I am going to start an online Forex Trading Journal that will be a public log of every trade I make. There are a couple of reasons I am going to start posting my trades here on the Winners Edge Trading blog. First reason is because I want to follow my own advice in an article I wrote last week about forex discipline. If I am going to write about doing it, I want do to it and live it. So this will be my trading accountability structure. All of you will be my accountability partners, and I want every one who reads this blog to help out. You guys can post your trades her as well and we can get some group feedback. I will write all the entry points as well as stop loss, and take profit target. I will also include my pre-trade analysis as to way I take each trade.
The other reason I am going to post my trades is because I have been getting tons of emails about my trades and strategies. In addition to helping me in my trading I believe this will help everybody else as well. To keep my entries to a manageable number I will only post swing trades with a daily, 4hr, or 1 hr entry candles.
I am always writing about keeping a Forex Trading Journal so now I will teach you how to keep one as well by following this journal. The journal will start tomorrow because it is the first of the month. It is easier to show someone something then it is to tell someone about it. This way I will be showing you how to keep a journal. Please join me and participate in this Forex trading journal because as always your participation is what is going to make this a success. Winners Edge Trading would not be here if it was not for this great community. If you like this idea or have any other ideas about how I should proceed please include it the comments below.
Saturday, October 09, 2010
Forex trading tip#1 - remember to always pit the strongest against the weakest - Written by Karthik
Lot of people/traders talk about how similar stock markets and the currency exchanges are. Both are leveraged products, both involve lots of risks and returns, both can be analysed using techies and fundies and we could go on and on about the similarities. But there is one crucial difference between how you trade stocks and how you trade currencies which many traders fail to realise and recognise. Due to the fact that they don't even realise it, they do not realise how powerful it can be and how it can be properly exploited to increase your profit potential and at the same time, decrease your risks as well.
The big crucial difference is the fact that in the FX market, i am talking about spot forex and not the futures, we always play one currency against the other while in the stock market, we always deal with only a single stock at any point of time. In other words, we are not bothered about how the share price of Microsoft is going to perform relative to the share price of Google. We are just going to be bothered about how it is going to go on its own respect. Whereas, in spot forex, we always need to see how one currency is going to perform relative to the other.
So, how does this affect our profit and risk potential? Imagine this scenario: assume that there are 2 boxing bouts, one in which Muhammed Ali (one of the greatest boxers of all time) is up against Joe Frazier (another very good fighter) and in another bout, you have Ali against yours truly (yes !! Thats me, Karthik). Assume that the odds are the same for both the bouts. Which bout would you place your bets on? It would of course be the one which pits yours truly against Ali. It does not mean that Joe cannot or never will beat Ali, its just that you want to be on the safer side, reduce your risk and make some very good,low-risk money. At the end of the day,Joe might even beat Ali, but you always play to the side which has lesser risk. And even if Joe does beat Ali, it is going to be a long, hard-fought excruciating fight which will make you keep biting your fingernails, not knowing the results till the last moment. While the bout between me and Ali is going to be a short straight forward low-tension fight. Now, can you think for a while and compare this scenario with the one in the spot forex markets ?
From the last article, assume that Ali is EUR, JPY is Joe and USD is yours truly. So, now the first bout translates to EURJPY and the second bout translates to EURUSD. For the past 2-3 weeks, we have seen that the euro has been strengthening, Instead of blindly going long on some pair based on its strength, you needed to spend 5-10 mins to find the best pair to go long. So, now, you have decided to go long on EUR. Choose the pair which pairs the Euro against the weakest. Surely, JPY is not the weakest. How do we know that. We can know this by seeing that it is gaining against USD. Now we know that USD is weaker. Now, we see whether USD is gaining against any other currency. We continue doing this till we find a currency which is not gaining against any others. Now, we see that USD is not gaining against any currency. So, we come to the conclusion that it is best to play the strongest, Euro, against the weakest, the USD. True to this, we can see that EURUSD has gained 600 pips in 2-3 weeks while no other pair has gained that much.
I could see that there were a lot of people who tried going long on GBPUSD, EURJPY etc. but all that you needed to do was go long on EURUSD. This guarantees good returns and the risks were also very low. If you had more money to invest, take more lots on EURUSD rather than going long on other pairs just because one of it was strong. In the boxing example, we knew Ali was strongest but we had to pick the bout which pitted the strongest against the weakeast.Lesser risk,lesser nail-biting,lesser tension, higher returns. So remember to always pit the strongest against the weakest.
The big crucial difference is the fact that in the FX market, i am talking about spot forex and not the futures, we always play one currency against the other while in the stock market, we always deal with only a single stock at any point of time. In other words, we are not bothered about how the share price of Microsoft is going to perform relative to the share price of Google. We are just going to be bothered about how it is going to go on its own respect. Whereas, in spot forex, we always need to see how one currency is going to perform relative to the other.
So, how does this affect our profit and risk potential? Imagine this scenario: assume that there are 2 boxing bouts, one in which Muhammed Ali (one of the greatest boxers of all time) is up against Joe Frazier (another very good fighter) and in another bout, you have Ali against yours truly (yes !! Thats me, Karthik). Assume that the odds are the same for both the bouts. Which bout would you place your bets on? It would of course be the one which pits yours truly against Ali. It does not mean that Joe cannot or never will beat Ali, its just that you want to be on the safer side, reduce your risk and make some very good,low-risk money. At the end of the day,Joe might even beat Ali, but you always play to the side which has lesser risk. And even if Joe does beat Ali, it is going to be a long, hard-fought excruciating fight which will make you keep biting your fingernails, not knowing the results till the last moment. While the bout between me and Ali is going to be a short straight forward low-tension fight. Now, can you think for a while and compare this scenario with the one in the spot forex markets ?
From the last article, assume that Ali is EUR, JPY is Joe and USD is yours truly. So, now the first bout translates to EURJPY and the second bout translates to EURUSD. For the past 2-3 weeks, we have seen that the euro has been strengthening, Instead of blindly going long on some pair based on its strength, you needed to spend 5-10 mins to find the best pair to go long. So, now, you have decided to go long on EUR. Choose the pair which pairs the Euro against the weakest. Surely, JPY is not the weakest. How do we know that. We can know this by seeing that it is gaining against USD. Now we know that USD is weaker. Now, we see whether USD is gaining against any other currency. We continue doing this till we find a currency which is not gaining against any others. Now, we see that USD is not gaining against any currency. So, we come to the conclusion that it is best to play the strongest, Euro, against the weakest, the USD. True to this, we can see that EURUSD has gained 600 pips in 2-3 weeks while no other pair has gained that much.
I could see that there were a lot of people who tried going long on GBPUSD, EURJPY etc. but all that you needed to do was go long on EURUSD. This guarantees good returns and the risks were also very low. If you had more money to invest, take more lots on EURUSD rather than going long on other pairs just because one of it was strong. In the boxing example, we knew Ali was strongest but we had to pick the bout which pitted the strongest against the weakeast.Lesser risk,lesser nail-biting,lesser tension, higher returns. So remember to always pit the strongest against the weakest.
New trader's mistakes - By Diane Holstrom from WorldFXIQ
It was once said, “a smart man learns from his Forex mistakes – but a wise man learns from others’ Forex mistakes!”
When it comes to learning Forex trading, your money is on the line! We want you to learn from others that have forged ahead of you in the learning process.
1.Trading without the proper education
a.Let me ask you – would you be hired as an educator, engineer, accountant, doctor or lawyer without the proper education? NO! Then why do we believe that because we can do this trading thing in the convenience of our home with no boss, no employees, that it should be easy? It’s not rocket science – but you need to be committed to getting educated in order to make smart and profitable trades.
2.Trading without a plan
a.This is a nutty idea – but I would venture to say that over 90% of new traders do this. Why? Because we don’t yet know what we are doing and we are simply feeling our way around. Trading with a plan includes some of the following items:
i.Declaring the pairs you will trade and stick with those for a period of time
ii.Knowing your limit of the number of trades to have on at the same time.
iii.Deciding you will leave a bad trade when it goes against you at 2-3% of your total margin
iv.Understanding that if you don’t know why you are in a trade – you need to leave it.
v.Committed to only training when nothing else is going on; no phone calls or visitors, etc.
3.Trading when emotionally distraught, trying to get over being emotional!
a.Greed and fear rule trading. Greed gets stronger when the trade is going in your favor and fear takes over when the trade is going against you.
b.Emotions rule in either case so deciding not to trade when or if something else in your life is distracting you is the only decision.
c.Emotions keep you from following your plan.
d.There is an old adage – Bulls make money and Bears make money – pigs get slaughtered.
4.Trading when you must have the money
a.This type of pressure puts you in a position of fear. Sound, logical decisions that support your plan will be abandoned. Be wise – know this is not a quick fix to your money problems!
5.Placing an order for the wrong pair
a.The charts are exciting and new at the beginning of your trading career. When you see a pair heading in a direction you don’t want to miss – take one more second to make sure the order you are placing is the one you want!
6.Placing an order for 20 lots instead of 2 lots
a.Ouch, this hurts! Especially if the trade is going against you. Often times traders post different amounts each time they trade e.g. 1 standard lot, .5 lots, .3 or even .1 lots. Be sure you know when you are getting into the trade, how much you want to put in the trade and check it one more time! That extra second it takes to double check could save you lots of money!
7.Placing too many trades at one time
a.New traders are excited to trade and don’t realize the adrenaline that is pumping through the veins. Getting multiple trades on at a time may keep you from managing the money on 1 or 2 very profitable trades because you eyes were off the ball. Be wise. Start small until you are proficient.
8.Placing too much risk on a single trade, otherwise known as “doubling up to catch up”!
a.This happens so quickly! You think you are fine; the trade is headed in your direction. Then, it’s not! So you place another trade in the same direction to “dollar cost average the trade” knowing that it will eventually turn in your favor. But it doesn’t and you now have 3 or maybe 4 trades on the same pair. Now you are stuck holding that one trade and have used up all of your available funds so you’re unable to get into something profitable. Its not fun to sit on your hands and watch the pips evaporate and your account get margined out. Remember it is better to be wishing you were in a trade then wishing you were out of a trade.
9.Placing a trade not knowing why you got in the trade
a.As a new traders you have so much to learn. Someone will call a trade in the news, or from a Tweet. You trust the individual, so you make the trade. Boom! It goes against you! How dare them! Be careful as you didn’t know why you were in the trade in the first place! Remember it is your money
b.Only get in a trade when you agree with the call.
10.Accidentally going Long instead of Short
a.This is as easy as entering 2 lots instead of 0.2 – be very clear when you pull the trigger the pair you are trading
When it comes to learning Forex trading, your money is on the line! We want you to learn from others that have forged ahead of you in the learning process.
1.Trading without the proper education
a.Let me ask you – would you be hired as an educator, engineer, accountant, doctor or lawyer without the proper education? NO! Then why do we believe that because we can do this trading thing in the convenience of our home with no boss, no employees, that it should be easy? It’s not rocket science – but you need to be committed to getting educated in order to make smart and profitable trades.
2.Trading without a plan
a.This is a nutty idea – but I would venture to say that over 90% of new traders do this. Why? Because we don’t yet know what we are doing and we are simply feeling our way around. Trading with a plan includes some of the following items:
i.Declaring the pairs you will trade and stick with those for a period of time
ii.Knowing your limit of the number of trades to have on at the same time.
iii.Deciding you will leave a bad trade when it goes against you at 2-3% of your total margin
iv.Understanding that if you don’t know why you are in a trade – you need to leave it.
v.Committed to only training when nothing else is going on; no phone calls or visitors, etc.
3.Trading when emotionally distraught, trying to get over being emotional!
a.Greed and fear rule trading. Greed gets stronger when the trade is going in your favor and fear takes over when the trade is going against you.
b.Emotions rule in either case so deciding not to trade when or if something else in your life is distracting you is the only decision.
c.Emotions keep you from following your plan.
d.There is an old adage – Bulls make money and Bears make money – pigs get slaughtered.
4.Trading when you must have the money
a.This type of pressure puts you in a position of fear. Sound, logical decisions that support your plan will be abandoned. Be wise – know this is not a quick fix to your money problems!
5.Placing an order for the wrong pair
a.The charts are exciting and new at the beginning of your trading career. When you see a pair heading in a direction you don’t want to miss – take one more second to make sure the order you are placing is the one you want!
6.Placing an order for 20 lots instead of 2 lots
a.Ouch, this hurts! Especially if the trade is going against you. Often times traders post different amounts each time they trade e.g. 1 standard lot, .5 lots, .3 or even .1 lots. Be sure you know when you are getting into the trade, how much you want to put in the trade and check it one more time! That extra second it takes to double check could save you lots of money!
7.Placing too many trades at one time
a.New traders are excited to trade and don’t realize the adrenaline that is pumping through the veins. Getting multiple trades on at a time may keep you from managing the money on 1 or 2 very profitable trades because you eyes were off the ball. Be wise. Start small until you are proficient.
8.Placing too much risk on a single trade, otherwise known as “doubling up to catch up”!
a.This happens so quickly! You think you are fine; the trade is headed in your direction. Then, it’s not! So you place another trade in the same direction to “dollar cost average the trade” knowing that it will eventually turn in your favor. But it doesn’t and you now have 3 or maybe 4 trades on the same pair. Now you are stuck holding that one trade and have used up all of your available funds so you’re unable to get into something profitable. Its not fun to sit on your hands and watch the pips evaporate and your account get margined out. Remember it is better to be wishing you were in a trade then wishing you were out of a trade.
9.Placing a trade not knowing why you got in the trade
a.As a new traders you have so much to learn. Someone will call a trade in the news, or from a Tweet. You trust the individual, so you make the trade. Boom! It goes against you! How dare them! Be careful as you didn’t know why you were in the trade in the first place! Remember it is your money
b.Only get in a trade when you agree with the call.
10.Accidentally going Long instead of Short
a.This is as easy as entering 2 lots instead of 0.2 – be very clear when you pull the trigger the pair you are trading
Forex trading is a up-hill battle for most
There is a high turnover in the number of traders that come into the premium trading room. We try everything in our power to help them trade profitably and stay members. As a matter of fact we conducted a poll of one of our trading session at the end to see how many traders were profitable during the session. This was a session where we posted 5 trades and they were all profitable for us. At the end of the poll the results were that 21% of the traders lost money even though we called 5 profitable trades.
In the beginning our team would get very frustrated about the fact that traders lose money despite us doing everything we can to help them. We still work hard and do everything we can but we have learned that many people fall through the cracks and dont make the cut as forex traders.
I have found a remarkable article about Forex Discipline that I recommend that you read. It is written by Jason Stapleton and he explains some key issues why traders fail.
I have also found an article that release the actual success rate of all traders at IBFX.
Thanks for reading and I hope this helps you take some improvements in your trading.
Casey
In the beginning our team would get very frustrated about the fact that traders lose money despite us doing everything we can to help them. We still work hard and do everything we can but we have learned that many people fall through the cracks and dont make the cut as forex traders.
I have found a remarkable article about Forex Discipline that I recommend that you read. It is written by Jason Stapleton and he explains some key issues why traders fail.
I have also found an article that release the actual success rate of all traders at IBFX.
Thanks for reading and I hope this helps you take some improvements in your trading.
Casey
Discipline: Why You Don’t Have It……And How to Get It.
It’s the “thing”. When you break it down and cut out all the noise, all the talk about trading systems, EA’s, psychology, money management and risk management what trading really comes down to is discipline. It’s the one thing that will make or break you as a trader. Winning system? Without discipline, you won’t follow it. Tight spreads? Without discipline, you will still over trade costing you a fortune in broker fees. Lightning fast internet connection with a spit second new feed? Without discipline, you will constantly miss out the good trades due to your own indecision.
But this is nothing new. Everyone knows you need discipline to be a trader. The question is HOW.
I’ve always believed the best teaching tools come from real life. So I want to talk to you for a little while about something else in life that takes a great deal of discipline with roughly the same success rate as trading…….weight loss.
Nearly everyone reading this article can identify with a waistline that’s become a little………unflattering. At some point, the sight of yourself as you pass by the mirror on your way to the shower becomes too much for even you to tolerate. What follows is a process that is all too familiar.
1. Tell friends and family that you are thinking about losing some weight.
2. Listen to those people giving you advice about how best to lose the weight. (Most are overweight as well.)
3. Get several new books by current authors covering the latest strategies for achieving your goal.
4. Buy a bunch of new stuffs like a blender, vitamin packs, health foods, new running shoes, exercise shorts and a gym membership.
5. Decide to start in a week or so.
6. In a month, received the credit card bills for all the stuffs you bought and decide to get started.
7. Religiously follow your diet and exercise program for a full week.
8. Start to see some results.
9. Give yourself a “cheat day” to reward yourself.
10. Go right back to your old eating and exercise habits.
11. Put all your weight back on.
This has been the process for nearly every dieter in the world at one point or another. So let’s talk about the WHY. WHY is it so hard to stay disciplined when dieting? Let me frame the scenario differently. Let’s say you want to lose some weight and you decide you are going to cut out the sweets. NO MORE SUGAR! No more soda pop or candy. No dessert or treats after meals. On its surface this seems to be a very simple, rational and effective plan for losing some of those unwanted pounds. How hard to you think it would be to follow?
Most people would say, “Sure Jason, it sounds simple. But it’s a lot harder than it sounds.” True, but let me add a critical piece of information. If you’re stranded on a deserted island. See what I mean? With no access to processed sugar it becomes easy to follow your rules and stay disciplined.
But let’s change our scenario one last time. What if you worked at a pastry shop? Not just any pastry shop but the kind of shop that would rival Le Grenier a Pain. Every day you show up and create some of the most delicious morsels ever devised. You get to smell the aroma of fresh baked sweets as the waft through the kitchen. The display cases are lined each day with every conceivable guilty pleasure. Occasionally you poke your head out only to find the patrons of the shop enjoying the fruits of your labor. You see the look of satisfaction on their faces as they devour every last bite.
Get the picture? So how long do you think you could stay disciplined and committed now?
Traders, your commitment to follow your trading plan and stay disciplined is just like a commitment to cut out sugar. The problem is………..
The FOREX market is your bakery.
Each and every day you sit down to trade your commitment to follow your trading plan will be tested. You’re on a diet in a pastry shop. The market will seek at every turn to challenge your resolve and attempt to push you out of your comfort zone causing you to make impulsive emotional decisions rather than disciplined, planed ones.
Many people will tell you it is wrong to look at the market as a living breathing entity, “The market is not out to get you.” as the saying goes. But I find in this case that it serves the analogy well. The “market” is the representation of every trader’s decision as a specific point in time. That’s all. But the market rewards risk and punishes those that follow the path of least resistance. This must be the case in order for markets to function.
Because of this simple truth we can deduce that in order to succeed, we must have the strength of our convictions since they will no doubt run contrary to many in the market.
Remember 90% of traders lose money. If you want to be part of the 10% look at what the 90% do, then do the opposite.
Ok, if you’re still reading I’ve kept you in suspense long enough. So how do you stay disciplined given the overwhelming temptation to do otherwise?
Discipline is an emotional quality. To have discipline means you have fixed yourself in a course of action and are unwilling to deviate from it. Having discipline starts with commitment. Even this first step causes people some problems. A lot of people think they are committed but most are not.
“There’s a difference between interest and commitment. When you’re interested in doing something, you do it only when circumstance permit. When you’re committed to something, you accept no excuses, only results.” -Art Turock-
Step one to staying disciplined; Are you truly committed? If not, you must make that commitment if you ever expect to succeed. This first step while simple acts as an anchor to your trading. The commitment to succeed is what allows your mind to focus on a goal. This is a moving target. As one goal is achieved a new commitment to a new goal must be set allowing you to continue your journey.
In NLP and NAC (psychological processes) we actually call this an “anchor”. You must literally change your perception of reality before you will truly create lasting change. Again, using the weight loss analogy; People who ultimately achieve lasting results have shifted their reality. Often this comes from a doctor visit when they are told they have diabetes. For some, it comes after a heart attack, or after a child expresses concern for their well-being. Whatever the catalyst, something changes in the individual at a fundamental level that literally alters their perception of the world. Their new reality causes them to view their decisions differently and shifts their focus of what’s important.
But if blowing up account after account doesn’t do the trick how do we create this anchor? I find that a lack of trader discipline is the result of 2 specific things.
1. A Lack of direction
You simply don’t know what you’re doing. This sounds a little hash but the cold hard truth is most traders simply don’t have the education, understanding and experience to have confidence in what they are doing. If you’re struggling with discipline right now I would venture to say you really question if there’s something you’re missing. Some piece of the puzzle you don’t yet have.
2. Lack of/Unprofitable Trading System
This one get’s misunderstood. I don’t mean to suggest that most traders don’t have a winning system. What I am saying is that most traders don’t KNOW if their system is a winner or loser.
They have never done any of the hard work necessary to test and verify the system they are trading. I would venture to guess that most of you reading this article have not tested the system you are currently trying to follow for any length of time. For those of you who think you have let me ask you a couple of questions:
Over the past 300 Trades,
What is the expectancy of your system?
What is the average DD given your money management strategy?
What is the maximum DD
What is the average number of losing trades?
What is the maximum number of losing trades in a row?
What is the average Risk/Reward Profile?
Given your money management system what was the ROI over the past 300 trades after accounting for slippage and commissions?
If your answer includes the words “about” or “roughly” you’re wrong. You should have exact figures. WHY? Because having those figures gives your mind something to anchor to when the going gets tough. It provides a foundation for you to build your trading house on.
If you know, for example, that your system produces 4 losing trades in a row on average and that you had a maximum of 7 losing trades in a row over the sample testing period, you have a base line. When that 3rd 4th and 5th losing trade come you can have confidence that if you are disciplined, the losses will soon end. Not only were you prepared for this drawdown, you were expecting it. You knew it would come. And now that it has you are prepared for it mentally.
When this happens your reality literally shifts. You can now change what kind of effect your decisions have on you emotionally based on how you now view your trading. Instead of “winning brings me pleasure and losing brings me pain.” You now have a new reality. “Following my rules brings me pleasure; not following my rules brings me pain.” This is much the same way someone who used to over-eat due to a love of food now eats healthy because of a love for their health. They have shifted what brings them pain and pleasure based on how they view the world.
Imagine how different your results would have been over the past several months if you had simply applied some if this knowledge. But alas, you’re trading journey has gone largely the way of the 90%. See if this sounds familiar. (Not unlike the dieter.)
1. Get interested in FOREX and find a chat room where you tell others of your interest.
2. Listen to those people give you advice about how best to trade FOREX. (Most are losing money, hand over fist.)
3. Buy several new books by current authors covering the latest strategies for achieving your goal.
4. Do OK in a demo account, decide to go live.
5. Blow your account out in a month
6. Attend a seminar, buy a $97 EA that promises you millions while you sleep, join a signal service or a live trading room.
7. Decide to get serious and create a plan to follow
8. Religiously follow your trading plan.
9. Start to see some results.
10. Get cocky.
11. Slip back into your old habits
12. Blow your account out again.
The secret to gaining discipline in your trading is having confidence in what you’re doing. That comes from KNOWING. Not hoping or believing but KNOWING that if you follow your rules with consistency and discipline then you will achieve consistent results.
Now if you don’t have a winning system or any idea how to test the one you have, then we have more to discuss. But that will have to wait for another article. Until then, I wish you every success in trading and in life.
Good Luck and Good Trading,
Jason Stapleton
Head Trading Coach
4xtraderslive.com
But this is nothing new. Everyone knows you need discipline to be a trader. The question is HOW.
I’ve always believed the best teaching tools come from real life. So I want to talk to you for a little while about something else in life that takes a great deal of discipline with roughly the same success rate as trading…….weight loss.
Nearly everyone reading this article can identify with a waistline that’s become a little………unflattering. At some point, the sight of yourself as you pass by the mirror on your way to the shower becomes too much for even you to tolerate. What follows is a process that is all too familiar.
1. Tell friends and family that you are thinking about losing some weight.
2. Listen to those people giving you advice about how best to lose the weight. (Most are overweight as well.)
3. Get several new books by current authors covering the latest strategies for achieving your goal.
4. Buy a bunch of new stuffs like a blender, vitamin packs, health foods, new running shoes, exercise shorts and a gym membership.
5. Decide to start in a week or so.
6. In a month, received the credit card bills for all the stuffs you bought and decide to get started.
7. Religiously follow your diet and exercise program for a full week.
8. Start to see some results.
9. Give yourself a “cheat day” to reward yourself.
10. Go right back to your old eating and exercise habits.
11. Put all your weight back on.
This has been the process for nearly every dieter in the world at one point or another. So let’s talk about the WHY. WHY is it so hard to stay disciplined when dieting? Let me frame the scenario differently. Let’s say you want to lose some weight and you decide you are going to cut out the sweets. NO MORE SUGAR! No more soda pop or candy. No dessert or treats after meals. On its surface this seems to be a very simple, rational and effective plan for losing some of those unwanted pounds. How hard to you think it would be to follow?
Most people would say, “Sure Jason, it sounds simple. But it’s a lot harder than it sounds.” True, but let me add a critical piece of information. If you’re stranded on a deserted island. See what I mean? With no access to processed sugar it becomes easy to follow your rules and stay disciplined.
But let’s change our scenario one last time. What if you worked at a pastry shop? Not just any pastry shop but the kind of shop that would rival Le Grenier a Pain. Every day you show up and create some of the most delicious morsels ever devised. You get to smell the aroma of fresh baked sweets as the waft through the kitchen. The display cases are lined each day with every conceivable guilty pleasure. Occasionally you poke your head out only to find the patrons of the shop enjoying the fruits of your labor. You see the look of satisfaction on their faces as they devour every last bite.
Get the picture? So how long do you think you could stay disciplined and committed now?
Traders, your commitment to follow your trading plan and stay disciplined is just like a commitment to cut out sugar. The problem is………..
The FOREX market is your bakery.
Each and every day you sit down to trade your commitment to follow your trading plan will be tested. You’re on a diet in a pastry shop. The market will seek at every turn to challenge your resolve and attempt to push you out of your comfort zone causing you to make impulsive emotional decisions rather than disciplined, planed ones.
Many people will tell you it is wrong to look at the market as a living breathing entity, “The market is not out to get you.” as the saying goes. But I find in this case that it serves the analogy well. The “market” is the representation of every trader’s decision as a specific point in time. That’s all. But the market rewards risk and punishes those that follow the path of least resistance. This must be the case in order for markets to function.
Because of this simple truth we can deduce that in order to succeed, we must have the strength of our convictions since they will no doubt run contrary to many in the market.
Remember 90% of traders lose money. If you want to be part of the 10% look at what the 90% do, then do the opposite.
Ok, if you’re still reading I’ve kept you in suspense long enough. So how do you stay disciplined given the overwhelming temptation to do otherwise?
Discipline is an emotional quality. To have discipline means you have fixed yourself in a course of action and are unwilling to deviate from it. Having discipline starts with commitment. Even this first step causes people some problems. A lot of people think they are committed but most are not.
“There’s a difference between interest and commitment. When you’re interested in doing something, you do it only when circumstance permit. When you’re committed to something, you accept no excuses, only results.” -Art Turock-
Step one to staying disciplined; Are you truly committed? If not, you must make that commitment if you ever expect to succeed. This first step while simple acts as an anchor to your trading. The commitment to succeed is what allows your mind to focus on a goal. This is a moving target. As one goal is achieved a new commitment to a new goal must be set allowing you to continue your journey.
In NLP and NAC (psychological processes) we actually call this an “anchor”. You must literally change your perception of reality before you will truly create lasting change. Again, using the weight loss analogy; People who ultimately achieve lasting results have shifted their reality. Often this comes from a doctor visit when they are told they have diabetes. For some, it comes after a heart attack, or after a child expresses concern for their well-being. Whatever the catalyst, something changes in the individual at a fundamental level that literally alters their perception of the world. Their new reality causes them to view their decisions differently and shifts their focus of what’s important.
But if blowing up account after account doesn’t do the trick how do we create this anchor? I find that a lack of trader discipline is the result of 2 specific things.
1. A Lack of direction
You simply don’t know what you’re doing. This sounds a little hash but the cold hard truth is most traders simply don’t have the education, understanding and experience to have confidence in what they are doing. If you’re struggling with discipline right now I would venture to say you really question if there’s something you’re missing. Some piece of the puzzle you don’t yet have.
2. Lack of/Unprofitable Trading System
This one get’s misunderstood. I don’t mean to suggest that most traders don’t have a winning system. What I am saying is that most traders don’t KNOW if their system is a winner or loser.
They have never done any of the hard work necessary to test and verify the system they are trading. I would venture to guess that most of you reading this article have not tested the system you are currently trying to follow for any length of time. For those of you who think you have let me ask you a couple of questions:
Over the past 300 Trades,
What is the expectancy of your system?
What is the average DD given your money management strategy?
What is the maximum DD
What is the average number of losing trades?
What is the maximum number of losing trades in a row?
What is the average Risk/Reward Profile?
Given your money management system what was the ROI over the past 300 trades after accounting for slippage and commissions?
If your answer includes the words “about” or “roughly” you’re wrong. You should have exact figures. WHY? Because having those figures gives your mind something to anchor to when the going gets tough. It provides a foundation for you to build your trading house on.
If you know, for example, that your system produces 4 losing trades in a row on average and that you had a maximum of 7 losing trades in a row over the sample testing period, you have a base line. When that 3rd 4th and 5th losing trade come you can have confidence that if you are disciplined, the losses will soon end. Not only were you prepared for this drawdown, you were expecting it. You knew it would come. And now that it has you are prepared for it mentally.
When this happens your reality literally shifts. You can now change what kind of effect your decisions have on you emotionally based on how you now view your trading. Instead of “winning brings me pleasure and losing brings me pain.” You now have a new reality. “Following my rules brings me pleasure; not following my rules brings me pain.” This is much the same way someone who used to over-eat due to a love of food now eats healthy because of a love for their health. They have shifted what brings them pain and pleasure based on how they view the world.
Imagine how different your results would have been over the past several months if you had simply applied some if this knowledge. But alas, you’re trading journey has gone largely the way of the 90%. See if this sounds familiar. (Not unlike the dieter.)
1. Get interested in FOREX and find a chat room where you tell others of your interest.
2. Listen to those people give you advice about how best to trade FOREX. (Most are losing money, hand over fist.)
3. Buy several new books by current authors covering the latest strategies for achieving your goal.
4. Do OK in a demo account, decide to go live.
5. Blow your account out in a month
6. Attend a seminar, buy a $97 EA that promises you millions while you sleep, join a signal service or a live trading room.
7. Decide to get serious and create a plan to follow
8. Religiously follow your trading plan.
9. Start to see some results.
10. Get cocky.
11. Slip back into your old habits
12. Blow your account out again.
The secret to gaining discipline in your trading is having confidence in what you’re doing. That comes from KNOWING. Not hoping or believing but KNOWING that if you follow your rules with consistency and discipline then you will achieve consistent results.
Now if you don’t have a winning system or any idea how to test the one you have, then we have more to discuss. But that will have to wait for another article. Until then, I wish you every success in trading and in life.
Good Luck and Good Trading,
Jason Stapleton
Head Trading Coach
4xtraderslive.com
Friday, October 08, 2010
Friday - trading the news release thingy
Wah lau....high impact news release trading, but for the 2 releases this evening I managed to get "whacked" by both. CAD Employment Claim plus Unemployment rate for Canada at 7pm followed by the mother of all news release Non-farm Employment report from US at 830pm.
The lessons learnt were that whatever personal's view doesn't really matter and that the market is always right and has it's own way to deal with over where it wants to go. For me....can only guess at best and hope my guess is right. For the set-up, it is to enter the market just a minute or two before the release plus set the SL tight enough for the widening of spread by the dealers/brokers during the release and still left enough for some wild swings but not too wide that will caused bigger losses! If the spike goes against you....then it is wiser to take the "hit" than to fight it. For this high impact release....the run can be more than 50 pips in less than a min. So...no point to have wide SL.
Btw it is any body's guess which way the market spikes? For the rest...of the forex traders, we can only hope for the best and hope our guess and set-up was "right".
The other good thing was that I closed all other orders and trades before the release to lock in and focus on my trading plan! I also tips from a few different top-guns traders, still "failed" and take a 25% hit for my fund. May have to do another top-up this coming week or left with not much bullets for another good fight! For forex....traders must be able to take "hits" then be cool enough to profit from it.
The lessons learnt were that whatever personal's view doesn't really matter and that the market is always right and has it's own way to deal with over where it wants to go. For me....can only guess at best and hope my guess is right. For the set-up, it is to enter the market just a minute or two before the release plus set the SL tight enough for the widening of spread by the dealers/brokers during the release and still left enough for some wild swings but not too wide that will caused bigger losses! If the spike goes against you....then it is wiser to take the "hit" than to fight it. For this high impact release....the run can be more than 50 pips in less than a min. So...no point to have wide SL.
Btw it is any body's guess which way the market spikes? For the rest...of the forex traders, we can only hope for the best and hope our guess and set-up was "right".
The other good thing was that I closed all other orders and trades before the release to lock in and focus on my trading plan! I also tips from a few different top-guns traders, still "failed" and take a 25% hit for my fund. May have to do another top-up this coming week or left with not much bullets for another good fight! For forex....traders must be able to take "hits" then be cool enough to profit from it.
Thursday, October 07, 2010
Wah...it's Oct already!
Time flies....yes, it really does!
Same for my fund too....blew it trading USD/JPY, USDCHF and USDSGD pairs. Thought they were already too low as it was reported that these pairs were at their lowest level for the year, then multi years' low...shit, they still went further down. Now! I had cold feet....almost wiped out my funds at Onada and MFG. Topped up....but it was gone again!
At same time....also "got caught out" by shorting of EURUSD and AUDUSD pairs. Luckily......I traded with tight "SL" but with a few std lots size at one "go" so the damaged was "bad" too. Was thinking....how low can it goes? And also surely BOJ would step-in again if it across a certain level. But no action noted....on Wed and Thu and the USDJPY sank to near 82.1 level before jumping back to 82.4. Now....back to 82.3 level and maybe to test the low again by morning. Btw I have 3 std lots....awaiting at 82.02 to 81.92 level, still believe that BOJ will intervene! Shit.....they must have gone to sleep!!
For stocks....got whacked by Genting PLC, shit! 25 lots at $2.16 bought last month.
Today....it was at $2.03! Btw it was "greed" that I bought it thinking it can go higher for the Qtr-end plus F1 thingy but it didn't work out according to my thought! It was worst last week....it was down to below $1.85 with a strong finished on Friday to $2.00. The best it went up was on Tuesday....$2.13!
Trading forex on news releases....still didn't quite got a "hang" for it. eg today, I bet that AUDUSD would dropped due to the same situation yesterday with the RBA thingy. No...once the news was out, it "popped" upward and got out my "shorts". Yesterday...it was the other way around. It sank....and caught my "long" since my signal was telling me 2 thirds of the Analysts were looking at 4.75% interest rate.
I was thinking....all the datas lately from Australia do not support such a move.
Frankly I don't blame anyone for my losses nor find excuses for my "greed and fear".
This evening...when GBPCHF, USDCHF and USDJPY "tanked" I was busy shifting my positions downward. I was thinking....wah, so lucky that I managed to shift before my position was triggered.
Oh....I went to KL for my niece's wedding on Sat, so I drove up on Fri morning after my work. Hand-over to my daughter to drive most of the trip. Only took back the wheel....near to KL and the Singapore/JB leg. Crazy jams at KL and crazy drivers too....but they don't really get too pissed at each other like here! They go about their business even when they were "blocked"....they still don't "honk".
Quite peaceful lot....those crazy drivers but they do "tail-gate" which I hate! So
I speed up....whenever it happened!
Same for my fund too....blew it trading USD/JPY, USDCHF and USDSGD pairs. Thought they were already too low as it was reported that these pairs were at their lowest level for the year, then multi years' low...shit, they still went further down. Now! I had cold feet....almost wiped out my funds at Onada and MFG. Topped up....but it was gone again!
At same time....also "got caught out" by shorting of EURUSD and AUDUSD pairs. Luckily......I traded with tight "SL" but with a few std lots size at one "go" so the damaged was "bad" too. Was thinking....how low can it goes? And also surely BOJ would step-in again if it across a certain level. But no action noted....on Wed and Thu and the USDJPY sank to near 82.1 level before jumping back to 82.4. Now....back to 82.3 level and maybe to test the low again by morning. Btw I have 3 std lots....awaiting at 82.02 to 81.92 level, still believe that BOJ will intervene! Shit.....they must have gone to sleep!!
For stocks....got whacked by Genting PLC, shit! 25 lots at $2.16 bought last month.
Today....it was at $2.03! Btw it was "greed" that I bought it thinking it can go higher for the Qtr-end plus F1 thingy but it didn't work out according to my thought! It was worst last week....it was down to below $1.85 with a strong finished on Friday to $2.00. The best it went up was on Tuesday....$2.13!
Trading forex on news releases....still didn't quite got a "hang" for it. eg today, I bet that AUDUSD would dropped due to the same situation yesterday with the RBA thingy. No...once the news was out, it "popped" upward and got out my "shorts". Yesterday...it was the other way around. It sank....and caught my "long" since my signal was telling me 2 thirds of the Analysts were looking at 4.75% interest rate.
I was thinking....all the datas lately from Australia do not support such a move.
Frankly I don't blame anyone for my losses nor find excuses for my "greed and fear".
This evening...when GBPCHF, USDCHF and USDJPY "tanked" I was busy shifting my positions downward. I was thinking....wah, so lucky that I managed to shift before my position was triggered.
Oh....I went to KL for my niece's wedding on Sat, so I drove up on Fri morning after my work. Hand-over to my daughter to drive most of the trip. Only took back the wheel....near to KL and the Singapore/JB leg. Crazy jams at KL and crazy drivers too....but they don't really get too pissed at each other like here! They go about their business even when they were "blocked"....they still don't "honk".
Quite peaceful lot....those crazy drivers but they do "tail-gate" which I hate! So
I speed up....whenever it happened!
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