When one mentors a group of aspiring forex traders the energy and curiosity of young and old is intoxicating and it always revs up my own enthusiasm for trading to become an even more focused trader and mentor.
At the time, I was notorious for writing strategies and then abandoning them for the next great thing. Although psychological insight is one of the most important aspects only a few traders really dedicate enough time to it. Therefore going through the archive of strategies and establish the reasons why one has abandoned an at first glance splendid strategy is a useful exercise.
Looking at old ideas with fresh eyes can be incredibly valuable. One of the most important factors in abandoning strategies was related to my contract ‘size’. In the realm of logic and setting up trading systems ‘size’ should not matter. It should simply be relative to your account. But in real life where psychology controls all, ‘size’ is everything. Regardless of your account size, it’s still easier to lose 40$ on a1000$ account then 3000$ on a 100,000$ account even though proportionally the latter is a smaller loss.
But of course, we don’t think in proportions or probabilities. We think in absolutes. So when we trade a strategy that is 80% accurate and hit 3 or 4
losses in a row we are ready to ditch it the way Weinstein dumps girlfriends… That’s why pain in trading needs to be kept to an absolute minimum and Trading Tiny is the best solution even if you had a five or six-figure account and could afford much larger positions. Trading Tiny eliminates almost all bad trading behavior
One needs to realize that by keeping your individual trade risk very small you won’t pull stops or start revenge trading or average down needlessly. Stress levels will be contained and one will be able to generate meaningful returns even on a larger account by trading a variety of strategies, diversifying the currency pair, time frame and risk parameters.
In trading as in life getting old and young together can work marvels.
Rudy De Sutter
Senior forex mentor
BSc (Engineering) (VUB-BE)
BSc (Hons) Psychology (UCT-SA)
wipe out your fear, failure is not an option
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