How to Recover from Losses in Forex Trading

Joe Ross' Biggest Loss in Forex

(…) You wrote about the experience of losing $45,000 in about twenty minutes, and the fact that with support of your wife, you managed to forgive yourself. How do you think the ability to forgive oneself can help a young trader?

The ability to forgive yourself is incredibly important. Jesus said that you will be forgiven if you forgive others. So it is a two part thing. Many traders have never forgiven someone from their past. (...)

(...) One night in the Bahamas, where I was living at the time, we were sitting with another friend of mine who is a psychologist. We were talking about trading, all relaxed, enjoying a beer. Very subtly, in a way you wouldn’t realize, this psychologist was probing into this trader. He began asking him questions, and it finally came out that when he was a boy, his father kept telling him that he was no good; that he would always be a failure. His father was a completely negative influence. (...)

(...) Most people do not know who they are. They think they know. They believe what other people say about them, but they never really look deeply into what is holding them back. When a trader can not pull the trigger on a trade, there is something there, something very deep that may go way back (quite often to early childhood) that keeps him or her from winning. They have an image of themselves as a failure. A person who has that image is defeated before starting. That person needs either a cure, or to stop trading, or both.

People may have internalized those losses long before they come into the market, but it is the stress and pressure of the market that brings it out. It is usually something they buried a long time ago. They no longer remember it. They need to examine themselves to see why it is they can not win. It might have been a lost fist fight in school that changed their self-image. They may have been betrayed by someone they thought was a friend. They may not remember it, or do not want to remember it. But when they get into the market, the hurt and the pain is brought out. Little crazy stupid things can have such a huge impact on a person’s trading.

It is a remarkable thing how psychology, mindset, and emotions play a part in our success or failure (…)

For the full articles, please refer to Forex Market Masters

For more articles on forex trading, please visit FX Journal


To Your Profitable Trade,

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Coping with Losses (Overcoming The Fear of Losing Money)

In modern society, money seems to be taking on the specter of the major motivating force for human actions.
Without money, a person's quality of life can be stunted and leave a person standing on the outside of society.
Money-and the successful pursuit of it- may be the new religion.

The paradox of being a trader is that you do it to build wealth, but to really enter into the game, you need to already have some wealth.
Not only that, for money to not ruin the chances of making your trading capital grow, you need to not need it......
Say what? Let me explain.

To be able to trade effectively, a trader can't be afraid to lose money. You see, you will have losing trades and you will go through periods when you will see your trading account dwindling. It comes with the territory. Losing is just part of the reality of trading on probability.
Over time, even the best prepared and most favored fall victim to probability. Just as the New England Patriots.
And trading is all about probabilities.

The fundamental concept of trading is that a trader, over time, will have more winning trades than losing trades and that the margins on the winning trades are higher than the margins on losing trades.
Over a set of trades, top traders expect about a 65-75% win to loss ratio. That means that at least 25% of the time, even the best traders have losing trades.
So, the first thing to accept is that there will be losses.

Most people who are aggressive enough to be attracted to trading have been successful in other aspects of their lives. This may often mean that they are used to winning or at least normally not failing.
From our earliest days, we are taught that losing is equivalent to failure. That you have done something wrong. Losing becomes a deeply ingrained negative symbol.
Often times, it is accompanied with some sort of negative consequence and negative emotions amplify the impact of the concept of losing.
Unfortunately, not many people learn to see a losing situation as an opportunity to learn and improve.
But in trading, you not only have the deep seated connotations of losing but also the emotional impact of the tangible loss of something valuable-money.

Because money has such power, traders must apportion an amount to trading that won't make a significant impact on the life style, financial obligations or future plans of the trader.
That is to say, the trading account should be monies that can be lost without adding any stress to the economic situation of the trader.
If the total trading account were lost, it would have little to no impact on the economic well being of the trader. And thus, little emotional impact.

Because trading is a long haul proposition, traders need to be conscious of the fact that capital conservation is part of the strategy of keeping in the game and exposed to the probabilities.
As a result, most traders are very conservative with the money they don't really need. (the trading account).
It's common to hear that most traders have a drawdown limit of 20-30%. This means that if the account balance decreases 20-30%, a trader will stop trading and return to the drawing board.

Normally, the trader will need to tweak the trading system or take a hard look at how the trader is implementing the system.
Not only do traders use drawdown limits on the trading account, but also they have limits on how much money can be traded on any one trade.

For example, most traders won't trade more than 1-5% of the trading account on any one trade. This allows a trader to absorb the inevitable losses and still have resources to continue trading. Remember, trading is about being correct most of the time, not all of the time.
Losses will happen but they are quickly closed out to minimize impact on the cumulative number of trades.

To sum it up, traders need to totally negate as much as possible the emotional impact of losing money. Proper training of the subconscious mind to put losses in the right perspective can be extremely helpful.
In addition, traders need to set up rules and procedures to limit the effects of the inevitable losses and play to stay in the game.
To use the baseball analogy, being a trader is about hitting for average and not about hitting home runs.

[by Norman Hallett, CEO of Subconscious Training Corporation, Makers of TradingMind Software]

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Risk Management

The answer to the question, "Is Managing Risk Optional?", given by most people and certainly most traders and investors is "Absolutely not! Of course you must manage risk in order to potentially be successful," they say. And they are absolutely right! Why then do few traders and investors do a good job of managing risk?

Managing risk is an easy concept to embrace intellectually, but not emotionally. We all tend to want to risk too much on any given trade, or worse yet, we'll tend to have that "home run" mentality, always looking for that one great stock that will make us wealthy. We end up committing too much capital per trade which sets us up for a string of losers that could do serious damage to our account. We do this because we fail to comprehend that any system or method of trading will suffer losses from time to time, no matter how good the system or method - alas, the "Holy Grail of Trading" does not exist.

Another tendency that most of us have is to want to trade on a regular basis every day, and every week depending on our time horizon, without any regard to whether or not there are any good trade set-ups offered by the market. One of the most effective forms of risk management is to avoid trading when there are no potentially high probability set-ups available.

Is managing risk optional? No. For stock traders, following these two simple rules could potentially mean the difference between outstanding returns and unnecessary losses*:

Rule#1: Risk no more than 2% of your account on any one trade.
Rule#2: Be patient, be selective and wait for the good trades.

[Source: Risk Management in Trading, by Bill Poulos]

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How to Choose Your Forex Software

The forex software that traders choose to use should have several features. These are some of the features that must be there in the forex software.

As a start for your forex (foreign exchange) learning and software testing, you can give Forex Tester software a try.

Web based software

If you wish to trade from anywhere, then it the forex software should be a web based software. This enables you to just login from the site and start trading instantly. You can trade real time and will receive all the information that you require online. Exchange rates are constantly changing each second and this has to be factored by the traders that are making the deals

Downloading the software

Forex software can also be downloaded onto the system and the web can be used to make the deals easily. Many of the companies that provide the forex software also provide practice accounts and demos. Many of them also have consultant that are available online for chat as well as over the phone. Many believe that the internet should be supplemented with the personal touch that they receive.

Many of the software and the companies also allow the traders to trade with as little as $100 of margin money. It's imperative that the forex software provides a safe and secure environment for the transactions to take place. The data should be stored securely in a central exchange.

Secure transactions

Unauthorized entry can play havoc with the accounts and margin money. This can be quite harassing for the traders as they could lose substantial amounts of money. This is reason that the SSL by verisign should be displayed on the websites for forex trading. This ensures that the data is been suitably encrypted and the users are safe to use the forex software and the website

Locking in the rates

When the trader wants to execute a trade, they need to lock in the rate on the forex software Usually the rates are displayed on the forex software in real time for about 10 seconds. After this another rate is displayed for the currencies been traded. Usually the forex software will also show whether the currency pair is going up and down. Many of the forex software will display the forex quotes for over 30 of the currency pairs been traded currently.

Since the forex market is a 24 hour market with no central exchange, the rates are extremely dynamic nod the forex traders are responding to it extremely fast.

Article Source: http://EzineArticles.com/?expert=Naveah_Walker

For a start, you may want to try this software, which meets all the above requirements.

Furthermore, you may want to try this professional forex tester software to:

• Study trading on the FOREX market in a fast and convenient way.
• Develop and test your own trading strategies without being a programmer.
• Test your trading strategies on years of historical data.
• Save your money and time.

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