Accepting Losses in Forex Trading

by Editor 931 views

In order to accept losses in Forex trading, one must understand why they are happening.  The best way to accept these losses is that once you understand where they are coming from, you can use them to learn for the future.  When you view a loss as a learning experience and as something that will make you a better, more successful trader in the future, it no longer seems as bad. Success cannot occur without failure and no one can win every single trade.  The best way to be able to accept your losses is to see how necessary they are to your success.

The overwhelming majority of Forex losses are painful because the losses are almost always   a greater sum of money than the wins.  This is unfortunately due to normal human psychology.  We are so afraid of failure that when a trade is losing we don’t want to exit. Our need to be right often makes us stick with things that aren’t going well because of the hope that they will turn around.  More than 50 % of all trades close on the positive side but the total amount of losses is greater than the total amount in the winning column.

Cut your losses.  This is something we know intellectually but when it comes down to it, many of us are hopeful that things will change instead of getting out of a negative situation before it becomes more negative. Psychological research says that loss hurts more than gain feels good.  That translates to being willing to gamble more to avoid a loss than to increase a win.  Once you understand that this is a significant issue in Forex trading, you can learn to force yourself to go against this instinct, limit your losses and they will be less painful and easier to accept.

One of the other lessons to be learned from Forex Losses is connected to this idea.  If you stick to a well-reasoned, well researched and realistic trading plan, you can limit your losses.  When you have an excellent trading plan and do not stick to it when you are losing, your losses will become greater.  If this happens to you, then the next time you confront the same situation, you will remember what happened and you will adhere to your plan.

Another thing that Forex losses can teach you is to go back to the drawing board.  When you are new to Forex trading, and you feel you are ready to start trading with real money instead of on your practice account or demo account, you might start and not be immediately successful.  These early losses can mean that you need more practice or learning time.  Remember that it is extremely important to be sure you are ready to be risking actual money before you make that leap.

Losses can also teach you to manage your expectations.  It is one thing to know that they will come and it is an entirely different feeling when you actually experience that feeling of loss.  Forex losses are inevitable and the sooner a trader accepts that the better prepared they will be when those losses actually happen.