Lessons from the Pros


The Secret That Splits FX Traders

Last week I was fortunate enough to get some vacation time in, spending a little time out relaxing and recharging. A week away is more than enough for me as it gives me plenty of time to top up the tank, catch up on some reading and, of course, spend time reflecting. As is always the case, I get to meet people from different backgrounds while away and, of course, they like to ask me what I do. As expected, when you tell people that you are a trader, plenty of questions tend to follow. It always seems to be more fascinating to everyone else than it does to me; I suppose maybe because I have been involved with the markets for well over a decade now. How time does fly.

A conversation I had with one gentleman prompted me to write this article in fact. When we got to talking about what I do and what I teach, he revealed to me that he also liked to speculate in the currency markets from time to time. As the chat went on he revealed that he had actually been trading the FX market for about five years. He was very open with me and we discussed how he had made some decent money out of it, but in the end he was still in the negative. Asking him how he felt about that, he replied by saying that he was close to giving up because he felt that all financial markets are rigged and manipulated. He repeated that quote, “The big boys are all out to get you.”  My response was to ask him why he didn’t just quit if he felt like that. To which he responded that, he just needed to find the big secret to it all and that maybe I was the guy to help him. Recognizing his pain, I felt it was time to reveal to him the big secret to the markets. He held his breath in anticipation.

“The big secret to it all is that there really is no secret,” I said to him. Money is made and money is lost by every single person and institution who speculates. We all win and we all lose but what truly separates the profitable from the unprofitable is how you win and how you lose. Lose very small and win big and you won’t need to be right that often. Nobody gets it right all the time and if they did, the markets would eventually cease to exist as it would no longer be a zero-sum game, after all there must be a winner for every loser, right? This all seemed to make sense to him but he still asked me what he was missing, as the idea that the markets were manipulated on a daily basis was dogging him and he couldn’t get away from that.

“What do the banks know that I don’t?” he asked me. My response was simple in nature as I explained to him how they probably have access to resources that the public will never be able to see or afford, yet even after all of that they still cannot guarantee the markets will work in their favor. Nobody ever knows what is going to happen next after all. I explained to him that the one thing they do like to do is get the very best price they can, by buying as low as possible and selling as high as possible to minimize risk and maximize reward. This is how money is best made in any sense. The key is to wait for the price to come to them and be prepared to pull the trigger when the opportunity presents itself. This is the concept which we teach our students at Online Trading Academy. If you can spot the footsteps of the institutions on a price chart and see where they are buying and selling, there is no reason why you can’t attempt to buy and sell at the same time as them, is there? His next question was obvious: “Can I learn to do that too?”

Free Trading WorkshopIn my humble opinion anyone can learn to trade and become consistent, but only if they learn to model the successful, avoid the mistakes that novice traders make and are prepared to follow the rules of trading without letting their emotions get the better of them. If you want the secret to trading then here it is: Accept that you must keep losses small, wins big and focus on risk management first and foremost. Then be patient enough to wait for the opportunity to buy and sell when your rewards are high and your risks are small, at institutional levels of supply and demand. You will have wins and you will have losses too. Don’t make a big deal of it either way and don’t waste your time trying to avoid losing. That’s a sure fire way to lose your flow. Finally, take your set ups when they present themselves to you and then allow your plan to do the work without getting in the way of it. Pretty simple secret isn’t it, really?

After this explanation, my new friend almost looked relieved and decided to explore some real education on the FX market after finally learning the big secret wasn’t really that big after all. I hope you found my big revelation helpful too. Be safe and stick to the plan.

See you in two weeks,

Sam Evans – sevans@tradingacademy.com

DISCLAIMER This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.

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