If it is possible to fix one basic rule in the forex world, then it would be “Stick to your stops.” Before you decide to enter any trade, just test the threshold of your pain. This is the perfect way to analyze that all of your losses are controlled and in such cases you won’t run away with emotions.
Trading in practical is very hard. This is the reason that in the forex market, there are more losers than the winners. The main reason of becoming a failure is not that they aren’t aware of working here. They actually lose because of their emotions. The main reason behind the failure is that is most of the times traders time a long time to stop, or they extend their losses willingly.
In the forex world, one must predetermine the risk to avoid any unusual loss. The best time to measure the risk is before you actually start trading. This is because at that time you will be able to make an unbiased decision which won’t be affected by any price change. However, if you don’t predetermine anything, then likely you will move on and wait for a position when you will find yourself as a winner. Unfortunately, in this entire time period thing might not remain as you are thinking. To be on the safe side, you must calculate the worst-case scenario so you make you stop accordingly. The stop must be based on technical analysis rather than your personal choice.
Every trade regardless of its outcome consists of an educated guess. However, nothing can be assured of in the trading world. There are several factors that affect the movement of a currency. Sometimes sift of price is due to some basic factors. However, sometimes it can be due to some extraordinary factors. It is important for you to keep an eye on all these factors and instantly make you stop according to the situation.
On the other hand, the reward is something that is unknown. Whenever there is a movement in the currency, it can be small or huge. In the case, the management of money becomes extremely significant. If you refer to our article “never let a winner turn himself into a loser” in which we advised to always trade in the lots. Through mini-accounts, you can follow this procedure in many organized ways. By following this procedure, you can easily lock your gains on your initial lot and can make you stop on the second lot once it reaches the breakeven point.
Make Trend your Friend
The forex market is actually a trending market. Trends can start from a day and can last for a month. This is perhaps the main reason why a majority of the black boxes in the forex market relies on the trends. They believe when the trend will make to an optimum position, they will make huge profits. About, 50% of trading is about the strategy whereas the other half is about how you do money management. If you are facing loss in the forex market, then there is no need to get panic. Learn from your mistakes and move forward with polished strategies.