When you start trading as a Forex trader, it is so easy for the promises contained on every website and every intrusive banner campaign to take over from reality. “Easy money”, “quick returns”, “new opportunities”, “give up your day job” are all very tempting offers which unfortunately are rarely in touch with reality. What the adverts and the websites don’t bother to tell you is that what is really needed is for the new trader to develop a philosophy that will inform his trading practice over an extended period.
First Trading Mistakes
It is specifically this lack of philosophy coupled with the inability to control your emotions that can cause so many problems for traders who are “new on the job”. You have to remember that starting as a Forex trader is not like driving away from the showroom with your brand new car when you can’t wait to try out its paces and twiddle all the knobs on the dashboard. If you take the same headstrong attitude to initial trading and dash in regardless, you could easily find yourself pouring a great deal of money down the drain. Much better to adopt a rational trading strategy and avoid hasty decisions.
Understanding the Market
In order to develop your trading philosophy, you have to educate yourself in the way the market moves. Remember you are not dealing with inanimate objects but are essentially pitting your wits and your experience against another human, who may have had greater experience and understanding than you. Learn about and profit from the various kinds of orders in order to maximize risk and minimize profit.
If you are unable to manage your resources, you will never be able to succeed as a trader. You must integrate successful money management into your trading plan. Most money management strategies are based around the calculation of your core equity which means your starting balance minus the money used in open positions. It is more than common sense for you to limit your risk to 1% to 3% of each trade. Thus your philosophy as a trader would reverberate around a slow and steady growth of profit, always allowing for the inevitable setbacks.
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