If I had a time machine, one of the things I would do is reverse into the time when I first began my trading journey and enlighten my past self about all the things I now know about Forex. I’m sure this would have immensely aided my progress as a trader.
Sadly, there are no such time machines. However, and fortunately for you, you can learn the most important trading lessons I have learned over the years, trading and analyzing the market dynamics.
I have put together five of the most important things I wish I knew when I began trading and these will help put you at a good advantage as you trade likewise. Here we go!
Trades Require Time to Play Out
This one is huge in fact, traders often make the mistake of not giving their trades the time and/or space they need to play out.
In a recent article, I discussed how good trades often take longer than we think to play out. This is true and it means we need to be more patient and take a more ‘set and forget’ approach, but we also need to give our trades more space to play out, meaning wider stop losses. I discuss the average true range in that same article I just mentioned, and how it can help you give your trades enough space so that you don’t get shaken out before they start moving in your favor.
You Cannot Avoid Losing Trades
I find that traders run into a lot of trouble because they try to ‘avoid’ losing trades. You may not even know you are doing this, but you are probably guilty of it to some degree, as I was in my early trading days.
If you are doing any of the following: Trading without stop losses, moving stop losses to breakeven too soon / every trade, taking small profits (less than 1R), closing out trades before they hit your stop loss at your predetermined 1R risk amount and other similar emotion-induced trading errors, note that you are trying to avoid losses, and that is the wrong approach my friend.
Simply put, losses are a part of trading, and you have to lose to win, so to speak. The key is to make sure that the losses you take are a normal part of your trading edge. Meaning, you are taking good trades that meet your trading strategy criteria, and the losses you have are just good trades that don’t work out, as every trading method has.
The losses you can and should avoid, are the ones that come from over-trading and not trading your plan and sticking or you method. Those losses are ‘bad losses’, not the normal losses I just mentioned, and you should try to avoid them. Just remember that some losses are normal and cannot be avoided even if you are trading with discipline and patience. This is why you always must manage your risk properly.
Focus on The Trading Process Not On The Trading Profits
Like it or not but you simply cannot become a successful trader if you are solely or overly-focused on ‘profits’, ‘rewards’, and those big lofty trading goals that everyone obviously wants to attain.
Becoming a good trader is what makes you money in the market. To become a good trader you have to be skilled in your approach and that means developing a mastery of your trading strategy and a mastery of yourself and your behaviour in the market, if any of those are missing you will not succeed. You can only attain these things by focusing and becoming passionate about the trading process and forgetting about the profits and rewards.
The more you focus on the process and on becoming a good trader, the more the money and profits will become attracted to you over time. However, when you are overly-focused on profits / rewards, it causes you to commit all the trading mistakes that we mentioned earlier like over-analyzing, over-trading and over-leveraging your account, because you are simply trying to ‘force’ the success rather than earning it the right way.
Simplicity is Powerful
You don’t need five computer monitors with charts plastered up in indicators and CNBC playing on the flat-screen TV. Especially for the beginning trader, these things amount to little more than distractions and unnecessary variables that will cloud your thinking. Trust me. I have been burnt.
Having studied the trading ecosphere, I learnt to apply less trades, but strategic; less time on the charts, less clutter on my screens and less clutter and confusion in my mind. All of these are cornerstones of my trading approach and a big reason why I finally became a successful trader.
In the Forex market less is more. The less trades you take the greater chance you have of finding consistent profits. Taking less trades to make more money goes against human nature. But doing so will open up your eyes to the importance of always choosing quality over quantity and keeping your trades simple.
Patience is a Virtue by Choice
An impatient person trading Forex is synonymous with a recurring loser in the game.
This is one area that I certainly took for granted during my early days of trading. I heard all of the experts talk about the importance of patient but I figured I knew better and continued in my impatient and fast ways.
I’m here to tell you that if you truly want to become a successful Forex trader you must learn patience. Read books, go to seminars, do whatever you need to do to develop patience because once you do you will never view trading the same anymore.
It’s time to stop chasing trade setups and start allowing them to come to you – that’s what developing patience is all about.
Lastly, I have come to realize that it’s easier to over-trade than you think. “Over-trading” is probably a term you’ve heard before, but what exactly does it mean?
One of the biggest things I discovered as I became a more experienced trader, was that in the first few years of my trading experiences I was over-trading and I didn’t even know it.
As a matter of fact, over-trading is when you take any trade outside of your predefined trading strategy and trading plan. It’s a very easy mistake to make, especially for beginning traders, and it’s also a very costly one at that.
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