Carrying on from my last entry - as Traders, there are, I believe, 3 blocks to a Traders success.

The first one is: Over-Analysis. The old analysis paralysis syndrome.

• Do you find yourself looking at more and more charts trying to gain a better understanding?
• Do you find each of your charts is littered with dozens of indicators, moving averages and trendlines as you search for the perfect trade?
• Do you find yourself unable to pull the trigger until you have a 100% possibility of success?

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The first thing a rookie learns about leverage is: a trader cannot do without it.

It is a sort of necessary evil, a big bad wolf that keeps showing up…. The higher you set your leverage, the higher your risk - but still, unless you use it, you cannot make good profit. Tricky…

Even if everyone is talking about leverage and almost everyone believes to have understood how it works, there are still so many misconceptions about this concept that cause traders to lose money.

We will start by analyzing together two of the most common misconceptions about leverage, and point out how a half-truth can turn into a big fat lie, when our emotions and greed decide to take over. (more…)

Following yesterday’s comments (on which are the best currencies to trade), I shall now try to suggest a few brief solutions for those traders who keep changing the pairs they trade, hoping this will result in better performance.

As I said before, good trading has little to do with the pair(s) we choose to trade. If we have a clear trading strategy and the ability to respect our trading plan, then we already have a first possible answer to our question: the best pairs to trade are those which we already tested, and which - as a result of our testing - seem to yield better results in the long run. If we developed a strategy, tested it for example on EUR/USD, USD/JPY and EUR/SEK and saw that USD/JPY seems to respond better and generate more profit, then we must give this pair priority, at least for as long as we follow this strategy. It is a simple obvious fact, but one that requires discipline and patience: if we decide to trade only, say, USD/JPY signals, then our trading must reflect this decision. Never go for impulses like: “come on, let’s go crazy for once, let’s trade a new pair and see what happens”. Demo accounts may be appropriate for this kind of approach, live accounts are not… Trading is not for those looking for a thrill, but for educated and organized individuals who are ready to treat it seriously.

The coherence of our strategy (based on extensive testing on several pairs) should be the most important factor when deciding which pairs to trade. However, if we are to choose between the vast array of currency pairs available and have not developed a trading plan just yet, there are still some small but very important points we should take into account. Minor and simplistic as they may seem, in the long run they can seriously tip the scales in our favor. (more…)

Fear is defined as ‘the anticipation of pain’, which is very often linked to a past outcome. As traders it can be the defining element between success and failure for an individual. We can have the most elegant and sophisticated of trading strategies but if we’re paralyzed by fear then we will amount to nothing!

• How many times have you ’sat on your hands’ and avoided pulling the trigger?
• How many times have you seen a fantastic set-up in the market only to ignore the opportunity because it wasn’t perfect?
• How many times have you convinced yourself that when you’re a better/more confident/ better capitalized trader then you’ll take those trades?

To be continued…