45 Tips on How to Trade Without Losing Money in Forex

Welcome to my comprehensive guide on “How to trade without losing money in Forex.” In the world of Forex trading, where most traders lose money, it’s crucial to understand the underlying reasons behind these losses.

This article is written to illuminate the common pitfalls and missteps that lead to unsuccessful trades. By delving into the reasons why Forex traders lose money, I aim to equip you with the knowledge and tips necessary to navigate the Forex market more effectively.

The focus here is not just on why most Forex traders lose money but, more importantly, on how you can avoid joining their ranks. Let’s embark on this journey towards more informed and profitable Forex trading.

How to Trade Without Losing Money in Forex

Learning how to never lose a Forex trade requires more than just luck. It demands a deep understanding of the market dynamics and a disciplined trading approach. This section will give you the 45 tips to avoid losing money in the Forex market.

1. Knowledge Deficiency

Most new forex traders do not take the time to learn what drives currency rates (primarily fundamentals). When some news or a statement is due out, they close out their positions and sit out the best trading opportunities. They are taught to only trade after the market calms down.

So essentially, they miss the whole move and then trade the random noise that follows a fundamental price move. Just think for a moment about technically trading the aftermath of a price move; there is no potential.

2. Overtrading the Trade

Often, tight stops and tiny profit targets will only make the broker rich. The desire to just make a few hundred dollars a day by locking in tiny profits whenever possible is a losing strategy.

3. Over leveraged

Leverage two-way street. The brokers want you to use high leverage, which means more spread income. After all, your position size determines the amount of spread income, and the bigger the position, the more spread income the broker earns.

4. Relying on Others

Real traders play a lone hand. They make their own decisions and don’t rely on others to make their trading decisions for them. There is no halfway. You either trade for yourself or have someone else trade for you.

5. Stop Losses

Putting tight stop losses with retail brokers is a recipe for disaster. When you put on a trade, commit to a reasonable stop-loss limit that allows your trade a fair chance to develop.

6. Demo Accounts

Broker demo accounts are a shill game of sorts. They’re not as time-sensitive as real accounts and give the impression that time-sensitive trading systems, such as short-term moving average crossovers, can be a consistently profitable trade. Once you start dealing with real money, the reality is quick to set in.

7. Trading During off Hours

Bank FX traders, option traders, and hedge funds have a huge advantage during off-hours. They can push the currencies around when no volume is going through, and the end game is that new traders get fleeced trying to trade signals. There is only one signal during off hours, and it is better to stay out.

8. Trading a Currency, Not a Pair

Being right about a currency is half a trade. Success or failure depends upon being right about the second currency that makes up the pair.

9. No Trading Plan

“Make money” is not a trading plan. A trading plan is a blueprint for trading success. It spells out what you see your edge as being. If you don’t have an edge, you don’t have a plan, and likely, you’ll wind up a statistic (part of the 95% of new traders that lose and quit).

10. Trading Against a Prevailing Trend

There is a massive difference between buying cheaply on the way down and buying cheaply. What was a low price quickly becomes a high price when you’re trading against the trend.

11. Poorly Exiting Trades

If you put on a trade and it’s not working, make sure that you exit correctly. Don’t compound the damage. If you’re in a winning trade, don’t talk yourself out of the position because you’re bored or want to relieve stress. Stress is a natural part of trading, so get used to it.

Make sure to check out this article on Forex trading for beginners!

12. Trading Too Short-term

Don’t make the trade if your profit target is less than 20 points. The spread you pay to enter the trade makes the odds way against you when you go for these tiny profits.

13. Picking Tops and Bottoms

Looking for bargains works well at the supermarket, but not trading foreign exchange. Trade in the direction the price is going, and your results will improve.

14. Being Too Smart

The most successful traders I know are high school graduates. They keep it simple, don’t look beyond the obvious, and have excellent results.

15. Not Trading Around News Time

Most of the big moves occur around news time. The volume is high, and the moves are real. There is no better time to trade fundamentally or technically than when news is released. This is when the real money adjusts its position.

As a result, the price changes reflect serious currency flow (compared to quiet times when bank traders rule the market with their customer order flow).

16. Ignore Technical Conditions

Determining whether the market is over-extended long or over-extended short is a crucial determinant of near-time price action. Spike moves often occur when the market is all one-way.

17. Emotional Trading

When you don’t pre-plan your trades, it is essentially a thought, not an idea. Thoughts are emotions and a feeble basis for doing trades. Do people generally say intelligent things when they are upset and emotional? I don’t think so.

18. Lack of Confidence

Confidence only comes from successful trading. If you lose money early in your trading career, gaining true confidence afterward is challenging. The trick is not to go off half-cocked and learn the business before you trade.

19. Lack of Courage to Take a Loss

There is nothing macho or gutsy about riding a loss. It’s just stupidity and cowardice. Moreover, it takes guts to accept your loss and wait for tomorrow to try again. Getting married to the wrong position ruins lots of traders.

The thing to keep in mind is that the market does crazy things often, so don’t get married to one trade because it’s just a trade. One good trade will not make you a trading success; instead, it is the monthly and annual performance that defines a good trader.

20. Not Focusing on the Trade at Hand

There is no room for fantasizing about successful trading. Counting up and mentally spending profits you haven’t made yet is mental masturbation and does not do any good. Same with worrying about a loss that hasn’t happened yet.

Focus on your position and have a reasonable stop loss in place when you do the trade. Then, be like an astronaut, sit back, and enjoy the ride. There is no sense worrying because you have no real control because the market will do what it wants.

21. Interpreting Forex News Incorrectly

The press only has a superficial understanding of the news they are reporting. They tend to focus on one element and miss the point. Learn to read the source documents and understand them for real.

22. Lucky or Good

Your account balance changes don’t tell you the whole story about your trading. If you take a lot of risk and make money, you will eventually crash and burn. Look at the individual trade details and focus on your big losses and losing streaks.

Ask yourself this: if I had a couple of consecutive losing streaks or a couple of straight big losses, how would my account balance look? Generally, traders making money without significant daily losses have the best chance of sustaining positive performance. The others are accidents waiting to happen.

23. Too Many Charity Trades

When you make money on a well-thought-out trade, don’t give back half on a whim. Instead, invest your profits from good trades on the next good trade. Here is a simple way of trading multiple time frames in Forex.

24. Courage under Fire

When a police officer breaks down the door to a drug dealer’s apartment, they are scared, but they do it anyway. When a firefighter climbs onto the roof of a burning building, they are afraid, but they do it anyway and get the job done.

It’s the same with trading, and it’s OK to be scared, but you have to pull the trigger. No trigger means no trades, and no trades means no profits, which leads to an unsuccessful trader.

25. Quality Trading Time

I suggest three hours a day of quality, focused trading time since that’s about all your brain allows. When you are trading, you must be 100% focused because the halfway effort is plain bullshit and does not work.

Don’t even think that time spent in front of the computer watching the rates has any correlation with profitability because it doesn’t. Spend less time, but when you are trading, be 100% focused.

26. Rationalizing Killer

Put your trade on and let it run. If it hits your reasonable pre-determined stop, you’re out. Moving your stop is like getting up after being crushed with a knockout blow, which is pointless, and things will only worsen. Don’t ignore the obvious when you are wrong. Come back the next day and try again. A slight loss will not hurt you, but a catastrophic one will.

27. Mixing Apples and Oranges

Have you ever done this: you see the EUR/USD trading higher, so you buy GBP/USD because it hasn’t moved yet? That’s a mistake. Most of the time, the reason the GBP/USD hasn’t moved yet is because it has already overbought or some 4:30 am UK news was bearish. Don’t mix apples and oranges. If EUR/USD looks good, buy EUR/USD.

28. Avoiding the Hard Trades Bank

FX traders have a hypothesis: the more complex the trade, the better the trade is. This I learned from experience when I needed to buy EUR/USD, and it was hard to get them. That’s when paying up and getting the business done is necessary. When it’s easy to get them, sit back and wait for better levels.

So, if you’re trying to get into a trade or, more importantly, get out of a trade, don’t put around for a few points. Instead, get your business done.

29. Too Much Detail

If you are trading more than two indicators, then you need to clean house. Having many indicators stifles trading and finds reasons not to trade. A setup and a trigger are all you need.

30. Giving up Quickly

Your first trade of the day may not be your best, but certainly, it’s not a reason to quit. I have a preset daily trading limit, and I use it. You can’t make money by making excuses. Getting trades wrong is natural and should be expected.

31. Jumping the Gun

Don’t be penny-wise and dollar-foolish. Wait for your trade signal to be clear. Make sure to put on your trade and give it a decent size stop loss so that you don’t get knocked out by random noise. Make trades, and don’t buy lottery tickets (extremely tight stops).

32. Afraid to Take a Loss

Trading is not personal but a business. Don’t think that a poor trade is a reflection of you. It could be that you are just ahead of your time, or a commercial order hits the market and temporarily creates a small, unexpected move.

Again, place your stop beforehand and NEVER increase your pre-determined risk. If it goes bad, it will probably get worse. I think that Einstein in motion stays in motion.

33. Over-relying on Risk Reward

There is zero advantage in risk-reward. If you put a 20-point stop and a 60-point profit, your chances are probably 3-1 that you will lose. Actually, with the spread, it’s more like 4-1 (from the entry point, if it goes down 17 points, you lose, or up 63, you win. 17/63 is close to 4-1).

34. Trading for Wrong Reasons

Just because the EUR/USD is rising is not a reason to buy. Buying EUR/USD because it’s not moving is even worse. you’re paying the toll (spread) without hinting that you will get a directional move. If you are bored, don’t trade because the reason you are bored is that there is no trade to do in the first place.

35. Rumors

Rumors are gossip almost 100% of the time. Think about where you heard the rumor in the motion. If EUR/USD is up 50 points in the last 15 minutes and the rumor is dollar negative, well, then you missed it. Whenever you trade, determine where in the motion you are entering.

36. Trading Short-term Moving Average Crossovers

This is the money sucker of the century. When the shorter-term moving average crosses the longer-term moving average, it only means that the average price in the short run equals the average price in the long run.

For the life of me, I cannot understand why this is bullish or bearish. Easy to set up on software, complete with lights, bells, and whistles, it’s good for the seller who’s getting thousands for the software, but in terms of creating profit, it’s a zero.

37. Stochastic

This is another money sucker. Personally, I think this indicator is used backward. When it first signals an overdone condition, that’s when I think the big spike in the overdone currency pair occurs. To be overbought means strong, and oversold means weak.

Try buying on the first sign of overbought and selling on the first sign of oversold. You’ll be with the trend and likely have identified a move with plenty of juice left. So, if %k and %d are both crossing 80, buy! (Same on the sell-side. Sell at 20)

38. Wrong Broker

Many Forex brokers are horrible, so make sure to get a good one. Read forums and chats in several different places to get an unbiased opinion.

39. Simulated Results

Watch out for black-box systems. These are trading systems that don’t divulge how the trade signals are generated. A great majority of them are absolute garbage.

They show you a track record of extraordinary results, but think about it: if you could build a trading system with half a dozen filters using the benefit of hindsight, couldn’t you develop a great system?

Of course, going forward is an entirely different story. High-speed number crunching capabilities allow for building great hindsight trading systems; BEWARE.

Check out this article on day trading Forex strategy!

40. Inconsistency

Every business (Forex trading included) requires a plan (trading plan). Unless you have taken the time to write down a set of rules you can and will follow, your trading will likely remain unfocused and directionless. Make a plan, have rules, follow them, set realistic goals, and you will achieve them.

41. Master of None

Focus on one currency for technical trading. Each currency has a unique way of trading, and unless you get intimate with it, you will never truly understand its underlying idiosyncrasies. Don’t spread yourself too thin. Master one currency at a time. Also, read bankers’ way of trading in the Forex market.

42. Thinking Long Term

Please don’t do it. Stay in the moment, especially if you’re a day trader. It doesn’t matter what happens next week or month; if you are trading with 30 to 50-point stops, restrict your thought to what’s happening right now.

That is not to say that staying in the long-term trend is not essential but that the long-term trend will not always help when trading in a significantly shorter time frame.

43. Overconfidence

Trading is complex, and the statistics show a 95% failure rate. If you’re doing well, don’t take your success for granted. Always be on the lookout for ways to improve what you’re doing.

44. Getting Pumped Up

The trick is to maintain an even keel. When in a trade, you want to think exactly as you would if you didn’t have a trade on. This requires a relaxed disposition since this is not a football game. Make sure to relax and try to enjoy it rather than getting psyched up.

45. Staying in the Game

I don’t recommend demo trading because traders learn bad habits when trading with play money. I also don’t think that letting it all hang out right away is wise, either. Start off making trades and taking a relatively small risk that still makes a difference to you, whether you win or lose. About a quarter to a third of what you expect to reach as your trading matures is reasonable.

The Bottom Line – Making a Living Trading Forex

The quest on how to never lose a Forex trade may seem elusive, especially considering that most Forex traders lose money. However, through this article’s exploration of the various reasons why Forex traders find themselves on the losing end, I’ve provided crucial insights and strategies to help mitigate these risks.

Keep in mind that successful Forex trading is not about never facing a loss but about making informed decisions, managing risks effectively, and learning continuously from the market dynamics.

By understanding these principles, traders can significantly improve their odds in a landscape where losses are common but can be intelligently managed.

This was submitted to me by one of my readers, and there is a lot of value in it. take this page, bookmark it, and read these points all the time. I don’t agree with everything, but this is good. Let me know what you all think of this. – Jimmy Young – Forex trader.

Casey

Thank you for reading!

Please leave a comment below if you have any questions about the ways to avoid losing money trading Forex!