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Many traders come to trading with dollar signs in their eyes and dreams of a yacht docking at the Bahamas. Whilst this dream is not unattainable the percentage of traders that are ever going to make that type of money is extremely small. What can be realistically achieved? What you will be able to gain out of the market is largely based on the amount of money your trading account has. Someone with $1,000 is going to struggle make decent living and ride out what are inevitable losses that will come, compared to someone with $100,000 who is going to have a far better chance. It is simple maths that the more money in the trading account the less percentage that the trader has to make, to make a decent living. Are you kidding yourself? Are you expecting to open an account with $10,000 and quit your job? If so I think you need to realistically asses your situation. Example: Let’s say that you need to make $50,000 per year to make a living. Account balance A= $10,000 to make $50,000 profit = 500% per annum Account balance B= $200,000 to make $50,000profit = 25% per annum As you can see from the above example trader A needs to make 500% yearly to make a living, whilst trader B only needs 25%. This is obviously not including compound interest from within that year however trading on the assumption that you need to make any more that 5% a month is very risky. Some people will say "only 5% a month". Well 5% a month is 60% per year, and if you add compound interest with the growth of your account it is 80% per year! If you can make 80% per year growth you are doing very well! How does having unrealistic expectation hurt my account? Getting rid of unrealistic goals will help you with the mental application of your trading plan. Traders that are trying to reach trading percentages that are large will in most cases do two things; 1. Over trade 2. Risk too much money per trade Overtrading is a very common mistake made by many traders who are unrealistic in what they can achieve. They operate on the assumption that trading more will make them more. This is in fact is the complete opposite. Trading more will lead them to taking setups that are not worth taking and they will begin to lose. Risking too much will in most cases lead to an account being blown. Occasionally a trader will get lucky and pull off a large winner. Over time however the same trader can’t keep it up and when the losses come their account is crippled. What is needed to become consistently profitable? To become profitable a trader needs to realistically asses their situation. Every trader is different. How they trade and what method they will use will vary greatly from trader to trader. Learning a method such as Price Action trading and perfecting that method will greatly increase the chance a trader will have of making consistent returns in the market. If a trader can learn to trade Price Action and start using strict money management principles they will set themselves apart from the pack and give themselves a good chance of becoming consistently profitable. I hope you enjoy this article. It is designed to show you what is possible but at the same time bring you into the correct mindset that is needed in such a competitive market such as Forex. Safe trading, Johnathon Fox
Today's article is going to touch on a subject most traders never even consider working on improving. Ironically this is the very same thing that always with out a doubt stops them from creating consistent profits from the market. I am talking of course about trading psychology and the mistakes traders commonly make. Common emotions Professional traders know trading is very much a matter of having control over one’s mind and emotions. Some of the more common psychological mistakes are; - Fear: of losing, being wrong, missing out etc - Greed - Boredom - Revenge trading Fear Traders experience fear in a lot of their trading experience. Fear can be brought in by simply placing a trade or when a trade goes into negative territory. This fear can be crippling for a trader and can lead to that trader being frozen. Normally fear is a result of the trader either risking too much money or not having a sound trading plan. Traders that risk too much will tend to always worry with fear as they know it is only a matter of time before their account is crippled. Fear can be hard to banish. Traders can get rid of this awful feeling by learning a solid trading method as well as very sound money management techniques. Traders are less likely to be in fear mode if they are risking only a few % of their accounts and they know they will be able to trade another day. Trading with only money that a trader can afford to lose is also likely to limit the affect fear has on a trader’s mental state. Never ever trade with money that is supposed to be for something else such as rent or food! Anything can happen in the Forex markets and trading with money that one cannot afford to lose is a sure way to being frozen with fear. Greed Greed is trait that brings many traders undone. The feeling of making a lot of money in a short amount of time appeals to a lot of people. This then increases the trader’s appetite to risk too much, on too many trades and bingo their account is crippled! Another all too common situation is the trader in the winning position and is up a tidy sum of money. Instead of taking the money when the market makes it available the trader hangs on looking for more and more! You can guess what happens……… Yep the market turns and the trader is left with a loss. I have a motto and that is “Always leave some for the next guy”. I never look to pick the bottom or the top instead looking for a logical place price will turn. I place my take profit a few pips above or below this level as to make the chances of my target getting hit a lot higher. When the market makes profit available to you, take it and move on to the next trade. There will always be another trade! Boredom Forex trading is not a form of entertainment. It is a business! When new traders are bored they will quite often turn to the markets for excitement. This in turn tends to lead to over trading. They want to feel the rush of being in a trade so they place just any old trade. Do not fall into this trap. Have set times that you scan the markets for setups. As soon as your done, turn the computer off and do something else. Do not look to the market to fill the feeling of boredom. Revenge Trading Quite often when amateur traders lose a trade and money, they will look to make that money back straight away. This is regardless of whether there is a viable trade to be placed or not. This then leads to the trader losing more money and on the cycle goes. Trading is a random event. No matter how good the setups look you just don’t know which trades will be the winners or losers. If you have a proven edge on the market you know that over a large sample size of taking only the viable setups you will be up. Do not take average trades as they decrease your edge on the market. When you place a losing trade move on and look to the next trade. You should definitely learn from the trade but start to look at the market as a random event. Two traders can have the exact same method with all the same equipment. One trader makes money consistently and the other losers. Why is this? It’s because the trader that makes money has mastered their beliefs and frame of mind. They have learnt to deal with the problems detailed in this article. Trading is all about dealing with your emotions and subconscious beliefs. If you can start to work on your state of mind whilst trading you will increase your edge in the market. I hope you have enjoyed this article and can implement some of the thoughts and strategies into your own trading. Safe trading, Johnathon Fox
Often new traders come to the market with many false beliefs about what is needed to make money consistently in the markets. This article will explore some of those false beliefs and how you can fix them to become a successful trader. False Belief 1 – I need to watch the markets as much as possible This is a very common belief that many new traders find themselves falling into. Quite simply trading does not have to involve long hours staring at the screen and many traders actually find that once they begin to cut back their screen time their success rate climbs. Traders need to identify when is the best time to place trades and then step away from the screen. An example of this might be a trader that trades off the 4hr chart. They may choose to look at the charts and scan for trades during the US and UK sessions when the 4hr candle closes. If they find a trade they place it and set stops and targets and then turn the computer off until the next 4hr bar closes. If there is no trade to place they simply turn the computer off until the next 4hr bar closes and they scan again for trades. Watching the markets endlessly will not produce any more trades for you to enter compared to scanning at a set time. Continually watching the markets will wear you down and make you a lot more likely to over trade. The feeling of wanting to be in a trade just for the sake of it is hard to fight when you are just watching the market endlessly. False Belief 2 – The more indicators and junk I can place on my chart the more likely I am to predicting the direction of the market Many traders believe that placing indicators on their charts give them a great chance of picking the right side of the market. The problem with this is indicators are built off what price has done or off old price data. What does this mean? It means traders who use any indicators at all, are using old price to predict what may happen in the future. This may sound crazy but it’s true! All that’s needed to trade successfully and to consistently make money is simple Price Action. Price Action is the key to all moves in Forex. Price Action is people’s behaviour placed on a chart for us to analyse. As all indicators are made of old price information, it makes sense to use the current live price information to base our trading around. False Belief 3 – I can’t be wrong Traders often look at trading as a matter of being right or wrong on each particular trade they take. I prefer to look at the market as a random event. I can never know for sure no matter how good the setup looks that it will work! I try to take only the best setups but does that mean they are all winners? No, the outcomes are random! I make money consistently month after month because I know I have an edge on the market that produces more winning trades than losers over a span of time. I may lose 3 trades in a row but I know over 30 or 40 trades I will always be up. Start forgetting and stressing over this trade and the trade the just went past. You are not right or wrong. Trading Forex will always produce a random result. False Belief 4 - I have to analyse every little thing and know everything inside out Whilst it is good to be a master at the method you trade you do not need to know about every little thing. People often come unstuck falling into analysis paralysis. They can never believe that things can be simple and more than that, making things simple is the way to success and profitability. SIMPLE is the way to go. Pick just one method to trade with such as Price Action and perfect it. Do not try to involve 100 methods with 10,000 indicators and just as many timeframes! Keep it simple and perfect you’re one chosen craft! I hope you enjoyed this article, Johnathon Fox