A mature advise to beginners

You may have found that most of the new traders in fx market seems to have luckiness with them. Their first deals always bring them good profits. This luckiness, however, disappears after a short period of time. Some of they start to lose money, or even leave the market finally.

What is the reason for the so called “beginner’s luck”? Why it is not long-lasting? How to gain real luckiness in fx market?

Interesting question. And the answer is largely based on human psychology.

Beginner’s luck is just that…luck. Any monkey can place a trade and hope for the best. They have a 50-50 chance more or less on any individual trade. So, if they continue to place trades it is possible to hit some kind of winning streak. It’s as simple as that. But even though any monkey can place a trade, no monkey can continue to see success without a proper balance of method, money and mind-set.

The truth is when most people start out they don’t think trading is that tough, so they tend to jump right in. When they do, they have no real notion of what risk management is or what it means to have an edge in the market. They have no real sense of what thinking in probabilities means. In essence, they are clueless in terms of what it takes to succeed in the long run.

So, they might enter a trade, very likely risking a large amount of their account. On occassion, they hit a winner and because they had a large position size, the money rolls in. This, in turn, convinces them even further that trading is not difficult and continue to trade in the same way. They have just received positive reinforcement for bad behavior so why shouldn’t they continue?

When they do continue, they may hit another winner and become even more euphoric, risking even more and more as they go. Eventually the luck will run out. When it does, they have no idea what it means to take a loss in the market. They might not even have a stop in place. But assuming they do have a stop, they will probably move it to give the trade more room to turn around. They’ll keep moving it until the trade does turn in their favor or until the loss becomes so overwhelming that they cannot take the pain anymore and close out the position for a larger loss than they could have ever dreamed possible. What would be even worse, though, is if the trade did turn in their favor. Then, psychologically, they are completely tarnished because they have just been unknowingly convinced into the thinking that the worst possible habit to have actually works.

The luck runs out because they have no idea of what risk management is all about. They could be right 90% of the time and still go bust because they don’t control the down side. They ultimatley end up giving their losers all the room in the world to breath and eventually cut their winners short the second they have them. They eventually lose because they unwittingly give into fear and greed.

This is why the only chance you have in trading is to educate yourself first, and then take babysteps as you progress.

I have never had beginner’s luck! I have been trading for a year and have fought a tough battle. Everything that could go wrong went wrong. Get this. I was following my system had a few losers, then I got in a winner, only for it to hit my stop and continue in the direction for a quite profitable trade, then the next trade was also a winner but because I was just demoralized from the last one I missed out on it. Also I had a streak of 20 losses in a row(nearly unheard of) and just when I started to be successful with one currency pair, I decided to jump the gun to three, lost a lot of money but got a good educational experience. The worst part was that everytime I jumped to demo, I would be profitable, yet once I went back to real oh boy - back to the red zone. However, examples like these have helped me shape myself and my system. I learned how to re-enter (linear and non-linear conditions), I learned to let go of fear (probably the best learned atrribute), I learned how to be bold when with a trend, and most of all I learned how to adapt. Now, of course I’m not a fully developed trader yet, however the journey continues and so does my education with the market. The things it has taught me mean more than anything I’ve ever learned. But anyways the message is, I think the more mistakes you make, the more likely your success (if you learn from them). I know I personally resonsible for my trading results, but I don’t regret them, in fact now I welcome them. I think the fact that I have never had luck in the market helped me more than anything. When you understand you must succeed by failing, I think you are taking a step in the right direction. The Challenges I’ve faced make me love trading even more, without the struggle the gains you make don’t mean as much. Just my thoughts though. Take it easy and as always Stay Cool Eh!

Best Trading To All!

Since this is the investment world, you have to invest too. Buy trading books; allocate time to browse forex sites that offer training. Read, read, and read. Then look for a mentor that you know who has knowledge on the game, learn from him, from his ways. Open a free demo account on forex companies to have a feel of the market. I�ve found e-book named Forex Trading Machine on forexboost.com it provides free training on forex trading.

This is an interesting concept; BEGINNER’S LUCK!

As someone mentioned above, I too really did NOT experience “Beginners Luck”. It was TOUGH! in the beginning.

My hardest barrier to encounter was, once I had a loosing streak, keeping in mind my “rules of engagement”, risk management, and all that “stuff”, was to actually allow myself to get back in and make trades!! That was a tough one.

However, I began to find, the more I STUDIED my management details, strategy, and all that, the more I ALLOWED! myself to take the pressure off and make the trade!

Can you honestly reach a point to really make this fun? Yes, I do believe you can. However, that ONLY comes through education, study, and matching YOURSELF to this crazy world of trading.

I can’t trade like someone else. A Mentor is good, as was mentioned. But, eventually, I have to make this trading mine! And mine alone.

If nothing else, I keep reminding myself; there has been many people from the past that have actually made good in this trading. Why should I be any different? Keep a level head, plan accordingly, and WORK THE PLAN!

Sounds simple, right? Oh well, such it is with the Forex…

Great comments in this thread! Very true and speaking loudly of mature experience. I can agree with all of it having felt the pain of it all. However I am still learning about ME. Discipline.
When I look at a graph, determine the trend, decide the smartest point to enter that trend (and stack the probabilities substantially in my favour)-these are my best trades. Cold calculated discipline.
Any emotional ohh the market is moving, I need to jump on now… are normally exhaustion spikes in the wrong direction and recipes for disaster.

I think of myself as the Lion waiting in the long grass for the easy catch antelope who is straggling at the back of the herd.As opposed to a Lion who runs ignorantly/haphazardly into the middle of the herd and then chooses his target.

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I definately believe in beginners luck. The 1st qtr of '06, I had turned a profit of $15k total for that period. Only to wind up losing most of it all. (at least I got my initial investment back out).

Whatever Forex system you use, please don’t use one that involves adding positions when the trend is moving against you. I had researched, and read up on Forex, and that was one of the strats I had read. (O how I wish a site like babypips.com woulda been around then)

The strat was… once you’ve entered a position, keep adding small positions every 40-50 pips or so, even when the currency pair is moving against you. That way you are “averaging down your entry point, while building a large position that will eventually make a massive profit once that currency turns around”.

The reason that worked at first, was because the 1st qtr of '06, the market was consolidating, or ranging. But if you remember, there was a big G8 meeting at the end of March '06. Where it was decided the US $ was to strong. As soon as the the market opened that Sunday afternoon, the US $ opened 100+ pips DOWN against many of the other currencies, and just kept on going. I kept applying this sytem during that breakdown period over a period of several days, but got wiped out. That strat just can’t deal with a breakout/breakdown.

I have now learned… NEVER DO THAT. There are much better systems. Simple systems that use a main indicator as well as a confirming indicator, and that also utilize stops.

I have now learned if I use a Parabolic SAR as my main indicator with a MACD as a confirmation, on a daily chart, that is a reliable way to get me into the right side of a trend. And either a Scholastics or RSI indicator are fairly reliable ways to get me out of said trade. I now can turn in a steady stream of more reliable profits. Now, there is no more luck, its simply me adhering to the system.

And either a Scholastics or RSI indicator are fairly reliable ways to get me out of said trade.

Can CCOX himself or someone tell me he meant by “out of said trade”? I don’t get it and I feel it might be important…
thanks :smiley:

I was simply refering to getting out of the trade. If your using a sound, logical system to enter the right side of trades, then another opportunity will come around soon enough.

Don’t dwell on perceived missed profits. Redirect that energy to getting into the next trade. And a RSI or Scholastics charts are good indicators of overbought/oversold coniditions. Certainly worth consideration.

Just spend some time looking at the major pairs on daily charts. More often than not, when a new parabolic dot has formed, AND the MACD lines have crossed(which is confirmation), that currency pair goes on for a little while at least. Certainly good for a nice 75-100 pips at least, probably more. At least thats been my observation. You can also set your EMA to say… 5,12. That would also give you a good indication, things might be reversing on you, time to get out.

Its been my experience, many times people make the mistake (myself included) of going with smaller time frame charts. Then their is some choppiness in the market, or some whipshaw, and it makes them gunshy or something. They have a hard time staying in the market, even when they are on the right side of the trade.

Remember, if your using a larger time frame like a Daily chart, you won’t be experiencing that same degree of choppiness or whipshaw like if it was an hourly or 30min chart.

Oh, one more thing…

Remember… no matter what “system” you use, don’t ever let it take the place of common sense. ie No way in the world, was I getting into a long term trade this past Friday with the release of the NFP data.

Even if you look at the US $, and see how much it dropped against the other major currencies this past Friday. I’m not going to go trying to predict what will happen come Sunday afternoon, or Monday.

The US $ may very well continue going down, but my infintile amount of $$$ isn’t going to move the market 1 inch. So, I’ll sit and wait for a new trend to meet the criteria I’ve outlined below, then I’ll enter a position. I don’t plan on trying to “preempt” anything. I’ll sit back and let the major players move the market, and I’ll just “tag along behind”, collecting some profits as I go.

mmmm… the great golf player Gary Player used to say …

“the more I practice, the luckier I get…”


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Completely agreed