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Forex Trading For BeginnersSumming it Up
Being fixed on the percentage of winning trades versus losing ones is similar to a disease and it cannot be easily cured. In trading, not all battles are won and instead you should be willing to lose a few battles along the way. More accurately, as a trader, you should be willing to deal with small
losses in order to avoid the creation of a large loss. A number of trading fiascos begin in the unwillingness of the trader to accept a loss.
The Amateurs and the Professionals
In the judging of your performance record as a trader, an institutional investment company will first agree on whether your results are due to your outstanding decision making or from excessive risks. Take this for example; there are two traders both with starting equity of $50,000. The first trader was able to double the initial investment, thus resulting in a 100 percent gain, although he suffered a drawdown of 50 percent along the way. On the other hand, the second trader rose only to $60,000, which is only a gain about 20 percent, but his worst drawdown was only at 2 percent of the accounts value.
Although the first trader had the larger return, he is an accident waiting to happen. Any trader who is willing to lose 50 percent is also an excellent candidate to lose the account. Probably, the first trader was trying to hold on to his losing trades, or even adds to them, which is normally a signal of failure in trading the currency market.
The trader who can be considered superior is the second trader, since he was able to attain considerable gains with minimal drawdown. Generally, the institution would want to know just how much money can the second trader could comfortably trade.
The Good Trade and the Winning Trade
In trading, it is important to always remember that the ends do not justify the means. This only means that the outcome of the trade does not automatically justify the method used to achieve that outcome. There are traders who take the attitude that for as long as the trade wins, there is a good reason no matter what rules were broken during the process.
The truth is, winning trades are not always good trades and vice versa. It is still possible to perform everything incorrect and still achieve a triumphant result on a specific trade, just as it is possible to do everything right and still lose the trade.
Remember that, as a trader, it is important to strive to be a good trader instead of a lucky one, since anyone can be lucky. More so, do not judge the trading on any particular result, but rather on whether the process followed proper protocols. If done correctly but still not trading successfully, at least you will be able to resolve that the problem lies not with the execution but with the plan.
Importance of Proper Execution
Take note that any good plan is useless without being executed properly. Unfortunately, this is one area where most traders go wrong. Since they desire to succeed, they make a plan and then randomly change it probably due to lack of discipline. When failure occurs, the blame goes on the plan. In fact, the error is not with the plan but with the execution.
When a trader moves from one technique to the next, most of the time, they have no way of knowing if their plan actually works. When you successfully followed a plan properly, it is important to do everything that can be done to reinforce that behavior, despite the consequences of the outcome.
Also, never congratulate yourself for a successful trade outcome that came from an ignored plan or unplanned at all. Instead, consider yourself lucky and realize that it might be impossible for you to succeed in this manner again, in the long run.
Taking Responsibility for the Actions
Several traders like to place blame. They would have people think that their unfortunate trading records are due to exploitation on the part of the market makers, institutions, or other outside influence.
Although dodging blame may be effective in dealing with other aspects of life, like work, it is not conducive in performing good trading. Deflecting blame only causes traders to remain the same and leave no space for change. Additionally, by accepting that the fault lies with someone else, there is no need for learning and growth.
Always remember to accept responsibility for every trade that you place. If you are very open in taking credit for the winning trades, then you should also be able to accept blame for any losing trades as well. Those individuals who always fail to take responsibility for their own actions, or trades, have the tendency not to succeed in the forex market, or any trading environment for that matter.