The day someone decides they are going to get involved in active investing or pursue trading, they are typically making that decision because of the potential financial prize. In other words, they are making that decision because of the perceived benefit. What most people don’t understand, let alone consider, is that they are about to step into a world of trading challenges that have the potential to really hurt their bank account and their self-confidence all in one.
When I look at new traders and investors who do well and those who don’t, there are some clear observations to take note of. The group that focuses on the prize tends to lose money and never achieve their goals. The group that focuses on the trading challenges tend to succeed and reach their goals. As always, it’s one group providing income and wealth for the other; welcome to market speculating.
Trading Challenges
Self-Control
This is a must. If you don’t have self – control (discipline) in other parts of your life, don’t think you will magically have it when you start trading. In fact, trading will challenge your discipline more than you can imagine. From birth, we run to things that make us feel good and run from things that we are afraid of. Proper trading and investing means you have to think the opposite if you want to succeed.
What I mean is that we want to buy low and sell high. To buy low when prices are cheap, you need to buy when everyone else has sold, after red candles, with down sloping indicators, accompanied by bad news and so on. The act of buying low and selling high is NOT comfortable for the human mind when trading and investing. In other parts of our lives we have no problem trying to buy things on sale. However, when speculating in markets, most people do the opposite for the reasons I just mentioned.
Profits and Losses
People love profits and don’t like losses. This simply leads to people taking profits quickly when they have them and refusing to take losses because they don’t want to lose. This action is VERY common and doesn’t lead to trading success.
Successful traders take losses quickly when their plan tells them to, and they hold on to gains until they reach their target. In other words, they plan their trade and trade their plan. For investors who only buy the stock market, most don’t have a plan for profit or loss. I could write an entire article on this topic.
Perseverance
Have you ever heard of the person who spent lots of time digging for gold. They dug a deep tunnel in the side of a mountain and found nothing. Dug deeper and deeper and found nothing. Dug a little deeper and found nothing and then gave up. What they didn’t realize is that they were only 5 more feet away from the gold. Someone else came in and only had to dig five feet and the gold was sitting right there.
Life-long consistent profits in markets is the same. Trust me, you will be challenged. Trading is like a mirror. It reflects every emotional flaw you have and Murphy’s Law exposes all the new trader or investor’s flaws very quickly.
The journey to financial freedom is a marathon, not a race, so make sure you use small position sizes while you are learning and practicing. Don’t take on risk until your demo trading proves that you have an edge that your competition doesn’t have. Then, begin with as little position size as you can. Let your results dictate when you should increase that size. The problem you need to be aware of is, typically determination goes hand in hand with aggressive action. Don’t let the burning desire (determination) to reach the “prize” lead you to take on too much risk, too soon. Longevity is the key and properly handling risk with position sizing and small losses is the key to longevity. Instead, channel your strong determination into energy that allows you to conquer your trading challenges and follow your rules.
Hope this was helpful, have a great day.
Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
Editors’ Picks
EUR/USD stays near 1.0850 after US housing data
EUR/USD trades in negative territory at around 1.0850 in the early American session on Tuesday. The US Dollar preserves its strength following the upbeat housing data and makes it difficult for the pair to gain traction. The two-day Fed meeting goes underway on Tuesday.
GBP/USD recovers modestly from two-week lows, trades near 1.2700
GBP/USD staged a modest rebound after touching its lowest level in two weeks below 1.2700 on Tuesday. The cautious market mood helps the US Dollar hold its ground and limits the pair's upside as markets gear up for the Fed and the BoE policy meetings.
Gold stays in daily range near $2,160
Gold fluctuates in a narrow band at around $2,160 for the second consecutive day on Tuesday. Ahead of the Fed's policy announcements, the benchmark 10-year US Treasury bond yield moves sideways near 4.3% and limits's XAU/USD's volatility.
Why is the crypto market crashing?
The two most important contribution to the ongoing bull market is the meteoric rise in Bitcoin due to the ETF approval and the sudden interest spike in Solana ecosystem. But the recent move suggests that the upward momentum is dissipating and a correction looms.
Shocker, Yen weakens after BoJ hike
The Bank of Japan (BoJ) scrapped its negative rate policy, raised the rates from -0.10% to 0%, ditched its YCC policy and ended the purchases of ETF and Japanese real estate investment trusts.
RECOMMENDED LESSONS
Making money in forex is easy if you know how the bankers trade!
Discover how to make money in forex is easy if you know how the bankers trade!
5 Forex News Events You Need To Know
In the fast moving world of currency markets, it is extremely important for new traders to know the list of important forex news...
Top 10 Chart Patterns Every Trader Should Know
Chart patterns are one of the most effective trading tools for a trader. They are pure price-action, and form on the basis of underlying buying and...
7 Ways to Avoid Forex Scams
The forex industry is recently seeing more and more scams. Here are 7 ways to avoid losing your money in such scams: Forex scams are becoming frequent. Michael Greenberg reports on luxurious expenses, including a submarine bought from the money taken from forex traders. Here’s another report of a forex fraud. So, how can we avoid falling in such forex scams?
What Are the 10 Fatal Mistakes Traders Make
Trading is exciting. Trading is hard. Trading is extremely hard. Some say that it takes more than 10,000 hours to master. Others believe that trading is the way to quick riches. They might be both wrong. What is important to know that no matter how experienced you are, mistakes will be part of the trading process.