FX Flight: 2 of 4 Specific Trader's Behaviors That You Have To Be Aware Of - Deep Discussion of Trading Psychology Part 3

The Perfectionist – some traders are like this. They don’t want a negative trade in their account history. I’m not saying that it is not achievable. Actually, an account history with full of green colors is possible, but you’ve got to have a very good trading plan and you’ve got to have a high level of discipline to follow the trading plan. Some traders resort to not using Stop Loss (SL) on their trades. Yes, it is possible to trade without SL but you’ve got to know what you are doing. I keep telling this many times to my Forex students that trading both with SL and without it is equally risky if you don’t know what you are doing.

Here are basics on how to use both:

(a) Trading with SL – Limit the percentage of the fund that you are willing to risk on each trade. This doesn’t mean that you are not going to be careful on your entries. You still need to figure out the best entry set-up that you can find in the chart. The SL will only try to minimize your loses in case your entry is wrong.

(b) Trading without SL – This one is very tricky. You’ve got to find first the true range of the currency pair that you are going to trade. You will use the true range of the pair in your calculation of the lotsize. In some situation this is not enough and you may still lose some fund, so some traders double the true range in their calculation or the safest ways are use the lowest lotsize possible or calculate the lotsize with a very long range that the fund can handle. If your fund can handle 5,000 Pips or more, trading without SL is like a walk in the park. You can sleep soundly at night. This is true as of this writing but may change in the future, if Forex Market reaches global daily transactions of more than US$6 Trillions. Surely, sometimes, you will experience that a trade is open for a long period of time. This is the point that trader is stressed with confused judgement and felt the need to take any action that leads to the ruin of the fund.

Note: Take note these are just the basics of doing these trading styles. You need to do more research, or join a coaching group, to know the details and advanced components of the methods.

To correct this behaviour:

(a) You have to realize that it is also a part of a traders’ life to lose some money in spite of a good trading plan especially if you are using SL. Keep this in mind on every trade that you make and prepare your trade strategy on losing an acceptable amount of money on each trade. With this in mind, you just need to have a trading plan with high probability. If your Take Profit (TP) Pips are always higher than your SL, a 50%-50% chance on your strategy is profitable. If your method has a bigger SL than TP, you’ve got to have a higher chance of profit with your strategy, bigger than 50%. A 70%-90% strategy is possible. You just to look around the internet, ebooks, webinars or seminars.

(b) If you really want to stick with no-SL method, you can still do this but you need to have a big fund. US$5,000 or more is ideal. If you have US$25,000 or more, it is better. Once you have this amount of investment, the next thing that comes in your mind is profit percentage. See how to handle this in the ebook section “The Percentage Minded”. In this no-SL method, you still need a high probability strategy because it will make your profit faster. Surely you can trade without analysis with this kind of approach because your fund can handle a reversal 5,000 Pips or more, but if you don’t analyze, the time you hit the profit will be longer therefore will delay the increase of your fund. And if you don’t analyze, 5,000 Pips reversal will be still possible to hit and eventually you will lose your big fund. If you are going to do this method, be sure that you are prepared mentally to handle reversal for a long period of time and will not intervene with the trade by trading more or cutting big loss. Some successful traders I know that use this no-SL method, they still keep an SL in mind, or they cut loss at a very specific time. (e.g. if after 15 minutes that the trade is still open, it will be closed regardless of the amount of the loss and proceed on the next trade). This is the time that you can trade with no-SL with a small fund but you have to be strict and you really follow your imaginary SL, or cut-loss time. Discipline is the key.

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