Forex Lesson 9: Trade Management

Now that we are coming to the end of our Forex modules there are a few key points that it are worthwhile mentioning. It can be tempting at this stage to rush out and begin trading without remember some of the fundamental golden rules of trading.

It is often easy to get carried away by a trade or by trading in general and to let your heart rule your head whereas in trading your head should always rule your heart. Don’t get carried away by emotion and the thrill of the trade. Remember that forward planning is essential, even the most experienced trader cannot be successful merely on gut instinct. Plan your trades in advance using the skills and techniques we have covered in these modules. Use as much information as possible to inform your trading, The more information you use to inform your opinion of the market the better the analysis will be. Forward planning that covers every aspect of a trade for every eventuality will prevent emotion taking over when things don’t go as planned. Planning for every eventuality will make you a skilful and successful trader who is less likely to lose out. Once a trade is placed you cannot control the movements of a trade but you can control where to enter and exit a trade, as well as when to limit a trade. The market may not do as you expected but you will still be in control of your trade. Not planning in advance and leaving unexpected deviances to chance is foolish and risky.

When things don’t go as planned it is easy to take more risks in the hope that they will pay off. Many traders risk more when their trades aren’t succeeding in the hope that they will get lucky and their circumstances will improve. This is the worst thing that you could do. When trades aren’t going as well as expected pull back. Reduce the amount of trades placed, reassess your position, speculate and analyse what is going wrong. Don’t leave it to chance. Many traders embark on the slippery slope of investing more when they are not succeeding, it is a very slippery slope that once you’re on it becomes harder to break away from. The time to invest more is when you are succeeding, once again this is not a license to throw caution to the wind but more of an indication that what you are doing is working well. To continue to succeed you need to understand what you are doing well and to keep doing that effectively.

A quick fix is often tempting for many traders. Good trading takes time and patience and will not just happen over night. For some the allure of charts with short time frames is too much. Traders who only use short time frame charts without analysing the bigger picture and long term charts are taking huge unnecessary risks. All you need to be successful is a little time and patience. Short-term charts are excellent when used in conjunction with long-term charts but as a stand-alone method of analysis they cannot be relied on. Long-term charts reflect the bigger picture and more influential dominant trends. Remember also when analysing charts lines can be drawn form the tops to bottoms of the wicks or form the tops to the bottoms of the body of the candles, the only method where it is essential to draw lines form the wicks is the Fibonacci method of analysis.

To conclude the key points of successful trading and trade management; plan thoroughly in advance, use long term and short term charts but never just short term charts, let your head rule your heart not your heart rule your head, if you’re on a losing streak don’t throw more money at it in the hope you will turn it around, pull back, reassess your situation and make informed choices, if you’re on a winning streak analyse why you are being successful and continue to use these methods to inform your trading, remember if in doubt let the trend be your friend.

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