How to Limit Your Forex Losses

For many, the world of forex is like a book whose pages you dare not turn. You’ve heard tales of it – of the fantastical profits and monumental losses – but you’re afraid to fall under the spell of the words, to become entangled in the charming, romantic lure of money and luck and risk.

In truth, the real forex experience is very different. As with many of life’s more mysterious and complicated pursuits, all that emerges from behind closed doors are the most outrageous stories: of millions won and lost, fortunes made and ruined.

The reality is a lot less exciting. Real traders only run the risks that they feel comfortable with. If you don’t want to lose every penny that you have on the chance of making a monumental amount of money, then you don’t have to. Indeed, provided that you follow these four top tips, you can ensure that your account is always in the black.

Top Tip #1: Choose the Right Broker

The best way to limit your forex losses is by choosing the right broker. As your sole portal to the markets, a good broker will act as your conduit, advisor, support system, and teacher, so finding the right one for you is the ideal way to set yourself on the road to success.  Recommended firms like FxPro have a great record of making money for their clients, as opposed to losing it. With their expert hand to guide your trading ship, the chances of you making a monumental mistake are massively reduced.

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Top Tip #2: Never Trade More than 15 Per Cent of Your Account Total

The next tip is very easy to understand. The golden rule of forex trading is that you can never lose more than you stake, and this is something that should always be at the forefront of your mind. If you stake 100 per cent of your total on a trade, then this is what you stand to forfeit. Considering that success is never guaranteed, this is a very serious mistake to make. A better way to trade is to limit yourself to never placing more than 15 per cent of your account total on a single move. Although losing this would be far from ideal, a 15 per cent loss is recoverable; a 50, 75, or 100 per cent loss might not.

Top Tip #3: Don’t Trade Reactively

Another top tip is this: never trade reactively. There is no place for emotions in forex, and once you start to panic over losses, lots of traders will make some desperate decisions to try and recoup them. Stop, sit down, and think about what you’re doing. If you can say with 100 per cent certainty that you would make a move even in normal circumstances, then proceed; if you can’t, leave your trades for the day, go home and think about what you want to do, and return to forex with a fresh head come morning.  

Top Tip #4: Learn from Your Mistakes

Top tip four is to learn from your losses. Losing money is inevitable in forex, and in itself it’s not overly problematic. As long as your account stays in the black overall, then you’re doing just fine, and the mistakes you make can actually be quite useful. You see, the best way to learn what not to do is by doing it. If you keep track of your trades, you’ll soon gain a handle on what works and what doesn’t, leaving you free to repeat the former and avoid the latter.

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Limit your forex losses today with these four top tips.

About the author

Mark Holland

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