HOW TO MANAGE FOREX LOSSES

The main rules in Forex trading is “keep your losses small”. With small losses, you can outlast those times the market moves against you, and be well positioned for when the trend turns around. The proven method to keeping your losses small is to set your Stop loss before you even open a Forex trading position. The maximum Stop loss is the greatest amount of capital that you are comfortable losing on any one trade.

With your maximum loss set as a small percentage of your Forex trading float, a string of losses won’t stop you from trading. 95% of Forex traders out there are lose their money because they haven’t applied good money management rules to their Forex trading system, you will be far down the road to success with this money management rule.

What happens if you don’t set a stop loss? Let’s look at an example. If I had a Forex trading float of $1.000, and I began trading with $100 a trade, it would be reasonable to experience three losses in a row. This would reduce my Forex trading capital to $700. What do you think those 95% of traders say at this time? They would reason, “Well, I’ve already had three losses in a row. So I’m really due for a win now.” and that’s totaly wrong!

Their reason for failure was because they risked too much and didn’t apply good money management. Remember, the goal here is to keep our losses as small as possible while also making sure that we open a large enough position to capitalize on profits.With your money management rules in place, in your Forex trading system, you will always be able to do this.