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Where Many Traders Go Wrong
Often new traders come to the market with many false beliefs about what is needed to make money consistently in the markets. This article will explore some of those false beliefs and how you can fix them to become a successful trader.
False Belief 1 – I need to watch the markets as much as possible
This is a very common belief that many new traders find themselves falling into. Quite simply trading does not have to involve long hours staring at the screen and many traders actually find that once they begin to cut back their screen time their success rate climbs.
Traders need to identify when is the best time to place trades and then step away from the screen.
An example of this might be a trader that trades off the 4hr chart. They may choose to look at the charts and scan for trades during the US and UK sessions when the 4hr candle closes. If they find a trade they place it and set stops and targets and then turn the computer off until the next 4hr bar closes. If there is no trade to place they simply turn the computer off until the next 4hr bar closes and they scan again for trades.
Watching the markets endlessly will not produce any more trades for you to enter compared to scanning at a set time. Continually watching the markets will wear you down and make you a lot more likely to over trade. The feeling of wanting to be in a trade just for the sake of it is hard to fight when you are just watching the market endlessly.
False Belief 2 – The more indicators and junk I can place on my chart the more likely I am to predicting the direction of the market
Many traders believe that placing indicators on their charts give them a great chance of picking the right side of the market. The problem with this is indicators are built off what price has done or off old price data. What does this mean? It means traders who use any indicators at all, are using old price to predict what may happen in the future. This may sound crazy but it’s true!
All that’s needed to trade successfully and to consistently make money is simple Price Action. Price Action is the key to all moves in Forex. Price Action is people’s behaviour placed on a chart for us to analyse. As all indicators are made of old price information, it makes sense to use the current live price information to base our trading around.
False Belief 3 – I can’t be wrong
Traders often look at trading as a matter of being right or wrong on each particular trade they take. I prefer to look at the market as a random event. I can never know for sure no matter how good the setup looks that it will work! I try to take only the best setups but does that mean they are all winners? No, the outcomes are random! I make money consistently month after month because I know I have an edge on the market that produces more winning trades than losers over a span of time. I may lose 3 trades in a row but I know over 30 or 40 trades I will always be up. Start forgetting and stressing over this trade and the trade the just went past. You are not right or wrong. Trading Forex will always produce a random result.
False Belief 4 - I have to analyse every little thing and know everything inside out
Whilst it is good to be a master at the method you trade you do not need to know about every little thing. People often come unstuck falling into analysis paralysis. They can never believe that things can be simple and more than that, making things simple is the way to success and profitability.
SIMPLE is the way to go. Pick just one method to trade with such as Price Action and perfect it. Do not try to involve 100 methods with 10,000 indicators and just as many timeframes! Keep it simple and perfect you’re one chosen craft!
I hope you enjoyed this quick article.
Safe trading,
Johnathon Fox
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Comment by Janos on February 5, 2012 at 10:06am -
I knew I am a contrarian
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Comment by Peter jcp on February 5, 2012 at 10:35am -
I am another one :-)
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Comment by ForexSchoolOnline on February 5, 2012 at 10:35am -
Hahaha
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Comment by amarjit on February 5, 2012 at 12:07pm -
like your article containing some fundamental truths .. always good
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Comment by Lisa on February 5, 2012 at 3:45pm -
Part 1 - I think newer traders do have to spend longer hours studying price movement ...
and eventually can spend less time with greater understanding.
Part 2 - the more indicators one uses, the more information he / she has to understand, ...
process and master.
I think it’s better to be a specialist on one than a generalist on many.
In other words, a jack of all trades & master of none ~ not good.
Part 3 - Jack Schwager “Market Wizard’s” claims that the best traders are about 63% accurate.
Part 4 - I find it’s better to memorize smaller portions of information ...
keeping to the classical model of education.
Good Trading Ƹ̵̡Ӝ̵̨̄Ʒ
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Comment by Peter jcp on February 5, 2012 at 3:50pm
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Yet again Lisa - dont believe Jack Shwager - he is obviously not a master of SSS- but probably a good "Jack" of all trades ( pun intended lol)
Also I do think it helps were you live in the World - traders geographically closer to London have such a trading advantage being able to be in their "comfort work zone" and seeing 70% of all the action happening in their space. Dont get me wrong though- my perfect living location for trading would be the South of France - and when I am not trading Miami and Melbourne would both do be fine ( saying that Miami as not got a F1 GP- so I would still have to spend a few months of the year in Europe :-) )
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Comment by Lisa on February 5, 2012 at 4:41pm
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Why not take Jack Schwager's word into consideration ?
He did interview some of the most successful traders in the world (?)
"They" say it’s always about location, location, location *wink* [̲̅$̲̅(̲̅1̲̅)̲̅$̲̅]
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Comment by spiro gonzales on February 5, 2012 at 5:02pm -
Allow me to give a comment regarding the false belief 1
,
I think the biggest mistake in general is that most traders do not
asking them self the simple and important question ..,
What training new employees have to go through when they are employed as traders in hedge fund, what are the requirements for them.
What is the length of training curricula blah blah blah ..,
I have no doubt that an experienced trader can specialize in making money only to trade in a certain time frame ..
but I think / suppose to sit in front of the desk 10 hours a day, is part of the curriculum as an employer would expect that a new employee being trained trader has to go through to develop as a trader.
,
So for me it is a bit naive to think that I can expect me to develop myself as a professional trader based on a 4 hour candle.
.
I guess 4 hours candle is a product that has been launched over the Internet because it is designed for those who are working full time ..,
But generally, Americans who work full-time lucky, because they can trade Frankfurt / London open before they go to work and they should adapt their training - trading career so they can join the thousands of hedge fund / banks starting their trading in the timeframe.
,
Another sad thing is that most people are woefully under-funded
personally I think that if you want to be trading as a profession should have a minimum of between 300-500 k on account ..
and then you have a sober Salary with a sensible money managment.,
And I believe and that many who manage to go in the plus in trading with a modest account fails from the transition to a larger account.
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Comment by Lisa on February 5, 2012 at 5:34pm
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I do wake-up at 3am for the London open (EST) …
that definitely sets the tone for the day ...
and the majority of the time my pending orders are triggered at that time.
Many professional traders evaluate the higher timeframes ...
as they know these timeframes show the consensus of the market ...
and they have many other responsibilities ...
besides analyzing smaller and often erratic movements on lower timeframes.
I do agree, to make a living at the market, you need a rather large account ...
lots of capital to profit off of.
Depending also on the type of lifestyle desired.
Keep in mind, ...
“professional” traders that work for banks & firms & such ...
still get paid whether them make a profit or not.
They’ll probably not have a job for long if they don’t produced reasonable results, ...
but sometimes they are even in the negative for the year !?!.
I had read a long boring report on this awhile ago (that I also posted on here on FXStreet)
comparing experienced traders returns to newer employed traders ...
and the results were inconsistent to logical thinking.
The older, more experienced traders often did not earn higher returns ...
compared to their newer, less experienced counterparts.
Trading is a conundrum.
(I’ll try to find that report)
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Comment by Lisa on February 5, 2012 at 6:04pm
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It was a pdf similar to this one ...
http://insidertrading.procon.org/sourcefiles/TradingIsHazardousToYo...
but I found this quit interesting too ~ lol
Good Trading Ƹ̵̡Ӝ̵̨̄Ʒ
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