By Sam Evans, Online Trading Academy XLT-Forex Trading Instructor
This week I have had the pleasure of returning to the Live Trading classroom to teach the Online Trading Academy Professional Forex Class. It has been a good week and as much as I enjoy teaching in the ongoing virtual environment of the Extended Learning Track (XLT) program, it is refreshing to welcome and instruct new students of Online Trading Academy in the flesh from time to time. We work hard across the 6 days of the course, immersing ourselves fully in the markets, analyzing price action, exploring low risk, high probability setups and putting it all into practice by executing trades live to test the various techniques. My aim is to guide the students in the ways of consistently profitable speculation and professional risk management, so they are prepared to face the challenges the Forex market has to offer and deal with them in a disciplined manner.
As much as I would like to be there with them in the early days of their new trading career, in the practical world, we all know this is just not possible. While all Online Trading Academy grads have the advantage of being able to retake their course as many times as they like for free, they are still on their own for the majority of the time, so I like to provide them with as many tips and tricks for securing the longevity of their trading journey as I can upon their departure from the class. I call it "The New Trader's Survival Guide" and in this article, I am going to share a few of these same key tips with you as I give to them. If you are new to trading, these action points should provide you with a safety net in the early days and help to conserve that account for future gains – if you are currently trading with some degree of success, then maybe you will find these suggestions to be further enhancements to your overall plan. Let's get started:
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Stick to your stops and keep your account healthy. It's easier to turn a small loser into a winner rather than a large loser into breakeven...
The key to consistency is to lose small and win big, which in reality, is harder than it seems. Emotions are the main problem due to the fact that the human psyche is simply not designed to accept loss. We feel sadness when we lose and joy when we win. Therefore, this encourages the novice trader to cut winning trades off far too quickly the minute a positive trade begins to lose steam. This is normal in any market – accept it. Winners need time to work out, so the best thing to do is to set and forget. Remember, a watched pot never boils. If you get it wrong with a small loss, then accept it and move on. Don't try to get "revenge" on the market and chase it back to breakeven. Wait for the next objective opportunity and stick to the plan. Consistency is the result of consistent rules and application.
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Technical stops are clear on the charts – if you are taken out by a technical stop then the trade is clearly not going your way – what more confirmation do you need?
Place your stops in solid technical areas where you know you are wrong. If you are taking a long position and the market then decides to put in a new pivot low, then it is not behaving as expected. Get out! The market has proven this was not your trade. There will be another. You don't have to be 10% down on the account from one trade to know you got it wrong.
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Don't try to master everything from the start – find a set of tools which you are comfortable with and use them consistently – consistency leads to profits...
Ever heard the saying "Jack of all trades, master of none?" Never a truer word was said in the world of the novice trader. I remember how I felt when I was new to the markets. I was so hungry for information that I fell into the trap of trying to use too many tools at the same time. Simplify the system and use only a select number of techniques for your trades. Master these and keep things clutter-free. Too many signals can be an overload of information and there is a constant danger of paralysis through analysis.
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Come to the market each day with an open mind – never say something can't happen – it probably will!
Bias is a thorn in the side of every market speculator and regular readers of my newsletters will be used to my emphasis of the necessity of completely objective analysis. It can be easy for anyone to be overly Bullish or Bearish, ironically often as a result of an especially successful trade. I clearly remember a large win I had on the Dow Jones in my Futures trading where I took nearly 300 points in a short position. The following week, I almost gave two thirds of my profits away by thinking that this was the start of a new downtrend! Almost every subsequent trade I was taking was short due to the fact that I had mentally convinced myself that because one short trade had worked so well, this was the only way to go. Instead, I found myself fighting bigger picture demand over the next few days as buying in the market had resumed. It didn't take me long to let go of my bias! Now, I am neither a Bull nor a Bear – I am a Market Driven Trader guided by price action alone. The market will tell you what to do only if you let it show you the way.
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Keep a trading journal – why did I take the trade? How far was I in profit? Where did I get out? Emulate the things you do well and acknowledge the mistakes.
Jumping into the market without correct planning is an obvious problem but even with the most structured strategy, a trader's career can be easily laid to waste if each trade is not assessed and recorded as a performance measure. Focus and emulate what is working well in your trading and be aware of what is not. Then and only then can you hope to correct these flaws, but without a record of the details, how can you hope to fix any problems which may be arising? Don't beat yourself up and take your time. Train yourself to be a winner, not a loser.
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STICK TO YOUR STOPS! There is nothing wrong with being wrong – welcome to the real world. Perfection is an illusion...
Did I mention this already?!! Yes, it is that important to adhere to risk management and protection of capital at all times. Remember that successful trading is not about making money, rather it is about not losing money. All traders will lose money from time to time as this is an inevitable part of the process; however, by securing the powerful art of controlling risk, each and every market speculator is setting themselves up to eventually make money. It's not about being right or wrong...it is simply about just doing it and doing it methodically. Good luck with your endeavors. If you respect the rules, the market will in turn respect your ambitions.
Have a great day!
Sam Evans sevans@tradingacademy.com
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