Today we’re going to take a look at something that isn’t as exciting as some aspects of trading forex, but is nevertheless something you’ll have to deal with on a regular basis. I speak of course, about losses. We all know that on some trades, despite our best efforts, we will finish up with a loss when a position goes against us.
Even if you think you’ve done everything you can think of to reduce risk in your trading, losing on some trades is simply part of the business. If you don’t have the ability to cope with them, you’ll probably become a trading statistic before too long.
Here’s some tips and ideas for dealing with these little losses that should help you become a happier and more profitable trader.
The most important tip I could give you is to never let your emotions take over when you are trading. The best way to be in control your emotions is to have a good understanding market trends, along with a trading plan that has you trading for the longer term instead of trying to scalp the market day in, day out.
It’s also important that you don’t let greed or by ambition cloud your judgement. You’ll know if you are in the grip of one of these emotions if you are over-trading by taking positions that are too large, or trading too often.
Both greed and ambition can lead you down a well worn path to crippling losses. Even experienced institutional traders such as Nick Leeson, who despite all the checks and balances they’d tried to put in place sent Barings Bank into bankruptcy a few years back, fell into this trap.
The system you use to trade is an important mechanism for helping you handle losses. If you set realistic, progressive profit targets and stop loss points to limit the amount you are prepared lose on each trade, you know you’re covered both ways.
And finally, you must learn at what price levels you should take your profits. If you spend time learning about trading trends, you don’t get frustrated by a few losses, and you always set stop loss orders to protect your capital, you’ll have every chance of becoming a profitable forex trader.
Currency trading is NOT for the feint hearted, but it truly is the most enjoyable ‘job’ ever invented. If you follow a proven system that works, find a good mentor to teach you, and keep your risk in check, you’ve got everything you need to build a highly profitable trading business.