8 Key Considerations For The Forex Beginner – What Should I Leave Behind?
Foreign exchange trading is a long-term game. One shouldn’t enter it thinking it’s the Holy Grail to the fast life by the pool because it most definitely isn’t. Successful traders are well researched, and devote a lot of time to understanding and managing risk along with monitoring market developments across multiple markets using a variety of indicators and news sources. So what traits should you learn to manage or leave at the door if you want to succeed in trading?
Unrealistic expectations – insufficient capital
As we all know we live in a very connected world nowadays. That means you have to monitor a lot of different markets to understand the associated risks that may impact on your positioning. This is especially the case for traders with short term trading horizons where the market moves are fast and often quite random, you really do need to have your finger on the pulse as to what’s going on.
When you are starting out in FX, it is advisable to initially look at longer-term trade horizons rather than going straight into intraday trading and nano-pip trading. It is far easier to stick to a plan and structure a plan and then walk away from your terminal if you are trading within a long-term framework. This way the unexpected random volatile movements that occur when you are nano-pipping the market will have less effect. These movements can and will play on your mind, and psych you out of the market. Also, focusing on a longer-term perspective initially will help you keep your job and deriving an income from your employment. This is preferable to putting pressure on yourself by leaving your job and trading with small amounts of capital and having to make large gains, which is very difficult especially when you start out.
Another thing that I’ve noticed from my time trading is the impact of unwarranted arrogance. It’s quite amazing how many people will put on a position and will have a confidence that just defies belief, and I wonder to myself “how can they be so confident?” Sometimes these same people have had very little experience in the game and they fail to recognise that markets can move to levels that leave even very experienced and adept traders just gasping. That size of confidence definitely does not belong in this field and it’s one of the worst attributes you can bring to the trading environment.
I think we have probably all had some life experiences where we’ve met people who are very confident and they’ve taken setbacks and ignored the risks that were present that an objective person could see. The arrogance just has to be left behind. You have to bring a balanced view to success if you’re having a good run because you need to remember there will be periods where you have quite a poor run that will knock you back. But if you keep an balanced view of your wins and losses and don’t let good times go to your head you’ll have a far more consistent trading approach and style which will produce better results.
The impact of poor discipline definitely can’t be understated. If you lack the discipline to follow a proven strategy or set of rules and don’t accept when your getting it wrong you’ll guarantee failure. I’ve seen people who’ve continually averaged into positions and lost their livelihood by just not following their trade plan or not even having one. You have to be really disciplined in this business if you want to succeed.
The market will be there tomorrow. You don’t have to worry about the fact that you’ve lost money today and feel like you need to go and get it straight back. If you walk away from the table with your capital preserved, you’re going to have another chance to fight in the morning. It’s a good thing to sit back and think about what you did wrong and move away from the table when things aren’t going well.
Attention deficit problems/impatience
This is not a business for people who are impatient. If you’ve got an attention deficit problem, and I think a lot of people these days do, when your attention is lacking you need to leave the table. I’ve seen many traders who enter a trade because they want some action or excitement. Trades should be motivated by the right reasons, which are the trading rules and strategies you’ve developed through experience. These will tell you when to initiate a trade; impatience is certainly not a good attribute to have. Have some days off, enjoy some activities that bring stimulation if you need a buzz but don’t put your finger on the trigger just because you want to.
Inability to regulate your emotions
When trading you really need to regulate your emotions properly. If you are very emotional, you will lack that objectivity and be motivated by the wrong reasons when trading. If you can’t control your emotions, your discipline will be curtailed so good traders have got to leave those emotions at the door. If you find yourself cooking with anger, walk away. Go for a walk in the park, listen to some nice music or maybe enjoy an episode of your favourite comedy do anything to get away from your trading station at the point when you have lost control of yourself.
Are you in it for the right reasons?
Do you want to trade in FX for the right reasons? We all know successful people and most of them are successful because they love what they do. If you’re in this business because you simply want to make money, or want to buy a new boat or house, then you are not in it for the right reasons. You want to enjoy what you do and need to want to learn from your mistakes.
Stubborness and lack of flexibility
We have to embrace the learning experience. The market isn’t against you and it doesn’t care. Your stubbornness is just a game against yourself. To be a good trader we need to learn from our mistakes. We all have them and as much as you know and have had a bit of experience in the market, it is these mistakes that are going to give us the best lessons and learning experiences. From here we can be a better trader and avoid these mistakes in the future.
Adversity to risk
FX is a high-risk game. If we can’t deal with the consequences of taking a loss then I firmly believe you shouldn’t be in this business. We have to take those losses to reap the rewards. The idea is to simply have a system in place to help minimise the chance of these losses happening. Once we have developed a methodology in our trading, we are able to move on from these losing trades. We will not dwell on the loss of an individual trade in the faith that we know we have a system that actually works.
Another thing that people should take on board is to never take a loss personally. The market doesn’t know or care about your position. Think about a structured trade plan, research, always be prepared for what to do when you lose money. It’s very important to think about what will happen when your trade goes well, but really the main point to focus on is to think about what you’re going to do when your trade starts going wrong. Have a firm plan in place that you stick to.