The Authority’ on Price Action Trading. In 2016, Nial won the Million Dollar Trader Competition. 1:1 risk reward is analogous to a easy money on the forex market coin toss.
Why do most Forex traders lose money then? What human variables contribute to the success rate being much lower than breakeven for most traders? Perhaps the main reason most traders lose money is because the majority of people have little self-control and cannot resist the temptation to over-trade and over-leverage when there is no one to be accountable to. Another main reason most traders lose money is because they try to buck the trend for some reason, even though they KNOW they have a statistically higher chance of winning by sticking with the trend until it is clearly finished.
As human beings we all have a tendency to pass the blame and find fault elsewhere. However, when you are trading badly, it is your fault and no one else’s. If you find you are losing money in the markets it is not your broker’s fault, nor is it the result of a bad quote, a bad tip, or a hardware failure. Accepting responsibility for your losses and trading mistakes is paramount to turning your trading around. The first step in any self-help group like Alcoholics Anonymous is admitting you are the problem and that you have a problem. One thing that definitely prevents most traders from making money in the market is over-trading.
So, if you are currently losing money on a consistent basis and you are trading lower time frames, you will definitely benefit by switching to higher time frame Forex trading. How many times have you won a few trades in a row, made some money, and then given it all back quicker than you made it? This happens all too often for traders who have not yet learned to risk the same amount every trade or who have not yet learned to manage their emotions effectively. However, just because you know exactly WHAT you are looking for in the market, this does NOT mean that it WILL work out. So, if you are equally confident in every trade you take, because you have mastered price action trading, there really is no reason to risk substantially more or less on any single trade. You want to keep your risk amount approximately constant relative to your total account value. If there is one single thing that most traders do wrong who lose money on a consistent basis, it is poor trade management.
Every trader knows after a little practice and education on a high-probability trading method like price action, they can pick near-term market direction with pretty good accuracy, at least enough to get into open profit. This is not the hard part of trading. The hard part comes after you enter a trade. A related topic here is having a Forex trading plan. Your trade management plan should just be one part of your overall Forex trading plan. If you don’t have a written down plan of attack on how you will trade the markets, you are probably going to go nowhere fast.