Rick Wright
Online Trading Academy
Hello traders! A diary of a failed (hypothetical) trader:
Monday morning journal entry: Here it is, another cold day in forex land. I wonder who is going to hunt my stop loss today? If it isn’t one of those dirty dealing desk traders, I’m sure the reason for my loss today is going to be that horrible trade-picking service I subscribe to. Can’t believe they advertise how great they are, yet every time I take one of their trades I lose. Those idiots. Don’t even remember what website I clicked to find their banner ad, they must be out of business as well. Ugh. Why isn’t this market moving? Maybe I’ll just draw in a couple of support and resistance lines, see how things go.
Two hours later… Well nothing has happened, wonder if a moving average will work today? Which one, which one…I’ve tried the 50, the 200, the 8, the 55, maybe an exponential instead of a simple…Nothing here, either. To heck with it, if I’m not trading I’m not making any money, let’s just buy the EURUSD.
Monday night journal entry: Of course I got stopped out on my trade. I knew I should have been short; bet those other traders were out there just waiting for me to get in so they could move the market against me. This is all their fault! Tomorrow, I’ll show them!
Tuesday morning journal entry: Got a decent night’s sleep, can’t wait to get my money back! Been dreaming about the day when I am a super awesome trader, and the market gives me whatever I want! Today is the day it begins!
Two hours later…What was that, what the heck just happened? Did Bernanke say something? Geithner? I thought he resigned? I forgot to check my economic calendar today, was there some bit of news? I just tried a new trading strategy a friend emailed me this morning – he said he made money with it on a trade last week. He can’t wait to make enough money trading so he can quit his job at the fast food restaurant. Last time I listen to him! This loss is all his fault – I’ll never trust his technique again! Too mad to even do my research for tomorrow, I’ll just get up early and prepare for the market.
Wednesday morning journal entry: After two days of losses, with those market makers and my friend’s terrible trading ideas out of my way, I know I can make money. I wonder what those traders are doing in that online forum on that news site I like, let’s see if their analysis agrees with mine…Hmm, oh wow, I didn’t see that trade, its already moved 30 pips from where they were talking about it, I bet there is room left in the trade! Time to buy! These guys are good, I don’t even have to identify my zones first, I know this one will work out, look at how strong this trend has been!
Two hours later…That does it, I’m never going to that website again! Those traders are all idiots! I hope they are happy that they made me lose money! I’ll show them! It’s all their fault!
Thursday morning journal entry: Got up extra early today, can’t believe how slow this computer is. I’ve researched the market for over an hour, and I couldn’t find a decent trade anywhere. If I can just change time frames fast enough, I could try to scalp, but this computer is killing me! I know if I lose today, it’s all the computer’s fault!
Sorry dear readers, but I don’t have the heart to finish an entire week of this hypothetical journal! How many mistakes did you notice our trader make over those few days of his trading journal?
Let’s start with the first, and most obvious mistake, which is: not trading with a defined plan.
In our Online Trading Academy classes, one thing that we strongly encourage is to make and/or update your trading plan during class. There are many things that go into your plan, but one of the more important is clearly defining your trading strategies. Without a clear set of rules and setups to look for, how are you going to know when/what to trade? Taking trading ideas or suggestions from anonymous internet websites is probably not a great idea. Especially if you haven’t kept track of their performance! What about taking trades from an untested strategy that one of your friends has told you about? Do you really want to throw away your hard-earned money on an untested strategy? Anytime one of my trader friends suggests a new technique that they have used, I test it for 30 trades with very small position size. No reason to risk real position size money on a strategy that I might not be good at. After the 30 trade test, then full position size is allowed-according to my trade plan.
The second, and most painful mistake this hypothetical trader made was the blame game. I’m sure you know someone like this in your life, maybe they trade as well. Nothing is ever their fault, maybe the whole world is against them, or their computer is too old, or their internet connection is too slow, their broker is out to get them, and on and on and on. When I hear someone start to list the “reasons” that they aren’t successful at something, I just want to grab their shoulders and shove them in front of a mirror. How about a little tough love? “YOU hit the order entry button, YOU didn’t trade with a stop loss, YOU didn’t follow an easy, clearly defined strategy, YOU listened to random strangers and risked YOUR money. NO ONE held a gun to your head to take these trades, NO ONE broke into your house and placed these orders. The responsibility lies 100% on YOU.”
The best traders I know have already accepted the fact that trading is an intensely personal business – you get the credit when you are profitable, and you lose YOUR money when you aren’t profitable. The faster you can take responsibility for everything you do in trading, the easier it is to focus on how easy trading really is. How easy is it? Follow our core strategy, follow proper risk management, take the small losses when they happen and let your winners run. Why do people make trading so difficult? My personal belief is the lack of personal discipline is the main culprit to failed traders.
Take responsibility, be disciplined, follow the simple rules of trading, and start making money in the market! Give yourself the credit you deserve, it can be done!
Until next time,
This content is intended to provide educational information only. This information should not be construed as individual or customized legal, tax, financial or investment services. As each individual's situation is unique, a qualified professional should be consulted before making legal, tax, financial and investment decisions. The educational information provided in this article does not comprise any course or a part of any course that may be used as an educational credit for any certification purpose and will not prepare any User to be accredited for any licenses in any industry and will not prepare any User to get a job. Reproduced by permission from OTAcademy.com click here for Terms of Use: https://www.otacademy.com/about/terms
Editors’ Picks
EUR/USD climbs to daily highs near 1.1820
EUR/USD now picks up pace and advances to the area of daily peaks north of the 1.1800 barrier at the end of the week. The pair’s decent move higher comes against the backdrop of a generalised lack of direction in the FX galaxy and the mild offered stance in the US Dollar.
GBP/USD trims losses, retests 1.3460
After briefly challenging its key 200-day SMA near 1.3440, GBP/USD now manages to regain some balance and revisit the 1.3460 zone on Friday. Cable’s pullback comes as the selling pressure on the Greenback gathers traction, reigniting some recovery in the risk-linked space.
Japanese Yen gives back half of early gains against USD ahead of US PPI data
The Japanese Yen (JPY) surrenders half of its early gains against the US Dollar (USD) during the European trading session on Friday. The USD/JPY pair rebounds to near 155.90 as the JPY falls back, but is still 0.15% down.
Editors’ Picks
EUR/USD: Fed calm, ECB steady, but the Dollar still leads Premium
EUR/USD is still struggling to find real traction. The pair has tried to stabilise, but momentum keeps fading, leaving the door open to further weakness.
Gold: Falling US yields, geopolitics help XAU/USD hold ground Premium
Gold (XAU/USD) gained traction and climbed above $5,200, ending the fourth consecutive week in positive territory. The next round of US-Iran talks and crucial macroeconomic data releases from the US will be watched closely by market participants in the short term.
GBP/USD: Will Pound Sterling defend key 1.3450 support ahead of US jobs data? Premium
The Pound Sterling (GBP) entered a bearish consolidation phase against the US Dollar (USD), after having tested critical support near the 1.3450 level on several occasions.
Bitcoin: Another month of losses, and it’s been five
Bitcoin (BTC) price is stabilizing around $68,000 at the time of writing on Friday, but the Crypto King is poised to close February on a fragile footing, marking its fifth consecutive month of losses since October and a rare start to the year with back-to-back monthly corrections.
US Dollar: At a crossroads; Fed steady, tariffs in flux Premium
The US Dollar’s (USD) upward momentum from the previous week seems to have encountered a tough nut to crack in the 98.00 region, as measured by the US Dollar Index (DXY).
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