Initially its called 'ADVICE FOR NOVICE TRADERS" but I find it imperative too for any trader of any trading age, to remind himself with few things from time to time :
- Set up strict limits for your losing trades, so that you don't lose more than you can handle. These limits should be within 3-10% of the total sum of your account, depending on its size. If the market starts going in the wrong direction, don't try to think of excuses why you shouldn't close that position - as soon as the losses reach your set limit, immediately close the position. Even if the market starts going in the right direction 5 minutes later, you have eliminated the risk of it not turning around. You will make such trading rules, so that you could trade by them, not try to go around them - you would only be hurting yourself if you did.
- One of the most deadly mistakes a trader may commit, one will destroy your trades, is when the trader (after already losing $200 on a position) begins to think of excuses not to close this position - perhaps the market will suddenly turn around and move in a favorable direction? The trader keeps thinking of this, and doesn't have the heart to close the falling position, waiting until this happens. The market does not do any favors for anyone. Eventually the trader will be forced to close the position, with losses of $1000, or even greater. Not only will the trader lose money, they will lose morale too. They will lose confidence in themselves and their decisions. The reasons for committing this mistake is simple greed and hope. Losing $200 doesn't hurt your opportunity to not only make up your losses, but also make additional profit. Losing $2000-$3000 in 1 or 2 trades, you completely destroy your opportunity to earn further money! In order to avoid this trouble you must follow a simple rule - never go over the risk limits you set for yourself. Close your positions immediately when your losses reach these limits!
- . Mistakes and losses are an unavoidable part of any trade on any market. The sooner you learn to accept losses in such a way, the sooner you will begin to earn. You should not blame yourself, others, or the market for your losses. Your losses are in no way related to your reasoning abilities. Your task is to calmly analyze your mistakes and to not repeat them in future trades. You should not jump from joy after winning $800, nor beat your head on the wall after losing $200. The less you let emotion get a hold of you during trading, the better your ability to see the true market situation and to make the right decision. It is vital to develop a cold-hearted lack of emotion, and to treat winnings and losses as just numbers - not money. Understand that traders don't learn from their winnings - they learn from their losses. When every loss is perceived as one step towards your next winning trade - you are on the right track.
- The trader's greatest enemy is not the market, putting the blame on which is the same as blaming nature. The trader's greatest enemy - greed, impatience, lack of control over emotions, insecurity in oneself, and a self-centered nature of the trader. You must never open a position simply because you get bored and want to do something, because you haven't opened a position in a while. There is no norm as to how many positions you should open in a given period of time. Even if you only open one position on 2-3 days, but that trade earns you $600-800 - you are on the right track.
- Keep a diary, where you will describe the conditions that led you to make the trading decisions that you did. Write about the market events that influenced your decisions to open or close a position. After every trade, analyze it and write down the result in your diary. If you made a profit, it is important that you understand and remember your flow of thinking, which led you to the right decision - market events happen often and new news may replace old news, so you will eventually forget what happened unless you keep track of it yourself. It is even more important to understand why you lost. There are really not that many mistakes that amateur traders commit, and if you can understand them all, you can learn not to repeat them.
- Reading the opinions of others, base your trading decisions on your own analysis of the market, and your feel for the market, which you will eventually acquire. If your prediction matches someone else's, good. If not, thats not a problem either. However, if upon seeing such a disparity, you start doubting your analysis, it is best not to make the trade on your real account - only on demo. If you are confident in your decision, go ahead and do it - one of the predictions will be correct. If your prediction is not the correct one, find the fault in your analysis.
- Try to think of your demo account as your real account. The sooner you are able to convince yourself that the demo is trading the same real money that you would trade on your real account, the sooner you will begin to develop the proper technique of trading which you will eventually use on your real account. You must act the same way when demo trading, as you will when trading for real, because the technique you develop determines your success in trading.
- New traders are not recommended to trade on Sunday nights, New York time, because this is actually Monday morning on Asian markets, and the behavior of the currencies at this time is the least predictable. It is also not recommended to trade on Fridays, especially mornings, New York time - on Friday the market usually breaks away from the trend, which it set during the week, and for you it may become an unpleasant surprise. Also, on Friday, more often than not, the market has a tendency to sell off American dollars, especially in periods of an uncertain economic situation in the USA.
- Try to begin trading at the same time of day, each time - the behaviors of the currencies at different times of the day differ, and by concentrating on a certain time of day to trade, you will be able to understand the characteristic behaviors of currencies at this time. Begin your day by researching events that occurred on the market while you were away from trading. For this purpose, our site has a great feature that will help: "Market Watch". After getting familiar with the market events, look at the graphs for the movement of the currencies, starting from "tick" charts and ending with daily, and select a tactic which you will use for this particular day.
- Concentrate on 1-2 currency pairs, not more. Research their behavior thoroughly. Do not trade different currency pairs, but observe and analyze the behavior of all currencies - they are all dependent on each other. Understand which cross rates have the greatest influence over the behavior of the currency pairs, including the US dollar.
ORIGINALLY FROM :
http://www.pinnacle-exchange.com/forex-novice.html
ADVICE FOR 'all' TRADERS
Great Advice
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