Nothing is perfect in human life. Given this fact and knowing that this applies to trading, we need to plan for the inevitable. There can never be 100% perfection in anything as long as the human factor is in play.
The inevitable involves loss, account drawdown and the peaks and valleys of trading. Gambling casinos understand that not every game of poker will go in their favor and be a winner for the house.
But casinos know that they do have a winning edge over the public playing at the casinos and overtime they will win more than they will lose. It is the game of probabilities just like that in trading.
Overtime you are expected to have developed the trader’s mindset and possess superior trading psychology and confidence. The master will have a deeper understanding of loss and losing trades. You will no doubt know your ratio of win to losses, average dollar win to average dollar loss statistics. Learn swing trading. Understand forex charts.
However, there will always be a trade that will not be a winner. Even the masters cannot get a winner every time. Even masters can fall prey to illusion of being invincible every once in a while and then they will be vulnerable to emotional trading.
We are all humans. No matter how much expert traders we become, we need to remember the root of all trading evil. The evil of forgetting and accepting the risk of potential loss in each trade!
It takes time for novices to understand this fact that you can’t be right every time. Some times a far worst thing happens. New investors entering the market have their winning streak right from the start. They start believing the advertisements regarding the get rich quick.
As a beginner, you can only attribute this winning streak to their good luck. They may have poorly calculated their stops or have used no stops at all. They may have taken far too much risk for their current portfolio size.
The winning trades will reward them for bad behavior and give them a false sense of security. This will give them a feeling as if they are invincible. You must have seen all the disclaimers that the past performance is no guarantee of future results. That means if you have a few big winner, you are not guaranteed winners forever.
Market is alive all the time. It has bulls and bears. It has ups and downs. You can get a swift kick from the market if you get off guard. So never let your guards down. Keep your eye on your money management.
So find a trading system or approach that is compatible with your personality, experience level and comfort zone. Paper trade! Always use stop loss. Determine proper trade size. Maintain a trading journal. When your trading system is failing, determine what the cause of failure is.
First practice on your forex demo account. Practice and practice, remember the saying, “Practice makes a man perfect.” Once your testing, analysis and paper trading proves profitable. Re-enter the market with a live cash account.
Tags: trader mind-set, trader's mindset, trader's psychology, trading mindset, trading psychology
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