In foreign exchange trading, maintaining the correct mindset is crucial for investors. It is said that in over 80% of all failed trades, the incorrect mindset is the cause. All efforts made in trading ultimately require a good mindset to implement, and whether you can stop loss in time and let profits grow fully depends on mindset! The correct mindset will produce the correct results.
Recently, many friends have been trading forex on the 4E platform and often ask me how to control their trading mindset. As a veteran in the forex market, today I will talk about how to control the mindset and increase profitability in forex trading.
First, money management – only trade what you can afford to lose
Good money management is the foundation for maintaining stability and the right trading mindset. Investors with large positions are like travelers carrying heavy burdens. Even a slight obstacle on the road can cause them to fall, mainly because their positions have exceeded their capacity to bear and have become a burden. The desire for profit has made it impossible for them to evaluate themselves correctly, and they are already deeply immersed in the quagmire of profit. Under normal circumstances, only trade what you can afford to lose. Your losses should be within your capacity to bear. Therefore, the size of the funds used can be calculated based on your maximum stop loss amount, and not based on expected profits.
There are two types of client groups in the forex market: retail traders and clients with relatively large funds. Perhaps many people have the same idea – that large clients must make a lot of money, and small clients are bound to lose money. However, this is not the case. Large clients simply have stronger trading abilities, and their funds do not pose any threat to small clients. In the forex market, everyone is equal, and there are opportunities for profit as well as risks of loss.
The size of the funds used can also be combined with your trading ability. Traders with strong trading abilities can use a larger proportion of funds, while those with weaker trading abilities are better off being cautious. If you don’t understand money management, even if you were given $10 million today, you could be back to square one tomorrow, and you might even lose another $10 million.
Second, understanding losses – it is just the normal cost of seeking profit opportunities
Profit and loss are like the left and right feet of a person. Successful profits are made up of both winning and losing. Losses are a normal occurrence in trading and will inevitably happen. Investors who cannot understand losses correctly will never be able to overcome the fear of market uncertainty, and will always be afraid of making mistakes. This fear will lead to an unstable mindset, loss of confidence in trading, and hesitation in entering and exiting the market. Even with good money management, they will not be able to execute their trading plans effectively due to the fear of making mistakes, thus missing out on trading opportunities.
Understanding losses correctly means seeing losses as the necessary cost of seeking profit opportunities. It is just the normal cost of finding profit opportunities. Don’t think of losses as a wrong trading behavior, and don’t demand accurate market predictions from yourself, because that is simply not possible. Only by treating losses as the cost of seeking profit opportunities can you not fear losses, and only by being able to accept losses calmly can your trading mindset remain stable.
Third, focus on stop loss, forget about profits
After achieving the first two points, your trading mindset will still be affected by the desire for profit. The desire for profit is always surging within us, and our mindset fluctuates with the price movements. We always hope that the price will soar after buying, and plummet after selling. This eagerness for profit itself will lead to an unstable mindset. The market will not move according to your mood!
In trading, profits will not obey us, because the market is difficult to predict, and the only thing we can control is stop loss. Therefore, focusing on profits or market trends means dealing with things that we cannot control, and our mindset will fluctuate like the candlestick chart, dragging us down with anxiety. After entering the market, we only need to focus on stop loss. As long as the price does not reach the stop loss point, we continue to hold without paying too much attention to specific fluctuations. Stop loss is relatively static, and its controllable nature allows us to maintain a good mindset.
Focusing on stop loss without considering profits does not mean not pursuing profits, but it is in fact the best way to pursue profits. There is a saying in the market: let profits take care of themselves. This is very insightful, because profits naturally come from patiently holding positions after making the right decision, and not from deliberate pursuit and frequent trading, which is the source of profits. When risk management is good, profits will naturally come.
Maintaining a good trading mindset is a systematic process, and these methods apply whether you are trading forex on the 4E platform, or trading in the US stock market, cryptocurrencies, commodities, etc. In summary: first, control losses through money management; second, understand losses correctly and accept them calmly; and finally, focus on stop loss without considering profits, and implement these principles into specific trades.
