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Enjoy the video? DailyFX analysts host live events daily, for details see the Webinar Calendar.

Today, we had a bi-weekly (twice a month) Q&A session, where the floor was opened up for traders to ask questions pertaining to the psychology of trading, proper risk management, techniques for trade execution, as well as other facets of trading.

One trader expressed their inability to stick to a pre-determined stop-loss and often find themselves getting out much sooner to avoid taking the larger loss. One of the top questions one should ask themselves before entering any trade is – can I accept the amount of risk attached to this trade should it hit my stop-loss? It should be a very decisive “yes” or “no” answer. If the answer is “yes”, then you are trading with a position size which is in your comfort zone. It’s worth noting that risk tolerance varies from one trader to the next. So, know what you are willing to lose before entering any trade. If the answer is “no”, then it is imperative that you reduce your size. By doing so you reduce the risk of mismanaging the trade and help keep fear from becoming a dominating factor in your decision-making process.

Check out this psychology trading guideBuilding Confidence in Trading.

Another trader said that when they do well they are patient and when they weren’t they found themselves trading poorly. The question was, how do I develop patience? At first glance, the obvious and cliché answer is – discipline. But there is one action which can be taken, which we discuss frequently, to help keep a trader on track to making those trades which fit within their game-plan and avoid those which don’t. It’s using a checklist. In short, a checklist will keep you honest with yourself, and if the proper boxes aren’t checked off prior to entering a trade then you are likely taking a trade you shouldn’t. By going through this process, if you are honest with yourself, you’ll likely find yourself having more patience in waiting for trades which fit your trading style. (For more detail on checklists, see this prior webinar.)

Related links to this webinar: Creating a Trading Plan; Handling Drawdowns; Risk Management; Analysis, keeping it simple; 6 Mistakes Traders Make; Focusing on the Process; Building Consistency

For the full conversation, please see the video above…

---Written by Paul Robinson, Market Analyst

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You can follow Paul on Twitter at @PaulRobinonFX.