Emotional Rescue

Did you know that 90% of all Forex traders lose money? Now I bet you are questioning my zeal for trading the spot Forex market! If you are just starting out trading this market this not a very good omen. How do you ensure that you become the 10% that succeed, especially if given the fact that so many traders are willing to part with their hard earned cash?

There are many reasons for these abysmal stats: lack of discipline, lack of money management skills, and the. I think the reason for the poor success rate is that 90% of the traders can’t manage their emotions while trading. This is the demon I fight daily. Money management and discipline are the symptoms, but emotions are the root cause!

From day one of trading the currency markets I have heard every guru shouting at the top of their lungs to cut you r loses and let your profits run. Or that anyone can put on a trade, but it is the professional trader that knows when to exit a trade. It seems like a simple concept to let your profits run and take those profits when the market offers them up to us. But why can’t we get this right?

Emotions!!

The curse of all traders, the last and most difficult skill for us to overcome is to remove the emotions from our trading. Period!! Well I got news for you… you can’!! You, my friend, are a human being and thus an emotional being. OK, so we must trade emotional-less, but that is beyond the realm of most traders.

Letting emotions interfere with your trading can manifest in many ways. Let me just give you some examples of my past (and sometimes present transgressions):

Taking a loss and angrily reversing my position only to have the market resume in my original direction! The infamous revenge trading!

Listening to trade signals from members of my trading group instead of listening to my own signals and intuition (afraid I was going to miss the proverbial boat!).

And my personal favorite…
Having the market retrace and return almost to my original entry point, exiting and having the market execute a classic continuation pattern to original target (a target that was selected in advance before the trade was executed)!

What do we do?


I have been following traders that focus solely on trading the news or other fundamental factors. Although this has some merit it won’t do squat for checking your emotions. Technical analysis should be your weapon of choice for keeping your emotions in check. Do you analysis before your trading session. Follow your trading plan (money management and strategy) as though your life depended upon it (your account balance certainly does!!). Visualize your trade execution like Tiger Woods does before every golf shot and above all, trust yourself! I repeat the following mantra before every trading session:

“I am the world’s most disciplined forex trader. I trade my plan and I plan my trade. I trade with confidence and decisiveness. If the reason for me to be in a trade no longer exists I will cut my losses or take profit without hesitation.”

I am an emotional person. It makes me feel alive, however when I trade I want to be a stone-cold, calculating pip capturing fool and leave the emotions for when I shank a drive into the water at the golf course.

Happy Trading!!

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BTW, did you see Tiger Woods at the press conference after winning the PGA Championship? A reporter asked him if he expects to win every major he plays. Without hesitation Tiger said “yes.” There was an awkward silence while Tiger waited for the next question and the reporter waited for Tiger to expand upon his answer. I loved it and want us all to trade with the kind of confidence and discipline Tiger Woods displays while playing golf!

Seriously

If you have been following my blog you know that I am a big proponent of setting up a compounding account as a wealth building strategy for those of you new to the Forex market. This compounding account is not to be touched until you can meet your financial need with only withdrawing 50% of your profit without changing your risk profile. You can have your “Mad Money” account to satisfy some of your more exotic Forex desires, but having a compounding account where you are depositing a consistent number pips is critical to your long term viability as a individual currency trader.

So why is this so critical? Now that you are a trained trader you have probably realized that your Forex Journey has only just begun. You have discovered that there are numerous strategies and approaches to trading this market. You have also noticed that in the end most of the strategies are viable and that the most volatile factor in any trade is the human interaction in the marketplace itself. I am sure, like me, you have discovered you are your own worst enemy! Having a compounding account ensures that you are trading from a centered base. Your pip goal is reserved and very attainable and your entry and exit strategies will reflect this conservative approach. Trading this account will also build discipline and allow you to avoid those huge draw downs. In this account you are not the gambler, but the casino. When was the last time you heard of a casino losing money on their gaming operations? You rely on a strategy to meet your daily pip goal (at least 3:1) and through money management you are keeping the long term odds in your favor like a casino operator. Your actions will then dictate your profitable results!

Do the math! See what your results would be if you started with a $3,000 mini account, risk no more that 5% on any given trade and made just 15 pips per day. How much will your balance be at the end of a year of trading? The results will astound you!!

Happy Trading!!



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Make Forex Education Your Top Priority

I have been doing a ton of reading this summer. This is not atypical for me. Reading is a way to continue my education and renew my focus on the task at hand. I have recently been exposed to several Forex training evaluation sites, as well attended some of those FREE Forex workshops you see on TV (some of them are still calling me!). It got me thinking

… “What advice can I provide to all those who are eager to learn the currency market with all that information out there without getting burned?”

I have come up with 3 Golden Rules to follow when evaluating currency training opportunities.


1. Know Thy Self – This is probably the most important advice I can provide. There is good training and bad training. Often the worst training has the best marketing plans. First figure out how you best learn information. Are you the type of person that can read a manual on rocket science and build a spaceship or are you a person that needs to be shown things through personal instruction and repetition? Figure out how you receive and process information and align Forex training source that fits your method of learning.

2. Don’t Believe the Hype – There is no golden system and it will take considerable effort to trade currencies successfully. Accepting these realities before embarking on your Forex Journey can save you tons of money and more importantly time spent climbing up the learning curve! If it sounds too good to be true, then it probably is. This should be no surprise! It is buyers beware market out there. Look for a Forex education company that can provide you with some solid aftercare resources.

3. Be Realistic – It is a journey and all good journeys take time to develop and flourish. This can be a remarkable journey, but one where you are apt to lose your account a few times before you surrender to the market and learn to take what the market is offering for profits that day. Listen to recommendations, but make decisions based on your own criteria, because in the Forex market this skill will serve you well!!

When reading internet-based sales letters or infomercial or forums, just remember that everyone has an opinion, but in the end the only one that matters is your!!

Happy Trading!!


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