Margin call: When your trading account does not have enough funds to sustain open losing trades. The broker will then close all your positions automatically one by one until the account shuts down completely. You could have an account with a $5 000 balance but still end up with an account with zero balance in an instant. It happened to me, you can read all about it Here.
Forex trading can deceptively appear as the easiest thing ever whereby one only needs a cellphone and technical indicators to confirm some lines and that’s it. Because of that notion, most people are venturing into Forex with high expectations to profit from it but not enough information of what is really needed from them. One has to be a realist and know their abilities and limitations when it comes to Forex. Fortunately though, it is a skill that anyone can learn, as long as there’s willingness.
One of the most painful things a trader can experience is margin call. Majority of Forex traders have had this unpleasant experience, yours truly included. That experience does not only leave you shocked but extremely ashamed and embarrassed. Below are the 3 ways to avoid margin call.
1. Mind Your Margins
Having a live trading account with no clue of what a margin is, was my biggest downfall. Knowing all the other details on my platform, like the balance (which is really not that important now that I am well-informed) neglecting what I now think is the most important part, your margin, free margin & margin level. You don’t want to deplete your free margin because that’s what gets your account to margin call. Know what gets allocated to each trade. That is golden information that you need to understand the most.
2. Avoid Bigger Lot Size
There is absolutely nothing wrong with trading a bigger lot size as long as your account can handle it. In fact, in Forex trading, size does matter. A bigger lot size allows you to make bigger profits (and bigger everything else such as losses, which is something that can be controlled with the right coaching and mindset)
Knowing whether your account can handle it or not, lies in the margin for each lot size that you trade. This is the part that I emphasise the most in my private coaching, as I believe it forms a bigger part of money management. I also try by all means to simplify this in a way that makes it easier for my mentees to understand it like a business cost without bombarding them with lot size calculators and a whole lot of complicated systems. I am a simple girl who believes in simplicity.
3. Avoid multiple trades
Because most people do not have a clue of what really causes margin call ( I think I have tried to explain that and I hope you now have a slight idea) they usually just open as many trades as possible hoping to maximise the chances of making more profits. Opening more trades simply means that you’ll use more margin and increase the chances of depleting your free margin which will eventually lead to margin call, should those trades go to bigger losses.
No matter how good your trading strategy is, if your money is not well managed, you are playing a losing game. The last point that I want to get across is that the internet is your main tool in Forex trading. You cannot really do much without good connection. The markets do not care if your internet is slow. If you have live trades, be sure you have good internet connection especially if you are a day trader. Thank you for stopping by. I hope you find this post valuable. If you do, kindly share with your peers so it can reach as many people as possible who are looking for practical Forex tips.
Bank Of Japan (BOJ) will issue their monetary policy statement on Wednesday. U.S Retail Sales stats are expected to rise to 7.4% versus -16.4% expected. Fed Chair Jerome Powell is also due to testify on the Semiannual Monetary Policy Report before the Senate Banking Committee, in Washington DC. On Thursday, Swiss National Bank and Bank Of England (BOE) will decide on their Interest Rates and issue their Monetary Policy statements. Below is the weekly economic calendar.
I believe as people we are different, we have different ways of doing things. Our personalities play a big role in the type of businesses or careers that we end up choosing . I am fully aware that as traders, we are all different in our personalities and needs, therefore we ought to have or prefer different styles of trading.
Questions become answers
The simplest way to find out the type of a trader that you are, is to ask yourself some questions such as, are you impulsive or nervous, or are you a calm person in general, do you get anxious when things don’t go your way? These kind of questions can actually give you an idea of what style you should be adopting when it comes to Forex trading. I have found my own and I have been sticking to it for years. I had to unlearn some personality traits to make it work. That can also be done.
Identify yourself
Below I will list a few Forex personalities that I think you can be able to identify your own style and be able to choose the trading style that can best suit you, your personality and your lifestyle. Understanding your own needs is key to identifying your preferred method. Some of the personality traits can be unlearned as long as you are allowing yourself to unlearn them. A good mentor/coach is able to assist with such behavioural issues, because some of them can be changed by adopting new habits.
Minimalist
Simplicity and effectiveness is what this type of trader looks for. Complicated systems confuse this type. They are just cool with a simple yet effective system, steadiness is also important to this type, BUT unfortunately the markets aren’t as straight forward. Some reading will surely be required. This is the fact that we cannot dismiss. Looking at the current markets conditions, one cannot just rely on a “pluck & go” system.
Anxious
This type of person is nervous by nature, this trader becomes so nervous to handle multiple open positions, has a low risk tolerance and does not feel comfortable taking long term trades. If this type happens to enter a long term trade, they will have sleepless nights thinking of what might happen in the markets.. So in short, this trader is best suited for small volumes, and should be staying away from systems that rely heavily on leverage, because all this can cause negative emotions. short term trades is best suited for this type.
Autonomous
This type prefers to have a very little contact with the system and isn’t really a fan of computers. They prefer a system that is able to run on its own. I think this type can do well on autopilot trading or just copying other traders because they will not have to worry about which trades to take and when and why. If you are this type, I suggest that you start some learning. I was once this type and that also led me to copying other traders and later sourced out signals. I can’t say much about how it all ended, you can find out from this post HERE. I did pen it down. This type is also likely to just want to trust other people to trade for them, which is never a great idea in most cases. I believe that there is no one who can take care of your money better than you can.
Complex
This type of trader is up for variety, not only looking at trading currencies but CFD’s as well , like Gold spot, Dow Jones, FTSE 100, Dax, Nasdaq, BrntCrude Oil and many more. This type is the one that is “heads up” with what is happening as far as economic events, geopolitical, Central Banks and their Interest Rates and monetary statements are concerned. They are in the know when it comes to the fundamental reasons why the markets move. Any system that does not including reading and understanding the reasons why the markets move, will probably frustrate this type and it won’t make sense. I am definitely this type and I love being this type. It has saved me from from a lot.
Aggressive
This is the type of trader who prefers high frequency trading (HFT), and the risk appetite for this type is quite high. This type looks for higher gains due to an increased risk. Slow trading systems are too ”tame” for this type. They want to be there, hands on and prefer to do things on their own. This type is the one that sometimes fails to see the thin line between trading and gambling, they can easily gamble because trading high volumes is not an issue for these ones. Their eyes are only set on profits, driven by greed and the need to make it big, forgetting that what they can make reflects what can be lost as well.
Now that you can at least identify yourself and you can see which category best describes you, you can choose wisely and act rationally when taking trades instead of acting emotional. In closing, respect the market and it will return the favour. You may love to read this post about Forex trader Vs Forex gambler. That should also help you to identify your personality traits. Thank you for stopping. To help spread the tips, kindly share this post. If you would like to be notified whenever I publish a new post, you can subscribe to this blog. Look for the subscribe button on the sidebar, enter your email address. An email will be sent to your email address (it may be in the spam/junk folder) click on the link to confirm subscription. You can also download the App on Google Playstore for a quick read and weekly tips which are only posted on the App.
We are kicking off our week with a speech from the European Central Bank (ECB) President Lagarde. She is due to testify at a virtual hearing before the European Parliament Economic and Monetary Affairs Committee, via satellite.
On Wednesday, Federal Reserve Bank (FED) is expected to maintain their Interest Rates at a current rate of <0.25%, followed by FOMC press conference. Below is the weekly economic calendar.
There’s a thin line between trading and just gambling
The statement above can be very true for many people. It was also very true for me too for so many years. It is very easy to adopt a gambler’s mentality when trading the financial markets, especially when you are expecting trading to be exciting and you are viewing it as some cash slot machine. How you view your trading account makes all the difference and has an impact in your performance. There are a number of contributing factors which may lead a Forex trader into becoming just one more gambler without even being aware. On this post, I want to focus on this one big factor listed below.
Trading psychology
From the day a Forex trader decides to go from a demo to a live account, things change in so many ways. The trades that they do become emotion based instead of logic based. They become indecisive about so many things, like when to take profits, or when to cut the losses and whether to enter the market or not. If you start to feel like that, you have just discovered the effects of trading psychology. It is just a phase that is likely to pass if you really want it to pass. What you do after that, will determine whether you’ll succeed or you’ll become a gambler.
How does this affect your trading?
It actually clouds your judgement. There are two most important emotions that I am sure every trader has experienced in their trading career, these two are:
Fear
Greed
Fear
Fear can either cause you not to place a trade even when opportunities are plenty in the market, or it can make to you to close good running trades prematurely without giving them a chance to actually be profitable, and it can also cause you to hold on to a losing trade even when there is no hope for that particular trade, for the fear of being a loser. As long as one stays in the market, this emotion will at some point affect them. We all go through it at some stage of our trading journey or career.
The good news though is that it does get better with time. Actually, it does disappear completely. Think of the first time you had to be in the car driving alone and think of yourself now when driving alone. The fear that you had is no longer there. But if you stopped driving on that first day just because you became too scared and you ended up crashing your car, you would not be as experienced today. What made you become better was the fact that you never stopped driving and you faced your fears head on. That gave you strength to keep on trying and improving. You did not park your car and go back to public transport. It’s not just driving, there are so many other situations when you had fear and today you are a master in that area of your life simply because you did not give up.
Greed
Greed is the most dangerous zone, you don’t want to find yourself here. This emotion can cause you to take trades that are too risky with an aim to score big or to make massive profits in a short space of time or it can also be just about trying to appear clever and impress the crowd or even to be seen as the best. Greed can also make you to not close winning trades hoping that you can still make more out of them.
This emotion causes a trader never to be satisfied even when they make profits. They keep on holding on to a trade until they sometimes find themselves on the wrong side of the markets. When they are finally on the wrong side of the markets, they want to trade even more by opening more trades in the opposite direction to make up for a loss.
The good news again is that this emotion can be dealt with effectively as long as you are willing to put in the work that is needed. A good mentor/ coach is able to assist with such issues. I work together with my mentees to help them deal with these issues and I have had successful cases (but only where there was willingness and commitment from a mentee) Should you need private lessons, mentorship and coaching, you can enrol here.
Just like any other business whether online or offline, risk becomes part of it, but it should be a calculated risk because if it is not, it can eventually lead to the business closure. In closing, we can all be profitable traders as long as we understand that we never lose but learn, and we focus more on being consistent and getting it right because by getting it right, the profits start pouring eventually. Thank you for stopping by. If you find value in this post, kindly share with your peers and subscribe for weekly publications. You can also download the App on Google Playstore for a quick read and weekly tips which are only posted on the App.
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