The Art of War and Currency Trading
How a 2,000 Year Old War Strategy Will Make You a Better Trader
Over 2,000 years ago a book was written in Chinese entitled The Art of War by Sun Tzu, and over generations this book has been translated into dozens of different languages with tens of thousands of copies published. The information and strategies apply not only to the conflict of nations but to the conflict of traders as well.
In the forex market place, traders may come in all sorts and sizes but they are all chasing the same profits, though not all traders will attain those profits. Many times when dealing with currency trading on a retail level, the forex market maker is made out to be the enemy, but the truth is that the individual trader usually poses a higher risk to his/her own trading account than the market maker does.
Of the many oft-quoted phrases from The Art of War, Sun Tzu said that "Every battle is decided before it is ever fought." This quote is particularly relevant to someone trying to make a living trading in the forex market, because what this means is that without the proper emotional, mental and analytical preparation a trader will lose no matter how good the market conditions may be.
One of the main characteristics of the forex market today is the high amount of leverage freely granted to all traders, even allowing people to participate in the forex market with just a few hundred dollars. But something that your broker and even your trading instructor probably forgot to mention is that leveraging your money will also magnify the emotions you experience regarding your trading positions moving up and down.
The two main emotions experienced while trading are fear and greed, and while your excitement may peak when you watch a 50-pip spike triple your account balance it will also make it harder for you to let your profits run when you can only think about capturing what's already there. Your emotions will also run the other way, and when the market turns against you there is a chance you will be tempted to deviate from your trading plan and trade on impulse.
So if every battle is decided before it is fought, what you must do to succeed with forex is to make sure you can master your emotions while trading and have in place a solid risk-management strategy before you ever open a position or make a trade. With this mastery it will actually be difficult for you to lose, because if you have a strict objective trading system and never let the subjectivity of your emotions enter into your trading activity, then you will only ever enter into the market when a profitable trading opportunity presents itself.
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