In What Ways Can We Avoid Losing Money in Forex Trading

If you are a beginner in trading, you will face losses, but with proper fund management you will still be in business. There is no perfect technique to avoid loosing money. You can not avoid losing money, but you can minimize the losses to only those losses that are inherent to trading.

One very important thing in trading after fund management is to avoid emotional trading.

Two Kinds of Losing in Forex

Losing money in Forex is very easy. There are two kinds of losing. Losing because your analysis was wrong. Losing because your impatience, greed or fear stepped in. Those are the losses you can get rid off, by training self discipline.

Loss Trader

The way to stop losing and to start winning is to first shift your thinking:

  • Take your FOCUS off of money and profits-focus on learning
  • Set a reasonable profit goal for each trade instead of holding onto a trade until it eventually retraces into a loss
  • Trade less and only take high probability trades which meet very strict criteria you have developed for your style of trading
  • Trade when there is alot of liquidity in the market during London and New York sessions and don’t trade when the market is slow and consolidating
  • Use a reasonable stop loss based upon your style, time frame, etc. so you don’t get stopped out on every trade
  • Keep a journal of what works and what doesn’t and keep doing more of what works and less of what doesn’t
  • Keep learning about order flow, market structure, auction theory, how big boys make money and don’t get caught up in software, indicators and sales pitches
  • Read the following books:

“Reminiscences of a Stock Operator” by Edwin Lefevre

“Art of War” by Sun Tzu (Not a trading book but the best reference book to understand the nature of trading as a war of wits)

“The Trading Methodologies of W.D. Gann” by Hima Reddy

“Time Compression Trading: Exploiting Multiple Time Frames in Zero Sum Markets” by Jason Alan Jankovsky

“The Game in Wall Street” by Hoyle

These books will help you to start to think like a professional trader.

  • Write a trading plan. Keep a trading journal. Always trade small and always manage risk.  Good luck.

There is no technique to stop you from making losing trades in the forex market. But there are several principles that can make you consistently grow your equity overtime.

  1. Cut your losses short and let your profits run (in trend trading).
  2. Carry trading is one positive foolproof technique to milk the market consistently.
  3. Know your strategy and stick to it

Truth is, making profit consistently is different from never having losing trades. Trading is like a game of probabilities. The odds are simply in your favour or against you and it can be felt and seen only over a period of trades, not necessarily one specific trade.

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