Losing in forex is stressful for all forex traders, especially novice traders. What you do after you make forex losses can have a significant impact on your trading performance.
How this article can improve your trading?
- Increase ability to limit losses
- Increase your risk reward
- Increase your ability to stay calm after a loss
Learning to lose
The hard part of forex trading is that you will experience a lot of losing. Learning how to lose is very important if you want to become a professional trader. Losing money on a trade is not a bad thing if you know how to lose.
The easiest way to improve trading performance is to reduce the size of your losses. Predicting future prices is difficult for all traders, and it is difficult to achieve a win rate greater than 50%. Achieving a risk reward ratio of at least 1 (average profit is greater than the average loss) will make it easier to make long term profits.
Most traders fear losses, so they set stop losses that are too large. In day trading, profitable trades usually generate immediate profits, so large stops are not necessary. For most traders, the fastest way to make more money is to reduce the size of their stops。
What should I do when I lose in Forex?
The first thing to do when you lose in Forex is to take a break from trading. Too many traders rush to trade again because they want to recoup their losses as soon as possible. Losses feel bad, and that feeling is very understandable. However, opening a position too quickly after a loss is dangerous.
Revenge trades are one of the biggest causes of losses for forex traders. Revenge trades are usually not well planned and there is no justification for entry. One revenge trade can trigger many more revenge trades, which can be very costly and dangerous.
After losing, you need to step away from the trading screen and take a short break. During the break, remember that losing is normal in forex trading and that there is nothing to worry about as long as you follow your trading plan. Once you feel calm, you can begin trading again. Depending on the trader, you may need a five-minute break to calm down after a loss, or you may need a full day break.
Because you can quickly become frustrated after days of losses, we recommend taking a full day break after two or three consecutive days of losses. During the break you can review your trades and find ways to improve your trading performance. If you want to become a professional trader, it is important to accept losses and improve your trading skills.
Remember that all professional traders lose money in forex trading. Your job as a trader is not to predict the future. It is to minimize losses and maximize profits.
