There is an old saying that goes a penny saved is a penny that is earned. This is one of the oldest sayings out there.
If you have not heard this it is basically saying that it is better to save money then to spend it immediately. This is created with the thought that saving money is a good thing. This will help you have money if you need it in the future.
There is really nothing bad to say about saving money. Saving money is very good thing.
There is another way to save money then to put it in a savings account at your local bank. Most life lessons can be learned from losing money and taking a risk with it. There is a way to gain money by taking the money that you have saved and using it to fund a Forex trading account. This is a way to make money with this trading form if you have some self discipline.
People that have followed my trading advice have picked up on the less is more idea. The less often you trade the more money you will make if you have a profitable technique.
Saving and earning money can be a bit different when it comes to Forex trading. While Forex still deals with trading there is a less obvious angle that you need to look at. You need to focus on not losing your money. This is one of the most important things when it comes to investing. You may not make a fortune right away but you need to protect the money that you have.
This may not make the most sense to you at the moment but read on and you will understand what I am talking about. You will learn how important it is to protect the money that you have to invest.
The Unconventional Approach
When you are involved in Forex trading you need to learn how to think in an unconventional manner. As humans we often think about what benefits us and not the other way around. We want to think about things that will make out life better and not worse.
For example, if I asked you to start trading in the Forex market you would be wondering how much money you are going to make. The purpose of trading is about making money but there is another approach when it comes to the Forex market. You will not respond that you are looking to trade and lose money in the process. No one wants to get into trading so they will lose money and go broke.
Some people take an offensive look at trading while others look at it from a defensive angle. There are ways to look at trading to become successful.
Both responses can be filly. Trading not to be poor is a better reason to get started then trading to become instantly wealthy. They feel they will be able to make money and secure their financial future. That is why many people even have an interest in investing money.
There is nothing wrong with wanting to find ways to increase wealth. If that is your motivation that is fine. If you sit down and expect to make millions with every Forex trade you make, you are going to fail.
There is a simple reason behind this. When you think about trading your mind will go to making money and adding additional funds to your account. We want to focus on the reward and not the risk.
While this approach is natural there are other ways to look at Forex trading. You need to be open minded when it comes to trading.
If you want to make money you need to think of what will affect your account and how much money you may lose if the market is experiencing unfavorable conditions.
When you think with a defensive mind this should help you avoid trouble. It will also help the money in your account grow. You are aware of the possible loses and you can take measures to prevent your accounts from losing money. This is one of the most important things you can do when it comes to trading.
The Truth is in the Numbers
The best way to look at possible loses is with illustrations. The chart shows the possible grains needed to offset the losses. The green line is the gains and the red line is the losses.
The show shows the amount the gains need to be to offset the losses.
According to the information on the chart if you lost 50% of your account you will need a gain of 100% in order to recover from the loss. That is hard to do even for experience Forex traders.
If you lose 80% of your account you will need to have a gain of 400% to break even.
In addition to cover you loses you need to find a way to gain money in a safe manner. Throwing your money in the market and hoping for the best will not help. It will only get you more in debt. Anyone that has tried this knows this to be true.
The numbers do not lie to you. Taking a big hit can damage your Forex trading account. Less is more when it come to Forex trading.
I am not the only one that thinks this. Bill Lipschutz has stated:
If a trader can be patient at least 50% of the time they will make a lot more money.
He is referring to making a profit by doing nothing. It may seem surprising but as a trader doing nothing can be profitable. You need to worry about protecting your investment and not just making more money. If you lose your investment it will take even more effort to recover the money you lose even before you see a profit.
The Non Visual Side
When it comes to Forex trading the non visual side can be bleak. In order to look at losing money it is important to see the numbers. The numbers will never lie or deceive you.
The real problem is that if you lose a lot of money you are going to experience emotional pain as well. Taking a loss can leave you feeling bad and may reduce any confidence that you may have had. You may even doubt your skills as a trader. You will build up your skills over time.
If you were a trader for a period of time you know that having a strong mind is important. You need to be mentally strong if you want to enjoy some success. You can be the most adventurous trader our there but if your mental game is not strong, you will not see the money that you want.
We need to protect our mental health by avoiding any unnecessary risks when it comes to trading.
You may not think this statement is too much help. Do not brush it off quickly. You need to embrace this and use it to help you become a better Forex trader.
There is no reason to take unnecessary risks. The good news is there are some things you can do to help you avoid some losses. This will help you build up your account and see a profit.
Some Simple Suggestions
You know there are losses in the Forex market and you may be wondering how you can avoid them.
There are some simple ideas that will help you avoid losses, but losses are a part of trading. There is nothing in the financial market that says you will never lose.
Losses are not always a bad thing. Some of them can be used as a learning experience. You can see this an something that will help you get better and are part of the market.
There are some easy things to do to reduce your losses:
These are some of my favorite tips
Trade on a daily basis and develop a timeframe
If you are ready to get into the action then you need a daily time frame. While the timeframe alone will not make you rich is one of the most overlooked items in trading.
Why is this so important?
Most Forex traders feel that a time frame will help them make money faster.
There is no truth behind that. There are many people that focus on larger time frame.
Daily charts will allow you to be more selective about where your money is going and you will trade less often. This in the long run will help you make money.
Many Forex traders feel they need to earn 10 pips a day each and every day. This will put you on the fast track to becoming wealthy.
While this may sound like a good idea, it does not work out.
Instead of thinking about how much you can make you should limit the number of trades you make each month, it is wiser to set limits then to set goals. If you are starting out you should not make more than 15 trades for the entire month.
If you set limits you are able to be more selective about the trades that you make. This will help you make more money. Once the trades are done for the month you cannot make any additional trades until the next month.
This is one of the most important things to learn. Instead of taking losses walk away. Take a break for at least 24 hours.
I learned this along the way. In order to reduce the loss it is best to take a short break. If you have traded for a period of time you may have experienced loss and the desire to get the money back as soon as possible.
All you need to do is walk. It is not going to be easy but this is an important thing in Forex trading.
If you do not set limits and know when to step away you may get caught up in revenge trading. You will exceed your limit. This can lead to more trouble. After experiencing a loss take a step back for a day and give your emotions some time to settle.
In many ways the power of doing nothing will allow you to be successful in Forex trading. You need to protect your trading capital and this is going to take some patient and practice. As tempting as it is to trade frequently you need to avoid this. All you need is one or two good trades a month in order to make money with Forex trading. The more you trade the more money you are going to lose.
When trading develop a daily chart, set monthly trade limits, and learn when the time is to walk away. You need to learn how to walk away after a loss as well. It does not matter how you choose to do so but the most important thing is that you need to learn how to protect your capital. This will allow you to keep your banking account in good standing. This will also help you learn how to recover if you do experience a loss.
There is a big difference between those that had success with Forex trading and those that continue to struggle. Even successful traders will experience loss. They will turn this into a learning experience so they do not make the same mistake again. Those that continue to struggle do not learn from these mistakes and will continue to make them.
Now that you have this information you should be able to get a good start at Forex trading. You need to be in control of your emotions at all times. You need to learn how to be patient even when the market is not looking to well. If you are patient and have time to wait and can control your emotions you will eventually make money with Forex trading.
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