It’s a fact that FX online trading can be very profitable. Despite this, newbie traders tend to lose quite a bit in the beginning of their trading career. Usually its one or a combination of the following things that create such an outcome:
- the system chosen by the trader is inherently defective and cannot generate profits
- lack of discipline in applying the system
- allowing trades to be influenced by emotion
- the trader simply made mistakes
Whatever the cause of the losses, reducing losses and maximizing profits can be yours with proper education and experience. Creating a definite and detailed FX online trading plan coupled with proper implementation can salvage seemingly terminal scenarios regardless of the system being used.
A market tested profit generating system and an efficient plan are two components for success in FX online trading. The trading systems on the market are much too numerous to enumerate here so our presumption will be that you have in fact, acquired your own system. The deficiencies begin when people presume that having a system is all they need. Well, in time they will realize that it certainly is not. The choice of system is definitely important but equally important is having a plan whose objective is the proper and effective implementation of the system chosen.
This plan must contain these three elements:
- the position size which is defined as the amount invested in every trade. While this would be defined in terms of lots, it is worthwhile to take into consideration the magnitude of the margin as well as what percentage it is of your total funds. Leverage available to you and the acceptable risk level involved are the determinants of the percentage amount.
- your stop loss level. This is defined in terms of pips but like position size, it’s better to analyze it as a percentage of your trading funds. As a general rule, traders should set up stop losses in manner in which they will not risk more than 2% of their total funds on just one trade. This may be adjusted based on your account balance. In cases where you have a minimal amount of funds, it may be necessary to take on more risk. This is because small normal market fluctuations will trigger stop losses every now and then. Ensure though that you keep foremost in your mind the fact that you are taking on a larger risk.
- exit levels for successful trades. Most traders do not plan this ahead of time but in reality, it should be done. For majority of market situations, profit maximization is facilitated by a preset profit exit amount. Resist the temptation to ride the trend to the end in the hope it will just continue and generate more profit for you. Eventually market conditions will change and when they do they may affect you severely.
Stick To Your Plan
What is the point of making a FX online trading plan if you won’t follow it anyway? The dissenting voices will always be there, urging you to waver from your plan, showing a large number of alternatives.
One temptation just mentioned was that of riding a positive trend indefinitely. This is just one of many temptations you will encounter. Another one occurs after a loss, where you are tempted to risk a larger amount than planned hoping it will create profit to compensate for the loss. Do not give in.
Another scenario is when your trading volume has been non-existent because there are no trades that conform to your trading criteria. One day, you are presented with a situation that just misses being traded by your system. You are tempted to give a little bit to accommodate this trade. Should you do it? Most certainly not. This is the essence of discipline, being able to say no.
It is also important to maintain focus by avoiding distractions in the course of your trading day to ensure that the chances of making mistakes is reduced if not eliminated. Mistakes can be unbelievable like going long when you intended to go short. Or maybe entering the market using the wrong pair and even setting stop losses at a level 10 times more than you had planned. Simple errors bordering on sheer stupidity but most traders will own up to making at least one such error once in their life. Domestic distractions are responsible for a good number of them. Doorbell ringing or maybe kids crying and your impulse is to place the trade immediately so you can address the distractions.
This is where the use of forex robots become a great advantage, no matter what the external elements are, the robot will implement the trading plan. As long as your robot can be setup as part of a profitable system, it will just go on trading automatically. By utilizing robots for your trades, you are able to insulate yourself from the dangers of temptation and distraction which can severely impact your fx online trading.
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