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Dealing
With Losses
One
of the most vital
rules of FOREX
trading is to keep
your losses at a
minimum. With
small FOREX
trading losses,
you will be able
to resist the
times when the
market moves
against you, and
will be well
positioned for
when the trend
turns around
again.
A
good method to keep
your losses at a
minimum is to determine
your maximum loss
before you even open
your FOREX trading
position.
By
maximum loss, we mean
the greatest amount of
capital that you are
comfortable with losing
for one trade. With
your maximum loss put
as a small percentage
of your FOREX trading
effort, even a string
of losses will not stop
you from trading for
any given amount of
time. Unlike the
majority of FOREX
traders who make money
losses due to not
implementing wise money
management rules to
their FOREX trading
system, you will be
doing
alright.
For
instance, let’s say you
have a FOREX trading
float of $2000, and you
begin trading with $200
per trade, you should
reasonably expect about
three losses in a row.
This would then
decrease your FOREX
trading capital down to
$800. Then, it will be
decided that you might
want to bet $400 on the
next trade because you
think there’s a higher
chance of winning after
having lost three times
in a row
already.
If
the trader does bet
$200 dollars on the
next trade because he
thinks he might win,
his capital could go
right down to $500
dollars. So the chances
of making money then
will be practically
zero because he would
need to make 150% on
the following trade
just in order to break
even. In this case, if
the maximum loss had
been determined
beforehand, and kept
to, there wouldn’t be
any problem.
Here,
the reason why the
trade failed was due to
the fact that the
trader risked too much
money, and didn’t apply
good money management
skills to his bet.
Don’t forget, the goal
here is to keep your
losses to a minimum
whilst also ensuring
that we open a position
large enough to
capitalize on profits
and keep losses to a
minimum. With your
money management rules
in place within your
FOREX trading system,
you will always be
completely able to do
this.
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