| For many traders, their trading psychology and | | | | Nevertheless, having a good trading plan only |
| mindset will ultimately determine the success of their | | | | comprises one part of the overall trading game. |
| trading. In fact, learning how to manage your | | | | Knowing what to do when the going gets tough will |
| emotions while trading and training your responses to | | | | eventually distinguish a successful trader from the |
| various trading situations is a very important aspect | | | | other high percentage of unsuccessful market |
| of maturing as a trader. Many rogue traders that | | | | participants. |
| caused huge bank losses failed to manage their | | | | Generally, traders will risk between 1% and 5% of |
| trading psychology well. | | | | their trading account's value on any given trade. Also, |
| The primary emotions, that tend arise when trading | | | | by always risking the same percentage, the trader's |
| includes fear, greed and hope. | | | | trade size will tend to grow along with the equity in |
| Secondary emotional responses might include anger, | | | | their account. |
| frustration and elation. No matter what emotion | | | | In order to effectively trade with stops, the trader |
| arises for you when trading, it makes sense to have | | | | would do well to examine technical indicators and |
| an objective trade plan worked out in advance that | | | | other trading signals and to place stop-loss orders |
| helps you manage them for optimal success. | | | | accordingly, thereby maintaining a more objective |
| Because of the volatility often seen in the Capital | | | | mindset when trading. |
| Market, a trader without a sound money | | | | Furthermore, trading involves making both profitable |
| management component to their trading plan could | | | | and unprofitable trades, and knowing how to manage |
| be likened to a skydiver without a parachute. In the | | | | emotions that arises from the unprofitable trades |
| event of a string of losing trades, the trader's | | | | tends to matter more. When trading profitably, the |
| account balance will drop much like the ill-fated | | | | money tends to take care of itself, but when a |
| skydiver without the benefit of a parachute to break | | | | trader encounters a series of losing trades, having an |
| the fall. | | | | objective exit strategy and knowing when not to |
| A large percentage of people that begin trading in | | | | trade could save the account from ruin. |
| the market fail mainly because of lack of discipline | | | | Basically, having an optimal trading mindset that |
| and poor money management. Without knowing how | | | | includes sound money management principles is not |
| to deal with losing trades, many novice traders start | | | | only essential for Forex traders to learn and practice, |
| "chasing money out the door" by committing a range | | | | but can benefit just about any business. In fact, even |
| of typical money management mistakes. Eventually | | | | people that do not trade at all can often profit |
| they can end up losing a lot of money, perhaps even | | | | considerably from learning how to manage their |
| their whole trading account. | | | | money better. |