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Trading Outside Your Comfort Zone

Six pointers to keep in mind when starting forex trading

While making some extra money or a rock solid income is one of the main causes people start trading, it also tends to happen in a point of a new trader's life when they want to try something new. While some people jump from an airplane and release a parachute, others start learning about trading.

Simple 1-2-3 (or S123) is a 3-step, rule-based Forex trading strategy created by Lennox Chambers and Peter Bain. S123 helps Forex traders to locate, enter and exit trades across all timeframes. This unique trading system offers guidance to traders to not only know where to enter trades, but where to exit trades.

Open a Practice Portfolio

So, after finding out what trading is and how it works, you will hopefully start to feel passionate about it, especially if you can get FX broker with negative balance protection. You can start reading more and more and eventually open a practice portfolio from the many available systems online. In here you will find that trading is not that hard, and the good news are that practice portfolios are basically real portfolios, with practice money. So, as the values are real, the difference in the trading itself is not that big when we switch to reality.

After completing this quota and start feeling ready for the big leagues, you should know that things will change, not from the trading perspective itself, but in a psychological manner. Risking our capital is not something to be taken lightly. Although it can look easy sometimes, making consistent profit requires discipline and a good handle on the emotions that your trades will cause you.

Practice paper trading before you start for real
Before you get into the big leagues of FX trading, start small and manage your trading
with a disciplined approach, to build confidence and experience.
 (Image by Pixabay.com)

Successful trading requires discipline

In order to achieve this, traders must consider two things:

  • First, they need to know how to react to losses, which will happen sometimes, and deal emotionally with the trends and streams that a trade is following;
  • Second, they need to learn how not to get greedy on earnings, just because a basket is good doesn't mean that we should put all our eggs on it, right?

It is also important that traders take into account that an efficient trading strategy and a money management strategy are key elements in the real market.

When it comes to trading, our minds are as important as our trading knowledge. The biggest challenge in forex trading is keeping it all together consistently. I’m sure most of bankruptcies in this market comes from losses with emotional roots. Whenever they get into a trade, most traders have a system to follow, which creates their own “comfort zone”

Keeping Calm and Playing Smart

It is normal that some people use those methods in order to feel comfortable, after all if we don't have a system to do our things, where do we even start?. When talking about trader’s expectations, it is important to establish the priorities extensively; if they find out that there are diverts, it could mean that there is a certain level of risk. Therefore, once traders stop following their day to day strategies, they will surely be nervous. Probably because of the feeling of “What if there’s something I don’t know about this type of trading or what to do if I get negative balance?”.

The most important thing that traders should remember is that they need to be calm down when they are trading. The most clear and peaceful of minds will surely have “luck” on their side, since the thoughts are clear as water. If you discover that something is not going well on your trade, do not start feeling anxious, since this attitude will result in more losses, stop, analyse, think and plan to execute new strategies. Every loss provides you with the chance of a great comeback.

Learn to lose properly

It is common for new potential traders to panic when their trading strategy is not going as they planned, and they decide going for the old double up technique and hope to get it right the next one and recover. According to the Martingale strategy, traders should double up only when they are attempting to recoup their losses on their next trade.

In this case, traders must overcome this common mistake as soon as possible. The problem with that approach is that once a traders win a few trades, it is probable that markets go against them for longer than they can stay liquid.

According to Peter Brandt, a trader with more than 5 decades of experience, one of the first things that traders must learn is how to lose properly, as it holds the most important part of the game perhaps.

Undisciplined trading can lead to losses
As with any market and investments, an essential part of your experience will be knowing
how to handle your losses properly, which will inevitably happen.
 (Image by Pixabay.com)

Avoid Distractions

Traders who begin with demo account still have no idea what they are about to face. Again, it is important that the beginner traders take into account that they will be under pressure constantly. Besides, they have to consider that it is not common that trading conditions change from demo to live accounts; however, the trader’s ability to deal with the pressure from losses is what matters most, and is not being measured in here. As you can imagine, is not the same to say “Hey, I like this trade, let’s do it” , get to it and come out with an “I knew it” or a “Damn. Thank god that wasn't real money”, than to have your bank account linked to what’s happening here.

One of the things that could help traders to feel more comfortable about trading is to ignore the profit and losses area of the trading platform displaying the current open positions. Traders only have to consider the monthly P\L; the rest will be a distraction.

Resist the greed factor

Another big enemy of us for this matter is greed. Greed is the most common mistakes new potential traders make. Imagine a new trader starting with $500, with a well-disciplined plan in mind. After about two months, or eventually, the same trader has $25,000. He gets cocky, brings up his game to $10,000 each trade because his amazing at it, at the end of two and half losses, he’ll be broke, struggling to borrow $500 to start over, with the previous extra expensive lessons learned.

To sum up, it is not good that traders depend on pure luck when trading. It is important that they remember to stick a plan, be constant, and make a detailed calculation to minimize risk and promote the probability of profit. According to statistics, over 89% of beginner traders get a considerable profit, but once they reach the top, they forget all the strategies that help them to get there: a trading strategy, a money management strategy, negative balance protection brokers, and patience, a lot of patience.

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