That high leverage is dangerous is well-known to most people, but it is not unusual to make spectacular profits with a highly leveraged account, just as it is not unusual to throw three heads in a row during a coin-tossing competition. The sad fact is that even those spectacular profits are highly likely to be wiped out if the trader continues to make bets utilizing high leverage, as we examined in the previous articles on gambling strategies in forex. The inability of the trader to get rid of high leverage after a bout of successful trades is related to a concept called the “gambler’s conceit”. The gambler’s conceit is not caused by high leverage only, but we will limit our discussion of this subject to high leverage since it’s so common among traders.
Many of us have that genie beside our ears who whispers to us all the time that risking too much is not a problem because we are wise enough to exit a risky bet while still running profits. High leverage may be wrong, undercapitalization may be dangerous, but our trades have so far been profitable, and as soon as the profits diminish or losses are being registered, we will close our positions, and exit the game, be it gambling with cards or gambling with forex.
It's very convincing. After all, why would one want to risk losing the profits of such a risky practice as high leverage? What is the point of continuing to practice a losing strategy even after your profits have been halved by a string of losses?
Many beginning traders who make a lot of money randomly in the forex market in a short period of time are convinced that it is their method, style, attitude that makes those large profits possible. On the other hand, the experience and knowledge possessed by a trader at the start of his career is insufficient for practicing self-control or employing money management methods successfully. Thus, in many cases (but not always), the doubling, or tripling of the account of a new trader is just a chance event, regardless of the rationalizations which the trader uses to explain his situation. What is more, even in the case of a highly successful, highly disciplined trader, the occasional very large profits are not at all a sign of increased efficiency or better understanding: There’s nothing extraordinary about the occasional extremes in a trader’s career. Instead of emphasizing them too much, and thinking about what he did right or wrong to deserve such large profits or losses, the seasoned trader will evaluate them for what they are: statistical anomalies on which neither a career, nor a trading strategy can be based.
The Gambler’s conceit prevents such a rational explanation. Instead of understanding the gains after highly-leveraged bets as random developments, the trader ties these results to his own exceptional luck, skill, or insight in evaluating the market action, or to his superior trading strategy, and convinces himself that he will be able to terminate his trading activity due to his controlling power over his trading results. With such false confidence, when the inevitable large losses occur he will ponder on what went wrong with his trade, which indicator, which scheme he needs to revise and refine, instead of accepting and understanding that gains on highly leveraged bets are illusory, and unlikely to remain with him permanently. When a peer confronts him about the unusually high leverage of his trades, and his irrational expectation that he can keep profiting with such high risks, he will protest by mentioning his past successes.
In fact, gains on a highly leveraged account have the potential to be even more destructive than losses. Losses will teach the trader to be humble, and will lead him to revise his methods. Gains, on the other hand, will addict him to his errors. Sadly, such an addiction can only be broken by the pain of a totally wiped-out account sometimes. Fortunately for you, we’re here to warn you about the dangers associated with this risky practice.
The best remedy of the gambler’s conceit is avoidance of the addiction entirely. Instead of consoling yourself that you will give up the practice once the profits are gone, convince yourself to never begin the unhealthy game. Do not aim at exceptional results; aim at consistency. But if you find that you’re already deep into the game of high leverage and risky practices, our advise to you is to cut it off right now, without waiting for the losses to show up. Just close the chapter, quit trading for a while, and a few weeks later, or maybe a month, restart your career by practicing sane and sensible strategies this time. Not only will you find intellectual satisfaction at having overcome a dangerous addiction, you will also have a profitable path before yourself as you improve your skills, recognize your errors.
To repeat, brief periods of enormous profits is never the purpose of a successful trader. Such periods are always temporary, and the false confidence that becomes instilled your psyche is often destructive to your career as a trader: aim at consistent profits, do not aim at high very high profits.
Tuesday
Trade Timing — how to decide entry/exit points.
If money management is one half-of trading, determination of entry/exit points constitutes the other half. No amount of successful analysis will be useful if we can't determine good trigger points for our trades. Even if we know that the value of a currency pair will appreciate in the future, unless we have a clear conception of when that appreciation will occur, and where it will end, our knowledge is unlikely to bring us great profits. Similarly, even in the unfortunate situation where the analysis that justified the opening of a position is false, mastery of trade timing might allow us to register positive returns due to the high volatility in the forex market. Clearly, we need powerful strategies to help us calculate the best trigger values for a trade justified by careful and patient analysis.
We have discussed the various ways of creating stop-loss orders on this website, and in this article we'll continue on that theme by handling this subject in a more general way by identifying some principles for the management of our positions. The opening and closing of a position are the most frequent activities of any trader; it is obvious that this should also be the subject to which we devote the greatest attention. However, as in the case of a doctor or an engineer, the final task that is performed routinely and most frequently depends on certain skills, education and study which for the most part lack any obvious relationship to it. Thus, it is important to note that the study of trade timing is one of the final lessons for which the trader must prepare himself. The other courses that would lead us to this subject, such as technical and fundamental analysis, may not always have clearly definable benefits at first sight, but they pave the way to our ultimate goal of timing our trades successfully and profiting from them.
Before going into the technical aspects that complicate our trading decisions, we must say a few words on the necessity of emotional control in ensuring a successful and meaningful trading process. Let's repeat again, as we've done many times on this site, that without proper control over our feelings not a single word in this text would help us to trade profitably. The psychological endurance necessary for achieving a successful trading career is an important precursor to both money management and trade timing. Consequently, even before beginning the study of trade timing, we must concentrate our energies toward the goal of understanding and restraining our emotions, and gaining control over the psychological aspects of decision-making in a trading career. The Main Principle of Trade Timing
The first principle of trade timing is that it’s impossible to be certain about both the price and the technical pattern at the same time. The trader can base his timing on the actualization of a technical formation, or he can base it on a price level, and he can ensure that his trade is only executed when either of these events occur, but he cannot formulate a strategy where his trade will be executed when both of these occur at the same time. Of course it is possible that by chance a predefined price level is reached precisely at the time that the desired technical pattern occurs, but this is rare, and unpredictable.
Supposing that the trader is desiring to buy one lot of the EURUSD pair, he has the option of basing his entry point on the realization of a technical pattern, or the reaching of a price. For example, he may decide that he’ll buy the pair when the RSI indicator is at an oversold level. Or he may decide, for money management purposes, that he’ll buy it at 1.35, to reduce his risk. Similarly, he may choose to place his stop-loss order at the price point where the RSI reaches 50, or he may choose to enter an absolute stop-loss order at 1.345, to cut losses short. But due to the unpredictability of the price action it is not possible to define an RSI level, and a price level at the same time for the same trade.
We may examine this further on a chart.
This is an hourly chart of the GBPUSD pair between 5 December 2008 and 5 January 2009. We’re supposing that we opened a long position at around 1.5, where the RSI registered an extreme value at 24. In this case we expect to close our position when the value of the indicator rises above 50, to acquire healthy profits while not risking too much by staying in the market for long. We could have alternatively placed a real stop-loss order at 1.48, for example, but we decide not to do so because of the high volatility in the market. However we do expect that if the RSI rises, we will not need a stop-loss order, because the price would have been at a higher level indicating a profit, since it’s supposed to rise with a rising price.
But such is not the case, as we can see in the picture above. When the RSI had risen to 49.35 on the chart, which is a close enough point for our goal on the indicator, our position is, surprisingly, in the red. Not only do we fail to match our stop-loss to a lower price, but we actually match a lower price with our take profit point, which was 50 as mentioned. To put it shortly, the indicator converged on the price action, contrary to our expectation that it would move in parallel.
So what is the use of technical analysis in timing our trades? Most importantly, how are we going to ensure that we don’t suffer great losses when divergences on the indicators appear and invalidate our strategy, and blur our power of foresight?
The potential of the divergence/convergence phenomenon for creating entry points has been examined extensively by the trader community, but its tendency to complicate the exit point has not received much attention. But it is just one of the many aspects of trade timing that is complicated by the unexpected inconsistencies which appear between price and everything else. So if we had the choice, we would prefer to exclude price from all the calculations made in order to reduce the degree of uncertainty and chaos from our trades. Unfortunately that is not possible, as price is the only determinant of profit and loss in our trades.
In trade timing, the trader has to take some risk. The best way of taking the risk and avoiding excessive losses is using a layered defense line, so to speak, against market fluctuations and adverse movements and we discussed how to do this in our article on stop loss orders. The best way of taking the risk and maximizing our profits is the subject of entry timing, and the best way of doing so is using an attack line that is also layered. What do we mean by that?
In ancient warfare, it was well-understood that the commander must keep some of his forces fresh and uncommitted to exploit the opportunities and crises that arise during the course of a battle. For instance, if the commander had run out of cavalry reserves when the enemy launched a major charge against one of his flanks, he might have found himself in an extremely unpleasant situation. Similarly, if he had no rested and ready troops to mount a charge at the time his opponent demonstrated signs of exhaustion, a major opportunity would have been lost.
The layered attack technique of the trader aims to utilize the same principle with the purpose of not running out of capital at the crucial moment. In essence we want to make sure that we commit our assets (that is our capital) in a layered, gradual manner for the dual purpose of eliminating the problems caused by faulty timing, and also outlasting the periods associated with greatest volatility. By opening a position with only a small portion of our capital, we ensure that the initial risk taken is small. By adding to it gradually, we make sure that our rising profits are riding a trend that has the potential to last long. Finally, by committing our capital when the trend shows signs of weakness, we build up our own confidence, while controlling our risk properly by placing our stop-loss orders on a price level that may bring profits instead of losses.
To sum it up, the golden rule of trade timing is to keep it small, and to avoid timing by entering a position gradually. Since it is not possible to know anything about the markets with certainty, we will seek to have our scenario confirmed by market action through gradual, small positions that are built up in time. This scheme will eliminate the complicated issues associated with trade timing, while allowing us great comfort while entering and exiting trades.
Of course, there are cases where the risk/reward ratio is so positive that there is no great necessity for gradual entries. In such cases, the exact price where the position is opened is not very important. So we will not be discussing such situations in this article.
To avoid this problem, the role of trade timing must be minimized, at least at the beginning of a trader’s career. And this can only be achieved if the size of the position is built up along with the trader’s confidence in it, and stop-loss orders are created where the closing of the position may result in gains, albeit small. All these factors lead us to consider the gradual method to the best one for trade timing, while minimizing our risk.
We have discussed the various ways of creating stop-loss orders on this website, and in this article we'll continue on that theme by handling this subject in a more general way by identifying some principles for the management of our positions. The opening and closing of a position are the most frequent activities of any trader; it is obvious that this should also be the subject to which we devote the greatest attention. However, as in the case of a doctor or an engineer, the final task that is performed routinely and most frequently depends on certain skills, education and study which for the most part lack any obvious relationship to it. Thus, it is important to note that the study of trade timing is one of the final lessons for which the trader must prepare himself. The other courses that would lead us to this subject, such as technical and fundamental analysis, may not always have clearly definable benefits at first sight, but they pave the way to our ultimate goal of timing our trades successfully and profiting from them.
Before going into the technical aspects that complicate our trading decisions, we must say a few words on the necessity of emotional control in ensuring a successful and meaningful trading process. Let's repeat again, as we've done many times on this site, that without proper control over our feelings not a single word in this text would help us to trade profitably. The psychological endurance necessary for achieving a successful trading career is an important precursor to both money management and trade timing. Consequently, even before beginning the study of trade timing, we must concentrate our energies toward the goal of understanding and restraining our emotions, and gaining control over the psychological aspects of decision-making in a trading career. The Main Principle of Trade Timing
The first principle of trade timing is that it’s impossible to be certain about both the price and the technical pattern at the same time. The trader can base his timing on the actualization of a technical formation, or he can base it on a price level, and he can ensure that his trade is only executed when either of these events occur, but he cannot formulate a strategy where his trade will be executed when both of these occur at the same time. Of course it is possible that by chance a predefined price level is reached precisely at the time that the desired technical pattern occurs, but this is rare, and unpredictable.
Supposing that the trader is desiring to buy one lot of the EURUSD pair, he has the option of basing his entry point on the realization of a technical pattern, or the reaching of a price. For example, he may decide that he’ll buy the pair when the RSI indicator is at an oversold level. Or he may decide, for money management purposes, that he’ll buy it at 1.35, to reduce his risk. Similarly, he may choose to place his stop-loss order at the price point where the RSI reaches 50, or he may choose to enter an absolute stop-loss order at 1.345, to cut losses short. But due to the unpredictability of the price action it is not possible to define an RSI level, and a price level at the same time for the same trade.
We may examine this further on a chart.
This is an hourly chart of the GBPUSD pair between 5 December 2008 and 5 January 2009. We’re supposing that we opened a long position at around 1.5, where the RSI registered an extreme value at 24. In this case we expect to close our position when the value of the indicator rises above 50, to acquire healthy profits while not risking too much by staying in the market for long. We could have alternatively placed a real stop-loss order at 1.48, for example, but we decide not to do so because of the high volatility in the market. However we do expect that if the RSI rises, we will not need a stop-loss order, because the price would have been at a higher level indicating a profit, since it’s supposed to rise with a rising price.
But such is not the case, as we can see in the picture above. When the RSI had risen to 49.35 on the chart, which is a close enough point for our goal on the indicator, our position is, surprisingly, in the red. Not only do we fail to match our stop-loss to a lower price, but we actually match a lower price with our take profit point, which was 50 as mentioned. To put it shortly, the indicator converged on the price action, contrary to our expectation that it would move in parallel.
How to time our trades: Layered trade orders
What are the lessons derived from this example? First, the correspondence between technical values and actual prices is weak. And as we stated in the beginning, it’s not possible to base our trade timing on a price and an indicator at the same time. Second, technical indicators have a tendency to surprise, and how much a trader relies on them will depend on both his risk tolerance and trading preferences. Lastly, technical divergences, while useful as indicators, can also be dangerous when they occur at the time when we are willing to realize a profit.So what is the use of technical analysis in timing our trades? Most importantly, how are we going to ensure that we don’t suffer great losses when divergences on the indicators appear and invalidate our strategy, and blur our power of foresight?
The potential of the divergence/convergence phenomenon for creating entry points has been examined extensively by the trader community, but its tendency to complicate the exit point has not received much attention. But it is just one of the many aspects of trade timing that is complicated by the unexpected inconsistencies which appear between price and everything else. So if we had the choice, we would prefer to exclude price from all the calculations made in order to reduce the degree of uncertainty and chaos from our trades. Unfortunately that is not possible, as price is the only determinant of profit and loss in our trades.
In trade timing, the trader has to take some risk. The best way of taking the risk and avoiding excessive losses is using a layered defense line, so to speak, against market fluctuations and adverse movements and we discussed how to do this in our article on stop loss orders. The best way of taking the risk and maximizing our profits is the subject of entry timing, and the best way of doing so is using an attack line that is also layered. What do we mean by that?
In ancient warfare, it was well-understood that the commander must keep some of his forces fresh and uncommitted to exploit the opportunities and crises that arise during the course of a battle. For instance, if the commander had run out of cavalry reserves when the enemy launched a major charge against one of his flanks, he might have found himself in an extremely unpleasant situation. Similarly, if he had no rested and ready troops to mount a charge at the time his opponent demonstrated signs of exhaustion, a major opportunity would have been lost.
The layered attack technique of the trader aims to utilize the same principle with the purpose of not running out of capital at the crucial moment. In essence we want to make sure that we commit our assets (that is our capital) in a layered, gradual manner for the dual purpose of eliminating the problems caused by faulty timing, and also outlasting the periods associated with greatest volatility. By opening a position with only a small portion of our capital, we ensure that the initial risk taken is small. By adding to it gradually, we make sure that our rising profits are riding a trend that has the potential to last long. Finally, by committing our capital when the trend shows signs of weakness, we build up our own confidence, while controlling our risk properly by placing our stop-loss orders on a price level that may bring profits instead of losses.
To sum it up, the golden rule of trade timing is to keep it small, and to avoid timing by entering a position gradually. Since it is not possible to know anything about the markets with certainty, we will seek to have our scenario confirmed by market action through gradual, small positions that are built up in time. This scheme will eliminate the complicated issues associated with trade timing, while allowing us great comfort while entering and exiting trades.
Of course, there are cases where the risk/reward ratio is so positive that there is no great necessity for gradual entries. In such cases, the exact price where the position is opened is not very important. So we will not be discussing such situations in this article.
Conclusion
In surveys on what traders find most difficult about trading, timing often comes up as the top issue. Since timing is the only variable that directly influences the profit or loss of a position, the emotional intensity of the decision is great. While it is expected that every successful trader will achieve a degree of emotional control and confidence, the pressures of trade timing are often so severe for many beginners that the process that leads to a calm and patient attitude to trading never has a chance to develop.To avoid this problem, the role of trade timing must be minimized, at least at the beginning of a trader’s career. And this can only be achieved if the size of the position is built up along with the trader’s confidence in it, and stop-loss orders are created where the closing of the position may result in gains, albeit small. All these factors lead us to consider the gradual method to the best one for trade timing, while minimizing our risk.
Thursday
Why Don't You Get a Life.
Trading foreign currencies isn’t the easiest business to get involved in, especially for beginners or those with limited trading experience. Your most successful traders undoubtedly have several years combined experience in the Forex and other financial markets. Expert traders and those traders that make a living trading the Forex often advocate that beginners take a methodology similar to students beginning an advanced degree program at any one of the different types of professional schools (e.g. vocational, college or university, graduate school).
My time served in the arena of higher education has confirmed that moving ahead in such a program requires some level of commitment to reading, studying, and maybe even attending a study session related to the given field. To move to the top of that class, however, requires even greater discipline and more time committed to learning the course curriculum. I gained this “knowledge” strictly by not doing than by doing. I left the “doing” up to the “smart” kids in class; I won’t lie. At that time, the level of educational excellence at which those kids were working was higher than what I was willing to work for. And as you can image, the results at year end were justified. The smart kids were still smart kids, and I was, well, not. And I hated them for it. Funny how that works, huh?
Was I right to hate the “smarties”? Sure, why not! They got the good grades! They had the good hair! They studied hard and long. They gave up evenings and weekends of partying and fun for… the library. They actually read the homework assignments. I mean, what’s not to hate?. They probably attended Harvard or Princeton, and then went on to create a social networking site, which they sold to the highest bidder for billions, only to... let me stop my ranting.
Like school, learning to trade currencies is very similar in the type of commitment required to be successful. The best and the brightest of the Forex world have put in the time and effort, gaining invaluable skill, and becoming seasoned traders. Going into school, medical and law students know what’s required to succeed in the program, so limiting their social lives to better focus on developing their skills becomes a necessity. All efforts are centered on learning about their field, often at the sacrifice of hanging out with peers or living the “normal” life. The life balance is tipped dramatically in favor of work over play.
But is this balance the only way to become a successful Forex trader (or pediatrician, or nuclear engineer, or angio-radiologic technologist), one who is at the top of their game? Would you be mad at me if I said “Yes, it’s the ONLY way!”? One school of thought thinks so.. My thought is that it depends on the level of happiness in your life you want to retain during your educational journey.
Forex trading can be time consuming when you factor in the beginner’s learning curve, strategy creation, demo trading, learning to read, back testing, figuring out how to use your mouse and the list goes on. The more time you spend learning Forex, the more you are exposed to the workings of the Forex market. With time you start to build a good skill set for trading, and your experience grows with every trade. But with time spent learning and trading Forex, time is taken away from something else – your family, your friends, your other job, your toe nails, your dog, your lawn, your social life. My answer – to each his (or her) own. There’s no right or wrong answer here, folks.
Yes, you’re money is on the line (that’s if you’ve taken that big step to trading real money), but that doesn’t necessarily translate into ALL OUT FOREX OPEN 24/7! The most successful traders will tell you that trading isn’t only about that winning trade, but it’s also about what you learn along the way. There’s the mental challenge of trading. There’s the benefit of learning how others make money trading foreign currency. There’s the excitement of learning new investment strategies. It’s the process, man, the process!
You can be dedicated to learning and developing your skills as a trader, but a balance must be struck between your trading and the rest of your life. Stress outside of your trading has a way of finding its way back in. Stay happy. Get a life.
Give me your thoughts in the comments section if you have time. Are you an addict or wish you were (Forex addict, that is)?
My time served in the arena of higher education has confirmed that moving ahead in such a program requires some level of commitment to reading, studying, and maybe even attending a study session related to the given field. To move to the top of that class, however, requires even greater discipline and more time committed to learning the course curriculum. I gained this “knowledge” strictly by not doing than by doing. I left the “doing” up to the “smart” kids in class; I won’t lie. At that time, the level of educational excellence at which those kids were working was higher than what I was willing to work for. And as you can image, the results at year end were justified. The smart kids were still smart kids, and I was, well, not. And I hated them for it. Funny how that works, huh?
Was I right to hate the “smarties”? Sure, why not! They got the good grades! They had the good hair! They studied hard and long. They gave up evenings and weekends of partying and fun for… the library. They actually read the homework assignments. I mean, what’s not to hate?. They probably attended Harvard or Princeton, and then went on to create a social networking site, which they sold to the highest bidder for billions, only to... let me stop my ranting.
Like school, learning to trade currencies is very similar in the type of commitment required to be successful. The best and the brightest of the Forex world have put in the time and effort, gaining invaluable skill, and becoming seasoned traders. Going into school, medical and law students know what’s required to succeed in the program, so limiting their social lives to better focus on developing their skills becomes a necessity. All efforts are centered on learning about their field, often at the sacrifice of hanging out with peers or living the “normal” life. The life balance is tipped dramatically in favor of work over play.
But is this balance the only way to become a successful Forex trader (or pediatrician, or nuclear engineer, or angio-radiologic technologist), one who is at the top of their game? Would you be mad at me if I said “Yes, it’s the ONLY way!”? One school of thought thinks so.. My thought is that it depends on the level of happiness in your life you want to retain during your educational journey.
Forex trading can be time consuming when you factor in the beginner’s learning curve, strategy creation, demo trading, learning to read, back testing, figuring out how to use your mouse and the list goes on. The more time you spend learning Forex, the more you are exposed to the workings of the Forex market. With time you start to build a good skill set for trading, and your experience grows with every trade. But with time spent learning and trading Forex, time is taken away from something else – your family, your friends, your other job, your toe nails, your dog, your lawn, your social life. My answer – to each his (or her) own. There’s no right or wrong answer here, folks.
Yes, you’re money is on the line (that’s if you’ve taken that big step to trading real money), but that doesn’t necessarily translate into ALL OUT FOREX OPEN 24/7! The most successful traders will tell you that trading isn’t only about that winning trade, but it’s also about what you learn along the way. There’s the mental challenge of trading. There’s the benefit of learning how others make money trading foreign currency. There’s the excitement of learning new investment strategies. It’s the process, man, the process!
You can be dedicated to learning and developing your skills as a trader, but a balance must be struck between your trading and the rest of your life. Stress outside of your trading has a way of finding its way back in. Stay happy. Get a life.
Give me your thoughts in the comments section if you have time. Are you an addict or wish you were (Forex addict, that is)?
The Clock is Ticking.
Forex trading, even when done on a full-time basis, demands a lot of time and mental and physical energy. It's equivalent to a brand new job or the new "thing" you decide to spend your life doing. For some, it's your first time really exposed to this industry, let alone anything investing related. Sure, you've done the 401K thing at work, but that was multiple-choice. You do your best to read and learn everything you can get your hands on, when you have the time. Many beginners, however, underestimate just how much there is to learn about the markets, indicators, and economics in general. And get information overload from Day 1.
And lets be realistic - most of you aren't trading full-time. You've got a "day" job and more than likely a family to manage. Your trading consists of the few hours during the week and weekend when you can get away from your hectic life and focus on all things Forex. To help yourself, many of you start your trading day (or night) by formulating a To-Do or Action Items list.
You write out all the things you expect to get done by the end of the night, next week, and next month. You have some things that need immediate attention - those you'll tackle today. There are some things that need to get done now, but they're very time consuming - you'll try to fit those in today. Finally, you list the "wants - not needs" that aren't critical at this very moment, but are still important enough to eventually need completing.
You start on the first task, usually something quick and easy - sharpen a box of new pencils, install a new trading software platform, or peruse the beginner's forums. You complete the small task with lightning quickness and you move on to the next task that also needs immediate attention. Halfway through the next task, the phone rings.
"Hey, Mom. What a surprise!" Geez, we just talked last week. "Sure, I always have time."
45 minutes later you're off the phone and back to work. "Wow," you exclaim to yourself. "Where's the day going?" So, you get back on task and back to what you were doing. An hour or so later you've satisfied your immediate worries/tasks and you're on to one of the more important ones - like familiarizing yourself with Japanese Candlesticks at your most favorite and oh-so-funny Forex web site.
"Oh, this won't take too long. Candlesticks sound easy."
But do you ever get through an hour of learning candles? Nope, usually because the phone rings, or you feel the need to check your email, or the kids come a screaming about after school sports, or the boss calls needing a revision of the TPS report immediately, or dinner needs cooking, or something. The corporate world calls it "fire fighting," or "putting out fires." You've got your daily task list, but unforeseen "fires" erupt and need immediate attention. You're taken away from the current work load, breaking your focus and momentum. For others (myself included), not effectively managing all the items on our plate gets us into trouble. And this could be due to distraction (like the 18 hours of Law and Order televised daily, or the season premiere of American Idol), procrastination or just pure pressure to meet a deadline.
We need help!
Effective time management skills and having realistic expectations both play an important role in your trading development. A trading strategy has to be well planned, which usually mean hours spent reading journals, examining financial reports, and deciphering charts. And while the experience and knowledge you gain from doing each one of these tasks does play a role in the success of your trading plan, you'll soon realize that it gets tough spending too much time completing each one. With the recent discovery that a typical day only comprises of 24 hours, science tells you that you can only do what you have time to do, and your time is up! Your body is next to respond to your nonstop need for production by shutting down completely. Your body will only expend as much energy as you give it before needing a recharge. Unless, of course, you're a robot!
Expectation is important to keep under control because expectation can work for you or against you. Expectations set too high do a great job at creating pressure. When you're already burdened with too much to do and then pressured on top of that, anxiety kicks in and takes over your spin. You sit there biting your nails, thinking off all the things that need to get done.... yesterday, and nothing gets done! I know you really think you can back-test your latest trading strategy for the past 30 years and read the most recently released market reports from all world banks before lunch, but a lowering of your expectations is in order. Putting too much pressure on yourself to get something or many things done will only lead to more stress on your mind and body. Be realistic in your approach and expectation, and you'll see the difference in your productivity.
"Why don't you go do something productive with yourself," yelled my mother so lovingly, right before she chased be away from the television with her slipper.
How do you determine how much time to spend on formulating a trade or strategy? Honestly, there isn't one right answer. You've just got to be realistic about the time you have available to spend on the trade. Sure, reading ten trading books is beneficial to your learning, but reading them all at the same time doesn't work for most. You must realize your currently work load and prioritize those things that will be the most beneficial to your learning at that moment.
Which trading ideas or strategies do you follow? Many times you put together a great strategy that is highly successful but the prep time is mind-boggling. You have another strategy that doesn't return as well but is easier to execute. It's a balancing act where you have to decide whether dedicating large amounts of time to high ROI trades is worth it. The clock is definitely your enemy when you're just getting started in Forex. But getting more trades under your belt will be more beneficial to your experience in the long run.
There are only so many hours in the day for you to work with. That makes time a valuable commodity. Make a conscious effort when creating goals and timelines to be realistic about the amount of work needed to fulfill those goals and the amount of time you have to spend to complete those goals. Profitable trades don't only happen to perfectionist and those traders who spend every waking hour researching and testing. It is sometimes necessary to bring things into focus and down to eye level, out of the clouds. You can keep that big picture in your wallet, but remember not to place the bar too high that it can't be reached. Prioritize the tasks that will be most beneficial to your learning and keep things simple. In the end, success will only be another trade away.
And lets be realistic - most of you aren't trading full-time. You've got a "day" job and more than likely a family to manage. Your trading consists of the few hours during the week and weekend when you can get away from your hectic life and focus on all things Forex. To help yourself, many of you start your trading day (or night) by formulating a To-Do or Action Items list.
You write out all the things you expect to get done by the end of the night, next week, and next month. You have some things that need immediate attention - those you'll tackle today. There are some things that need to get done now, but they're very time consuming - you'll try to fit those in today. Finally, you list the "wants - not needs" that aren't critical at this very moment, but are still important enough to eventually need completing.
You start on the first task, usually something quick and easy - sharpen a box of new pencils, install a new trading software platform, or peruse the beginner's forums. You complete the small task with lightning quickness and you move on to the next task that also needs immediate attention. Halfway through the next task, the phone rings.
"Hey, Mom. What a surprise!" Geez, we just talked last week. "Sure, I always have time."
45 minutes later you're off the phone and back to work. "Wow," you exclaim to yourself. "Where's the day going?" So, you get back on task and back to what you were doing. An hour or so later you've satisfied your immediate worries/tasks and you're on to one of the more important ones - like familiarizing yourself with Japanese Candlesticks at your most favorite and oh-so-funny Forex web site.
"Oh, this won't take too long. Candlesticks sound easy."
But do you ever get through an hour of learning candles? Nope, usually because the phone rings, or you feel the need to check your email, or the kids come a screaming about after school sports, or the boss calls needing a revision of the TPS report immediately, or dinner needs cooking, or something. The corporate world calls it "fire fighting," or "putting out fires." You've got your daily task list, but unforeseen "fires" erupt and need immediate attention. You're taken away from the current work load, breaking your focus and momentum. For others (myself included), not effectively managing all the items on our plate gets us into trouble. And this could be due to distraction (like the 18 hours of Law and Order televised daily, or the season premiere of American Idol), procrastination or just pure pressure to meet a deadline.
We need help!
Effective time management skills and having realistic expectations both play an important role in your trading development. A trading strategy has to be well planned, which usually mean hours spent reading journals, examining financial reports, and deciphering charts. And while the experience and knowledge you gain from doing each one of these tasks does play a role in the success of your trading plan, you'll soon realize that it gets tough spending too much time completing each one. With the recent discovery that a typical day only comprises of 24 hours, science tells you that you can only do what you have time to do, and your time is up! Your body is next to respond to your nonstop need for production by shutting down completely. Your body will only expend as much energy as you give it before needing a recharge. Unless, of course, you're a robot!
Expectation is important to keep under control because expectation can work for you or against you. Expectations set too high do a great job at creating pressure. When you're already burdened with too much to do and then pressured on top of that, anxiety kicks in and takes over your spin. You sit there biting your nails, thinking off all the things that need to get done.... yesterday, and nothing gets done! I know you really think you can back-test your latest trading strategy for the past 30 years and read the most recently released market reports from all world banks before lunch, but a lowering of your expectations is in order. Putting too much pressure on yourself to get something or many things done will only lead to more stress on your mind and body. Be realistic in your approach and expectation, and you'll see the difference in your productivity.
"Why don't you go do something productive with yourself," yelled my mother so lovingly, right before she chased be away from the television with her slipper.
How do you determine how much time to spend on formulating a trade or strategy? Honestly, there isn't one right answer. You've just got to be realistic about the time you have available to spend on the trade. Sure, reading ten trading books is beneficial to your learning, but reading them all at the same time doesn't work for most. You must realize your currently work load and prioritize those things that will be the most beneficial to your learning at that moment.
Which trading ideas or strategies do you follow? Many times you put together a great strategy that is highly successful but the prep time is mind-boggling. You have another strategy that doesn't return as well but is easier to execute. It's a balancing act where you have to decide whether dedicating large amounts of time to high ROI trades is worth it. The clock is definitely your enemy when you're just getting started in Forex. But getting more trades under your belt will be more beneficial to your experience in the long run.
There are only so many hours in the day for you to work with. That makes time a valuable commodity. Make a conscious effort when creating goals and timelines to be realistic about the amount of work needed to fulfill those goals and the amount of time you have to spend to complete those goals. Profitable trades don't only happen to perfectionist and those traders who spend every waking hour researching and testing. It is sometimes necessary to bring things into focus and down to eye level, out of the clouds. You can keep that big picture in your wallet, but remember not to place the bar too high that it can't be reached. Prioritize the tasks that will be most beneficial to your learning and keep things simple. In the end, success will only be another trade away.
Positive Thinking Powers your Potential.
Being successful, whether it's as a Forex trader, a business owner, or even as a parent, takes a lot of personal development. Day after day you have to deal with many uncertainties, some known and many others unknown. You are continually tested by your surroundings (the currency market, your employees or coworkers, your children), and how you react before, during and after these challenges all play part in your success.
As currency traders we all have those days (or weeks) when things just don't go our way. Our losses are overshadowing our wins, and we can't seem to consistently win. We start to wonder if we can ever make any "real" money and if becoming a full-time trader will ever be realized.
"Why did I ever get into currency trading? It's nothing but a stress builder and a gigantic head ache. Who am I kidding? I think my hair is falling out!"
If you've been feeling this way and are asking yourself some of the same questions, it's time to sit down and work on your positive thinking. Any successful trader will tell you that he has made the mental decision to be as positive as possible in thinking, acting and doing, and that having a positive mind is critical in overcoming the setbacks brought on while trading.
So what can you do to become a better positive thinker?
Start off the morning by looking at yourself in the mirror and saying "I'm good enough, I'm smart enough, and gosh darn it, people LIKE me!" And say it just like Stuart Smiley from Saturday Night Live... with enthusiasm! No really, promoting yourself to YOU is a great first step in the right direction. It helps you get in the right mind set, and helps you to start your day thinking positive thoughts. If looking in a mirror scares you, I'm sorry...try just saying it out loud to yourself.
Next, observe your negative thoughts and understand that only you can change them. Once you start ridding yourself of those thoughts, you are thinking positively, while also creating a positive attitude. The market has its ups and downs. Your trading will have the same. Loses are inevitable. They happen to everyone.
Think and visualize yourself as already being a successful trader. Imagine that your trading experience allows you to easily notice changes in the market and react to them by making profitable trades. Imagine only positive results. Imagine the wealth you've created and the lifestyle it affords you. This type of thinking will help reinforce the ideas that first led you to the currency market and motivate you to stick with it.
Another easy method to assist you in becoming a positive thinker is to surround yourself with a positive environment. This can be your work space or the people around you. The world is filled with doubters and people who want to "help" you by destroying your dreams or shooting you out of the sky. Make it easier on YOU by surrounding yourself with other positive thinkers who reassure and support your Forex trading. And liven up your trading space so it's inviting and makes you want to be there. Maybe it's time to replace this crusty keyboard?
Also help yourself by being a positive talker to others and about youself. Speaking positively fills your head with positive thoughts and ideas. Negative self-talk only helps to hinder your potential as a trader and keeps you from growing.
Do your best to welcome the currency market's obstacles and view them as your opportunities for profits and success. Dealing with these obstacles will only help you to create a better trading experience. Small changes in the way you think about yourself, think about others and think about trading will go a long way in your overall success as a trader.
As currency traders we all have those days (or weeks) when things just don't go our way. Our losses are overshadowing our wins, and we can't seem to consistently win. We start to wonder if we can ever make any "real" money and if becoming a full-time trader will ever be realized.
"Why did I ever get into currency trading? It's nothing but a stress builder and a gigantic head ache. Who am I kidding? I think my hair is falling out!"
If you've been feeling this way and are asking yourself some of the same questions, it's time to sit down and work on your positive thinking. Any successful trader will tell you that he has made the mental decision to be as positive as possible in thinking, acting and doing, and that having a positive mind is critical in overcoming the setbacks brought on while trading.
So what can you do to become a better positive thinker?
Start off the morning by looking at yourself in the mirror and saying "I'm good enough, I'm smart enough, and gosh darn it, people LIKE me!" And say it just like Stuart Smiley from Saturday Night Live... with enthusiasm! No really, promoting yourself to YOU is a great first step in the right direction. It helps you get in the right mind set, and helps you to start your day thinking positive thoughts. If looking in a mirror scares you, I'm sorry...try just saying it out loud to yourself.
Next, observe your negative thoughts and understand that only you can change them. Once you start ridding yourself of those thoughts, you are thinking positively, while also creating a positive attitude. The market has its ups and downs. Your trading will have the same. Loses are inevitable. They happen to everyone.
Think and visualize yourself as already being a successful trader. Imagine that your trading experience allows you to easily notice changes in the market and react to them by making profitable trades. Imagine only positive results. Imagine the wealth you've created and the lifestyle it affords you. This type of thinking will help reinforce the ideas that first led you to the currency market and motivate you to stick with it.
Another easy method to assist you in becoming a positive thinker is to surround yourself with a positive environment. This can be your work space or the people around you. The world is filled with doubters and people who want to "help" you by destroying your dreams or shooting you out of the sky. Make it easier on YOU by surrounding yourself with other positive thinkers who reassure and support your Forex trading. And liven up your trading space so it's inviting and makes you want to be there. Maybe it's time to replace this crusty keyboard?
Also help yourself by being a positive talker to others and about youself. Speaking positively fills your head with positive thoughts and ideas. Negative self-talk only helps to hinder your potential as a trader and keeps you from growing.
Do your best to welcome the currency market's obstacles and view them as your opportunities for profits and success. Dealing with these obstacles will only help you to create a better trading experience. Small changes in the way you think about yourself, think about others and think about trading will go a long way in your overall success as a trader.
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