There is a golden rule in Forex trading and generally in the investing world which states, NEVER INVEST MONEY THAT YOU CAN’T AFFORD TO LOSE.
Ever wonder why when trading a demo account, most times, trader’s who trade with reasonable risk exposure relative to account size, always make good ROI, but when it comes into a real live account, it turns into a different scenario? It is all Psychological.
Imagine a case where you collect a loan from the bank and invest such into Forex. Of course the potentials in terms of profit are endless, you can triple that money within a day, but if you happen to make a loss of 30-40% of the account, you have already put yourself at a disadvantage, because at that stage, your mind will start playing tricks on you which might lead to a faster depletion of the account. That being said, that doesn’t mean some traders don’t actually make good returns trading with loans, but my point remains the psychological aspect. Only those who have mastered their emotions are usually able to repay loans trading Forex.
Once you don’t have emotional control of your trading, your account is just a ticking timebomb waiting to be blown. You will even experience cases of having very solid set-ups, but maybe due to impatience or greed, you jumped into the trade early on or with substantial lot size and next thing you notice, your trades are in losses, you begin to doubt yourself, and maybe close those trades in losses. After which, a few days or hours later, the market starts moving in the direction which your set-up speculated. At this point in time, once you notice this, you are literally a slave to the market because you might be tempted to jump in for REVENGE TRADING. The rest is history as they say.
Your first goal in Forex should always be to avoid big losses, big losses will only happen when either greed or over-confidence comes into play. Don’t be greedy and always understand that the market is King, you don’t own it, you can’t control it. You only ride the wave, if you ride against the wave, it will surely be disastrous.
Always seek the advice of Seasoned Forex traders.
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