Forex Trading Education - Losing Small

By: Harold Hsu

Forex traders often suffer from losses. If you've been live trading or even demo trading, you'll more often than not find yourself losing more than 50% of the time. But losing half the time in itself is not necessarily a bad thing. The problem is that too many traders react to this situation in the worst possible manner. In this article, allow me to show a winning perspective that will help you trade more profitably, even if you lose more than half of your trades.

To be a profitable trader, you'll have to take a long-term view on your trading. You see, many traders tend to obsess over every single trade they make, without realizing that it is only one of the hundreds of trades they will make in the months to come. To be a profitable trader, all you'll need to do is to win more MONEY than you lose... not to win more TRADES than you lose. It's a small but crucial difference, and the key is to keep your losses small and your winnings big.

Small Losses

More often than not, you'll find yourself losing more trades than you win. If you "bet" the same amount of money for each trade you make, you'll obviously come up with a net loss. For example, if you make 10 trades and risk $1 for each trade, winning 40% of the time (and losing 60% of the time) will net you a total loss of $2. ($4 - $6)

However, if you manage to keep your losses small, and reduce your losses to $0.50, then your total will become ($4 - $3) a positive $1.

Can you see how keeping your losses small enables you to have a net gain, even though you're losing 60% of the time?

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