One of the cardinal rules of Forex is to always try to minimize your losses. With minimal losses, you can survive when the market moves against you and will you be well positioned when the trend turns around. The proven method to do this is to indicate your maximum loss before you enter the market. The maximum loss is the largest amount of capital that you can lose. 95% of tradeurs lose money because they did not apply good money management rules.
What happens if you do not specify a maximum loss? Look at an example. If I had a capital of $ 1000 and I started to trade with $ 100 in a single trade, it would be reasonable to experience three losses in a row. This would reduce my budget to $ 700. What do you think 95% of tradeurs say this time? They reason: "Well, I already had three losses in a row. So I'm going to win now."
They decide Dechange with $ 300 on the next trade because they believe they have a higher chance of success. if tradeurs really enter the next trade with over $ 300 because they believed they would win, their capital could be reduced to $ 400. Their chances of making money are now very slim. They need to make 150% on their next trade just to balance their budgets. If they state their maximum loss and remained faithful to that decision, they would not be in this position.
Here is a perfect illustration of why most people lose money in the currency market. Suppose you enter the market with a capital of $ 1,000 and you exchange with $ 250. After only three losses in a row, you will have lost $ 750 and your capital will be reduced to $ 250. Effectively, you must make a return of 300% on the next trade just to balance your budget.
In both cases, the reason for the failure was because the tradeur risked too much and did not apply the proper management of money. Remember, the goal here is to minimize our losses by applying a good strategy to avoid the losses that can stop your adventure on the market.
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