Even when traders have been trading different financial markets for decades, they know and will tell beginner traders that one of the most crucial steps to achieve success in forex trading is to maximize profits while minimizing losses, as much as possible.
However, despite the trading strategies that successful traders use and how much they stick to their trading plan, they will have experienced some trading losses, made bad trades, fallen for forex scams, or underestimated the market conditions.
Achieving successful and profitable trades is one thing but recovering from a streak of trading losses is another, as the latter demands a different mentality and set of skills, and it can even mean taking a break from trading for some.
Emotional Discipline is Key
If traders are on the verge of losing a trade and they are looking for different ways to alter their trading plan, they should consider exiting their trade before they lose more than they can afford.
Even if there is a slim chance of recovery, it is not worth pursuing if the trader could risk losing all the capital in their trading account.
Traders should not allow for a bad day to dwindle the profits that could be made on a good day.
Evaluate the nature of your loss
Once traders have gotten out of a bad trade, they need to consider the nature of their loss in the forex market, between either of the following two that typically occur:
- Emotional losses – which are losses that are triggered when traders are over-emotional or too emotionally invested in their trades, either by over-trading and not following the trading plan, going outside of the boundaries of money management or having an unrealistic profit target.
- Technical losses – caused by statistical issues that can be traced back to the trading strategy. In addition, even when traders trade responsibly and consistently, some trades will end up with a loss as no strategy is guaranteed to work all the time in all market conditions.
Once the trader has evaluated where they went wrong, they can take a step back and assess the situation. Whether the loss was big, small, isolated, or part of a consecutive stretch of failures, it is an important process that allows traders to learn from their mistakes.
If the situation is dire and to such a point that the trader has a negative balance in their account, they can do nothing more than to take a break from trading and returning once they have the finances to continue trading says Louis Schoeman from Forexsuggest.com
Traders are urged not to dip into their savings or to use funds that they have allocated towards other things to restart their trading careers.
Go back to your demo account
This may seem like going a few steps backwards, but it is one of the best ways for traders to retrace their steps and evaluate their trading strategy from step one to see where they can modify and just it, or whether they can start a new strategy altogether.
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Focus on what helped you achieve success
Retail traders who have been trading in the forex market for long enough will know that they have their share of wins and losses. Traders are urged to go back on their trading journey and to revisit their trading objectives, to evaluate whether they are relevant, and to realign themselves accordingly.
Traders can review their successful trades and consider all the components from the trading strategy, forex currency pair they traded, and the market conditions at the time to use it to build a new strategy.
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