Some traders try to stay away from it. Some people dispute it. Some people are so self-absorbed that they can’t take it. In forex trading, on the other hand, success and failure are a part of the game.
In order to profit from day trading, you must suffer a loss at the opposite end of the screen.
You, as a trader, want to take greater losses.
The herd is always losing money in forex trading, but these five practical tactics will help you get away from the pack.
Forex Trading: How Not To Go Broke
- Recognize that you will experience occasional lapses in your trading.
- Plan your strategy and stick to it.
- Switch to a more distant timescale.
- Leverage should be reduced or eliminated.
- Always use a stop-loss order when trading.
- Recognize that you will be unable to complete all trades.
As the adage goes, “What you fear most is what comes true.”
If you’re afraid of losing money in forex, you’ll lose all you’ve worked so hard for.
You should never have a problem taking a tiny loss if you understand that every transaction you undertake has an equal possibility of turning a profit or a loss.
Why would you allow a loss to continue when you knew it was going to happen?
Losing money in forex trading can only be avoided by becoming used to tiny losses.
It’s easier to trust the method when you’ve already lost a few minor bets.
Trade according to a strategy that has been tested and proved and with a strategy.
Stop trading with your instincts if you don’t want to lose money in forex.
If you don’t follow the guidelines of a tried-and-true trading strategy and a trading plan, your money is as good as lost.
Extensive market exposure gives rise to a trading strategy.
Trading for ten years isn’t necessary if you’re just starting out.
To backtest your ideas, simply open any chart on any broker’s trading platform and go back ten years in time.
Alternatively, you can use the free practice accounts provided by brokers to hone your trading techniques.
Your trading rules will be formed as a result of discovering the optimal conditions in which the strategy performs at its peak.
Trading according to a set of predetermined guidelines keeps you from sporadically entering and exiting the market.
You develop the ability to be patient.
Rather than risking money on trades that may turn out to be losers, you may avoid paying spreads and costs by just waiting for your entry signals.
Avoid losing money in forex trading by switching to longer timeframes.
Trading 5-minute charts is exhilarating, and I’ve done it myself.
However, you’re not here for the thrills and spills; you’re here to earn a profit.
Higher timeframes have fewer trade possibilities, but when they do appear, you can easily make 100+ pips.
When you increase the timeframe, you’ll see:
Spreads and charges on your trades will be reduced.
Because you don’t let your emotions to influence your trading, you are methodical and rational.
Trading on longer timescales might be tedious, but as legendary trader George Soros points out:
If you’re having fun with your investments, you’re probably not making any money at all.” It’s boring to do well in the stock market.”
Avoid losing money in forex trading by reducing or eliminating leverage.
Leverage makes it possible to get from $10,000 to $1 million in one year.
Advertisers take full advantage of this by claiming to be able to quadruple the funds of new traders within a single day. They’re ready for anything, though.
The good side of leverage can make you a small fortune in a short period of time, but the bad side can quickly deplete a trading account.
Leverage of more than 1:1000 has been advertised by brokers. One standard lot can be traded on a regular account with a balance of $100.
If you’re 10 pips off on a trade, you’ve already lost your entire account.
In order to avoid losing money in forex trading, what is your goal? Leverage should be avoided at all costs.
Leverage increases your losses, but it also develops a more emotional trader, one who is more likely to make subsequent mistakes in an attempt to make up for previous losses by using leverage in new trades.
To avoid losing money in forex trading, use a stop loss order.
Without a life jacket, you won’t be able to go kayaking. Unless you’re an extreme daredevil.
Trading is the same. Keep a stop loss in place when you’re trading.
Your entire account balance is at risk if you are following the “no stop loss” philosophy. The markets will eventually teach you this lesson if you are a student of the doctrine.
When the market goes against your trading plan, a stop-loss limit will help you avoid taking large loses. It’s a life preserver in the choppy waters of the foreign exchange market.
On the subject of forex trading losses, here are some last thoughts:
Even if you want to be financially independent in the long run, you need to exercise prudence while dealing with leveraged items.
Trading has the ability to provide you with everything you’ve ever wanted, but only if your account lasts for an extended period of time.
Trading losses can be minimized by allowing for a small amount of loss on a regular basis.
Eventually, your huge winnings will balance out your tiny losses if you stick to a tried-and-true trading method.
If you follow my five-step plan, I can assure you that you will win from trading each month.
Get through today so that you can get back out there tomorrow.