You can go to a university to get a first degree followed by a second (higher) degree, work certain jobs, and achieve remarkable success in your career. It’s just unfortunate that forex trading isn’t one of those “jobs” that promise any level of success based on a fancy degree.
That is because a degree in anything that gives any level of understanding of the financial markets will only make you a very good strategist – at best. But history has taught us repeatedly that even the best strategies fail.
Of course, strategies are important, but when it comes to forex trading, all successful traders add principle and the discipline to stick to those principles to their strategies. So in essence, contrary to what you might have in mind about trading, the discipline to stick to set principles is what sets successful traders apart from the less successful ones.
To that end, here are two quick principles that successful traders have and stick by. Imbibing these principles and sticking by them would drastically up your chances of success.
Don’t Ever Trade When you’re In Dire Need of Money
This is more of a housekeeping matter. You should fundamentally know that forex trading is not a get rich quick scheme. It has never been and it will never be. Pros who seem to have made millions from trading didn’t get there overnight. Discipline and consistency is what got them to that point.
In fact, trading platforms, like iFOREX, advice that the best way to get started as a forex trader is to view the entire trading thing as what it’s like to start a new day job as an entry level staff. At an entry level, there is a limit to what you can earn. To earn more, you need to learn new skills and work your way up the ladder diligently. If you view forex trading this way and deal with it this way, you’ll be positioning yourself for long-term success. Don’t ever make the mistake of venturing into trading when you’re in dire in need of money, as you’re likely to be desperate – which is a recipe for failing.
Cut Loses Fast
It just plainly feels horrible to lose at anything. But the truth is you’ll lose at some things in life. That applies to trading as well. Regardless of how great your strategies are, you’ll lose. The only thing that will keep you in the game is learning to cut your loses fast.
Tim Grittani, one of celebrity day trader Timothy Sykes’ students, said that at a point when he was starting out, he was down by about $500. Instead of living by the thought that he’s got a really solid strategy and hoping that the trade will end up being profitable, he cut his lose fast. He could have lost more had he not been disciplined. You just have to put the old maxim that says, “Live to fight another day” at the heart of your trading endeavors to achieve long-term success.
You need to understand that big risk doesn’t always translate to big returns. In fact, as rule of the thumb, you should never risk losing more than 1% of your trading account in a single day. That is, if your trading account has $10,000 in it, your maximum daily risk should be $100.