The Professional Forex Trading Course – Lesson 8 - Psychology - Part 2

5.Do not predict the future

• It is impossible to predict the future -> driven by crowd psychology

• Avoid listening to experts who give predictions of the future or to predict yourself

• Trade based on the current trend or reversal in trend

• Predicting the future clouds our judgement and makes us less willing to take losses (ego)

6.Risk Management

• There is no trade that is guaranteed a win. Always risk a small percentage of your capital (e.g 1-3%) and enter high probability trades where your profit target and stop loss is pre-set.

7.High level of CONFIDENCE

• Confidence to follow your trading strategy through the wins and losses

• Confidence does not come from the outcome of any particular trade

• Confidence comes form knowing that your trading plan / strategy has a positive expectancy (edge)

WHAT IS GOOD TRADES AND BAD TRADES

• A good trade - followed the rules of your pre-defined trading strategy.

• A bad trade is a trade - 'broke' your own rules.

• A good trades can be a wining trade or a losing trade.
  Executing good trades assumes long term success and repeatable long term profitability.

• A bad trade can turn out to be a winning trade. While it may 'feel good' in short term, it reinforces bad trading habits in the long term and may lead to poor performance in the long run.

MANAGING YOUR EMOTIONS

• When trading, you will be facing a whole host of emotions that is tied to money at stake in your account - greed, fear, doubt, hope, excitement etc....

• To be a winning trader learn to think and act contrary to our natural instincts. Many of our emotional patterns make us lose money. When we are conscious of these patterns, we can overcome them.

• It is advisable to trade at a level of capital and risk where a few losing trades does not hurt your emotionally. This level depends on your individual 'pain threshold'.