U.S Elections and Your Forex Trading Plan.

Hello all I am sure what is on your mind this week is obviously the U.S. presidential election and how to possibly take advantage of the increased volatility in your forex trading.

A very quick post today regarding my thoughts.  Quite simply we are not in the business of predicting what the markets will do… or at least we shouldn’t be.  Trying to guess an outcome of the election and in turn trying to predict how the market will react to that outcome is gambling plan and simple.

Personally I like to trade from the higher time frame charts and I am just going to keep an eye on how price reacts to the election and carry on with my trading plan as usual.

Plan your trade, trade your plan.  If your system provides you with a signal based on your trading plan as a result of the volatility created by the election, great.

Well as promised a very short one today.  Good luck this week and if you enjoyed the post please like, share, and comment 🙂

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Trading: The Long Game

Hello all,  I hope that 2016 is treating you well so far.  My wife and I were blessed with the birth of our daughter last May and she has been keeping us very busy :).  So busy in fact I have not had a chance to write anything on my blog in quite a long time.  It is a bit of a lazy Sunday afternoon in our home today so I have seized the moment.

I have really been giving a lot of thought lately to why so many forex traders are unsuccessful over the long term, and what is the key thing that separates a long term consistent trader from those that crash and burn and blow up their account in less than a year?

Having been involved with forex in some degree or another since about 2005, I can say from experience that for a very long time I was very focused on finding that “holy grail” strategy.  “If I could only find that perfect trading system that gives me laser accurate entry signals I would be successful” I would think.  And so I would go jumping from one trading system to another on the forex system treadmill.  Does this sound familiar to some of you?

Perhaps there are a lucky few who skip this initial search for the “holy grail system” phase in their trading journey but I have a feeling this is a very very common phenomenon.  Eventually after getting tired of being on this “forex system treadmill”, and after much self reflection I eventually came to the conclusion that a trader’s “system” which tells them when to enter and exit a particular trade is actually a very small part of what makes a trader successful over the long term.  We spend so much time focusing on this, and marketers are so successful selling us “trading systems” but what most of us actually fail to realize is that having a sound trading system is only a good start.

Do You Have a Trading Plan?

In previous posts I have already spoken about trade management, which in my humble opinion is probably more important then the decision of when to enter the trade, and yet so few “trading systems” sold to us even deal with trade management.  Before entering a trade you should be able to answer the following questions:

  1. Why am I entering this trade (why do I feel I have an edge here)?
  2. Where am I going to set my stop loss to get out of the trade if I am wrong?
  3. How much risk am I going to take on this trade and thus what lot size am I going to take on this trade?
  4. If the trade goes in my direction am I going to move my stop loss to break even, or move it higher than that to lock in some profit?
  5. At what point am I going to move to break even or lock in profit?
  6. Where am I going to bank my profit and get out of this trade?

If you start thinking about all of these questions after you have already entered the trade its too late.  You are no longer going to be objective about your trading decisions at that point.  This is not to say that you should never alter your trading plan once the trade is open if something unexpected occurs, but I believe that we so influenced by our emotions once a trade is open and we have money on the line that these decision have to be made prior to entering a trade.  Plan your trade and trade your plan.

Are You Taking on Too Much Risk?

In addition our failure to truly follow a trading plan, we as forex traders tend to use way way too much leverage and take on way too much risk.  It wasn’t that long ago that I personally believed I was being conservative by only risking 2% – 3% of my trading capital per trade.  Not only would I risk 2% – 3% per trade but I would sometimes take multiple positions at the same time on currency pairs that were highly correlated.  For example GBPUSD and GPBJPY.  In effect I wasn’t actually risking 2%-3% of my trading capital but more like 6% – 9% if I had 2 or 3 positions open.  This is a recipe for disaster.

Only you can really ascertain what amount or risk is right for you, taking into consideration your trading style, your risk appetite and your trading objectives.  However, I believe large draw downs are probably the number one reason traders assume their trading system is no good and abandon it prematurely and move on searching for the next “holy grail”.  When in fact their trading system was fine, they were just taking on way too much risk per trade.  Psychologically it is so difficult to sit through a period of large draw down.

Every trading system loses; period.  In fact it is possible for your trading system to suffer, 5, 10, 15 or more consecutive loses before turning around.  Will you be able to stomach a draw down of 30%, 40%, or 50% or more while maintaining the confidence that your trading system is solid long term and will bounce back?  Much easier said then done.

The good news there a way to drastically reduce the draw down your trading system suffers and reduce the likely hood that you will blow your account or abandon an otherwise solid trading system.  Reduce your risk!!  Personally I have come to the decision that I am not willing to go through any more than a draw down of 25% on my account.  Any more than this is outside of my comfort zone.  How am I going to prevent a draw down of any more than 25%?  Well, there are never any guarantees but I believe that if I use an absolute maximum risk of 1% of my trading account per trade and do not take multiple positions simultaneously on highly correlated pairs this should give me a very good shot at preventing a large draw down.

Trading is a long game affair.  Slow and sure.  The best hedge funds in the world average between 10% – 20% gain per year.  If you can maintain growth of 20% per year the law of compounding will take care of the rest and you will be among the ranks of some of the best traders in the world.  Resist the temptation to double your trading account every month as this will only lead to a blown trading account and leave you searching for the next “holy grail.”

I hope you have found this post informative, and if so feel free to comment, share and like 🙂

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Your Thought Process May be Standing in the Way of Your Forex Trading Success

Like most forex traders I have always believed, at least on a passive basis, that our psychology or thought process does play a fairly large role in whether or not we are successful on a long term basis.  You hear it over and over again that “you need the right psychology in order to be successful at trading”.  But what does this really mean?  To be honest I have never really taken the time or put forth sufficient effort to investigate this whole trading psychology business, or how one should possibly change their thinking in order to improve their trading results.

Brain Pic

Yes I know that having a sound trading plan, discipline, patience and proper money management are essential.  But what I am talking about goes way beyond these principles.  Can our actual thought processes, or the way we think mean the difference between attaining success in the forex markets, or joining the ranks of the other 95% who fail?

Another good question; are successful traders born with the proper thought processes or is this something that can this be learned?  Are we stuck with the thought processes that are hard wired into or brains, and ingrained in us by all the conditioning we have absorbed since childhood, or can we learn to change these thought processes so that they are conducive to success as a trader?

I think these are all compelling questions, and any aspiring forex trader would do well to give them some serious thought.  As forex traders we are always so wrapped up in whether our forex system or method is going to lead us to our trading goals.  But I don’t think most of us ever really stop to think that maybe our trading system or method actually has very little to do with our level of success.  For example, many aspiring traders endlessly jump from one system to the next because that “holy grail” forex system is just around the corner.  The sad reality is that most will never find success because they are looking for something that doesn’t exist and the key is really between our ears, our thought process.

I recently finished reading a book called “Trading in the Zone” by the well known author Mark Douglas, and I must say it really took the blinders off for me to a certain degree.  In the book Mr. Douglas explains in a clear manner how 99% of us, come to trading with thought processes that are almost certain to ensure we will fail.  It isn’t our fault.  These same thought processes  work very well for us in everyday life, and have essentially been engrained in us from an early age. But when it comes to the reality of trading, these same thought processes actually cause us to sabotage ourselves.  Until we can really identify this problem and learn to train our minds, we can have the best trading system or method in the world, but we will likely not be successful long term.

Mr. Douglas essentially comes from the premise that trading offers unlimited and complete freedom for creativity and freedom of choice.  There is unlimited potential for profit and unlimited potential for loss.    The markets offer limitless and endless choices. Our brains are not wired or accustomed to operating in a realm where there are no bounds, constraints or rules.  And this is why most ultimately fail.

These are somewhat tricky concepts to relay and I am probably not doing the book justice so I will let you hear it from Mr. Douglas himself in this short video below:

If you really want to better understand how your thought process may be holding you back from reaching your forex trading goals then I would highly recommend giving the book “Trading in the Zone” by Mark Douglas a read.

While the proper thought process or psychology is essential, having a sound trading plan that will provide you with a statistical edge over the long term is also necessary.

I believe that Price Action trading is something that can provide that edge.  If Price Action Forex Trading is something that appeals to you I would highly recommend checking out DNB Forex Price Action Membership.  I have been a member of the DNB Price Action War Room for quite some time now and I can honestly say if you are serious about trading forex, the low one time membership fee is totally worth it.

To check out my recent review blog post on the DNB Forex Price Action Membership Click Here.

I hope you have enjoyed this post, and if you have please comment, like and share 🙂

Cheers.

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Hello world!

Hello my name is Serge in this is my first blog post on my new forex trading blog!

I hope this blog will become an informative, interesting resource for fellow traders, where we can share various thoughts and strategies ideas related to forex trading and especially price action based trading.

Please check back often and I encourage you to post, share your thoughts, ask questions, and be involved!

Cheers.

Serge

 

 

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