I have seen and witnessed (many times on my behalf) the one and most devastating fact or rule, as you may call it, in forex trading. It is not tied with a chosen currency trading strategy. It has nothing to do with your trading plan or forex indicators that you use. It is very often not related with your calculating and logical ability or incapability. The fact is it is very often neglected by forex traders and was neglected by me for a considerable amount of time, which led to number of losses. This one issue makes you a looser in fx trading and may drive you into despair and hopelessness, if not dealt with accordingly and timely – the sooner the better.
The thing I am talking about is market confidence, over esteem and conviction in your trading strategy.
In business world self confidence means a lot – it is vital in some money-making spheres like marketing, sales or advertising. If you have no confidence and belief in a product or service you are selling – nobody is going to buy it, and you will be earning from little to zero money. Besides, employers always look for confident, brave, assured employees, because such features usually lead to success and recognition.
Sadly, such features are just one big obstacle in forex investment business. Why am I so sure about that? Well, because I have experienced it myself, unfortunately. The whole foreign exchange and stock market work quite differently when it comes to security and confidence – it usually misleads a trader, especially if his past results were amazing.
The problem is that profitable past results bring a happiness experience and sort of feeling of security that you will never make a mistake. This results in overestimated self confidence which leads to thinking of using a bigger leverage, in other words – higher risk. So, instead of risking only 2 % of your account, you start taking a 10% risk in the same market conditions. And here is one problem – you don’t know how you will take one trade of 10% loss and how long the market will favor you with predictable moves.
You could have another wining trade, but do not forget the unpredictable and fluctuating forex market. I myself started using higher leverage like crazy after some successful months of trading and the consequence was lost money and time. The market suddenly changed and my system did not work anymore for another couple of months. I was pretty sure, it had to work, but every trade that I took seemed to be set up against me draining my capital. You see, my past glorious experience kept telling me to risk more and recoup my losses, because, anyway, “I won so many trades”, I just can’t lose anymore. Well, I lost. If I have been using the same leverage and keeping to the same cautious style of trading, like I did before my “going nuts on leverage” thing – I could have 10 or 15 % loss of my capital at greatest. After a couple of crazy and choppy months the market settled and the whole trading could go on the same pace. However, my “confidentiality” left me without anything to invest. That was one hard and painful lesson I had to learn, which cost me my money and some nerves.
My advice in trading is cautiousness, discipline and self development. This way little by little you will be gaining confidence in your trading style and strategy and making more profit. First you may try trading on forex demo account and gaining some investing knowledge and experience, in order to avoid that kind of bad experience. Of course, it won’t protect you from future losses, but at least they will be estimated and minimal. If you lack those features, I would suggest using some managed forex trading, where your money are invested by professionals.
0 comments:
Post a Comment