What’s Stopping You From Making Money With Forex?
The many thousands of people that enter the world of Forex are often in for a rude awakening when they start their trading career. The lessons, many hours practicing, and the knowledge they build before they begin is often thrown out the window as soon as they use actual funds for trading.
In my Forex coaching, I will often plead with clients not to get stuck in the trap of using demo accounts for too long. The reason for this is simple. I have met countless ‘demo millionaires’ yet despite the fact that they can execute their trading on a demo environment with ease, if they attempt to replicate these results in a live environment then they throw all caution to the wind.
Their trading turns sour, and they lose their hard earned funds in a short space of time. I have seen this on more occasions than I would care to remember. It seems somewhat counter-intuitive then that I ask them use live funds on their accounts right from the beginning.
Even if they are risking a mere dollar, the psychological effects of this are far more profound than the results of demo trading could ever hope to be.
So, what’s stopping you from being profitable? Below are some of the key points that I have noted in both my own experience, and in the experience of others that I’ve witnessed.
People will often dismiss this without a second glance. They believe that because they are not at the local race track betting on the dogs, or horses then they cannot possibly define themselves as gamblers.
Unfortunately the markets are not much different. People don’t like to feel like they are gambling as long as they are sticking to their system, which brings me to the next point…
Inability to Stick to a Trading System
Actually, this should probably read: Inability to create and stick to a trading system. It may sound harsh, but again I have witnessed many people with a lot of market knowledge throw themselves to the mercy of the markets because they try to trade on ‘hunches’ rather than a proven plan.
Believe it or not, a trading plan does very little unless you have the following vital component;
Money Management Plan
I believe it was the famed markets educator Dr Van K Tharp that could take something as simple as a coin toss with a supposed 50% winning ratio, and create a profitable trading system simply by adding money management. That is how powerful money management is!
You may have heard of the two percent rule. In basic terms, this means that you should never risk any more than two percent of your account balance on any one trade. For some with a gamblers mentality this is hard to fathom. Normally speaking, people are allured to the markets by the thought of quick profits, and easy money.
Like many ventures in life, you can strike it large on a few trades, but for the most part you are better off focusing on executing your trades well and eking out small profits as they come.
This covers just a mere glimpse of ways to better your trading. If you can see anything on this page that sticks out at you, then you should adapt it to your own trading. Sometimes merely knowing what an issue is, is the first step towards fixing it.
Check out these free resources: http://www.freedom-fx.com
Written by Keith S Davies