A Few Guidelines To Prevent Over trading Your Options Account

By Paul DiGi

Nearly all beginning day traders that start up trading without much planning or preparation throw money away...FAST! I remember my first FOREX account, financed with 800 USD, turned into $400 in just 2 weeks. It was like a snowball going downhill, gaining speed and energy with out an end in sight. In fact, there was an end in sight because I chose not to deposit more cash into my trading account until I had a hold on what I was actually doing. So why did my trading account lose half of its value before I could even blink? The answer is 'Over-Trading'. Here are three guidelines that you can set up to limit your risk and allow yourself a chance to begin generating profits.

Don´t Use Too Much Leverage

If you are wagering more than four percent of your trading on a single trade, you are asking for speedy conclusion to your Forex career. This will mean that your stop-loss (non-negotiable) is required to be close enough to your entry to assure that you will not lose more than 4 percent of your trading account. Bear in mind that the market can 'jump' every now and then, so your stop-loss almost certainly must be even closer to make up for unexpected 'market slippage'. If you do not have the self-discipline to adhere to your stop-losses, then just quit Forex now.

Pick One, Selected, Strategy

When beginning, I suggest selecting one entry signal and Solely trading on that particular method. You need to have a distinct description of what it means to take an entry, and you will not trade until you see that entry signal. What this means is that you won´t make a trade every time you feel like it. It can be really hard to remain on the sidelines when you see the markets moving, but you must follow a very simple trading plan that reduces thinking throughout the early levels of your Trading. While you get experience and start to see steady profits, you will be a lot more prepared to begin trading more trade signals.

Recognize How To Take a break from Trading

Often your trade entry setup isn´t functioning. I´ve got a straight forward principle for day traders - 3 losing trades back to back and you need to stop trading for the day or you need to go to practice account trading. When you are prepared to start trading once again, start smaller (maybe half of your standard size) to ease back into a winning rhythm. One of many blunders I made with my first account was over-margining my trades after a string of losing trades ('trying to make it all back'). The easiest method to steer clear of this conduct is to restrain yourself from making trades when your strategy is not working. Simply put, you have to form your own guideline for when to take a rest from trading.

In addition there are other conditions that can negatively have an effect on your your ability to focus like tiredness, illness, personal issues, and many more. You´ll need to be conscious of your fitness and psychology so you can determine when you are fit for trading and when it is best to take a vacation.

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About The Author
Paul DiGi also manages a website called TradingVideoGuide.com - a site dedicated to finding the best free, educational trading videos on the internet.