Why So Many Lose
I’ve had the great fortune recently of seeing the trade signals we rely on start to be automated. By essentially taking away that part of my decision making process it’s freed me up to concentrate on a few other trade determinates which I had thought I had been accounting for, but which I found I had not been highlighting – think categorizing – in a methodical, organized manner: namely momentum, time of day, and structure (support or resistance). I had definitely accounted for them in my trading plan, but I had not been in the habit of definitively accounting for them in the same step by step process used for the signals. These three conditions — momentum, timeof day, and structure – are separate from price but essential in trade selection. They are how we filter the actual trade signals. If the price pattern is not showing the appropriate momentum in the context of existing structure, at the appropriate time of day, then we pass on the signal.
Getting this process more automated is great because it means there is far less room for human error, which is the number one problem for discretionary traders. Yes there is still the need for the individual to make that last determination before pulling the trigger, but it sure helps having everything processed up to that point. It also brings up the point of this article: the process from market overview, to trade overview, to trade set-up, to trade signal involves more decisions than even I had thought. No wonder so many people lose money so consistently! And no wonder, as my first trading mentor Bill Williams told me so long ago, that two characteristics he looks for in somebody to train to trade: being organized and having a strong work ethic!
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Jay Norris is the author of Mastering the Currency Market, McGraw-Hill, 2009, and a Senior Market Strategist with BrewerFX.com
DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. Risks include the potential that changing political/economic conditions may substantially affect the price/liquidity of a currency. Investors may lose all or more than their original investments.
This is good, great in fact!!
Yes a trade signal involves a hell of a “more” decisions than first meets the eye!!
To have an automation system just before the Trigger, w/out the suto pilot pulling the trigger is a really, really good thing!
Those are good words from Mr Williams – I for one will try to live up to them….Thank-You Bill (and Thank-you Mr Norris – Sir)
Mr Norris always has good points in his posts. I have his book and can say that after one tutorial I have not been able to look at the chart the same way again. Thanks as always for the insights, Jay
Bob Nunnally