Can I trade forex without losing?

Foreign exchange traders of all skill levels, from beginners learning about financial markets to experienced traders with years of trading expertise, are drawn to the global forex market, the largest financial market in the world, by the chance to make money. The market is open 24/7, offers flexible leverage, is reasonably priced, and is easily accessible. As a result, a large number of forex traders enter the market rapidly and then quickly leave after suffering losses and setbacks.

Trading, whether in stocks, commodities, or foreign exchange, is often presented as an opportunity  where big profits can be made with the correct strategies and advanced analysis. Many traders, especially beginners, view losses as an unacceptable aspect of trading. In fact, many of them will quit trading if they are exposed to such losses.

More than 80% of daily traders quit trading within the first two years, according to Bloomberg research, because they lack precise knowledge of both traditional and modern trading mechanisms and clear strategies, which leads them to make rash decisions that result in losses.

As a result, one of the common misconceptions among traders is that they should not be exposed to or acknowledge the concept of losses. Instead, viewing trading losses as part of the trading process, can help traders gain more experience, encourage them to take advantage of future opportunities, keep clear of rash or emotional decisions, protect their capital, and make money even in difficult circumstances.

This article will examine the reality of trading losses, explain why they are an inevitable and natural aspect of the process, and discuss strategies for traders to develop a risk-accepting mindset that views losses as chances for improvement rather than failure.

Losses are part of forex trading

Losses are inevitable in trading because it is an unpredictable activity, even with the best research, analysis, and strategies.

Due to the fact that trading is surrounded by numerous factors, many of which are out of a trader’s control, including abrupt geopolitical events that upset established market trends, even the most seasoned and proficient traders occasionally experience drops and losses.

It is not a sign of weakness to understand, believe in, and acknowledge this aspect. Instead, it is a crucial component of the trader’s mindset development, making him more adaptive and flexible to the markets and even to the noise surrounding the financial world. Understanding exposure to losses during trading is a tool for risk management in the broadest sense due to the fact that long-term success in the trading industry requires not only avoiding losses entirely but also managing them.

Losses may include more than just financial losses; they can also involve lost opportunities and poor choices, which can be explained as follows:

1. Financial losses: This is the most frequent and immediate type of trading losses. It happens when the market moves against the trader’s expectations and analyses, causing the trader to lose all of his capital. For instance, a trader may purchase a stock at $10 with the expectation that it will increase in value due to news or analysis showing the company’s success, but for geopolitical reasons or an emergency involving the company or market conditions, the stock falls to $8, costing the trader $2.

2. Missed opportunities: This kind of loss in forex is less evident but nonetheless very significant. It happens when a trader either misses the chance to purchase an asset whose price is rising for some reason, or when he or she does not act on a potentially profitable trade because of hesitation or fear. For example, they may miss a strong buy signal because of hesitation or fear, and instead choose to watch the deal pass before their eyes without taking advantage of it.

In this case, lost opportunities can be just as painful as monetary losses since they represent the potential profit that was not realised, which frequently results in frustration and speculation.

3. Incorrect decisions: This kind of loss can be one of the most common reasons for a trader to make poor choices. It can be due to inadequate analysis, opinions, or emotional and impulsive choices. For instance, a trader may sell a position early because he thinks the price has increased too much, hears a rumour, or is influenced by an expert’s analysis without verifying his identity.

A trader may also make a poor choice out of fear or greed, which causes him to act rashly and incur actual or even cumulative losses. For example, he may hold a losing position for an extended period of time in the hopes of a market reversal.

Losses in forex are helpful

In addition to the Bloomberg study, a study on forex traders by the US Securities and Exchange Commission shows that 70% of traders lose money every quarter and that, on average, they lose all of their money in a year.

According to one of those stories, Matthew Schneider, the CEO of e-States and a former stock market trader, revealed that he had lost his savings five times in a single day of trading. However, he clarified that these losses were not a disaster for him but rather, they were excellent chances to grow, learn, and turn significant losses into worthwhile lessons.

Expert forex traders stress that achieving success in the trading industry requires a long-term strategy rather than short-term gains or frustration from early experiences, which makes losses a necessary part of the process rather than the final decision to stop the journey at any point.

Understanding this fact releases the trader from an overemphasis on short-term performance, limited results, and even conflicting emotions of doubt about one’s own performance or the market itself. This raises awareness and prevents rash decisions, and it also strengthens the personality of a trader who is different from others, leading to the professionalism that many seek.

Actually, there are many advantages to this fact, particularly in realising and comprehending that everyone is susceptible to loss and that even the most skilled and experienced traders do not always win.

6 ways to deal with losses

1. Accept losses and control your emotions: There is no trader who has not experienced losses, regardless of how accurate his experience, understanding, and analyses are. This acceptance must include avoiding exaggerated emotional reactions like anger, frustration, or fear. So, remain composed and refrain from making decisions when upset.

2. Keep an eye on long-term objectives: By clearly defining objectives, especially long-term ones, a trader can view losses as a necessary component of the steps to achieving those objectives. This helps accept losses, handle them, and gain from them wisely.

3. Examining and evaluating losses: Understanding losses, whether they be monetary, the result of a poor choice, or an alternative opportunity and then going over and evaluating the circumstances surrounding them is a great way for traders to learn how to prevent them in the future or lessen their impact if they do occur.

4. Learning risk management: First, read about risk management in forex from reliable sources. The second step is about learning from past losses or other people’s losses to figure out the best course of action for you in terms of either identifying stop-loss points or figuring out the right position. The third step is about following the rules of risk management and putting them into practice.

5. Set reasonable goals: Determining the trader’s financial size, figuring out how much money is available for trading, and other aspects of the social and professional environment are all part of setting reasonable goals. It also involves understanding the trader’s personality and psychological tolerance.

6. Take breaks as required.
Making the choice to avoid the market when feeling anxious or excited after experiencing losses helps to prevent making poor emotional choices since trading under emotionally charged negative circumstances always results in losses that rise up.

7. Keep trading notes: Skilled forex traders are more likely to learn and develop new trading habits because they frequently keep notes on their trades and experiences, whether they are profitable or not.

Final thoughts

To succeed in any trade, a trader must comprehend losses, accept them, and learn from them. Along with being as familiar as possible with the conditions that can impact the markets, a successful trader must also surround himself with a wealth of knowledge, whether it be traditional scientific knowledge or immediate knowledge about the market he wishes to start trading in.

In fact, some experienced traders use the golden rule that “a little adds a lot” to mean that they should be content with certain profits from transactions rather than letting greed get the better of them and cause them to lose money they didn’t expect.

Disclaimer: This information is not considered investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced, or hyperlinked, in this communication.