Forex Trading - Beating Discouragement

December 13, 2016

Every Friday morning in my Forex trading room, I spend 30-40 minutes providing some trading related training. During these Forex training sessions (webinars) I have covered various topics such as; Why do most Trader's Fail, Why I Trade the 1 Hour Time-Frame, Trading Records, Managing Risk, Brokers and more... All of these Forex webinars are recorded and are available as part of my Advanced Price Action Trading Course. My latest training session was about mind-set and how having the correct mind-set can help overcome discouragement and other emotional aspects of trading. You can view the recording below...

 

 

Why are most Forex traders not profitable?

 

Most traders are not profitable. The FCA recently released a statistic that around 82% of a spread betting brokers clients are not profitable. I hope that the percentage of profitable trading clients of STP and ECN brokers is higher but we have all heard figures that suggest 70-90% of retail clients are not profitable. So, why is this... 

 

From my experience, most traders fail due to their lack of emotional discipline. They are stuck in a continual cycle of developing/following/learning a trading strategy, trading that strategy until they hit a losing streak, becoming discouraged, giving-up on the trading strategy, developing/following/learning a trading strategy and so on... 

 

To break this cycle - the cycle of unprofitable trading - traders need to only develop/follow/learn a profitable strategy and then stick to it!

 

But it's so hard! I hate making losses! How do I not become discouraged and give-up?

 

It's all to do with your mind-set! Disappointment and discouragement all comes from what you (your mind) expects. When something does not meet our expectation, we are often tempted to become discouraged. 

 

Applying the following points may help you to gain a more realistic expectation of Forex training...

 

1. Do not expect every trade to be profitable. It sounds obvious right? But when most unprofitable Forex traders open a trade, they are expecting it to be a winner. When this does not happen, their expectations are dashed and they become discouraged. 

 

Most trading strategies give a trader an edge that usually provides a healthy risk reward ratio and a win rate of around 50-70%. If your strategy offers a win rate of 60%, why are you expecting each trade to be profitable? Nearly half of all trades are going to be losers. You need to accept that and expect that before trading the strategy.

 

2. Have a long-term perspective. Trading is about making a consistent positive return. Results and profits should be calculated and reviewed monthly, quarterly and annually. The trader that is checking his or her account balance every hour, every day or even every week, has a wrong expectation of trading and the reward it will bring. During 2015, I had a massive return of 126.00% (see my Forex trading results). If I divide that by the 261 working days in 2015, the result offers a return of 0.48% per day (averaged). The truth is, I had plenty of losing weeks and even some losing months in 2015. My expectation is to make a positive return each year. With this expectation, if I have a losing month, it is not a big deal!

 

3. Believe that you can do it. If you have a back-tested strategy that offers a positive return, all you need to do is stick to the trading rules. Believe in yourself. Profitability comes from sticking to the strategy not using your "ability" or "experience" to determine what trades you should be taking.

 

4. Watch the following video on mind-set...

 

All the best!

 

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