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If you have a losing position that is at your maximum loss point, you should just get out right away. No one can corner the market: The FOREX market is so large and has so many participants that no single trader, even a central bank, can control the market price for an extended period of time. Being well-educated means that you have thoroughly researched and tested your trading ideas and know why your trading system worked in the past and is still working. Even if it did do this, the mental energy and negative feelings from holding the losing position are just not worth it.
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9. This also helps to guide you to only pay attention to things you really want to achieve with your time and resources that you have available. While forex trading easily permits bi-directional trading, trading in the direction of the trend improves your odds over the long run. For example, you can shadow your real trades with identical ones in your demo account, but you will want to widen your stops in the demo in an effort to see if you're being too conservative.
One of the most important rules of Forex trading is to keep your losses as small as possible. With small Forex trading losses, you can outlast those times when the market moves against you, and be well positioned for when the trend turns around.
The one proven method to keeping your losses small is to set your maximum loss before you even open a Forex trading position.
The maximum loss is the greatest amount of capital that you are comfortable losing on any one trade. With your maximum loss set as a small percentage of your Forex trading effort, a string of losses wont stop you from trading for any particular amount of time. Unlike the 95% of Forex traders out there who lose money because they havent implemented wise money management rules to their Forex trading system, you will be ok with this money management rule.
To use as an example- If I had a Forex trading float of 00, and I began trading with 0 a trade, it would be reasonable for me to experience three losses in a row. This would reduce my Forex trading capital to 0. It would then be decided that theyre going to bet 0 on the next trade because they think they have a higher chance of winning after having lost three times already.
If that trader did bet 0 dollars on the next trade because they thought they were going to win, their capital could be reduced to 0 dollars. The chances of making money now are practically nil because I would need to make 150% on the next trade just to break even. If the maximum loss had been determined, and stuck to, they would not be in this position.
In this case, the reason for failure was because the trader risked too much money, and didnt apply good money management to the play.
Remember, the goal here is to keep our losses as small as possible while also making sure that we open a large enough position to capitalize on profits and minimize losses. With your money management rules in place, in your Forex trading system, you will always be able to do this.