Ways to minimize your losses while trading forex

Many people think that forex trading is an easy way to millions of dollars because some $ 19.95 ebooks tell them. The types of publications talk about the potential of trade victory that you can make, but only a few will mention potential losses.

For example the winning trade, say the EUR / USD contract is traded at 1.2500. You believe the euro will increase its value, so you buy a contract for 100,000 euros and sell $ 100,000 USD (this will require a deposit of around $ 1000 of your own money). After a few hours, your predictions are correct, and the contract value goes up to 1.2510, making 10 pips profits. Because it is a $ 100,000 contract, every pip is worth $ 10, therefore you get a profit of $ 100 at your $ 1000 deposit. 10% profit is pretty good for a few hours of work! However, what do you do if the contract value goes to 1.2490? This means you lose $ 100, or a 10% loss on your $ 1000 deposit. Eh oh … how many of these losses can you maintain? On a small account of $ 1000, not much! Therefore, the key to successful forex trading is you need to keep your losses at a minimum, because you will make a loss in the end.

The only way to guarantee never to lose money in Forex trading is to never trade at all. One thing that by some smart forex ebook sellers mentions in their book is that losses can occur, and they will occur to everyone. Here are some ways to minimize your losses in forex trading.

Have a plan

Most Forex traders do not have a trade plan for what must be done if they make a losing trade. They only hold on to their losing position in hopes of returning. Often, their losses cannot be maintained by their account, and therefore they finally lost everything. Smart traders who make millions of Forex trades have a trade plan that tells them what to do if they begin to make losses. This usually means out of trade very quickly if you don’t do, thus minimizing their losses. This good trader does not have any problems that recognizes they make a losing trade. In fact, they might notify you that they produce twice the more trade they do with the winning trade. So, how do they make money? Simple, one of their winning trade can produce ten times than one of their trade because they keep their kingdoms small. Therefore, put your self-esteem and learn to receive lost trade quickly!

Exercise makes it perfect

Most online forex brokers will allow you to practice your trade first. Each broker has a slightly different procedure to enter and exit trade based on their software, so it’s best to practice first. This means that they can manage practice accounts with $ 10,000 (or other numbers) of hypothetical money, where you can watch and learn their graphics and trade with “money” this as if it is yours. So far, this is the best way to learn how the market moves and you can test whatever trade techniques you do. By doing this, you will learn a lot, because it’s like learning how to trade using other people’s money and there is no risk of real loss (or real profit too)

Have a big trade account

After you practice forex trade and gain trust in your trading capabilities using online brokerage software and hypothetical money, you may feel it’s time to use your own money. You must have as many accounts as possible. Large, I’m not talking about millions of dollars. If your broker requires a $ 1000 deposit for every $ 100,000 of your trading currency, why not have $ 10,000 in your account. That way, if you lose 50 pips (ie $ 500), you only lose 5% of your total money, not 50% if you only have $ 1000 in your account. If you don’t have $ 10,000 to be traded, the next tip can help you.

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