Sound Money Management takes the Emotions out of your Trading

People often ask why most newbies seem to do the best they can to lose as much money as possible in no time. Well we all were newbies before and so was I. The reason why I burned my hard earned real work money with my first accounts was, well, that I tried to make as much money as possible... in no time as well.

Always know exactly how much money will be lost (or earned) with a trade that you make. With the first accounts I never knew really. I was all excited of making lots of money if the market just moves the way newbie Peter thought it would.

When it didnt I watched the minus growing and growing, panicking with every additinal red pip coming. When a position stopped out and one quater of my account was gone I sought revenge ! ... and lost again.

When you lose a large quantity of your account for one trade (or win, it doesnt matter), you will get very emotional about. either seeking revenge or to make even mooore.

So always know how much money you will lose if a trade stops out and always be sure that even if it loses, it won't matter as it is not going to touch more than 2.5 to 5 % of your account. Otherwise you will freak out, trust me. With money management, even if the first 10 trades fail you will still have enough equity left to learn from your failures to adjust your strategy.

If you risk too much per trade, trust me you will freak the hell out if the market goes the other way. and then you are in a spiral of emotions that is not going to make you one of those "sustainable traders" that constantly book profits.

I hope this helps some of you as I learned this lesson quite late. I always thought money management would be soely about chances and maths when it really is about trading calmly, professionally, and, profitably in the end! So take care, develop your strategy and forget about getting rich quick. Making some safe extra money each month is awesome too!

I think risking 2.5 to 5% per trade is quite a lot. But I do agree, if you risk less and always know how much you risked you will sleep good at night...I find that by risking 1% per trade I sleep pretty well

On the risk, it depends on the trader but anything above 3% is not a good call, especially if the trader is a newbie. .And yeah, still remember the burns I got with my first two accounts..been there, shared the misery with every new trader on the block. I guess, in retrospective, I should have opted for learning to walk before trying to run..

For newbies, stick to 1% max per trade and 3% for the total number of trades on

Yeah, risk management is a must and for the newbies, opt for small accounts, low leverage.

No matter what risk management we employ in our trading, emotions will ALWAYS be there. The SECRET is, we should be have an ABSOLUTE control of our emotions.

We are humans, not robots. Our perception is we did something wrong if we did not get what we want. However, as new traders, you have to accept that we do not and cannot control the market, so if we do not get what we wanted, it does not mean we did not do it right, its just is.

When I first started, the most difficult part is the emotions bottled up from point A (entering a trade) to point B (closing a trade). Entering a trade was easy, but when I was already in a trade and the price fluctuating and my emotions are kicking in, should i close now or should I wait?

And of course, risk management is very important, however, it does not take the emotions out of trading, it helps controlling our emotions.

Just my 2 cents.

We cannot completely remove emotions as we are human beings.

According to my past experience trading according to a plan will remove emotions to the some extent.

No one's going to be able to remove all the emoticons out of the play and if we could do that, guess we may as well stand in for artificial intelligence..
Moving on, when it comes to emotions and trading, you need to learn how to keep it under control and yes, it's easier said and done, along with a million other similar cliches but that's what it comes to..

Emotions cannot be ended it can only be controls because emotions are natural and we have to trade with patience and with good trading plan and strategies. Proper plan and strategies helps the trader to control their emotions while trading.

Successful Trading Strategy= 60% Psychology, 30% POSITION SIZING or MM, 10% Trading system- Van Tharp

Great post Peter !
My take on this. When you feel too emotional, do not trade... Then you can not make right decisions... Only enter all trades, when you feel "cool". When you feel like a robot.. That saved me a lot of money...

Just for fun watch this:
Trading In The Zone EFT Tapping Technique:
http://forexscalping101.blogspot.com...technique.html

I collected links for some free psychology tutorials and interviews with traders. Watching self improvement tutorials, helps a lot to deal with your emotions:

http://forexscalping101.blogspot.com...bel/Psychology

Trading is troublesome. In trading, we can get a lot of stress. At the point when a position starts to betray us, that is the point at which we start to feel it. The red bolts on the outline go with every one of the fears of disappointment that race through our brains in nanoseconds. As the loss keeps on stacking against us, that anxiety turns out to be increasingly significant; making the idea of making a move considerably all the more scary. What's more, this is accurately how our battle or-flight intuition can adversely influence us in exchanges, as we enable ourselves to settle on choices in to a great degree distressing states that, periodically, don't help us.

Emotions can never be taken out of play. The quality I have tried to apply is called "Self Control". If I have a trading system, and proper risk management plan, self control will help me to stick to it at all times. I might lose today, but I will stick to my system and apply that same risk management to prevent me from losing everything all at once.

I seem, proper money management knowledge can protect our trading capital from any unfortunate losses! Besides, we should follow a tight risk management policy here; maximum 2-3% risk-reward ratio based on per trade!

We are people, not robots. Our discernment is we accomplished something incorrectly on the off chance that we didn't get what we need. Notwithstanding, as new traders, you need to acknowledge that we don't and can't control the market, so in the event that we don't get what we needed, it doesn't mean we didn't do it right, its simply is. When I initially began, the most troublesome part is the feelings contained from point An (entering an exchange) to point B (shutting an exchange). Entering an exchange was simple, however when I was at that point in an exchange and the cost fluctuating and my feelings are kicking in.

Emotions is a common human nature so that’s not possible at all to reduce completely. but if we can ensure discipline when trading of course we could avoid the emotions.

FWIW I posted some ideas that have helped me here.

Allow the emotions to come and go. If we try to control it, it will stay with us and trouble us.

While trying to control emotions, our attentions is diverted to unwanted things. Its better to focus our attention to what we want to achieve.
Break down bigger targets into smaller achievable targets. Only then money management too works.
Do not overload emotions, trading, strategy or money management.
In right quantity, at right time it will yield results.
As for emotions, when we try to control it, it takes another form. We will go after it and our focus is diverted to unwanted areas.
then failure follows. this is what happens to every trader.