To Reduce Unnecessary Stop-Losses, Expand Your Perspective

Many people struggle with constantly cutting losses and not having successful trades.

I used to be like that in the past, constantly entering trades and then cutting them as soon as they moved against me.

However, when you review your trades with stop-losses, you might find that the patterns are surprisingly consistent.

By keeping these patterns in mind, you can reduce unnecessary stop-losses.

Why stop-losses occur despite good entry points.

When I see the trades of people who are struggling in FX, often the entry points themselves look like, “That’s good.”

For example, in the image below, there is a trade where a sell entry is made at the yellow circle and a stop-loss is placed at the aqua circle.

In this case, if I only look at the entry point, it’s actually a quite decent entry. In fact, it’s entering after breaking below previous swing low which is trend reversal to downtrend.

And then, entering on retracement.
Therefore, entry point is good timing.

However, the fact that it still ends up with a stop-loss suggests that there is some issue somewhere.

So, what is that issue?

To understand it, you need to look a bit more to the left on this chart.
Take a look at the chart image below.

What do you think?

I believe you probably understood it as soon as you looked.

Yes, indeed.

There was a support level to the left.

It’s quite common for situations where you enter a trade and it immediately reverses, resulting in a stop-loss.

When I look at my past experiences of frequent stop-losses in FX trading or the losing trades of my students, I often find that the entry points themselves are well-timed, but the perspective is too narrow.

That’s why, before entering a trade, just widening your perspective a little and shifting your focus to the left can help reduce unnecessary stop-losses.

First, prioritize the overall market trend.

People often experience frequent stop-losses despite having good entry points, and in most cases, the narrow focus is the root cause.

That’s why it’s essential to always check the overall market trend before entering a trade.

Even in this chart image, if you shift your gaze a little to the left, you can see not only the support line but also the overall trend, which is an upward trend.

As a result, even if a potential trend reversal is indicated by breaking below the previous swing low, there is still the possibility of an upward trend.

Especially if you look at a larger time frame than the one in this chart, it should still be in an upward trend.

Therefore, just by recognizing the overall trend, you can make judgments like, “Right now, it’s an upward trend, so there’s no need to force a sell entry.”

This reduces unnecessary entries and, in turn, decreases the number of stop-losses.

To achieve stability in FX trading, it’s crucial to trade in line with the overall trend. No matter how good the entry point is, entering a trade against the predominant trend increases the likelihood of stop-losses.

So, to reduce unnecessary stop-losses, it’s essential to always confirm the overall trend.

Avoid fixating too much on short-term charts.

This is a phenomenon that often occurs in day trading, where traders use short-term charts like 1-minute charts to make their entries.

For example, I also do this, as shown below, by arranging multiple charts and displaying a 1-minute chart in the top left corner.

With this arrangement, you follow what’s known as the “Zigzag” approach, where you view the charts sequentially from the top left.

As a result, you consistently focus on the 1-minute chart when analyzing, and you feel the price movement is big.

This can lead to eager to trade despite the price movement is not big on 5-minute or 15-minute chart.

You also might think, “I can probably make a quick profit,” and end up entering trades in non-optimal positions, increasing the number of unnecessary stop-losses.

Now, even if I have a 1-minute chart displayed, I no longer make unnecessary entries. However, back when I was struggling and losing in FX trading, I often found myself entering trades impulsively.

Furthermore, when experiencing reversals after stop-loss, I would often engage in revenge trading. Additionally, I found myself frequently averaging down, unable to cut losses, and lost significant amounts of capital.

What’s even worse is that by repeating these behaviors:

– Inability to cut losses
– Averaging down
– Engaging in revenge trading

These bad habits became ingrained, and it took several years and substantial losses to overcome them.

Therefore, when you’re not seeing positive results in FX trading, it’s better not to have short-term charts like 1-minute charts displayed prominently, as they can lead to impulsive decisions and reinforcing these detrimental habits.

Related Post: Recommended Background Color and Layout for FX Charts

Try to block out other people’s information.

Furthermore, blocking out other people’s information can be surprisingly effective in reducing unnecessary stop-losses.

For instance, on social media platforms like X (Twitter), there are individuals who post about their winning trades.

It’s actually better not to see such information.

The reason is that by viewing such information, you might get the urge to think, “Maybe I should try to emulate this person’s method,” which can make you more prone to making unnecessary trades.

When you see people who are successful in FX, it’s natural to feel envious and want to emulate them. However, even if you mimic someone else’s strategy or information, you won’t achieve the same results.

This is similar to FX products; for instance, many people buy FX products and try them out, but often find that they don’t work as expected.

The reason for this isn’t that the FX product is flawed, but rather that the product creator’s:

– Trading skills
– Trading experience
– Personality
– Living environment

may not align perfectly with the buyer’s, resulting in different outcomes.

Related Post: Why Copying Others’ FX Trading Strategies doesn’t Work

Mimicking the content shared by successful FX traders on social media is similar to the previous point. If your abilities and personality don’t align with theirs, merely copying the surface of what they do won’t yield the same results. In fact, it often leads to more losses and frustration.

Especially when you see individuals who have significantly grown their capital starting with a small sum, it’s easy to fall into the misconception of “I can do it too.” However, attempting to mimic them almost certainly results in losing everything.

Those who achieve such impressive results are highly skilled experts. Trying to emulate them while struggling in FX trading usually leads to increasing unnecessary stop-losses.

Therefore, it’s advisable to block out as much as possible the information shared by others on platforms like social media.

Especially when you come across posts showcasing impressive trading histories, the envy might make you want to imitate them.

In these cases, not viewing such content can help reduce unnecessary stop-losses.

Related Post: Break Free from Depending on Others to Succeed in FX

Summary

When your trades aren’t going well, and you’re experiencing frequent stop-losses, there’s a high probability that you might not be seeing crucial factors such as recent support and resistance levels and the overall market trend.

Hence, before making an entry, even if it’s just for a few seconds, looking a bit to the left of the chart can help reduce unnecessary stop-losses.

Moreover, excessive focus on short-term charts and exposure to others’ information can also lead to impulsive trading and an increase in unwarranted stop-losses.

So, if you find yourself experiencing a high number of stop-losses, it’s essential to be aware of these aspects and approach your trading with this in mind.