Tips to Handle Trading Losses
Accept Responsibility:Own your losses and admit when you make a wrong decision. It is healthy to stay honest with yourself so that you can avoid repeating losses and mistakes.
Take a Break:After trading losses, you are more likely to make irrational trading decisions if you are overwhelmed and stressed. It is ideal to take a break when you feel that the market is against you. Take some time off trading and review your trading activity. Start by sorting out the weaknesses and mistakes to work on them.
Analyze your Loss:Successful forex tradersare always concerned with performance analysis. Not only good trades, trading losses should be analyzed as well. When you do this, you can figure out the weakness points to work on and wrong decisions to avoid later.
Assess your Exit Strategy:When you struggle with a severe trading loss, its better to reassess your exit strategy. If you hold on losing trades for long, then you should focus on cutting your losses early.
Keep a Trading Journal:Keeping a detailed trading journal will help you identify what needs to be improved and what you should stick to. A trading diary should include trade details including size,entry and exitpoints in addition to targets and risks. Writing down your decisions and emotions will also be more helpful. The more detailed a journal is, the more insightful it is.
Avoid Revenge Trading:Feeling frustrated after incurring trading losses is inevitable no matter how experienced a trader is. This feeling may push the trader to make irrational decisions leading to bigger losses. Revenge trading exists, and you have to be aware of it, work on it and contain it. Never let your feelings of anger and frustration take control of your decisions. It may be hard at first, but with experience you should have better command of that.
Move On:After reviewing your performance, analyzing your losses and accepting your mistakes it‘s time to move on from this loss and prepare for what’s next. Get back in the game and regain confidence.
Follow Risk Management Rules
Forex risk managementplan is a set of rules that help mitigate the impact of any risks that could threaten a trade. Risks are the potential threats that may cause losing money in forex trading. Managing risks is a key factor in successful trading.
If you keep your losses limited, by minimizing the impact of potential risks, you will be able to stay in the market for a long time. To achieve this you have to calculate your losses per trade. Stick to the 1% common risk rate for each trade. Also consider a proper risk-to-reward ratio of 1:2 or 1:3, meaning that potential profit should be triple or at least double the potential loss on the trade.
Using astop lossorder will help you minimize losses as possible if the market goes in the other direction by automatically closing a trade when the price reaches your set price level.
Read more detail on our Tips to handle trading losseson aximdaily.
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