CONCLUSION

So that is all there is to it, right? Install the indicators, set up your charts, identify trend, watch for points of confluence on retracements within the trend, enter at those optimal points, set your stops & take profit and sit back & collect your cash.

It should be that easy .. but there is one thing that can get in the way. And sadly, that thing is ... YOU. Or rather, your psyche.

Traders can have the best trading method in the world and still be losers if they cannot control themselves. There are a some good ebooks about trader psychology and I will refer you to them for more information on this all important .. actually crucial .. element of trading.

Bottom line, once you have found your trading method, you must trade like a robot. Do not chase other 'systems', do not change the rules, do not 'try' something new, always set your stops and NEVER move them wider. You can exit a trade sooner if you think it is definitely going against you, but never widen your stop! Take your profits according to your trading rules ..
then continue doing the same thing .. every day, over and over again.

Forex fortunes are not built by learning how to make hundreds of pips per trade. They are made by learning how to make 10, 20, 40, 60 pips per trade .. but making them consistently. And once you are confident in your ability to do this (after 3-4 weeks of doing it with a live account), then you simply start compounding. That is you keep doing the SAME thing, you just increase your trade size.

Look how this works:

If you make 20 pips per day consistently in a micro account, you will make $2 per day.
Whoopee.
Can't retire soon on that.

However ... after a couple weeks of making your 20 pips per day (100 per week) you increase your trade size to 2 micro lots. Now you are making $4 per day.
You are not doing anything different, just larger trade size.

Two weeks later you are trading 3 micro lots and making $6 per day, $30 per week.

Four months later you are trading 3 mini lots and making $60 per day. $300 per week.

A year later you are trading 3 standard lots and making $600 per day, $3000 per week.

And you are not doing anything different than the days when you were trading that 1 micro lot and making $2 per trade.

But you have to have iron discipline .. because it is not easy, once you are trading larger & larger lot sizes to not get psyched out by either fear or greed. Fear because when you see a trade go against you, that is hundreds or even thousands of dollars you are losing ... and greed because when you see it go your way, the temptation is to do more, do more!

That will kill your account .. one bad trade made with too much at risk can wipe out an account in minutes. Or erase all the gains it took you months to acquire.

The rule is, especially when trading with a larger account size, NEVER put more than 2% of your account balance at risk.
NEVER. (as in, Don't Do It!)

Let's say your account balance is $10,000. 2% is $250. That means if you are trading 2 mini lots your stop must be set at 125 pips or less. So your maximum dollar loss would be 2 x 125 = $250. You can sustain that kind of hit to your account many times without it having an impact.

But suppose you think this trade is a 'sure thing' and you put on 2 standard lots. Your stop is hit and 1/4 of your account is gone.

Don't ever do that!

The millionaire forex traders (and there are many of them) never risk more than 2% of their account size, no matter how good they think a trade will be. That iron discipline, more even than their trading skills, is what made them millionaire traders.

 

NEXT: RESOURCES

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