Perhaps the most important element of trading FOREX successfully is to understand yourself as a trader.
To learn FOREX and trade profitably you need to know your limits, how do you behave under stress, are you disciplined or not?
Money is a very powerful and emotional subject and can lead to bad decisions if you have not planned your trading and have the discipline to follow that plan.
Successful trading is all about applying rules in a consistent manner, measuring the results and the adjusting the plan to try and improve profitability. When measuring your trading results you will also need to get a large sample of trades to make any measurement meaningful.
Sometimes you will make losing trades in order to understand what is wrong with your trading plan. You must sacrifice some success in the short-term in order to reach strong profitability in the long-term.
When you are making a trade, how will you react if things go wrong?
Let's say you have gone long on the EURUSD, and initially it all goes well. Suddenly some news is published and the EURUSD drops like a stone and you start losing money! Here are some of the thoughts you may be thinking.
"I'm losing money! What do I do? Ok... I will wait. The market will come back and I will be in profit again. I'll just be patient.... Damn... It's dropping further. I've lost 10% of my trading pot already. It must come back... surely. I mean my analysis was great, my predictions looked very good. I'll wait... Oh heck. Now I've lost 20%....!!! I'm getting out now! Why didn't I follow my trading plan and get out when I was down 2%?"
These thoughts lead to panic and a breakdown of trading discipline. This leads to losing money.
The only way to overcome these feelings is to take the emotion out of trading. Here are some ideas that should help you.
? Don't think in terms of how much money you are making or losing. Just try to think in terms of the number of pips you are trading with.
? Take regular breaks. Don't sit in front of the screen all the time. It will drive you crazy! Get away from the computer, and even better get outside for some fresh air.
? If you're having a bad day, then shut down that computer and get away. You need time to clear your head.
? Follow the trading plan. Never risk more than 2% of your trading pot (the money you have allocated for your trading) for each individual trade. By being systematic in the execution of your trading plan, then you remove the emotion from it.
? Remember, that if you lose 50% of your pot in one trade then you will have to double (i.e. increase by 100%) just to get back to your original amount.
? If you are only losing 2% on each trade then it would take a huge number of trades to lose all your money.
I hope that the points raised above will help you to learn FOREX and trade more profitably. There is more information available by checking out the link below.
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