Before I get into the lesson I just want to mention that I now have a book deal and am in the process of writing a book about forex trading. I invite you to help me write a book that will offer a great deal of value by giving me feedback here. This is your chance to contribute.
I work with new traders on a regular basis. I show them how to analyze the market, how to assemble a perspective and how to act on it in a way that makes sense in terms of the risks they have to take. After I give them some pointers and show them how to interpret the current price action, they are excited, ready to take on the world. And then, when the market presents them with a new situation, they can’t adjust. Why? It is because they have not fully developed their market listening skills. That’s ok though because they have access to people like me who can keep them on track as the market changes. So if you are on your own with no mentor, then how do you stay on track?
Trial and Errors
I spent a number of years struggling to become a consistent trader. Year after year with nothing to show for it but knowledge of methodologies and systems that don’t work. I spent a great deal of time working with a momentum indicator that was supposed to be the solution to everyone’s problems. It wasn’t. I spent countless hours experimenting with combinations of different indicators only to consistently get caught in losing trades. I would repeat the same mistakes over and over with little improvement. When I thought I was on the right track, I would soon learn that I wasn’t and felt as if I had to start all over again, a number of times. To put it lightly, it sucks. My most experienced trainee Morgan has asked me, “How are you still trading?” I’m extremely stubborn and don’t know any better.
If you don’t have a mentor, you can do yourself a huge favor and pay for one. If you can’t afford one, then you will have to have the extra internal fortitude to make it through the harsh learning curve on your own. I would recommend finding good analysis to follow as one way to gain some perspective in these markets. I am going to be publishing some analysis for free here.
Another exercise that you should implement is the building of your playbook. One of the cornerstone’s of SMB’s training success is getting students to document their trades in such a way that not only can they learn from them, but others can evaluate them much more effectively. For example, when you initiate a trade, you should automatically take a screen capture of your chart. Is a picture of the chart at the time of the trade enough? No. You want to write your reasoning on the chart. What type of trade is this? Scalp? Day Trade? Swing Trade? What are the primary reasons for this trade? Pattern? Reference pivot support? Can you describe what was present in the data at the time that validated your trade entry? You don’t have to write a book. All this information can be answered in a sentence or 2. How does the trade play out? Make sure you have a record of the process from entry to exit.
What benefits does this exercise offer when you are at it alone? You can go back and see what you were thinking at the time and compare it to the outcome. Was there anything in the data that could have given a more accurate clue? What about impulsive trades that you should have known better to take? They usually stand out right away and help you recognize when you are about to make one. If your excuse for not recording trades is that you have too many to record, guess what? That’s a problem. In the forex market, opportunities are not overly abundant so most likely you are forcing trades.
This exercise is one that will help keep you aware of your actions and better help you decide if what you are doing has any possibilities. And if not, you can always find a mentor and show them what you are doing for further insight. It can only help.
Either way, as a newer trader, you need guidance. Whether you find your own way (have fun with that and hold on to your hair), or if you employ someone keep you in the right track, you will need constant review and realignment. We do this for our traders at SMB and is one of the reasons why they are able to improve and actually trade with confidence. If you are not sure whether it is worthwhile to invest in an education, you need to ask yourself if you are ready to invest years of your time without any certainty of results. By hiring a mentor you can reduce your learning curve into a year or less and have an effective means to track performance.
Learn more about our training here.
Want to see real trades reviewed? Our archive is here.
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Marc Principato, CMT,
*No Relevant Positions
2 Comments on “Forex Trading: How do You Stay on Track?”
Ideas for your book:
Don’t re-write everything that is already out there. Everyone writes the first 8 chapters as though nobody has heard of MACD or Fibonacci – it’s been explained already so no need to do it.
Skip all the material as though you are writing for beginners because after all they won’t be able to trade no matter how good your book is. Beginners need TIME and lots of experience and losing trades and the lessons they can learn from that.
How about writing how you actually make money? You could talk about how you plan on the weekend, when you wake up what your routine is, what you eat, what you read to get an understanding of the day, how you go through your charts, how you stalk trades that day, how you enter, how you manage those trades – win or lose it doesn’t matter, how you exit too soon and find an alternate entry back in. Etc, etc.
How about instead of saying how important Money Management is you actually talk about what your MM philosophy is? Don’t go through telling us all the various ways MM can be done (yawn), how do you actually do it?
How about instead of saying you need Discipline and strong psychological control you actually tell us what you do about it? Things like making your method very mechanical so it takes that element out of the picture, or Set and Forget your trades, or meditate – only what you actually do.
I think that would make a great book and speak more about YOU as a trader rather than all the other books writing only what is adequate to qualify as a Trading book.
GI