Forex100 Academy Educational Series – (7 July 2019)
You must know these SECRETs before you start Trading (Part 3 of 3)
In every journey or adventure that you plan to embark on, I believe that you should at least try to understand what you are in for. Hope you agree with me on this statement
- A business you want to start – got to have a business plan, product, location etc
- A holiday you are going – got to have your itinerary ready
- A 18hole golf game – some golf lessons before that
So how about when you embark on your Forex trading journey? It is critical that you know what you are jumping into. I would like to share this SECRETS that every trader should know before they start trading.
Course Director – Harmonic Trader
The 3Ms of Forex Trading
You have read the MONEY and the METHOD part of the 3Ms in trading. Here is the 3rd and final part of the series. This article will be focusing on the most important of the 3Ms which is the MIND of the traders.
The mind can make or break the trader. It’s the most difficult to conquer in your trading journey.
The 3rd of the 3Ms – MIND
“Greed and Fear refers to two opposing human emotional states theorized as factors causing the unpredictability and volatility of the Financial Markets
Throughout history, we have seen how greed has managed to drive markets prices up into the bubble stage before collapsing. The first being the Tulip Mania in during the Dutch Golden Age where prices of tulip bulbs reached extraordinary heights before it dramatically collapsed in February 1637.“
A trader must understand their personal tolerance level for losses. This will enable you to manage your fear of losing money when you trade.
For example: “Are you able to lose $100 per trade?”
If a $100 loss is a too much to risk, then will $50 or $20 risk per trade be fine? Once you are comfortable with your own answer, then you would have removed the fear in trading.
To be able to trade without FEAR would give you the clarity of mind to evaluate, engage and manage your trades properly.
The other fear is FOMO – (Fear Of Missing Out). You have to understand that the market will always present the trading opportunities over and over again. So, once you miss a trade, just let it pass and wait for the next trading opportunity.
Manage your expectations. I have heard of many unrealistic expectations from people
- With a $10k account, I want to make $5k on a monthly basis (i.e. 50% ROI per month)
- I want to turn a $10k account into a $1mil account in 3 months
Take smaller steps, look for reasonable returns. Target longer term targets such as 1-2% profits per month. The yearly 15-20% ROI is more achievable, realistic and more importantly it is more sustainable.
“Can I learn to trade within one day?”
Yes! you can, the expectations will be to just learn, focus and execute 1-2 strategies diligently. Don’t expect to understand the entire Technical Analysis out there
Stress & Emotions
Learn to trade with a proven strategy. The METHOD you choose should have a positive profit expectancy. Once you confident of the strategy and adopt it in your trading, this can easily remove the EMOTIONS in trading.
You just have to continue taking the trades as the opportunities present themselves and let the winning probabilities take care of itself. Why? You already know that the system will eventually give you the profits that you are looking for.
STRESS can be there only if you are over trading, risking too much per trade and the FEAR of losing kicks in.
Confidence & Doubts
“How to gain the confidence that your trading system is good & profitable?”
Answer: Only way to fully understand the METHOD that you are using is to do a thorough back testing. Go through the past charts and test out the strategy. On different pairs and also on different time frame to ensure robustness.
If it ends up profitable, it should easily give you the confidence that it works.
When you hit a bad patch of losing trades, in which you will sooner or later, you just have to stick to the system and follow the rules. Don’t fall into the danger of DOUBTING the system. If you have already done your back testing and the system works well, there should not be any DOUBT.
Focus & Discipline,
Stay focused on the trading methodology that works. As the saying goes, don’t fix what’s not broken. If the system is profitable, just stay on track and trade it as it comes. Just make sure you are DISCIPLINED and stick to the trading rules. There will be times when you will start to think of breaking the rules just to get into a trade.
Another one of the biggest human flaws is EGO.
Imagine if you have just won the last 10 trades in succession. Nothing seems to be able to go wrong, every trade you took was all in your favour. What you will be feeling that very moment when you take the next trade, the 11th one?
With an inflated EGO, will you double (or even triple up) the risk on the next trade? This is when the Market will punish you deflate your EGO and bring you back down to earth.
Back to the earlier point……. Stay focus and disciplined
Patience & Hard Work
Forex Trading is not difficult, but it is not that easy either. Traders needs to put in the hard work to learn, understand the market movements and get comfortable with your trading strategies.
It takes practice to identify the opportunities, engage the trades and manage the trades as it plays out. Practice is the key to success in anything you do.
Be PATIENT, I always say this to new traders.
“The job of a Trader is to be patient and wait for the trade setup to present itself”.
Your mind set in trading is the most important of all.
- Test out the trading system to ensure it gives you a positive profit expectancy
- Put in the work to understand how it works and manage your expectations
- Gain the confidence and remove doubts by practicing to trade
- Control the stress and emotions to have a clear mind when trading
- Stay focused and disciplined when trading
- Avoid the fear & greed and keep your ego in check
I generally trade the Harmonic Patterns, and this trading system has given me the peace of mind, allowing me to trade in the zone.
You have earlier seen the MONEY and METHOD part of the 3Ms of trading,
This article covers the 3rd part which is the MIND.
Hope this series of articles can help you improve your trading !!
Thank you for reading
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