By: Terry Allen
You may have heard through the Forex grapevine that experts possess mindsets exhibiting harmony, tranquility and confidence. Are you able to say the same as well? If you are new to this type of trading, then most likely you will not.
In fact, most novices achieve a very agitated state of mind soon after they start Forex trading especially after they have endured their first strings of consecutive losses. In addition, their constant manic search for new techniques, tools and strategies to enable then to join the mystic circle of 5% successful traders drains their morale and confidence in a dissipating manner.
One major point that you must understand is that good traders can make even poor methodologies produce positive results whilst beginners will fail no matter how good the tools and strategies that they use. This is very sad, but true. If you are part of the latter group, then you need to heed this warning in order to preserve your equity.
You can understand this process better by considering that some experts trade in the following manner. For instance, they realize that Forex can be extremely volatile and so they always ensure that there is no chance that they will ever overtrade. They do this by taking such actions that will guarantee that their useable margins will never come under such risks that they can be reduced to zero resulting in margin calls.
Your useable margin is a very important trading parameter because it informs you how much equity you have available to support all your open positions. Experts provide adequate protection for theirs by limiting their risk per trade to only 2% of their total equity.
This action also has the additional benefit of allowing each new position time to move in its anticipated direction. This means that experts can just sit back patiently and allow events to unfold. As many novices utilize excessive leverage they do not allow themselves the luxury for this to happen.
Instead, they become increasing worried as they witness their useable margins shrink dramatically by the minute. They could suffer further trauma after their positions are stopped out only then to watch price proceed back into their chosen directions.
Experts are also not thrill seekers, but analyze trading opportunities carefully with great patience. They do not feel the need to action numerous trades daily as beginners do. Instead, they prefer to depend on the more accurate statistics associated with the daily time-frames and higher as opposed to the shorter ones.
Consequently, they know full well that they can perform technical analysis using indicators or price much better because of its increased reliability. Although experts open fewer trades than novices, the ones that they do are of much higher quality.
You must realize that experts place themselves under little pressure by never overtrading and activating only quality positions. Consequently, you may draw the conclusion that they possess mindsets exhibiting harmony, tranquility and confidence because they do almost nothing at all.