Yes, you read that right: if you want to learn Currency Trading, you have to be ready to lose. Naturally you’ve got to go into each trade with the objective of earning money, but some trades will inevitably go against you. How you handle that when it happens is one of the most important factors in determining whether you will become a successful currency exchange trader.
Everybody knows that it is vital not to let your feelings be in control of your trading. However, even super cool traders, even people who employ a system such as FAP Turbo, who never make a foolish mistakes ( if there are any ) are certain to lose sometimes because no system is a hundred percent successful. Some trades will just go screwy.
Also, and this is harder to handle, all systems will sometimes go thru bad patches where they drift into making a loss over a couple of days or weeks. You can see this taking place when you backtest a system. There are times when everything seems to go right and times when it is the opposite. When it occurs in real life, you have to be prepared.
One way to prepare for a bad spell is to have an idea of the drawdown of your system. This is the amount by which your funds are likely to drop during a bad run. It relies on the percentage success rate of the system ( the proportion of moneymaking trades ), the average profit of those trades and the average loss of losing trades. Typically if you have backtested the system thoroughly you may have an idea of what the drawdown is likely to be. Real life can always surprise us so it’s best to set your position size so that your total funds cover the drawdown three or 4 times over.
When you begin foreign exchange trading it is really easy to be drawn in to committing too much money to each trade. You may start out with a minute account and use a lot of leverage to manipulate position sizes that involve you in more risk than your fund balance can handle. This will inevitably lead to a crash. So even if you only have the littlest possible micro account, work out your drawdown and allow for it. If you don’t, your funds will be wiped out at some point soon in the routine swings and roundabouts of your system and even if it was only a touch, this is very discouraging.
So on the one hand you must protect your funds from bad times at all costs, but on the other hand you must be a little detached from them too. Don’t consider that money yours any more, consider it spent, just as if you had used it to buy a new auto. You should only be trading with money that you can afford to lose, so if you can’t do this, you want to rethink how your trading is sponsored.
It is very important that you don’t depend on this money. Never trade with the rent money. If you do, you may be under a lot of unnecessary stress while you are trading and that is likely to lead to mistakes. Ironically, the way to earn more cash when you learn foreign exchange trading is to plan for loss.
