Gold Canon Episode 8｜Those who cannot cut losses lose more—the question is how to decide your "risk guardrails"

Introduction

Forex is not a guaranteed principal and there is a possibility of losses exceeding the invested amount due to market fluctuations.
This article does not guarantee profits for any particular method or product and should be viewed as a reference material for a way of thinking.

In previous installments, we have covered how to read signals, position sizing, and criteria for deciding whether to buy.
In this eighth installment, we will consider the topic many traders struggle with until the end: “cutting losses.”

Reasons why cutting losses is considered important

In forex trading, what is said to be more important than maximizing profits is deciding in advance how to limit losses.
Since no one can predict the future market moves, moves contrary to expectations can happen to anyone.
At such times, whether you have a mechanism to keep losses within a certain range often determines whether you can sustain your capital for a longer period.

Conversely, even if your win rate is high, a single large loss can wipe out accumulated gains.
If you view cutting losses as preserving capital to continue the next trade rather than as “admitting defeat,” psychological resistance can be reduced.

Three patterns common to people who delay cutting losses

There seem to be several common tendencies behind poor loss-cutting performance.

First, cases where you hold a position without predefining a cut-loss line.
If you try to decide after observing price movements, the more unrealized loss grows, the stronger the feeling becomes that “if I cut now, the loss will be realized,” making the decision harder.

Second, cases where you move the predefined cut-loss line closer as the unrealized loss approaches it.
The hope that “it might come back if I wait a little longer” tends to cause the line to be moved backward over time.

Third, cases where the fear of cut-loss poverty leads you to widen the line too much.
If reducing the number of cut-loss occurrences becomes an end in itself, the loss per trade increases and it tends to disrupt capital management balance.

How to determine a cut-loss guideline

For these tendencies, the following perspectives are often referenced.

・Determine by price range: setting a line in advance based on recent price movement ranges, in a fixed number of pips

・Determine by logic: using the point at which the rationale for entry collapses as the exit criterion

・Have a mechanism that avoids emotional involvement: entrusting the timing of decisions to external standards such as signals rather than personal intuition

What all these perspectives have in common is the idea of “deciding in advance rather than thinking on the spot.”

Role played by Gold Canon

Gold Canon is a set of signal tools and semi-automatic tools designed to support the idea of “having pre-set criteria.”
Because entry and exit guidelines are displayed as signals on the screen, even when you are holding unrealized losses, you can verify them as a reference material without relying solely on your present emotions.

In addition, you can view past performance such as win rate and pip gains in a panel format.
Because you can review past results, including cut losses, as numbers, it is easy to use this to build a habit of reassessing the feeling of “I delayed cutting losses for no particular reason” as a record.
Please note that these figures are based on past results and do not guarantee future performance.

For forex beginners and those who struggle with “even though you know it in your head, you still delay cutting losses,” we believe this can be one of the options to add to your decision-making material.

Conclusion

Cutting losses is a topic that many traders continuously face.
Having pre-set criteria such as price range and logic, and incorporating a system that is less influenced by emotions, may help in maintaining capital for a longer period.

Details of Gold Canon, examples of signal displays, and panel content can be checked on theProduct Page.
If you’re curious, please take a look at the contents first.

Next time, we plan to discuss preparations for actually using Gold Canon.