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Thursday, June 22, 2017

Prepare Your Two Different Scenarios

There is one question that all Forex Traders hate to ask to themselves. And that is:

“What do I have to do if I was Wrong?”

You can browse on the internet about this topic and you might find there is not too many of people who would like to talk about it.

But, hey, in Forex Trading, this is NORMAL.

Do not dream about having a huge success if you are not prepared for a (temporary) falling scenario.

Do not dream about taking a lot of profit from Forex Trading if you are not prepared for (temporary) having some loss.

In Forex Trading, there will be time when you made a long position (Buy) and just five seconds after that… BOOM… the market went down and….. down further. Well, as long as you can anticipate it, then it will be no problem for you. But if you think that market will go up as per your expectation while in fact, it goes down much deeper, then you will be in Deep Sh*t. That is why we need to use a stop loss to anticipate our loss (we will discuss how to put your stop loss on a different article).

At least, there have to be two scenarios that you have to prepare your mind before you enter Forex Trading. And those are:

 “What to do if I’m right?” and…

 “What to do if I’m wrong?”

Failed to have those mindsets will guide you to lose your money in Forex Trading. YESS, even for the first scenario.  If you don’t know what to do if you are right then it will lead you to lose your money also. It’s only a matter of time.

The followings are some of the things that you’re gonna need in order to have Prepared Scenario before entering Forex Trading:

Good Forex Trading System

Each person will have their own Trading System that works the best for him. Take some time to dig on this issue as a good Trading System for one person might be a bad one for the others. Read books, browse the internet and try to test your strategy on a demo account before using a real live account.

Money Management

As discussed in previous articles, the best advice would be to use 2% only of your Total Capital. In this case you would be able to control your money in Forex Trading.

Set Monthly Goal

It is better to set a monthly goal. How much of profit would you like to achieve of each month. Or…. How much of Maximum Loss that you can handle of each month.

In this case, you will build a good portfolio from your trading account if you can maintain steady profit, and if someday you decided to become a fund manager, then this is one of the things that your potential customer would try to look for, “steady profit”. Instead of those who promise them a huge profit but end up in a huge loss in short period of time.

Vice Versa, if somehow most of your predictions are incorrect, you need to set certain limit. Up to what points you can still handle the loss. Once the limit has reached, it is better to stop and step back for a moment. Analyze how can you possibly be wrong? Is it because you didn’t implement your strategy correctly? Or your strategy is no longer accurate? Or is it because your emotion has disturbed you to make accurate decision… or anything else? Take some time to analyze before entering the market again.

Scale Up Your Profit

If you have successful trading, you got your ROI and you earn a lot of profit….. then the next thing to do is to scale up the profit.

You might duplicate the quantity considering that the amount of money that you’re gonna risk would be only 2% of your Total Capital.