Picture this: you’re hungry to learn Forex trading and champing at the bit to get started. Then, a trading veteran tells you that you can still make a mint at the end of the year even if you lose 70 per cent of your trades.
Quite a lot of Forex newbies would either laugh this off as an eccentricity or feel a twinge of panic rising about the realities of trading. Yet there may be more sense in it than first impressions suggest, and a professional boxing megastar like Mike Tyson can exemplify why this is so.
Tyson became a world champion when he was just 18 years old. In his prime, he was to the boxing world a (distinctly scarier) version of George Soros in the trading world.
But beneath his seeming invincibility, he was subject to an ineluctable truth about boxing contests: no matter how talented, driven and agile he and other top champs may be, no matter how inexhaustible their stamina seems, it’s well-nigh impossible for them to avoid taking a number of hits from their opponents in every boxing match.
For Tyson, that was OK. He didn’t panic, and he rarely flew into a rage (was that ear-biting incident anger or just grim pantomime?). Like all pros, he worked a strategy for each opponent long before stepping into the ring.
That’s where the analogy with Forex comes into play. As with boxing, you can’t trade without taking a few punches (i.e., losing some trades). What matters are your Forex trading strategies for minimising risk and loss, maximising gain and protecting your investment.
A few Forex training tips that might be the equivalent of a boxer’s pre-match training:
- Never trade without using protective stops on each occasion. Let your winners ride, but cut your losses short.
- Don’t put more than 3-5 per cent of your capital on a single trade.
- For rookies especially, stick to a risk-reward of 2-1 (i.e. aim for a £1000 profit when you risk £500).