Learning to Develop Trading Discipline
You need to develop trading discipline. If you come to a point in your market analysis in a trading session when you have no confidence on the accurate direction of the market forecast, choose not to trade. Always remember, a lost opportunity is better than lost capital.
You should wait for the market conditions to become clearer before you enter a trade. You should increase the probability of success by trading when the trade setups are strong and risk to reward ratio is not more than 1:2. This is far more important in forex than in stock markets. The forex markets move a lot as compared to the stock markets.
High leverage gives you the opportunity to make a lot more money much faster. If you don not clearly see an opportunity, try to sit on the sidelines and wait for the market conditions to become clearer. Let the market come to you. Learn to be a patient trader.
You should understand that leverage is a wonderful money making tool. It is the key to making money in the currency markets as no other markets allow high leverage that this market allows. A leverage of 100:1 means that for a $1000 deposit, you can trade $100,000. This huge amount of leverage gives you the opportunity to make the kind of returns that you want.
However, it also has the potential of making you lose some or all of your capital if you trade foolishly. Think about the credit cards. The bank lets you borrow huge sums of money on the promise that you will pay it back.
But in case you abuse your credit card. It can lead you into heavy debt. It can even result in bankruptcy. You should manage leverage in forex trading like you manage your credit card. You have $10,000. It does not mean that you should trade 10 lots and use all your $10,000 capital. Using all your capital in one trading session would be foolish on your part and highly risky.
A very conservative yet a very effective trading method would be to never use leverage of more than 20% on your capital. So you should only trade two lots with a $10,000 capital in your account. Using good money management rules and trading discipline, you can grow your account realistically in a short period of time.
Dont forget the power of compounding. The compounding factor applied to your capital can make it grow fast. Many people want to get rich quick. They take unnecessary risks while trading thinking that a few big wins will make them rich. They dont focus on proper trading principles. You need to develop the discipline in yourself to follow simple money management rules.
If you are trading a mini account, start by trading one position of one tenth of a lot. You will not make much money in the beginning as the position size is only one tenth of a normal lot. But the percentage of returns will compound over time and let you trade a much larger sum of money with the passage of time.
As a trader, you should make realistic goals that can be achieved over time. You should always trade with the money that you can afford to lose! Never ever trade with money that you cannot afford to lose! It is foolish. You should never borrow money to trade. You should not use money that you would use to pay monthly utility bills. You should not use your life savings. You should not think like a gambler. - 23217
You should wait for the market conditions to become clearer before you enter a trade. You should increase the probability of success by trading when the trade setups are strong and risk to reward ratio is not more than 1:2. This is far more important in forex than in stock markets. The forex markets move a lot as compared to the stock markets.
High leverage gives you the opportunity to make a lot more money much faster. If you don not clearly see an opportunity, try to sit on the sidelines and wait for the market conditions to become clearer. Let the market come to you. Learn to be a patient trader.
You should understand that leverage is a wonderful money making tool. It is the key to making money in the currency markets as no other markets allow high leverage that this market allows. A leverage of 100:1 means that for a $1000 deposit, you can trade $100,000. This huge amount of leverage gives you the opportunity to make the kind of returns that you want.
However, it also has the potential of making you lose some or all of your capital if you trade foolishly. Think about the credit cards. The bank lets you borrow huge sums of money on the promise that you will pay it back.
But in case you abuse your credit card. It can lead you into heavy debt. It can even result in bankruptcy. You should manage leverage in forex trading like you manage your credit card. You have $10,000. It does not mean that you should trade 10 lots and use all your $10,000 capital. Using all your capital in one trading session would be foolish on your part and highly risky.
A very conservative yet a very effective trading method would be to never use leverage of more than 20% on your capital. So you should only trade two lots with a $10,000 capital in your account. Using good money management rules and trading discipline, you can grow your account realistically in a short period of time.
Dont forget the power of compounding. The compounding factor applied to your capital can make it grow fast. Many people want to get rich quick. They take unnecessary risks while trading thinking that a few big wins will make them rich. They dont focus on proper trading principles. You need to develop the discipline in yourself to follow simple money management rules.
If you are trading a mini account, start by trading one position of one tenth of a lot. You will not make much money in the beginning as the position size is only one tenth of a normal lot. But the percentage of returns will compound over time and let you trade a much larger sum of money with the passage of time.
As a trader, you should make realistic goals that can be achieved over time. You should always trade with the money that you can afford to lose! Never ever trade with money that you cannot afford to lose! It is foolish. You should never borrow money to trade. You should not use money that you would use to pay monthly utility bills. You should not use your life savings. You should not think like a gambler. - 23217
About the Author:
Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in day trading stocks and currencies. Know Swing Trading. Learn Forex Trading!
posted by X - Men @ 6:30 AM
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