1. Don’t focus on making money
Focus on getting your trades to work. Money is a natural by-product of your edge being executed perfectly.
2. Think independently
Don’t take a trade based on someone else’s reasons. Make up your own mind on whether it’s a good idea based on your experiences. The ‘pros’ get it wrong quite often.
3. Keep a tight journal of your results
How can you know exactly how well your edge is performing if you don’t monitor it. Just looking at the profit and loss statement from you broker at the end of the month will not tell you the full story. You need to fill out a trading journal after each trade.
4. Screen shot all trades
Whether it’s a winner or a loser, take a screen shot of all your trades and file them as part of your trading journal. Review each trade at the end of the week and see what you did right or wrong. “Those who do not learn from history are doomed to repeat it”
5. Have a risk management plan
Points 3, 4 and 5 all tie in together, but this is the most important. Remember the first rule of trading forex is protect your capital, the second rule is, don’t forget rule number 1!!. Learn to manage your risk, be rigid in your rules and flexible in your expectations.
6. Don’t over expose yourself
If you have 3 open positions split your risk don’t triple it.
7. Once a trade is live let go
Emotionally disconnecting from the outcome of your trades is a crucial part of trading. If you are risking a $$ amount you are comfortable in losing, then you should have no problem letting go of the trade once it is live. You mind set needs to be: I am playing a system that has an edge on the market. There are a random distributions of wins and losses for any set of variables that define an edge. The result of this single trade is not important.
8. Trade just 1 set up or edge until you have perfected it before moving on
Don’t be the “jack of all trades and the master of none”. I know how tempting to play a set up you have just learned about, but you are never going to get it to work unless you have a solid trading plan around it and you know it intimately. See point no. 2.
9. Have a trading plan
If you fail to plan, you plan to fail. The problem with most small business ventures (your trading is a business, so treat it like one) is a lack of planning. You need to have a clear and concise plan for executing every trade you take. From entry to position size, stop loss, take profit as well as a plan for potential drawdown periods. Plan your trades, and trade your plan! Download a free Trading Plan
10. Back test
Even if you have bought a system or strategy, you need to get the feel of it before you let it fly on a real account. Back testing is the best way to internalize the finer details of the system and price patterns based around it.
11. Trade smaller position sizes
Only risk what you are comfortable loosing. If you become emotionally charged after a losing trade (or a winning one for that matter) chances are you are trading a bigger position size than you are really comfortable with. Forget the “don’t risk more than 1%” rule. Find an amount you are fine with loosing 10 trades in a row. (or the potential max drawdown of your system)
12. Accept losses
Losing trades is the ‘cost of doing business’ for a forex trader. There is a random distribution to wins and losses for any set of variables that define an edge. If you experience a loss, shrug it off and move on…. Statistically it just means you are 1 step closer to your next win.
13. Get rich slowly
If you are having money issues you probably need to stop trading until you have a secure source of income. Making good money in forex take time (3-5 year plan to becoming a professional). If you try to force it, you will start to make fatal errors that will affect your trading account in an adverse manner. Take your time, it’s not a race.
14. Focus on the process
Do not become wrapped up in ‘is this trade going to win or lose’ mind-set. Focus on what you can control, a good entry (when your edge is present) sound trade management and logical take profit points.
15. Buy your stop
This is the process of banking some money as your trade starts to work essentially buying your stop loss if the trade were to suddenly turn and head the wrong way. This puts you in a risk free position. You can also more your stop loss to break even, but nobody went broke banking profits. One the price has moved 20 – 30 pips take something out… even if it’s just 20% of the position.
16. Hit singles not home runs
It is much easier to be right about a 10 – 20 pip move then it is to be right about. 100 – 200+ pip move. If you are a long term trader, think about adding a scalping or intraday strategy to your bag of tricks. It will keep your pip count ticking over while you are waiting for the stars to align on your longer term set up.
17. Treat your trading like a business not a hobby
If you want to be successful in this game you need to be focused and use discipline. Pro traders don’t take trades after a couple of cold ones while watching the football. They are professional in every facet of their trading routine.
18. Use affirmations
Using positive affirmations as a part of your trading plan. Use them to enhance your discipline and get yourself in a ‘winning’ mind set.
19. Flex your discipline muscle
“To become what we want, first we must change who we are”. Exercise discipline in every facet of your life from exercise to diet and any other way you can. This will have a positive spill over effect on your trading. Do love chocolate? Or a beer after work? Go without for 2 weeks! Discipline is not something we are born with, it is something that can be learned. Like a muscle, the more you exercise it the stronger it gets. Improve you discipline with a 3 step action plan.
20. Don’t over trade.
When we become tired, your decision making becomes impaired. Don’t overdo it, and plan regular breaks and regular rewards throughout the day. After achieving even seemingly insignificant goals reward yourself with a break and 15 minutes of what you love doing.
21. Don’t revenge trade
Revenge trading is taking a trade straight after a loss to try and recoup your losses. The chances of you viewing the market in a clear calm and unbiased manor is seriously diminished, and thus so are the chances of you winning that trade. If you are emotionally charged after a win or a loss, turn off your computer for the rest of the day.
22. Don’t average down
Averaging down refers to when you take a buy for example and the price moves half way to your stop, so you take another trade in the same direction. The mentality is the trade just needs to make it back to the original position and you are at break even. Trust me, you just don’t want to do it… it rarely works. See No. 3 & 4.
23. Keep it simple
Albert Einstein said ‘keep it simple, but not simpler’. Don’t get hung up on an over complex entry criteria. You will just miss opportunities. Develop a system that has > 50% correct over a large sample size then refine your risk management & trade management/ exits to maximize your returns.
24. Be calm
You cannot make unbiased decisions if you are emotionally charged from previous trade. Turn off your computer and relax… Read a book and come back with a fresh mind tomorrow.
25. Set and forget
This a trade management strategy (or lack of) for beginners to intermediate traders to help with trading psychology. The biggest issue faced by traders is second guessing their proven positive expectance system once the trade is live. It involves basically setting your stop/ setting your profit target(s) and letting price hit either one without interfering. You will be surprised how much you can learn to trust your decisions and how many more pips you can bank when you don’t interfere with your trades after they are live.
26. Be consistent
“We are what we do consistently. Excellence is not an act but a habit” -Aristotle. Be consistent with identifying your edge, your risk management & trade management & you will consistently make money.
27. Have min. 1 positive expectancy edge
All pro traders have at least 1 tested and proven edge on the market that they trade every day to extract consistent pips from the market. We are not speculators, but trade price patterns. Find on and stick to it. Once mastered, add another one.
Your edge begin present is confirmation enough, you can never be 100 % about a trade. A set up is a setup is a setup. If your edge is present then pull the trigger.
29. Don’t think you know what is going to happen next
nobody does. All we know is the edge we play has a statistical probability of willing over a long string of trades. Stick to it and you will be profitable.
30. Have a trading ritual
Example When I trade I have a trading plan typed up and printed next to me. With boxes to tick off as I go through my set up criteria. Them once the trade is finished, screenshot, fill out journal and file trading plan checklist. Refer no.26
31. Unclutter your charts
If your charts look like this, then you may need to rethink your trading technique. Too many lagging indicators only serve to confuse you. Keep it simple.
32. Invest in yourself
You don’t know what you don’t know. And what you don’t know is potential profit to you and what you don’t know is potential risk to you. Do a forex course, read more books or follow a trader on forums. The learning process is ongoing, you can always shave a few strokes off your game.
33. Does your trading strategy suit you?
All good traders need to know their strengths and weaknesses. They model a trading strategy working with what they have naturally. For example, I’m not the most patient person in the world…. Though I am improving. When I started trading I was trading a long term swing technique. After I made the switch to an intraday strategy where I could realize profits sooner and get instant gratification for my wins or take my losses and move on… My trading improved out of sight.
34. Try price Action Trading
I have never heard anyone say that Price Action Trading ‘isn’t for them” once they have learned it. There is no better indicator than raw price, so being above to see price in its raw form and make decisions based on what it is telling you in the now moment (instead of what a lagging indicator is telling you about yesterdays price) is the holy grail of trading.
35. Trade live
If you have not ventured from demo to live charts it could be time! Spending lots of time demoing a strategy or system is definitely the right way to go about it, but the strategy is only half the story. You need to now forward test this system with real money. This is when your emotions come into play. Having the correct mind-set and discipline is critical to moving forward in trading. Start small though. See point No. 3
36. Don’t speculate
Pro traders may tell you what that think might happen in the market next based on current sentiment or price action, but when it comes time to make a trade, they are trading a pre-defined, positive expectancy methodology or system with a specific set of entry and exit criteria. See No. 29