In the world of trading, especially in intraday trading, one of the biggest dilemmas is deciding what factors to consider before opening a position. Charts, news, macroeconomic data... the information is overwhelming. But what hidden dangers exist in the most common practices, especially when trading around key economic data?
Today we will analyze one of the most critical and dangerous situations a trader faces: managing losing trades, particularly in the context of news-based intraday trading. We will base this on the premise that not closing a losing trade on time can literally mean the elimination of the trader.
Most traders try to combine everything: they analyze news, wait for data, and cross-reference with charts looking for the perfect entry point. Worse still, they often seek external validation, consulting the opinions of other traders in forums or social media.
This approach is problematic. First, because doing what everyone else does leads to the same results as most, which statistically, are not consistent in the long term. Second, seeking external opinions is counterproductive. It conditions us, undermines our own confidence, and drags us to follow the crowd, whether they are right or wrong. It is a reflection of market psychology and the human tendency to seek security in the group.
As it is well said, "misery loves company". To achieve consistency and eventually make a living from trading, research and the development of your own criteria are vital. It is necessary to build a solid foundation of training and experience to filter the constant noise of the market.
Let’s consider trading based on the economic calendar. How many traders crowd in front of their screens waiting for data? How many actually win consistently this way? The risk-reward ratio does not compensate.
Market makers know this concentration of traders and set traps. The most common: THE SWEEP. Sudden and rapid movements in both directions to eliminate stops and trap the unsuspecting.
Here arises the debate about stop-loss. Mental or physical? The mental stop is a danger. Why? Because it introduces the psychological factor at the critical moment. The discipline to close each and every losing position at the defined point is extremely difficult to maintain under pressure.
And it is crucial to understand this: just one time that you don't respect your loss limit, just one trade that you let run hoping the price will return, can lead you to face elimination as a trader. Any strategy that opens the door to this catastrophic failure must be discarded.
Let's talk about greed and fear. We know that favorable data can generate quick profits, but what if it is against you? What if it creates a price gap? If you are also leveraged, the situation becomes dramatic.
Watching your capital being destroyed at a rapid pace... how losses increase uncontrollably... how you are unable to close, paralyzed by the irrational hope of a recovery... It is one of the toughest experiences. You realize that the first loss, which seemed large, is now insignificant. You would "kill" to have closed then.
There comes a point when the loss is so great that you can no longer close. You accept the situation. You let the position run, risking the entire account in hopes of a miracle. This means hours, days, stuck to the screen, waiting.
And the market is "very wicked". Often, after a drop, there is a rebound, perhaps even up to halfway. Hope is reborn. You believe it will fully recover. You cling on. You might even average down, adding more positions to try to accelerate the recovery. But then, the market turns around and falls harder, destroying your account and your spirit.
The outcome is known. If there is not enough capital, the margin call arrives. If there is, it can take days, weeks, months, or years to recover the initial capital, if you even manage to do so. All that time, without liquidity, unable to do what you love: trading.
In light of this bleak scenario, the justification for physical stop-loss and iron discipline is absolute. Any element that can systematically lead to a catastrophic loss must be eliminated from our trading.
And here we arrive at a logical conclusion: if trading based on intraday macro data carries such a high risk of falling into this deadly trap, the most sensible solution is to avoid that situation altogether. Therefore, close all open positions before relevant economic data is released.
In summary, trading requires much more than technical or fundamental analysis. It requires self-awareness, extreme discipline, and relentless risk management. Avoiding unpredictable high-risk situations, such as trading news without a clear exit plan and cutting losses without hesitation, is not an option, it is a necessity to survive and thrive in this difficult field. Prioritize capital preservation over the pursuit of quick and volatile profits.