Leave Your Emotions Out

It always seems that there are at least two sides to everything; heads and tails, right and wrong, boys and girls, the list goes on and on. For those of us that dabble in, or make it our full time profession in some type of financial market, the apex of these two sides is buying and selling. A few years ago, I was told that the purest form of buying and selling was found in currency exchange, thus began my journey of learning how to trade currency. But with any form of financial market, one key element controls how everyone trades, that is, emotion.

Different forms of trading have been around for many years, yet most individuals have no idea what real trading requires. The definition of trading is exactly how it sounds, the exchange of two different goods or services. In my world, this is some kind of financial market, whether it be stock market or the currency market. I find that trading can be a bit overwhelming for many individuals because they don’t understand it, and by my account most people don’t want to take the time to learn it because they are afraid to fail. You could say that is a legitimate fear as it is widely accepted that only 5% of people make money in trading and the other 95% lose it. My logical choice has always been to be in the 5%; especially as the market that you are in can trade up to 3 trillion dollars a day, 24 hours a day, 5 days a week, but when my emotions get involved. I can easily slide to the 95% without knowing it.

Since everyone reading this now wants to be in the 5%, we can lay down a few ground rules to get started.

  1. Learn to crawl before you drive a Ferrari. Trading is a powerful tool and when successful, you can go very fast. But you need to start slow. The main reason why most are not successful is because they jump the gun in fundamental applications in the discipline of trading. That discipline is emotion. By controlling your emotion, you can exercise patience. You don’t put someone who went to school for nursing into a role as a CEO of a multi-billion dollar corporation. In the same respects, be patient with your progress in learning how to trade.
  2. Practice. Before you start trading real money, trade fake money. This is crucial to the survival of your pocketbook. This point can also emphasize patience. Open up a demo account somewhere and practice. When you think you are ready to jump in to trading live money, DON’T, just practice some more. This might seem mundane and a no-brainer for some, but I can almost assure you that you will start trading live money before you are ready.
  3. When you trade, just trade. Don’t come home from work after a bad day and start trading. If you do, someone will take your money because they are more relaxed and understand the game more. If you have the mentality that you are going to make up the money you just lost by doubling down or increasing your risk, give me a call because you might as well give your money to a stranger, and since I warned you, I believe I am entitled to it.

The above mentioned are some guidelines on how to break into the world of the 5% that make money in some sort of trading. This should be your trading commitment. If you are not willing to commit to this, then you are better off not dipping your toe in the water per say. If you are able to commit to this, then welcome to the wonderful world of trading. Now is the time where we can all focus on the advantages of the markets that makes our serotonin levels skyrocket and get some of us downright giddy.

As I mentioned earlier in my article, some markets trade about 3.5 trillion dollars a day (foreign currency market). Translation- biggest market in the world by a long shot. Most larger banks trade in some type of market. The money that we lend the bank to get our 2%-5% CD’s can be used by the bank to trade in the market. But as of about ten years ago that ability has been opened up to the retail side of things, largely due to the growth and development of the internet. Customers in any trading arena can capitalize by using leverage. The highest leverage is in the currency market, leverage can be between 1:100 and 1:400. If there is anywhere else in the world where you can have $10 represent or trade like $100,000, please share it with me. Trading with this type of leverage can have its downsides, yes. However, if used correctly, leverage is a beautiful thing. If none of this gets you a little bit excited, then you might want to get yourself checked by a physician.

Metatrader 4 platform Chart

After a little bit of training, it is easy to understand how to trade. Most platforms will walk you through how to set up the platform, and the basics of how to place a trade on the platform. There are several different types of platforms available; the Metatrader 4 platform (as seen above) is the most widely used in the world of currency due to its functionality and ease of use. Each broker, whether stock, currency, commodity, etc. will have a different platform to use. Always take the time to understand how the platform works, and place practice trades if possible.

One of the most appealing features for currency traders is the ability to trade whenever you want to. Since the market is open 24 hours a day, 5 days a week, you can essentially trade any time you have spare time. There are obviously specific times when the market is slower moving than others, as with any market, but having the option to trade before one goes to work, over the noon hour, or something to do instead of watching television is a beautiful thing. Trading stock is a little more limited because the market is only open a certain amount of time per day. Either market allows individuals to get into the market part time and only trade when their time permits. Trading currency is one of the few jobs, part-time or full-time, that tolerates truly working from anywhere, anytime. Given current technology, you can trade in the car, on the subway, at the office, or in the bathtub using a mobile phone with internet access. Regardless of its convenience, one should still exercise patience and persistence, and, if you can leave your emotions at the door, you can enable yourself to be a successful trader.

Trading in the markets has a venue for everyone. If you are willing to exercise discipline and patience, and willing to learn from triumphs and failures; trading can be a very enjoyable and exciting hobby, or possibly even a full time occupation. I encourage those who are new, to step out into the unknown to give trading a try, but above all, have fun and leave your emotions at the door.

Tony Rietema is a founding partner of Holland Global Trading which includes subsidiary companies of Fedora FX (www.fedorafx.com) and Get Forex Alerts (www.getforexalerts.com). Tony has been in the investment business for over 5 years and has made buying and selling forex, stocks, and real estate his livelihood.

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