How to Manage a Forex Trade Gone Wrong?

A lot of forex traders struggle with this and while there are many ways one can go about handling this one of the things I advise new traders to do is to cut your losses and learn from it. All the planning for a trade should go in before you enter your order. This is when you are free of emotions and you can think logically and rationally. Have an exit strategy for each scenario so you know exactly what do to if something goes wrong and do not enter a trade without a proper strategy and react to it as situation arise.

There are tools like stop loss which will be very helpful if things go wrong, and if you are making mistakes regularly , then you should take a break and replan your strategies before investing.

How to Manage a Forex Trade Gone Wrong? -Close it!

Many traders start using recovery with martingale etc or simply wait for it to turn in their favor when they trade without SL and going for small amount of pips, this can work few times but if you make this a habit it will lead to disaster in long run, so I do not recommend anything than closing it, it might be hard emotionally at the beginning but you will get used to it and your account will appreciate it :slight_smile:

Kick the cat, slash the neighbors tires and have faith in your trading plan. Equity locked up in a “losing” trade is equity unavailable to trade with. And considering we’re speculators not investors then we need that equity available.

One should never enter a trade without first setting a reasonable stop loss. Once the trade has been entered there is nothing left to do with a losing trade besides wait for it to hit the stop.

The issue becomes what a trader does AFTER a trade hits a stop. Typically emotions drive traders into getting into another trade ASAP. These type of rebound trades are usually impulsive and poorly thought out and typically compound upon the first loss. In the poker world this is called going on ‘Tilt’, and weeks of good profits can be blown in a few hours of perpetrating this trading sin.

After losing a big trade, take a step back… Close your computer… And take a walk. Come back with a fresh mind and come up with a well planned trade to recover your loss. Spend the extra few minutes… It’s worth it.

I agree with TheLastBear and bobbillbrowne. I disagree that simply setting a SL will be enough as I have met traders who set their SL and then move it once their trade moves against them. It is a terrible idea and basically the same as not having one. As TheLastBear said you need to have an exit strategy before you enter the trade. I think many fail to stick to their plans in early on as new traders and despite having it react emotionally which leads to losses.

[QUOTE=“Rambo35;678209”]As TheLastBear said you need to have an exit strategy before you enter the trade. [/QUOTE]

AKA a stop loss.

Yeah, there is one type of stop that I use, borrowed from Livermore, a time stop. I was actually re-thinking my use of a time stop, whereby I exit a trade if it’s not moving in intended direction after a couple of days.

I had come to the conclusion that this approach (remember on short term trades) was a sign of impatience on my part.

I was long EUR/CHF, applied the stop before the SNB wizardry - saved me a few pips - although I still think I was just lucky :slight_smile:

BTW, for learners, Livermore didn’t see a time stop as impatience, he argued that the second you enter the market you are exposed to risk, if you are not seeing any gain from that risk - then exit the risk, “don’t hope” was his mantra.

It is essential to follow up the person who is well experienced in this work. So, At online we have many sources through video and data regarding to know about the trade and trading system, strategies and tips. It will be more helpful to get the success in this one.

The best thing to do then is to find a way to exit the market to avoid a margin call from your broker; secondly don’t enter the market with the hope of making back your losses; you will end up loosing more money.

How can someone possibly even think of entering a trade without a stop loss. If you don’t have a SL --> you don’t know what percent of your account your risking. POOR money management Pick a SL, make it equal to a 1% loss ( or a little more) and move it to BE whenever you get in some profit. For me, if I risk 2%, I move to BE when I’m 2% in profit. And don’t ever increase your SL. It’s not rocket science

[QUOTE=“pipdawkter;679384”]How can someone possibly even think of entering a trade without a stop loss. If you don’t have a SL --> you don’t know what percent of your account your risking. POOR money management Pick a SL, make it equal to a 1% loss ( or a little more) and move it to BE whenever you get in some profit. For me, if I risk 2%, I move to BE when I’m 2% in profit. And don’t ever increase your SL. It’s not rocket science[/QUOTE] Trading without a stop loss can be a valid strategy but it would be only reserved for position trade where you have a strong fundamental reason to go short, plan on holding the position for years, and aren’t using much if any leverage.

Carl Icahn (one of the worlds richest men) is a good example of this as he built a long term short euro position over the last two years… Having an average entry position at 1.27 and holding it short despite it nearly reaching 1.40. Because he had a strong conviction based on the fundamentals, and wasn’t using much leverage, he is still riding the position down.

But yes, day trading on leverage however should always require a stop loss.

No such thing as trading without a stop loss. Every trade you ever put on has a stop loss. It may be all the money in the account, but that is a stop loss. Some like that stop loss and that is just fine. The trouble comes when traders decide after a loss that they wanted a stop loss closer to their entry.

[QUOTE=“Arbitrager on Acid;679391”] Every trade you ever put on has a stop loss[/QUOTE] Not if you aren’t using leverage :wink:

Without leverage the stop loss is the complete end to the value of the instrument. Put $1120.80 in a forex trading account, go long 1 micro of EUR/USD (no leverage). If the euro goes to complete ZERO your loss is limited to the $1120.80.

Put $200 in a brokerage account and buy $200 worth of ETF TTT with no leverage. Your stop loss is set hard at $200 if and when TTT goes kaput. What is more likely however is that the etf will lose value asymptotically as bond prices rise. But if bonds crash, your $200 could stand to gain a bundle as TTT is a triple leveraged ETF inverse to 20 year bonds. Take your profits when you have reason to believe the bond market has bottomed.

It is you that gave me the idea to put a hard stop on my forex account buy depositing only the cash I want to put at risk. Had I been doing that during the SNB psyche-out, I could have limited my losses to 5-6% rather than the 40% I was handed.

I think what I am taking away from all of this is that a stop loss order with a broker/dealer is only a first line of defense in stopping losses. The true hard stop loss is the total amount of cash your broker/dealer has in your account. And as you pointed out, the losses stopped by the limitation of your account balance could come from external inputs not at all connected to your orders (your broker could lose your money for you).

All positions have stops. The stop could be everything we have, but that is certainly a hard stop. The question is whether we want to mindfully tighten stops or let others put our stops where they want them. I didn’t realize that I was letting others choose my stops and I am going to take control and put my stops where I want them.


Do I REALLY know where my losses will stop?

Trade should be closed if it goes wrong. But the main thing to remember, trade shouldn’t be ever opened without a plan, which means you need to have a target in mind and you need to have a stop loss in mind. You need to know when and at what price the trade is simply wrong. If you don’t have that plan, you are not trading, just paying around.

I’m fairly new, but my first reaction would be to let it hit my stop-loss and not adjust it…except if I clearly see that every tiny bit of hope that it will no longer go my way, then I close the position right away to cut further loss.

Justo close the trade if it went wrong or wait for your initial stop loss to hit.

Rightly said, there is no need to trade without placing any stop loss. If any trader is doing so then he is trading on the basis of luck which is certainly not a good method of trading.