Learning Trading Discipline by Ahmad Hassam
Develop trading discipline in yourself if you want to become a successful trader in the long run. In a trading session lets you come to a point in your market analysis when you have no confidence on the accurate direction of the market forecast. Always remember a lost opportunity is better than lost capital. Choose not to trade.
You should wait for the market conditions to become clearer before you enter a trade. You should increase the probability of success by trading when the trade setups are strong risk to reward ratio is not more than 1:2. This is far more important in forex than in stock markets. The forex markets move a lot as compared to the stock markets.
High leverage gives you the opportunity to make a lot more money much faster. If you don not clearly see an opportunity try to sit on the sidelines wait for the market conditions to become clearer. Let the market come to you. Learn to be a patient trader.
You should understand that leverage is wonderful money making tool. It is the key to making money in the currency markets as no other markets allow high leverage that this market allows. A leverage of 100:1 means that for a $1000 deposit you can trade $100,000. This huge amount of leverage gives you the opportunity to make the kind of returns that you want.
But using high leverage can be dangerous. It has the potential of making you lose some or all of your capital if you trade foolishly. Take the example of credit cards; the bank lets you borrow huge sums of money using your credit card on the promise that you will pay it back. You should use your credit card responsibly.
But in case you abuse your credit card. It can lead you into heavy debt. It can even result in bankruptcy. You should manage leverage in forex trading like you manage your credit card. You have $10,000. It does not mean that you should trade 10 lots use all your $10,000 capital. Using all your capital in one trading session would be foolish on your part highly risky.
A very effective trading method yet very conservative would be to never use leverage of more than 20% on your capital in the account. You should only trade two lots with a $10,000 capital in your account. Use good money management rules. Trade with discipline You can grow your account realistically in a short period of time.
Understand the power of compounding. The compounding factor applied to your capital can make it grow fast in a short period of time. Many people want to get rich quick take unnecessary risks while trading. They think that a few big wins will make them rich. They dont focus on proper trading principles or rules. You need to develop trading discipline. Follow simple money management rules consistently persistently.
Suppose you open a mini account. Start by trading one position of a tenth of a lot. You will not make much money in the beginning. The position size is only one tenth of a normal lot. Be patient The percentage of returns will compound over time. You will trade a much larger sum of money with the passage of time.
You should make realistic goals that can be achieved over time. Always trade with the money that you can afford to lose Trading with money that you cannot afford to lose is foolish. Dont borrow money to trade. Dont use money that you would use to pay monthly utility bills. Dont use your life savings. You are not a gambler.
Mr. Ahmad Hassam is Harvard University Graduate. He is interested in day trading swing trading stocks currencies. Learn Forex forex or stocks. blogspot. com 2009 05 learn forex nitty gritty. html Nitty Gritty. Develop your own Forex Trading System forex or stocks. blogspot. com 2009 05 forex trading system. html. Learning Trading Discipline
