Money Management & Trading Habits

Money Management & Trading habits:

Maximum 2% risk per pair -What that means is when you calculate your stop losses your stop loss amount has to be within 2% of your account .If the trade goes against you, the maximum you will loose is 2% of your account. This way it also prevents you from getting panic attacks when the trade retrace against you resulting you close the trade pre maturely.
If your desired stop losses do not come within 2% of your account don’t take that trade. As I always say, you may miss one trade but there are millions more to come.

You always have to calculate your risk every time before you enter your trades.
Your risk to profit ratio has to be minimum 1:1. That means if you are taking a 2% risk on a trade make sure your profit target would be at least 2%.

Always have realistic targets. My aim is 300 % capital growth per year. The lesser your target is lesser the risk of losing your own money. Even if you have 50% capital growth per year you are doing better than 90% of the worlds biggest hedge funds.

More trades you take the more you expose your account for losses. No trader in this world can profit from every single market move.

Patience plays a big part in trading. Take the trades only if you are at least 90% sure of profiting from it. If you are not sure stay away from the trade. Staying on the sideline is as good as winning.

Never trade against the trend. Specially with a high volatile pair like GBP/JPY. It may give you couple of winning trades. But it’s going to get you in the long run.

Always have a trading strategy ... make a habit to stick to it doesn’t matter how desperate you are.

Always trust your strategy but not bloomberg or some statement from citibank. Don’t go with your gut feeling because 95% of the time your gut feeling is wrong.

Your charts are your forex bible. Everything what you need to know about forex is on your charts. You will learn something new everyday from you charts.

Specialize in one or two pairs. Every single pair has it’s own characteristics. No two pairs are the same. Don’t trade all the pairs your broker can offer. If you specialize in one or two pairs very soon you will be able to read the pair like a road map .

Stay away from the ranging markets. There will be enough of trend break outs on this pair than you ever want. Why take any extra risks trying to chase 20 pips on a ranging markets when you can grab 200 pips on a break out.

As Monarc mentioned traders are a greedy bunch. Less greedy once are the most successful once.

Don’t try to chase every single pip or market movement. Have a realistic weekly or monthly target as a percentage of your account . Not the number of pips. If you have already achieved that target stay away from the market. As I mentioned before.. the more you trade there is more risk of losing your money.

The losses are part of the game. Do not try to cover all your previous losses from your next trade. First your trading plan has to include at least 50% of losing trades. Then you can cut down on the number of losing trades while you gain experience and confidence.
When you start you must demo trade at least for the first 3 months to build a trading strategy. Then for the next 3 months trade on a demo account or a micro account and test your strategy coupled with a good money management strategy. When you are fully confident then trade with your real account.

Use minimum account leverage. Don’t abuse it. My recommendation for new traders is maximum one mini lot for every $2500 or one full lot for every $25000.

At last ... remember there is no easy way to become a good consistently profitable trader. No one can become a profitable trader overnight. As everything else in life it takes time, patience lots of sacrifices and learning. Don’t be afraid of mistakes.

It took me 8 months to make my first consistent $100 per week.
Since then making money is like a walk in the park.

(By: Jacko's Forex House of Pleasure and Pain)