Let It Cook – Give Your Trade Time to Hit It’s Target

By November 8, 2013Uncategorized

This is a very important lesson on your way to becoming a seasoned and experienced forex trader.
We’ve all been there. We’ve prepared for the day ahead, analyzed our charts and have our broker platform ready to go. The perfect(or close to it) trade has presented itself for entry. The risk to reward is within our tolerance. The candle closes and we place the trade. We close our charts and decide to check back before the close of the current H4 candle. When we return, we find we’re at least 50% into our stop loss and our stomach does the uneasy move. What’s going on here?

In a nutshell, we have nothing to worry about.

The first thing is that trades take time to hit their targets. I’ve had trades that I’ve entered via the H4 charts that have taken two days to meet their profit targets. Conversely, I’ve had H4 trades take only a couple of candles to hit target. What I’m saying here is that you have to give your trade “time to cook”. A trader has to develop the patience needed to see the trade through. How is that patience developed? The first way is that you’ve sat through countless hours of screen time and have confidence the setup you entered on has a positive outcome associated with it. It has an edge. You’ve noted the setup, correctly analyzed your risk. You have two or more factors of confluence intersecting in order to have entered the trade. You’ve checked the global macroeconomic news to ascertain if there’s an event meriting termination of the trade. There is not.

The next thing is that as confident traders who have a plan they follow, we know our risk of loss is acceptable no matter what the outcome of the trade. I cannot express adequately how important this point is: WE KNOW OUR RISK OF LOSS IS ACCEPTABLE NO MATTER WHAT THE OUTCOME OF THE TRADE. This is what lets us go about our day not fraught with nervous tension and stress. Our account will be there, ready to provide funds for another trade entry even if we lose this trade. It’s a part of the business of trading. We will take losses from time to time. It’s inevitable. But because our risk to reward for the trade is something we accept, we have no fear, no tension, no stress. And because we’ve been patient in waiting for only the Grade A setups, we have a much better chance at success.

This is why a trader must give their trade the time it needs to hit target, time to cook. The market moves. Sometimes it moves to the point it looks like all but a foregone conclusion that our stop loss will be taken, when in reality the market is testing the value area of our trade one last time before moving in our chosen direction. I have personally seen this happen more often than I can count. Early in my trading career I would force myself out of perfectly good trades only to watch in disbelief as the trade turned and proceeded in my chosen direction after retesting a value area below my stop loss. Talk about a lousy feeling in the pit of your stomach. That’s what happens when a trader doesn’t accept risk and/or is not confident in the trade entry signal. Give your trade the time it takes to hit target…let it cook for a while.

 

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