Succesful Traders

Kamis, 31 Juli 2008

Most of the people fail in forex. That`s a fact. Some people say that 90% fail, I don`t believe it`s that big the amount of unsuccesful traders. However, the vast majority fails, and that`s a fact without any doubt.

Most of the ads are about trading systems. That`s also a fact. So there`s a problem in here. If most of the ads are about ways of trading, this means that the people buy that. On the other hand they fail. Therefore, definetly there`s a problem in here.

It`s true that you need a trading strategy that works. However this is only a little part of the game. Actually is quite easy to get a strategy that works, and you can get it for free. You`ve got woodies cci, for example. So you must be asking, why most people fail. There are several problems to this. Let`s analyse each of them.

Trading strategy: you need to masterize and feel confident in one strategy at the time. Choose one, the one that`s comfortable for you. Stay with that. Test it. Get involved with it. You`ll loose sometimes. Don`t worry, you have to loose sometimes. There isn`t a single strategy that doesn`t fail. But on the whole year you have to get a profit. Not in each trade. People are not patient enough, and they want the best strategy that leads them to the million dollars in one day. I am sorry to inform you that there isn`t such strategy. In addition, if someone creates a strategy like that, he won`t sell it for nothing in the world. So don`t trust in the people that promises you heaven.

So this part is easy. Find a strategy that suits you and STAY WITH IT, don`t change thinking that there is a better one, unless you already make profit with the first one. And the second one, you start with demos, and once you dominate it you can change it, or, if you prefer, stay with both.

Trading strategy is only 20% of what a succesful trader is made of.

And remember, without taking into account the spread, if you throw a coin and trade with that, you`ll have 50% of probabilities, therefore, with a little analysis you have to have more probabilities.

Psychology: you have to be disciplined. This is the most important part of the trading. I read in a web page: READ YOUR SIGNALS, TRADE SMART, STAY FOCUSED. If your systems doesn`t indicate to trade, DO NOT TRADE. If there aren`t opportunities in a day DO NOT OPERATE, let the others loose money, don`t loose your moeny. If you have to be a whole week without a single trade, that`s it, it is OK. Don`t worry. If you loose in a trade, close your windows, and stay quiet, have a break. Do not trade because you "have to". Don`t start the day expecting to trade, just trade when your signals say you should trade.

People say that this is 80% of the trading. I would give this a 40% of what a succesful trader is made of. However, notice this, how many ads have you seen about psychology? I think none, or just a little. So this is really important. Don`t underestimate the power of a psychology strategy.

Money management: I place the last 40% of what a trader is made of, in this topic.

Imagine this: throw a coin, head you buy, the other side, you sell. You place a stop and a limit at the same number of pips (I am not considering the spread, though, this is just for being illustrative). If you analyze this way of trading, the possibilities are half and half. And this is a better strategy than what the majority use. Why? Simple, the majority, let`s their looses run and close the profit fast, because they have the fear that the trend will change (this is also psychology). It is the other way round, you have to let the profits run, and cut your looses fast. If you have a stop loss of 10 pips, and a limit profit of 50 pips, you can loose 4 out of 5 trades and still be a succesful trader. When you consider how to control the money management, you have to think of: how many trades you loose and how many you win, what`s the relation between your stop loss and your limit profit, how many loosing trades subsequently can you have, and what is the % of the account that you risk in each trade (stop loss). After calculating with these numbers, you`ll be able to know if your money management is ok.

This is just an introduction about a succesful trader. Remember that a succesful trader doesn`t build millions in one week. He is consistent. You can be a succesful trader if you manage to achieve a 20% per year and you are consistent. Of course you can achieve more. But if you have a profit, and you are consistent, it is great. It is all what you need. Once you get this, you can start looking for another system to implement.