Ways to Limit Losses in Forex Trading

Sep/20/2016


Most of the losses made in forex trading is due to failure to prepare in advance. This can be prevented by improving your trading plan to enjoy consistent profits. In order to acquire greater profit, you must either win most of your trades or reduce the losing ones.

Here are more ways to limit your losses in forex trading:

Trade less

It’s important to assess the number of trades you make and how much of them you lose and win. Experienced traders tend to manage profit consistently which makes it alright for them to take on several trades.

Manage the amount of trades you make in a month. It only takes one good set up coupled with a good trading plan to make a considerable amount of money. A good trade can be worth as much as 6% of the profit as you could only be risking 2% of your account balance.

Once you reduce your losing trades the amount of winning trades will be valuable and will produce a larger impact. Increasing profit means limiting losses.

The daily time frame

Using the daily time frame implies that you have to trade less frequently since there are lesser quality opportunities. However, this doesn't mean you can make less profit. The daily time frame also provides traders with several advantages.

The daily chart gives you an ample amount of time to analyze the market, develop a plan and execute it without feeling rushed. Since technical analysis works best in highly liquid markets, a daily candle provides more activity throughout the day and will likely perform better when it comes to technical analysis.

The daily time frame produces sustainable trends compared to any lower time frame. Choosing a higher time frame will allow you to avoid much of the day-to-day volatility. Both time frames provide the same potential risk, however with the daily chart your ability to resist sudden jumps in volatility has grown significantly.

Awareness of outside factors

It’s highly important to be aware of what the headlines are and their corresponding potential impact to the market. Carefully consider these factors and incorporate them into your technical approach to place you in a better position to lower trading losses.

Trading strategies

Strategies must be mastered one at a time. Attempting too much too soon or all at the same time will not only slow the learning process, but might also lead to undesirable outcomes. Select one strategy that resonates with you, study and master it completely. Once you have done so, only then should you look into adding more as you trade.

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