You know the phrase" two steps forward, one step back"? It's a general phrase that people say when talking about making their way towards success. If you are always only taking one step back and two steps forward then you can continue an upward trend. Sadly, in trading it's the opposite for some reason. Many traders enjoy strings of winning days only to give all of it back plus some on their losing days. So what can you do to take small steps backwards while pushing forward and growing your capital?

While most writers may start with losers here I will take an alternative approach and argue that statistics is the first place to begin. When you developed your strategy, or were taught that strategy from someone else what do the statistics look like? What I mean here is, what is an expected loss for your strategy? There are many great strategies that can be researched where one can expect to lose two thirds of the time, yet their winners will be 3 times greater than their losers. Can you expect to take many small losses?

There are other strategies that statistically break down into 80-90% win rates but the losing trades will average 3 times the winners. Those are still profitable strategies but what are you expecting on your strategy? See, if you know your personal strategies statistics then you know what an acceptable loss is. If you know what an acceptable loss is then you will never be psychologically damaged by a losing trade or a series of losing trades.

Many times people feel like they are not making any progress because they will have a large loser after a strong of winners. Well if your strategy calls for that sort of pattern then due to your win rate and win loss ratio then it may not be a cause for concern. In short, know what your statistics are for your strategy and then at that point see what you can do to refine your trade management. As you refine you may find that you can beat the statistics of the strategy and take two steps forward. Happy Trading!