There is an aspect of trading that most traders pay little attention to. And “that thing” can slowly, slowly destroy your account. So you need to know how to Capital Management in foreign exchange trading, let’s find out with Learn Forex Trading!
General information about Capital management in trading
As traders, we work with electronic computers. The numbers that represent the money in your account are also electronic numbers. And as a result, you lose the real feeling of greenbacks, not being able to touch or feel them. Or smell them (you can only when you have withdrawn money and hold them in your hand) from losing or winning orders. The lack of interaction between us. And real money in physical form is not good in my opinion. This causes us many disadvantages.
Physical Money and Cryptocurrency
I present two situations in Capital management to ask you which of the following situations would you feel more angry about:
1) One evening, you were standing in front of the ATM counter of ACB bank to withdraw money, $500, when suddenly two robbers stole the $500 you just withdrew and fled on a motorbike.
2) That same evening, you were wearing shorts and a tank top, sitting on a soft cushioned chair, with a bottle of wine and a cigar next to you. Then quite unexpectedly, your order hits stop loss and your account loses $500.
I’m sure the 1st situation will make you even more mad. We lose the same amount of $500 in two situations, but why are our reactions different?
In the first case, the money is more “real”, you are holding – feeling – maybe even smelling it in your hand. You have a real physical connection with them. In the second case, the lost amount is simply the electronic number on your account minus 500 value points. But you don’t have a clear sense of material loss from that $500.
I know and understand what you are thinking right now. You think that there is no way you won’t feel anything when you lose that amount of money in your account. Yes, I used to think the same thing before. The truth is that one of the main reasons why traders lose money in the market is because of that “don’t see, don’t feel” aspect.
When you lose money on a trade, it has less impact on you than losing the same amount of money when it gets robbed. When you win in a trade, this amount of money does not make you happy. By being on the road you pick up the same amount of money.
See more: Become a wise investor with ForexFactory
How to feel more clearly the impact of winning/losing orders?
Sounds a bit silly, doesn’t it?
When I first entered the market, I struggled with Capital management like most other traders. I came up with a little trick to make winning/losing orders more “real” and more impactful. I looked to buy a poker set to get some chips. These chips will represent the correct amount of $ in my account.
Next, I bought 2 bowls (beautiful), in 1 bowl I wrote Loss, and in 1 bowl I wrote Profit. After each order, I will put the number of chips corresponding to the money into 1 of 2 bowls, if I win, I will profit, if I lose, I will lose. I put these 2 bowls on the trading desk. Right in front of me so I can always see them (and touch them too).
The effect of this for me is very clear and good. I have more real things to feel about each of my trades. I don’t just see electronic numbers anymore. I have a bunch of poker chips in front of me, more “real”. When the Profit bowl filled up, I understood that I was doing the right thing. And if the Loss bowl is full, I will have to review and review again. These give me a clearer feeling than the electronic numbers on the screen.
In addition, you can also learn more about factors affecting demand to learn how to Capital management better.
Liability Issues in Capital Management
Unless you are the world’s champion of discipline, then no. You’re probably still having (big) difficulty sticking to your trading method. Difficulty in being patient in “watching” for really good and clear opportunities in the market.
One of the main reasons why you keep struggling with that “group” is because you have no one who dares to monitor or urge you, other than yourself. Buddhism has a saying that I like:” The biggest enemy of human life is oneself.” Trading is truly a war with ourselves.
When you go to work every day, you have many bosses on different exchanges assigning you to work. If you don’t work effectively, you will be fired. You are under the supervision of one or more people. As a trader, no one dares to kill you. And many times you think that if you had a boss like the one at work, you would be more disciplined and do better. If you intend to jump into the market when there are no clear signals. The boss will knock your head and say: “If you do that, I will fire you”…
Capital management in forex trading has always been one of the most difficult skills of trading. So you should try to create as many things that are truly present, and have a real and stronger impact on you.
See more: Registering Exness broker account on your phone
Keeping your Capital management ability visible is important
These poker chips can help you be more responsible about your forex trading.
Only you can know how you win/lose, and how much money you make. Putting 2 bowls of Profit and Loss is also a way for your family members to see the effectiveness of your work. This makes you more focused and responsible for each of your transactions. You will have a little more pressure – motivation to be more careful with your account. You don’t want your loved ones to see a Loss bowl full of chips, right?
Like a boss, the inanimate pile of poker reminds you how well or how poorly you did through their results.
Create discipline
The main point I want to share in this article is: that discipline in capital management forex trading becomes extremely difficult because everything is done on a computer screen and there is no physical/material feel. What reason do you make or lose money? Let’s find out with Learn Forex Trading!
Poker chips (or other forms) will help your results become more “real” and help you be more disciplined. I recommend that you (try) to do so.
Good luck!
