Many Forex traders know that often one or two unsuccesful trades can destroy all the previous profits made during the cirrent day, month or year. It is natural to hear things like: "I made $10,000 in the previous month, but I had two unsuccessful trades where I lost twice as much".
The reasons for increased losses are different, but the most general is the fact that the Forex traders don’t want to admit that in the chosen position they are wrong. Indeed, a couple of successful deals can make your month, while a couple of less successful deals may destroy the success not only of this month, but also of the previous one.
One of the tactical schemes which changed the activities of many Forex traders dramatically is the practice of accepting the losses with the purpose of decreasing total damage. Many traders doing this and preparing themselves to the fact that they will lose are actually starting to earn.
The practice of incurring losses requires an attitude totally different from the dream about large incomes. You don’t get stuck with the thought how much you would earn or how you would feel. You just mechanically focus on the practice of incurring losses, proving for yourself that you can take losses easily, which occur when “stop loss” works. You concentrate on working without keeping the score of losses and profits.
An effective technique which works with any time frames is moving your “stop loss” to make-out to keep the profits. In other words, move your “stop loss” to the starting point just as fast as your position will become profitable. This will protect you from losing money in this position, and while the position changes in your direction, move “stop loss” to protect half of your profit. If the profit increases to a certain extent and then decreases more than by half, close this position. Many techniques can be used, but the key is a system which cuts down losses.
This system is similar to insurance. Though the price is high, there is a reason – a mistake can cost you everything.