Treating Your Trading Like a Business

Filed under: Learn Forex Trading |

If you want to be successful at trading the foreign exchange (forex) currency markets, then it is of paramount importance that you treat it as a business. Your startup capital is like your workers, and you must take care of it as such. Without your workers, no work will get done, so you must have real concern about money management so that your capital is never in danger. Next, you must control your levels of risk. Every business must take risks in order to make big profits, but those risks must be controlled and calculated so that not too much damage can be done. This means exercising good levels of risk against your possible reward.

 

Businesses are also scrupulous about record keeping so that performances can be reviewed and everyone is accountable. You must also do this when trading forex by keeping a record of every trade that you make, including the pair it was made on, the date, the risk-reward scenario, the type of setup, and the profit/loss made; at a minimum. By doing this, you can later review the trades (at the end of every month is a good idea) and ascertain whether there is anything that you could be doing better. For example, you might find that most of your profits over the long term are made on pin bar setups, and you might focus more on those setups in the future.

 

Another thing you could do is to print out a visual record of every trade that you make so that you can study your setups at a later date. This is much better that simply recording information as you can actually see the charts and the setups that you took. In addition, you should also keep a running total of your profit/loss so that you can create an equity chart and assess how you are doing and determine your maximum drawdown.

 

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