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The Forex Trader Vs The Forex Gambler

Today’s lesson is going to open your eyes and help you decide if you are trading or gambling, so I want you to read the whole thing very closely, three times over if you have to. You should read today’s lesson even if you don’t think you have a problem with gambling in the markets, because you will surely pick up some useful advice that will work to improve your overall trading results.

Gamblers fund $500 accounts, blow them up and fund them again with another $500, they repeat this process over and over again without changing their routine, mindset or their strategy; they do the same thing week in and week out expecting to actually make money. I believe it was Einstein who said “doing the same thing over and over again and expecting different results is the definition of insanity”… so we could even go so far as to say that continuously gambling with your Forex trading account is not only financially problematic, but it’s insane.

Any business like trading where you are your own boss and there are basically no rules except the ones you make can be addictive and induce gambling qualities. Now, I am not here to tell you have a gambling problem; I am here today to help you recognize that you may be trading like a gambler and you need to make a change and start trading like a professional. This lesson will help you transition your mindset and your daily routine into that of a professional trader’s, so that you can avoid throwing anymore of your time and hard-earned money down the drain.

The difference between pro trading and gambling…

In trading, we have the possibility to do almost unlimited financial damage to ourselves. There are basically no rules in the trading arena, it’s just you versus you, and the winner or loser will be you. Sure, you can think you’re trading against other market participants, but in reality you are trading against yourself. You are the one who determines whether you make or lose money in the markets. My point is that when you put a human being in this unbounded trading environment, they have nearly unlimited temptation to gamble with their money, so we have to devise a plan to combat this temptation. Many traders think they are ‘trading’ when in reality they are behaving exactly like someone with a gambling problem.

Since it’s so easy to fall into a cycle of gambling as a Forex trader without even really being aware of it, it’s important that we go over some of the basic traits of both a gambler and a pro trader so that you can determine which best defines you:

Basic traits of a gambling Forex trader:

• Has no trading edge or effective trading strategy
• Doesn’t have or use a trading plan
• Doesn’t have or use a trading journal
• Pays little to no attention to risk management
• Spends most of their time focused on profits and rewards
• Often feels intense emotional ups and downs while trading
• Often holds trades in blind hope of unrealistic profit targets
• Trades far more often than they should

Basic traits of a professional Forex trader:

• Mastered an effective trading strategy like price action
• Has a Forex trading plan and uses it
• Has a Forex trading journal and uses it
• Focuses on risk management and on controlling risk on every trade
• Not overly-focused on profits and rewards
• Trades only when their trading edge is present.
• Does not become emotional over a win or a loss
• Treats their trading like a business

As we can see from the traits of a gambling Forex trader listed above, we are mainly dealing with psychological ‘traps’ and pitfalls that we create for ourselves as we interact with the market. I would say that if two or more of the traits of gambling Forex traders we listed above apply to you, then you need to take some action.

Unlike normal gambling addictions, a trader can break a cycle of gambling-like behavior if they will accept that they need to change their habits and then follow a predefined plan of action to start thinking and trading like a pro.

Solutions for the gambling Forex trader…

solutionsIf you find that two or more of the above traits of Forex gamblers describe you, it’s time to do something to change them. There’s nothing wrong with admitting that you are gambling in the markets, it happens to all of us, I have even been guilty of it in the past. What you should focus on is changing this behavior and on constantly trying to improve yourself both as a trader and as a person. Let’s have a look at some of the most important things you can start doing today to transition yourself from a gambling trader to a professional trader.

A checklist for the gambling Forex trader:

• First thing is to stop trading with real money. You’re going to have to take a break from trading real money to cut out the emotion and regroup effectively.

• Second, make sure you: A) Have a trading strategy that you know can be a high-probability trading edge, like price action trading strategies, and B) Fully understand how to use this strategy and you’ve demo traded it long enough to feel you have ‘mastered it’.

• Create a daily checklist or Forex trading plan. This should essentially be your daily trading routine…write down your daily trading routine so that you have a guide to follow each day, this way you’ll be far less likely to enter random trades or ‘wing it’. This will help you view your trading more as a business and less as a trip to the casino.

• Have a risk management plan, and make sure you actually adhere to it by being aware that you never know when a losing trade will come up. In other words, your trading edge is randomly distributed across a series of trades, so don’t ever assume any one trade will be a winner and risk more than you are comfortable with.

• Start tracking all your trades in a journal…don’t deviate, if you don’t have a trading journal you can get one here.

• Limit your time in the market by setting a maximum of 3 trades per week until you feel you are not gambling anymore. This will give you a strict rule to follow and help instill some discipline into your trading routine.

• Be confident in your trading strategy and rely on the long-term edge to recover any short-term losses, rather than trying to get ‘revenge’ on the market and jump right back in after a loser.

• Constantly be aware of your mindset and try to control your emotions in the market by doing the things discussed above. If you feel yourself getting an urge to trade for no reason or to risk more than you should, simply remove yourself from the markets. Also, work in a section on maintaining the proper forex trading mindset into your trading plan and read it every day.

Professional Forex trading is all about habits, and the first step to changing your habits from a gambling trader to those of a pro trader is by determining whether or not you have a problem. If you are bold enough to be honest with yourself about this and find that you do have a problem, please try to follow the above points at least for one month and see if your trading, mindset, and general physical state of well-being don’t improve.

The gambling traps that snare amateurs and that pros avoid…

A few winning trades often misleads amateur traders into thinking they are ‘onto something’. But what usually happens is they hit a big winner and then they give it all right back, and usually more. This cycle of winning here and there and then giving all your gains back, works to keep traders in a cycle of gambling in blind hope, and it slowly depletes their accounts until their gone. Humans are wired to fall prey to this trap of randomly distributed rewards. What happens is once we hit a few winners via luck, we sort of view that as some ‘special trading ability’ and then we just end up gambling our money away in a futile attempt to keep winning. There are scientific studies that show that we condition ourselves to repeat self-destructive behavior like this for the allure of a large randomly distributed reward…playing the lottery comes to mind here…or going to the casino and hitting one nice sized jackpot and then spending countless hours and dollars trying to hit another.

You have to recognize this gambling behavior and try to break through it, because it really is a part of our wiring to trade like a gambler. Luckily, we have large brains with highly-developed pre-frontal cortexes that can plan and think long-term amongst other things. This is our primary tool to use in defending against our more primitive brain areas that tend to naturally dominate most of our actions in the markets and cause us to gamble.

A professional forex trader is constantly managing their risk and thinking about it. They are disciplined and they follow a strict routine, they know they are in the business of trading and they treat it as a business. A pro trader is not fazed by a winning trade or even a series of winning trades; they are emotionally neutral on a loser or a winner. Professional traders are more emotionally excited about their ability to stay true to their trading plans and capital preservation plans than they are about the outcome of any one trade…because pro traders know if they can manage their bankroll properly they will end up out front. If you want to learn professional Forex trading strategies and concepts that will help you transition from a gambler to a successful trader, checkout my Forex trading course and members’ community.

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Price Action Trading – The Most Adaptable Forex Trading Method

In order to consistently profit in the Forex market you need a trading method allows you take advantage of ever-changing market conditions. Whether range bound or trending, the Forex market is a dynamic and sometimes volatile market to trade. If your method to trade this market mainly involves indicators such as stochastics, MACD, RSI, or any host of others you are probably putting yourself in the worst position possible to take advantage of Forex price movement.

The problem with such lagging indicators is that they react with latency to price movement; meaning after a movement has setup and moved a substantial amount then the lagging indicator will give you a signal to enter. Often times these indicators give a signal to enter long just as the market is about to correct to the downside, or vice versa. When you trade the Forex market using pure price action strategies there is no latency, either the price setup is there or it is not. There are a handful of great price action patterns that can tip you off to impending Forex price movements as they happen, not a substantial amount of time after the move has started.

Another problem with most trading methods is that they require the trader to cloud up his or her chart with a bunch of fancy indicators that do nothing more than give you a visual representation of what has already occurred in the market. The ironic part here is that everything you need to know about price movements in the Forex market is already reflected on a naked price chart via price action analysis. All indicators do is cover up this raw price data and make it more difficult to discern. However, because most traders have a false belief that trading is inherently difficult and should be technically complicated, many of them fall into the trap of using lagging indicators and over-analysis.

Trading using price action analysis is much more conducive to the relaxed and objective mindset that is required to prosper in the Forex market than any other method you will find. This is because when your method is adaptable to all market conditions and makes logical sense within the context of the market there is no second guessing your self before you enter or spending large amounts of time over analyzing numerous lagging indicators.

Trading forex with price action allows you to trade on any time frame you want, and even becomes more accurate the higher up in time frame you go which allows you to spend as little as 20 – 30 minutes a day looking over your daily Forex charts for price action setups. Many people get into trading because they want more freedom or are just tired of the daily grind and working for someone else. Often these same aspiring traders lose sight of their original intentions and allow their trading to control them and forget that part of the allure of Forex trading is that it allows you to spend minimal time analyzing charts while providing for maximal personal time. Price action analysis rewards the trader who is disciplined in their approach and does not over trade, it is entirely possible to use this extremely adaptable method and make a full time living trading off daily and weekly charts alone, thus freeing you from the daily rat race and giving you the best gift of all; time.

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Why Forex is the Best Market to Trade

1. Forex is the largest financial market in the world.

The Forex market has daily volume of over $3 trillion per day, dwarfing volume in the equity and future markets combined. Such a huge amount of daily volume allows for excellent price stability in most market conditions. This means you likely will never have to worry about slippage as you would when trading stocks or commodities. The price you see quoted on your trading screen is the price you get.

2. Trade whenever you want; 24 hours a day 6 days a week.

There is no opening bell in the forex market. You can enter or exit a trade whenever you want from Sunday around 5pm EST to Friday around 4pm EST. There are 3 distinct trading sessions for you to take advantage of in the U.S., Europe, and Asia which allows you to trade on your own schedule and respond to world-wide breaking news. While it is possible to trade some stocks and commodities in the after hour electronic session, the liquidity is often very low and this makes prices extremely uncompetitive.

3. Commission free trading and overall low transaction costs.

A stock trade will cost anywhere from $5 to $30 for an online stock broker and typically up to $150 per trade for a full service broker. Futures brokers generally charge between $10 and $30 round turn, this means you pay between $10 and $30 to enter and exit every trade. Most forex brokers offer little or no transaction fees, they are compensated through the bid/ask spread of each currency pair. Typically these spreads are as little as 1.5 to 5 pips, depending on the broker and currency being traded. So essentially the only fee associated with a forex trade is that you start out being a few pips negative on every trade due to the bid/ask spread.

4. Market transparency and Instant execution.

Market transparency is much greater in forex than in stocks or commodities, this means it is easier to analyze the inner workings of the market and figure out what is driving it. For example, economic reports and news announcements that drive a country’s economic policy are widely available and accessible for anyone interested. Whereas an individual company’s accounting statements are much harder if not impossible to obtain. Instantaneous order execution is another great advantage forex has over other markets. Retail forex trading is generally done over the internet on all electronic platforms. The forex market has no central exchange, no open-out cry pits, no floor brokers, and was designed to be this way to facilitate large banks and allow for instant execution of transactions, this means no delays for you and extreme ease of execution.

5. Low margin requirements.

Forex margin requirements were recently raised in the U.S. but at a maximum of 1:100 this is still much higher leverage than you will get in the futures or equity markets. This means you can control 100,000 worth of currency for only 1,000, or 1%. To compare, in the futures markets traders must post margin equal to between 5%-8% of the contract value while stock traders typically must post at least 50% margin. Leverage can be a double-edge sword however, as an increase in leverage leads to an increase in risk but also in profit potential.

6. Price movements are highly predictable in the forex market.

Due to its highly speculative nature forex price movements tend to over shoot and then correct back to the mean. This means there are a number of repetitive patterns that are easily recognizable to the trader who is trained in price action analysis. Forex currency pairs generally spend more time in very strong up or down trends than other markets, this is also a huge advantage because it is generally much easier to trade a strongly trending market than a chaotic and consolidating market.

7. Equal opportunity to profit in rising or falling markets.

The forex market has no structural bias as do most stock markets. For example, most stock markets have a bullish bias, this means traders tend to like the long side or upside of the market more and as a result of this it is actually more difficult and generally requires more margin to sell short in a stock market. This is not the case in the forex market. As an inherent feature of the structure of the forex market it is equally easy to buy or sell at anytime and there is never any increased fee for selling short. In fact, each time you buy a currency you are simultaneously selling another, and vice versa. The ability to buy or sell at any time with no penalties is another advantage the forex trader has over those trading other markets.

8. No constraints on the number or type of transactions.

The futures market sometimes will have what is called a “limit up” or a “limit down” day, this means when the price moves beyond a pre-determined daily level traders are restricted from entering new positions and are only allowed to exit existing positions if they desire to do so. This is meant to control volatility, but because the futures market for currencies follows the spot forex market the next day at the futures open their sometimes will be large “gaps” or areas where the price has adjusted over night to match the current spot forex price. Now, if you were holding a futures position over night it is entirely possible that your stop got gapped around, in which case you would get filled at the next best price, which often will be extremely damaging to your trading account. Due to the 24 hour nature of the spot forex market even in extreme market volatility traders generally don’t have to worry about gaps and can almost always get out at the exact price they want.

9. Mini and micro accounts make it easy to get started.

There are many forex brokers that are easily accessible on the internet. Unlike futures or stock markets it is not going to benefit you much if at all to have a full service broker in forex. Most of the bigger forex brokers all offer tight spreads and very similar price feeds, they also all offer demo accounts that let you test out your trading ideas before risking real money. Another great thing about the forex market is that you can get started with as little as $250. Micro accounts allow you to trade position sizes as small as 1 cent per 1 pip movement. This means you can effectively control your risk even if you are not starting with much money. In the futures or stock market not starting with at least $10,000 is a big factor in why people lose so often.

10. Forex price movement lends itself wonderfully to price action setups.

Due to the speculative and contrarian nature of the Forex market prices tend to continue in one direction for a decent move and then revert back to the mean or value-area. More often than not these big moves are tipped off with a price action signal. If you are trained by a professional trader in the art of price action analysis you can design an entire trading plan around a few simple yet effective price action setups. Some of these patterns re-occur on a regular basis on the 4 hour and daily charts and can be extremely accurate. Due to the inherent high volume and large price movements, Forex is the best market to trade using price action analysis.

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Why Use Forex Price Action Analysis?

price actionI have tried about every trading method you can imagine, and after all the frustration, time, and money that I wasted earlier in my career, I ended up realizing that the best way to trade any market is just by analyzing a ‘naked’ price chart. When I say ‘naked price chart’ I mean trading off the pure price movement or of the market; in other words, you are trading primarily off the natural price dynamics of a market and not off of indicators, robots or expert advisors.

My unique way of trading using price action setups is a result of many hours of screen time spent analyzing price movement and price action patterns. Trading is a process of trying different methods and tweaking them and eventually ending up with your own unique trading method. I don’t believe in rigid and Forex trading systems that force a trader to trade in a mechanical fashion or when it gives them an automatic signal. The markets are dynamic and constantly changing and ebbing and flowing.  I firmly believe that the only way to make money in this type of environment over the long-run is to employ the discretion and intellect of the human mind. Trading off the natural price action of the market is the best way to do this.

Why Trade Forex with Price Action?

The Forex market is a highly liquid and sometimes fast moving market that lends itself wonderfully to the trading method of price action analysis. Price action analysis is the identification and implementation of specific price action signals or setups in the market you are trading. Forex is a great market to use price action analysis on because it is open 24 hours a day 5.5 days a week and this means there are more price action signals for you to take advantage of. The Forex market also boasts dense liquidity and good trends, these are just a few of the advantages of trading Forex.

Successful Forex trading is both an art and a skill. Whilst you can manufacture trading signals by aligning lagging indicators together, you really need to trade in harmony with the Forex market and follow the raw price trail as it unfolds. Once you learn to effectively interpret this price trail or “price action”, you will have the potential to become an extremely accurate Forex trader and have an edge that many other traders are lacking. You have probably already experienced the frustration of entering a trade only to see it move against you immediately, this is often what happens when traders strictly use lagging indicators to trade the market, it’s a habit I try to encourage all my students to kick. The message is clear – “Stop Using Indicators!” The reason is that since these indicators “lag” behind price, they naturally give you an entry or exit signal just as price is about ready to move in the opposite direction, or in other words, they are “late” signals. In my view, the only true way to become an accurate Forex trader is to learn how to interpret the dynamic price trail (raw price data) as it plays out each day in the Forex market. Your new goal should be to learn to trade with price action trading strategies.

Price action analysis works very well in the Forex market because it is such a dynamic and active market. The beauty about price action analysis is that it is an inherently flexible approach to trading that gives you a perspective on the market that allows you to make sense out of what is happening at any given time. I have been profitable by concentrating on just 2-3 good price action strategies that have proved profitable again and again for me. If you learn how to read what the chart is telling you and focus on just 1 to 3 setups that you like, eventually you will master these setups / patterns, allowing you to have a better chance of  making  make money from your trading. Where people go wrong is using indicators and other overly complicated methods and then constantly jumping from one technique to the next (BIG MISTAKE). You have to find a truly consistent edge in the market and then just concentrate on that until you get it down, remain in the one frame of mind, focus and master those setups first, then you can maybe add more tools to your trading arsenal.

Trading is difficult enough without having an overly complicated method that tells you to look at multiple indicators when you could just be looking at a simple price chart. Probably the best reason to trade Forex using price action is that any indicator you use on your chart to analyze market movement is derived from price and is just showing you the same thing price is showing you but in a less vivid format. Some people like indicators because they give you buy and sell signals when lines cross or whatever and thus they eliminate most of the thinking that a trader needs to do and should do. The thing is, trading is not a ‘get rich quick scheme’ and you need to think and use your brain to be a successful Forex trader, just like you have to do this to be successful in any other profession.

Why Trade with Price Action Instead of Indicators?

Just because your charts come with a hundred different indicators doesn’t mean they are going to help you trade better or make you money in the markets. We are trading financial markets here, so the core of what we are doing is trying to profit off of price movements. Thus, why people would not primarily make their trading decisions off of pure price movement is beyond me. I promise you that if you simplify your trading method and concentrate on using price action strategies you will wonder how you ever traded any other way.

Look at the two charts below. The important thing to notice here is that the chart with all the indicators contains many more variables for you to analyze…other than price. Also, note how adding all these indicators onto your charts actually decreases the amount of screen area that the price action takes up…in other words it distracts you and takes your focus off the price action and puts it onto indicators. Indicators are derived from price action, they are simply a less precise and alternate way of viewing price movement…but why would you want to view price movement in any way other than it’s natural form? It is like trying to drive a car at night with your headlights off…sure you CAN do it, but just because you can do something doesn’t mean you should, and it also doesn’t mean it makes what your trying to do easier or better. Trading with indicators all over your charts is like trying to drive a car in the dark with your headlights off…it makes the same task much more difficult than it needs to be, as well as more dangerous.

A chart with just pure price action and the key support and         The same chart full of some popular indicators:
resistance levels drawn in:

Learning to Trade with Price Action will Only Make You a Better Trader

Finally, perhaps the best reason to learn how to trade with price action is that no matter what strategy or system you ultimately end up trading with, knowing how to read and trade off the raw price action of a market will only make it better. Price action is the foundation of any trading method, whether you are using an indicator-based system or a software-based system, the signals that systems generates are ultimately derived from the raw underlying price movement. Therefore, having a thorough and practical knowledge of how to trade off of price action will help you understand your trading method much better than if you don’t.

Whether you decide to use price action in conjunction with another trading method or as a stand alone trading strategy, learning how to trade off of it is only going to make you a better trader. This is a realization that typically takes most traders a while to figure out as they struggle with mechanical indicator and software based systems. Once you learn how to trade with price action it will be like turning on the lights; you will instantly gain a clearer and more effective understanding of how the markets move. If you want to learn more about how to read and trade off of the raw price action of the market, you should checkout my price action trading course and members’ community.

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Overcoming Fear in Forex Trading

The Oxford Dictionary defines fear as ‘an unpleasant emotion caused by the anticipation of danger which leads to feelings of dread, anxiety and apprehension’. Fear is about the expectation that something detrimental could happen and constitutes a crucial physiological and cognitive mechanism functioning to aid our survival by causing us to either anticipate and avoid potentially dangerous situations, or, if we so chose, to face and confront them with a heightened state of alertness and focus. From an evolutionary perspective, fear leads to the instinctive ‘fight or flight’ response. Adrenalin floods the system and we are prepared for battle or to flee. Thus, all traders feel fear at some level because they are exhibiting an innate reaction to an unpredictable environment – the precariousness of the market and the risk of potentially life-changing losses.

Fear is not always our friend. Whereas successful forex traders are in control of their fear, others can become controlled by it and eventually become apprehensive, anxious and unable to make decisions. The ‘entering’ and ‘exiting’ of a trade becomes a nightmare. For successful traders the heightened state of arousal induced by fear leads to sharp concentration and awareness before entering a trade. But for those who have become its captive, the adrenaline rush leads to feelings of panic and fear which cloud the mind and impair judgement.

To become a successful trader, it is essential to make fear our ally, to harness it and flow with it in order to reap the benefits such a survival mechanism has to offer. Traders need to understand how the different facets of fear can influence trading behavior in a negative or positive manner. Fear is unavoidable and is processed partly on a subconscious level, but when fully understood, it can help you improve your trading performance.

Fear can be broken down into three categories:

1. Fear of Loss
2. Fear of missing good trades
3. Fear of being wrong

Fear of Loss

Trading is like any other business in that losses are a part of the game. But losing over and over again can lead to psychological scarring that can paralyze and fill the trader with dread when approaching the trading table. As Mark Douglas explains in his classic book ‘The Disciplined Trader’, fear of losing actually leads to losing. Stops are placed too tight, instead of giving the price action room to breathe. Trades often pull-back after entry which causes the fearful trader to panic and exit with a small loss to prevent a larger loss. A series of small losing trades will eventually empty the account.

The focus should be on avoiding large losses not on small ones. If you cannot cope emotionally with a small loss, you will miss out on potential large moves because every trade you enter has the risk of turning against you. It is vital to know how much you are prepared to lose in any trade. Another catastrophic action is hoping a losing trade will retrace to exit at breakeven. So often however, this leads to even greater losses.

When fear of loss prevents the execution of trades, the trader’s focus may be largely on results rather than following the forex trading plan. This causes doubt about the reliability of the trading plan which gets in the way of pulling the trigger. And thus, a vicious cycle of self-doubt develops.

To combat the fear of losing, demo trading or trading with small amounts enables you to concentrate on execution of your trading system rather than profit and loss. I advise the latter, for if you trade with small amounts of real money you will experience the emotions of the market but at a lower level, and you can gradually accustom yourself to them. The money you put up is money you can afford to lose, and can be viewed as the cost of education, like a college degree. Pure demo trading does not pull up emotions as nothing is at stake.

When you can trust yourself to execute your trading plan without exception and when you can enter and exit the market with decisiveness and without hesitation, then you can consider going live.

Fear of missing good trades

nervous traderFear of missing ‘good’ trades can be dangerous because it will often cause the trader to join the market at any price. Excitement and euphoria overrule the trading plan with little thought to potential downside risk. This fear of missing out on trading opportunities is something you will have to eliminate if you want to become a successful trader, because if you don’t, it will cause you to over-trade.

As I discuss  in my article on low frequency vs high frequency trading, the frequency of trades is not what you should be concerned with, what you should be concerned with is the quality of the trades you are taking. What you should be afraid of is trading too much, not trading too little! Over my 10+ years of trading and helping other traders, the number 1 problem that I see amateur and struggling traders making is that they simply trade WAY too much. The market is not going anywhere, there will always be another day to trade so don’t worry about missing out on a trade setup or two. It’s better to be cautious and miss out on a trade than be frantically trying to force trades when there really isn’t anything worth trading.

Fear of being Wrong

Focusing on being right rather than making money comes from the traders’ ego. It is the ego that equates the trader’s net worth with his/self-worth which leads to profits being taken too quickly or to exit at break-even.

Trading throws up many issues regarding one’s relationship to money. An internal conflict with making money or needing to be perfect can make it difficult to exit a trade at a loss because it damages your self-image of perfection. Or you may have grown up feeling guilty about having money so you subconsciously find a way to give it back to the market. To avoid self-sabotage, the ego has to stop protecting these versions of the self.

Trading is a probability game and there will always be losses. Being a perfectionist is only setting oneself up for failure. If you cannot take a loss when it is small because you have to be perfect, then this loss will often grow and grow into a much larger one.

Making mistakes has different effects on individuals. Bad grades might have caused parental disapproval and you felt small and worthless. We are so susceptible to the feedback from others. When we are children, feedback can have long-lasting and unforeseen consequences. Many of us never fully recover from the emotional effects of being punished for making mistakes. Neural pathways become ingrained in the brain which attach emotions to learning experiences. When these emotions are negative, they interfere with our ability to learn in a healthy and constructive manner.

Understanding and controlling your fear in the market

free yourself from fearYour trading plan must account for the emotions you are likely to experience, particularly those related to fear. As a trader you must move from a fearful, apprehensive mindset to one of confidence, one which enables you to learn from your mistakes. You have to believe in your ability to make more money than your losses. That makes it easier to continue to place trades after a string of losing positions.

Successful forex trading is about overcoming the major fears you face as you trade the market, gaining confidence in your trading method and even more confidence in yourself. If the different manifestations of fear can be understood, the trader is well-equipped to turn fear from a destructive force into one of our most vital assets when operating in the market.

Article by Nial Fuller Learn To Trade The Market.

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How to Become a Full-Time Forex Trader

Becoming a full-time or ‘professional’ Forex trader is something that almost every trader wants to achieve but that very few ever do. If you want to have a realistic chance at making a full-time living from the markets you are going to have to approach your trading with a disciplined and patient mindset, that is perhaps the single most important piece of insight I can give you. Also, you need to understand that there are no “magic-bullets” or “Holy-Grail” trading systems, despite what you have probably read  on other Forex websites.

I teach traders how to trade with simple yet high-probability Forex price action setups on this website. There are no guarantees and no promises of trading from the beach next month while making a million dollars a year. If you want honest and relevant education on how to trade the markets, then continue reading, if you are looking for a “quick-fix” then I suggest you leave now.

Here are some of the critical steps you’ll need to take if you want to make your living trading the markets:

1) Be realistic and honest with yourself

The first thing you need to do if you want to make a full-time living trading the markets is to simply be realistic and honest with yourself about what is possible at the current moment given the size of your trading account.

For instance, if you’ve got a $2,000 trading account, you’ll have to set your sights a little below ‘full-time trading’ right now, and just aim to supplement your income each month via your trading. You have to learn as soon as possible that you can’t ever risk more than you are comfortable with losing per trade, and if your trading account is relatively small you have to expect to trade smaller position sizes to accomplish this. A small account means trading small position sizes to properly manage risk, at least until you’ve built your account up over time. So, the first step to full-time Forex trading is to simply sit down and say “OK, I have this much money in my account, realistically I am emotionally OK with losing this much of my account per trade, so this is what my position size will be”, then you have a starting point.

You can’t worry about getting rich quick or fret over making less money than you want. Focus on being a good trader whilst your account is small and I promise you the money will follow later. Traders who put too much emphasis on the money in the beginning of their career are the ones who end up losing and quitting.

2) Make sure you know the basics of Forex

This step is sort of a no-brainer, but I’m always surprised at how many traders email me saying they’ve lost a bunch of money and based on the comments in their email it’s apparent they don’t even have a basic education on Forex or Forex trading. So, make sure you understand what the Forex market is, why it exists, and basic trading styles BEFORE you start trading with real money, you can take my free forex beginners course here.

3) Master an effective Forex trading strategy

You only need to master one trading setup to be a consistently profitable trader. Screen time will allow you to master one setup. After you have mastered one setup and “own it” you can add another setup. This can be an ongoing process developing your own style.

The best price action setup to begin with is the one that you see and understand easiest. If you are forcing yourself to learn a setup because you believe another person is successful using it you may be taking the longer route to profitability. We are all different. Our brains and personalities will gravitate to different setups. This is also true of exit techniques. Most traders I hear from lengthen their road to profitability by trying to apply too many concepts before owning the first one. They have studied a myriad of techniques but have yet to master any. This allows them to talk about trading but they are unable to consistently trade profitably.

The first decision to make is; do you desire to be a counter-trend trader or a trader who trades with the trend? Eventually, you can be both. At the beginning, or at a new beginning perhaps, you will do best by choosing to master trading one setup with the trend. If you have been at this game for awhile and are not yet consistently profitable you know what I am saying is correct.

This site contains trading techniques and setups with the intent that it will aid you in creating your own personal trading style. My personal trading style is a combination of various styles and setups. I trust this website will be an exercise in my personal understanding of my own style allowing all to benefit. So, learn what I teach here and then “make it your own”, every trader will trade price action a little bit differently, there’s nothing wrong with that as long as you keep it simple and remain disciplined.

4) Make a Forex trading plan (and use it)

Next, you need to solidify your mastery of your trading strategy by creating a Forex trading plan around it. If you learn from me you are going to learn my price action strategies, thus you’ll need to build a price action Forex trading plan before you start trading the markets. It’s really not that difficult to make an effective forex trading plan, click on that link to the left to learn more.

A trading plan is a critical element to becoming a full-time Forex trader because it acts as a guide for you to follow and as a constant reminder of how to trade your strategy. This helps you to stay focused and disciplined and helps you to avoid over-trading, over-leveraging your account or generally trading emotionally. Emotional trading is the reason why most traders lose money in the markets, and by creating and using a Forex trading plan you can give yourself  a much better chance at avoiding turning into an emotional trader.

5) Make a Forex trading journal (and use it)

You also need a Forex trading journal so that you can track your trades and see your trading performance over time. The reason I said “and use it” in these last two sections, is because many traders create a Forex trading plan and forex trading journal and never use them, or they use them for a day or two and then upon their first losing trade they forget about them. You’ve got to have more discipline than that, understand and accept that you aren’t going to win every trade and you’ll have a far easier time sticking with your plan and using your trading journal religiously. Don’t treat trading as a game, because it isn’t, it’s a business, and if you’re trading with real money you need to treat it like a business. Businesses have plans and they track their costs vs. their profits, you need to do the same with your trading business.

6) Demo-trade

After you have mastered an effective trading strategy and forged a trading plan around it and have your journal ready, you can start practicing your trading strategy on a demo account. Do not blow-off demo trading as something you don’t need to do, because you most definitely do need to do it. Demo trading allows you to get familiar with your broker’s platform if nothing else, and this is important because many traders make silly trading errors just because they aren’t familiar with how to input or close orders, and when trading with real money this can cost you dearly. I suggest any serious trader practice their trading strategy on a demo account until they are consistently profitable for 3 months or more before even thinking about trading with real money. It’s true that there is a difference between demo trading and live trading because there’s no emotion involved in demo trading, but if you treat your demo trading like a live account it will do a good job of preparing you for real-money trading, which can save you tons of money and time.

7) Risk Management

Managing risk should be seen as your number 1 priority if you want to become a full time forex trader, because if there’s one thing that full-time Forex traders do exceptionally well, it’s manage risk effectively. Simply put, you CANNOT become a full time or professional Forex trader if you don’t properly manage your risk. Managing risk properly means NEVER risking more than you are comfortable with losing per trade as well as never funding your account with money that you aren’t truly OK with losing.

You need to understand the power of risk reward and you need to also understand position sizing, as these two things are crucial components to correctly managing your risk in the Forex markets. Amateur and struggling Forex traders by definition do not manage their risk properly, and it’s one of the main reasons why they don’t make consistent money, not because they haven’t found the “perfect” trading system yet. No trading strategy or system will work if you don’t use it in conjunction with an effective risk management strategy.

8) Trading Psychology

Finally, the fundamental difference between beginning / struggling traders and professional / full-time traders, is that full-time traders think differently about trading. Struggling traders tend to gamble in the markets whereas professional traders view trading as more of a business and take calculated risks. It’s very easy to become over-confident after a winner or a few winning trades in a row, and it’s also very easy to become vengeful after a losing trade and want to jump back into the market to try and make back the money you just lost. However, when you have these feelings, you must understand they are not logical and they are not part of your trading plan. Indeed, it is HERE that your Forex trading plan comes into effect. After every trade you take, whether a winner or a loser, you should go and read your plan to make sure you stay focused and don’t jump back into the market for an emotional reason. Check out this cool article on developing the proper Forex trading mindset for more, and if you want to learn more about learning price action trading strategies and how to formulate them into an effective trading plan, checkout my price action Forex trading course and member’s community.

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