„One mistake is not a mistake – Forex gives you a second Chance”
Committing one error during the investing game is not full error in our reasoning – the mistake is committing the same wrong action at least twice. Therefore, FX gives you a second chance. You make a mistake, but the second time you will not open similar erroneous position – thus you avoid the mistake.
When Forex gives you a second chance?
There is a one rule – you have to stick to the principles of money management. Only then you will have a chance to repair your behavior and avoid the same mistake. This is necessary, because if you open too large position and not use stop loss order – you can lose everting, including a second chance.
In fact, to learn how to be a successful in the Forex market you need the time. Of course, training, books are also important, but the truth is if you do not give yourself enough time – you will not learn anything – and sooner or later go bankrupt.
As it was mentioned, there are two ways to give yourself the time needed to learn – the first one is capital management. In most basic version of it you have to remember not to risk more than few percent of the whole deposit in one transaction (optimally 1-2%). Then a single loss does not matter – you can look on the broader perspective (monthly, yearly, etc.). Only that way you will learn whether you are a good trader and whether your strategy is good – you have to test yourself and the strategy in longer period of time.
Secondly – loss management. You can never leave an open position without SL order. We recommend setting stop-loss before clicking BUY or SELL. When you risk 1% of our whole depo and set smart SL you may trade peacefully, without excessive stress. The single loss will not hurt, does not hog the deposit. We have time to learn new things and become better each day.
Why so many people have problems with closing unprofitable transactions? Why so many of them change the SL position when the rate is moving not in the take profit direction?
This is due to some emotional immaturity – we have been programmed in such way, it is an instinct that tells us to avoid loses at all costs. In psychology, there is so-called behavioral theory (learning through incentives). From our childhood we learn that good behavior means reward, bad means punishment. We use this instinct in trading – but it will not work here – avoid penalty in the form of loss leads to bankruptcy.
You have to believe us, that when it comes to stocks and Forex it is good to learn to admit mistakes as quick as possible – to close bad transactions and not to feel bad because of it. Many have a problem with that, so we recommend reading about long-term trading strategies, following the trend systems, etc.
Losses are a normal thing and you should get used to them
Let’s finish this topic with a quote from Victor Sperandeo’s book which should be a motto of every trading plan:
“The most common mistake committed by the traders is too early profit-taking and allowing yourself to make too large losses”.
If this is not enough, we may also quote Goerge Soros:
“No matter how often you are right or you are wrong, it is important how much you can earn with right decision and how little you will lose with the bad ones”
You should not believe in the pressure of false effectiveness – efficient on the stock market is not about closing as many transactions as possible with profits. Remember: no matter how often you are right or wrong – it is not the point!