How To Control Your Emotions With A Forex Trading System
The single most important factor to your success as a trader is if you have a forex trading system to follow or not
. Before trading a live account you first must spend your time detailing and developing a well written strategy to stand a chance at becoming a successful trader.
A study was done by a famous university and they found people who wrote down their goals achieved them more than those who did not. Having a written trading plan will help you achieve your goals more so than those who do not.
Having a forex system in place helps you know how to react in all circumstances. If for some reason you were to be in a trade outside of your system rules you must exit right away and enforce correct behavior in yourself.
Revenge trading occurs after a trader takes a few losses in a row and tries to make back the gains. The largest losses can occur when a trader tries to make back lost money in a short time trading outside the method in place.
Having a few guidelines in place and calling it a trading plan is the most common mistakes I see new traders making. Your trading plan cannot be something vague like I will not risk more than 3% on a trade and will not loss more than 5% in a single day.
A forex system needs to include all of the essentials of trading which include money and risk management, market edge from technical or fundamental analysis and price action for entry. The only way to be successful at trading is to have a well rounded system that takes nothing for granted.
The worst thing you can do when creating a forex trading plan is spend your time backtesting past data trying to create an auto trade system. Once you forward test a system that was curve fitted it will fail going forward. Instead spend your time understanding price behavior and market fundamentals.
The difference from traders who make money trading in the markets and those who desire to is that profitable traders have a planned out detailed trading system they stick to and those who wanna be traders play with their calculators figuring out how much money they could make if they have some silly unreasonable monthly return. First learn to have a return on your money before dreaming about how much money you could make. Begin with a well defined system to follow and take your time building a proper foundation.