Recognizing when you are wrong does not mean the currency pairs deviated from how your analysis stated things should go. Remember, the market is completely random. Understanding when you are wrong is something you need to define. For me it’s how much a position goes against me before I see a profit. Once this happens things will go one of two ways for me. First the market will give me the mercy exit opportunity and will close the position with a minor loss or slight gain. Secondly, the market will continue in the opposite direction and I will take a bath. Please do not get caught up in my specific rules; more focus on the fact that you need to know when you are wrong. Accepting that you will not always get it right will save you all sorts of time and money.

More importantly, you will begin to think of the market in terms of averages. You will have x percentage of winners and x percentage of losers. There is no escaping this fact. Show me a trader that always needs to be right and I will show you a negative equity curve.