Taken from Forex No Name Bot
It is not a well-liked subject, but a crucial part of any forex trader’s forex trading information is understanding how to lose well. Foreign exchange trading is very dodgy and losses are inescapable occasionally. Everybody hopes that large losses will not happen to them, but sooner or later they can. The key to success in currency trading is not understanding how to win all of the time, because that’s impossible, but knowing how to deal with losses. If it is one massive loss or a run of little losses, there will be occasions when the account balance takes a thrashing. If you’re thinking, ‘This will not happen to me,’ then there is a big risk that you will not bounce back from a loss. Being unready is likely to lead to emotional swings and bad choices like making unwise trades or taking massive risks to try to recover the loss as speedily as practical.
On the other hand if you’re prepared for losses with good foreign exchange trading education, you will be in a much stronger position. First, you will not lose faith in your system if you understand its average wins, losses and drawdown ( the low point that your account balance is probably going to reach between 2 highs ). Understanding these contributors makes it rather more likely that your account will survive a bad run, because you’ll have been adjusting your risk to take account of the possibility.