5 TIPS TO SURVIVE AND THRIVE IN FOREX TRADING
The desire to achieve financial freedom is universal. The world of financial service and forex trading in particular is appealing primarily due to the magnitude of profits one can make. By the same measure, the magnitude of losses cannot be ignored. Ambition and passion alone cannot assure your success in forex trading. I would like to share tips and lessons that can improve your odds of success.
1. Knowledge is power, right knowledge is freedom.
Seek knowledge about forex trading patiently and at all cost. Many delve into forex trading with little to no knowledge and expect to make it. Remember, forex trading is a zero-sum game, what you lose, somebody else gains. It’s a ruthless game of skill and patience. If you are not investing in the right knowledge you are guaranteed to be fodder for traders who consistently improve themselves. In my course, I teach you the skills required to analyse the market in 12 weeks, thereafter I expect you to make 50 trades as a way of practicing and refining your edge. Submit yourself to the process of learning. Accept and make peace with the fact that learning is a never ending process.
2. Focus on risk not return
You read it right, focus on risk, not return.
High risk = High return =High probability of failure.
Low risk= Low return= Low probability of failure.
Low probability of failure ensures you survive long enough to earn consistent returns. Think of your capital as a tool of trade. Without it you can’t hunt or trade, therefore cannot feed. Would you be willing to risk your tool of trade in high risk environment or low risk environment where you are assured of consistent future possibilities? It is better to risk your tools hunting a rabbit daily or weekly as opposed to unrealistically hunting an elephant. Focus on capital protection long enough and the returns will roll in effortlessly. Take care of your downside, the market will take care of the upside.
3. Less is more
Forex trading is a long-term business. Voluminous trades are not the key to long-term success, lesser trades will do the trick. Suppose you have two traders, Mary and Joseph. They are both interested in succeeding in forex trading, however, Joseph places three micro lot (0.01) trades and Mary places only one micro lot trade (0.01). Joseph is aggressive compared to Mary and is likely to be rewarded big time for his aggression. You are right to think that, but forex trading is not a sport, aggression is not required. Should the market head in their expected direction, Joseph stands to make more money compared to Mary. For a moment, let us assume that the market goes in the opposite direction, who stands to lose more? To reinforce point number two above, Mary is assuming low risk; she has better chances of succeeding in the long-run.
4. Trade your plan
Many traders do fail to consistently follow their plan. I am no exception. In my short trading career, I have come to the following conclusion;
- If you follow your plan and succeed, you are more confident and profitable.
- If you follow your plan and fail in a trade, you are wiser.
Adhering to your plan not only improves your edge but it also reduces your exposure to emotional trading; particularly fear and greed. My inability to follow my plan has exposed me to fearful trading and greedy pursuit of profits.
a. Fear
At the beginning of 2022, I went short on gold. Putin and Ukraine happened and gold rallied. My plan indicated gold would fall to 1700 price handles. I decided fear knew better and exited my positions on a Friday. Monday morning, as if to mock me, the market sent gold spiralling downwards from 2000 to 1800 and subsequently to 1700 levels. I let fear rob me of a perfect trade. Later in the year, I went long on GBPAUD. Upon close interrogation of the market, fear took control in the absence of empirical data and I closed the position with 6 dollars profit on a micro lot. Later that evening, GBPAUD rallied to my intended take profit, I would have walked away with 23 dollars. The price of fear was 17 dollars for this particular trade.
b. Greed.
In the same year, I placed trades with the intention of making 50 dollars per trade. The market was more than willing to reward me with 30-40 dollars per trader. Yours truly would not take the profit. Later on, the market reversed and took all the profit and converted the trades to running losses. I sacrificed guaranteed profits for unrealistic profits.
5. Continuous learning
The process of refinement is never ending and thinking otherwise is folly. Your process to mastery must return to the full circle. Inevitably, you will find yourself where you started, seeking more knowledge, but this time, it is specific knowledge to improve your edge. You are conscious of the mistakes you are making and willingly seeking additional knowledge to remedy the situation. Evidently the quality of your analysis ,trading plan and confidence gradually improve supported by competence. Value learning over money.
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