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Friday, 14 September 2018 / Published in Uncategorized

Patience and discipline, a need in forex trading

Most people lack the patience and discipline necessary to make a profit in the market. If you want to make money trading currencies, you should ask yourself some questions. Can you stay calm at all times, even when you are losing money? Can you close a losing trade, even if you think it will generate profits in the future? Don’t forget that in currency trading, you can be your best ally or your worst enemy.

Therefore, to be successful, you must have patience and discipline in Forex trading. It wouldn’t do you any good to have a good trading plan with clear rules for buying and selling currencies if you simply can’t respect and follow them at all times.

In this article, you will learn the importance of these two factors that are often overlooked by traders.

Rules of Discipline in Forex Trading

As you may already know, to trade currencies you need a solid trading plan that specifies market entry and exit points, as well as risk management and money management rules. However, the best of Forex plans would be totally useless if you don’t have enough discipline to apply it.

It can be said that there are 4 main rules about Forex discipline. Know them and apply them to your financial operations.

1 – Create a trading plan

Not only do you need the discipline to apply your trading plan, but also to create it. When developing your trading plan, you must take into account the following elements. The following points will be the cornerstones on which your success in the Forex market will be based:

  • Clearly explained signals of market entry and exit.
  • Trading frequency: 1 day, 1 week, 1 month.
  • Maximum trading limit according to your frequency.
  • Currency pairs you will use.
  • Sessions in which you will work.
  • Maximum and minimum duration of the sessions.
  • Methodology for opening and closing positions.

A solid and clear set of rules is one of the most important steps to have discipline in Forex. Without a trading plan, you would simply be drifting and most likely end up with losses.

After developing the trading plan, comes the most difficult part: its application. You will need an iron discipline to follow the rules you have created yourself.

2 – Establish and respect your stop loss

If you want to be a disciplined Forex trader, you must set stop loss on all your trades. It may seem like too much work, but it is the only thing that will protect your capital from unexpected events and undesirable losses.

A common mistake of many traders is not respecting their stop loss. There are many people who set their stop loss according to their trading plan, but at some point, they get carried away by their emotions and modify them, or simply eliminate them. Keep in mind that stop-loss orders are as effective as the discipline you apply. These orders would be useless if you change or close them before the market does.

If you have a loss-making trade and according to your analysis, you don’t expect it to generate a profit at any time, you can close it before it reaches the stop loss. In fact, you would be limiting your losses while leaving the stop-loss intact.

It is worth mentioning that this rule does not apply to take profit. When you are just learning to trade Forex, it is a good idea to set take profit on all the positions you open. However, when you gain experience, you can modify, change or move the take profit as you see fit. Even though take-profits are more flexible than stop-losses, you have to determine a profit taking level in your trading plan.

3 – Set a trading schedule

schedule

Another important element of patience and discipline in Forex trading is the trading hours in the market. In your trading plan, you must determine the times you will work based on your currency pairs and trading sessions around the world. A common mistake of many beginners is to trade outside of their predetermined trading sessions, so they may suffer the effects of a news item or an economic event of which they had no knowledge.

According to this rule, if you decide to trade in the Asian session, you should limit yourself to that session only. You may be tempted to open trades in the European session, but there may be a news story that affects the markets in that geographical area and you end up losing money because of your greed.

4 – Establish a maximum limit of operations

Another important aspect of Forex trading discipline is the maximum number of trades you can make in a given trading session. It’s worth mentioning that your sessions depend on your personality and should be embodied in your trading plan. For example, if you are a short-term trader, your sessions will most likely be 1-day sessions. On the other hand, if you are a positional trader, you will work on sessions of 1 week or more.

 

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Tagged under: discipline, Forex, patience

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