Most forex traders simply never make big returns because they cannot accept them. This may sound paradoxical as you would think most traders would want this and yes they do – but a psychological problem stops them from making the returns they deserve.
Traders have more problems accepting profits than taking losses.
Taking a loss is easy you place your stop and your taken out or not with a profit you don’t have such clear cut levels to work with – in fact you have no levels at all as the trade could produce a minor profit of a few hundred dollars or a huge profit of $5,000, $10, $20,000 or more but:
When do you take profits?
This is the problem for most traders.
The dilemma is most traders have problems staying with a long term trend, as open equity swings eat into their open profit.
Here is a typical example of what happens.
When a trader gets a profit he gets excited, the bigger the profit becomes the more excited he gets and the more tempted he is to take it. All the time as the trend is moving volatility causes retracements and losses in open profit.
As the profit gets bigger and the swings against him more violent the more nervous he gets and in the end he moves his stop up or snatches the profit and banks it.
He then watches as the trend continues the way he thought and make a huge profit while he only has a minor profit despite getting the trend right.
So how do you cope psychologically with the above?
Here are some guidelines that will help you milk and maximize your profits from major trends.
1.Have Courage
You’re after a big profit, so you know that if you believe the trade has further to go you need to accept short term price swings against you. Short term dips in equity, are a by product of making huge gains.
2.Risk = Reward
Do NOT Move your stop to quickly leave it in its original position and trail it up slowly, a big trend will sometimes show huge volatility as it develops and this means not getting clipped out early. Traders try so hard to avoid risk they actually create it by getting clipped out by putting their stop to close.
3.Trail Slowly
If you want to make money from the big trends you are going to have to trail your stop slowly and this means that at the end of the trend, you are going to give a big chunk back at the turn – this is unavoidable with long term trend following so get used top it. Comfort yourself with the knowledge that if you caught just 50% of every major trend you would be very rich.
The KEY
Is to have rock solid confidence in your forex trading strategy and accept that you will give back profit and lose open equity but acceptance of the above will make you a lot of money.
A lot of traders think that they actually don’t deserve big gains and they should take what they can get but if you have the courage and conviction to hold a big trend you deserve every cent of it – because most traders are simply incapable of doing it.
Accepting big profits is not easy psychologically – but get the right mindset and a solid system and you could be catching the big trends that yield thousands or tens of thousands in profits, so get ready to accept them when they come your way!
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