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To practice discipline in trading, two things are most important. |
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Written by admin admin
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Wednesday, 13 February 2008 |
To practice discipline in trading, two things are most important.
Trading System You have to regularly monitor your trading systems with the changes inthe market and also your style of trading. If there were changes in the products that you trade, i.e.for example if you were trading stocks, then the system you may have used will not be relevantfor the Forex market, because the behaviour, patterns, volume etc are totally different in aForex market, so your trading system should reflect what products you are trading. In order todevise a trading system, you have to make plans and have patience, to go through all areasof trading. Having designed a system you must ensure that you implement it Many traders failto implement the system, mostly due to fear. Fear of profit or fear of loss, fear is also themost important aspect in the psychology of trading and I have written a full chapter on fear asit relates to trading.Money Management - Must have discipline to follow sound money management. So for examplea trader who has 70% of winning trades, yet overall loses more on the 30% of trades is a loser.The bottom line is what you take home! Small losses should
not turn into large losses, andequally important you should not snatch your profits. Once again here, if you implement yourtrading system, then large losses can be contained the ability to do this is discipline!As part of my trading system, as soon as I pull the trigger to open a new position, I immediately puta stop loss. Once the position is in profit, often I will start closing some of the positionsgradually. Depending on the market conditions, I would close at least 25% of my position for aprofit of 20 to 50 pips, then another 25% for 75 pips+, thereafter I would be using trailing stopsfor the rest of the position, using the moving averages and other indicators to keep me in thetrade. Using this method I have been able to pocket several hundred pips from the final trade! AsI keep saying currencies trend very well so ride the trend.One Forex trader I am mentoring never closes any of his position he uses trailing stops and allhis trades get stopped. Looking at his trade record for the past 3 months, he has 70% of histrades being stopped out between a loss of 50 pips to gain of 50 pips. He starts with a 50-pip stoploss then will gradually have a trailing stop. Overall, this 70% of trades has averaged a loss of 10pips per trade, so for 7 trades that would be 70 pips.However, for the 30% of winning trades he has averaged a profit of 180 pips per trade, so for 3trades that is a profit of 540 pips. Therefore, that would be a net gain of 470 pips for 10 trades.Once again, this illustrates the power of letting your profits run.I discuss some of these strategies in my weekly Forex newsletter, the bottom line is not howmany losing trades you have, but how much you take home, i.e. to what extent your capitalis increasing. Easy Forex Trading Strategies Share Your Opinion. (0 posts)
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Last Updated ( Wednesday, 13 February 2008 )
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