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.

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.

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.

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.

Once you know why you want to trade then you can set weekly and monthly goals.
This will automatically set you annual goals. It is easy to get caught up in making
winning trades that you forget why you started to trade. This will also help you
chose your trading style.

Maybe your goals include having some free time. Then you might say I will only
trade between two set times and only trade 3-4 days a week. Maybe you want to have
an extra $100,000 when it comes time to retire. Then you need to figure out how many
years you have until retirement then how much you need each year then month then day.
This will keep you focused on what you are trying to accomplish by trading the currency
market.

If you want to make a lot of money, then you need to figure out what a lot of money is.
Your target needs to be specific and measurable. Otherwise you are just spending time
on an expensive hobby. It needs to be broken down into bite size chunks and reviewed
on a regular basis.

If you do not have enough starting capital to reach your goal then you need to change
your goal or earn some more investment capital.

This is just an idea on how to stay focused on the right thing, and that is to
make money.

A day traders comments: He is a consistent trader his accuracy was good but would have
a blow up one day a month and lose a lot of what he had made. When he realized that
being right is not the key to making profitable trades. Sticking to your pre determined
plan and making high probability trades and not being emotionally attached to being right.
Stick to stop losses religiously. When he corrected his thinking he has quadrupled his
profits in just a few weeks.

Another trader makes a few comments. Traders look for the Holy Grail. The Holy Grail
could be within you. Get rid of the bad habits you have. Harnessing your emotions gets
rid of bad habits that keep you from being a winning trader. People over look their i
nner trader. Traders need to get rid of the bad habits and reinforce the good skills
they have by being disciplined.

This trader felt that there was an advantage of strong mentor ship. Trading is 85% mental
and 15% know how. If you are a disciplined trader you are following the rules of your
trading strategy. Step back look at the trading strategy, document the rules and make
sure that you are truly following the rules. Successful traders document their trading
activities they learn over time where they have improved. You need to be a disciplined
and focused trader. Being more patient and waiting for the high probability trades you
will notice the percentage of your winning trades will go up. Being disciplined will
help you to have more confidence and be calmer in your trading.

When you learn the basics of trading you do not have to learn about your emotions.
BUT when you start trading live you quickly learn about your emotions. Control the
emotions of fear and greed. You will not be able to eliminate it but you have to
control them. Writing the journal helps you know where you need to improve you do
not have to tweak your trading system. How you feel when you lost and when you won.
Take less trade avoiding the bad trades so the account grows. People will spend a
lot of time learning the technical side of trading but never do the record keeping
or checking their emotions.

See if any of this information could help you become a more disciplined trader.

You might say I am looking at charts, the indicators, price movement… what else should
I be observing? Let’s make a list of the things you need to look at.

How am I feeling?
What is my emotional state?
What is my self-talk before, and after the trade?
What is my thinking?
What patterns did I observe?
Did I follow my rules?
Did I hesitate or just take the trade when I saw the signals.

Once you get use to different things you need to keep track it will come automatic
and you will not have to think about it. Your goal is to become a mechanical trader
see the signals enter the trade, manage the trade, and exit the trade. Look for the
next trade and repeat the process.

Be aware of your environment and what is going on inside and out side of you.

Trade Good,

(excerpts in this series were taken from the book “The 4-Hour Work Week”  By Timothy Ferris)

“Uncovering Fear Disguised as Optimism”

“There’s no difference between a pessimist who says, ‘Oh, it’s hopeless, so don’t bother doing anything,’ and an optimist who says, ‘Don’t bother doing anything, it’s going to
turn out fine anyway.’  Either way, nothing happens.”

“Fear comes in many forms, and we usually don’t call it by its four-letter name.  Fear itself is quite fear-inducing.  Most intelligent people in the world dress it up as something else:
optimistic denial.

Most who avoid quitting their jobs entertain the thought that their course will improve with time or increase in income.  This seems valid and is a tempting hallucination when a job is boring or
uninspiring instead of pure hell.  Pure Hell forces action, but anything less can be endured with enough clever rationalization.  Do you really think it will improve or is it wishful
thinking and an excuse for inaction?  If you were confident in improvement, would you really be questioning things so?  Generally not.  This is fear of the unknown disguised as optimism.

*Note we are not implying that you should quit your job without a sound exit strategy.  In fact, keeping a job while growing your trading career is the best move in our minds. You can use the
J.O.B. as a tool to accelerate your situation.  So quitting does not need to happen until you are financially sound and capable to transition to a full time trader.  Remember we are not talking
about taking backwards steps here.

So, work into your plan of attack how you will use the job to meet your obligations.  Work towards paying off debts to increase your freedom,  Focus on the entire financial picture.  It is
all connected.  Seriously, you can trade part time and make really good money.  But it is a riskier investment than your 9-5 job.  So take care and caution to preserve your stability.

GOOD TRADING

(excerpts in this series were taken from the book “The 4-Hour Work Week”  By Timothy Ferris)

“Conquering Fear=Defining Fear”

In the last post 2-4 “The Power of Pessimism”  I talked about facing your fears by using a plan of attack and addressing what those fears are that are keeping you in place.
I would like to define this process in greater depth.

Define the nightmare.  Create in your mind what that trading experience would be: whether it is a first loss, a streak of losses, or a serious drawdown causing a set back in
your trading account.  Create that scenario in your mind and then live as if you are there in that moment. (possibly you have already experienced it or are living inside that
nightmare right now?)  Either way put yourself there and record the emotions that you feel.  Once you have defined the emotions you are feeling, refer back to your plan of attack.
Make sure that you have defined the fear as it really is, then make any adjustments to how you will cope with the emotions that you are having and define a plan to extinguish them.

GOOD TRADING

(excerpts in this series were taken from the book “The 4-Hour Work Week”  By Timothy Ferris)

“The Power Of Pessimism: Defining the Nightmare”

“To do or not to do? To try or not to try? Most people will vote no, whether they consider themselves brave or not.  Uncertainty and the prospect of failure
can be very scary noises in the shadows.  Most people will choose unhappiness over uncertainty.”

The solution is to develop a plan of attack.  If you find yourself unable to pull the trade trigger because of uncertainty.  Take some time to write down on a
sheet of paper what the fear is, distinguish what the pros and cons of this uncertainty that you face in your trading.  With that clarified you can now
devise a road map as to how to avoid the pit falls and what you will do if you hit a pit fall.  For example:  I will only trade 2% of my account on any given trade.
I will place a stop loss on all trades at the resistance level or at no less than a 3% draw down on my account. If I do encounter a drawdown of this amount I will
return to demo trading until I have had twenty positive trades in a row.

It is simple things like this that can make all the difference in defining the nightmare and facing that fear.  As a little boy, when I had a bad dream my mother would
comfort me and tell me that I had the power to change that dream at any time I wished.  As a father I find myself guiding my children through the same process of
mental control.  As Traders we need to empower ourselves with the same mental control to face our fears and plan our attack.  Remember the noises in the shadows at
best are just noises.

GOOD TRADING!