When it comes to putting your hard earned money at stake, many traders chicken out when the time comes to actually buy or sell currencies. It is not really the trading knowledge that gets you through a trade. Being fearless to take the risks is all that really matters when you are trading in foreign exchange.
1) Love your trades
2) Risk 1% to 5% of your balance.Profit in that case should be 1% to 10%. (1:1 profit/stop loss ratio minimum)
A fear of losing is always there, but only a good tradesman has it in him not to give in to the fear completely and muster up enough courage to overcome this fear and make deals. With every trade the fear lessens, till a time comes when you become fearless. However, becoming fearless to the point of not evaluating the involved risk in a potential trade is not correct.
So for a trader who wishes to excel, the two extremes conditions must be avoided; not being able to trade out of fear of losing or closing a vividly lost trade. By looking into these two problems right in the start of your journey can help you develop an attitude that helps you watch out for yourself and not end up being in such situation.
Begin by self analysis. Analyze yourself whether you are an emotionally controlled person who can carry out a trade under utterly tense circumstances or whether you are overconfident and generally end up picking a trade that involves way too much risk. You need to identify if you are any of these two persons before you make an actual trade. This is important to avoid ending your trading career due to a loss owing to fear or overconfidence. A loss would end your career as trades person, unless you produce a capital from your personal assets compensating for the loss altogether.
A person who fears excessively should be aware that the story doesn’t end by merely entering a trade. Once entered it is required to stay in trade. When a trade is losing, it is required to exit from it fast. The novice traders find implementing this problematic.
The real estate businessmen sell only when the season is favorable. For the rest of the time, they cease their sales. Trading in foreign exchange is different as the currencies are involved in directional trends that may extend for long periods of time. In case of drawdown, you might be swept clean of your balance by the time the drawdown ends.
It is equally important to overcome the doubts of losing that raised by fear and to actually stay in a trade that is progressing. The most common situation in trades going uphill is that the fear gets the better of the trader and he closes on the trade owing to the dreading thoughts of the direction trend reversing for currencies and causing a great deal of loss. It should be kept in mind that generally the news about currencies that are in increasing in value is mostly positive. It is ridiculous being anxious and taking decisions owing to baseless possibilities that are merely manifestations of fear. Let go of the fear and formulate closing strategies based on actual movement in the currency values.
Another common situation of closing a progressing trade is being engulfed by the boredom of a somewhat stationary trend. For a winning trade the movement is mostly always favorable, a little patience can win you even more. So why give up the opportunity?
Foreign exchange trade is meant for the fearless and patient people. However the reckless ones can also be sobered down. If having your investment at stake takes away your sleep means you are lacking the knowledge that provides you the assurance in your decisions required in trading.
Long term success in trading can be achieved only by being patient, having commendable finance management skills alongside a hot niche to market. The charts with technical indicators and a humble financial budget although may heighten the chances of succeeding but they alone cannot attain you the long term stability as some believe them to and who eventually crash and burn. Attaining a sound knowledge of trading also helps in raising your chances to succeed.