There are a number of important rules to follow when you are trading in Forex, or any other market. Every strategy will involve different objectives and methods, but there are some key points to consider one of which is:

Never add to a losing trade

This is certainly a rule that’s hard to follow, especially is we have a strong view of the trajectory of a particular currency. Trades are split into winners and losers, and if a trade is a loser, the chances of it turning right around and becoming a winner are too small to risk more money on. If indeed it is a winner disguised as a loser, why not wait until it shows it's true colors (and becomes a winner) before you add to it. If you do this you will notice that nearly always the trade ends up hitting your stop loss and does not look back.

Sometimes the trade turns around before it hits your stop and becomes a winner and you can count yourself very fortunate. Sometimes the trade hits your stop loss and then turns around and becomes a winner and you can count yourself unlucky. Whatever the result, it is never worth adding to a loser, hoping that it will become a winner. The odds of success are just too low to risk more capital in addition to the initial risk.

For more of the Golden Rules of Trading, avail of the free copy of "Introduction to Foreign Exchange" from Go Markets here.