Most Forex traders have their priorities mixed up. The reason for that is that we usually brag about our wins and hide our losses. No one is going to login to a Forex forum and write about how they lost a lot less than they could’ve, but if you just get a 10 pip profit, all of a sudden you’re a shark, ready to call your friends and share the news of your new found wealth.
Most traders think about profit first and risk later. That’s why a lot of traders settle for small profits but let their losing trades ride all the way to a huge drawdown. If you’ve got profit in your sights first and foremost, you’re headed down a slippery path to vast losses.
In Forex trading, risk comes first and profit comes second. A distant second.
The reason is that if you lose too much you may not be able to trade anymore. You may blow out your account or suffer such a mental blow that you’ll be scared of trading ever again. On the other hand, if you miss out on a profit opportunity, there is always another which will come along soon enough.
You have to switch your priorities and make sure you reduce risk to as low as it can get, that you know in advance how much you can lose on each trade, and that you’re in control of the risk. Only then, plan the way you’re going to get profit out of the market.
If you don’t follow this advice, you’re doomed. If you do, you’re likely to profit more in the long run by cutting your losses short and letting your profits ride.
But first, minimize risk. Here’s a nice, short, video which shows how you can drastically reduce your Forex risk: Click here to watch this risk reduction video
