Starting a profitable business is not so difficult. With one in two chances to be right, the initial chances of success are very beneficial.
However, it is difficult to keep these benefits.
How many times have you had a serious winning operation to return all your winnings to the next one? Sometimes the losses you incur in the next transaction will be greater than the profits from the previous transaction.
It is time to complete this cycle of expansion and collapse. If you want to open an account and become a profitable Forex trader, you must learn to protect your profits.
That’s where today’s mail comes in. When you finish reading this lesson, you have a three-stage process that you can implement to protect your profits.
Ready to start? That’s what it’s all about.
What is a “big victory”?
This is, of course, very subjective. What I consider to be a great victory will probably differ from your interpretation. It is also important to use percentages when discussing this topic. After all, a profit of $100 seems much more important for someone with a $500 account than for someone with a $10,000 account.
However, I am also looking for opportunities to develop the pyramid. If everything goes well, I will often do two or three rides on the way to the final destination. Even if I risk only 1% of my account balance per transaction, it can often amount to 5% to 10% profit. Again, this assumes that everything goes according to plan.
For me everything in this range of 5% to 10% is considered a big victory. This may not be much, but with a larger account even 5% equals a significant amount of money.
Step 1: Update your trading history
The first thing you need to do after a big win is to update your trading files.
Whether you are using a more sophisticated paper magazine, spreadsheet or online magazine, you need to add your last win as soon as possible.
In this sector of activity it is often possible to make large profits quickly. It is not uncommon to earn 5% to 10% per week or less, even if you only risk 1% to 2% of your account balance.
In some cases it may seem too simple. We all had a competition, which we introduced into the game, and then we didn’t think it was so easy to win a big victory.
By documenting what’s happening, it helps consolidate the gains. This gives some sense to the intangible event that has just occurred. This is no longer something that has simply happened, but a trade that can be placed according to certain criteria.
Instant documentation of your profits will also help you discover that these profits are now yours.
How many times have you made a significant profit just to get it back to the next trade?
One of the reasons is that this is due to what we call the “house money effect”. More on this in the next section.
Step 2: Take a break of trade exchanges is required
This is perhaps the most overlooked step in this process.
After a great victory, most investors want to use this fresh capital for their work. So instead of spending some free time, they get back into another business. The common reason for this behaviour is that the investor now uses “money for the house”.
The effect of household money is the tendency of an entrepreneur to take more and more risks when using commercial profits. Let’s say for a moment you have an account worth $10,000. You just left the business and have reached 10% or $1000 profit. This way your new balance is $11,000.
The household money effect means that you now tend to take more risks.
What’s wrong with you?
From your point of view, you just found $1000, and since you won a few minutes ago, you still feel like a capital at your disposal. You said otherwise, you haven’t accepted $1,000 into your new account.
If you’ve ever been in such a situation, I bet you know what will happen next. You’ll most likely immediately start a new transaction to see that it’s going in the wrong direction. Even if you win the next two consecutive trades, the inevitable loss of a position that destroys all the last gains is just around the corner.
How can trade distortion help consolidate these profits?
Simply put, a pause will calm emotions.
We are all human beings. No investor is free of emotions. In fact, it is more important to listen to emotions during trading than to suppress them.
Pause, you have time to collect your thoughts and process all the remaining emotions with a big profit. It depends on you how much time you have to take a break: it can be as short as a day or as long as one or even two weeks.
It is not always easy to take breaks. As traders, we believe that it is our job to negotiate. However, anyone can make an exchange. There is no talent in that.
So we can say that the role of a trader is not only to trade, but also to know when not to trade. That’s what will separate you from the herd.
Step 3: Begin with half amount
You’ve now updated your data records and taken a break from working. Once you’re ready, it’s time to get back to work.
If there are persistent emotions since your last victory, you prefer that they affect a smaller position, don’t you?
But I have to be honest. It’s not something I’ve always practiced. In fact, it’s quite rare for you to take half-sized positions after a big win. But years ago this technique was incredibly useful. It’s also much more useful if you don’t take a break from racing, as I discussed in step two. Although this step is optional, you should seriously consider reducing the size of your position after a remarkable win. This is especially true if you are still struggling to control your emotions.
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