Big losses will ruin your forex account! Just don’t let them happen.
You can’t make money trading forex unless you control you losses. And the only way to protect yourself from big losses is to use Stop Loss orders. A stop loss order is a simple Buy Stop or Sell Stop order, which you use to close an open position.
A stop loss order becomes market buy or sell order once the price reaches its level. Therefore when market moves fast, the actual execution price might differ a lot from what you expected. You just should be aware of that fact and try not to place stop loss orders at major psychological levels where everyone else places them.
Also, it’s a good idea to remove stop loss orders prior to news releases and 1-2 minutes after releases. It’s not uncommon for a price to swing wildly in the direction opposite to the main move just before and even after the news release.
Some advice placing mental stops, which means just keeping a certain price in mind and closing your position once the currency pair trades at that level. I don’t believe in mental stop loss orders. They just don’t work for me. I am too emotional for that. Also, if you trade in your spare time, you might not be able to react when a big move against you happens.
Remember, if you lose half of your account you will have to double what’s left just to get back to where you started.
It is not easy to double your account unless of course you risk too much. And in most cases, by risking too much you will erase whatever is left in your account.
Always know your risk. Decide on where your stop loss will be before you place the order. This simple step will save you tons of money and will keep you in the game of trading forex.