Open Fixed Size Trades
We will start with a risk management system which is an indispensable assistant to any trader. And the size of your transactions should underlie this system. This point seems obvious but you will be surprised how many traders trade all in when they think that this trade will definitely work out. Even if you are lucky one or a few times, such a habit will inevitably lead you to a complete loss of your investment.
Make it a rule to set a fixed lot size for each of your transactions. Some traders choose a certain amount in dollars, like $20, and don’t open trades above this volume. However, over time, your balance will increase. And when your capital exceeds $2,000, then sticking to $20 might not already be a smart decision for you.
The best option is to set the maximum percentage for your transactions. In this case, the limit should be 1-2%. So, when you select a 2% maximum with a balance of $1,000 you will open $20 trades. When your capital grows to $2,000 the trade size will already be $40 which will increase your potential profit without raising the risk level.
Many traders also adhere to the 6% rule. It implies that the maximum risk level for all of your open transactions should remain at 6%. You can choose your own limits. However, when chosen, make sure to stick to them.
Keep Repeating Your Goals
Thoughts have power. The more often we visualize or repeat something to ourselves, the higher the chances that this will happen. Many successful people give such advice. And it works for millions of people around the world.
This method can and should be applied in Forex. Set goals for yourself, write them down on a separate sheet of paper and put it somewhere where you can see it. This way, you can constantly return to them. Better to read them out loud every day.
I don’t mean any blurry desires like “I want to get rich” or “I want to achieve success”. It is about specific goals. You should give yourself an attitude for the future: “I will”, “I should”, “I must”. And it is important to include there not only the ultimate goals such as “become a professional” but also intermediate tasks that will help you achieve them:
- I will clearly follow my trading plan
- I will control my emotions at any outcome of the transaction
- I will focus on my successes and become a more confident trader
- I should treat Forex as a job, not a hobby, etc.
Analyze Your Trading
Let's talk about the most important thing - if you want to become a successful trader you need to reduce the number of mistakes and continue making the right decisions. The only way to do this is to analyze your trading history. If you don’t keep a trading journal yet, make sure to get one.
If you already have access to your past results, it's time to review them. See your progress for the first half of 2020. What helped you in these 6 months? Maybe you clearly followed the trading plan? Or you have chosen a more suitable time to search for trades during the day? Whatever it is, mark it, praise yourself, and continue to do the same in the future.
Let's move on to a less pleasant procedure and write down all the mistakes that you made during this period. Note how they affected your performance. I don’t mean a specific decision for each individual trade: I should’ve bought instead of sell. No. I mean, your general habits and methods:
- I reacted violently to the loss and opened trades out of revenge
- I increase the lot size after winning and lose more than I planned
- I change trading strategies too often
- I use too many indicators and clog the charts
- I don’t follow my risk management system, etc.
The process of becoming a professional trader is to work on yourself on a constant basis. Once you know your mistakes, make a decision to fight them, and choose the way to do that. This leads us to the last point of this article.
Build Your Improvement Plan
Just knowing your mistakes is not enough. You need to develop a plan to deal with each of the problems. The good news is that you are not the first to face any of these situations. Whatever happens to you, you will find information on how best to deal with it.
For example, you notice that you make trading decisions based on emotions. If you search the Internet for ways to solve the problem, you can make an appropriate plan for yourself:
- Describe your emotional state before and after each trade in your journal. This way you might find out that after a stressful day at work you often make the wrong decisions.
- Have more rest. In order for the brain to function at the maximum level, it needs to be charged. Sleep 8 hours a day and take breaks from work and trading.
- Open smaller trades, no more than 1% of your capital. So you will worry less about the amount of possible loss.
- Accept losing trades as part of the process. Focus on the overall result where your profit can significantly exceed your losses, etc.
I hope that my advice from the last three articles will inspire you to positive changes in your habits and trading methods. This will improve your results in the second half of 2020 and give you the necessary inspiration on your path to a professional trader.