Why Boring is Beautiful in Forex Trading

Like most things in the world that involve money, there is a lot of deception in the Forex world. Some of it malicious, and some of it benign. At this point, you have probably seen several commercials or advertisements explaining how exciting the world of high finance is, and how rich you can become trading currencies. However, most of this is going to be nothing short of sales tactics.

The reality is that most professional traders are very even keel people over the longer-term. This isn’t to say that they won’t have the occasional blow up or outburst, because of course any time you are talking about large amounts of money, emotions most certainly get involved. For years, I have worked on myself to try to keep calm and not to trade on a motion. You are in a situation where a lot of the big banks are trading algorithms, meaning that there is no emotion in those moves. Compare that with the average retail trader, and you can see how they are not clearly thinking at all times as they are trying to get their money back after a particularly bad loss as an example.

Both winning and losing streaks can be detrimental

Ironically, I have found that over time both winning and losing streaks can present a lot of the same issues. For example, if you have seven or eight losses in a row, you feel like you can’t do anything correct when it comes to trading, and then you start to make erratic and emotional decisions. On the other hand, if you were to have five or six wins in a row, then it’s very easy to feel like you have finally “figured out the market”, and therefore you start to trade a bit more. You feel like you see the market in ways that only you can, and that of course is exhilarating. The reality is that this is one of the most dangerous times, because you may find yourself taking trades that don’t line up quite perfectly, and that you are willing to take a little bit more risk than usual.

As a general rule, if you had a streak of both wins or losses, the reaction should be the same: you should sit on the sidelines and take a bit of a breather. You need to get your emotions back into check before trying to get back into the market. That should give you the ability to calm down, and therefore you can make much more strategic decisions.

You are competing against professionals, act like it

Professionalism is the most important thing that you should keep in mind when trading. You should have a system that has proven itself to be reliable over the longer-term, and once you know that it works, you shouldn’t work against it. Unfortunately, far too many retail traders will let the spur of the moment get them, and therefore take trades that have nothing to do with their system. This is difficult to compete against, because there are times where you feel like you see the market is about to do something before it happens. However, if it’s not part of your normal trading signals, if you are wrong you can completely blow your results up. If that’s the case, you will find erratic returns.

I can assure you there is a reason why professional shops have risk managers, and extremely tight rules. They understand human nature and they understand that the more exciting trading gets, the more likely something bad is about to happen. This can be as simple as giving back all of the profits for the day, or it can be something like turning a 1% loss into a 10% loss. Either way, it’s deflating to say the least.

Finally, keep things in perspective

Look, we all love trading and I understand how you feel about it. I can’t think of anything else I would rather do than work in the currency markets. I truly love what I do but having said that one of the biggest problems that traders run into is that they put far too much emphasis on trading in general. While trading is something that I truly care about, I have a whole list of things that are much more important in my life.

I understand that sounds like something that should be obvious, but it’s hard to remember that when you’re in the process. This is kind of the initial problem that I see with most traders. They get into the idea of trading because they are going to become rich overnight, simply clicking a few buttons on a laptop while sailing around the Caribbean. However, they then become scalpers and sit at their desks for 16 hours a day. It doesn’t matter what that pays, I think that is no way to live. Beyond that, if you figure out how much you are making per hour, it would probably turn your stomach.

Be able to walk away

I think it’s important to be able to walk away from the computer. Not only when the market is moving and you are having a bad time, but even when you have a trade live. If you have stop loss orders in place, as well as potential take profit orders, there’s nothing else to do. Watching the chart is not going to change what happens next. Some of the best trades I have ever made have been when I walked away to come back and find massive profits or perhaps even a closed trade that already had my take profit order.

Remember, we are trading to make money and to make our lives better, not living to trade. You simply must keep perspective in what this is, and what is likely to be the end result. I know that it’s difficult to keep yourself calm, but it’s absolutely crucial. If you know a system or methodology that makes money over the longer-term, your job is to simply execute it. If you do it than statistically speaking, you should be making money. It’s all the other nonsense that keeps us in trouble.