How to control losses in Forex

We know that money management will bring us long-term gains in the Forex market, but now we want to show you the other side of things: what happens if you don’t apply the money management rules? Consider this example: let’s say you have $ 100,000 in your account and lose $ 50,000. You have lost 50% of your account. What percentage of that $ 50,000 do you have to earn to get back to $ 100,000? It’s not 50% … You need to earn 100% of your $ 50,000 to get back to the original $ 100,000. This is called reduction. In this case we have a 50% discount. The objective of this simple example is that it is very easy to lose money, but very difficult to recover. We know that, in your opinion, it

We always look for an advantage. That is why operators are developing systems. A system with a 70% profit seems an excellent system. If your system earns 70% of the time, does that mean you earn with 70 for every 100 trades you open, or 7 out of 10 losing trades? You don’t know. You can lose the first 30 exchanges and win the remaining 70. That gives you 70% profitability. But, I should ask, could I bear 30 losses in a row and continue working? This is the reason for the importance of money management in Forex. No matter what

system you use, you might have a bad execution at some time. Even professional poker players who live from the game have terrible bad luck and still make a profit. The reason is that good poker players have money management rules because they know they don’t win every tournament they participate in. They only risk a small percentage of their accounts to survive the bad streaks. This is what you should also do as a currency trader. Risk only a small percentage of your account with each transaction to survive the bad times. Remember that you will always win if you have a good trading system and strict rules for long-term money management. In the next article of our Forex course, let’s illustrate what happens when you apply the money management rules correctly and not …

 

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