There are only two things that can save you from taking losses on a trade, and only two things. Those are order flow and liquidity. That is it.
If you are stuck in a trade and you are down 50 pips lets say, and your stop is 100 pip away, the only thing that is going to save your trade is aggressive order flow that consumes the liquidity enough to move prices. There is nothing else that can save you. There is nothing else that can cause your trade to go into a profit. Other traders need to come to the same determination as to the direction of the financial instrument that you are trading and be willing to execute aggressive orders into the marketplace. If both you and a large trader believe that a currency pair will go in the same direction, that doesn’t matter. What matters is if they are willing to execute orders into the marketplace. Now you may ask, what if that big trader you talked to already has a big position in the market in the same direction as your trade. Well that doesn’t cut it either, especially if that big trader is already fully invested and cannot generate any more order flow. That big trader still requires additional order flow to come into the market, a lot more in order for their positions to be profitable. Now it would be interesting to know their reasoning “why” they think the market will move.
Of course there is a whole list of things that can generate order flow and liquidity that you should keep track of.
But notice that I did not say that a MACD, stochastic, chart pattern, astrological pattern, moving average, momentum divergence is going to save your trade. They can’t save your trades because they don’t work. They don’t generate order flow because they can’t. They can’t generate order flow because billions of dollars are not transacted because of a MACD divergence. That is just the hard truth. They do not generate sufficient order flow to move price. They cannot explain “why” price is moving. I suppose at somepoint in the future it could possibly generate order flow, but I won’t be waiting around for that day as you will be waiting a long time. Instead focus on what has been known to generate order flow today and in the past going back decades. Those order flow generators exist for sure.
You need order flow and liquidity, always need it. The traders who bought Silver near $50 needed the bids to be strong so that the market would not sell off. They needed aggressive order flow to consume the liquidity and take prices above $50. Same thing for people who bought EUR/USD above 1.4900. Same thing for people who bough tech stocks during the dot com boom. Every trader everywhere around the world, no matter the financial instrument requires order flow to validate their trades and liquidity to get out of their positions. If their analysis does not generate order flow, then you are relying on luck. That is how it always has been, is currently, and always will be decades into the future.
You have to have the order flow, and preferably massive order flow on your side in order for your directional trades to be successful. In order to have a wildly successful trade, you need to have three things: Correct Direction, Correct timing, Correct Liquidity.
1. Correct Direction – Aka, know which way the market will move
2. Correct Timing – Aka, know when they order flow that you are expecting will be generated. Know when the massive order flow will occur. Know when your analysis will “kick in” and generate the sufficient order flow to move price
3. Correct on the liquidity – There needs to be liquidity on the prices in which you want to transact so you can get your order filled with preferably little slippage. This is not that big of problem for retail traders are they are trading small positions. But this applies heavily to the big traders working at banks and hedge funds trading hundreds of millions and billions of dollars.. They need to right on the liquidity so they can get in a decent sized position. If they are wrong on the liquidity then they would only be able to exploit the trade for a small position size. Therefore they need to properly judge how much liquidity will exist. This helps with timing a trade to determine how quickly or slowly they need to begin building a position in the marketplace.
The only thing that is going to save your trade is aggressive order flow that consumes the liquidity enough to move prices. There is nothing else that can save you.