If there is one thing that is true about the forex market, it is fair to every trader in equal measure. If a trader is balanced and moderate in the way he approaches his trading, then the FX market will reward him with wins and dish out losses on some occasions as well.
Unfortunately, these crunch situations are where most forex traders mess up. This is possibly why most new traders do not last in the FX market for anything more than a couple of years, with most bowing out ungracefully within a few months. What this shows is that it is extremely important for an FX trader to know how to cope with his wins and losses in the market.
Why This Is Important
When an inexperienced trader gets a series of wins or one big win he loses control of his entire process and ends up losing whatever money he had won or even more than what he had won. Similarly, a series of losses or one big loss causes the same kind of havoc on his trading process.
These common reactions are why every forex trader must learn to cope with big wins and big losses in the FX market. Here is a list of things that you should never do after a big win or big loss in the FX market.
Never Increase Your Position Size
The usual reaction to a lot of profits or many losses is for the trader to increase or decrease his position size. In the first case, he increases his position size because he becomes certain that he has cracked the market while, in the second case, the result could be an increase or decrease depending on retribution or fear, respectively.
However, this is exactly what you should never do in the forex market as consistency is the sole thing that will allow you to maintain your profits and curb the losses.
Always Resist Increasing the Number of Trades
Just like you should never change your position size after an abnormal amount of profits or losses, you should never change the number of trades either. For instance, winning a lot does not mean that you start placing more trades in the forex market nor does losing a lot mean that you should reduce the number of trades you place in the market.
Avoid Chopping and Changing
Many inexperienced traders go one step further when they incur a lot of losses or make a lot of profits. They change their strategy altogether because they either think that it is not working or that it is working because of their own personal brilliance. You should never change your strategy on the basis of a few losses or wins.
Review Both Carefully
At the end of the day, you need to understand both big losses and big wins. The reason for this is that big wins will teach you what you need to continue doing in the forex market while big losses will teach you what you should not do in the future.