The best Way to deal with losses for beginners
First situtaion: trading in loss with small leverage
- When entering into a reversal trade with a small leverage and in the event that there is sufficient margin available for trading to enter into new deals. Here, the trader must look for a distinct opportunity, preferably on another financial asset that differs from the previous financial asset that is achieving a loss at the present time.
- For example, if the dollar was rising, and a trader bought the euro against the dollar, “in other words, he sold the dollar,” then the euro-dollar pair began to decline, without the trader placing an order to stop the loss. In such a case, it is preferable to buy the dollar against another currency, and in order for the success rate to be greater, it is preferable to search for the weakest currencies and buy the dollar against it.
- Generally, the trader needs to have enough experience to analyze the trend and forecast price movements, so that he can know the right time to enter and exit each of the open trades. Other than that, currency trading is a form of gambling and adventure.
Second situation: Trading in loss with big leverage
- When entering into a trade in the opposite direction with huge leverage and there was no margin available to open any other deals, so that the value of the account gradually approaches zero, in such a case the trader has a choice of only two, which are depositing into the trading account and analyzing the market in another form.
- The second method is to enter a trade on the same financial asset, but in the opposite direction of the first deal. Suppose, for example, that a trader has a capital value of $ 1,000, and he entered a certain deal with a large leverage (1 lot, for example 1.0), then this means that losing 100 pip points means the account's weighting and losing the entire capital, and this in the logic of money markets is a great risk, as The market could move the 100 pips in a few minutes.
- If this trader bought the sterling dollar pair, for example, with the leverage that we mentioned, and the sterling dollar began to decline to 75 points, “here the trader would lose $ 750,” and in this case there is no margin available for trading and entering into new deals. Even if there is any margin available, entering into any new position is considered the shortest and fastest way towards account review. So what is the solution?
- The solution, as mentioned, is to use hedge and enter into a sell position in the pound against the dollar at the same value as the buy position (1.0 lot). In this case we have a buy and sell position on the same pair, which means that we have stopped the loss bleeding. However, in order for the trade to be managed properly, the trader must have great experience with which he can correctly predict the trend.