2Bull Forex Blog

Most forex traders simply never make big returns because they cannot accept them. This may sound paradoxical as you would think most traders would want this and yes they do - but a psychological problem stops them from making the returns they deserve.

Traders have more problems accepting profits than taking losses.

Taking a loss is easy you place your stop and your taken out or not with a profit you don’t have such clear cut levels to work with - in fact you have no levels at all as the trade could produce a minor profit of a few hundred dollars or a huge profit of $5,000, $10, $20,000 or more but:

When do you take profits?

This is the problem for most traders.

The dilemma is most traders have problems staying with a long term trend, as open equity swings eat into their open profit.

Here is a typical example of what happens.

When a trader gets a profit he gets excited, the bigger the profit becomes the more excited he gets and the more tempted he is to take it. All the time as the trend is moving volatility causes retracements and losses in open profit.

As the profit gets bigger and the swings against him more violent the more nervous he gets and in the end he moves his stop up or snatches the profit and banks it.

He then watches as the trend continues the way he thought and make a huge profit while he only has a minor profit despite getting the trend right.

So how do you cope psychologically with the above?

Here are some guidelines that will help you milk and maximize your profits from major trends.

1. Have Courage

You’re after a big profit, so you know that if you believe the trade has further to go you need to accept short term price swings against you. Short term dips in equity, are a by product of making huge gains.

2. Risk = Reward

Do NOT Move your stop to quickly leave it in its original position and trail it up slowly, a big trend will sometimes show huge volatility as it develops and this means not getting clipped out early. Traders try so hard to avoid risk they actually create it by getting clipped out by putting their stop to close.

3. Trail Slowly

If you want to make money from the big trends you are going to have to trail your stop slowly and this means that at the end of the trend, you are going to give a big chunk back at the turn - this is unavoidable with long term trend following so get used top it. Comfort yourself with the knowledge that if you caught just 50% of every major trend you would be very rich.

The KEY

Is to have rock solid confidence in your forex trading strategy and accept that you will give back profit and lose open equity but acceptance of the above will make you a lot of money.

A lot of traders think that they actually don’t deserve big gains and they should take what they can get but if you have the courage and conviction to hold a big trend you deserve every cent of it - because most traders are simply incapable of doing it.

Accepting big profits is not easy psychologically - but get the right mindset and a solid system and you could be catching the big trends that yield thousands or tens of thousands in profits, so get ready to accept them when they come your way!

Many people try and base their forex trading strategy on predicting where forex prices will go but this is one of the biggest mistakes you can make in forex trading. You can win and enjoy currency trading success but you must not try and predict for the following reason.

Predicting the future is impossible and so is predicting forex prices and where they will go. Why? Because prediction is another word for hoping and guessing and you wont make money doing that in life - or with your forex trading system.

TRADE THE REALITY

The way to trade forex markets successfully is to trade the reality of price change and execute your trading signal in line with it an example will make this clearer.

Traders will often look at an area of support and want they want to buy low and get their marketing timing right at the bottom. As prices approach support they buy and hope and many occasions’ prices keep going and go through support and hit their stop.

You don’t know if support is going to hold so don’t try and predict!

The best way to trade is to wait for support to hold and turn away from the level i.e it’s been tested and has held.

How do you do this?

You need proof and the best way to do this is to look at momentum and use some momentum oscillators to indicate a trend change.

Good ones to use are:

The stochastic RSI, ADX, MACD etc

We dot have time to cover these indicators in detail here, ( simply look up our other articles) they will alert you to potential trend changes and let you enter the market when the odds are in your favour.

EXACT MARKET TIMING IS NOT POSSIBLE

You may say I Will miss the exact turn and yes you will but you couldn’t predict that anyway so there is no point in trying. If you caught just 50% of every major move you would make a lot of money.

What you are doing is trading the reality and what you see on a forex chart and that’s the way to get the odds in your favour.

TRADE THE BREAKOUT

If you want to know the best way of trading try trading breakouts.

It’s a fact that most major moves start from new market highs NOT market lows and buying or selling new highs or lows will enable you to catch every trend.

Most traders want to get into these moves but don’t, as there waiting for a pullback and a better price but it’s a fact most of these major moves don’t pullback - they accelerate away from the breakout.

If you learn to trade these moves, you’re not predicting your trading the reality of a breakout and will be in on all major trends.

A MAJOR MISTAKE

Most traders get so obsessed with getting perfect market timing that they trade low odds set ups - They think buying just above support is low risk way of trading but they don’t have the odds in their favour and lose. It’s the same with breakouts - they think they have missed a move, wait for a pullback and never get in.

If they would have traded the reality of the break the odds would be on their side.

TRADE THE ODDS AND WIN

Any successful forex trading strategy should be based around trading the odds and that’s why prediction is doomed to failure - it looks low risk on the face of it but is anything but.

If you trade the reality and confirm your moves with your forex trading strategy, your chances of success are greatly enhanced and you can make a lot of money. Try and predict and your predictions will be as accurate as your horoscope and you will join the 95% of losing traders.