Any loss is a business expense for the Forex trader, especially in the discussion of Forex trading loss. And if you want to make more money, you need to either have more winning trades or will those you lose. Sometimes Forex trading loss hurts.
To avoid it, here are 5 things you need to know about Forex trading loss.
1. Trade Less
Whatever the number, you’re likely overtrading. If, of course, you are an accomplished investor, and regularly manage to benefit. A “good” trade is one where you can make a profit of at least 3R. That is your bare minimum for opening up a role.
At 3R, if you lose 2% of my account balance, that one trade might be worth as much as 6% income. Even at a risk of 1 percent it is still income of 3%. If you’re able to reduce your losing trades, a 3R win (or more) would have a much greater effect on your final score.
2. Use the Daily Time Frame
Daily time frame has a big deal in a Forex trading loss. First, it slows you down, allowing you to think through your decisions. No way to jump into roles and genuinely expect things to go your way. The daily chart gives you the time to evaluate the market, create a strategy and implement it without feeling precipitated.
Second, greater liquidity means better quality. For highly liquid markets technical analysis works best. All one has to do is equate a blue chip stock to a penny stock, and you’ll quickly see the difference.
Third is your ATM. Once you’re learning how to pyramid into a winning strategy, there’s endless potential for major wins. The average time frame is much greater than any lower timeframe in generating sustainable patterns. There is no alternative to it.
Fourth is filters out the noise. There’s no lack of market-moving activities in a global economy like currencies. Some are planned events while others are accidental, such as natural disasters. You can prevent much of day-to-day uncertainty by sticking to a higher time frame such as the daily one. It functions as a natural filter, in a certain way.
3. Always Consider Outside Forces
So long as you remain aware of what is coming up on the calendar as well as the key rates on the map, you are in a much better position to reduce losses from trading.
4. Master One Trading Strategy at a Time
One technique you need to learn at a time. Trying to do too much too fast would not only hinder the learning process but can also lead to some catastrophic consequences, such as blowing up a trading account.
5. Keep it Simple
Too many traders find it overcomplicated. They waste their time researching expert advisors or developing metrics when the true truths are right in front of them on why a market moves the way it does. The “secret” is to simplify the entire trading process, if you want to call it that.