Forex Discipline

When it comes down to it, all successful traders have learned to mastery one important skill … discipline! As I progress as a trader, whether it is on my home court (the forex market) or on a road trip (trading options), discipline has been the skill that has made me more profits and lack of it has been the major contributor of all of my losses!

Living in the western portion of the United States requires local forex traders to either stay up late to trade the London session or wake up early to trade with the east coast. I am a morning person, so it is no brainer that I do the majority of my FX trading during the London-New York overlap period. A good nights sleep and a fresh morning coffee and I am ready to go hunting PIPS! Well I broke my rule last night and after tackling receipts going into tax season and looking at some option positions I had on, I took a look at my forex charts for a swing trade opportunity. I saw a nice opportunity for the euro to move up over the next several days. A long story short, I was yawning and could hear my bed calling. I shut down the computer and patted myself on the back for not placing any trades while I was so tired. I was disciplined in recognizing that I just do not trade well during the late evenings.

What happened today?

The euro was strong all day, and as of the writing of this post, had moved up 123 pips!!! Not the ending you were expecting!

My point is, discipline made me aware I was at my low point mentally and should not be placing forex trades in my current state of mind. I bring this up because this will happen to all traders a one point or another. 99 times out of 100 this would have been a losing trade!

Know yourself, establish your style and stay true to your plan. If you follow this simple formula success will just be a matter of time. Forex education is the key to developing a solid discipline trading approach.

Visit FX Trade Central for forex educational opportunities.

Forex Money Management

This may be my quick version of forex money management, but there is nothing more important. As I have been told over and over again, any one can get into a currency trade, but those who are profitable forex traders know when to exit a trade.

This is for profits as well as loses!

I find that the best forex trades I put on are those trades where my emotions are not a factor in the currency trade to begin with. To do this there are some basic principals I follow regardless of the strategy or time period I am trading.

• I set a pip goal for the trade based on my trade plan and technicals. If you do not have a trade plan where you have outlined your currency trading goals and objectives then stop reading this blog and create one now!
  
  
• I never risk more than 5% of my account on any given trading opportunity. To calculate the amount I will risk I divide my trading account principal by 0.05 and then divide that by my stop loss (dictated by the strategy I employ) to give me the number of lots I will place on the forex trade. This is the number I am personally comfortable losing. Yes, I said losing! I always approach risk management in forex trading from a “what if I am wrong” point of view.
  
  
• I always trade with a stop loss and limit order! This takes the emotions right out of the equation. I have learned with experience to employ trailing stops and fine tuning of my technicals to lock in profit and provide ever increasing better entry and exit points. Over time I have been able to let more winners run and cut loses shorter than when I first began trading.
  
  
• Here is my forex money management “golden nugget!” If take pause after a draw down of 25% AND after a run up of 25%. During this 2-5 day period I trade in my demo account, practicing new strategies or reviewing the basics. This keeps me grounded when I am too down or too up.

These are my rules. By keeping a good forex trade journal you will be able to recognize your strengths and weaknesses, and employ them in your money management plan.

Join my community of traders at FX Trainer for your forex training needs and visit my forex education portal FX Trade Central for more currency information and education.

FEAR and FOCUS

Is fear preventing your from achieving forex success? By now I know everyone has heard of the acronym for F.E.A.R. (False Evidence Appearing Real). Sometimes to get over the hump and put fear in our rear view mirror only requires an attitude check! Adjusting our attitude can build our confidence and basically get our heads out of the way and journey on to forex success!

Author’s Mark Victor Hansen and Jack Canfield (both from the famous Chicken Soup series of bestsellers) has another overlooked book on the market called The Power of Focus. In the nook they discuss strategies to combat fear and build confidence. Some of these strategies include;

• Remind yourself that you did some things well in your trading everyday.
  
• Read inspiring biographies and autobiographies. These can fall outside of the trading world.
  
• Be thankful. You are taking massive action to take control of your financial future!
  
• Build a support network around you. Use the mastermind principal to build a support team of traders and non-traders.Chunk it down! Take your long term goals and plans and chunk them down into smaller bits like mastering trading channels in your demo account.
• Celebrate your success! If you can’t do this than repeat the first step (and do not collect $200!!!).
  

You can find this book and my entire mandatory reading list of my forex educational site, FX Trade Central.