Trading is like a video game. In some video games, you can level up your character from level 0 to level 99. Final Fantasy anyone? As you level up, your attributes increase. Strength up, agility up, defense up and etc. At higher and higher levels, you can equip better weapons, heavier armor, faster boots. And defeat stage bosses.
So it is similar to trading. As you level up in your trading skills, your ability to attack and defendagainst the market increases. You get better at knowing when to enter the market (attacking skills ), when to cut loss (agility skills ), when to stay out of the market (defensive skills ). Also, you are able to manage your position size, when to up or down your position size according to your experience (constitution and wisdom skills). Last of all, with each trade, you are aware of your own psychology (mind skills).
In this thread, i wish to share my mind games of trading. Remember, trading is a mind game. As i share, hopefully all of us can level up from our current level to level 99. At a high enough level (level 70-80??), we should be able to extract profits from the markets consistently.
I will post my thoughts frequently and will help us level up from level 01 to level 99. Alright, i will be posting on level 01. Check back soon.
Level 01-10 will cover the most basic stuffs of trading. Yet these foundations are the most important to trading success. Remember the story of the 3 pigs and the big bad wolf? “I will huff and puff till i blow your house down!!!” growled the wolf.
Strong foundation = strong house to withstand earthquakes and hurricanes.
Weak foundation = straw house ready to crumble anytime.
Understand this and internalise into your soul. There are only 6 possible outcomes to any trade.
Large win
Small win
Breakeven
Small loss
Large loss
Account blown to zero
My trading system has a winning edge. I know this. Because my trading account is getting bigger when i trade my edge over the past few years. I just need to stay away from #5 & #6. And my account will grow over time. Here is my ultimate losing trade. Every trader have one or two. Be honest about it, learn from it and NEVER repeat it again. That is the mind game of trading.
A good trader is like a sturdy chair with 4 legs. If 1 leg is damaged, the chair become wobbly and very risky to sit. Would you risk buttocks to sit on such a chair? Ouch!!
Likewise in trading, there are the 4 M’s to become a successful profitable trader. Each M represents 1 leg of the chair. When all 4 legs are in your trading system, your chair is in good shape and so are you.
A professional trader will strive to maintain a strong chair. Once the chair becomes creaky, they will repair it. However, a novice trader will try to sit on their 1-legged or 2-legged chairs. Which chair do you have? :57:
Nice. For sure. I read somewhere to treat learning Forex like a game, and don’t think about it in terms of profit as you’re beginning.
There’s no way you’re going to see your profits increase when you’re first starting out, especially if you don’t have much starting capital. Even if you did have a large amount of capital, why risk it when you’re still learning the rules of the game?
I try to place my trades and analyze in terms of % and think of pips. Right now my trades still consist of 0.01 lot orders, which has finally gotten me to concentrate on the game and not let greed get in the way of learning how to trade.
It is good money management to start small when starting out. I wish someone would have taught me that early in my trading career. Yes, trade small, analyze in terms of % & pips, and not let greed find its way in. You are on the good road to trading success.
This is the difference between a consistently successful trader and a novice trader. A novice trader puts on a trade and sees imaginary money pouring into his trading account.
He neglects risk control. He does not think “How much can i lose on this trade?”. Rather he thinks “Oh yeah! I am going to make $1 million dollars on this 4rade. I can feel it. I can smell the money!” Hey, stops are for losers. I ain’t no loser. And because he hates to put stop losses, he ends up losing 50% of his trading account on that “i can smell the money” trade.
A successful trader first priority is risk control. He decides beforehand how much he afford to lose on that one trade. He finds out where is the best logical place to put his stop loss. Based on that, he will determine what % of his trading account to risk on that trade. And then based on that, he calculate his position size.
He will think like this:
Trading account = $10,000
Willing to risk 2% per trade = $10,000 * 2% = $200
Best logical stop loss for that trade = 40pips
Therefore, $200/40pips = $5 per pip
Position size = $10,000 * 5 = $50,000
A novice trader decides how much money he wants to win. A successful trader decides how much money he wants to lose.
Most trading books i read tells me to remove greed and fear from my trading. The authors forgot one thing. Emotions are mental issues, not physical. It is not like going for a surgical operation, where the doctor can cut out dangerous lumps from your physical body. However, emotions are all residing in my mind.
How do you propose to a neuro-surgeon to cut out greed and fear from our brains? Maybe there is a ala-carte menu on the neuro-surgeon’s desk. Click “A” if you would like to remove greed and fear. Click “B” if you would like to insert more love and joy. Thank you for the selection. Your operation will be completed in 3 hours. Thank you and have a nice day. But hey?! In another 100 years, it could be as common as going for a cosmetic surgery.
Therefore i am proposing a new way. The tai-chi master way. What do a taichi master do when he is facing a opponent who is stronger and bigger than him? The opponent comes in with a strong punch, yet the taichi master does not block it directly. What he does is to deflect the energy of the punch by guiding the opponent’s hands to hit elsewhere. Not hit him. Then the taichi master wallops him with his shadow kick when the opponent is temporarily out of balance.
When we trade, greed and fear will always be with us. We cannot control when they come. We cannot brute block them. These emotions are inside of us and stronger than us, like the giant opponent. So this is what we can do. We mimic the taichi master. We deflect and guide these emotions to our advantage. We need to feel these emotions, then channel these emotions and use them. Write down in your trading journal what you feel when you enter and exit trades. Observe for any recurring patterns. Are there any repeating emotions that causes me to make money or lose money? Identify these emotions. Use emotions to your advantage. Be like the taichi master.
One thing i learnt is to write my emotions into the trade journal. Example, when i took the trade, did i feel confident, uncertain or etc? After the trade is closed, i will see whether it was a winning trade or losing trade. Then i compare my emotions to see whether there are any correlations to the trade being a winner or loser.
I think thats a brilliant idea. Im currently a novice trader who felt invinsible due to a great start in trading and made money very quickly. But invincible became a shattered glass with one big loss! I will be keeping a close eye on this thread. Very good advice so far.
Very nice thread.
Giving out a lesson about ‘GREED’ is very important.
As for beginners you need to always cancel out the greed, be happy with small gains.
I started on trading a few days back, I was introduced to FOREX trading like a week ago - I have studied economics in school for about 4-years. So it took me a day or two to grasp what happens in the trading world.
I was only at KinderGarten ( Unfortunetly ) of Babypips when I deposited my first $50.
Everything looked bright and I converted that $50 to large sums of money just because of pure luck and no sound decisions, but guess what? When I was at $1000. I shorted AUD/USD from there, I was 100% certain price would fall - but it never did. I kept holding on the trade for the anticipation of the price fall. It just never happened until I hit my stop loss!
But wait, before it hit my stop loss, it was in green and I fell asleep on my desk. When I woke up, I was in a shock because that money which I lost due to greed meant a lot to me, my account balance went from $1,700 to $0.58. I got my first lesson in the opening week of my trading to keep greed out of it. Plan your trades carefully and then allocate a certain percentage of gain you’d be happy with and try avoid playing with x100+ leverage if you are a beginner. No one can become a millionaire from Forex overnight. Emotional intelligence is important and I am glad you have started this thread ‘ForexMindGames’ will be looking to read more.
This is a hypothetical example trade. Lets say you want to LONG AUDUSD at 1.2000. And you determine based on your charts, the best place to put your stop loss is 1.1160 (40pips stop loss).
The idea is to place your stop loss at the best logical level based on your charts. You can substitute 40pips with any pips (30pips, 50pips etc), if your charts say so. So it is whatever pips you have pre-determined.
What are you? Are you a feeler or a thinker? Are you an extrovert or introvert? Do you like to do things slowly and steadily as a turtle? Or you talk and whiz about like a busy bee?
Are you able to answer the questions above? If you wish to succeed in trading, you have to understand yourself. You have to find a market and trading lifestyle that is compatible with you. Think about this. There are over 6 billion people on this planet. And no one has the exact same personality as you. In other words, you are unique. Thus your approach to trading will also be unique. The market, on the same hand, is also infinite (almost). And because the market is infinite, it can also be able to accommodate any infinite number of trading styles. Therefore, the market can accommodate you.
So the next question is, can you accommodate yourself to the market? How can you do that? Simple. Find out everything about yourself by taking personality profile tests. There are many different types of personality profiling methods. To start off, i will suggest you to take a look at these 3 types of personality profiling.
Go and google
DISC personality test
MBTI (Myer Briggs Type Indicator)
OCEAN personality test
You may have spend some money to do these tests. But if you do, you should get some form of professional feedback after answering the test questions. Such as a description of your personality type, your strengths and weaknesses, your ideal career and others.
Or if you wish, just type “personality profile test” into google.
There are some free ones. I have listed a few below to help you begin. Please note again that i am not affiliated to these websites in any way. Have fun!!!
