My stop-loss rule: In day trading, the day's losses should be cut within the same day [Kasumi Kate]

Kate Shizuru Profile

Foreign exchange journalist. After studying at a university in California, USA, she worked in Vanuatu, Bahrain, and London before returning to Japan. She engaged in sales to financial corporations of Japanese/Asian equities at a foreign securities company, and in marketing of alternative investments for financial institutions at a British investment advisory firm. After retirement, she shifted from the world of stocks to FX activities, writing for FX information sites and money magazines, appearing on radio programs, and serving as a lecturer at seminars. Her books include “Foreign Currency Investment Techniques to Multiply Your Money by 10x” (Forest Publishing) and “FX 5 Investors Who Start Now Reveal the Rules for Victory” (Subaruya).

You won’t truly understand it unless you experience it

In FX, the hard truth is that people won’t truly understand until they experience pain. The belief that “you won’t cut losses because they aren’t real losses yet,” or that the market will recover without taking action, are merely hopeful expectations. Those can lead to large losses someday.

When I was a beginner, I held onto a 1.9 million yen unrealized loss because I didn’t cut losses (or couldn’t). Enduring through a year and a half until the market recovered taught me that, even if it eventually turned into a profit, the emotional toll was not worth it. Maintaining patience may be important for people, but in FX, patience seems counterproductive.

In investing, the urge to profit can easily take precedence. Nobody goes into FX to lose money from the start, but losses are an inevitable reality for everyone as you continue. If losses are unavoidable, the only option is to aim to keep them small.