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at 2:58 pm #6687AnonymousInactive
The human brains are designed not to embrace the losing trades. Most of the time the new traders are losing money only due to their lack of control over their emotion. After facing a small loss the novice traders get emotional and execute big lot size to trade to recover their loss. But this is something that you should never do in the financial market. People in the United Kingdom often consider this act as the number one mistake in the trading industry. Losing is nothing but a part of the trader’s life. You can easily make a decent income in every single month just following proper money management on every single trade. However, it’s true that being a new currency trader it will be really hard for you to embrace the losing trades but this is the number one duty of the professional trader. Losing trades are always appreciated as long as your follow proper money management. In today’s article, we will discuss the importance of losing trades.
Managed loss in the door way to success
No can make money 100% of the time by trading the live assets. If you think that you have all the knowledge of this industry then you are just making a big mistake. This market is dynamic in nature and every single second it’s changing its movement. So if you don’t keep yourself updated with the latest market news then it will be nearly impossible for you to get the best possible trades setups in the online trading world. In fact, many trades are only here to make money. Thing type of mentality often force the traders to execute big lot size trade after a losing trade. But if you simply trade with proper money management then even after facing many losing trades your trading capital should be completely safe. In any single trade never risk more than 1% of your account capital being a new trader. And always look for high-risk reward trades in the online trading world to safeguard your profit factor.
Importance of money management
The Forex market is totally unpredictable. Even the professional traders in the Forex trading industry can never predict the future price movement with 100 percent accuracy. So all of them are more focused on probability factor to make a decent income. For instance, if you risk 10% of your account capital in single trade then there is a high chance that you can lose 50% of account capital after 5 trade execution. But if you simply risk 1% of your account capital then even after losing 5 trades you will only lose 5% of your account. There is a huge difference between 5% and 50%.You need to understand the importance of money management to become a successful trader in this industry.
Losing is just a part of your trading career
As long as your trade the market with proper money management a few losing trades will not affect your trading career. In fact, you can easily afford more than 10 losing trades by risking 1% of your account capital in each trade. And it is highly unlikely that you will have 10 losing trades in a row. However, if you do have 10 losing trades then there is something wrong with your trading strategy. Out of 10 trades, you must win at least 3 trades. But to make money even after facing more losing trades, you need to make sure that you are trading with high-risk reward ratio. For instance, if you trade with 1:3 risk reward ratio then you can easily lose 3 trades in a row since a single winner will cover up all your loss.
Trading the financial instrument is an art. You need to be extremely patience in order to make money on regular basis. Make sure that you trade the market with proper money management and never take any risk which you can’t afford.
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