Lessons from the Pros


The World of Real vs. The World of Ideal

Let me start this article with a simple question: Did you have any real idea what Forex trading involved before you started doing it? This may seem to be an unusual way to start this piece, but I really do want you to think back to when you first looked into learning to trade in the currency markets and try then to remember what first motivated you into getting involved. Is it now all that you exactly expected or did it fall short somewhere along the line? Maybe you are one of the few who knew what to expect and you are going about your trading to this day in an unemotional and disciplined fashion? Whatever the case may be, for the most part, the majority of FX speculators have an idea of what trading will be like before they start doing it but it then rarely tends to develop the way that they expected at all. To put it simply, their initial idea of trading turns out to be far different from the reality of trading.

So why is this an important topic of discussion right now? Well, I feel that it is vitally important for all active market speculators to constantly remind themselves why they got into the game in the first place because it is so very easy once you get sucked into the markets, to forget what brought you there in the first place. The obsession with overcoming the various trials, tribulations and challenges of the market tend to overwhelm the average currency speculator before they even realize it is happening, leading very quickly to the destruction of their morale, confidence and often, their account. Once sight of one’s original goals is lost, the path becomes a very different one altogether. Ironically though, keeping one eye firmly on the prize and focusing your dreams and aspirations to the forefront of your mind will always play a huge role in keeping you grounded and committed to dealing with the hurdles that the markets will always put in front of you. If this state of mind is not maintained then the lines can become blurred very quickly indeed, leading to the trader attempting to make their reality that which they want in the ideal world, thus completely ignoring the reality of the market which lies before them. When you face the reality of the situation in front of you, then and only then can you hope to deal with things as and when they come.

I have said many times before that often people like the idea of trading much more than the reality of trading that they soon discover! Think about this: so many books and websites out there today paint an ideal picture of the markets which promise great leverage, unrealistic expectation and quick and easy riches. With this on offer, who wouldn’t want to be an FX trader? How many times have you visualized yourself turning on your PC in the morning, dipping into the market for a few minutes, pulling out some profits and then wrapping up for the session, faced with the rest of the day to yourself?  A nice ideal to say the least isn’t it? Then you actually open an account and find out that it is not quite as easy as you first thought, leading to you spending more and more time each day trying to painfully figure out exactly why it isn’t working out as you first hoped it would. Instead of spending an hour doing your trades in the morning like you first planned, you now find yourself becoming a slave to your screen for hours and hours a day. Hold on a minute: I thought we wanted to get trading so we didn’t have to sit in front of a PC all day!?

Don’t get me wrong, I am a huge fan of setting goals and making the life you want but you still need to prepare yourself for the environment you will have to operate in to make it happen. Trading itself should be seen as a vehicle to get you to where you want to go and it is a vehicle which needs to be driven on the right roads to get you to your destination. Sure, it would be nice to be able to fit your trades into a set time each day, take your profits and be done but this ideal does not respect the reality of how the market actually works on a daily basis. The very best low risk, high potential reward trading opportunities exist where there are imbalances between willing buyers and willing sellers. These imbalances in-turn, create areas of Supply (Resistance) and Demand (Support), allowing the disciplined and objective trader unique entries into the market. While these areas are present on a daily basis, we still need to wait for price to get to the right area before we can take action to buy or sell. Sometimes it may take a few minutes for price to reach a level, other times it may take longer. No matter how long it takes though, we wait and we stay patient.

This you see is the simple reality of consistent trading. The markets will always present a trader with opportunities to enter a position but the question of whether or not the entry is on a whim because we want to take a trade or because it is a pre-determined low risk, high probability trading opportunity, is one which can only be answered by the person taking the trade itself. I have seen so many traders attempting to fit a square peg in a round hole, only to then find frustration when it doesn’t work out for them. Consistency in FX trading can definitely play its part in helping a motivated individual create their ideal world but only if they face and prepare themselves for the reality of the task at hand. Thanks go out this week to all my students from last week’s Professional Forex Trader Class in Philadelphia and especially Najia for the inspiration for this article!

All the best,

Sam Evans


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.