Managing Spot Forex Trading Losses

One of the most important rules of spot forex trading is to keep your losses as small as possible. With small spot forex trading losses, you can outlast those times when the market moves against you and still be well positioned for the trend reversal.

The one proven method to keeping your losses small is to set your maximum loss before you even open a spot forex trading position. The maximum loss is the amount of capital that you are willing and able to lose on any one trade.


With your maximum loss set as a small percentage of your total forex trading account, a string of losses won’t stop you from trading for any particular amount of time. Unlike 95% of the spot forex traders out there who lose money because they haven’t implemented wise money management rules to their forex trading system, you will be better prepared with effective money management principles.

To use as an example- If you had a forex trading float of $2000, and began trading with $200 a trade, it would be reasonable for you to experience three losses in a row. This would reduce your spot forex trading capital to $800.



Perhaps you would then decide that you’re willing to risk $400 on the next trade because you think you have a higher chance of winning after having lost three times already.

If you as the forex trader were then willing to risk an additional $200 dollars on the next trade because you had an indication you were going into a winning trade, your capital could be reduced to $500 dollars.



The chances of making money now are practically zero because you would now need to make 150% on the next trade just to break even. If the maximum loss had been calculated, and adhered to, you would not be in this unfavorable position.

In this case, the reason for failure to produce a profit was because the trader risked too much money, and didn’t apply good money management to the spot forex trade.

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Remember, the goal here is to keep your losses as small as possible while also making sure that you open a large enough position to capitalize on profits and minimize losses. With your money management rules in place in your spot forex trading system you will always be able to accomplish this.