Forex Articles 4
Position Size and Risk Mitigation in Forex
It is foolhardy to make a second trade, if your first trade shows you a loss. Never average losses. Let this thought be written indelibly upon your mind. - Jesse Livermore, Reminiscences of a Stock Operator
Risk mitigation should be at the forefront of every traders mind as it will be a contributing factor in your success or failure in the Forex market. If you're like many traders who think that they're bound to hit a win after a string of losing trades, then you're heading for a premature end.
The desire to win came sometimes cloud even the sanest of judgments and can cause financial ruin in some cases. Just ask Nick Leeson who famously who brought about the collapse of Barrings Bank in 1995. He, like many traders, didn't no when to cut his losses and just kept doubling up and trying again in the vein hope that the next trade would be a winner. It wasn't and he ended up losing billions and ultimately serving time in prison for his crimes. In these situations it's wise to focus on calming internal frustrations and not focusing on the losses too much. Focusing on any one trade in isolation is never a good thing... unless it's a big winner, in which case feel free to pat yourself on the back and have a drink or two! (more…)
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