You can expect lots of advice on how to manage your forex trading so that you avoid, or at least reduce your losses. But there are two aspects to "losses" in forex trading: One is avoiding losses in the first place; The second is dealing with the loss when it occurs; And perhaps a third point - there will be losses. Somehow, the experts seem to spend very little time telling traders, particularly new traders, how to deal with losses when they occur. Vendors and advertisers would rather talk about on how much money you will make using their system/advice/services. It might not be a written rule, but one of the certainties in forex trading is that losses will happen; there is no way you are going to be exempt from this "rule". Even the old hands lose; sometimes quite substantially, so don't be astonished when it happens to you. The manner in which you deal with losses will play a large role in your career in the business of forex trading, so here are some tips to help you deal with the bad days. Tip 1 (the most important one) - never trade without setting up a stop loss. A stop loss does two things; it is part of the "how to avoid losses in the first place" issue, and it is also plays a key role in ensuring you have the right mind set and the right approach to forex trading. Successful operators will confirm that trading is not only about mechanics and the right system, it is also about having the right mind set. By managing your risk a stop loss helps manage your emotions; and you can keep on trading knowing that even a bad run won't wipe you out . The outcome - you can regard a loss as a temporary setback only, not a catastrophe, and you can keep on trading rationally. Tip 2 - don't decide think your system is "wrong" and just because you have suffered a loss, or even a series of losses. No trading approach is perfect; take a bit of time, look back and analyze your results, particularly if you have suffered a series of short-term losses. Have you a good run of profitable trades? Perhaps the losses are just "statistical noise", as your results smooth themselves out and get back to the system norm? What are your percentages like over a month? Three months? Six months? If your analysis tells you that your results are OK on balance, then don't change systems. Nothing will do more to exhaust your bank balance than changing from one "sure thing" to another. Tip 3 - As part of the analysis you do, have another look at your approach. Maybe you should change systems. Take a look at what you did and why. Did you follow through exactly when the signals said "go"? Did you follow your system as closely as you could and still get bad results? Did the results using real money follow the results you got on your demo account? (Of course you tested the system first on a demo account?) Maybe you should run the system on a demo account again and see if the losses continue, without risking any more trading capital. Once you have finished this analysis and assessment you can decide whether it is time to change to a new trading system. If you do swop, at least you will know you that you made a considered decision and not give way to a knee-jerk reaction. These three tips should help you handle any losses in a professional manner. Thoughtful and considered decisions when dealing with forex trading losses will make you a more professional trader - and probably a more successful one.
About the author:
If you spend a lot of time watching the trading screen, you need to think about keeping fit and in shape. Visit http://www.ellipticalstep per.net to find out how a home gym with a compact Elliptical Stepper can help you lose weight and stay fit - and still have time to trade. |
