you will lose money on
a trade. How you handle risk is the single most important concept a
trader must understand to survive long term. Unfortunately, managing
risk is a confusing topic for many traders. Through my blog I’ve spoken
with traders from around the world who have made the same mistakes I did
as an inexperienced trader; the discussions in this chapter are a response
to those conversations.

           In this chapter you will learn how to use stop orders, avoid overtrading,
size your positions correctly, and manage trailing stops appropriately.
Managing risk is a key principle of bargain hunting because you can’t trade
if you end up losing all your money. Arm yourself with the information in
this chapter and you’ll be prepared to protect your account capital from
the risks of trading currency.

TRADING PRICE ACTION

            Identifying support and resistance is only half the battle; to make money,
                                     you have to be able to trade them. There are a couple of tactics I prefer to
trade price action along support and resistance levels, and you will learn
those tactics in this section. You will see these tactics in action when we
discuss actual trading methodologies in Chapters 6 through 9. To trade