Forex Trading: What is Right and What is Wrong?

Rights and wrongs in Forex trading … is it a fine line or is it black and white? Hopefully it’s not red!

How do you know what is right and what is wrong in trading? In Forex trading, it’s important to be clear about your trading objectives before you trade. There is no other way to know if you were right or wrong.

If you don’t set a trading objective, then it’s impossible to know when you have succeeded. It might make you happy to take profit at 30 pips, but when you watch the market continue moving in your direction for 300 more pips, maybe you’ll feel like you missed out on something.

Conversely, stopping out when the market is racing against you seems like a smart idea, but was it right? Probably. However, when it swings back in your direction immediately after stopping you out, you might feel like you made a mistake. Did you?

Some people will say it was right, some will say it was wrong. Obviously, there are different opinions about closing your winning position too soon and about stop loss strategy.

Before I trade, I remind myself of my trading objectives:

  • I am clear about how to anticipate a 30 pip change in price.
  • I am clear about when those moves tend to happen.
  • I am clear about how those profits will add up over time.

When taking profit, my goal is 30 pips per trade.  Very often I have the opportunity to make more, and the challenge is to stay on track with my trading objectives.

When taking a loss, my goal is to keep the loss small enough that I can easily make it back in the next trade (or two).

The bottom line is, if you’re clear about your trading objectives, don’t worry about being right or wrong.

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By the way, if you need help identifying trade setups, check out Jennifer's trading group. Before long, the patterns will be popping out for you, too!