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 hits two-day highs near 1.1820
EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.
GBP/USD reclaims 1.3600 and above
GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.
USD/JPY drops back below 157.00, as focus shifts to Japan snap election
USD/JPY is back in the red below 157.00 in the Asian session on Friday. The Japanese Yen recovers ground against the US Dollar amid some profit-taking ahead of Japan's snap general election on Sunday. The preliminary reading of the Michigan Consumer Sentiment Index report for February will be released later on Friday.
Editors’ Picks
EUR/USD: US Dollar to remain pressured until uncertainty fog dissipates Premium
The EUR/USD pair lost additional ground in the first week of February, settling at around 1.1820. The reversal lost momentum after the pair peaked at 1.2082 in January, its highest since mid-2021.
Gold: Volatility persists in commodity space Premium
After losing more than 8% to end the previous week, Gold (XAU/USD) remained under heavy selling pressure on Monday and dropped toward $4,400. Although XAU/USD staged a decisive rebound afterward, it failed to stabilize above $5,000.
GBP/USD: Pound Sterling tests key support ahead of a big week Premium
The Pound Sterling (GBP) changed course against the US Dollar (USD), with GBP/USD giving up nearly 200 pips in a dramatic correction.
Bitcoin: The worst may be behind us
Bitcoin (BTC) price recovers slightly, trading at $65,000 at the time of writing on Friday, after reaching a low of $60,000 during the early Asian trading session. The Crypto King remained under pressure so far this week, posting three consecutive weeks of losses exceeding 30%.
Three scenarios for Japanese Yen ahead of snap election Premium
The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.
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