Can You Really Manage Loss in Forex Trading?

Can You Really Manage Loss in Forex Trading?

Forex traders are always scouting the internet for articles on how they can minimize losing trades. Any wise forex trader should not be naïve of the losses. Sometimes the best approach is always to expect and accept that losses here and there in trading otherwise you might quit trading before you even begin. Luckily, there are certain strategies that can minimize loss in trading.

Important Forex Trading Strategies

Protect your portfolio by taking profits

When pursuing profits, leave your emotions at the door. In fact, when forex trading, you can’t afford to be emotional. Emotions cloud your decision making and judgement skills and you forget that predetermined exit strategies are also crucial.

Avoid impulse trading and be more logical and disciplined if you want to increase your profits. While small gains may be tempting, exercise patience to maximize your profits. Don’t just exit a trade when you notice things shifting or moving against you because you could be doing yourself more harm than good.

In its own right, a manual exist is always a risky move because the market tends to move in a zigzag pattern which could imply things are moving against you. However, it could also be planning to move in your favor and by exiting you deny yourself more profits.

Plan your trades, be patient and commit to ride out the market irrespective of the pattern. You can efficiently ride the market waves when take-profit orders are in effect. This allows you to cash in when you need to hence protecting your portfolio.

Avoid letting uncertainty and fear dictate your decisions

Again, emotional trading is quite risky. In forex trading you need calculated discipline because to reap rewards, there needs to be a certain amount of risk. However, even discipline traders can be liable to emotions which will cloud their trade analysis particularly when one suffers unexpected losses and eagerly want to get their trading track back.

Overreacting to one loss will make you make another bad decision and if you decide to stay in an open position to try and win back what you lost, you might end up digging a deeper hole for yourself. Remember the more you lose, to climb back you need larger percentages. So, if you lose 20%, you need a 25% return and sometimes even the odds can be against you.

So be wise, take a breath, and don’t be scared to take losses. This is a numbers game which means that losses are inevitable. We recommend focusing on the big picture and avoid abandoning your trading strategy impulsively.

Be wise about position size

In forex trading, size matters a lot. When you increase the lot size, your risks also increase so when you your risks increase too much too soon, you account might blow out. This is more so the case when using large-scale leverages.

Forex traders tend to commit very small percentage in any single trader to their total account value. It is not unusual to commit 1% for a single trade to your account value. Before determining your position size, look at the monetary value of your position against your account value and the number of pips you could be risking in a trade.

However, remember that these calculations are prone to change due to different factors. We recommend paying attention to pips as well as the unit-to-pip ratio for any potential trades you want to open through your account.

You require great care and thought when determining your position size. If you take a huge risk, take time to prepare and calculate before determining the amount of time the recovery will take. With forex trading, increasing the position size and volume isn’t the best way to recover after a loss.

In Conclusion

As a forex trader, you are a survivor first, profiting comes second, that the best way to be a successful trader. Any trading system can be profitable if you use the right techniques to negate risks and manage your money.

When managing your trading efforts, equally manage your risk. Risking too much on a single trade puts you in a position to lose profits of your system. By integrating these strategies, you will be more likely to succeed in your trading efforts.