I could blow my Forex account.
But I'm not going too and here's the situation…
I've just got back from 2 weeks away.
I didn't look at one Forex chart for over 2 weeks (perks of success in Forex).
Many Forex traders in this position would like to act like a SuperTrader.
They think they can just turn on the charts and everything will go back to the way it was.
This is my first week back trading and I expect to lose. Not because I'm a bad trader or because I don't know how to find winning trades.
My Years Of Forex Experience!
I've learned from my years of experience trading that when you expect something negative, you can minimize the damage.
I'm bound to have rust (whether consciously or subconsciously). Many traders run the risk of placing all their chips on the conscious level of trading. When in fact the subconscious level is where real Forex psychology is won or lost.
If I came back feeling bulletproof and expecting to trade supremely well I would probably lose a lot of money.
But If I come back after a break expecting dire results, I can plan around it and be cautious.
- Risk a smaller % of my account on trades (I currently risk 2% or less)
- I could take less trades (I normally take 2 trades a day maximum when day trading)
- I could be extremely cautious
Nobody likes to lose but if you accept it you will get over it much easier and much earlier. These are the kind of things which determine who blows a Forex account and who trades consistently well.
Thinking about all this made me want to right about managing risk in Forex trading. And stop losses was something easy for us all to relate to when it comes to managing risk.
Use A Stop Loss Or Blow Your Account!
The fact is, we should all be using stop losses regularly. Risk management is essential. But especially after a two week break I want to more than make sure a stop loss is present. Because in times like this, this could be the thing that saves me from a series of bad trades which result in revenge trading.
Let's say I started trading this week without a stop loss.
I lost a few trades with minimal risk like I might do during a normal week. But after a few trades, losing started to get the best of me. Instead of a stop loss being present to take away any negative emotional responses, I could find myself wishing and hoping as my positions move further and further against me. This happens everyday to Forex traders.
Some of them are going through the same cycle over and over again. Others have no idea what's happening. I've explained in this blog post today something that not many Forex traders ever get to understand.
This is just one psychological element that effects many Forex traders regularly. These are the things which result in you losing money. There are many more. I reveal 50 different ones in my Fast Track Forex Bootcamp course (click here to find out more).
Do you want to blow your Forex account?
I would hope not. A stop loss will help you tremendously. And here are 3 reasons why.
1. Stop Losses are Automatic
The great thing about a stop loss is the automated element. If I enter a trade and place a stop loss, I don't have to spend the whole day watching the trade to see what it does. Stop losses free up loads of time for you to do other things.
You might work every day so don't have time to be there all day. I currently trade for about one hour every day, I don't want to be watching charts all day.
I spoke about travelling for two weeks. I could have had trades opened and not needed to really monitor them because I had a stop loss on my trades.
Stop losses provide much flexibility for traders and I am extremely surprised more Forex traders don't use them religiously.
There is a great power about knowing EXACTLY how much you will lose in a potential losing trade.
2. Stop Losses are Free
I've been using stop losses for years without any major problems. We're not even discussing paying for guaranteed stops. Regular stop losses are free. What do you really have to lose by using them?
Imagine buying a car and the salesperson turns around and says if you crash you are covered by our free premium cover. Wouldn't you take it?
It's a no brainer. It's kind of like a free insurance policy which takes no real extra work to be used. And I truly believe it forces you to be a more calculated Forex trader.
3. Stop Loses are Emotionless
Whether we like to admit it or not we are emotional people. This is one of the reasons why selling robots and magical indicators are so popular. Not because they work, but because they promise to solve a major issue everybody can run into.
I have already mentioned, we don't like to lose. You have two options:
- Do nothing and hope for the best
- Expect it, plan for it and succeed through it.
Most follow number 1 and lose. I teach Forex traders how to follow number 2 and get success. This is another key ingredient in my Fast Track Forex Bootcamp Course.
If I know I have the potential to hold a loser for way too long, the smart money would say never put yourself in that situation.
If I know I get too emotional when price goes against me and I start making irrational decisions I need to find a solution for that if I am going to be a successful Forex trader.
A stop loss doesn't worry about these things. It doesn't decide to move itself. You set it up and can walk away.
You can either learn to accept defeat early or keep hoping for a trade to turn around. The first is much easier, the second is more painful.
Make sure a stop loss is a solid part of your Forex trading going forward.
If you like this, this is just one area in which you could be falling short as a Forex trader. There are probably more areas which are stopping you from making money consistently as a Forex trader. I highlight 50 different elements which could be stopping you. With over 4 hours of solid Forex education you should get my Fast Track Forex Bootcamp. Click here now to get instant access for just $97.