Risk management is one of the main things that new traders neglect to their great peril.
In this section I will offer some very useful tips and advice on how to manage your risk and ensure that losing trades are a minor occupational hazard rather than an exponential disaster.
First I need to make it very clear that you, me and every other forex trader on the planet has and will always have losses.
Next, you need to adjust your thinking to not only accept these losses but also expect the losses, because if you’re expecting them they will come as no surprise and are less likely to knock you out of your stride.
Once you can accept this you can view it as a problem to work around rather than solve. It is when people decide that they need to find a 100% win rate that they get sucked into the quest for the holy grail of trading and once you get sucked into this quest you can forget all about making money.
The biggest mistake of the unsuccessful trader is that of focusing on a high win % when in reality the most important thing is a good risk reward ratio and consistency.
When you combine this with an edge you have absolutely no reason to fail other than your own psychology, fortunately there are things that you can do to reduce and control your risk and keep yourself profitable despite losses.
Next: Risk Reward Ratio