Forex Trading – The Trader’s Mindset

admin — Thu, 03 Sep 2009 04:31:50 +0000

If you want to become a Forex Trader, choose one of these mindsets.

The Independent trader or the Dependent trader

Which type of trader you are will dramatically affect the potential money you can make in the markets. In fact, it could well determine what the rest of your life will look like, whether it is how long you work for someone else, when and where you vacation, or where and how you live.

You may think that’s an exaggeration, but the reality is those who take initiative can positively affect the outcome of their lives (and their trading) as opposed to those who let others determine the course of their lives for them.

It is important to note that anything requiring little to no effort will produce limited, temporary or no results. Conversely, anything requiring you to think and act for yourself will produce lasting and permanent results.

Trading, whether Forex, stocks, or other markets, especially proves this true. Returning to the two types of traders, they illustrate very common mindsets — which one represents you?

The Dependent trader is looking for the easy way, wants to make a quick buck, or strike it rich — but never wants to put any effort into the process of accomplishing such things (if such things even exist, and it should be argued that they do not).

Dependent traders will follow the crowd, trade based on hot tips, seek out automated ‘millionaire-making’ trading programs, listen to all the news experts and blindly place ‘can’t lose’ trades (which do lose), all with no plan, no thought and no understanding of what they’re doing.

Naturally they’ll become frustrated with their losses and failures and do the only thing they can think to do: they give up.

Dependent traders are the trading equivalent of lottery ticket buyers; they know full well the odds stacked against them, but they believe anybody can get lucky, so why not them?

Needless to say, Dependent traders exert little control over their lives and have little chance for financial success.

On the other end of the spectrum is the Independent trader. This trader wants to have control over their financial future and has learned (or will learn) how the markets work, which approaches to trading the markets really work, and how to empower themselves to trade without relying on others for advice or tips or news.

An Independent trader understands and believes that only they can maximize their odds for success and only they can achieve their financial and life dreams. They will seek out and learn from others, educate themselves, learn from failure and strive to accomplish greater things.

It should be noted, however, that everyone has a little bit of the Dependent trader in them at some point. The difference being, the person on track to become Independent may take up with a mentor or lean on a reliable education source at the outset – but as their knowledge grows, the Independent trader will begin to apply what they’ve learned completely on their own.

The Dependent trader never will.

Three simple steps to becoming an Independent Trader:

Step One: Create and execute a trading plan. Whether you want to day trade or trade at the end of hte day, or once a week — decide what fits BEST in your daily schedule and then determine what sources form #2 and #3 below best align with your plan. Don’t try to apply day trading methodologies to end of day trading and vice versa, as you’ll likely discover they don’t and won’t work.

Step Two: Seek out 2-3 reputable education sources. We will provide some to you – but the goal is to identify one that you can understand and trust. Learn everything you can from those sources. Then, learn to apply it on your own.

Step Three: Learn from and test out multiple methods for trading. You are unlikely to succeed wihtout some basis in trading methodologies, especially when utilizing technical or fundamental indicators.

The steps above will require time and money investment.You should consider them your trading education costs — it is far better to invest in yourself than to lose money too easily in the market.

No related posts.

Forex Trading Methods – Finding the right one – part 4

admin — Mon, 31 Aug 2009 18:59:09 +0000

End of day trading: In my last articles, I shared that for any Forex trading method to be considered, it must be first, a complete method (Forex Trading Methods – Finding the right one – part 3 ); second, it must teach specific risk management rules; and third, it should be based on technical analysis, without being 100% mechanical or automated. The last step in determining whether a forex trading method should be considered, is the amount of time it requires a forex trader to implement it on a daily basis.

The dirty secret in the Forex markets is that most people OVERTRADE. This happens because forex traders are widely taught that the only way to succeed in the markets is to Day trade. The dirty ’secret’ is that if a forex trader can’t make money trading forex on an end-of-day basis, the forex trader is unlikely to be any more successful day trading forex.

In fact, growth among retail forex traders is accelerating — these are people who currently have ‘day’ jobs. There is no likelihood that these traders have the time to watch the forex markets 24 hours a day. What happens if the traders fall asleep and miss putting in a protective stop order? Or miss an entry point?

I advocate trading forex on an end of day basis to eliminate the stress and time pressure to make instant decisions on order entry, immediate placement of stop orders, and constant ‘watching’ of the markets.

Combined with utilizing technical indicators, end of day trading allows forex traders to spend more time looking at the ‘big picture’ — is there really a trend? Is my method ‘right’? Are my numbers and calculations correct? And, they can do so in the quieter trading hours following the New York close (5:00pm Eastern Time).

Here’s a brief example:

Using a recent chart of the EUR/USD pair, from March 2009, shows a strong move from the 1.2600 range to 1.3000 — a 400 pip gain, which took about 7 days to complete and should have been captured by a good end of day trading method. However, that same chart shows more extreme fluctuations as the price ranged sideways in a 200 pip channel — if a forex trader is trying to day trade in that channel, the trader can quickly find themselves on the wrong side of a trade in more extreme short term volatility.

Forex traders who do not have the time to commit to managing their trades and monitoring the markets are precisely the traders for whom an end-of-day forex trading method based on technical analysis is best suited.

That concludes this four part series. Next time we’ll start looking at some more basics of Forex Trading

Forex Trading Methods – Finding the right one – part 1 Today I want to take a few minutes to talk...
Forex Trading Methods – Finding the right one – part 2 Risk Management: I want to continue the discussion on how...
Forex Trading Methods – Finding the right one – part 3 Technical Analysis: In my last articles, I shared that for...

The Trading Forex Blog » Day trade

Forex Trading – The Trader’s Mindset

Forex Trading Methods – Finding the right one – part 4