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Never Adding To A Losing Trade

 

One of the few trade management rules that you should always apply is to ‘Never add to a losing trade’. Trades are divided into winners and losers, and if a trade is losing the chances of it turning around completely and becoming a winner are too small for you to want to risk even more money.  
 
If it actually is a winner disguised as a loser, it is best to wait until it shows it is a winner before you decide to add to it. If you do this you will realize that nearly every time, the trade ends up hitting your stop loss and doesn’t change its direction.  
 
Sometimes the trade can change before it hits your stop and becomes a winner and you can count yourself very fortunate if it does. And sometimes, the trade can hit your stop loss and then turn around and become a winner and you can count yourself rather unlucky.  
 
Whatever happens to you, it is never worth adding to a losing position, hoping that it will eventually turn into a winner, this is because the odds of success are just too low for you to risk even more capital in addition to the initial risk.

Do Not Take Too Much Risk
One of the most distressing mishaps that any trader can make is when he risks too much of his capital on a single trade. Remember that one thing is certain in trading, and that is that if you lose your entire capital, you will be out of the game. Therefore, don’t risk too much so that you are not prevented from continuing.

A useful saying in poker is that going all-in works every time but once. With trading, it’s pretty much the same. If you risk all of your account on each trade it will only takes one loser to wipe you out completely, so it will only be a question of time before you are out of the game.

Generally, you should only risk 1-3% of the available capital given to a system on any individual trade. This is calculated through the size and, the difference between our entry price and our maximum stop price, and the amount of capital that is allocated to the system.

With these elements combined you will be almost certain to never lose all of our trading capital. In actual fact, the chances of you hitting your maximum drawdown for the year will be extremely low.

All the trades that you take up should be of a small size, a size that almost seems pointless to your future fortune. If you are concerned about the size of your trades then they are probably too big and you should immediately switch to a lower amount.

Remember that in any trading market longevity is the key to making money by trading. You should try to trade slowly over a long span of time with a minimal risk. This is always preferable to proceeding rapidly with a higher risk.

Click for more in your Forex Tarding Guide - Positive Trades

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