Focus on The Process and Steady (profits) As She Goes!

Whilst chatting online last week to another student who had recently completed a personal mentorship programme with Sunil Mangwani, I asked how their trading was going?

The answer came back, rather melancholy, that ‘I’ve only made XY% profit this year’.   To which my reply was great, that’s a neat profit!  The ensuing online chat was then along the lines that constant steady profits no matter how big or small when compounded grows ones trading account nicely over time.

When starting out in the world of Forex if you can consistently make profits, whatever their size, then you are moving in the right direction.  So if you are learning how to trade Forex, then set your overall expected profit targets at a realistic level and over time these will be exceeded and you can set a higher bench mark for yourself.  The more pressure you put on yourself to make money, the less well you are likely to trade.  Far better to focus completely on the process of trading than on the expected outcomes, as they will take care of themselves if you can get the process right and down to a fine art.

Top Trading Tip:  Focus on the process of trading such as implementing your chosen strategy to perfection, along with good trade planning, risk and money management and the profits should take care of themselves.

Less is More and More is Less – Don’t Over Trade!

When I first started trading I felt I had to be in a trade or I was going to miss out on a move and as result I found myself over exposed to the markets even though I was managing my risk on each trade properly.

I soon began to realise that over trading can kill your account quite rapidly.

I now plan all my trades down to the last detail and only take those which appear to have a higher probability of succeeding.  Sure I still have losing trades but the profits from my winning trades by far offset those losses, which are inevitable.

So following on from my previous Blog about trying to have the Patience of a Saint and the Discipline of a Soldier when trading the markets, if we apply those ideas to our trading and stick rigorously to our Trading Plan, Trade Plan, Strategy and Risk & Money Management we should be able to stop ourselves from Over Trading.  After all we need to preserve our trading Capital to take best advantage of those moments in the market when we have total clarity of the likely direction and are thus in for the kill at the right moment.

These events tend to take place when we get what I and Sunil call confluences taking place, where everything seems to come together at one point in time across several timeframes, but more on that topic in a future blog article.

So even if you only take one good really good well planned trade a week it will most likely pay well and you will minimise your losing trades and on balance will see your account grow faster.

Top Trading Tip:  Try not to take impulsive, unplanned trades and don’t Over Trade and kill your account, pick and plan your trades carefully, as Less really can mean More.

Don’t Force It – Patience Pays

A common problem encountered by novice retail traders is their overwhelming desire to trade, no matter what the market is doing.  They switch on their laptop or PC check their charts and expect to get into a trade and make some money during the time they have allotted.  Many end up ‘Forcing’ a trade and this approach can lead to losses.

We have found that waiting for a quality set up and entry signal pays greater dividends over time.  Yes, you will be in fewer trades, but that doesn’t mean less profits, in fact the opposite is nearer the truth of ‘Less can mean More’.

To be successful with this approach, as Sunil Mangwani so often says and constantly reminds me, you need the ‘Patience of a Saint & the Discipline of a Soldier’ to be a consistently profitable Forex trader.  Waiting for a quality set up may mean you miss what seems like a potentially good trade but it also means you don’t get sucked into a losing trade.  If a slightly dodgy set up occurs and goes in the desired direction, don’t chase price, wait for a decent pull back and then join the party but when you take that trade make sure it is a quality set up based upon one of your chosen, tested and proven strategies.

Endless entries into poor trades will eventually cause one’s trading account to be quickly depleted.
So try and think of yourself as a soldier waiting in ambush or a wild animal waiting for its prey to come by and then at the right moment pounce and execute the trade.  For both these examples failing to pick the right moment could mean the difference between life and death so try trading as if your life depended upon it and bring some real focus, patience and discipline to your trading and let me know if it makes a difference.

Top Trading Tip: It is better to be Patient and wait for a quality trade set up to occur before taking a trade than being impatient and trying to force a trade.  Try and be patient and disciplined in your trading as this should reap dividends over time.  Remember ‘Patience of a Saint and the Discipline of a Soldier’ and lie in wait for your foe!  Less can really mean More.

FOREX-CRAZY.COM

Who or What Is Pulling Your Strings?

When you are trading do your emotions drive your actions?  Do you chase price, only to have the market turn as soon as you pull the trigger? Do you bail out of a trade as soon as it looks like it could go against you? If so you are probably at the mercy of the 2 key emotions that can stop you becoming a successful consistently profitable trader, and they are FEAR & GREED.  Fear can lead HESITANCY which can make you fail to take a potentially good trade and Greed can lead you to take on too much Risk and make poor unplanned entries and eventually probably blowing up your account.  Lastly the result of poor trades due to all the above can lead to UNCERTAINTY, with you wondering what the heck is going on in the markets

The best traders have learnt to control their emotions when trading.  How have they achieved this?  By knowing their chosen strategies inside out, backed up by a robust Trading Plan and historic data which proves their strategy works, if implemented with constancy and accuracy over a period of time.  If ever uncertain about the markets or a particular trade then check your plan and if necessary stay out!

All traders have losses but the best traders minimise their losses by precise implementation of their strategies and using strict Risk and Money Management.  Having such a robust Trading Plan and following it to the letter, provided the right market signals are given, leads to unemotional trading, but you do need to understand and work on one’s own Psychological Trading profile.

My own Psychological Trading profile is that I have an impulsive nature when trading and thus I have worked on developing my trade planning, patience & discipline, but more on the latter two topics in a future blog.

If you need help with any of the any of the above here are a few pointers:

• Great Book on Trading Psychology:    
• Personal Mentorship & Workshops
• Trading Beliefs

Top Trading Tip: Try and plan down to the last detail every trade you take as this can take the emotion out of the equation.  Try and focus on the process and not on potential gains or losses.  Also give some thought to and try and identify and analyse what your own Psychological Trading Profile is, as once recognised, you will be half way to addressing it and improving your trading.  And If you are ever in doubt then stay out!

Stop, Stop, Stop!

It is often said that ‘the best Stop is a great entry’, meaning that as soon as you enter the market price moves in the direction of the trade and never goes near your Stop.  This takes time and practice to achieve but is a laudable target to aim for.

I also remember being at an International Traders Conference a few years back and trading live with some top traders and as the novice traders inevitably asked the question ‘Where would you put your Stop?’ you could see the expert’s eyes glaze over!

So to answer that novice’s question and put it to bed, here goes ……

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• Firstly, I recommend always use a Stop Loss to manage your Risk.

• Secondly, it depends upon what strategy you are using and what that requires, which you will, of course, have back tested a thousand times over before trading live. 

• Thirdly, your Stop Loss should be placed just beyond a particular technical level, plus an allowance for the spread, beyond which your trade plan is wrong and you definitely want out.

• Fourthly the size of the required Stop will dictate (along with your account size) your position size.  So if you have a tight Stop your position size can be larger, but if you have a large Stop you will probably have to reduce your position size, so that your risk on any one trade remains fairly constant.

A technical level is above or below a key support or resistance level, beyond a pivot level or a key fib level and so on, but a point beyond which you know your trade was in the wrong direction.  If you can’t manage you risk because the Stop is too big then stand aside and wait for a better setup. If you need help with these concepts then maybe you could benefit from attending our next Forex Mastery 2 Day Workshop in London.

Top Trading Tip: Always use a Stop Loss and place it beyond a technical level (also allowing for spread) and manage your risk by altering your position size to match your Stop size, so that your Risk remains fairly constant for every trade.  If you can’t do that because your Stop is too big, then stand aside and wait for a better set up to occur.

Go Go Go & Get Organised

I have found setting up and sticking to a daily routine with regards to trading can pay dividends.  Establishing a routine means getting organised with regards to your trading.  So what sort of things can you do to get organised and establish a trading routine?

• If you get up early for a particular pre-market and market opening then when you wake switch on your laptop and internet and log on, whilst everything loads, go and do whatever your morning routine is.  It may help to be washed/shaved/showered and dressed, breakfasted and watered before you start.  This will help the brain and how you feel.
• Make sure you have your Trading Plan and Check Lists available & use them.
• Manage any open trades by moving stops and taking profits/cutting losses etc.
• Check the likely news flow for the day to make sure you don’t get caught out.
• If there are certain strategies you employ on certain timeframes, then set up templates if you use MT4, and then scan the currency pairs for any potential trade setups.  This quick scan routine can get you focussed in quickly on the currency pairs that matter.
• Once your quick scan is complete then conduct your Top Down/Bottom up analysis and apply any filters you use to establish if any of the potential trades are worth taking.
• Then plan out any chosen trades that pass the filters and analysis test, making sure you know the market context in which the trade will be taken, if the entry criteria are met.  Remember the 5Ps (trade context; risk:reward; entry; stop; profit targets etc) before entering the market.
• If the identified trades are some way off entry then set up alerts if you use MT4.
• Next comes trade execution, make sure you follow your plan.
• Take a screen shot of the trade and file for reference.
• Annotate your records and note any specifics.
• During your chosen trading session plan some breaks when the market goes quiet and there is no news expected and keep hydrated and have a snack if needed.
• On quiet days go do something else or hit that list of back testing to be done, or go over your performance thus far or research an aspect of trading that you’d like to know more about – just Google or Bing it!
• At the end of the day or even weekly keep a journal record of your thoughts and feelings with regard to your trading.

Top Trading Tip: Establish a daily trading routine and get organised, treat your trading like any other business.  Keep records and review your performance and aim to improve on identified  weak areas. If you need help the maybe we can do that

The 5Ps!

Over time I have learnt that the best trades often occur as a consequence of the effort and attention to detail that I put into the planning stage, prior to pulling the trigger.

A great acronym for this, which can be applied to life in general, is the 5Ps or PPPPP:

Prior Preparation Prevents Poor Performance!

So before you make that impulsive trade and just jumping into the market stop and think about the 5Ps, it may just prevent you from blowing up or seriously damaging your account.  If you need help in developing into a consistently profitable trader then we can help you.

Top Trading Tip: Before taking any trade, ask yourself have you planned it out, are you following your (back tested) strategy to the letter and do you understand the risk you are taking and the potential reward you may gain?  Remember the 5Ps!

Safe trading!

Martin W

Forex-Crazy and FxTribe