Essential Elements of a Successful Currency

Essential Elements of a Successful Currency

Trader

Courage Under Stressful Conditions When the Outcome is Uncertain

All the foreign exchange trading knowledge in the world is not going to

help, unless you have the nerve to buy and sell currencies and put your

money at risk. As with the lottery “You gotta be in it to win it”. Trust me

when I say that the simple task of hitting the buy or sell key is extremely

difficult to do when your own real money is put at risk.

You will feel anxiety, even fear. Here lies the moment of truth. Do you

have the courage to be afraid and act anyway? When a fireman runs into

a burning building I assume he is afraid but he does it anyway and

achieves the desired result. Unless you can overcome or accept your fear

and do it anyway, you will not be a successful trader.

However, once you learn to control your fear, it gets easier and easier and

in time there is no fear. The opposite reaction can become an issue –

you’re overconfident and not focused enough on the risk your taking.

Start by analyzing yourself. Are you the type of person that can control

their emotions and flawlessly execute trades, oftentimes under extremely

stressful conditions? Are you the type of person who’s overconfident and

prone to take more risk than they should? Look inside yourself and get

the answers. You can correct any deficiencies before they result in

paralysis (not pulling the trigger) or a huge loss (overconfidence). A huge

loss can prematurely ends your trading career, or prolong your success

until you can raise additional capital.

Both the inability to initiate a trade, or close a losing trade can create

serious psychological issues for a trader going forward. By calling

attention to these potential stumbling blocks, you can properly prepare

and develop good trading habits.

The difficulty doesn’t end with “pulling the trigger”. In fact what comes

next is equally or perhaps more difficult. Once you are in the trade the

next hurdle is staying in the trade. When trading foreign exchange you

exit the trade as soon as possible after entry when it is not working. Most

people who have been successful in non-trading ventures find this

concept difficult to implement.

For example, real estate tycoons make their fortune riding out the bad

times and selling during the boom periods. The problem with trying to

adapt a hold on until it comes back strategy in foreign exchange is that

most of the time the currencies are in long-term persistent, directional

trends and your equity will be wiped out before the currency comes back.

The other side of the coin is staying in a trade that is working. The most

common pitfall is closing out a winning position without a valid reason.

Once again, fear is the culprit. Your subconscious demons will be scaring

you non-stop with questions like “what if news comes out and you wind

up with a loss”. The reality is if news comes out in a currency that is

going up, the news has a higher probability of being positive than

negative.

So your fear is just a baseless annoyance. Don’t try and fight the fear.

Accept it. Have a laugh about it and then move on to the task at hand,

which is determining an exit strategy based on actual price movement. As

Garth says in Waynesworld “Live in the now man”. Worrying about what

could be is irrational. Studying your chart and determining an objective

exit point is reality based and rational.

Another common pitfall is closing a winning position because you are

bored with it; its not moving. In Football, after a star running back breaks

free for a 50-yard gain, he comes out of the game temporarily for a

breather. When he reenters the game he is a serious threat to gain more

yards – this in indisputable. So when your position takes a breather after

a winning move, the next likely event is further gains – so why close it?

If you can be courageous under fire and strategically patient, foreign

exchange trading may be for you. If you’re a natural gunslinger and

reckless you will need to tone your act down a notch or two by making

the necessary adjustments. If putting your money at risk makes you a

nervous wreck its because you lack the knowledge base to be confident in

your decision making; develop your knowledge base.

Patience to Gain Knowledge through Study and Focus

Many new traders believe all you need to profitably trade foreign

currencies are charts, technical indicators and a small bankroll. Most of

them blow up (lose all their money) within a few weeks or months; some

are initially successful and it takes as long as a year before they blow up.

A tiny minority with good money management skills, patience, and a

market niche go on to be successful traders. Armed with charts, technical

indicators, and a small bankroll, the chance of succeeding is probably 500

to 1.

To increase your chances of success requires knowledge; acquiring

knowledge takes hard work, study, dedication and focus. Learn all

aspects – fundamental and technical.

Do the work and you will succeed.

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