Develop trading discipline in yourself if you want to become a successful trader in the long run. In a trading session, if you come to a point in your market analysis when you have no confidence on the accurate direction of the market forecast. Always remember, a lost opportunity is better than lost capital. Choose not to trade.
You should wait for the market conditions to become clearer. You should increase the probability of success by trading when the trade setups are strong. This is far more important in forex than in stock markets as the forex markets move a lot.
You should understand that high leverage gives you the opportunity to make a lot more money much faster. But in case you go wrong, you can get your account wiped out. When you don't see an opportunity clearly, try to sit on the sidelines. Wait for the market conditions to become clearer. Learn to be a patient trader. Let the market come to you.
You should understand that leverage is a wonderful money making tool. It is the key to making money in the currency markets as no other markets allow high leverage that this market allows. A leverage of 100:1 means that for a $1000 deposit, you can trade $100,000. This huge amount of leverage gives you the opportunity to make the kind of returns that you want.
But using high leverage also has the potential of making you lose some or all of your capital if you trade foolishly. Take the example of credit cards. The bank let's you borrow huge sums of money using your credit card on the promise that you will pay it back.
But in case you abuse your credit card. It can lead you into heavy debt. It can even result in bankruptcy. You should manage leverage in forex trading like you manage your credit card. You have $10,000. It does not mean that you should trade 10 lots and use all your $10,000 capital. Using all your capital in one trading session would be foolish on your part and highly risky.
A very conservative yet very effective method would be to never leverage more than 20% of your account. Thus, you should only trade two lots with a $10,000 capital. Using good money management and discipline, you grow your account successfully in a short period of time.
Don't forget the power of compounding. The compounding factor applied to your capital can make it grow fast. Many people want to get rich quick. They take unnecessary risks while trading, thinking that a few big wins will make them rich. They don't focus on proper trading principles. You need to develop the discipline in yourself to follow simple money management rules.
If you are trading a mini account, start by trading one position of one tenth of a lot. You will not make much money in the beginning as the position size is only one tenth of a normal lot. But the percentage of returns will compound over time and let you trade a much larger sum of money with the passage of time.
As a forex trader, you should make realistic goals. Goals that can be achieved over time! You should not use your life savings. You should never borrow money to trade. You should not use money that you would use to pay monthly utility bills. You should always trade with the money that you can afford to lose! Never ever trade with money that you cannot afford to lose! It is foolish. You should not think like a gambler. Trading is business. It is not gambling.
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