Learning Trading Discipline
Develop trading discipline in yourself if you want to become a successful trader in the long run. In a trading session, lets you come to a point in your market analysis when you have no confidence on the accurate direction of the market forecast. Always remember, a lost opportunity is better than lost capital. Choose not to trade.
Wait for the market conditions to become clearer. Increase the probability of success by trading when the trade setups are strong. This is far more important in forex trading than in stock trading. The forex markets move a lot.
You need to learn that high leverage will give you the opportunity to make a lot more money much quicker. But in case you go wrong, currency markets are ruthless. You can get your account wiped out. You dont see an opportunity clearly. Try to sit on the sidelines. You dont have to trade every time. Wait for the market conditions to become clearer. You should learn to be a patient trader. Wait for the market to come to you.
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.
But using high leverage also has the potential of making you lose some or all of your capital if you trade foolishly. Take the example of credit cards. The bank lets you borrow huge sums of money using your credit card 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.
Understand the power of compounding. The compounding factor applied to your capital can make it grow fast in a short period of time. Many people want to get rich quick and take unnecessary risks while trading. They think that a few big wins will make them rich. They dont focus on proper trading principles or rules. You need to develop trading discipline. Follow simple money management rules consistently and persistently.
Suppose you open a mini account. Start by trading one position of a tenth of a lot. You will not make much money in the beginning. The position size is only one tenth of a normal lot. Be patient! The percentage of returns will compound over time. You will 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.
Article Source: FxTradingStock.com
About the Author
Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in day trading and swing trading stocks and currencies. Learn Forex Nitty Gritty. Develop your own Forex Trading System
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by: Ahmad Hassam
Total views: 69
Word Count: 637
Date: Fri, 19 Jun 2009
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