Forex Trading is Business
Trading the markets is a business, and it is for you only if you are passionate about it. Do not start trading the forex market just because you need to make some quick and »easy« money. I guarantee you that is the recipe for disaster. Disaster ( or you can call it stupid decision ) such as I made right at the beginning of my trading career almost 10 years ago, when I borrowed $5k from my close one to fund my live trading acccount. I was thinking I would make 10% return per month easily without any experiences. Of course, ha! Manage your money and finances smart, if you want to become a better and more relaxed trader.
Did I achieve this goal?
Of course not!
I focused on making money, and results, instead on my trading process . I was thinking about making money before I even learnt to trade properly and develop my trading process. If you are a trader with some experiences under your skin, you can probably confirm you made such a mistake it the past too.
Trading just to make money will never work for you on the long-term. You may get lucky, and make few profitable trades, but you will soon hit the obctacles.
My personaly advice is to never trade just to make money, or if you are in really bad financial situation. Trading, learning to trade and journey to mastering your trading process will take time. You will have ups and downs along the way as any other successful trader had.
If you are in the bad financial situation and you trade forex ( or any other market ) just to make money, your situation can become worse. Your »wish« to make quick money will only lead to the mistakes such as chasing the market moves, revenge trading, overtrading.
As I said many times, if you are not organzed and disciplined in your life outside of your trading business, you will hardly be organized and disciplined just in your trading. If you can not make yourself a bed every morning with discipline of a soldier, how can you expect to be a disciplined to follow your trading plan and rules?
How you do the one thing, is how you do everything else.
If you can not manage your finances and money in life, how can you expect to become a good trader, where the money and risk management are the key to long-term trading success.
Having the big trading account size, latest trading computer, or proven trading strategy alone will not help you to trade better and make a good »process-oriented« trading decisions.
What will help you to be more focused, relaxed and disciplined is how your personal finances are organized. You will see you will have much less pressure to trade, and you will be more calm and really focused just on following your trading plan, process. And that is the key. Trading mindset is very important for your long-term trading success to become a good trader.
Below, I share my ways to manage your money better in order to become a better forex trader and decisions maker. Better your financial situation will be, more likely it is you will make better trading decisions and follow your trading process religiously.
6 Simple Ways to Manage Your Money
1) Save to invest
Save at least 10% of your income. Set monthly automated deposit to your saving account. Do not worry about the interest rate on it. The goal is to have an extra money on the side that you can use in the future for investments to make even more. Depends on your financial situation, I would recommend you to start with at least 10% of monthly income. As the time go, there is always a chance to increase it, and going for 20 or 30%. You will achieve financial independence much quicker. Do not deny that is not your goal – everyone wants to become financial free. Once you have a few thousands of extra money there, you can fund your trading account, buy mutual funds, or whatever investment you will make with it.
2) Long-term over the short-term pleasure
If you have »free« money that you usually »spend« during the week, send it to the saving account and forget about it. Similar to the first step, if you have an extra money sitting your checking account or wallet, put it on your saving account.
You will be surprised how much extra money you can save. Learn to look at the each dollar as your soldier which will work for you in order to achieve the financial freedom.
3) Cashflow is the king
Do not just focus on one income stream. More incomes you will have better it will be for you. Do not rely just on the trading income, if you do not have any other source of the income.
One of mistakes majority of the people do is, they focus just on the one income and on saving from this one alone. Big mistake.
Running a list of your expenses, and cutting unnecessary expenses can save you a lot of money, but do not stop there – do not focus just on one income. Focus on earning more. Build a long-term cashflow. They say typical millionaire have 7 sources of income.
4) Debt is killing you
Get ride of debt. Debt is a poison, and always weight you down. Set a plan to pay all of your debt, if you have any, and cut all credit cards. I never used the credit cards and never plan too. If you want to become financial free you need to learn to work only with the money you earn, and have.
5) New TV will not make you happier
Do not buy the material stuff you do not need just for your short-term pleasure, if you can not afford it. We are living the the consuming world today. Everything is only about spending dough. More you spend more popular you are. Totally wrong approach and the recipe to become a life-time slave. » Do not buy things you can not afford with the money you do not have, to impress people you do not like. «
6) Magic of compounding
Let the power of compounding works in your favour. Once you become a consistently profitable trader, do not withdraw everything you make. Leave at least half of your profits on your trading account every trading year. This combined with you consistently growing your trading account ( by following your trading process ) will have a massive effect on the long-term.
The key is to take action now. Do not just think » Wow, good tips. They can help me improve my financial situation and make me a better trader too. « If you want to achieve any goal , you need to decide what you want to achieve, make a plan and take action. Believe me, if you will follow above steps and manage your money better you will become much better trader, and you will achieve financial freedom faster. Pick 1-2 points and start doing them from today on.