What You Should Know Before Entering Forex Trading
There is a perfect mindset, character and mental attitude that traders need to acquire. I say acquire because few people have an innate personality that makes this thinking natural. As for your trading, it means that you are free from anxiety, fear, despair or regret. It also involves the ability to remain calm, confident, focused and disciplined in the face of adverse trading results.
Trading with a disciplined plan
The problem with many traders is that
they take buying more seriously than trading. The average buyer will not spend $ 500 without serious research and study of the product he/she is going to buy, but the average trader will make a trade that can easily cost him/her $500 based on a little more than a feeling or a hunch. The plan should include stop and limit levels for trading, as your analysis should cover the expected decline as well as the expected growth. Make sure you have a plan in place before you start trading.
Good Performance, Good Anticipation
Everyone knows that trading is a game. I mean, our success does not depend on the outcome of the next deal, our success depends on the overall profitability of many deals. So while we’re trading, whether the last trade we made was profitable or not is definitely not important. It makes no sense to draw conclusions about the results of only one-or even several-deals.
We can access our waiting skills only when we have made a reasonable number of trades and see the long-term result of our actions. This is so important that when we trade, our goal should be to focus on executing our trades with ruthless efficiency and judge only about that. If you consider the ways in which you lose money when trading, you will find that this is due to poor execution, not bad waiting.
And let your profits grow
This simple concept is one of the most difficult to implement and is the cause of death for most traders. Most traders break their pre-defined plan and take their profits before reaching their profit target because they feel uncomfortable sitting on a profitable position. These same people will easily sit in unprofitable positions, allowing the market to move against them by hundreds of points in the hope that the market will return.
Also, traders who have had their stops hit multiple times just to see the market coming back in their favor as soon as they get out quickly remove stops from their trading, believing that this will always be the case. The stops need to be hit and to stop you from losing more than a given amount. You just let your profits on the winners run and make sure your losses are minimal. What’s so hard about cutting losses?
Do Not Over Trade
Don’t bet on the farm. One of the most common mistakes that traders make is using their account too high, trading much larger sizes than their account should reasonably trade. Leverage is a double-edged sword. Just because one lot of currency requires only $1000 as a minimum Deposit does not mean that a trader with $5000 in the account should be able to trade 5 lots.
One lot is $ 100,000 and should be considered as an investment of $100,000 rather than $1000 set as margin. Most traders analyze the charts correctly and place sensible trades, but they are prone to excessive leverage. As a consequence, they are often forced out of position at the wrong time. A good rule of thumb is never to use more than 10% of your account at any given time.
Don’t Marry Your Professions
The reason for trading with a plan is tip #1 because the most objective analysis is done before the trade is executed. Once a trader is in a position, he / she tends to analyze the market in a different way in the hope that the market will move in a favorable direction rather than objectively looking at the changing factors that may have turned against your initial analysis. This is especially true of losses. Traders with a losing position tend to marry their position, which makes them ignore the fact that all signs indicate continued losses.
So should you before you trade. To start the trading day in an optimal state of mind you have to take 15 to 20 minutes to prepare. Treat each day as an elite athlete preparing for the competition. Here’s how to do it:
Inhale and exhale slowly, protruding your stomach each time you inhale.
Consciously relax all muscles.
Focus all your attention on breathing.
When your mind begins to wander (as it will), refocus on your breathing to exclude from your consciousness everything that your mind began to think about, including bodily sensations.
Be aware of your exceptional being-in the present moment. Eliminate memories or thoughts of past events, as well as worries or expectations or planning for the future.
Do this after a point of boredom until your restless mind calms down and you enter a peaceful, relaxed state. It usually takes 15 to 20 minutes, but for some people it may be longer.
Good luck and happy trading!