Fear and Greed: Two Enemies of Forex Trading
April 19, 2009 by Admin
Filed under Overcoming pitfalls
There are many pre-requisites if you want to succeed in Forex trading. You need to treat it as a business, need to have a sound trading plan that includes not only your trading strategy but also sound risk management and money management techniques as well.
The biggest mistake that traders make is that they put the money that they can’t afford to lose on the line.
While trading on demo account is a good way to test your trading strategy, it is completely different when you switch to live account. Here two forces come into play that weren’t so obvious when you traded the demo: fear and greed.
You are afraid to lose money so you quit losing position too early even though your trading plan and money management strategy tells you otherwise and when you win, you don’t exit even though all the indicators you’re using for your strategy tell you to exit the trade immediately. You just don’t have enough, you need more.
Not adhering to trading strategy, not being consistent in your trading efforts is the path to failure.
Remember, there must be couple of losing streaks in a row before you start winning. If you have a good tested trading strategy and apply good money management techniques this shouldn’t scare you. The key is to remain disciplined no matter what. If you just enter the trade because you want to “get even” you will never win and will lose even the small initial deposit you started with.
Sometimes losing streaks is associated with a physical pain. It will make you very unsure of what you are doing and you will lose confidence in yourself and your strategy. This is the attitude of failure.
There are several ways to deal with it:
1. Find partners, money pool and trade together so you will support each other.
2. Buy an automated trading strategy where the research is already done for you so you will just have to install it into your trading platform. Click here for the one I recommend.
3. Go to hypnosis sessions to help you eliminate irrational fears, greed and develop self-discipline.
You can also combine these strategies together for a better success.
