Your own "Psychological Money Wall"
Over the last few years I have had a few fellow traders say to me - OK you have a great consistent FX Intraday method - why is it you are not trading with far great stake sizes and compounding more and making twice or three times your present money returns .
The answer is quite simple - Its all down to your own psychological "comfort zone" and everyone's is different.
A great analogy in sport is marathon running and anyone who jogs will have heard of the "wall".
A marathon distance is 26.2 miles - but most first time runners who may have put 100's of miles training in prior to their big day - will hit the so called "wall" at between 16 and 20 miles.
Ok the less prepared might hit it earlier and the fitter novices might even make 22 miles - but then their "mind" kicks in and tells their body - we don't like this - its hurting - stop !
All that pre preparation as disappeared - you become a quivering wreck and suddenly you dont feel comfortable and instead of carrying on jogging - you start walking a few hundred yards and then you stop for a water drink.
By then all the pain of the last 15 + miles is kicking in and even though you know you want to carry on and make it to the end - your muscles won't work and you feel a loser - your are useless - no good - go back to being a couch potato etc etc.
Now - imagine that in trading.
Most traders know there is a world of difference between sim or demo trading and trading with real money. You just don't have the emotions of losing real money or seeing your entry take 3 seconds or 3 pips difference to when you wanted to enter.
Its easy on demo - in fact I would say 80% of traders can make profits on demo - they are confident and feel in control and every winning day means they can move up from 1 lot to 5 lots to 10 lots to 50 lots etc
After a month or so they think this trading lark is easy - they open their first $1k account and feel it will be $5k by the end of the month with no problem.
The newbie traders who are disciplined will be Ok - ie maybe only 1% stake size based on their capital and stop size and the first few sessions go OK - ie 6 winners 4 losses and they are up 2 % are are delighted.
They then progress slowly and stay in control.
This was probably me over 8 -10 yrs ago before I went full time.
However I had compounded and taken a larger account up to £170k and was then feeling it was time to push it more and go over £100 a pip with the objective of getting to over 25 lots per pip.
At that time my stop size was approximately 10 pips on average .
I had done well in my business life and earned a lot of money - losing a couple of grand on a trade would be no problem if I was going to be winning £5 - 10k every day - so I thought
I had a few thousand live trades behind me and thought I could handle it - even 5 bad trades in a row - so I thought
Nobody talks about this next part - you will hit a psychological money well - and with me it was approximately 22 lots or at that time just over £150 a pip.
One normal trading day it happened
My first time I had 7 consecutive losing trades over a 2 hr period and my previous few days profits had disappeared - and I could not think straight - I was a scared quivering wreck of a trader.
I was not comfortable - I tried the next day on only approx 10 lots and I experience palpitations and sweaty palms and by brain was frozen - I could not think clearly - i was no longer in control .
In the back of my mind I had big doubts and thought my method is not that good - Its not working etc etc etc.
See on my prior trading journey I had not experienced this. It was real live losses - with my own money - not just a few grand - but more than I had been earning in a few months in my business life - all in a couple of days.
It took me nearly 6 months to get back to a fairly normal trading routine and even now over 5 yrs later I will not trade over 10 lots a pip with my own money - its out my comfort zone.
Every trader will have different comfort zones.
I am no gambler - hardly ever bet on the horses or on other sports and even then would only be a fiver or tenner - never 100's or thousands of pounds on any cert.
Gamblers could end totally crushed - because they maybe will take far greater risks and even end up martingaling and end up losing their whole account.
That's never happened to me - thankfully I am too disciplined - but also I have had luck of never being involved in a major black swan event over the last 8 years of serious trading.
Nowadays 1 to 5 lots per pip is a piece of cake - its in my "comfort zone" - over 10 lots would be hitting my psychological money wall and being in my 62nd year of life - I don't want palpitations and extra worry and stress etc etc.
Think about it
If you trading ambition is to go full time within 2 to 4 years and earn over say £50k or £100k per annum ( all possible but remember you will be in a very small band of full time retail traders maybe less than 5% of all financial traders - but still many thousands around the world ) then its all possible on just 2 or 3 lots per pip with a great method.
If you can make over 5 lots per pip - great average just 500 pips a month and $25k or £16k of earnings per month puts you well up in the high earning bracket .
But take your time getting there - dont go from $5 a pip to 5 lots all in three month - step by step - stay in your comfort zone and remember even with a 75% win ratio - you can still on very odd occasions have 7 or even 10 bad trades in a row .....
But also remember you can have 25 or even 35 winning trades in a row -
- make sure your money management is designed to cope for all occasions
Regards
F
