How to Minimize Forex Trading Losses
by Forex Trader Gregor Anton – http://www.ForexCurrencyDayTrader.com
Last week I had some very good trades. I wish they all would be , but lets face it, this isn’t a get rich quick scheme. You will have losses. How you manage your money and minimize risk, and minimize losses will play a key role in becoming a successful Forex Trader.
Rather than looking at how to get the most pips and make successful trades, lets focus on minimizing your Forex Trading Losses:
* No Trade is a Good Trade – Patience is key. If the market doesn’t make sense, stay out. Create a demo account and practice first. Only trade when you’re 100% sure all your trading conditions are met.
* Don’t Babysit Your Trade – Everyone loves watching that green positive number get bigger and bigger, but don’t stress yourself out and watch it fluctuate or worse, go into negative red numbers. Follow your Forex trading plan, set your stop losses and take profits. Walk away or do something else. Don’t stress over your trades. Let your system handle it.
* Don’t Get Greedy – No matter how many pips and profit you make, you’ll always want to make more. Sometimes less is more and that extra 10 pips can cost you the 200 you just made earlier. Emotional and impulse Trading is Gambling.
* Save Your Emotions – This is a tough one for me, it’s hard not to get frustrated when you’ve had a great week and in the matter of minutes you can see your profits disappear. Even with the best of trading plans, systems, and strategies. And in my experience, especially with Forex Robots, Signals, and Alerts. Let your profits run, cut your losses, and be sure to stick to your system and strategy.
* Measure Profit in Pips – I find focusing on pips rather than profit in dollars keeps you focused on your trading goals. The right money management and risk reward ratio is key too and surprise surprise will usually align nicely with your comfort zone.
* The Trend is Your Fairweather Friend – It will change and according to some the Forex Market is Trending only 20% of the time. Don’t get me wrong, identifying the trend or lack of a trend, is important, you want to do so across multiple time frames. You’ll also want to use trend lines, horizontal and angular. Lets face it the market doesn’t just move up and down and side to side. It moves in all directions. Pivot Points are important too.
* Set Goals – Know exactly how many pips you are targeting. How many good or bad trades you’re going to stop at. Everyone has bad days… I go for a walk, eat some Ritter Sport chocolate, grab a Mocha at Waves Coffee, or change my scenery in some way that gets me away from Forex. Bottom line, have a plan! …and follow it.
* Set Conditions – When are you going to enter a trade? Exit a Trade? When do you take profit or take a loss? What hours, sessions, and currency pairs are you trading?
* Economic Calendar – The Forex Market tends to become volatile around news times. This “noise” can really impact your trades. Some people stay away from news times. Others trade news times exclusively. Stay on top of Forex News by checking the Economic Calendar at least daily and figure out what kind of trader you are.
* Manage Your Money – Only Risk 5% at most. Combined. If you have multiple trades, the sum should be 5% or less. Any more and you’re asking for a heap of trouble and the word gambling comes to mind. Be very careful. The more you risk, the sooner you can go broke and the longer it takes you to rebuild your account.
* Know Your Risk / Reward – How many pips are you willing to risk to make your pips? Are you going to risk 100 pips to make 10? Clearly you want to risk less than you are bound to make.
* Practice Practice Practice – Open a demo account, thoroughly test your system, plan, and strategy. And please don’t change it every day or hour and stop looking for that holy grail. Your demo account balance after 1 month of trading will give you a good indicator of how well you’ve done.
* Practice Practice Practice – Open a demo account, thoroughly test your system, plan, and strategy. And please don’t change it every day or hour and stop looking for that holy grail. Your demo account balance after 1 month of trading will give you a good indicator of how well you’ve done.
* Walking Away is the most important part of your day – We’ve all been there, a great trading day, week, or hour. x amount of successful trades, you’ve met your target and you’re excited. Do yourself a favour… Walk away. The markets are quick to turn and your profits can quickly disappear. Just walk away and continue on another day!
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