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The key to successful trading is less about winning than it is about minimizing your losses so you can maximize your winners and that takes discipline, observes Stuart McPhee of OANDA.

Gregg Early: I am here with Stuart McPhee, veteran currency trader and author of several trading books including Trading in a Nutshell, which is now in its fourth edition.

Stuart, with the dynamics of the currency market today, you have the euro, which nobody knows the direction of at this point-they can't figure out whether Greece or Italy's going to fall apart, and nobody knows what to do with it. The United States has flooded its system with liquidity. Japan doesn't seem to know what to do with the yen, nor does the rest of the world. How do you manage risk in this type of environment when you're trading?

Stuart McPhee: You bring up a very good point. I think regardless of market conditions, some of the rules remain the same. Some of the principles we need to follow are timeless and should always be adhered to.

The standard things like setting stop losses and sticking to them are things that should always be followed through, regardless of market conditions, regardless of the broader influences on the market. So, if we are in positions-which will happen regularly-that don't move in our direction, our favor, we're in a position where we can take care of those...just close the trade and move on to the next one. Some of those things really do remain quite timeless.

One of the other things related to risk can be volatility, and you mentioned things going flat and so forth. Of course, the opposite can occur when markets go wild and react very quickly to news, and announcements, and the like.

Again, we need to have some steps where we measure volatility, and ask when it is too much for our tolerance to risk and our personal threshold. Then it's really an option to hold back, not trade as much, maybe withhold from trading, maybe trade smaller sizes. There are certainly steps we can take when risk is increased and volatility increases; we can take steps to mitigate that and just reduce our exposure a little bit.

Gregg Early: So, really, fundamentally it's that basic rule of remaining disciplined-setting up your trades so if they head south, you make sure that you're out of them; that you don't hang on, hoping for the best.

Stuart McPhee: Absolutely. And what I'm saying now is not very new to many people; people have heard this before, you've heard this before.

But what are you doing about it? What steps are you taking to make this an easier process for yourself? Because if you don't do that, it's not very easy and you won't follow through like you said, about being disciplined and sticking to the plan. They won't do that if they don't make it easy for themselves.