This week on Tuesday, Reserve bank of Australia(RBA) is expected to maintain their Interest Rates at the current rate of 0.25%. On Wednesday Bank of Canada (BOC) is also deciding on their Interest Rates. They are expected to maintain their Interest Rates at the current rate of 0.25%. Both Central banks will also issue their Monetary policy statement. European Central Bank is also on the maintaining path. They are expected to maintain their Interest rates at the current rate of 0.00%.
To close our week, United States will release their 6th job numbers stats (the Non Farm Payrolls) on Friday. I have published Non Farm Payrolls(NFP) annual schedule. You can download it HERE. If you would like to receive any new publication whenever I publish one, kindly subscribe to this blog. Look for a subscribe button on the sidebar and enter your email address. Make sure that you check your email for a confirmation link which could be in spam/ folder. Clink on the link on email and confirm subscription.
Draw-down: A decline in an investment or fund. Let’s assume you start your account with $1000 and you lose about $100, that is a 10% draw-down (which is acceptable in my books, because you can recover it back). Being disciplined is one of the major challenges that many traders are faced with, but it is a skill that can be learned, but only if you are willing to learn.
Self control is something that should come from within, no amount of motivation or support can work if you are not doing your part. Traders need to understand that no matter how great the strategy or trading method is, if the emotions are not well checked, you are heading for trouble and a disaster is imminent. This is a very sensitive subject and not many traders are keen to talk about it.
It happens a lot, especially when you are still starting out, even seasoned traders do experience a draw-down. It is something normal, but it becomes abnormal when you cannot even figure out why you got your account into such a state in the first place. It then becomes very difficult to improve, especially if you do not keep a trading journal or even have a trading plan.
You had a very bad week and your confidence went out of the window. You feel so down and stupid, so ashamed and embarrassed, like you are such a loser and you think you need a break, maybe you do or maybe you don’t. There is absolutely nothing wrong with taking a break, but what exactly does taking a break mean? Does it mean walking away from your account and neglecting it without trying to figure out what you could be doing wrong or what could be the biggest contributor to your draw-down?
Trading is more about you than about a trading strategy
Most of the time, failing has nothing to do with your strategy or method of trading that you use, but a lot more to do with your emotions and your behaviour. A group of traders who are trading the exact same strategy can have different outcomes. I see this even with my own mentees, the outcomes aren’t the same. When you have lost more than 50% of your account’s equity, it is definitely time for you to take that break, evaluate yourself and work on your issues (if you have a coach, a good coach can help you with tools to sort out your issues but you have to be willing to do the work needed)
The problem is when you do not have a trading journal and you do not record your daily trades and the reasons behind them, it is almost impossible to recover and you won’t know what you did wrong, and therefore you won’t know what to fix. So while you are still reading here, check if your trading journal is in order (that’s if you have one), if you don’t have one, get it today and start writing In it from Monday and while you are still at it, also draft your own trading plan. If all these are really confusing for you, it is time you find yourself a coach (I can be one)
When is it a good break?
A good break means that you are going back to your demo account, you are decreasing the amount of money you are trading with by asking your broker to do a “withdrawal” for you on your demo to accommodate your new smaller equity on your live account. Get your trading journal in order, start writing In it right away. Do that for about a week and at the end of the first week, go back to review your daily trading activities and see if there are any mistakes you can pick up. Chances are, you will pick up some mistakes because you’ll be doing it with a sober mind, minus the emotions you get when you are trading live. Start fixing your mistakes on your demo account and see if you can improve or do better, chances are, you will improve and become a better trader. Gradually move back to your live account to get your emotions in check again. Start with a very small volume until you feel confident again.
When is it a bad break?
A bad break is when you walk away from your live account and you do not touch your demo account or even try to figure out what could have gone wrong and why you are in that situation in the first place. When you take a break, it is a bad break if you do nothing during that break. If you do that, chances are, you will go beyond a simple draw-down when you finally go back and you’ll head straight to a margin call (losing your account), because you will still come back with the same emotions and behaviour.
If you should know, a demo account is there to retest and retest. A trader is never too smart for a demo account. I used to do that all the time and it worked. That is how a trader becomes emotionally stable day by day and that is how you become rational. I hope you found this post informative. Thank you for stopping by, kindly share with your friends and if you need private coaching, you can check my course HERE.
Welcome back. I hope you are keeping safe and still holding up well under lock down circumstances. Please continue to look after yourself and your families. Wash & sanitise those hands, wear that uncomfortable mask and keep the social distancing rules, we will soon be fine. OK, today I want to share something regarding trading capital.
I always say that a person who can take care of his/her account by protecting its equity no matter how small the account is, can definitely do the same with a bigger account. I have seen this with my mentees when I coach them on smaller accounts, they develop a lot of patience which is a much needed skill in trading. A smaller account can teach you how to be more patient. It is the same patience that will carry you when you start trading a bigger account. If you start with a bigger capital before working on getting skills such as patience and being more disciplined, you are more likely to mess up and loose all the money. My favourite saying is “get a skill and get it right” then work on your capital when you’ve worked well on yourself and you’ve got it right. I’ve also published a blog post on how to grow a smaller account.
Undercapitalised myth or underdeveloped mindset?
It’s definitely a mindset issue. It might be true that with a bigger account, you can achieve more. The truth is, not everyone with a bigger account succeeds. I have seen people failing with enough trading capital and people getting it right with a smaller trading capital. What separates the two is the fact that the one with a bigger capital is likely to rely on the money and neglect all the principles and things like patience. A person who trades a bigger account as a beginner is also likely to think that the account is immune to margin call because the capital is bigger (which is definitely not true) succeeding with a bigger account requires more discipline.
If you feel like you are not yet disciplined and you are still struggling to overcome that (I’ll assume that a person who is aware of this, would want to work on it) rather start small even if you have enough money to start big, start small while you train yourself on such issues (I love coaching my mentees on such issues, having a mentor/coach to help you, makes it easier to overcome). I am sure you have heard the “if I had a bigger account I would have made it ’‘ excuse (I hear this all the time, even from my mentees) I am saying it’s an excuse because I know that succeeding in Forex trading requires a lot more than just capital.
A Perfect Example
A person who has a job would say only if they can get a promotion and earn a bit more, financial life will improve as well, but the opposite usually happens if that person has discipline issues. They start to increase spending and always running short of money, this particular person needs more discipline than more money. They aren’t undercapitalised but underdeveloped. It is the mindset and the discipline that is needed, not more money.
Now back to Forex trading, when a beginner trader wins, they feel brilliant and invincible, then start to take wild risks and trade larger volumes than what the account can handle. This type of behaviour leads to losing money. The capital is not an issue here but the behaviour is . I have come to understand that if you can handle $1000 trading account, you can also handle a $5000 account using the same mentality and discipline. You can also destroy a $5000 account as quickly as you would do with a $1000 or even $500, It is all in the mentality. If you can manage yourself, you can manage your finances.
Thank you for stopping by and reading this post. Thank you for your continuous support by sharing my content with more people who may need to improve their trading lives. For private lessons, mentorship & coaching, you can check detailed informationHERE and WhatsApp me for instant chat (see WhatsApp feature at the far bottom right of this post).
Week ahead: This week the markets are more focused on Central Banks and COVID-19. COVID-19 has been doing the most in the global economies and the Central Banks have resorted to cutting their Interest Rates. If you have no idea why would they resort to such measures, you can read my previous post.
On Monday, Federal Reserve Chair Jerome Powell will deliver a speech to discuss COVID-19 and the economic outlook in an interview conducted by CBS’ 60 Minutes. On Tuesday he will testify, along with Treasury Secretary Steven Mnuchin, on Corona virus Aid Relief, and the Economic Security Act. On Wednesday, Bank Of England Gov Bailey is due to testify along with three MPC (Monetary Policy Committee) members, on the economic impact of COVID-19 before the Treasury Select Committee, in London.
On Thursday, Reserve Bank Of Australia (RBA) Gov Lowe will participate in a panel discussion at the Financial Services Institute of Australia, in Sydney. Audience questions expected. Then on Friday, there’s European Central Bank (ECB) and Bank Of Japan (BOJ) on their Monetary Policy statements release. Below is the weekly economic calendar.