Four Forex Trading Tips from Millionaires and Successful Traders
Every trader forges his or her own path, usually by absorbing the knowledge of previous successful traders. Although no market or trading technique can make you a successful traderForex Trader, butThe experience of a successful traderIt can tell you where you should focus your attention and what areas you should work on.
Here are four pieces of advice from millionaires and successful traders. Most of these quotes come from Jack D Schwager's "Market WizardsSeries of books. These books explore the various trading methods of successful traders and provide a wealth of wisdom for anyone who wants to start trading.
Don't be afraid to cut your losses
"If my position is against me, I'm out; if it's against me, I'm in. Risk control is the most important thing in trading. If you have a losing position that makes you uncomfortable, the solution is simple: get out because you can always come back." Paul Tudor Jones
Loss avoidance and unwillingness to stop losses are among the most common trading problems that can quickly drain an account. Conversely, not having enough room to run profitable trades is also a problem. Winners outnumber losers on average. Even if you win more times, try to keep your average loss smaller than your average profit.
Learn to control winning and losing
"You have to learn how to lose, which is more important than learning how to win." Mark Weinstein
To make a profit is both about controlling losses and accumulating profitable trades. If you make $1,000 on one trade and lose (or more) on the next, you're not going to get much better either. But if you can make $1,000, then only lose $700, then make $1,100, then lose $500, you're getting better. Trading is always two steps forward, one step back. Make sure the step back doesn't undo everything you've done before.
Manage your risk
"Every time I enter a position, I have a predetermined stop loss. It's the only way I sleep. Before I enter the position, I know where I'm going to be out. The position size of the trade is determined by the stop loss, and the stop loss is determined according to the technical foundation.., I always put my stop loss outside some technical obstacle." - Bruce Kovner
A stop-loss order is one of the easiest ways to control risk. Under normal market conditions, it will limit your risk to a specific amount of capital. Once you know the maximum risk, you can evaluate whether the profit potential of the trade is worth the risk.
Rather than avoiding losses, focus your trading strategy on making your winners outweigh your losers.
Seek Truth from Facts
"I don't think you can consistently be a successful trader if you expect to be right more than 50 per cent of the time. You have to figure out how to be right only 20-30 per cent of the time to make money."
Most traders are looking for that elusive method where they can never lose money, or can win 8 or 9 out of 10 trades, amass huge profits in a short period of time, and there is no risk. But risk is always there, and it needs to be defined and controlled.
When developing a trading plan and strategy, make an analysis based on the worst-case scenario. Maybe you do tend to win 60% or 70% of the time (not unreasonable), but there is no doubt that you will face winning only two or four out of 10 trades.
Millionaire Trading Tips Summary
All of these traders have talked about losing money. Most novice traders like to think about making a profit or avoiding a loss, but controlling risk is more important. Anyone can make a profit simply because of random price movements. Successful traders focus more on controlling risk than avoiding losses. When a losing trade comes, they just take a step back, not erase everything they've done before.
Prepare for the worst, and your outcome is likely to be even better.
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Disclaimer: The content of this article does not represent the views of the Institute of Foreign Exchange. The content is for reference only and does not constitute investment advice. Investors operate accordingly at their own risk.