If you have been trading for sometime now, you will definitely know how it feels to be on the wrong side of the market. In fact, there is nothing more frustrating than seeing your trade moving closer and closer to your stop loss as time goes by.
So what exactly is drawing you toward placing a trade that is opposite to the movement?
From my years of experience trading currency, the key factor that draws traders into placing trades that eventually went wrong is their inability to identify a trend.
Most trader claim to be able to identify the trend but they are usually looking at trend on the lower time frame. In fact, what is really important is the trend in the higher time frame like the hourly, daily or even weekly.
Think about this, if the daily chart is in a downtrend. One short candle in the daily chart is equivalent to 24 candles in the hourly chart and it will translate to 96 candles in the 15 minutes chart. (Do you see the power of the higher time frame now?)
Therefore if you are constantly experiencing loss trade due to yourself trading in the wrong side of the market, you can now begin to look for long term trend on the higher time frame and then place trade that are in the direction of the trend.
Here is a tip for you to identify trend on any time frame:
1) Plot a 50, 100 and 200 Exponential Averages
2) If they are stacked nicely in a particular direction with good angle and separation, this usually indicates a good trend
3) If they are cluttered together and flat, this is a sign of consolidation.
Try this out on your chart and see if it works.