Forex Trading and Discipline

When i first started out forex trading years ago, i remember someone on forexfactory.com mentioning an important piece of advice about gearing and leverage. He said if your trade is geared at a point that it actually keeps you up at night, its probably too high.

Like a total noob, i ignored that precious bit of information and was risking 10% of my equity on every trade minus the margin requirements. It was a strategy based on only two things, price action and fibonacci confluence on the Gbp/Jpy. I only closed the trade when i made 3 times or more the amount i risked. I was so sure that my little forex system was going to work that i was willing to to bet i could dodge 10 ten bullets in a row.

And for a while, i did. I managed to triple my equity in a month. Feeling good about myself, i thought, this is it.

And as sure as the sun will rise, i ran into trouble. I was on my 6th loss in a row and my mind started unraveling. Whatever discipline sustained me during this period was in tatters.

I broke my rules and started making all kinds of bad trades in an attempt to gain back lost equity. And thats all she wrote. In 3 days, i blew my account.

My trading system wasn't entirely at fault. I was risking way to much per trade and 10 chances are just way too risky. I calculated what would've happened if i stuck to the rules and it turned out the 8th trade would've been successful and i would've covered back all my losses and then some.

But at some point, i would've lost 10 in a row, i'm sure of this. In the end it was my discipline that let me down. An immensely successful trader later told me something that i will always remember.

He said it doesn't take someone with great intelligence to make in the business. It just takes someone willing to suck it up and stick to the gameplan when things aren't exactly going well. This is assuming money management and a winning strategy was in place of course.

And he was right. You could have the best damn system on the planet but it won't mean a thing if the trader starts changing the rules when things are looking bad.

Being guilty of this, i can attest to the emotional turmoil a trader goes through when things suddenly take a dive for the worst. You feel on top of the world one week and worthless the next. So go around this problem i lowered the amount i risked to 5% and stuck to the gameplan come rain or shine. I wasn't always on edge and things were far more relaxed for me.