So you've graduated from being a breakeven trader and find that you're one of the elite few who can call themselves consistently profitable. Congratulations!
Now, you want to take your trading to the next level, but you just can't seem to improve on your profitability. You're making money, alright, but you know you can do better.
On today's edition of Pipsychology, I discuss three things that may be limiting your profitability.
When the market is trading in your direction and you are dealing with a high probability setup with large potential rewards, it may be a good idea to increase your risk. In Blackjack, it's like betting big when the cards are stacked in your favor.
On the other hand, if you feel like there's a lot of uncertainty involved (as in the case with news trades) and the potential return on risk isn't top-notch, it may be best to reduce your risk and go with a smaller position.
You can't expect to catch a big swing move when volatility is low and the market is trading within a tight range. It doesn't work that way. You have to be reasonable with your expectations and always plan your trades with the market environment in mind.
Remember, YOU must adapt to the market and not the other way around.
For one, you won't get the best price. You could miss out on pips that could tip the reward-to-risk ratio more heavily in your favor. Secondly, you usually end up entering at levels that make you vulnerable to pullbacks.
Don't get me wrong. I am a firm believer that the trend is your friend. But you should be aware that your fear of pulling the trigger may keep you from entering at optimal levels. Fear can lead you to jump in at inopportune times -- when the market has already moved so much. This my friends, is what we call "chasing the market."
Always try to be on the lookout for these things. Just because your account is in the green doesn't mean you should stop working to be better. That is the beauty of forex trading - there's ALWAYS room for improvement.
Hopefully, by becoming more aware of your position sizing, capacity to adapt to market environments, and fear, you can become even more profitable!
Now, you want to take your trading to the next level, but you just can't seem to improve on your profitability. You're making money, alright, but you know you can do better.
On today's edition of Pipsychology, I discuss three things that may be limiting your profitability.
1. Improper position sizing
Position sizing is a key element of risk management that can spell the difference between catching a big fish and snagging a small fry. It goes beyond knowing how much you stand to lose - you also have to know when to trade big and when to minimize your risk exposure.When the market is trading in your direction and you are dealing with a high probability setup with large potential rewards, it may be a good idea to increase your risk. In Blackjack, it's like betting big when the cards are stacked in your favor.
On the other hand, if you feel like there's a lot of uncertainty involved (as in the case with news trades) and the potential return on risk isn't top-notch, it may be best to reduce your risk and go with a smaller position.
2. Inability to adapt to the market environment
To maximize the moves in the markets, you have to be flexible and know how to adjust to changing market conditions.You can't expect to catch a big swing move when volatility is low and the market is trading within a tight range. It doesn't work that way. You have to be reasonable with your expectations and always plan your trades with the market environment in mind.
Remember, YOU must adapt to the market and not the other way around.
3. Fear
Sure, going long only after a pair has already risen and shorting only when it has already fallen may help you ride its momentum. But it has its drawbacks too.For one, you won't get the best price. You could miss out on pips that could tip the reward-to-risk ratio more heavily in your favor. Secondly, you usually end up entering at levels that make you vulnerable to pullbacks.
Don't get me wrong. I am a firm believer that the trend is your friend. But you should be aware that your fear of pulling the trigger may keep you from entering at optimal levels. Fear can lead you to jump in at inopportune times -- when the market has already moved so much. This my friends, is what we call "chasing the market."
Always try to be on the lookout for these things. Just because your account is in the green doesn't mean you should stop working to be better. That is the beauty of forex trading - there's ALWAYS room for improvement.
Hopefully, by becoming more aware of your position sizing, capacity to adapt to market environments, and fear, you can become even more profitable!
Editors’ Picks
EUR/USD eyes nine-day EMA barrier after rebounding from 1.1600
EUR/USD gains ground after registering modest losses in the previous session, trading around 1.1620 during the Asian hours on Friday. The technical analysis of the daily chart suggests an ongoing bearish bias as the pair remains within the descending channel pattern.
GBP/USD drifts lower heading into NFP range
GBP/USD edged lower by 0.2% on Thursday, settling close to 1.3350 in a strained trading session that kept the pair pinned near three-month lows. Price briefly recovered earlier in the day on reports that Iran had indirectly signaled openness to talks with the CIA, but the bounce faded as Israeli officials reportedly advised Washington to disregard the overture.
USD/JPY struggles near 157.50, eyes turn to US NFP
USD/JPY edges lower to near 157.50 in the Asian session on Friday after posting modest gains in the previous session. Broad US Dollar weakness, Japanese FX intervention risks and a risk-off market mood undermine the major, despite uncertainty over the BoJ interest rate hikes. All eyes now remain on the US Nonfarm Payrolls data.
Editors’ Picks
AUD/USD bounces back toward 0.7050 amid renewed USD weakness
AUD/USD stages a comeback toward 0.7050 in Friday's Asian trading, after falling about 1% on Thursday. The pair draws support from a fresh selling wave seen around the US Dollar even as risk sentiment remains weak. Surging oil prices due to the Middle East war dent risk appetite.
USD/JPY struggles near 157.50, eyes turn to US NFP
USD/JPY edges lower to near 157.50 in the Asian session on Friday after posting modest gains in the previous session. Broad US Dollar weakness, Japanese FX intervention risks and a risk-off market mood undermine the major, despite uncertainty over the BoJ interest rate hikes. All eyes now remain on the US Nonfarm Payrolls data.
Gold recovers above $5,100 ahead of US NFP report
Gold price jumps back above $5,100 in the Asian session on Friday. The precious metal regains traction, helped by a fresh bout of US Dollar selling and persisting risk-off flows. The US employment report for February will take center stage later on Friday.
Ethereum pull in $169M as validators pile in to stake ETH
US spot Ethereum exchange-traded funds recorded $169 million in net inflows on Wednesday, marking the largest daily intake in two months, according to SoSoValue data. The rise in inflows signals renewed institutional interest in Ethereum amid broader market volatility.
The market compass is pointing at a barrel of Oil
The Asian open is arriving with equities leaning the wrong way, and the reason is not complicated. The market’s compass needle has snapped firmly toward crude. In this tape, oil is not just another input price; it is the gravitational center around which every asset class is orbiting.
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