It is well known more than 90% of traders lose their money in the Forex market. The failure has a psychological basis, being the inability to open or close a position according to signals from your trading system. This psychological problem has many symptoms: a person is emotionally unable to close his loss position (he doesn’t want to lose money), and eventually a loss on this position leads to a stop-out. Or on the contrary, the individual immediately closes a lucrative deal just because it is profitable and doesn’t allow the profit to continue growing. A person can open a position only because he is bored, or because of a momentary impulse. Clearly that kind of trading can’t produce the desired result, and those traders who can’t control themselves won’t be able to win in the Forex market.
This article will describe how to overcome the psychological difficulties and start earning money. The method it imparts is particularly useful for traders who haven’t yet learned how to make money and are repeatedly losing deposits despite their own extensive trading experience.
Step One. Learn to perceive the money in your account as an instrument. Forget that this is money; that $ 50,000 is a car and $ 500,000 is a house. Forget about it. On the screen you simply see a tool; a tool for earning money.
Step Two. Transactions and the profits they produce are different things. Here we can use the analogy of an apple tree and apples (or another fruit, if you prefer). To close a deal just because it has brought you good money is like cutting down an apple tree just because it has brought you a lot of apples. Conversely, to keep a loss deal is like keeping a wise old apple tree in the yard even though it hasn’t brought you a single apple. You should be guided by a completely different system of values: “And how this apple tree (deal) can bring me more apples (profit).” If you have a good apple tree that has begun to decay, it is necessary to plant a new one. If, in your opinion, a bad apple tree will soon bloom, then you should keep it.
Step Three. When opening or closing a transaction, you must have an answer to the question, “Why am I doing it.” In the beginning it’s better to keep a record of the transactions and the answers to those questions in a notebook.
We then reach the main issue: “And if I cannot follow these rules . . . ?” This means you need to apply the method, which is called “lowering value” in the modern trading psychology. You have to trade with the amount you aren’t afraid to lose. Are you afraid of losing $ 10,000? If so, don’t deposit such an amount. What about $ 1000, or $ 100? Are you still afraid to lose such an amount? Do you still see in this amount money instead of a tool for earning it? Then deposit only $ 1 or even 10 cents. The experience of thousands of successful traders shows that the less the initial deposit is, the easier it will be. The main thing is that you don’t see in these figures the money. You must first perceive it as an instrument.
Do you agree that, when trading with $ 1, you won’t care whether you win or lose 10 cents per day? If you do agree, then you’re ready to perceive $ 1 as a tool. Thus we have the way to prove to yourself and the rest of the world that you’re able to predict the movement of the currency pair. But only after you’re able to overcome these three steps with the amount you don’t care about can you proceed to the higher amount.
If you’re getting a stable profit with $ 1, switch to the $ 10 account and trade for some time till you start getting stable profits with it. Then add money and trade with $ 50. If you began to lose money, switch back to $ 10 but do not try to recoup! Remember, if you’ve lost $ 1, it doesn’t mean you should switch to the $ 10 account (in order to win back that $ 1 quickly). On the contrary, it makes sense to try again or even reduce the amount of money in your account.
Unfortunately, this is the only way to make money in the Forex market, just as it is in many other areas. Start with a simple step, and gradually move to more complex or sophisticated plans.
We have useful material for beginners, please visit our site: www.profiforex.com