When you start trading you will probably buy “indicators”, with the thought that some magic lines on a chart can make you money, while they may well do it. You may try some forex robots that will work for a while and then lose big time. You can find yourself psychologically defeated by the battle.
I admit, I have had my account wiped out a few times in my trading career. This was through margin calls (when I had risked to much of my margin), bad trades, holding on to trades I should have closed and sometimes just bad luck.
How to overcome a fear of trading
The first reaction often to losing a chunk of your account is to be too afraid to trade. Unfortunately if you tell yourself ‘it’s not for me’, you will prove to yourself it’s not for me.
The only way to overcome defeat is to ADJUST WHAT YOU WERE DOING – analyse and look at what you were doing, what did you do wrong, how can you improve and get back into the fight.
DO NOT CONTINUE DOING WHAT IS NOT WORKING AND EXPECT IT TO WORK.
Treat your trading as a business, ask yourself, is this trade a good business decision it is much easier to lose the emotional part of trading if you treat trading as a business.
You and I have all seen them, posting on the Forex chat rooms “GBPUSD is going up”, then GBPUSD promptly turns the other way. If you read my blog you can see some of the analysis I have done, but it is for you to make that decision. However, if you trade on a whim, or without proper analysis or examination of the fundamental news that is being released, you are simply gambling. You are actually only 50% as good as you think you are, the forex will show you that the hard way.
Waiting can be more profitable than trading
Some days it is just not worth trading. For instance when the FEDS were dealing with the crisis, who could have predicted upon their agreement a huge reversal in the dollar’s fortune, ok it was short lived, trading at the wrong time (yes there is a wrong time), just before news (unless you are VERY sure of the outcome) is just gambling. Sometimes it is just better to wait and trade when you know:-
1. Your stop loss
2. Your target
3. Your risk vs reward, there is no point trading for 50 pips with a 100 pip stop loss.
4. The reasons for your trade, make sure you have reasons
Lack of funds
If you have a small trading account don’t be tempted to up your leverage. Keep your trades and risk small, it is so tempting to ramp up your leverage and then find your account wiped out. Don’t put into a trade what you cannot afford to lose. Sure, it takes longer to make any “make a difference to my life” money but you will slowly build up your account in that way.
It’s better sometimes to save for a while before trading live money. You can either trade a demo account or even trade in competitions. If you do well in a competition you will do well trading for real.
If you have $100,000 account and risk $100 it is nothing like as painful as someone with $100 risking $10.
Listening to the wrong people
I do take all advice on what to trade with a MASSIVE pinch of salt. It is of constant amusement to me how two different services can provide opposite forecasts. Of course only one can be right! Anyone can put lines on charts and anyone can be wrong. You are far better learning to trade yourself.
Trading the wrong timeframes
You can see from my charts I look for direction of the trades from the DAILY charts, that is what the big boys use, then I use the 10 minute chart to find an entry point. 5 minutes is too fast and 15 too slow for most pairs.
Not paying attention to news
You ignore the news at your peril, Non Farm Payrolls for instance can hit you hard and turn a pair round very fast. Even the best technical traders should have one eye on fundamentals and prepare for huge moves upon unexpected changes in country statistics.
If anyone has any more please post it on the questions below and I will try and answer them.
This post sponsored by BelforFX