Controlling your greed might be one of the most difficult tasks in the Forex market. Those who are new to the trading profession are always losing money since they don’t know how to manage their emotions. After learning about the basics, they start trading the real market with great hope to earn more money. Though they might secure some big winners, eventually they lose their entire investment due to an aggressive approach.
There are three major reasons for which the retail traders lose money.
These are –
- Lack of knowledge
- Lack of discipline
- Trading with emotions
Gaining knowledge about the trading business is easy. But things become super complicated when it comes to trading the market with discipline. For instance, most of the traders know that risking more than 2% of the account balance is more like a suicide mission.
The rookie traders break this very basic rule and increase the risk factor in each trade to earn more money. And after losing a few trades they become emotions and eventually blow up the trading account.
Controlling your emotions is one of the most difficult tasks in the investment industry. If you want to succeed at trading, you must trade this market with proper logic. But to gain control over your emotions is a very tough task. It might take years only to gain control over your emotions to trade the real market.
What if, you gain access to some sort of secret formula that can control emotions? What if, you no longer have the ability to trade the market greed? Some of you might be thinking it’s not possible. But in real life, many naïve traders are using smart bots that manage the risk exposure and the trading parameters in a very efficient way.
Application of custom bots
The traditional bots are not going to help you to control your emotions. Most of the time, traditional bots analyze the direction of the trade and trade on your behalf. It has nothing to do with greed and mentions. You need to create a custom bot that will define the number of trades that you will execute per day.
Most importantly, it will define the maximum amount of money you can lose for a particular period. To be precise, if your bot can control three main parameters, you don’t have to think about the emotions and greed at trading.
These three important parameters are –
- The direction of the trend
- Risk exposure
- Trade frequency
The direction of the trend
The smart trading bots can find the direction of the major trend with a high level of accuracy. Most of the time, the naïve traders lose money since they don’t know the importance of trend trading strategy. They try to trade the major reversal since they think it will give them an amazing profit-taking opportunity. Your trading bots must analyze the market trend and block the trade execution process when you try to trade against the most obvious trend. Though you will fail to execute some good trades during the major reversal, it is going to act like a lifesaver. Once you get confident with your trading method, you can enable the reversal trading method in the trading bots.
The trading bots can limit your risk exposure by using a simple risk management plan. The naïve traders become aggressive and start placing big volume trades to earn more money. But if you install a trading bot that can limit the risk exposure, you won’t be able to open big volume trades.
When you ask your programmer to develop the custom bot, let them know that you are not willing to risk more than 2% in a single day. If for any reason, if you lose 2% of your account balance, make sure the trading bots disable the trading option for the rest of the day. Just by using this simple logic, you will be able to maximize your profit without risk too much of your account balance.
This is the most important part that your bots need to take care of. Most of the time, the traders start executing random trades to earn more money. Your trading plan needs to define the maximum number of trades that you will execute in a day. If you use a scalping trading method, your trading bots should allow you to execute a maximum of 5 trades. And if for any reason you lose 2% in the first trade, the bot should disable your trading power for the rest of the day.
By now you should have a decent idea of how the bots can limit your risk exposure by imposing some strict rules. Though it will be tough for some of the investors, it is one of the most efficient ways to control your greed and emotions at trading.