How do I build my confidence in FX trading

Hi guys,
I am new here and need some honest advise on my trading career.
I have been trading FX for quit a long time but still don’t have confidence on my analysis. Based on this, I ended up closing a profitable trade prematurely.
How can i get through this as all books, classes attended has neither addressed this issue nor helped in any way

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@Emmdy

From what you are saying I am assuming you are using some kind of discretionary approach.

With a mechanical system you don’t do any analysis other than is it or isn’t it a set up. A binary choice.

I myself use a mechanical system - and I think it’s fair to say they are probably better for more inexperienced traders.

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Is the issue really a confidence problem or is it another psychological factor? Are you trading scared or afraid of turning a winner into a loser? I can’t really say without more information, but can offer you this tip ……

Try scaling out of your trades so you can take some profit off the table and let the rest ride at breakeven. Obviously you will get stopped out on occasion, but at least your still in the game in case the market continues in your direction. You can have your cake and eat it too!

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@rolandlc33
Thanks for your advise.
Sincerely speaking I don’t understand myself.
I knew about trading over a decade ago but I still don’t have a clue on my direction. I have failed on several approach. Swinging from one strategy to another.
I barely understand my pace.
My pairs are doing greater things with their Forex career while am still struggling with growing a $1,000 demo Account.
I feel it’s a psychological issues that requires help from experienced traders

@Johnscott31
Can you please explain more on what you mean by mechanical approach

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A way forward is to try and not swing for the massive moves as emotion is a wild thing all traders need to control. Set a target and have scale points to the target then walk away and only look at the chart at the end of the candle of choice ie 1hr etc. That way you are paid on the way to target and will stop meddling with the trade

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Have you back tested? Have you analysed your trading? Either you dont have confidence in your strategy or it’s your psychology keeping you back. It one of them or both. You mentioned swinging between strategies. Only move from one strategy when you have fully analysed it.

It’s like most things in life while gaining knowledge along the way trade trade trade on demo then small account till you find your niche as a trader

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@Lang15 thanks for the honest advise. However do you have any text or video that can address this nemesis ??

@tradeforex077
You have a valid point. Though i trade majorly on Support and Resistance coupled with some Fibs level which I feel is not sufficient to give total confirmation on ones bias.
Also I noticed if I have a running trade in my favour, I get this strong feelings to close in the advent of reversals while the reverse is the case when I have a lossing trade. My hope is always that there will be a reversal In my favour

This might help

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Nice work, again, @Lang15.

In my opinion, what you have just described in this video is the difference between trading as a serious professional and trading as a gambler/opportunist.

I think nothing destroys confidence quicker than constantly losing money - but without confidence in what you are doing, and your ability to do it, the trader will never be able to trade well (e.g. becomes prone to prematurely taking profits while it is there, running losses in case they might turn around, and so on).

It seems to me, though, that struggling traders often just resort to constantly swapping methods or just adding yet another indicator on their screen, hoping it will patch another hole in the sieve, instead of developing themselves.

But the answer is not in the tools or the method. As you say, it is in the person and their clarity and understanding of what they are doing - and having feet-on-the-ground objectives instead of head-in-the-clouds dreams.

Whether one is a surgeon or a plasterer, one only succeeds by knowing what one is trying to do, how to select the right tools for the job, and learning how to use them skillfully. Afterall, no good just buying more saws and hammers if you don’t learn how to use them!

One thing I would add to your wisdoms - not only should we seek to be a professional, but we should also seek excellence in our skills and take pride in our professionalism and achievements. You are a good example of that! :slight_smile:

Everyone knows that trading is challenging - but so is every other serious profession, until one has completed a throrough apprenticeship. Why should trading be any different or require any less from its practitioners?

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I’m no guru, not even close. I don’t even have a Lamborghini to my name. However if you wanna chat shoot me an email and let’s talk about your process. I would like more info so I can see if I have some lessons I could share with you.

A mechanical system is a completely rules based system, where as a discretionary approach uses ‘weigh the evidence’ approach

A basic example of a rules based system is

If price is above the 20 bar moving average then buy.

If price closes below the 20 bar moving average sell.

A discretionary approach might be:

Well the CPI was well ahead of expectations - I think the Fed is going to raise rates + stochastics are oversold on the US dollar and I think it just broke out of a 10 yr basing pattern so I think it’s going up.

Of course the second example is taken to a
an extreme - just to show the difference.

Some inputs on a discretionary system may well be mechanical - but the final decision rests with you.

In your post you talk about your ‘analysis’ which is why I thought maybe you were using discretion

Some traders are good with discretion but they are usually highly experienced and have witnessed many market cycles.

For me ( I too have witnessed many cycles) i just don’t think I’m clever enough to make sense of all the inputs.

Mechanical systems might take the fun out of trading but they also take alot of the stress out if it.

Now one final point, discretion isn’t solely used in fundamentals there are certain technical approaches I would view as discretionary.

Elliot wave for one - because each person’s interpretation of a wave count is different.

And here’s the other which may offend - trendlines and support resistance - because we each draw them in a different way.

You are using discretion buy choosing one way over another

Also many traders will say ‘price is approaching a support line and I think it’s going to bounce’ - again your using your brain to make a decision

I’m probably going to get alot of flack from SR traders who say I’m talking out my rear end.

Its possible I am. But from where I stand I would rather the markets tell me what to do - than guess what they are doing.

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Whilst this is indeed a discretionary approach, it is also what I would call a hybrid trading approach that is based on a mix of technical, fundamental and sentimental factors. A discretionary approach need not be anything like so complicated.

A discretionary approach can simply mean evaluating the quality of each signal rather than just mechanically entering/exiting just because the rules say so. Neither is right or wrong, it is simply a personal choice, as you say.

A mechanical system tends to assume the market will react in a certain way after a certain event/set-up happens. We all know this is not always going to happen, but if it does often enough to produce more green pips than red pips then it is just fine! :slight_smile:

Exactly! :+1::slight_smile:
Some typical discretionary situations might be:

  • a signal forms on Thursday afternoon, but Friday happens to be a holiday in the US so markets will be too quiet - skip the trade.
  • recent price action has been erratic so I will only look for 50 pips target instead of 100 pips.
  • the longer term picture shows a strong trend so instead of a fixed target, I will leave it open-ended with a trailing stop
    -the signal came but there is a significant event tomorrow so I’ll skip it (e.g. this week the BoE has announced their rate decision will be at 7.00 in the morning instead of the usual midday - something’s up . be careful!)
  • A strong signal but contrary to the longer term trade - maybe only a half-sized position and not a full one.
  • A strong signal and in line with the longer term trade - maybe a double sized position , scaling out at 50 pip intervals.
  • A good signal but is very close to a major, widely watched level (e.g. daily 200 SMA) and the nearest sensible stoploss level is far away (e.g. after a big candle move), therefore R:R does not make sense - skip it.

I guess that gives the general idea. It is simply evaluating the quality of the signal, looking at the market ahead for potential problems/benefits, fitting the position size, target/loss levels, etc to suit the market scenario.

Not from me, anyway! :slight_smile: I am just presenting arguments for the other side of the debate! :+1:

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in order to me, confidence is a thing that comes from best version of yourself , in life or Forex trading if you can develop yourself than before time to time , the confidence level will high very rapidly and you will become a successful person.

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yes , completely agree with you , more practice with patience can make you a confidence trader in trading. develop yourself step by step.

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You have to prove to yourself that you will not let anything rattle you from concentrating on your number one goal. Your goal should be to establish a plan before you do anything else. Learn as much as you can about the currencies you will be trading. Go over the Economic Calendar on BabyPips. Review the sections in the school about technical analysis, risk management and money management. If these are not part of your plan, then you will not have the confidence you need.
Just remember it takes time and patience to become a successful trader. It does not happen overnight.
Once you have everything in order your confidence will build and you will leave out the forces that upset you. Hope this helps

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If you have cofidence in yiour abilities then you would not feel pressure in your trade and your average profit per trade will increase and your average loss will decrease and you will be able to make large amount of profit.

Well, Its okay it takes time to gain confidence. Just trust your gut or you can follow a trading plan that will help you stay in limits and act accordingly. remember that losses are a part of forex so don’t lose hope. All the best.

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