The large majority of these exact same traders also go on to consistently lose money. FXCM recently carried out a study of 43 million trades from Q2 — Q1 to look at trader stats and some super surprising results came out. The problem with those figures is they do not show long-term profitability rates or follow the same account holders, so one account holder could make a large profit for months in a row and then drop off the edge into account draw-down.
BUT it does show profits are being made all the same, and also illustrates how profits are not just for some special group of people with a secret access key.
It proves to you that you can make profits, showing how huge percentages of the markets are doing it every single day. There are two super interesting stats that jump out right away from these trades: The elephant in the room and obvious question is why do these traders getting winner after winner not make profits? The answer is simple: The same as in any business right? If you are selling bread or milk or oil or houses, if you charge less than what you paid you will very quickly find yourself out of business, because you will be losing money.
You know this already. What you do need to know though before we move on is that as a trader you have two options: It makes a huge difference which you choose to be. Both have their positives and negatives. As a high win rate trader you are going to aim for more wins with a smoother equity curve and potentially smaller risk reward trades. If you are a high reward trader you will look for high reward setups and be prepared to take on more losses in search of those rewards.
I highly recommend reading the lesson on this to help make your decision at;. High Profits Are the Difference. When you think about it, it is actually more surprising that traders lose as consistently as they do, even though they have what is a winning edge over the market. This is a flip of the coin choice. Where it becomes more challenging and tricky is after the trade has been placed and you have to manage it. The best way to overcome this is by using a pre-trade plan that marks out exactly how you are going to manage your trade, so that once in it all you have to do is follow your plan.
The online dictionary merriam-webster. The explanation above explains breakeven really well in general terms. Breakeven in Forex trading works by you moving your stops from your first stop position into your original entry position once price has moved in your favor. Because this is set at the same price you entered at, you will not lose any money. If not, comment below…. The basics of breakeven trading can be used in the rest of your trade management, as I am about to show you in the next section.
How do you normally manage your trades? There are many different market types and situations and breakeven stops can help you manage your trades to protect your crucial capital. Below I have covered just a few of the different strategies you could look to implement and use in your own trading with the breakeven method.
These will allow you to protect your capital in the different market types. One of the best strategies for using the breakeven strategy is protecting your capital. As I explained when outlining how the breakeven works, the basic mechanics of this method are straightforward — you move your original stops into your entry position when price moves in your favor. The reason for this is because it will all of a sudden open up a whole heap of doors and opportunities that they have never seen or noticed before.
What are free trades? These are the best sorts of trades available. Say for example you are in a trade and you have taken profit target 1. You have cashed in part profit, you cannot lose on the rest of the trade and whatever happens is all profit, but either way — you cannot lose. The chart below explains both of these two breakeven strategies.
At the high sticking out and away from all other price we have a bearish pin bar reversal. To enter this pin bar we need to set our entries just below the low of the pin bar to enter when price breaks lower. As you can see on the chart, back to the left is a previous resistance level. Keep in mind when entering the pin bar at the time we would not have all the price action information that we have on the chart now. This could be an area where you may look to potentially protect your capital.
This is the beauty of the free trade and there are many combinations you can choose to work, depending on your style, comfort levels and particular trading temperament. It really is up to you.
The last point I wanted to touch on with the breakeven strategy that I know would really help you is discussing the different market types. A major mistake a lot of traders make is treating all markets the same when managing their trades. Something we teach our members in the members price action trading courses is to manage their trades according to the different market types. That is what I want you to do with your breakeven strategy as well.
Because price is ranging there are going to be a lot more support and resistance levels and price will be a lot more inclined to chop up and down, so make sure to keep this in mind.
You will notice in the chart examples below the super obvious and clear differences in the price action stories of the two charts. The first chart is making clear lower highs and lower lows and the second chart is caught in a sideways range that is very choppy.
If you were to manage these two markets the same, with the same trade management methods you may just come out with really great results once or twice, BUT overtime those results would leave a lot to be desired and the reason for that is because as just discussed above and as you can clearly see from the examples below; there are clear differences between market types.
Could breakeven trading be just the thing you need to turn your trading around or lift you over the edge into profitability? Trade management is something that we ALL have to continually work and practice on.
The fact is that the trader who makes the best decisions on a consistent basis will come away with the treats from the cookie jar.
Think about it like this: Johnathon Fox is a professional Forex and Futures trader who also acts as a mentor and coach to thousands of aspiring traders from countries right around the world.
Johnathon specialises in helping traders transform their trading with high probability Price Action trading methods and correct money management strategies. In order to get to break even you are risking capital to get to break even.
Therefore there is no such thing as a free trade. As explained in the lesson; there are varities on this, such as taking part profits etc. Many people, including myself, consider this age-old myth true. Kudos to you for pointing this out in your article!
This study and the other lessons I reference show some contradicting information. It would be very interesting if that other lessons followed up traders much longer term, but it still shows higher profitability rates all the same! When are you saying we should move our stop losses to breakeven?
You can use the breakeven in different market types to manage trades differently i,e manage some trades a lot stricter than others. Or you may look to use it as a strategy where you only look to make much bigger winners with it. For example; you take your first normal profit and then move to breakeven on a last portion of profit to see if it will run for bigger profits,. Thank you for the clarification. Anyway, I am wondering, does news or other data affects forex like how it affects indices?
Or is forex mainly demand and supply. I really enjoyed the lesson. I would also like to learn how to trade. Please equip me n become the best trader in the world. Moving your stop to breakeven and taking some profit is good as it protects your capital but you have also reduced your lot size in case the market move further in your favour. How do you balance the two strategy? As I replied ti Kl above; there are a few ways you may look to take real advantage of this in your trading, however; this is something you need to work out as part of your trading rules and trading plan.
For example; you take your first normal profit and then move to breakeven on a last portion of profit to see if it will run for bigger profits. It also allows you to start making rules and plans around the trade management side of your trading.
It seems this would have been a good article to include that link again. Your email address will not be published. Notify me of followup comments via e-mail.
You can also subscribe without commenting. Comments In order to get to break even you are risking capital to get to break even.
Hi Chris, good to hear from you. Heya Kua, yeah this is one of the major Forex trading myths. Hello John, When are you saying we should move our stop losses to breakeven?
Hi Kl, this is something you need to work out as part of your trading rules and trading plan. For example; you take your first normal profit and then move to breakeven on a last portion of profit to see if it will run for bigger profits, All the success, Johnathon.
Hello John, Thank you for the clarification. Hi Sutiv, thanks a lot for your comment. I As I replied ti Kl above; there are a few ways you may look to take real advantage of this in your trading, however; this is something you need to work out as part of your trading rules and trading plan.
Safe trading and all the success, Johnathoin.More...