NORTH PORT, Fla., Dec. 17, 2013 /PRNewswire/ -- Dmitri Chavkerov, CEO of Forex Peace Army, believes that trading losses are part of forex trading business and that traders need to gain deep understanding as to how to deal with them, in order to achieve success as forex traders. Forex Peace Army is a prominent website online that provides reliable and trustworthy information on various areas related to foreign currency trading. Forex Peace Army has been an active contributor in the field for the past several years and it continues to offer its expertise to traders all over the world.
According to Dmitri Chavkerov, traders need to gain an in-depth understanding about losses involved in forex trading. Losses are part and parcel of forex trading and even well-planned, seemingly impeccable trading strategies can lead to trading losses at times. The traders need to understand that this is part and parcel of the process and most of the time they should accept the losses as inevitable part of any short-term trading approach and continue to use their trading system.
"Forex money management is not to abandon your trading system when you have 5, 6, 7, 8, 9, or even 10 losers in a row. It's all part of the game," says Dmitri Chavkerov of Forex Peace Army.
Dmitri Chavkerov states that the most common mistake committed by many forex traders is that they get easily affected when they see several losses in a row. They would then go on to alter their existing trading system which is not always a wise thing to do.
"I have read many forex forum posts in my life, and I have seen certain people get frustrated with their trading system, after it brings them several losers in a row. As soon as it happens, some of them start tweaking it, or throw it away altogether, because they think that it doesn't work. Perhaps it has happened to you as well. You see, when people have a lot of winners in a row, they quickly forget it, but when they have a lot of losers in a row, they panic, and throw away or alter a perfectly good trading system. Please remember that it's a two way street," says Dmitri Chavkerov, President of Forex Peace Army.
Dmitri Chavkerov believes that the best thing to do would be to check the probability of facing several losses in a row according to the number of years the trader is planning to use a particular trading system.
"Let's go back to the trading system for EUR/USD that gives 60% winners and 40% losers. This system gives us 65 trades per quarter, its losses are 50 pips, its gains are 50 pips, and it brings on average 60% winning trades and 40% losing trades. Let's say that you use this system for around 4 years, so after 4 years, you have 1,000 trades. 600 of them are winners, and 400 of them are losers. In order to understand the real scenario, you need to calculate as to how many losses you will have to face in a row for a period of 4 years," says Dmitri Chavkerov of Forex Peace Army.
"As far as my knowledge of math goes, if you have a system where the odds that you'll lose are 40%, and you want to find out how many losers in a row you will have over a period of 1,000 trades, here is what you need to do: Let's say you want to find out the number of times you will have 8 losers in a row. So you bring 0.40 to the power of 8, and you multiply that by 1000. The number you get is 0.655, which approximates to 1. So you can expect that over this period of 4 years and 1000 trades, you will have 8 losing trades in a row, at least once. If you do the same for 7, you get approximately 2. So in these 1000 trades, you can expect to have 7 losers in a row twice. Keep doing the same math, and you will see that according to mathematical probability, having 6, 5, 4, and 3 losers in a row will happen many, many times throughout these 4 years " says, Founder of Forex Peace Army Dmitri Chavkerov.
Dmitri Chavkerov believes that traders can gain an insight on successful forex trading practices despite losses by having a clear understanding about the psychology of trading and money management.
"Understanding money management and trading psychology is absolutely crucial in order to succeed in forex," says Dmitri Chavkerov of Forex Peace Army.
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SOURCE Forex Peace Army