Thursday, January 8, 2009

Forex Trading Mindset – Why Most Traders Cant Accept Big Profits

This may seem an odd headline as your probably thinking all traders want big profits so will accept them – this is not so. Many traders are very often right about the big trends but fail to make money from them. Why? Let’s find out. Many traders have excellent forex methods and are right about the long term trends but cannot hold them due to the emotion of fear. So what do they fear? They fear of losing the profit that they have in an open position is something all novice trader struggle with.
The bigger the profit gets the greater the temptation is to snatch it before it gets away. As volatility eats into open equity, the temptation to take the profit becomes too much and the trader banks it.Missing the Huge Profits and What Might Have BeenOf course the trade then goes on to pile up $20 – 30,000 or more in profits! The trader knows he should be in - but did not have the mental discipline to stay in the market.It’s easy to say holding a trend is not hard just stay disciplined but that’s only if you have never done it! Believe me its hard even for experienced traders.
Money is on the line in many instances big money and emotions start to take control.Over Coming Fear When Trend FollowingOf course you need to over come these emotions and learn how to overcome the psychological trap of fear.
These traders could turn mediocre or average gains into huge gains and the way to do this is to have confidence in the method you are using. Even if you are following someone else’s methodology you will only be able to hang onto a trade if you have confidence in it.
1. Confidence in your method is essential and you should know how and why it works and will give you the big profits.
2. Hold stops back at entry. If it’s a long term trend, don’t trail too quickly or closely that will see your trade get taken out by normal market volatility.
3. Accept the fact that open equity will drawdown sometimes by several thousands of dollars per day – don’t tick watch - look once a day only, and hold with your stop in place.
4. Learn to love risk and see the short term drawdown as inevitable to get your hands on the bigger pot of profits at the end of the trend.
5. Study the big trends historically and match yours with some to give you an idea of the target you can expect. Keep in mind if you trend follow and you catch a big trend it can last for months or years and run for a 7 dollar profit!
Confidence Discipline and the eyes on the bigger prize
You can do it – it just takes a mindset that is focused on making big gains and ignoring short term volatility. It’s hard but if you can have confidence and discipline, you can hold on for bigger profits without the fear of losing.

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