How To Prevent Losses In Forex Trading

Monday, 30 March 2020

How To Prevent Losses In Forex Trading

In Forex Trading when Losses are more than Profits, then it's a problem


I want to talk about scalping, I'm guessing all forex trader or most forex trader understand the term scalping. In case you don't know, according to Investopedia - ( Scalping is a trading strategy in which traders profit off small price changes for a stock. Scalping relies on technical analysis, such as candlestick charts and MACD, for execution ).


Scalping Trading may look like an easy way to make money, but when scalping you have both losses and profits. When Losses are more than Profits, then it's a problem. It simply means you're not doing it right. Today I will share 8 tips on how to reduce losses or even prevent losses.



TABLE OF CONTENT


  • Brief Introduction and definition of Scalping
  • 8 tips on how to reduce losses or even prevent losses

    • 1. Minimize the use of indicators,
    • 2. Do not marry a trading position.
    • 3. Avoid over-trading.
    • 4. Do not neglect Risk Management.
    • 5. Have clear Entries and Exits.
    • 6. Having the right scalping personality.
    • 7. Keep an eye on financial announcements.
    • 8. Control the number of simultaneous trades.


How To Prevent Losses In Forex Trading 



1. Minimize the use of indicators


Some traders will have up to 7 setups for Entry and Exit. Not saying it's not good but having that much setups means you will have a lot of confirmations. Since we are scalping, by the time all your conditions are met, it may be too late to enter or even worst, you may enter and trade start going against you.

2. Do not marry a trading position.

This is when a trader becomes emotionally attached to holding a trade. Always know when to get out of the market. Remember scalping requires IN and OUT. When losing and you noticed your analysis was wrong, close trade with your loss. Holding may result in more losses. But a day trader can hold as long as he is sure of his analysis. I always give my students this scenario. You lost $50 from your $100 account, with proper risk management and money management, you can grow back the $50 to $100 but you can never grow $0 to $100.

3. Avoid over-trading.

A trader will have understood the meaning of this. Everybody at one point in time has been a victim of this. Always have a target and when the market is unstable, do not trade and accept that your target will be met on another day. 
Remember, you said you want to be a trader, why trade like you are quitting trading that day. There are other days and other opportunities.

4. Do not neglect Risk Management.

Risk management is a major factor to consider when trading, remember you worked for that money then why take a stupid risk. Only professionals can enter a trade without considering their equity, but that not being the case, always take calculated risks. Put TP and SL (Take Profit and Stop Loss). Immediately, you are entering a trade, have it at the back of your mind that, if this goes against my analysis, this is the amount I'm willing to risk.
When you see your mentors or screenshot of results and you see Profit with high Lot sizes, do not compare yourself with them. Those people have been in your position. GROW YOUR CAPITAL FIRST, MASTER FOREX FIRST, THEN YOU CAN TRADE LIKE A PROFESSIONAL.

5. Have clear Entries and Exits.

Do not take trade base on a guess, make sure you have a clear entry and exit.


6. Having the right scalping personality.

Scalping requires a lot of time observing the market and looking at your screen. You will need to be the focus and react quickly. In general, the scalping technique is not everybody because it requires you to make impulse decisions.


7. Keep an eye on financial announcements.

Always beware of any major financial news announcements on the day you are trading. It's better to play safe if you are sure of your analysis and the direction of the market, go with it else do not trade, wait for the effect of the news announcement to pass.


8. Control the number of simultaneous trades.

Always limit the number of trades you have depending on your equity. Never place more than 3 simultaneous trades based on one currency.
Imagine this scenario. You place more than 4 trade, having EUR in their pairs, it suffices to say if EUR goes against your analysis, you will lose the 4 trade.

That's why you should limit the number of simultaneous trade you have based on one currency




                                                                                                                 


If this post has been helpful kindly comment and shares our post.
Thank you for your time.

Fortizo Light Wishes you an optimistic life… Have a lovely day.


Kindly share your message in the comment box below. God Bless You RichlyThanks for stopping by.

No comments:

Post a comment

We love to hear from you! Sign in to comment "anonymously" without entering verification text.
Want to be notified when I reply your comment? Tick the "Notify Me" box. If your comment is unrelated to this post, please drop it on my Telegram Group
Thanks.