Loss Recovery Strategy in Forex Market
In forex trading, the hardest thing that many traders experience is dealing with losses. Losses become the catalyst that drives traders to make the worst mistakes that result in huge losses. Therefore, traders must have a strategy in dealing with losses. Loss will always be faced by traders, but these losses should not just wait and hope the market can turn around. When you experience a loss in trading, that is how to deal with it (recovery). In recovery, the most important and simple thing is cut loss. Cut loss can vary depending on market conditions and the currency pair used. The area used is support and resistance (SNR) to determine when to cut loss or resistance conditions. Every trader has a different resistance. In addition to cut losses, traders can also use switching or changing orders.
1. Stop Loss
Stop loss and take profit become one of the profitable things. However, when a trader cannot take full advantage of it, this will result in losses during trading. Stop loss is the loss limit for the lowest price value that the trader determines. Therefore, risk management tools such as stop loss are very important to use. Limiting risk is very crucial and must be owned by traders who do not want their trading capital to run out in one trade.
2. Switching
The switching strategy is to change direction by closing a losing position and then opening a new position in the opposite direction from the closed position, with the hope that the profit from the second position will be greater than the loss in the first closed position. There are several things that must be considered by traders, namely traders need to make a switch by opening a second position that is opposite to the position that was first opened. This is done if the trader predicts that the profit from opening a new position will exceed the loss from the first position. Second, when switching, it is better when a big trend begins to form.
3.Averaging
Averaging in trading is a trader's activity to open a new trading position when he already has one or more positive floating positions. If the traders are successful in carrying out this technique, then the results obtained in each trade can be very large. However, this technique also has a very high risk. Averaging is taken when the trader believes that the price will return to its original prediction. This means that when traders predict prices will go up, they actually go down, and traders still predict prices will go up, then what traders do is averaging. So that when the price returns to the first buy position, the trader already feels the profit.
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