Limiting Your Forex Losses

Forex is exciting, challenging, and thrilling, but that doesn’t negate one fundamental truth relating to it: it’s a dangerous game to play. Ideally suited to entrepreneurs, go-getters, and gamblers, it is a high risk, high reward venture, and it’s not for the faint of heart.

This doesn’t mean that you have to gamble everything that you have whenever you want to place a trade. Although you always run the possibility of losing the money you stake, the degree of risk that you take is entirely down to you. It is impossible to lose more than you have invested, and this means that there are lots of strategies to safeguard your assets and secure your success.

Forex Losses

If you’re in need of a little education, then here are a few methods that you might like to try…

Choose a Good Forex Broker 

Once of the most important safety nets that you can put in place is a good forex broker. Experienced investors understand how important this is, but their novice counterparts will often make a selection based on little more than their budget. A better way to approach the decision is by contemplating how much support you require, and carefully considering each brokers individual track record. Reputable names like OANDA tend to offer a good starting point, and will provide a steadying hand on the wheel to guide you through even the stormiest of waters.

Adopt the 15 Per Cent Rule 

Choosing the right team of people to support you is an excellent first step, but you’ll also need to assess your strategy, and make some changes where these are necessary. One of the most important methodologies to implement is the ‘15 per cent rule’. In the world of forex, you can only lose as much as you stake, and this means that gambling too much of your account total on a single trade is never a wise move. A better approach is to limit yourself to placing no more than 15 per cent on individual trades, however promising they appear. This way, should it all fall apart, you still have 75 per cent of your earnings to fall back on. After all, a minimal loss is recoverable; a larger one may not be.

Learn from Your Mistakes 

Although we all want to perfect our trading, small losses and early mistakes are inevitable. Even the most successful investors get it wrong sometimes, but the best way to limit your losses is to view this as a learning curve. Every time you make a trade, keep a note of it, whether it works or not. Then, come the weekend when the markets are closed, sit down and review your every move. Once you can identify the factors behind your losses, you can learn not to make the same mistakes again.

Apply our advice to your trading strategy today, and limit your forex losses.