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Naked Forex: Pt. 3 Trading Psychology, The cycle of doom makes sense to…

- - - - In phase 1 you are searching for a trading system. Once you have found a trading system that is exciting, you will move to Phase 2.
        
        In phase 2 you begin to trade your system. When you experience drawdown, the end of phase 2 is starting. The drawdown will cause you to lose faith in your trading system, and begin to move into phase 3.
        
        In phase 3 you will blame your trading system, because the system has not found consistent profits.
        
        You have given up the system and decided to search for new one. Now you back to square 1.
- - - - As a market specialist you will focus on one market.
        
        They have an exceptionally high win rate.
    - - As a trade specialist you will focus on one trading set-up.
        
        To apply this system confidently and consistently, you have to experience trading your system across a broad range of markets.
  - - - When you place a trade and you find it difficult to sleep or you are always thinking about the trade, then the risk is too big.
        
        Reduce your risk to the point at which you can place a trade and get a good night of leep.
    - - Define a daily and weekly maximum drawdown to prevent blowing up the account.
      - Drawdown retreat
        
        When experiencing a drawdown go away from the charts. Take a trip out of town or go for a run for example.
        
        This avoids revenge trading
        
        You will come back to the chart with a fresh perspective.
        
        5 step sequence
        
        Go Away
        
        Back-test your system
        
        Evaluate your trading statement
        
        Decide if your system still works.
        
        Work on you.
    - - These are the most obvious threats to your trading account. these trades results in losing more than you intended to do.
        
        Solution:
        
        Reduce the per-trade risk when several correlated currency pairs offer trading set-ups
      - Example:
        
        Bullish pinbar print on the daily charts for the following pairs: USD/JPY, AUD/JPY, NZD/JPY, CAD/JPY, EUR/JPY and GBP/JPY.
        The standard risk per trade is 1%
        The maximum weekly drawdown is 5%
        For simultaneous trade with a correlation above 0.65, the risk is reduced to 0.5% per trade.
  - - - Remember to celebrate your wins.