There’s an old saying in the world of Forex that states that if you want to be a gambler, then you should head on down to the casino! Whilst it is true that there is a definite element of risk involved in FX trading, whether it be online or in the city itself, it is fair to say that the majority of those risk elements are pretty much calculated. The name of the game is discipline and a trader who doesn’t have this attribute is not likely to succeed.
So what exactly is the difference between a disciplined and an undisciplined trader?
Trading can be an emotive business and when you are in a trade it is very easy to get caught up in the emotions of it all. As a result a skilled trader has the discipline to be able to stick rigidly to their trading plan no matter what emotions they are feeling. An undisciplined trader on the other hand is likely to make erratic decisions based on the euphoria of the situation that they find themselves in. This is when they stop thinking with a business brain and the gambling instinct comes in. Often a gambler gets rewarded with a string of winning bets and rather than call it a day when they are ahead, they are looking for that one last ‘big one’ that will make it all worth while. Inevitably that’s when it all goes horribly wrong and instead, they end up losing money. This is in light of the fact that they could have had ample opportunity to walk away with a clear profit. Similarly a trader who lets emotion rule their thinking, will do the same. This is why discipline is so important.
Other examples of an undisciplined approach are first of all, not placing a stop loss order right away after entering a position. Some traders forget to do this and it can see their entire accounts wiped out, if there happens to be a particularly big spike.
In addition entering into a new trade without first doing a risk assessment is often fatal. With some leverage ratios sitting at 500:1 a large sum of money can disappear with the slightest wrong movement of the market, so taking the time to do an assessment is vital.
If you are in the CFD market you need the discipline to be able to not jump on the first broker that you come across. Instead it is imperative that you find the right platform at the right CFD provider for you to trade successfully.
They say that fortune favours the brave, and whilst this is true, it is worth remembering that with bravado has to come an element of discipline and logical thinking.
Image by Håkan Dahlström