Category: On Forex
The Best Forex Trading Method – Is Trading In Your Emotions
It’s been said by so many successful traders that to become a successful FX trader you have to become effectively emotionless. It’s not always an easy task, but if you allow your emotional mindset to influence your decisions, you could have the best trading method going but it is still going to end up failing you.
How to separate your emotional mindset from your logical mindset
Some traders are lucky enough to have a more logical mindset inbuilt into their brain, and it’s these traders who are generally more successful. But providing you can separate your emotional mindset from your logical mindset, you have the ability to turn a good trading method into the best trading method – because the best trading method after all is your ability to sever ties with your emotional mindset.
Here’s a useful point to dwell on, and by repeating it to yourself often you can help your brain to understand the need to only apply logic and method to your trades:
The market will do what it does. Nothing you can say or do will change that. Regardless of what you do, the market will do what it does.
As such, the most important thing you can do is not cross your fingers and hope for the most desired outcome, but rather plan for every eventuality.
Many foreign currency traders have fallen into the pit (whether consciously or subconsciously) of almost believing that they can change what the market does. They can’t. Not even the best trading method has an influence on what the foreign currency trading market will do. The only way to face this pit and get over it, is to have the best trading method possible which will plan for every eventuality:
You cannot control the outcome, but you can be ready for whatever happens.
Traders who cannot separate emotion
If you are the kind of foreign currency trader who has difficulty separating logic from emotion, then this piece of advice probably won’t rest kindly on your ears, but it is absolutely true:
You are better off working another trade.
The fact is, many traders know that the method they are using is wrong. They know what it is letting them down, they know the best trading method to use – but because the best trading method in their particular circumstance doesn’t feel quite right, they can’t bring themselves to implement it, and as such continue to trade in a manner which is driven by emotion and instinct.
Emotion and instinct will hold you as a slave, and until you can learn the best ways to break free of their spell, you will never find the best trading method and have very hard time to make a consistent and successful foreign currency trader.
Foreign currency trading is a delicate skill to master. It requires a heavy quantity of self control, restraint, dedication and the ability to say ‘No’ to your inner instincts.
Unfortunately, human nature is designed in a way which doesn’t really help those engaged in foreign currency trading, and there are a lot of natural traits in the human brain which will slowly but surely send a trader to his or her financial destruction.
When faced with the knowledge that a certain amount of money is guaranteed to be lost – something which happens often in the world of foreign currency trading – it has been shown that human nature will dictate to the brain the best course of action is to put a lot more money on the line in order to be given a slim chance of recovering some of that lost money.
This is a self destructive instinct and one which has caused a lot of those in the foreign currency trading market a much more devastating loss than the initial amount.
To be successful at foreign currency trading you must understand certain points:
- Sometimes, losing money is inevitable. It’s something you can’t control – all you can do is accept the fact, deal with it to the best of your ability and move on to the next trade
- Getting hung up on specific trades can influence your ability to stick to your methodological system
- You are not going to win every single trade. Period
Why does our instinct tell us such things?
The human brain is not wired naturally for foreign currency trading. It is wired to make the most of the moment – a mindset which is not encouraged or useful in relation to foreign currency trading.
To understand the successful behaviour of those making money with foreign currency trading, you must learn to harness these instincts and plough ahead with the bigger picture:
- Don’t live for the moment – plan for the future
- Hammer your system into your instinct. You’ll never replace it entirely, but the more you follow your system the less you’ll listen to the destructive advice of your instinct
An example of human nature in relation to foreign currency trading
One of the most common train of thoughts which brings a trader crashing to his or her knees is the thought process of: “Run with your winnings… play with your losses”.
It is easy to distance yourself from money classed as a ‘loss’ and place it mentally as an amount of money which isn’t yours. But it is important to remember that no matter how much lower the amount is than it once was, it still remains money which can be utilized successfully.
Never disregard a trade because it has caused you a loss. Foreign currency trading isn’t all about focusing on your wins – it’s about what you do to minimize damage, utilize losses and build a fortune as part of a bigger picture.
How To Trade Forex
Becoming a foreign currency trader can be a life changing experience. Providing it is done right, there is a lot of money to be made and a lot of success to be gained. One of the most important parts of making a success of the Foreign Currency Trading however is to learn how to trade Forex effectively – from the beginning.
How To Trade Forex: The Most Essential Technique To Master
One of the most important techniques you can master when learning how to trade Forex, is money management. Managing your money can be a very easy thing to just set to one side, but in reality the effective management of money is actually more important than the price model itself.
Why money management is key to learning how to Trade Forex
Effectively, the ability to make successful trades and follow a solid system is rendered useless if you cannot manage the cash flow you’re generating. If you aren’t putting the right amounts of money in the right places, you’re going to end up losing in the long run. Remember that no matter how good a system is, you always have the opportunity to put more and more money into trades – and if you put a huge amount of money into a single trade which doesn’t pay off, all your hard work will have been for nothing.
Money management tips
It goes back to the old saying of ‘don’t put all your eggs into one basket’. Use the system, follow the instructions it gives regarding how to trade Forex, but don’t get over confident and try to make the big win in just one single trade. Remember that a successful trader wins on the big picture – not in a single trade.
Would you be willing to put your entire fortune on the line based on a 50% chance? Naturally, when first learning how to trade Forex you’ll be thinking ‘of course not, that’s silly’ – but if you have a poor approach to money management the nature of Forex trading can lead you unbeknown into this kind of mentality. Watch out for it.
Don’t confuse intelligence for potential success
You might be the most intelligent person around, but if you don’t follow a proven and successful trading system then your intelligence is worthless. Sure, intelligence is going to assist your ability to grasp and understand the basic principles of how to trade Forex successfully but it certainly doesn’t guarantee success.
Some of the most successful traders in history have been of mediocre intelligence, while some people of the most notable intelligence have been known to have their entire fortunes fall through the ground on the basis of assuming that their intelligence can beat the system they should be using.
The best kind of intelligence you can possess in regards to learning how to trade Forex successfully, is the intelligence to find the most solid systematic method and stick to it.
The actuality of it is however, is that within the sub context of different forex trading strategy is degrees of freedom. Some of these levels of freedom are out in the open and make up a very blatant part of each of the forex trading strategy you are studying – others, however are hidden and more difficult to uncover. The truth is you will need to develop an appropriate strategy a “Forex Trading Plan” that will evolve over time which will suit your personality and agree with your life style.
Is having a high level of freedom within forex trading strategy a good thing?
Having a certain level of freedom within your forex trading strategy can work out positive for you. However, too much of such freedom can be devastating to your trades. This very factor of forex trading strategy forms one of the major hurdles you must overcome in the implementation of your market analysis. For example, if you have a degree of freedom within one of the forex trading strategy you have chosen to use which applies only to a very specific and limited number of high data trends, it could lead you to mistakenly applying such principles to the countless smaller trends which make up your method and lead you to making some very costly mistakes.
So which forex trading strategy make up the best way of capturing accurate data which can be applied to the market on a wider scale?
There are a lot of forex trading strategies out there which can do this, but if you are just starting out it is always best to try a few and find which one you connect better with yourself. It is important however to ensure once you have picked one – stick with it, and make sure whichever of the forex trading strategy you’ve chosen to use, ensure you look with detail into the historic performance of such strategy and the proven applications such forex trading strategy can provide in respect of presenting you with reliable forecasts for future trades. To successfully trade FX market you will need a forex trading strategy that is flexible, effective, and easy to implement and comprehend.
Is it true different forex trading systems can be ‘optimized’ for peak performance?
Yes it is, and it quite simply involves trial and error of a wide variety of variations on your forex trading strategy – however, optimizing such systems is advised to be a delicate process which should still have strict methodologies attached.
Finding or developing the best trading system is the most useful thing you can do as a foreign currency trader. When it comes to Foreign Currency trading there is no room for second guessing. But after all, FX trading is not about what we do with each individual trade – it’s how we apply the entire mechanical system we use. It has to be said though, that it is possible to waste a lot of time and money trying to acquire the best trading system there is, so here are a few useful tips on finding the best trading system. Many traders develop efficient entry and exit strategies for a system in order to trade in the most efficient P&L ratio. Establishing or finding the best trading system may seem to be difficult. However, if you follow simple tips, you may be able to obtain a system that will work for you best and I hope this will give you a great starting point till you develop your trading style.
Don’t waste your money on buying the ‘best trading system’ The truth is that trading is a SKILL that must be learned
There are a lot of systems out there which have been developed to aid foreign currency traders in their quest for financial freedom. Many people who develop these systems decide to sell them on to other traders as a way of making money. Despite the fact that it is possible to find a successful trading system for sale, there are so many poor systems for sale by people just looking to make a quick profit instead of trying to provide proven mechanisms for foreign currency trading. To get the best trading system for you by purchasing it, you would have to buy your way through an awful lot of time-wasting systems – and the money and that is spent buying and trying these systems could be put to far better use in actually developing the best trading system yourself.
Don’t assume a system is flawed because you lose a few trades
When you’re trying out different methods as part of your journey in finding the best trading system, make sure you don’t disregard a system purely based on the fact that it makes you a few losses. Remember that the best trading systems in existence are still going to make you losses – they work by giving you a method to follow for the long run, not a fail proof guide for every single trade you make.
Developing the best trading system doesn’t happen overnight
Don’t fall into the trap of trying to get a quick fix when it comes to developing or discovering the best trading system. The really good ones – and I mean the ones which are absolutely solid in the long run – are usually developed over a period of years, with a significant investment of time and money. The more detail, effort and persistence you put into truly working out the best trading system, the more solid your system is going to be for you.