What is Capital Preservation?
Capital Preservation
Forex Trading Glossary
Quick Answer: Capital preservation focuses on protecting trading funds with conservative sizing, strict stops, and disciplined process.
What is Capital Preservation?
Capital preservation is a defensive mindset that prioritizes protecting trading capital over aggressive growth. Traders who preserve capital can stay in the game long enough to exploit high-quality opportunities.
Core Principles
- Position sizing: Risk only a small percentage per trade.
- Stop-loss discipline: Predefine exits and honor them.
- Diversification: Spread exposure across strategies and timeframes.
- Drawdown control: Set hard limits for daily, weekly, and monthly losses.
Mindset Shift
Capital that survives can always grow later. Capital that disappears cannot trade another day.
Practical Actions
- Trade filtering: Skip marginal setups rather than forcing trades.
- Hedging tools: Offset exposure with options or correlated pairs when volatility rises.
- Performance reviews: Audit systems regularly to remove underperforming rules.
- Emergency plans: Plan for platform outages and broker issues before they happen.
Related Terms
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