How to stop losing your money in forex trading
How to Stop Losing Your Money in Forex Trading
If you are currently on a losing streak in the markets, today’s Forex trading lesson is for you. All of us experience losing trades, it’s just part of being a trader, but if you are finding that you’re losing more money than your making and you don’t know how to stop it, you probably have some bigger issues that you need to face and fix before you can stop the bleeding. I am going to give you a two-part program in today’s article that will hopefully provide you with the insight you need to stop losing more money than you are making in the markets.
Part one: Master your mind
The main reason why most Forex traders lose money, is because instead of consciously controlling their emotions in the market by preempting all aspects of their trading, they get caught up in a game of emotional trading, mostly because emotional trading is easier to do and offers more “excitement” than disciplined, controlled trading.
The Forex market essentially offers traders two options:
1) Gamble your money away in an up and down emotional roller-coaster of trading.
2) Learn to master your mind by becoming a disciplined trader and make slow but consistent money over time.
I will assume that your aim and goal is to become a disciplined trader so that you can foster the proper trading mindset in order to not gamble away all your money in the markets like so many traders do. Let’s take a look at the two primary aspects of mastering your Forex trading mindset:
• Understand and implement proper Forex money management to attain mastery of your mind
If you want to attain the proper Forex trading mindset and really master your own emotions when interacting with the markets, you will first need to understand and implement proper forex money management. The reason why so many traders become emotional when they trade is usually because they are either risking too much money or trading too frequently.
When you risk too much money per trade, you inherently place greater meaning on each trade, since you have more to lose; this naturally causes you to become more worried about the trade and more emotional in general. Once you induce this type of emotional trading, it works to feed on itself and cause more emotional trading. When you lose on a trade you’ve risked too much money on, you put yourself in a very vulnerable position to continue the cycle because you will feel great frustration and anger over the amount of money you just lost, and this will work to fuel your desire to continue risking too much in order to try and make back the money you just lost. If you want to avoid this type of emotional trading, you must learn to become a disciplined forex trader.
Another way traders mismanage their trading account money is by trading too frequently. Many of my students are surprised when I tell them that I only enter one trade a week on average. Some weeks I might trade two or three times, some weeks not at all. The point is that most traders trade way too much and most traders also lose money over the long-term, I don’t think this is just a coincidence.
When you find yourself over trading, what you are really doing is acting emotionally and gambling. Thus, in order to stop over trading in Forex, you have to learn to control your emotions by having a detailed Forex risk management plan that also includes specifics on how you can avoid over trading.