How to Learn Forex - This is a reality: to be a successful trader is rarely achieved in short and direct. Usually a trader will face a bad thing in trading and it will be a teacher as well as a very valuable experience.Some traders will even the most bitter experience in trading. For example up capital depleted. However it does not mean that to be a successful trader should be no pain, but more importantly we can learn from mistakes. There is an interesting phrase from the book "Reminiscences of a Stock Operator", namely:"There is nothing new on Wall Street or in stock Speculation. What has happened in the past will happen again, again and again. Because this is human nature does not change "- Jesse Livermore
Which roughly means, in exchanges or trading world is actually nothing new, what has happened in the past will happen again in the present and so on. It is caused by human behavior has not changed.So that means the problems faced by every trader today is actually the same as the problems faced by traders in the past either 10, 20 or 100 years earlier. The reason is simply that - apart from the factor of technological progress and innovation - we are still as human beings who have emotions. What distinguishes only our emotions can be a barrier for us to make the right decision.
Which roughly means, in exchanges or trading world is actually nothing new, what has happened in the past will happen again in the present and so on. It is caused by human behavior has not changed.So that means the problems faced by every trader today is actually the same as the problems faced by traders in the past either 10, 20 or 100 years earlier. The reason is simply that - apart from the factor of technological progress and innovation - we are still as human beings who have emotions. What distinguishes only our emotions can be a barrier for us to make the right decision.
The Biggest mistake
Before I mention the biggest mistake of trading that we do, try to recall the bitter experience what you've experienced when trading? He he .. I know, trying to remember or open old wounds was very painful, but few of us are willing to learn from the mistakes we have done. Quoting an old saying: "experience is the most valuable teacher."Why trading that we do is always wrong not profit we gain but loss we get, answer the following question:
1. Do you have a trading plan?
2. If you have if you often break your trading plan which has been collated?
3. Do you let the price move is not in line with your position and you leave it alone without any anticipation?
4. Do you set limits your losses?
5. Do you know when to close the position?
If the answer to number one "No", then you've made a mistake first; if the answer to number two is "Yes" then you've made a mistake a second; if the answer to number three "Yes" then you've made a mistake a third, if the answer to number four "No" then you've made a mistake four; if the answer to number five is "No" then you make a mistake five.All these questions will eventually be narrowed down to one of the main reasons is often done by traders. When you are not making mistakes of the five questions above is actually still there is one reason why we are still experiencing a total loss. The main mistake that we do is that we do not understand the concept of risk reward ratio.
As expressions of Jesse Livermore above where we are only human, and human nature must always want to win, or if the trading profit had always wanted, there is no single human being who wants to experience a loss.Well .. this is where human nature is driven by emotion always wanted to profit sometimes forget logic and make the wrong decision. This means that although we often benefit compared to the number of transactions we are the losers, why are we still in total capital decreased?Consider the following picture:
Before I mention the biggest mistake of trading that we do, try to recall the bitter experience what you've experienced when trading? He he .. I know, trying to remember or open old wounds was very painful, but few of us are willing to learn from the mistakes we have done. Quoting an old saying: "experience is the most valuable teacher."Why trading that we do is always wrong not profit we gain but loss we get, answer the following question:
1. Do you have a trading plan?
2. If you have if you often break your trading plan which has been collated?
3. Do you let the price move is not in line with your position and you leave it alone without any anticipation?
4. Do you set limits your losses?
5. Do you know when to close the position?
If the answer to number one "No", then you've made a mistake first; if the answer to number two is "Yes" then you've made a mistake a second; if the answer to number three "Yes" then you've made a mistake a third, if the answer to number four "No" then you've made a mistake four; if the answer to number five is "No" then you make a mistake five.All these questions will eventually be narrowed down to one of the main reasons is often done by traders. When you are not making mistakes of the five questions above is actually still there is one reason why we are still experiencing a total loss. The main mistake that we do is that we do not understand the concept of risk reward ratio.
As expressions of Jesse Livermore above where we are only human, and human nature must always want to win, or if the trading profit had always wanted, there is no single human being who wants to experience a loss.Well .. this is where human nature is driven by emotion always wanted to profit sometimes forget logic and make the wrong decision. This means that although we often benefit compared to the number of transactions we are the losers, why are we still in total capital decreased?Consider the following picture:
Taken from The Number One Mistake Forex Traders Make
As
I said above this, it's human nature always wants to profit, as shown
above, if we look at the percent number of trading profit (blue trunks)
is greater than the amount of trading losses (the red color bars) almost
all currencies. Then the question that arises is not that mean nice and we feel happy, right?But
unfortunately from the image shown above is the percentage of profit is
greater than the overall loss not guarantee we will profit or that our
capital increase. How can it be like that?
This is because of the risk and reward ratio, risk reward ratio which is the ratio between how big the losses with the profits we hope to attain. Now try to think about it in your heart each. When you trade and prices are not in line with the position you take, whether you will hold the wrong position in the hope that prices will turn back? It is quite greedy, and in fact should not we be afraid?
Or if the case is reversed: the moment you take the correct position and prices move in line with the position we take before, whether you will soon close that position for fear the price will reverse direction again?Essentially habits that we often do when we hold the floating minus floating profit but by the time we rush to close the position, right?Back again to the concept of risk reward ratio. To understand more about risk and reward note the illustration below:
- A Trader A of 10 transactions 7 3 transaction transaction profit and loss, if we look at a glance the trader A cool instead. A trader but the risk reward ratio is set at 5: 1, for example, only a 10 pip profit target then limit the loss of 50 pips.
So Trader A profit of 70 pips (7 x 10 pips) while the loss suffered - 150 pip (3 x 50 pips), so in total A trader is still loss of 80 pips (70 pips - 150 pips).
- A trader B of 10 transactions 4 times profit while 6 times a loss, if we look at a glance trader B is worse than A trader is not. But traders and assign risk and reward ratio is reversed at 1: 5, so for example its profit target 50 pips then the risk limit is only 10 pips.
So Trader B profit of 200 pips (4 x 50 pips) while the loss suffered only minus 60 (6 x 10 pips), so overall trader and still profit of 140 pips (200 pips - 60 pips).
So in fact the essence of trading is not how often we profit, but more important is how much profit we earn when we correct position and how small losses we experience when we are wrong position. Practice continues using the demo account.Plan your trade, and trade your plan.
This is because of the risk and reward ratio, risk reward ratio which is the ratio between how big the losses with the profits we hope to attain. Now try to think about it in your heart each. When you trade and prices are not in line with the position you take, whether you will hold the wrong position in the hope that prices will turn back? It is quite greedy, and in fact should not we be afraid?
Or if the case is reversed: the moment you take the correct position and prices move in line with the position we take before, whether you will soon close that position for fear the price will reverse direction again?Essentially habits that we often do when we hold the floating minus floating profit but by the time we rush to close the position, right?Back again to the concept of risk reward ratio. To understand more about risk and reward note the illustration below:
- A Trader A of 10 transactions 7 3 transaction transaction profit and loss, if we look at a glance the trader A cool instead. A trader but the risk reward ratio is set at 5: 1, for example, only a 10 pip profit target then limit the loss of 50 pips.
So Trader A profit of 70 pips (7 x 10 pips) while the loss suffered - 150 pip (3 x 50 pips), so in total A trader is still loss of 80 pips (70 pips - 150 pips).
- A trader B of 10 transactions 4 times profit while 6 times a loss, if we look at a glance trader B is worse than A trader is not. But traders and assign risk and reward ratio is reversed at 1: 5, so for example its profit target 50 pips then the risk limit is only 10 pips.
So Trader B profit of 200 pips (4 x 50 pips) while the loss suffered only minus 60 (6 x 10 pips), so overall trader and still profit of 140 pips (200 pips - 60 pips).
So in fact the essence of trading is not how often we profit, but more important is how much profit we earn when we correct position and how small losses we experience when we are wrong position. Practice continues using the demo account.Plan your trade, and trade your plan.
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