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Limiting Your Forex Losses: 3 Tips to Reduce the Risk

Forex is not a pursuit for the faint of heart. Highly complex, challenging, and thrilling, it offers the potential for great profits alongside the risk of staggering losses. It has taken many an investor, chewed them up, and spat them back out, whilst it has raised others to true brilliance.

Yet the risks you run don’t have to be so high. Although many forex traders are libertine gamblers with a taste for danger, the true professionals know how to limit their losses, and this is a skill that even the lowliest investor can acquire.

If you want to spin the forex wheel but you’re afraid of the outcome, here are three tricks to limit your losses, and turn your trading into a triumph

Tip #1: Choose the Right Broker

In the world of forex, a good broker will be the greatest defender of your capital. They will make all the difference between profit and loss, so it pays to spend some time finding someone suitable for you. Rather than searching for the cheapest firm, or going with a single recommendation, spend a few weeks researching them properly. Look at those who come within your budget, read reviews and recommendations online, and check industry websites for statistics and so on. You’ll find that it pays to really sit back and consider the level of support you’ll require, and then to find someone that can offer this. Don’t be afraid to ring up those on your shortlist and speak to them in person; you’re not wasting their time when you could potentially end up making them a large amount of money, and they will understand this.

Tip #2: Stick to the 15 Per Cent Rule

 

 A good broker will go a long way towards steering you away from dangerous trades, but you will be the main driver of your success, so it pays to understand one simple concept: you can only lose the amount that you stake. Always remember that the capital you stake represents real money, and that risky gambles mean that you could lose it all. However certain you imagine the prospect of profit to be, success is never guaranteed, so staking 100 per cent of your funds on the outcome of such a trade is a recipe for disaster. Instead, stick to staking 15 per cent maximum, as such a loss will be recoverable, however bitter you find the taste of it to be.

Tip #3: Never Trade Reactively

Our third and final tip is this: never trade reactively. The aim of forex is simply to stay in the black, and this means that individual losses matter little in the grand scheme of things. Provided that you stick to the 15 per cent rule, they should be recoverable, so don’t let them affect you. If things start to go wrong, avoid the temptation of throwing more money at the problem, and write off your losses as unfortunate, but not disastrous. Do not be tempted to trade reactively to recoup them, for that way ruin lies.

Follow these three top tips today to limit your losses, and turn your forex venture into a roaring success.

 

 

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