Improve Your Forex Trading Profits

Improve Your Forex Trading Profits

If you eliminate your bad trading habits you will boost your trading profits. There is no doubt about that.
Do any of these situations sound familiar?

You fire up your computer and the markets look interesting. You have no specific signal but you want to make a trade. You know you shouldn't but the markets look like they are going to have a good day. You lose.

Markets are shooting higher and you missed your entry point by just a couple of pips. You know you shouldn't chase a trade but you do anyway. The market reverses almost immediately.

You suffer a big loss then another potential set up comes along. It's not a valid trade because some of your rules aren't being matched but you want to make good the losses you just made. You enter and lose. You suffer a big loss then an entirely valid trade comes along soon after. You ignore it because you're not in the mood. The trade is a big winner.

You're in a losing trade and it's heading further towards your stop loss but it's still not there. The trade turns around a little, lessening your loss. You know you should stick to the rules and exit only at your stop loss or if you get another signal, but you're getting nervous and decide to cut your losses there. The trade duly turns around and would have made a small profit.

Maybe you've experienced one of these situations or at least something similar. If so, you're not alone, virtually every trader alive will have a bad habit like one of these. Maybe you've not started trading yet, if so, have a look at this list again in a few months time. My worst habit is hesitating to enter after a big winner because I don't want to give it back. I've done the calculations and it makes no difference to my bottom line, but part of me wants to pat myself on the back and protect what profit I've just made.

The more I trade, the more I realise that the biggest barrier to success is not bad strategies but bad habits.

Don't get me wrong, you need a good system, strategy or expert to follow in the first place. But, you can have the best system in the world and still not make money from it, at least to start with. You might have a strategy with very rigid rules that make money in the long run, but you still have to have the mental discipline to follow the strategy to the letter. We have bad trading habits for one reason. Humans weren't designed to trade, we were designed to hunt and gather in small groups. There are two main parts of our brain. The first part deals with the automatic stuff like breathing and driving. The other part is the more rational section which encompasses our higher intelligence. Bad habits mainly come about through temptation or fear.

It's incredibly easy to be rational about trading and assume that in the moment of a big trade we will make the right decisions. This doesn't happen. It is not as simple as that. You might hold a trade far longer than you should or enter too quickly, but sometimes you'll get away with it. The first thing to do is to recognise your bad habits and not to underestimate them.

Keep a trading diary. Record the date, the trade, the result and your thoughts on the trade. Just the act of writing them down will make you realise that you did something wrong.

The first place to start is a simple checklist when you trade. List your trigger points and the habits to avoid and have this written in bold text next to your computer. Don't assume you'll get it right in the moment, have it there staring you in the face so you can't miss it.

One way to avoid your temptation and be disciplined is to set yourself a challenge. Enter every trade regardless of whether you have had a big win the one before or a big loss earlier in the day. Once you set your challenge, you name the stakes. Have someone to adjudicate on whether you've been successful. Make every challenge as specific as possible and achievable. Here are a few examples to follow:

1) Follow every trade for a system between 10.00 and 10.30. 2) Place every trade in a demo account instead of just writing them down 3) Progress to a small live money account and place your first trade 4) Stick to one system for one month

One last tip. Start small and eliminate bad habits one at a time, or improve a small part of that habit one stage at a time.