Self Confidence is a derivative of Knowledge; know more worry less.

I’ve been trading the spot fx markets for more than half a decade, and running charting today for a few years. During this time I’ve mentored/provided signals to a lot of traders in real time through webinars and also over voice, and I get all sorts of emails enquiries from all levels of traders. Only a small minority of traders with good money management skills, patience, and a market niche go on to be successful. Here is my insight based on my personal experience as to why most people are unable to succeed at this business.

Intolerance – Just because the spot fx market moves 24 hours a day, 5 days a week; traders think that there is always an opportunity to trade and be profitable. Since most traders start as part time traders, hence less time to trade, this everyone wants to make quick bucks, they don’t want to wait and just jump in the train blindly. Impatience in trading is like an epidemic and hardly any cure for it. No one wants to wait. When I used to give signals in a live chat room, I used to get this question umpteenth times a day “what should we trade right now”? This is a personality problem, and my suggestion to traders is to focus on profitability rather than just being trigger happy. Trade a plan, and learn to be patient.

“Who moves first often loses” – Andrei Knight.

Obsession with EUR/USD– This is another thing I have observed with traders. All they want to trade is EUR/USD. My question is “WHY”? Is it spread? Is it volatility? Is it because it’s the most traded currency pair in the world? Is it because the mentor also trades only EUR/USD? What is the reason that a trader wants to limit his trading potential by only wanting to trade EUR/USD? I personally love EUR/USD too, but there are so many times, when you don’t have any trading set up in that particular pair, but the other ones have gorgeous opportunities. What happens is that a trader “forces” a trade without any trading set up, and eventually loses. Don’t create an opportunity, rather than wait for the trade to come to you. Apart from EUR/USD, I very often trade AUD/USD and EUR/GBP and GBP/USD/


No Education, No Plan and No Rules– When anyone plans a trading career, he needs to be educated, he needs to understand the DO’s and DONT’s and he needs to be matured to start a business. When you start any other business, don’t you get properly well-informed? Trading is absolutely similar. A lot of traders think that by simply learning a few indicators, and seeing their demo account go to astronomical heights (they so conveniently ignore the emotional factor), and starting with $200 is enough to take their trading career to unbelievable heights. This is massive under capitalization. They have no idea about money management, but all they want is to “double” their account as soon as possible, and then plan to keep doing it. Traders should be flexible in dropping their position size whenever the market is not giving clear signals. For example, if you take an average position of 100,000 units in AUD/USD, you should be ready to reduce it to 30,000 units. This can happen either when trading counter trend or when the market is not displaying a strong trend. Your exposure to the market should depend on the market’s mood at any given point in the market. All what happens with traders who ignore the planning part is that they fail miserably in a short time. One should focus on obtaining knowledge and gradually experience the market and become profitable.

 


Greediness and Fascination with # of pips– So many times I get this email, as to why I took profits only for 40 pips in a trade, and did not go for 100 pips or more. I reply to them, that the set up allowed for 40 pips, so why should I go for 100? Then they start searching for signal providers who make +100, +200 or more. Crazy fascination with the numbers, but unfortunately true. I am not suggesting becoming fearful or too conservative or only becoming a scalper, but is greed good? Definitely not.

 


Emotions– Trading is an expensive place to get emotional enthusiasm or to be treated as an adventure sport. Traders need to keep a high degree of emotional equilibrium to trade profitably. If you are worried because of some unrelated events, there is no need to add trading stress to it. Trading should be avoided in periods of high emotional stress. Don’t trade just for the sake of it.


Trading the news– The news trading is driven by emotion and panic. It’s a rush. Also, this is the period used by the market to entice novice traders into taking a position which might be contrary to the real trend which emerges only later in the day. Most experienced traders simply watch the markets for the first half of the news (unless already positioned for a day trade) to understand the patterns and trade any subsequent trading breakouts. 

Overcomplicated Technical Systems – Over the past few years, I’ve often met traders who regularly ask me, do you really use just pivots, fibs, trendlines and SMA? How about all other indicators? Is that it? I said yes, and they find it hard to believe. You might be amazed by just how few indicators banks and other expert traders use.  It is not unusual to find a big trader with only one indicator on their charts.  Don’t over complicate your trading by placing multiple indicators on your charts.  Keep it simple silly.

Unrealistic expectations– In the end, one thing that is unquestionably frequent to all traders who are losing money in the markets is that they have impractical expectations. If you have $300 to trade with, there is no way you are going to be able to live off your trading. You have to take into consideration what you can pragmatically expect to make each week, given the amount of money you have to trade with.

This doesn’t mean you can’t be a winning trader however. Being a successful trader means you are time and again making money in the markets. If you have a small trading account but are making consistent profits that are in-line with your small account, then you are a winner. The same habits that make a trader successful on a small account are the same habits of successful traders of large accounts. Bear in mind that trading success is not calculated by whether or not you get rich quick, instead it is measured by your consistency, and the only way you can become consistent is if your outlook is inline with the reality of your current financial situation and the reality of the markets. To boost your odds of success to near certainty requires understanding; acquiring knowledge takes hard work, study, perseverance and focus. Accumulate your knowledge without taking any shortcuts, thereby assuring a rock-solid establishment to build upon.

Tanmay
Founder/Chief Market Strategist
www.chartingtoday.com

 

Published by
forex-trader
12 years ago