» dominating the fear of loss series http://www.forexstrategysecrets.com Wed, 08 Feb 2012 21:46:26 +0000 en hourly 1 http://wordpress.org/?v=3.2 Correcting A Misguided Thought Process 7 of 7 http://www.forexstrategysecrets.com/blog/correcting-a-misguided-thought-process-7-of-7.htm http://www.forexstrategysecrets.com/blog/correcting-a-misguided-thought-process-7-of-7.htm#comments Sat, 27 Feb 2010 20:12:26 +0000 Kirk http://www.forexstrategysecrets.com/?p=2725 ]]> We have gone over some guidelines to help keep our thoughts about trading clear and on track.  We have talked about:

Having a trading system and a set of rules.
Using trading capital that will not have an impact if it is lost.
Develop a win-loss ratio
Good money management

When we lose it can trigger negative emotions.  You can lose money and recover but if our emotions and
self-confidence are lost then we will have a hard time trading and recovering from a loss.  We can feel
bad about foolishly losing some resources and get angry at just plain losing, which will get things out
of prospective. We will then start to make some slight changes to our trading and not even realize it.
If we do not get it under control then our trading discipline can get lost and we will soon be out of
trading.

Traders need a system to keep them in control after losing on a trade.  Many people that deal with real
time like traders and athletes will get a trainer or someone they can talk to. You will need another person
to talk to, to help you maintain balance and deal with things when you start to feel sorry for yourself.

Having a good attitude is just as important as money management and a good trading system.  The system is
only as good as the trader and the execution of the trades.  So we need to trade like a robot and suppress
our human emotions.  Just follow the rules, develop a win-loss ratio so you know when to look for weaknesses
and manage the trades for maximum profit and minimum losses.

]]> http://www.forexstrategysecrets.com/blog/correcting-a-misguided-thought-process-7-of-7.htm/feed 11 When should I Review My Trading results? 6 of 7 http://www.forexstrategysecrets.com/blog/when-should-i-review-my-trading-results-6-of-7.htm http://www.forexstrategysecrets.com/blog/when-should-i-review-my-trading-results-6-of-7.htm#comments Sat, 13 Feb 2010 23:52:18 +0000 Kirk http://www.forexstrategysecrets.com/?p=2719 ]]> How much of my account can I lose before I go back to demo trading and review what I am doing wrong.
We have heard from 10% to 35% draw down before you should stop trading and analyze what is happening.
We lean to the 10% area.  You will have to decide what is right for you.  Keep in mind the preservation
of capital.

Here is a little chart to see what it takes to recoup a loss at different levels.

% Draw down            % Gain required to
Recoup loses

10                                          11.11
20                                          25.00
30                                          42.85
40                                          66.66
50                                          100
60                                          150
70                                          233
80                                          400
90                                          900
100                               Out of Money

Once you reach your draw down level you should close all trades without thinking about it and find out
what you are doing wrong.  Here are some things to think about:

Am I following my trading system?
Am I following my trading plan?
What is my state of mind?
How is my physical condition?
What do I need to do to correct the problem?

By following these simple rules of preservation you will be around for another day of trading and not be
emotionally and financially destroyed.  We all can have a string of bad trades.  The best thing you can
do is step back and give it some time.  The most common problem of poor trading results is when a trader
gets away from the trading strategy that was successful for him.  By using good money management and
following the trading rules will give you the opportunity to be able to stay in the trading game until you
can figure out what you are doing wrong.  By having some rules to follow it is usually quick and easy to
see what is being done wrong.  You should be able to spot some rule breaking by looking at just one losing
trade.  You should not have to go for long periods of time and many trades to see that you are doing some
things different.

]]> http://www.forexstrategysecrets.com/blog/when-should-i-review-my-trading-results-6-of-7.htm/feed 9 Money Management 5 of 7 http://www.forexstrategysecrets.com/blog/money-management-5-of-7.htm http://www.forexstrategysecrets.com/blog/money-management-5-of-7.htm#comments Fri, 29 Jan 2010 22:28:29 +0000 Kirk http://www.forexstrategysecrets.com/?p=2716 ]]> One of the basic laws to be used with the win-loss ratio is good money management.  A win-loss ratio can
be improved with good money management.

The first rule is to trade money you don’t need.  If you don’t need the money then you can be more in
control of your emotions and your trading.  Make sure that the money you are trading with is not needed
for personal living expenses.  You need to know that the more money means to you, the harder it is to
trade.  To a trader money is just a means of measuring your trading results and success ratio.

Most traders feel that you should not risk any more than 5% of you trading account on any one trade.
We feel that you may want to consider 1, 2 or 3 % to start with.  So if you have an account of $8000,
you should only trade $400 or 8 mini lots at one time using 5%.  When you use 2% of your account you will
only be trading 3.2 mini lots per trade.  The reason to trade with such a small amount of money is to stay
in the game and let the probabilities work for you. Preserve your trading capital so you can stay in the
game.  The more investment capital you have to trade, the better the chances of the probabilities working
for you.

]]> http://www.forexstrategysecrets.com/blog/money-management-5-of-7.htm/feed 0 Win-Loss Ratio 4 of 7 http://www.forexstrategysecrets.com/blog/win-loss-ratio-4-of-7.htm http://www.forexstrategysecrets.com/blog/win-loss-ratio-4-of-7.htm#comments Fri, 22 Jan 2010 21:45:05 +0000 Kirk http://www.forexstrategysecrets.com/?p=2714 ]]> How do you establish a win-loss ratio?  How many trades do you need to do?  The more trades the better
but you will need at least 100.  We like to break in down in to groups of 20 trades and see what the
ratio is on this small group of trades.  If your ratio gets better after 5 groups of 20 trades then
you are starting to know what your win loss ratio is.  If you start out at 4 wins 16 losses the first
round and end up with 15 wins and 5 losses, you have become a better trader and more skillful at using
your trading strategy.

This means you have 25% losses and 75% wins.  So if your wins are larger and the loses are smaller,
you will have a successful trading account.  This means you will lose 1 out of 4 trades.  If you
execute all the trades exactly the same then you can pin point the problem areas in your trading.

By doing the same thing each time you place a trade, you are developing a mechanical trading style.
You just see the trade and pull the trigger.

When you have a loss you need to still reduce the pain and emotions.  You need to make the money you
lose not so valuable.  Also set a limit of how much you will lose before you go back to demo trading.
All of your testing should be done in a demo account to get the skills you need to trade well.
It doesn’t hurt to go back to demo trading if you have a losing streak.  Do another 20 trades, get
your rhythm back then return to live trading again.

]]> http://www.forexstrategysecrets.com/blog/win-loss-ratio-4-of-7.htm/feed 0 How To Become A Smart Loser 3 of 7 http://www.forexstrategysecrets.com/blog/how-to-become-a-smart-loser-3-of-7.htm http://www.forexstrategysecrets.com/blog/how-to-become-a-smart-loser-3-of-7.htm#comments Mon, 04 Jan 2010 21:14:27 +0000 Kirk http://www.forexstrategysecrets.com/?p=2712 ]]> If you have learned a good trading system and know the mechanics of entering and exiting trades and you
can make money on a demo account, this does not meant you have the temperament to trade successfully.
Most people can learn the mechanics of trading and talk the talk but they cannot walk the walk because
they do not have the proper attitude.    It is the attitude that makes the difference between the
successful traders the not so successful traders.  If we do not know how to lose then pain and the lack
of logic along with follow through on the trading mechanics will take over and you will lose and not know
until the trade is closed what is happing to you.

The advantage a trader has is to be able to spot trades that will give them a greater chance for success.
Since trading cannot be 100% then we have to be concerned about the 15 to 25% of the time when we are going
to be wrong.  To have a better gauge of how successful a trade might be one has to get knowledge,
experience, and practice.  To become a successful trader it is not so much about having big winning trades
but having more winning trades than losing ones. Trading is a numbers game so you can expect to win some
and lose some.  It has a great deal to do with how you manage your trades.  When a losing trade is managed
properly it can be a small loss rather than a large loss.  When a winning trade is managed properly it can
become a larger win if you don’t get greedy.

To become a good loser you need to learn the difference between experienced losses and losses that cause
suffering.  We first need to get the education and logic behind trading then we need to strengthen the
emotional side of trading.  Having a trading system the gives exact entry and exit points can do this.
Systems that move with the market to let you know when to get out.

]]> http://www.forexstrategysecrets.com/blog/how-to-become-a-smart-loser-3-of-7.htm/feed 2 A Hole New World; Moving From Demo To Live Trading 2 of 7 http://www.forexstrategysecrets.com/blog/a-hole-new-world-moving-from-demo-to-live-trading-2-of-7.htm http://www.forexstrategysecrets.com/blog/a-hole-new-world-moving-from-demo-to-live-trading-2-of-7.htm#comments Tue, 22 Dec 2009 20:59:42 +0000 Kirk http://www.forexstrategysecrets.com/?p=2710 ]]> Trading is not a natural endeavor for us.  We have no basic skills or understanding of how it works when
we first start out.  We have to learn from scratch.  Everyone has to start somewhere.  Some new traders
have the all or nothing attitude with little or no training and soon lose some of their trades.  Once they
experience some losses then fear and pain set in.  Most traders who trade without preparation are on a
course of destruction.  They will destroy their trading accounts and or emotional strength so as to not
be able to stay in the trading game.  So the first order of business in avoiding the fear and pain of
trading is to get some education.  Not only technical education of knowing when to enter and exit trades
but, an education in understanding who you are as a trader, the physiological side of trading.

One of the basic laws of trading is to use and stick to a trading system. That
means you use a trading system and have done enough paper trades to know what win-loss ratio to expect over
a span of at least 100 trades. This can be done in increments of 20 trades and keep track of the results in
the trade tracker.  If you need to do 100 trades after you have figured out what works then the extra time
will be well worth it.  Once you have figured out what works for you then you must use the same criteria
and procedures on every trade. No exceptions. Paper trading makes it safe because there is nothing to fear
because there is nothing to lose. You just won’t sit there and lose money in order to experiment to see
what works if you are trading real money. This is one reason that 80-90% of new traders fail; they do not
learn how to trade before they try to become rich. This is one thing for sure if you want to be successful
at trading you need to study and practice.  If you don’t learn how to trade before you start trading with
real money you will go through a great deal of fear and pain.

Once you have developed the skills to follow a mechanical system.  Knowing how to pick a high probability
trade, set your stops, and manage the trade, whichever way it moves then you are ready to move to the next
lever.  You are ready to open a live account.  This is where you will encounter loosing real money and
having to admit that you were wrong on a trade or two.

]]> http://www.forexstrategysecrets.com/blog/a-hole-new-world-moving-from-demo-to-live-trading-2-of-7.htm/feed 0 Do We Learning From Our Mistakes 1 of 7 http://www.forexstrategysecrets.com/blog/do-we-learning-from-our-mistakes-1-of-7.htm http://www.forexstrategysecrets.com/blog/do-we-learning-from-our-mistakes-1-of-7.htm#comments Thu, 17 Dec 2009 20:40:14 +0000 Kirk http://www.forexstrategysecrets.com/?p=2707 ]]> As we all know loosing is a part of trading.  Win some and lose some.  A trader needs to get use to
losing.  That does not mean you have to lose all the time but it will happen.  Once you have entered
a trade then it is a matter of managing the trade that makes a difference.

Many of us never get over the subtle emotional effects of learning from mistakes.  Making mistakes are
just opportunities to learn. If not understood in a mature way, mistakes can be felt as a personal failing.
We all handle loss in different ways.  The way we handle loss comes from our experiences as a child.
Hopefully we learn from our weakness so we are able to make the right decision the next time something
similar comes up.  So if we learn from our losses and or mistakes then we will be able to survive trading.

If you use a set of indicators that work on all time frames then you can wait for the best trades and
time your entries.  By only taking the best trades you will have fewer losses.  Know that you will win
so many trades and you will lose so many trades.  Study both your losses and your wins.  Once you know
what you did wrong and what you did right along with how you felt with each kind of trade you will be
able to overcome the frustrations of losing.  When a trade goes against you cut it shortcutting the
emotions as well.  When you have a good trade remember what you did what you saw and how you felt.
Review how you managed the winners and the losers; managing the trade is a big part of overcoming the
emotion, fear of loss, and loss of your account.  Make sure you learn these lessons on a demo account.

]]> http://www.forexstrategysecrets.com/blog/do-we-learning-from-our-mistakes-1-of-7.htm/feed 0 DOMINATING THE FEAR OF LOSS A 7 PART SERIES http://www.forexstrategysecrets.com/blog/dominating-the-fear-of-loss-a-7-part-series.htm http://www.forexstrategysecrets.com/blog/dominating-the-fear-of-loss-a-7-part-series.htm#comments Thu, 10 Dec 2009 22:27:16 +0000 Kirk http://www.forexstrategysecrets.com/?p=2704 ]]> In this series of thoughts we are trying to point out some things to keep traders in the trading game.
The suggestions are not major changes; they are little adjustments to keep you on track.  When a trader
starts out with a plan, and follows some rules he will be way ahead in the long run.

The foundation a trading career is built upon can make a big difference in the final out come.  One of
the worst things is for a trader to have a couple of lucky trades in the beginning and not really
understand what he did right or wrong.  This will give a false sense of skill level and understanding of
the market.  When this lucky streak happens before the knowledge is obtained bad habits form and with no
method of tracking improvement a trader soon loses money and confidence so he is done.

These thoughts were split up into smaller blocks to give the concepts a chance to sink in.  Think about
where you are at in each of these areas.  Determine if you really want to be a successful trader or just
have an expensive hobby.  If you want to be successful at trading you will need to follow these guidelines
and be disciplines about staying on track.  If you read and think about what is written and apply the
concepts until they are habits you are one step closer to becoming a successful trader.

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