The ten points on this list are the result of excruciating lessons I had to learnon my road to maturation as a currency trader.
This is my list. It may not be yours. All I know is -- these things changed me froma trader who blew up two accounts into a (more or less) consistently profitablecurrency trader who now has the time and peace-of-mind to write a blog.
- I turned off CNBC.
Bad advice is free and it's everywhere. CNBC is designed to keep viewers up-to-date on the markets, not Forex. They don't do a very good job of presenting market news. I don't know what ever made me think they would help my currency trading.
- I stopped visiting online forums.
As I said in #1, "bad advice is free" and it runs rampant in online forums. Most Forex forums are frequented by newbies looking for quick answers to complex questions and getting bad solutions from self-proclaimed experienced traders.
- I decreased my trading hours.
I used to get up at 2:00AM EST to prepare for the London session. By Wednesday, I couldn't keep my eyes open and bad trading ensued. Now I trade from about 6-9 or 10 AM about 3-4 days a week.
Now I am well-rested, my blood pressure is under control and I can, once again, think clearly.
If I feel like trading at night (which is rare these days - see #9) I go from about 7-9 PM. I am very careful about the battles I choose to fight.
I couldn't keep my eyes open and bad trading ensued
- I unglued myself from the trading platform.
Too much stress.
- I eliminated stop/loss and take/profit orders.
If I think the price might retrace on a trade I am contemplating then I don't place the order in the first place. I know I'm going to be upside-down during some phase of the trading cycle and that doesn't frighten me anymore. I place my order; set SMS alerts to keep me informed of critical price points; and go away and do something else. When I receive an alert; I return to my trading platform; evaluate the current situation and act (or not) on what I see.
I NEVER sit there and stare at the monitor (see #4).
By the way, it's not a good idea for inexperienced traders to trade without a stop loss. You could lose your house, your car, and your underwear if you don't know what you're doing.
- I stopped trying to get even.
When you see a basketball player miss a foul shot to the left and then adjust his next shot so he won't miss to the left again, he's trying to avoid a mistake of the past by altering what he would normally do with an opportunity to score. But the current shot is not the previous shot. The previous shot is history and has nothing to do with the shot he is about to take.
Currency trading is the same. I used to try to get even and make up for a loss on a previous trade by altering what I would normally do with the current trading opportunity. But the current trade is not the previous trade. The previous trade was history and had nothing to do with the trade I was about to place.
Eventually I learned to forget the result of the last trade and start with a fresh outlook on the current opportunity.
By the way, it works the same if the last trade was a winner. The current trade is still not the last trade and replicating what you did before doesn't guarantee the same result.
- I developed my own indicators and expert advisors.
I know what I'm looking for in a trading setup and I know how I like to manage my open positions. I have my own ideas about price movement, volatility, trending, and trading with or without the herd.
I haven't found a technical indicator for sale that interprets market movement like I do or an expert advisor that trades the way I would. After trying various signals services, trading systems, indicators, robots, and account managers, I determined that the people selling those solutions didn't know any more about currency trading than I did. So I programmed my own trading savvy into my own tools.
It's wasn't really about marching to the beat of a different drummer. It was actually the beginning of my transformation into a self-confident trader.
If I fail then I fail, but I no longer put my trading destiny in the hands of others.
- I stopped trading the news.
I am aware of the news but I don't try to anticipate how the market will react to it. I found that it was much more beneficial to let the suckers get taken out by the price movement spike and wait as everything returns to normal on the retracement (see #10).
- I made an effort to understand global economics.
When I traded stocks I did very well with software companies because I knew that sector very well. I was keenly aware of what was happening within the industry and understood which news was important and which mundane. When I started migrating some of my money into the pharmaceutical sector I got slaughtered because I didn't really understand that market.
It's the same with currency trading. At the current time, my primary focus is on three currency pairs - EURUSD, GBPUSD, and EURGBP. Because I invested the time and effort to understand the economic challenges of the euro zone, UK and US, I now possess a good feel for how their currencies generally react to fundamental economic news. Coupled with a sense of the rhythm of their correlative dance as they exert their influences upon one another, I feel fundamentally and technically prepared to trade that basket.
Now I am employing the same due diligence to understand the Australian and Japanese economic landscapes so I can confidently trade the USDJPY, AUDJPY, and AUDUSD basket. However, I am not in any hurry to give back any money by prematurely trading those currencies.
- I stopped placing border trades.
Border trades are placed in the areas of support or resistance. If you place a BUY order near resistance or a SELL order near support, you're going to pay dearly. Border trades are usually the result of poor technical analysis. Did I say poor? I meant stupid.
I had a bad habit of placing border trades when I unexpectedly noticed a big price movement in-progress and impulsively decided to make some quick money by joining the herd and riding the price surge to profit. Invariably, the price would retrace and take my money.
So border trades come from poor technical analysis and sometimes undisciplined behavior (i.e., stupidity).
I don't know how many times I did that before I finally worked up enough flexibility in my legs to kick myself in the butt. Thank heaven for self-control.
Except for #10, my improvement as a trader has had very little to do with findinggood entry or exit points. It's had more to do with learning about myself: gettinga handle on my emotions; understanding and admitting my limitations; becoming morethoughtful; taking care of myself physically; and fitting my trading intomy lifestyle rather than my shaping my lifestyle around my trading schedule. Insummary, patience, discipline, diligence, and common sense.
You may not agree with everything on my list, but that's what makes Forex tradingso interesting -- different strokes for different folks.
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