The Balance between Learning & Losing
Many trading lessons are not learned until the student runs out of money. The same is true of life lessons. It is the law of the jungle really. One big difference between those that survive and those that don’t is the understanding that it’s not the speculators job to figure out which way the market is going to move next, but to position themselves in this same direction the market is moving now. Not understanding this truism is one reason why so many people adopt the belief that markets often make “no sense”. They don’t understand the golden rule of trading which is position yourself with the current trend and let your profit run. Traders who have survived, and gone on to thrive, know that once they find a trend, to stick with that trend. Traders who haven’t hang on in counter-trend purgatory as long as they can before getting burnt up and dropping off.
One tip off that a novice trader is not going to survive is that he spends excessive time looking at lower time frame charts during “off” trading hours. “Off hours” generally considered from just ahead of lunch time in NY thru lunchtime in Tokyo – though there are times the Tokyo AM session can be monitored. The exception being if they are a swing trader or position trader. Another is they don’t know the difference between a trend trade and a counter-trend trade. The biggest tell of all though that an individual is not going to make it is their persistence in telling others that they are doing “ok” in there trading, “ but would like to do better”. Until they can admit that they are failing, and it’s their fault, it’s unlikely they’ll be able to turn it around.
Turning things around starts when the trader realizes that his job is to not anticipate the next market move, or understand the fundamentals behind market movement – professional traders don’t react to fundamentals they react to price reacting to fundamentals – but to be able to measure current direction on the higher time frames in a market, use that same determination to know when direction has changed in a market, and position themselves in the same direction the market is moving in. That knowledge alone, once understood, is going to be invaluable to you.
Jay
Jnorris@brewerinvestmentgroup.com
Jay Norris is the author of Mastering the Currency Market, McGraw-Hill, 2009 which is the text book for the intermediate level trading course offered though Trading-U.com see: Trading Courses To schedule a complimentary, interactive tutorial with Jay on determining market direction and hear more about “Live Market Exercise” go to One on One Tutorial Jay’s second book Mastering Trade Selection and Management, McGraw-Hill will be in book stores in 2011
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. Any charts shown here represent market conditions at a particular point in time. Such conditions may not be replicated in the future. Past performance is not indicative of future results.