Traders, I wish I could assure you that trading forex will never result in a loss of capital. For the love of God, I’d give anything to be able to tell you about a no-lose forex strategy that successful traders will do anything to guard. I’m sorry to put an end to your quest for a no-risk forex trading strategy. There is no such thing.
What I can do for you, however, is guide you through the process of recovering from a forex trading loss.
The bright side is that you are not fighting this battle alone. All trading-related issues stem from this one issue.
Because of investment bias, traders find it difficult to accept a loss because their minds work hard to convince them that they were right about the trade, even when it is abundantly clear that they were incorrect.
So you hope and pray that the trade returns to profitability.
One percent of your trades could wipe out your entire account no matter how many of your other trades succeed.
Your mind has to be convinced that it’s fine to lose, because losing is just the bill you must pay in order for you to prove your superiority.
We must begin at the beginning in order to get there.
What was your first exposure to the forex market? If you don’t mind,
There is a common belief that forex trading can lead to an extravagant lifestyle that includes fast cars, big houses and exotic travel. However, this is not the case for most of us.
Many of us have yet to learn that the majority of forex traders are doomed to a life of financial ruin due to their proclivity for investing in risky positions.
We only see a few of these types of situations. When it comes to making money quickly, most people are sucked in by the promise of making millions, but the reality is that only 1% profit net of fees for all traders. In my opinion, most forex traders’ failures can be traced back to this initial introduction to the market.
If we want to get rid of our forex trading losses for good, we must fall into this psychological trap.
So, without further ado, here we go.
What causes traders to lose money. They go into trading with the wrong mindset.
Trading courses, signals, brokers, gurus, and marketers entice the majority of us to enter the forex market with enticing depictions of their glamorous lifestyles, such as the one in which George Soros made $1 billion in a single day.
And so, you take the plunge, hoping to finally achieve your life’s long-held ambitions.
A trader’s inability to meet these high expectations is exacerbated by the stress of having to make money quickly. Factors that lead to financial losses.
They use excessive leverage when dealing with clients.
Even on a low-capitalized account, you won’t restrain yourself from using leverage if you have the wrong expectations.
Some of us live in countries where brokers have the ability to offer unlimited leverage, so we’re able to take advantage of this. That’s insane; I can now trade lots of 1, 5, 10, 20, and even more with my $1000.
What do you think is going to happen next? That in a single day, you’ll go from having $1,000 to having $1,000,000?
They allowed their feelings to rule their decisions.
With leverage, your docile loss-inducing demons aka emotions are roused in an evil way.
First and foremost, money. You’ll hear rumors that you can go from $1,000 to $10,000 today.
Open a trade 10 times the volume in your trading plan and see what happens. Constipated men will be driven to the bathroom by a frenzied infusion of energy.
All remaining rules will be broken if the trade goes against you.
In the hopes that the trade will come back and at the very least break even, you will increase or even remove the stop loss limits.
How about doubling down on a losing trade, so that we can make up for our losses sooner?
If your account survives, you’ll want to get your losses back as quickly as possible.
The only way out is to give up all your earnings. You’ll give it another shot the next time, but you won’t make it.
They go overboard with the trading.
Every trade you make increases your trading expenses and losses.
Spreads and commissions add up when you’re trying to make money quickly.
You can easily lose 30% of your account in a choppy market even if you are using a good forex loss strategy.
They don’t take responsibility for their own actions and place the onus on everyone and everything else.
There is a widespread belief that a successful forex trading strategy exists. Another possibility is that the broker is at fault. True, there are stories of dishonest brokers, but the vast majority of trader losses can be chalked up to that. Brokers have a negligible impact, if any at all.
Every time you try a new strategy, expect to pay the price of education.
You’ll be like a blind man throwing darts if you don’t know what kind of trading environment a strategy performs best in.
There is a reluctance to be proven wrong by them.
This is the single most important reason traders lose money. They don’t want to be proven wrong by their trades.
Those who advocate for trading without a stop loss are deluded into believing that a trade will always return. Sure it does, but can you afford to lose thousands of dollars on a single trade?
Traders who move or remove stop losses, average trades in an attempt to prove to themselves and the market that they were correct in the first place are also motivated by this same ideology.
preventing monetary loss when trading in foreign exchange
Let’s take a look at some simple but effective ways to reduce trading losses now that we know why traders are likely to lose money.
hone your trading psychology skills
Developing a strong trading mindset is critical to success because most trading issues stem from a lack of self-awareness.
Keeping a trading journal is a great way to get to know yourself better, the markets, and how your trades’ outcomes are affected by the various variables.
You won’t be a victim of investment bias because you are confident in the odds of your trading strategy each time you place a trade.
If you don’t understand why something works, you won’t be able to use it to your advantage.
Once you realize this, you can put an end to your search for a forex trading system that guarantees a profit at all times and instead focus on executing trades in accordance with your trading strategy.
Developing the character traits of a disciplined trader is something you do every time you accept a loss and stick to your plan.
Your fear of closing a losing trade will fade as you gain experience.
One strategy at a time is best.
Trading losses are caused by switching between different trading strategies and systems, as we’ve seen before.
To minimize your losses in the market. One trading strategy at a time is the best way to stay focused.
Your ability to adapt to any market conditions will grow as you become more familiar with the market. Then you’ll know what to do in a market that’s ranging and what to do in a market that’s trending. You’ll get mixed results if you mix them up.
When you stick with a trading strategy for a long period of time, you unlock all of the strategy’s potential.
Don’t trade too quickly.
Slow down when you see your account dwindling. Put your ego aside and pay attention to what the charts are telling you right now.
Use a longer-term perspective when trading.
When trading on a lower timeframe, this will greatly alleviate the issues that arise.
Take a look at a 5-minute and a 4-hour chart and compare them.
There could be dozens of entries in a daily chart visible on a 5-minute chart.
A four-hour chart, on the other hand, may have a couple.
There are ten dangers compared to two dangers.
As with any trading opportunity, lower timeframes come with their own set of risks.
Rather than taking 50 trades a day, you may only take one or two – reducing your losses significantly.
Keeping a trading journal is a good idea
Prior to placing an order, writing about the trade is a waste of time. Trading setups at higher timeframes, where trading opportunities are few by nature, allows for this.
As a result, you’ll learn to be patient and wait for the best opportunities.
A checklist is a good idea before entering a trade.
Be sure to follow your trading plan’s guidelines and conditions before you enter a position.
Make a checklist and cross off each item as you go through the process of trading. In addition to reducing your risk of impulse trading, this slows you down and helps you avoid impulsive decisions.
Fill out this blank forex trading checklist sheet with the rules you need to follow before making a trade.
Reduce the amount of money you’re trading.
Dropping your trade size in proportion to your account size and trading confidence may feel like an eternity, but it’s the only way to avoid further losses.
A small amount of money you’re willing to lose will not bring back the negative feelings that brought you here.
Always have a stop loss in place when trading.
This should be a rule of thumb for all traders.
Before making a trade, calculate your profit and loss. Traders can use our risk and reward calculator for forex trading.
Forex trading, like any other endeavor, carries a certain degree of risk.
That’s why cars have breaks, and that’s why you should never put your bare hands on a hot pan.
When a deal is done, it’s done. Your stop loss or take profit target may be reached or your account may be wiped out at any time. It will all come to an end one way or another. It was entirely up to you.
Stop losses tend to frighten traders because they fear prices will hit their stop loss and then revert to the original direction in which they entered the trade in the first place.
True enough. Because market makers are aware of the areas where most traders place stop-loss orders, novice traders don’t realize this. And so they go out and hunt.
In order to set your stop-loss limits far away from the rest of the herd, create a forex stop-loss strategy around major support and resistance levels.
Accept the fact that you’re going to lose.
To avoid losing money in forex, it may seem counter-intuitive to say accept loss as a method of doing so.
Even if you take every precaution to minimize trading losses, they will still occur. In the market, that’s how it works.
The idea of forex trading without a stop loss should be rejected out of hand.
Accept a small loss now and wait for a better opportunity to come along in the future. ‘
This is a helpful piece of advice.
In order to reduce your losses in forex trading, it is important to keep a daily trading journal.
You’ll know exactly what to do if you keep a journal. As a rule of thumb, it will show you which currency pairs or trading instruments are losing money when it is time to lower the volume of your trades (lot size) or change trading sessions and hours.
In order to avoid losing money, you must keep track of every aspect of your trading. Then you can get to work on it.
As soon as possible after a defeat. Take a break from trading and go for a walk to get some fresh air.
After a loss, most traders are tempted to return to the markets right away. Not a good plan.
In the immediate aftermath of a loss, every trade you make is an emotional revenge trade in an attempt to make up for your losses.
Emotionally charged traders are a shark’s lunch.
Take a break from the computer and go for a jog.
Take a walk and let go of the tension that’s building up inside of you.
Take a jog, lift weights, punch a bag, or do the dishes; whatever you do, just do it.
If you jerk off to get away, you’ll be entering another trade in no time.
In the wake of a devastating loss, it’s important to engage in something physically and mentally stimulating to help you cope.
Don’t get bogged down in the past; move on.
It’s like moving through the stages of grief when it comes to dealing with trading losses.
Keep quiet about how much money you could have made had the trade gone your way.
It’s time to stop. Your time and effort will be wasted.
Let go of any resentment you may have and move on.
To learn from the past, you must first be ready.
Make fewer mistakes in the future.
If you don’t learn from a loss or a mistake in trading, it’s only a loss.
When you learn from your wins and losses on a daily basis, you become a better trader.
My wager is that you will learn more about yourself as an individual and as a trader through your losses than through your wins.
Go back to the section on how to minimize losses and learn from your mistakes.
Trying to find a forex trading no loss trick that you don’t already know is a bad idea.
As children, we are taught that winners never give up. That’s not quite the case, though. Winners know when to give up.
Willpower is required to overcome psychological obstacles in trading. Enough courage to carry out the simple tasks required by successful traders. When it comes to becoming a member of the one percent, you’ll need more money than you think to get there.
A lack of muscle is a deal breaker here. Quit.
A million other ways to make money are available to those who are willing to look. You may not be cut out for trading.
After blowing a forex trading account, two things should never be done.
When your trading account is depleted as a result of a large loss:
One option is to keep depositing money until you find out why you lost.
Spend money you don’t have to fund your trading accounts.
If you need money to trade, don’t take out loans, get a line of credit, or sell your house, car, or other asset to do so.
I’ve been there, and I know how it ends.
As long as you haven’t mastered the art of trading, you’ll eventually lose all of your new money invested in the market.
As a beginner, begin by learning and practicing on a demo account before moving on to the real thing.
To get a feel for the trading environment, every forex broker offers a free practice account. It’s there for a reason.
On verified live accounts, Tickmill and XM are going one step further and offering new traders a $30 no deposit bonus to trade risk-free.
When you’re behind a trading desk, you shouldn’t let this vision cloud your judgment.
Preparing yourself for losses in forex trading by learning about yourself and the markets is essential. It’s a treasure, so cherish it.
What forex trading losses have you had? Please do so in the space provided below.