Trading forex can reveal many mindset challenges in new traders, as it is a volatile market. One day your trades could be doing well and showing a good return and then the next day it could all change. There are many reasons for the change in value of your trades. A question that is asked a lot is ‘how do I stop losing money on bad trades’?
Forex Trading is becoming increasingly popular and many people are joining the market. Learning to trade forex is simple and; once you are aware of the different things to look out for, you will be able to tailor your trades to help you try and stop losing money and start making consistent positive gains. We have put together a guide to help you through your trading experience and help you to not only reduce the amount you are losing but help you to make choices in the right direction.
Accept There Will be Bad Trades
If you go into trading with the mindset that you have picked all the right trades and that they are going to perform well – you are going to come out with a negative experience. There will always be trades that do not perform the way you would like them to. Going into it with a level head, knowing that there will be some that you lose money on will help you to make smarter decisions, research more and be stronger when you do lose money. The mindset that you have is very important.
Think Long Term
Forex Trading is not a strategy for those with just short-term goals. Trading is a long-term investment strategy and you need to think of it that way. You can not be looking at your investments after a week and become frustrated because you can not see a return yet. Being able to look at it as a long-term investment will help you to make your decisions in a smarter matter. Knowing that it is a long-term investment means that you will take the time to look into the investments and choose the ones that look like they will give the best overall return at the end of the investment period.
Use a Proven Profitable Trading Method
The trading method that you choose is very important. You need to choose a method that is strong and that is able to show consistent positive results. Going into trading without a clear plan and method can get you into a lot of financial trouble. Using a strong trading method means that you can work through the defined clear steps that have already proven to produce a positive result and this can help provide you with the information and details you need to successfully trade for consistent profit. A method such as the LIFT Method which details each part of the investment journey, from planning, risk management, mindset, entering and exiting with a profit focus helps you to make the clear headed professional trading decisions needed for long term success. The LIFT method has been successfully used by many people with all levels of previous experience and the results have shown to support long term success.
Don’t Take All the Trades
Trading can be exciting and with the number of different options available it can be hard to say no when you see price spike suddenly. This is where you need to be smart and strong willed. Don’t take all the trades available. Stop and take the time to look at them, their return and their probability. Contrary to belief, just because a one currency pair has been performing well recently, does not mean it will continue to do so. Don’t choose all trades that have the highest profit. Choose the trades based on not only their past performance but their future probability.
Lock in Profits
If you have trades that are performing well and the profits on them are showing this, lock in those profits. It is better to have made a profit than to get greedy and wait for it to increase more, whilst potentially risking the profit you have already made. There are always risks involved with trading and if you do not lock in a profit, there is the risk that you will lose that profit and potentially decrease the price of your trades. Trade smart and lock profits in when you need to.
Have Strategies in Place
Investing and trading comes with risks and before you go ahead you should have in place strategies to not only limit your risk of loss but also strategies on what to do if you do have a significant loss. Having a stop loss strategy in place will help you to recoup the initial investment amount if things start to look bad. If you have a number of different open positions, set a strategy for the exit of some, in the times where volume starts to decrease. Having this fallback strategy in place is all about your peace of mind and helps you to continue trading with a clear mindset.
Many people look at trading and see it as a long-term way to lose money. If traded correctly you can significantly increase your initial investment amount and see good returns. Forex Trading is simpler than most people believe and can be started quickly, provided you start on a firm foundation of reality. Understanding the process is important and knowing what you are trading with is equally important. Take the time to research, get in contact with someone who can help you make the right decisions and most of all – enjoy it!