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It’s impossible to trade or invest and not find yourself in a losing position. That’s just the way things are. And a large trading loss can be devastating — not only financially, but emotionally. As defeating as losses feel, how you react to a big loss is more important than the loss itself. Inexperienced traders suffering a large loss can become hijacked by their emotions.

Some may try to trade through the pain, often creating more turmoil for themselves. Some may withdraw from the market, to avoid thinking about it. Others may try to “trade-in revenge,” determined to recover the losses. None of these reactions is constructive. In fact, they can be destructive if you don’t learn how to handle losing trades.

Whether it was an obvious minus in your strategy, a lack of discipline, or any other reason, nearly every trader will face a big loss (or several) in their career. After a losing streak or big loss, you may begin to question yourself, which leads to the typical problems many new traders have, like getting out of trades too quickly, holding on to them too long, skipping trades with the fear of losing, or getting into more trades than you should in an attempt to get some winning trades.

One major difference between successful traders and failed ones is how they handle trading losses. Successful traders treat losses as an opportunity to learn and improve their trading. Coming back from a large loss is challenging, but success is never accomplished by ignoring trading losses.

Losses — especially substantial ones — can be opportunities to become a more skilful trader.

Here are 7 rules successful traders take after a loss to become emotionally stronger and more disciplined:

1. Never let a bad day cost you more than you make on an average win day Knowing how to lose properly is a must in a long and prosperous trading career.

If you average, let’s say, $200 on your winning days, don’t lose much more than that on a bad day. Control the downside.

Knowing how to minimize risk is the most important aspect of trading. There are really only 4 possible outcomes to a trade or investment: A big win, a small win, a small loss, or a big loss. As long as we ELIMINATE the big loss from our trading days, we can live comfortably with the other three.

Risk Management is the primary cause for a successful or unsuccessful trading experience. Sound risk management can yield a steady increase in profits, while poor risk management can wipe out an account in a very short period.

If you follow the 1% risk per trade rule, a precise stop loss level presets that 1% value and you’d know beforehand the amount you risk losing should your trade turn negatively. And this goes hand in hand with the second rule.

2. Know the stop-loss level before you ever get into the trade. A stop-loss is a simple tool, yet so many traders and investors fail to use it. Whether to prevent excessive losses or to lock in profits, nearly all trading styles can benefit from this trade.

Think of a stop-loss as an insurance policy: You hope you never have to use it, but it’s good to know you have the protection should you need it. So, always use a stop loss and know its location before you ever get into the trade. Also, never widen your stop losses when the market moves in negative territory. Know that regardless of what happens, there is another trade around the corner. If your trading strategy relies on the success of one single trade, it’s a very bad trading strategy.

Remember that trading success is the accumulation of many successfully, managed, both winning trades and losing trades.

3. Don’t involve in revenge trading A big loss causes all sorts of inner conflict—a need for revenge, fear, anger, frustration, self-hate, market-hate, and the list goes on. After a big loss, there’s no way to trade with a clear head. There are more than 250 trading days in a year, so there is no rush to get back in there.

If you do so, you basically revenge trading. Rather than looking to your strategy and make sensible decisions around the incident, you jump straight back in.

This is dangerous for your account for two main reasons. First, it forces you to throw your trading discipline out the window. It shifts your focus from your trading process to trying to make enough money to recover your losses.

Trading based on emotions and luck is not trading. It’s gambling. It’s also a lose-lose situation. If you lose a revenge trade, you increase your losses even more with a trade that you had barely planned for.

If you win, then you believe that trading on guts and emotion works and you’re going to do it again. So don’t do it.

4. Accept responsibility If you suffered a large loss; be sure to own it. Don’t brush it aside, hide from it, or blame the “smart money” for your loss. There is always an excuse for a losing trade, but we must accept the risks as traders and investors.

Until we accept that we are responsible for whatever happens with our orders, the same thing will happen again. Accept responsibility and figure out what could have been done differently. This will help reduce the chance of it occurring again. It is also healthier than blaming other factors for your mistakes. Blaming others is admitting you don’t control your own trading, and if that is the case, you shouldn’t be trading at all.

If you control your trading and investing, then you can fix it. And is always something that can be done. It may involve changing markets, changing your strategy or your trading style. If you find that scalping the 1-min chart brings you a lot of losses, try swing trading. The solution is there; you just need to find it.

5. Stop trading for a while Sometimes, it’s better to take a break to figure out what went wrong.

Do those things so that you can get back to a better mindset in which you can refocus. After that, assess what happened by reviewing events carefully. Think about where you fell short.

For example, did you take too much risk? Was the trade well-planned? Were you mentally sharp, or did you hold a losing trade hoping to avoid a loss? Taking a break from trading is one of the hardest things to do, but it’s a smart move. Wait for the conditions to improve.

Preserve your cash, save your sanity and focus on other things. When the conditions improve, so will your results. Remember: the market will not disappear tomorrow. Nothing terrible will happen, on the contrary – during this time away from charts you will likely come up with new, better ideas on how to improve your trading.

6. Trade lower position sizes After a big loss, confidence can below. Not having a clear mind can cause you to skip trades, panic out of trades, or be overly aggressive. None of these is good. Take a step back and trade in a demo account for a few days.

Because it’s not real money, there is also less pressure in a demo account, so it is easier to focus on trading, and not worry about the financial aspect of it.

A few winning days in the demo account will raise your confidence levels and put you in a better mental space to take on the markets again with real money. So after a losing streak, start small; don’t jump right back to the same position size you were trading before. In the first days back, trade small position sizes. A winning day with a small position size will help build confidence, and you can slightly increase your position size as the account balance goes up. If you have a losing day, losing on small position sizes is easier to handle than another losing day on full position sizes.

Even if you win a few days in a row, increase your position size incrementally, so it takes about a while to get back to your full position size. I know that after you have traded bigger position sizes, it’s annoying to start back with a small position size, but it’s for the best. Bouncing back from a losing streak is about getting back to basics and implementing a strategy well, not actually about making money.

Money comes from implementing a strategy well. Demo trading and trading small position sizes get you refocused on what’s important, so you can start building your confidence again.

7. Let Go of the Outcome and Embrace the Process Realize that trading is a continuous process of learning. Most of the time, in trading (like in real life!), you learn more from your mistakes than your victories. Losing money should motivate you to look closer at your actions, read more, better educate yourself, become more disciplined in your execution and so on.

Next time, you will have a better idea of what happened and where you went wrong and can open up room for improvement and start stacking the odds in your favour. As cliché as sounds, putting your focus out of making money and enjoying the process will keep you on the right track and more likely end up in profit. If you learned something new and found value, leave us a like to show your support.

Forexgist.club

Some people are more comfortable with risk than other people. Personalities are different, and there is nothing fundamentally better about being a risk-taker or a risk-avoider. Risk tolerance is a financial industry measure. It refers to an investor willingness to take risks and the ability to stomach losses.

High-risk tolerance means an investor is aggressive and will find satisfaction in taking higher levels of risk in exchange for the possibility of higher rewards. It also means the investor can tolerate larger losses, knowing that there might be larger gains later.

A low-risk tolerance means an investor is conservative and will take comfort in preserving principal, knowing that lower-risk investments will mean lower returns. Risk tolerance changes over time. Age, income, and circumstance all interact to form your current level of risk tolerance.

As various factors change in your life, you will find that your risk tolerance rises or falls. Pay attention to your current risk tolerance, and be aware of the way your feelings about risk are affecting your judgment. Investors can assess their degree of risk tolerance by taking one of a number of different risk tolerance questionnaires.

In addition, it can be useful to review worst-case returns for different asset classes historically in order to get an idea of how much money one would feel comfortable losing if his or her investments have a bad year or bad series of years.

It is often said that practice makes a man perfect, but never has it been said how much practice and what kind of practice will make the man perfect. And the same thing goes with forex trading. When you learn a new forex trading strategy you first need to try it on a demo account to see if it really works and then shift to the live trading account. But how much time should one spend on a demo account? Well, there is no perfect answer to it.

Spending too much or too little time both has its cons. And also the time required depends upon the individual to individual. So, let us first understand this, and then I will tell you when you should shift to a live account.

How much time of practice will it take for a football player to play in professional games, or how much practice is enough for a musician to perform in front of an audience?

There is no definite answer to such questions.

I have come across a Ted talk once in which the speaker said that to become completely proficient at a thing, one needs to practice for at least 10,000 hours. But the question that arises here is that does everyone have that many hours to dedicate to practising? What I want to infer from all this is that no other than the trader himself can give an answer to this question. Let us consider two traders ben and Patrick.

Ben is intending to trade forex full time and does not have any other work commitments while Patrick has a job and wants to trade forex part-time. Both open accounts with brokers and trade on the demo account for a while before going live. Ben has lots of time in the day to dedicate to learning and practising on the demo account as compared to Patrick that has a limited time for this purpose, hence it might take a long time for Patrick to start a live account. To sum it up, whether one is ready to move on to live trading from demo trading is completely subjective. The trader will try out the various setups and strategies and will test out the broker’s trading platform in order to become accustomed to it.

Once the trader sees an improvement in his demo trading, he can always begin trading on the live account. In case the trader is of the opinion that he can still improve in some aspects of trading, he can spend a bit more time on the demo account before going to the live account. Now spending too much or too little time has its adverse effects. Like lets us suppose that Ben decided to give 5-10 days for demo trading before he shifts to a live account. The problem here will be that he won’t be accustomed to the different market situations as he just started testing the new strategy on a demo account.

He won’t be able to layout rules and a proper trading plan as he has not come across different trading conditions in so little time. So, when he shifts to a live account any new market conditions may cause him trouble. Now, let us suppose Patrick decided to spend 2-3 months on demo trading. So, during his time in a demo account, he is bound to develop different negative habits that will ruin his trading. Like, he won’t be witnessing any emotions as it’s just dummy cash he is trading for.

But in a live account, a single loss can cause overwhelming emotions. So he won’t be able to manage those emotions while trading live accounts. Furthermore, He will start risking recklessly, after all, it is just a demo account. And a loss won’t hurt much but the winner will probably make him overconfident. And when he does this for too long he will develop a bad habit of risking more than he should.

I still remember in my early trading days I happen to demo trade for too long, and during that time I developed a habit of not using a stop loss. This habit of not using a stop loss was so much ingrained in my mind that even while using a live account I kept on doing the same mistake.

And as a result of that, I blew up a couple of accounts before I could finally get rid of that habit. It is of utmost importance to understand that it is quite tough to unlearn negative behaviours or negative habits. And spending too much time on a demo account is more likely to develop such habits in you.

So if spending too much or too little time both are bad then what should someone do? Well, the right way is to set goals.

Set a goal and try to achieve the same goal twice or thrice with proper risk management. And only after you achieve that goal shift to a live account. Like when I test a new trading strategy, I set a goal of 20 to 30%.

Like if I am able to make 20 to 30% of my account at least twice by following a proper risk management plan. Only then do I use that strategy in my live trading. This makes sure that I am spending perfect time on the demo account to see if the strategy works plus it makes sure that I am getting used to it.

Hey everyone. This is Forexgist.club. And in this post, we’re going to talk about developing a daily trading routine. Now, it might seem odd actually to start here in Track but I believe that habits and routines are insanely important to your success, maybe not only as a trader but also in anything that you do in life.

And it really comes down to the difference between what to do versus actually doing it. The analogy that I use all the time when I coach people is, “We know that to be healthy, you have to eat right, you can’t have sweets, you have to go to the gym and workout or exercise. That’s not important. We know what to do. It’s actually doing it that actually makes a difference.

It’s going to the gym, it’s eating right, it’s not having sweets, it’s not doing X, Y, Z.

That’s the difference between being successful and not.” And the reality is that options trading is just a game of math. I’ve said it a million times until I’m red in the fact that it’s just a game of math and probabilities. Therefore, the only way we win long-term is by being consistent and persistent.

My two favourite words in this business are being consistent and persistent. You have to be consistent in how you place trades at the same probability of success level, on the right side of volatility, using the right strategy with the right position size.

And then you have to be persistent in doing that over and over and over and over again. It’s usually not hard for people to understand what to do, that you have to be an option seller, that you have to do X, Y, Z position size. That’s the easy thing.

The hard part is being persistent in doing that over and over and over again. And hopefully, we can help talk you through developing your own trading routine today that will help you get to that next level.

Aristotle once said, “We are what we repeatedly do. That excellence then is not an act, but it’s a habit.” And I truly, truly believe this.

I’m actually a big student of learning about habits and psychology and what makes people tick and think, including myself. Now, here’s the reality though. Our brains cannot actually distinguish between good or bad habits. Most people don’t know that. Most people think that it’s some psychological thing that, “Oh, it’s just a habit that I smoke or that I do something.

” It’s not that.

Your brain has no ability to distinguish between habits. All it’s trying to do is use up as much energy or use as little energy as possible to complete outcomes. Now, you have to forcefully create different habit loops if you want to change your outcome or your circumstances. And it basically works like this and all habits work in this 3-part reward or habit loop cycle.

The first thing that starts off this habit loop is the cue. Now, the cue is everything that the brain uses to automatically trigger a series of events, so like you don’t actually think about in the morning maybe necessarily brushing your teeth and the actual brushstrokes that you have and brushing your back teeth and then your front teeth or whatever. You don’t think about it. That’s the routine. That’s the physical or mental or emotional sequence of events that your brain has automatically done.

But it only does that after it’s been cued to do something. For example, your routine of brushing your teeth might come after you wake up in the morning or after you eat breakfast or whatever the case is, or the routine of going and checking your email in the morning might come when you turn on your phone.

It doesn’t really matter. What you have to understand is that the most important aspect of this entire loop is understanding what your cue is. What is the thing that makes you do whatever you do?

As a trader, some of these cues might be a drop in the market or a position going bad or some earnings announcement. A drop in the market might cue you into a routine because you’re so used to it of not doing anything, of selling your positions, of getting out, of going in cash or a million different other things. But the cue is that you have to understand, is that the drop in the market might have been your cue. That’s what you historically use to then develop this routine of doing whatever you do that maybe doesn’t work. That’s why you’re here at Option Alpha.

You have to understand this cue and routine process. The last thing that you have to understand is that everything has a reward at the end of it. This is what your brain is telling you. This is why it’s worth the routine. This is the endgame and your brain or your emotions have to have some sort of reward.

And it doesn’t have to be monetary, but it can be a feeling that you have or an emotional response or something like that. To use that brushing our teeth example – If we wake up in the morning, that’s our cue to brush out teeth, we go through the routine of brushing our teeth, our reward is that we feel good that our teeth and mouth feel clean, that we smile, that we don’t have that film on our teeth. That’s the reward. If you’re a trader and the market drops and that’s your cue to then sell all of your positions, well then your reward is comfort or is some sort of emotional response that you are comfortable because now you’ve done something and you’ve acted on it. It may not have been the right thing, but your reward might not have been monetary in this case, but it may have been some comfort or emotional response that you’re now feeling safe or steady or secure or something like that.

You have to understand how these things work and realize that options trading is just a game of math and that if we can control our habits and our routines with how we place trades, manage trades and execute trades, then we can really predict the outcome that we want as far as monetary or quitting your job or whatever you want to do at the end of the day.

That’s the important thing. Now, make no mistake though. Everything you have either done or haven’t done in your life can likely be traced back to some habit or routine. Your brain doesn’t distinguish between good or bad, so if you’ve done something bad in your life or you haven’t done something that you wanted to do, it’s likely because you haven’t developed the habit or the routine to do it.

And it’s no different when it comes to options trading, investing, whatever you want to call it that we’re trying to teach you how to do here.

Now, the good news is that you can recognize and change it. That’s really good. The bad news is yeah, it takes a lot of hard work and it’s tough. This is something that most people don’t want to do because they realize it takes a lot of work.

It’s not easy to understand how options work. It’s not easy to go into the market every single day and look for trades. But the reward is worth it at the end of the day when you can control your own portfolio when you’re not dependent upon the market moving up just to make money when you can generate a consistent stream of income with your options trading on a limited amount of capital.

It is worth in my opinion, the work and the hard effort that you have to put into it, but you do have to recognize and change some of the habits that you’re currently in right now. Now, I’m not saying that the routine that we’re going to talk about is the perfect example.

It’s what has worked for me and hopefully, it gets you thinking a little bit more about your own trading routine. Now, the first thing that we’re going to do here is talk about my routine in the morning.

Now, I can tell you honestly that this entire routine that we’re going to talk about from basically step #1 or the first thing that I do, all the way to the 5th thing that I do basically takes no more than maybe 15, 20 minutes at the most. That’s about as close to or sort of a timeframe as I can possibly make, about 15 to 20 minutes to go through steps 1 through 7. And the whole idea here is that you’re developing cues and habits of sequential sequences or processes that you go through.

And this is just an example and I want to lay this out for you, so that you can start to develop your own because likely, what you’re doing right now is maybe a little scattered. You might have your own routine about what you do, but it might be a little bit scattered. You can probably hone in and focus on a more efficient process.

The first thing that I do in the morning right away is check futures. Now, this is where I want to see where the market is likely to open.

Is it higher, lower or the same as yesterday? Now, when I say the first thing I do in the morning, this is not the first thing I do when I wake up. The first thing I do when I wake up is getting my kids up, get my wife up, sit and have coffee, talk with them, go through the day, plan our day, whatever, have breakfast, whatever you do in the morning.

I do not wake up and check markets. That’s crazy.

I don’t wake up and then check markets. But about 15 minutes before the market opens, I’ll check futures. That’s when my day really starts. The second thing that I’ll do is I’ll quickly scan the headlines. Now, this is important.

I’m not reading the news. I’m scanning the headlines because I want to see what are the major news stories driving the market. Did someone get bought out? Did someone file for bankruptcy? Did two companies merge?

Is some company accused of insider trading or fraud or accounting or did some company buy a new product or get a new endorsement? What is really moving the market? What do I need to be concerned about or aware of as I enter the trading day? Because it’s not that I have to be necessarily attached to that new story and know exactly what’s happening, but if I know that somebody basically got bought out or went bankrupt, maybe I might know how that might affect my portfolio.

The third thing that I do after I’ve looked at the futures, checked and scanned the headlines which can literally take 3 minutes or less, is look at the impact of whatever I’ve just learned on my portfolio or on individual positions.

If for example some company goes bankrupt or gets bought out or merged or whatever the case is and I have a position in there, I should probably know that that’s happening.

And that can be as simple as just scanning the headlines and knowing what’s going on. But it’s also important to know – How does all this stuff impact my portfolio? Is my portfolio balanced, meaning that if the market opens up higher, then that’s still good for my portfolio or maybe my portfolio is a little too bearish right now, I’ve got too many bearish positions, so if the market opens up higher, that’s maybe a bad thing and I need to start thinking about that? It’s just asking yourself what is the impact on your portfolio.

Most of the time for what we do here since we’re neutral traders and we have a neutral portfolio, if the market opens up 1% or 2% higher in either direction, it’s not going to dramatically impact our portfolio. And as long as we don’t see a huge pop in the market or a huge drop, we’re going to be in good shape to move forward. And those are some of the things that we’ll talk about as we get further through Track #3 here. The fourth thing that I look at is my trade hierarchy. And I look at trades and positions in this order and that is closing positions first, then adjustments, then new trade entries.

And it’s in that order for a reason. This is usually now after the market has opened up, maybe 30 minutes after the markets opened up or 15 minutes after the markets opened up.

I first am going to look at which positions can I take off, so which positions have now reached a profit target or at an acceptable level that I feel like I can take those trades off. I’m first going to bank some profits and clear positions that need to be cleared off if there are any, then I will look at adjustments to any trades that might need adjustment. Now, hopefully, I’ve already had trades on the horizon that I know are starting to go against me or that started to move against me, then I’ll start looking at adjusting those trades and I’ll work through adjusting those trades quickly.

I’ll quickly close trades then I’ll quickly go through and adjust any trades that need to be adjusted. And usually, if we’re making adjustments, it’s already something that we’ve been thinking about and looking at.

And then finally, we’re going to look at new trade entries. And the reason that we look at new trade entries last is we want to see what the impact of closing and/or adjusting other trades first has on our overall portfolio, so now we get a clear picture of where we are at the current moment moving forward and what new trades we should be looking for. Should we be looking for new bullish trades, new bearish trades, some strangles, some straddles, iron condors, credit spreads, calendars?

What should we be looking for now that we’ve closed out things that are profitable, now that we’ve adjusted things that might be going against us? This is what we can be focusing on. That’s why in my case, that’s the trading hierarchy because it forces me to before I look at new trades to check my overall portfolio balance and Beta weight it. Number five or the fifth thing that we do is walk away. Now, I can tell you right now that you have to get up and walk away from the computer.

You’ve got to find something to do, you’ve got to schedule it now or you’ll never cut the cord. Now, some of you out there that are watching this video know exactly who I’m talking about because you love looking at the markets all day. But the reality is that the more you look at the markets, the more you “see things that aren’t really there.” And we all know we’ve done this before, myself included.

In my case, what I do is I get up and I go play with my kids or I go on a walk with my wife or we go to the gym in the morning.

More often than not, we’ll usually schedule a time to go to the gym around 10:00, 10:30. That forces me to get up and go away from my office, away from the computer, away from the markets.

And for me because I love the market so much because I love trading so much, I love doing this, I have to have something that forces me to get away, that is on my calendar as something I need to do a priority and that’s my cue to then develop a new routine to get away from the markets. I think that’s really, really important. Now, the sixth thing that we do and the last thing that we do in our routine or I do in my routine is my end of the day review or EOD review.

And I can tell you this honestly. Most of the time that the markets are open, I’m not watching, I don’t care. We are not day-traders. I don’t care if the market is up 10 points and then down 10 points. I just don’t care because at the end of the day.

What I do is once I’ve made my trades in the morning, do what works around my schedule with my kids and my wife, then I will come back in later at the end of the day, usually 45 minutes to an hour before the close of the day and basically ask myself a couple of questions like, “What’s changed during the day? What’s changed from the morning to the afternoon?” I don’t have to watch the market all day to see what’s changed.

I can see if the markets rallied or maybe not rally or rallied early and then it fell or whatever the case is. What’s moving?

What’s moving late in the day? Is there anything that is new that we could be trading? Did implied volatility pop in something that could create a trading opportunity? I can adjust my order. Any orders that I had placed earlier in the day to enter a new position or close a position or adjust the position, I can tweak or adjust those orders if needed.

I can look at new trades and I could look at new exits because sometimes there’ll be an opportunity that’ll come up in the afternoon that wasn’t there in the morning. And likewise, you might have an opportunity to close a trade in the afternoon that wasn’t an opportunity in the morning. Now, the whole process here is to be in, make some changes, make some adjustments, some trades, whatever you need to do and then get out of the markets.

Not get out of your trades, but get out in front of your screen or log out of your broker platform, whatever you need to do to get out of being in this routine of being sucked to the screen and our eyeballs glued to each and every chart. In my personal opinion, I think that I do this well because I setup time in the morning to go through my trades and my positions and then I get away from the computer by going to the gym or going on a walk with my wife or going to the park with my kids or whatever the case is, and then in the afternoon, I forcefully come in before the close of the day so that the close of the day becomes my ending time for the markets or even earlier if I don’t need to do anything.

Here’s the deal. I realized that if I get too emotional and attached, I’ll make stupid decisions and that’s just the reality. I’m self-aware in that sense and I know that if I get too emotional or attached to the markets, I’m just going to make really, really bad trading decisions. I deliberately limit my analysis and trading time to force myself into rational, habit-based, non-emotional decisions. And I feel like most successful traders can tell you that this is exactly how they work as well.

It all has to be rational, habit-based. You got to do the consistent things that we talk about, high probability trades, low order size, etcetera, etcetera, great pricing, etcetera, etcetera. Now, if you are currently working full-time, you actually have a huge advantage because your job will force you to make efficient decisions quickly. And frankly speaking, there is no excuse why you can’t be successful working full-time. I basically work full-time as a dad and running this website, coaching people and doing software updates and writing articles and doing videos like this.

I do not spend the full amount of time that I have in the day actually trading.

Selfishly like I’ve said, this is also one of the reasons why I run this website because it keeps me occupied helping others which I love to do. Otherwise, I would just be staring at charts all day long until I saw what I wanted to see. And again, do whatever you want to do, have something that you like to do, have a hobby that you like to do. You do not need to be at this misconception that’s out there that you have to be staring at the screens all day and you have to understand every little movement in the market.

You don’t. It’s just a number and probability game. And you have to actually develop a habit to keep yourself away from the market because as traders, we’re tied to the market, we’re attracted to it, we love it. You have to develop a habit to get away from it. Again, try to remember cue routine and reward cycle or this habit loop because it’s really, really important to understand what has gotten you into the routines that you’re in right now and how you can change those.

Try different cues in the morning. Try using my process. Use a kitchen timer to time the number of minutes that you have to analyze the markets. Do you know what I mean? Just give yourself 10 minutes and then turn off your computer or whatever the case is.

But you got to try something different to get into a new routine. In my opinion, I think the best traders that are out there have very efficient routines to keep themselves rational and math-based in their approach. And they don’t really care where the markets go as long as they’re making money because their portfolio is neutral and their position sizes are small.

That’s what I think is really important as you start developing your own trading routine and daily routine.

You’re never going to make any money trading the Forex market! Trust me! One of the main reasons why most traders fail in the forex market is because they end up getting trapped in what I call, the “Cycle of Doom”

So, what is the Cycle of Doom? I hear you cry! Well, the Cycle of Doom is basically this Let’s assume now, you start off trading the forex markets. You’ve got yourself a strategy. Now you might have developed the strategy yourself. You might have copied it from another successful trader. Indeed, you might have bought it from somewhere on the web or so forth. So, now you have your strategy and you’re about to start trading this with live money. You start putting the trigger and off the bat, you start making some money! Everything’s going great.

Then the inevitable happens. You start losing some money. The strategy starts taking money away from your trading account. Now, this doesn’t feel comfortable, so the most common thing you do when you start to lose money is you start to doubt the strategy. So you start to tweak the strategy, you make… minor changes to the strategy.

And then, you get back trading again, and of course, you start to make some money again! And now, you have the perfect strategy! But then again, the inevitable will happen. You will start to lose money. Every strategy will go through its losing periods.

But you doubted, you start to doubt your strategy. So again, you start to tweak, you make further, minor changes to the strategy, and off you go again! It starts to make money. The same thing happens, you start to lose money, and you tweak again.

Eventually, after tweaking so many times you’re going to have completely lost faith in that strategy.

You’re going to throw it out, and you’re going to go and search for another strategy! You’re going to hop between that old strategy and a new strategy. The same thing will happen, you start to make money and then the inevitable happens, you’ll start to tweak it, and then round and round the circle, the cycle of doom, you go. Hopping and changing between strategies in the hope that you’re gonna find that Holy Grail.

Well, get this, It doesn’t exist! How do you make sure you don’t get trapped in that cycle of doom? Well, the first thing you need to do is you need to have confidence in the strategy that you’re implementing in the market. Well, how do you gain confidence in your strategy? Well, you need to fully backtest the strategy. You need to put it through all the historical data, so you know the characteristics of that strategy. You know how it’s going to perform in winning periods, and you know how it’s going to perform in the losing periods. And it’s only then when you know, and expect to have losing periods that you’re not going to lose faith in that strategy, moving forward and you’re gonna continue trading that strategy, knowing that it’s going to come back and give you the profits that you so desire and that you so you’ve seen in the backtesting.

That’s one of the main reasons, why most traders fail in this business. The other main reason I think, why a lot of traders fail in this business is because they come in with completely, the wrong expectations.

Now, they’ve read all the marketing hype from the gurus and the educators; how you can trade from the beach, you can give up your day job, you can tell your boss to go and jump in the lake. You’re now a Forex trader and you don’t need to do that day job anymore! Well, that’s complete hogwash!

It’s not gonna happen overnight! The other thing, you know, misguided bs that’s out there is that you can start off trading and make a ton of money with a $500 trading account! Again, that is not going to happen. Now, that’s not to say you can’t make a decent living with a small trading account, but it’s going to take time and it’s going to take work on your behalf.

Why do you think it is? The brokers offer you such bonuses to come and join them.

If you put in five hundred dollars, they’ll match it with five hundred dollars. They do that for one main reason because they know you’re gonna blow that trading account! Let’s assume, a broker signs up 100 new clients a week, each with a $500 trading account, a small trading account. Yeah? Now, they know that you’re gonna lose that money! That hundred dollars, that a hundred clients, a week, is a two-and-a-half million-dollar-a-year business for that broker because they know that you’re going to blow that money because you’re coming in with the wrong expectations. You need to be realistic about what you can achieve in the Forex market. In a hedge fund, the hedge fund manager would give his right arm, for example, to have a 25 percent return of investment.

Imagine, you start off with a 500 dollar trading account, and you have a great year. You’ve made 25% on your initial deposit with your brokerage. That’s about 120 bucks, $125 or whatever it is now.

That’s hardly enough to pay for your internet! But you’ve got to make sure that you’re coming into this with the right expectations.

Also, the other main reason why people lose money in this business is they over leverage.

Okay? They’re taking on unnecessary risks. And why are they taking unnecessary risks? It’s because they have unrealistic goals.

Again, you’ve got to ask yourself a question. Why is it that the broker will offer you, 100, 200, 500 to one leverage? Because they know the greed mentality of most people! You’re gonna lose that leverage, and you’re gonna blow and wipe out your trading account! So make sure you don’t get trapped in the cycle of doom.

Make sure you have realistic expectations about the Forex market and what it can deliver you. If you can start off and get your head around those two facts, then you’re gonna be halfway there to becoming a successful trader.

What is a pip in order to trade successfully, you need to understand what a pip is and how to calculate its value. A pip stands for percentage in point and is the smallest price change that a given exchange rate can make an increase or decrease in pips represents a profit or a loss in your forex trade. Let me explain further. When currencies are quoted, they are mainly quoted to the fourth decimal place. This is also true for silver and heating.

Oil exceptions are pairs that include the Japanese yen as well as commodities such as gold, oil, brent and gas, which are quoted to two decimal places. When we look at the euro US dollar pair and see it move from one-thirty, one, thirty to one thirty-one, thirty-one, it has moved one pip, because the fourth decimal point has increased by one a one: pip move for the US dollar: Japanese yen. We can see as seventy-seven sixty to seventy-seven sixty-one because the second decimal point has increased by one in major pairs quoted against the US dollar. We calculate the value of a pip as follows: the euro US dollar has an exchange rate of one thirty. One thirty: if one pip equals 0.

001, we divide 0.0001 by 130 130, which gives us a pip value of zero points: zero: zero, zero, zero, seven, six one euros: let’s turn this into a forex deal to see what the pip would represent in either a profit or Loss deal one sell 100,000 euros worth of euro US dollars at 130. 130 pip value in Euro terms is zero points: zero, zero, zero, zero 761 times 100,000 equals seven euros 61 or exactly ten dollars. If the deal is closed at one-thirty one-twenty with a ten pip profit, the total profit will be seventy-six euros ten or $ 100 deal to buy fifty thousand dollars worth of US dollars. Japanese yen, at seventy-seven, sixty pip value and dollar terms, is 0.

1 divided by seventy-seven sixty times fifty thousand equals six dollars, forty-four or exactly five hundred yen. If the deal is closed at seventy-seven, fifty with a ten pip loss, the total loss will be sixty-four dollars, forty-three or five thousand Japanese yen. It is our commitment to provide our traders with access to the best fixed, spreads and execution methods, and this is why you may at times notice additional smaller numbers at the end of a currency rate. These numbers are referred to as fractional pips and are a new pricing feature that lets you see more price action detail and helps you make more informed trading decisions. A fractional pip is 1/10 of a pip, and the addition of this feature to your account allows you to take advantage of smaller price increments and moves in the market instead of quoting prices to two or four decimals with fractional pips, we quote an extra digit, for example, normally the euro, US dollar ask, would be quoted as one thirty to fifty-one, while with fractional pips, we quote one thirty to fifty-eight with the last smaller digit representing the fractional pip earlier.

We mentioned deals of 100 thousand euros and fifty thousand dollars, which may have seen quite large, especially if you’re new to trading, but this is where an important factor comes in the use of leverage. Leverage basically means you can trade larger amounts than your initial investment view.

In this post, I’m going to break down the top four, Forex trading books that you absolutely must-read. Plus, I’m going to show you my number one, Forex trading book that I bet you you’ve never, ever heard of. We’re going to break it down from number four all the way down to number one. And if you do read these books, the chances of you becoming a successful Forex trader increases dramatically. And if you don’t read these books, then the chances of you failing increases dramatically.

Number four: my fourth favourite Forex trading book is actually a book called market wizards, and it’s not specific to Forex specifically, but about trading in general. And it’s actually written by this guy named Jack Schwager, who basically did the think and grow rich approach where he went out. He interviewed some of the top, most successful traders in the world.

And he gathered all the bits and pieces that he learned from all these different traders.

And it’s almost set up like an interview series where he’s interviewed all of these best traders. So that way you can simply pick the ideas and pick the minds of the best Forex traders and the best stock traders and the best future traders of all times. And you can just take and combine all their stuff and use it for yourself. So that’s number five, that’s market wizards.

Number three: Number three is a book called trading in the zone.

Maybe you’ve heard of it. It’s by a gentleman named Mark Douglas. And this book was a huge aha moment for me. It taught me a lot about when I was first getting started about trading psychology, as well as what he talks a lot about, instead of needing to know what’s actually gonna happen in the future in the market. He says you don’t actually need to know because the market is completely random.

And the best part about this that I learned is how to actually trade like a casino or how to trade like a robot and how to think in terms of probabilities and how to completely let go of my emotions when trading. So that’s number four, that’s trading in the zone by Mark Douglas,

Number two: I love this little book it’s called the candlestick trading Bible. It’s by this Japanese guy, I believe. Well, the book is written about this Japanese guy named Munehisa Homma, who was supposedly the most successful trader of all time.

And supposedly he made like $10 billion in what would be today’s money. And he’s known as the godfather of candlesticks. If you’re not that far in your Forex journey where you haven’t mastered Japanese candlesticks, it’s a huge advantage. Understanding Japanese candlesticks obviously. And they break this down in the book really, really simply the reason I love this book, it’s short, it’s very easy to read and they break down with the most important things, which is Japanese candlesticks.

They break down all these different patterns, how you should trade them and they give you a couple of really awesome strategies at the end of the book that you can incorporate. So that’s number three, that’s the candlestick trading Bible.

Number one: is a book I totally love. It’s called naked Forex.

It’s by this Australian gentleman named Walter Peters. I believe he’s a PhD and this book is different because he basically throws it in the trash. Everything else that you know, most retail traders are taught about using technical indicators. And he says that indicators don’t give you any indication of what’s actually going to happen in the future with a price. They’re all lagging.

They’re just like a wristwatch that telling you what’s actually happening with time. An indicator is just telling you what’s happening with a price. But in the past, instead of using indicators, he talks about using something called price action trading, where he basically teaches you how to actually read a chart and how to read what’s actually happening in the market. Like what formations are being formed. And what’s likely to happen based on the formations, which are based on the psychology of the overall market, which is really, really interesting.

So I love this book. It’s easy to read. It’s simple. It’s called naked Forex by Walter Peters.

The spread is an inevitable part of trading and is the profit taken by the broker. When trading Forex, whether through a Forex account or using spread betting, the broker does not charge you a fixed or monthly fee for operating the account. The broker does not take any direct transaction charges for taking a trade either.

Instead, the broker offers two different prices for a currency trade, often referred to as the bid price and the offer price.

These are the brokers’ prices, describe what the broker is doing, the broker is bidding and offering. You buy at the offer price and sell at the bid price. The difference is called the spread and is the brokers’ profit margin. Let’s look at some examples.

These are the prices at which I can buy and sell Eurodollar, the currency pairing of the Euro and the US Dollar. The price you can sell them to the broker is 1.2612.

This is the bid price, or what the broker is bidding to buy your currency. When looking at Forex charts, it is most common to have the bid price displayed.

If you wanted to buy this currency from the broker, you would have to pay 1.2614. This price is called the offer price, or ask price, or the price the broker is offering to sell you the currency. There is another price called the mid-price. The mid-price, as its name suggests, is the middle point between the two prices.

Take the bid and offer price, add them together and divide by two to obtain the mid-price. The mid-price is not often used, as you can’t actually trade at this price. It may be useful when the market is very slow or volatile. Currency movements are measured in pips. The spread is the difference between the bid and offer prices and is expressed as a number of pips.

To calculate the spread, move the decimal point four places to the right and simply deduct the bid price from the offer price. In this example, Eurodollar is trading with the spread of 2 pips.

When you look at a price chart based on the bid price, you need to add the spread to the bid price whenever you are contemplating buying the currency to find your true cost. Spreads on different currency pairs vary. The calculation is the same, so move the decimal point four places to the right and deduct the bid price from the offer price to obtain the spread.

Cable is trading here with the spread of 3 pips. On some of the less commonly traded currency pairs, it is normal to see spreads a lot higher. Here, the Kiwi Dollar and the Swiss Franc are trading with the spread of 7 pips.

You might decide this is too high for you to trade. You might restrict the currency pairs you trade on certain strategies as a result of the spread.

When it comes to trades involving the Japanese Yen, the decimal place is moved to two places to the right to calculate the spread. In this case, the Aussie dollar is trading against the Japanese Yen with a 4 pip spread. Competition amongst brokers is fierce and often seen in their advertising by the spreads they quote. Eurodollar is the most heavily traded currency pair and usually has the tightest spreads. Brokers are keen to let you know how tight (or narrow) their spreads are on Eurodollar.

From 2 pips, there are not many steps down to zero, so many brokers have moved to price at 5 decimal places.

To calculate the spread still means moving the decimal point 4 places to the right. In this example, the spread is 1.3 pips. The equivalent for pricing the Japanese Yen is to quote the price to three decimal places.

The decimal place is still moved two places to the right to calculate the spread, which at this moment is 2.8 pips. Most brokers now use variable spreads. This means the broker can change the spread at will. During periods of normal trading, this leads to very competitive spreads.

When trading is “thin”, which means not very much activity, brokers often widen their spreads. This can sometimes be seen at the beginning of the week when the market is opening and at the end of the week when it is about to close. Given spreads are variable, it can mean the bid and offer price moving quite independently of each other. This can also happen at times of high market volatility. Although the spread is the broker cut, it is not generally seen as a transaction cost.

When trading, the focus is on the bid and offer prices at the moment in time when the trade is executed. You can see the impact of the spread at the precise moment you take the trade. For example, trading Eurodollar at £2 per pip with a spread of 1.1 pips results in a cost of £2.20.

Rather than focus on this cost, you will be looking at the P&L as the trade progress and either the net profit to you or the total cost. A quick recap on spreads. Spreads on currency pairs vary by currency pair.

Most traders focus on the major currency pairs for trading, as the spreads are more competitive. Competition amongst brokers is fierce.

Don’t assume all brokers give the same bid and offer prices, or the same spread. If you have multiple trading accounts, shop around. Market conditions can affect spreads. Most brokers use variable spreads allowing them to take advantage of slow markets.

The term Margin Level refers to the “health” of your account. It is the ratio of the total equity to margin used on your open positions and expressed as a percentage. It can be easily calculated by the following equation: Let’s review an example. Suppose a trader has the following balance, and he uses $1,000 of margin. As you can see, this trader’s account remains very healthy.

As a general rule, the higher the margin level Reduced the chance of a trader facing a forced close.

For traders and investors, margin can come in handy when potential opportunities arise. Margin can increase buying power, enable access to advanced trading strategies, and even act as a line of credit. In this video, we’ll explain margin, discuss its potential risks and rewards, and list the requirements to enable margin in your brokerage account. Essentially, margin is money borrowed from your broker to buy stocks or other securities. According to the Federal Reserve’s Regulation T, investors can borrow up to 50% of the purchase price of a marginable security.

For example, an investor with a $5,000 account could borrow an additional $5,000 to purchase up to $10,000 worth of stock. The securities in your account act as collateral, and you pay interest on the money borrowed. Using margin, you can put up less than the full cost of a trade, enabling larger or more diversified trades. This is called leverage.ť When combined with proper risk and money management, leverage can potentially lead to higher returns.

Leverage, of course, is a double-edged sword. Because margin magnifies both profits and losses, losses can be accelerated. This can lead to a margin call. If you do not take action or deposit more funds, your stock may be sold with or without prior notice.

It’s even possible to lose more than the initial amount used to purchase the stock.

For example, this can happen when a stock bought on margin has a sudden, dramatic down move. To help avoid this, practise good money management. In other words, if you have $10,000 of available buying power, don’t overleverage your account by using it all at once set aside some of it in case markets move against you. This can help reduce the likelihood of a margin call, and the remaining buying power can be used to manage a losing position. In addition to providing leverage, margin can enable the use of advanced stock, options, and futures strategies.

Some of these require additional account approvals and each carries its own risks, so not all clients will qualify. One strategy is short-selling. Short sellers seek to profit from a declining share price. Instead of buying stock to open a position, you borrow shares from your broker and sell them. Your broker then withholds cash in your account, reducing the available buying power.

This buying power reduction is referred to as a margin requirement. Once you buy back the shares, the margin requirement is released. Note that the risk of loss on a short sale is potentially unlimited, and your position may be closed out by your broker without regard to your profit or loss. In addition to short selling, margin enables the use of advanced options strategies.

While buying options does not require margin, selling uncovered options and trading spreads does.

The margin requirements on naked options vary; however, when selling spreads, the total amount at risk is withheld from your buying power. And much like trading stocks on margin, futures margin allows you to put up less than the full price of a trade. Specifically, a futures trader is required to put down a good-faith deposit with a broker called the initial margin requirement. The requirement is typically 2%-12% of the contract’s total value. Keep in mind that futures trading is speculative, and is not suitable for all investors.

And finally, margin can play a role beyond buying and selling securities specifically, as a line of credit. Whether it’s for a large purchase or funds for an emergency, a margin loan can offer an alternative to traditional borrowing. Once you’ve been approved for margin, you can take out a loan at any time without additional forms or applications. Like any loan, you’ll incur interest charges. However, because margin loans are collateralized by securities, your interest rate may be lower than conventional loans.

And, the interest may be tax-deductible, so be sure to check with a tax professional. Also, you can repay the money when it’s convenient as long as the loan is in good status and you’ve met the maintenance requirements. To qualify for margin, you must deposit cash or eligible securities totalling at least $2,000 in equity and sign the margin agreement. As long as the equity stays above $2,000, the margin will be enabled in your account. Please note that margin is not available in all account types.

Ultimately, it’s critical to understand the risks of margin along with its benefits. Trading on margin can expose you to additional costs, increased risks, and potential losses in excess of the amount deposited.

As always, carefully review your investment objectives, financial resources, and risk tolerance to determine whether the margin is right for you. However, when used properly, margin can become a powerful tool for traders and investors alike.