I hope you have all been trading/learning well.

I have been a bit quiet recently as I have been heavily concentrating on my trading and I have also taken up a new hobby (chess).

If you haven’t checked out my ‘Getting Started With FX’ page, I recommend you do as there are lots of free resources that you might find helpful and I will be adding more to the page as time goes on.

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The 5 Most Important Things That Improved My Trading.

One. Realising there is no single magic solution to trading profitably. It is essential that you develop the skills to come up with your own trade ideas and build up the confidence to trust those ideas.

There is no single profitable trading solution and no magic one size fits all strategy — some people like to use fundamentals, some people like use technical analysis and some people like to use a combination of both. You could have 5 people looking at the exact same pair and those 5 people could come up with the exact same trade idea (say short AUD), but the strategies implemented to get to that conclusion couldn’t be more different. That in itself is one of the things that makes trading so damn beautiful and so fascinating.

The way I like to approach the markets is by looking at trends, waves and recurring patterns that occur in the charts. There is a huge misconception that if you trade that way you must not be interested in what the FED is doing, what the RBA is doing, NFP, abenomics, etc. — But I actually really love that stuff!

The way I trade may not necessarily be to everyones taste, but it works for me as I am working with my eye for trends. And that’s what you need to do — you need to build a repeatable method that not only works with your trading personality, but also works with your tolerance for risk, your available capital and your lifestyle.

With that being said, there will be times when the trade setups your method generates do not fit with what everyone on your Twitter stream is saying, or with what Mr. Bla Bla who has been doing this as long as you have been breathing is saying, or with what Mr. George Soros is ‘apparently’ doing. It takes tremendous discipline to be able to shrug that influence off and go with your own ideas.

If you have ever read Market Wizards by Jack Schwager (it’s a book of interviews with successful traders and I highly recommend you buy it if you don’t own it already), you can see that even the top traders have had to deal with their trade ideas sometimes conflicting with what others think. Here are the three answers that have given me the courage and the motivation to trust my trade ideas and trade in a style that suits me:

Michael Marcus on Ed Seykota being short silver when everyone else was bullish:

‘Everyone else seemed to be bullish, talking about why silver had to go up because it was so cheap, but Ed just stayed short. Ed said, “The trend is down, and I’m going to stay short until the trend changes”. I learned patience from him in the way he followed the trend.’

Paul Tudor Jones on the best crude oil trader he knows being bullish when he was bearish:

‘Because he was bullish, I never went short. Then the market started to stall and one day he said, ‘I think I am going to go flat here’. I knew that instant – particularly given the fact that bullish news was coming out of OPEC right at that time – that crude oil was a low-risk short. I sold the hell out of it, and it turned out to be a great trade’.

Paul Tudor Jones on picking tops and bottoms:

‘Everyone says you get killed trying to pick tops and bottoms and you make all the money by catching the trends in the middle. Well, for twelve years, I have often been missing the meat in the middle, but I have caught a lot of bottoms and tops.’.

Two. Starting this blog improved my trading more than I ever anticipated it would and I highly recommend you do something similar (go incognito if it makes you feel better).

The thing about trading is that it can be very mind heavy at times and the everyday life stuff that we all have to go through can be equally as mind heavy as well. Therefore, I sometimes like to use this blog as a little venting mechanism in order to help clear my mind so that I can continue to make the best trading decisions possible.

When I started my blog a year and half ago, I started with writing little daily updates on why I thought AUD/USD & ASX moved the way it did that day and what was going on around the world. I also included my little thoughts on trading and I put the occasional trade up so that friends of mine could see my progress. Were my write ups always correct? No way! I am sure they were embarrassingly bad. But doing that little exercise improved my trading dramatically.

Three. Realising that just because you come up with a profitable strategy, it does not mean you will automatically have the patience, discipline and confidence to trade that strategy exactly as planned, and being completely aware that it will be an ongoing thing trying to keep those emotions in check.

That is one of the reasons why I hate demo accounts — they give you a false representation of how you will perform as that ‘emotional attachment to real money’ component is taken out. That is why I always recommend trading your strategy with real money on a smaller scale to see how your mind will really perform. Better being safe and doing that, than going live with a massive amount of money and then realising 3 weeks down the track after you’ve completely annihilated your account that you have issues relating to fear, greed, or patience that you need to deal with.

With that being said, having control over your emotions now doesn’t necessarily mean that you will always have control over your emotions — like I said in the heading, it’s an ongoing thing trying to keep them in check.

Four. Not trading where I think the market deserves to be and not marrying a fundamental opinion.

I saw so many USD bulls that were anchored to their fundamental opinion get completely smashed over the past few weeks. It’s interesting times like these where you really just need to let the price guide you, and the price was telling me towards the end of last month that the USD looked like it was heading lower:

Over the past 2ish weeks, did I believe the price of EUR/USD deserved to shoot up? No way! But the chart was giving me clear signals that an uptrend was still in play, so I went long.

Remember a bit before I went on my blogging hiatus and my last AUD/USD long trade was from 1.036 into the 1.05’s? Did I believe the price of AUD/USD deserved to make that last little run up? Of course not!!! But you have to trade what you see and what I saw was the uptrend ‘should’ continue on.

Five. Every single trade is a calculated guess and is NOT a guarantee, therefore risk management is so important.

However strongly you believe in something, however amazingly coherent your idea seems to be and however sexy those technicals line up, there will be times when the market can and will prove you are wrong. That is something you must always remember and that is something you must always prepare yourself for.

I believe Larry Hite in ‘Market Wizards’ sums risk up perfectly in these 2 sentences:

(1) If you don’t bet, you can’t win.

(2) If you lose all your chips, you can’t bet.

Here’s a little clip of Salem Abraham from Michael Covel’s film Broke: The New American Dream talking about the need to remember that the unthinkable can always happen:

ALWAYS BE PREPARED FOR THAT METEOR. 

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My aim is to write realistically about FOREX trading and share stories about my FOREX trading journey so far. If you would like to read more of my ideas and stories, please check out my ALL POSTS page.

Twitter: Lynette_Allen 

To be notified of new blog posts please follow: @Trader_LA_Blog

You Need The Right Attitude & The Hunger To Want To Succeed.         

Every single time you place a trade you are risking money to make money.

Many people find that concept intimidating/uncomfortable and that is the reason why so many people will never get into trading in the first place and that is why so many people will give up after a few losing trades.

It takes courage, strength, discipline and a lot of practice to get past that initial uncomfortable feeling to the point where you can follow your trading method exactly the way you developed it and you can enter/exit without hesitation.

But of course getting to that point is not an easy journey. Learning the basics can take many many months, method development can take many years and being able to fight the battle of the mind can take many years on top of that.

The right attitude involves believing you can succeed, even when others think you can’t. It involves not being too hard on yourself when something doesn’t work and giving it another go. It also involves putting your ego and jealously to the side, identifying your weaknesses and coming up with a plan to improve.

Preparation Is Essential.

Understanding the basics is essential. Completely understanding the instruments you are trading is crucial.

What many people seem to forget is that while leverage amplifies gains, it amplifies losses as well. That is why it is so important to completely understand the risks associated with trading and completely understand the instruments you are trading (margin, lot size value, value per pip, etc).

Using stops is also so important. Even if your stop level is a million miles away, always put one in!!! Welcome to a world where absolutely anything can happen at any time and you must always be prepared for that anything.

You Will Need To Work On Your Mental Toughness – Building Confidence, Dealing With Self Doubt & Moving Past Setbacks.

Every trader has or will experience setbacks and the key to success is how you move forward after those setbacks.

What’s that saying? ‘Fall down 7 times, get up 8’.

My worst setback last year was not a losing trade, but spending hundreds of hours working on a method component that in the end proved to be nothing. It hurt, I had a bit of a meltdown – but I eventually picked myself up, learned from it and moved on.

We as humans are naturally programmed to get a rush out of winning and it hurts our ego when we lose. Then when you add money into that equation, those levels seem to amplify. Consecutive losses can easily manifest fear, hesitation and self doubt, and good runs can lead to over confidence and taking stupid risks.

So many beginner traders think all losing trades are setbacks and failure – but losing trades are a completely normal part of trading. Trades that are losers because you were an idiot and entered based on no analysis are setbacks. Trades that are losers during method development are setbacks, but they are setbacks that you can learn and improve from. Losing trades that are a normal part of drawdown are not setbacks – but the emotional aspect that is involved with getting use to drawdown can be a challenging thing to get use to.

You Will Need To Be Calm Under Pressure & Learn How To Make Decisions Effectively.

Trading requires a lot of focus and you will need to learn how to block out all distractions and go into ‘laser beam focus mode’.

And sometimes you do what you have to do in order to make decisions effectively.

Some technical traders completely cut out news and data so that it won’t impact their decision making. Some traders like to put their trading calls out on Twitter or in a blog because they believe the pressure makes them perform better, and some traders find they perform their best if they just keep to themselves.

My trading kryptonite, which I learned pretty early on, is that I can be influenced by other people’s trade ideas very easily. So in order to improve, I had to take the necessary measures in order to get that under control – that meant stop going on forums, shutting down Twitter when too many trade ideas came across my feed and only reading the analysis reports from the traders I respect.

 You Need To Be Dedicated & Commit to Goals.

This whole trading thing takes effort and if you really want to be good you have to take it seriously. That means putting the time and money into the learning process/method development and not be lazy when it comes to testing and documenting.

You might want to read my recent post on performance based and consistency based goals.

And Of Course You Will Need A Profitable System.

You will need to develop a system that will work with your lifestyle, account and personality. You will need to have clearly defined entries/exits and you will need to manage your risk so that the account you spent years building up won’t get wiped out in 3 weeks.

The components that make up a good system is another post in itself and I will have a crack at writing that at a later time.

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My aim is to write realistically about FOREX trading and share stories about my FOREX trading journey so far. If you would like to read more of my ideas and stories, please check out my ALL POSTS page.

Twitter: Lynette_Allen 

To be notified of new blog posts please follow: @Trader_LA_Blog

1. You need time, money and dedication.

You should go into this with the realization that you may not be profitable straight away and that it might take you years of hard work and a lot of money invested in the learning process before you see any profit – can you live with that?

Remember this is a world where you can make money knowing absolutely nothing and a world where you can still lose money, even if you think you know everything.

2. You need some kind of motivation to get you through the times when you think trading might not be for you and you want to give up.

We’ve all got our reasons as to why we want to do this – You might want to work from home so you can spend more time with your family. You might want to make a bit of extra money. You might want a mansion with nakie ladies serving you margaritas. You might have this weird need to want to be the best, or you might just genuinely love to trade.

Whatever your motivation is, you need to remember it and let it be the thing that pulls you through those rough moments – because there’s going to be plenty of them.

3. You will need to build up your basics.

If you don’t have a proper understanding of margin/leverage, don’t understand the value of lots/contracts and don’t know what a stop is – then don’t even think about placing a trade.

Babypips.com is a great place to start.

Some good beginner books to get you started:

• Reminiscences of a Stock Operator

• All About Forex Trading

• Forex for Beginners: A Comprehensive Guide to Profiting from the Global Currency Markets

• Principles of Macroeconomics

• High Probability Trading

4. You will need a mentor and/or a support network of other traders.

Those people will be there to help you out with your ideas, listen to you complain about your stuff ups and share resources with you.

You want people that are not afraid to be honest with you and you want people that won’t reply with, ‘You are weird’ when they receive a whining/you-kinda-sound-high email that was written on no sleep at 5 AM.

5. You will obviously need a method/system.

It is up to you to build something that is going to work with your lifestyle and your personality.

Don’t just follow a bunch of people on Twitter and place a trade because 5 people said they are going long AUD. Find out how/why they came to that conclusion (might be fundamentals, trend lines, pattern formations, indicators) and then look into studying that for yourself.

6. You will need to come up with a plan to deal with those emotions and silly trading mistakes.

Having some kind of method or system that works is only just one part of it. Being able to completely execute it the way you designed it is another story.

Entry/exit hesitation, not being able to let a trade play out, doubting your method and learning to be patient are just some of the things you will have to deal with even if you have a ‘winning system’.

7. You will need to find ways to deal with frustration/stress.

There will be times when you spend a lot of time working on something that appears to be promising and in the end it turns out to be nothing. There will obviously be times when you lose money. There will be times when you miss big moves. There will also be times when you are on an amazing winning streak and you make a silly mistake that turns into a losing trade and it completely rocks your confidence.

Sometimes you won’t be able to completely shrug everything off and move on instantly, so you will need ways to deal with this frustration. Meditation, paintball, blogging, taking a nap – you just need something.

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My aim is to write realistically about FOREX trading and share stories about my FOREX trading journey so far. If you would like to read more of my ideas and stories, please check out my ALL POSTS page.

Twitter: Lynette_Allen 

To be notified of new blog posts please follow: @Trader_LA_Blog