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The FOREX Market- Trade with your head not your heart!
Sounds simple�right? In actuality, this is the number one reason why day traders lose their shirts. They let their emotions get the best of them and end up doing something real stupid. Trust me I�ve done it.
When trading currency, you need to take yourself away from the platform and look at your trades in actual bills not numerical values on a computer screen. For example, let�s say you short the USD/JPY for a 50 mini-lot right before a data release and it tanks. The USD/JPY goes down about 50 some odd pips and now you�re up $2500 in about thirty seconds.
Now, if you were smart, you would close the position and take your profit, but you�re not and you decide to let it ride. The market goes down about another 10 pips. So, now you�re up $3000 and you still won�t close it. You think that it�s going to keep tanking and that you could make 5-6k on this one trade�wishful thinking.
All of sudden the market retraces and shoots back up 20 pips, your still up about $2000, but now you tell yourself, I�ll wait until it goes back down a few pips and then close it. Too late, the market ignites and now you�re break-even and then you�re negative. In the end you take a $500 loser, which isn�t too bad, but considering you were up $3000 it�s like you lost $3500.
Now, let�s pretend you did this same trade with actual, physical dollar bills. Now or days most people trade from a three wide spread, so let�s say that you gave a trade booker $150 cash to place a short USD/JPY 50 lot. The data is released and this man keeps giving you $50 bills and before you know it you have $3000 in your hands. In order to keep this money all you have to say is close.
You decide to press your luck and wait and the market continues to trend down and now you have $3500 cash. All of sudden, the market begins to retrace and this nice young man starts taking $50 from you each pip it retraces. How many pips does the market have to retrace before you say close? Maybe, ten pips? Once you saw actual dollar bills being taken away from you, you would throw in the towel. So, how does one improve their money management skills?
First of all, realize that you are trading real money. I�m sure you realize that the money you are trading is real money, but do you conceptualize it? When you make a few hundred or a few thousand dollars trading, do you feel like someone just handed you cash? Of course not! Every time you�re trading, no matter if you are profitable or not profitable visualize and grasp the outcome. Don�t just watch your balance and equity fluctuate; you need to relate your loss and gains to every day life.
For example, let�s say you have a 10k account and in the first week you doubled that to 20k. You need to step back and understand what you just accomplished; you just made 10k in one week by sitting in front of your computer and trading currency. Now, let�s take that money and put it to everyday use. If you were handed a free 10k, what would you do with the money?
Would you pay of some debt, by a car, put money down on a home, go on a vacation, put it towards school, I think you get the gist. All I�m saying is that 10k is yours, you own it and there is no reason you have to keep in the FOREX. You are that 10% that succeeded this week, but the law of averages states that you are most likely to be the 90% next week. If not next week then the week after and if not then, eventually you will.
If you invest 10k and your account doubles to 20k, why would you pull out 15k leave in 5k and go for the gusto? If you lose your remaining 5k who cares you still made 5k in a week at your computer. Tell me another investment where I can make 50% on a 10k investment in one week. Turn around the following week pull my initial investment and my profit and still have 5k to play with. If I hadn�t experienced this first hand then I would have never believed it. DO NOT GIVE YOUR WINNINGS BACK TO THE MARKET! It�s not worth it.
Regards,
Brett Michael
www.myfxsecrets.com
Forex Snippets
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The Forex market is perhaps the biggest financial market in today�s world. According to the latest stats, today more than 85% of all daily transactions involve trading of the Majors, which include the US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar. A true 24-hour market, Forex trading begins each day in Sydney, and moves around the globe as the business day begins in each financial center, first to Tokyo, London, and New York. There is so much to learn about this highly competitive, volatile and fragile market that we may find it a daunting task to learn it inside-out, so we do need some sort of forex training or education to equip our self to perform better in the market.
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Another reliable economic indicator in the foreign exchange market is the industrial production report. This report shows the fluctuation in productions in industries such as factories, and utilities. The report looks at actual production in relation to what the production capacity potential is over a period of time. When a country is producing at a maximum capacity it positively affects the Forex and is considered ideal conditions for traders.
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Indeed large multinational and individual banks and other major financial institutions have dominated FX trading (also known as Forex trading), but there is a paradigm change in the nature and type of investing. According to one estimate, in the new millennium, there are over 6 million online investment accounts, up from 1.5 million in 1997. As a result, start-up firms now compete directly with financial institutions to serve investors in the new technologically driven economy, and the clear winner is the customer. The competition between the brick and mortar institutions and the Internet-based companies has dramatically lowered the costs of investing, and empowered the individual investor to take control of their own investment strategy in Forex trading.
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