How To Make Money In Forex: Learn How To Take a Forex Trading Loss

Forex Trading losses are part of the deal, since in order to trade we have to risk losing. We have to accept that risk in order to succeed.

You should treat losses as a normal business expenses, after all it’s the money in your account at the end of the month that matters.  A loss never bothers me, I forget it instantly.

You should know where you will exit if the trade wins AND if it loses. A losing trade is an automatic function of your trading plan, so learn from it. You will have a rule in your trading plan about how many consecutive losses you can have before quitting trading for the week. This is an important rule to obey without question.

The following comments about Forex trading losses were made by a “Pit” trader named Peter Crowns on one of the internet’s many Forex forums.  I think you may find them interesting…

In reality much of what I will say has been said, by various people, various times; but maybe not in application to something that works so well…. There will, no doubt, be those who will recognize themselves when this is read. (Also, thanks in advance to Dr. Phil for some coming “get it” remarks.)

Wikipedia, which is becoming the virtual source of most information that is close to trustworthy for us in cyberworld states this under the definition of TRADER:

In finance, a trader is someone who buys and sells financial instruments such as stocks, bonds and derivatives. Traders are either professionals working in a financial institution or a corporation, …. or speculators. They buy and sell financial instruments traded in the stock markets, derivatives markets and commodity markets.

Forex is a derivative market.
Nowhere is there a definition of trader where traders are those people who buy and sell without losses. Losses are an integral part of trading, and those who spend most of their thought processes trying to figure out how to trade with the fewest losses, don’t “get it”. I know that some reading this will think I am over-reacting about the question of losses and loss taking, when in reality no one seems to take the concept of losing regularly as customary.

Until you learn how to lose, you cannot win, long term, as a trader. Take your losses for God’s (and yours and your family’s) sake, and then forget them. Get past them, recognize that they will happen a lot and learn to handle the one thing you are in complete control of. How much risk you take and the size of losses you take. Then the only thing you will be profits.

What a problem!!!

When I started trading in futures you had a fairly good idea (but not perfect by any means) of how much risk you were taking on trades until you came to a day when you put on a trade and there was an air pocket where there was no trade for dozens or 50 or 100 ticks when some big news hit the market and funds gobbled up all the offered contracts. If you were a slow pit guy you “died” that day if you had too much size on. We all have it so good today trading forex.

If you can’t see the advantages you all have and the opportunities to cut your risk to virtually nothing (pennies a pip if you wish), and the right to hold on to your winners almost forever if you want…!
What is everybody’s problem? Don’t you know that only losers get so freaked about having losses???? Losses are just losses. Make sure they are smaller than your winners, in aggregate, and you’re home free. I suppress more frustration at this stupidity than you can imagine. Your mental state of trading is KEY.

I hope you found that as informative as I did. Final thoughts from me; A losing trade can be useful if something is learned from the experience. It is how you deal with a losing trade that will determine your success. Don’t take your losses personally, professional traders have losing trades and (in fact they expect them). If a trade does not work as planned say “that’s interesting,” then find out why and move on.

By |2013-03-03T04:50:26-06:00April 8th, 2012|Forex Risk Management, Phil's Forex Blog|2 Comments
  • GW says:

    Great post. Losses are just as much about trading as expecting huge gains. Good advice.

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