In foreign exchange trading, maintaining the correct mindset is crucial for investors. In over 80% of failed trades, the incorrect mindset is the main cause. It can be said that all efforts made in trading ultimately require a good mindset to implement, and whether to stop loss in time and whether to let profits grow fully depend 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 an old hand in the forex market, today I will talk to everyone about how to control your mindset and increase profitability in forex trading.
First, money management – only trade with what you can afford to lose. Good money management is the foundation for maintaining stability and a trading mindset. Investors with large positions are like pedestrians carrying heavy loads, any slight obstacle on the road can make them fall, and the fundamental reason is that their positions have exceeded their ability to bear and have become burdens. The desire for profit has made it difficult for them to make correct judgments, and they have become deeply mired in the quicksand of profits.
Under normal circumstances, only trade with what you can afford to lose. Your losses should be within your ability to bear. Therefore, the scale of capital utilization can be calculated based on your maximum stop-loss amount, not on projected profits. In the forex market, there are two groups of end customers: retail customers and clients with larger capital. Perhaps many people have the same idea that large clients must make a lot of money, and small clients must lose money. But in reality, this is not the case. Large clients just have stronger trading abilities, and their capital does not pose any threat to small clients. In the forex market, everyone is equal, and there are opportunities for profit and risks of loss for everyone.
The scale of capital utilization can also be combined with your trading ability. Strong trading abilities can use a larger proportion of capital, otherwise you may think your profits are too small and have a negative mindset. On the other hand, investors with poor trading abilities should be more cautious, otherwise your losses may exceed your imagination and ability to bear, causing you to lose control of your mindset.
The trend in the forex market is simply up and down, big gains and big losses, all depending on the position size and risk control in operations. If you do not understand money management, even if you are given 10 million US dollars today, you could end up losing it all the next day, and even lose an additional 10 million.
Second, understanding losses correctly – it is just the normal cost of finding profitable opportunities. Profits and losses are like the left and right feet of a person, and successful profits are made up of both. Losses are a normal phenomenon in trading and will inevitably occur. Investors who cannot understand losses correctly can never overcome their fear of market uncertainty, and are always afraid of making mistakes. This fear of making mistakes will lead to a bad mindset, and you will always be hesitant in entering and exiting trades, and will not be able to execute trading plans effectively. Understanding losses correctly, losses are just the cost of finding profitable opportunities, and nothing more. Do not think of losses as a wrong trading behavior, and require yourself to accurately predict the market, which is simply impossible to do. Only by treating losses as the cost of finding profitable opportunities can you not fear losses and maintain a stable trading mindset in the face of market uncertainty.
Third, focus on stop-loss and 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 in our hearts, and our mindset fluctuates with price movements. We always hope for prices to rise when buying and fall when selling, and this eagerness for profit can make your mindset uneasy. The market will never move according to your mood!
In trading, profits will not listen to 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 you are dealing with things that you cannot control or grasp, and your mindset will be as volatile as the candlestick chart, dragging you down. 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 just hold on and do not need to pay too much attention to specific fluctuations. Stop-loss is relatively static, and its controllable nature can help us maintain a good mindset.
Focusing on stop-loss without considering profits is not about not pursuing profits, but it is actually 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 patience and holding positions after making the right decisions, and not from deliberately pursuing and frequent trading. This is the source of profits. If risk management is good, profits will naturally come.
Maintaining a good trading mindset is a systematic approach. The methods mentioned above apply whether you are trading forex on the 4E platform, or trading in US stocks, cryptocurrencies, or commodities. In summary: first, control losses through money management; second, understand losses correctly and accept them calmly; finally, focus on stop-loss without considering profits and apply it to specific trades.
