Minimizing 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 – No matter how many pips and profit you make, you’ll always want to make more. Sometimes less is more and that extra 10 pips can cost you the 200 you just made earlier. 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 - This is a tough one for me, it’s hard not to get frustrated when you’ve had a great week and in the matter of minutes you can see your profits disappear. 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.
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. You’ll also want to use trend lines, horizontal and angular. Lets face it the market doesn’t just move up and down and side to side. It moves in all directions. Pivot Points are important too.
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? What is your Stop Loss and Take Profit? What are the market conditions? Market hours? Will you carry over? Trade around news times?
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’re asking for a heap of trouble and the word gambling comes to mind.
Know Your Risk / Reward - How many pips are you willing to risk to make your pips? Are you going to risk 100 pips to make 10? Clearly 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.
Take a Forex Trading Course – Education is key. Education can be expensive, the alternative is far more costly. That one tip or strategy you learn can be the distinction that’ll change everything. There are many great trading courses out there, and there are many scams and hack-job courses too. Be sure to pick the right one. I swear by Currency Connect.
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 and end on a high note. The markets are quick to turn and in our over-excitement the simplest mistake can cost you all your profits. Just walk away and continue on another day!