How to Minimize Forex Trading Losses
Last week I had some very successful trades. I wish they all would be positive, 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 = A Good Trade - I've been there too, it's tempting to jump in and make a trade. Patience is key. Create a demo account and practice your hunches there. Only trade when you're 100% sure all your trading conditions are met.
* Don't Babysit Your Trade - Follow your trading plan, system, and strategy, and don't change it mid-stream. Know your entry and exit condition and don't babysit that 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 plan, set your stop losses and take profits. Set your alerts. Walk away or do something else.
* Don't Get Greedy - Fear and Greed will get you every time. Greed is an emotion and you want to keep your cool and stay focused on practical trading. Emotional and impulse Trading is Gambling.
* Save Your Emotions - Relax and you'll trade better. 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. Save the emotions for when you celebrate a good week!
* Measure Profit in Pips - I find focusing on pips rather than profit in $s is far better. $'s make it emotional, pips keep it strategic. If you're not comfortable trading bigger lot sizes, don't. 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. But don't rely just on the trend, use indicators, trendlines, and pivot points.
* Set Goals - Know exactly how many pips you are targeting. How many good trades you're going to stop at. How many bad trades you're going to take before walking away. Everyone has bad days and what I do is 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, follow it, make sure it's a Smart Plan. Specific, Measurable, Attainable, Realistic, and Timelined.
* 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 important economic news. This "noise" can really throw off your trades. Or it can help your trading. Either way, you need to stay on top of Forex News by checking the Economic Calendar at least daily.
* Manage Your Money - Only Risk 5% at most. Combined. If you have multiple trades, the sum should be 5% or less. Some people like 3%. Any more and you will have a tougher time rebuilding your portfolio after a bad trade.
* Know Your Risk / Reward - How many pips are you willing to risk? Are you going to risk 200 pips to make 20? 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!
Article Source: FxTradingStock.com
About the Author
Learn more about Trading the Forex Market. Stop by Gregor Anton's site where you can find out all about Minimizing Forex Trading Losses
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by: Gregor Anton
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Word Count: 827
Date: Thu, 10 Dec 2009
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