Forex Trading: Mastering the Money Making Mindset
As a forex trader, your mindset is everything. After all, you spend a lot of time sitting in front of a computer staring at blips on a screen. It’s easy to get bored or antsy or angry at the day’s losses. Here’s how to get your head in the game without the game messing with your head.
Develop A Plan
No good trader does anything without a plan. Even when you’re using one of the Metatrader platforms, like MT5, you still need to set up a plan for entry, exit, and trading styles. For example, when you enter a trade, when will you enter? When will you exit? Do you have a plan for what happens when you see a triangle develop in the chart?
What happens if the trend turns against you during your trade? How do you set stop losses? You need to devise your plan and give yourself outs before you start trading because, if you don’t, you’re liable to lose a lot of money.
Your plan should also include trading capital and reserves. In general, most traders don’t trade with more than 1 or 2 percent of their total capital in any given trade. Likewise, they set their stop loss conservatively, say 20 pips on a microlot, to avoid catastrophic losses. As a new trader, don’t be afraid to be this conservative. It works for the large players. It will work for you. Besides, you’ve got plenty of time and opportunities to make mistakes and lose money.
What To Include In Your Plan
Your plan needs to include a few basics like the total size of your trading capital, your overall strategy (i.e. directional trend trading, nondirectional trading, etc.), and entry and exit points.
You should also think about whether you’re going to use a bot trader or rely entirely on your own manual skills. For more new traders a hybrid platform is probably best. You’ll get to make key inputs and still change trading strategies if fundamentals change, but you’ll mostly just let the bot execute trades based on a predetermined trading strategy.
Finally, don’t forget to set profit goals and levels at which you will “skim” profits. This is, after all, what you’re in it for, right?
Build In Flexibility
Flexibility in your plan means that you have to adapt to changing market conditions. Sometimes, fundamentals will override the technical trading strategies. For example, if a central bank makes a surprise announcement or there’s an unexpected weather event that will wipe out an entire season’s major crop yield, then you’re going to want to intervene and switch up your strategy.
Strengthen Your Confidence
It takes confidence to trade forex – confidence you probably don’t have just yet. But, you’ll get it. Building that mental toughness takes time. You will see your trading account swell and shrink. If you’re really nervous, start with a demo account. Then, you can get your feet wet without really putting any money at risk. Once you’re comfortable, you can switch over to live trading.
Finley Swift loves Forex trading and investing. Finley enjoys sharing his successes and observations through blogging and you can find his informative and enjoyable articles on investing and financial websites.