I read this book called the zurich axiom the other day. And it just opens my eyes a whole lot from it
I just bought this book off of amazon. from what i hear it is excellent.
mark douglas trading in the zone is definatly a must read!!!
Im chiming in late but I would have to agree with those who say psychology is the #1 killer. Even a profitable system can be undone with poor trade psychology and even a lousy system can be made profitable with good healthy psychology 
That�s a powerful reply there!
That�s something every trader looking for the holy grail must pay attention before trying one of those profitable EAs. I have fallen for those great systems that announce larger profits in short time. In my experience there is not a 100% successful system. The market is changing every second and what technical analysis does is creating a picture of the market. A stationary system will have a probability of success, but as the market is always moving every system in this world would fail and that is a fact. The key to success is finding a good system that wins more times than looses and for that you must study and practice a lot. I have found a few good systems, I have made some good money, but it�s certain that I won�t make a life out of it.
The whole idea of trading is creating a good strategy. You can use your mix of indicator and create your own expert advisor�or you can try one from somebody else. But the point is to be comfortable with your system and your rules. I�m not talking about some psychological theory; I�m talking about confident and following rules. I have tried some strategies and even when they have been backtested for some great traders, any of them have worked for me. The successes of a strategy depend on the confident you get from it when taking a decision. You must be sure of how your strategy works in different situations. In other words, you must understand your strategy and be able to follow your rules under any condition. And that�s the big deal with strategies; they can be profitable and successful but if you are not able to understand the picture they are showing you will lose.
What you say is completely false. If your system has negative expectancy, then sooner or later youâll be out of the game. PERIOD. Psychology is a side effect whose importance has been excessively touted to mislead the public.
To beat the market, you must have the odds with you (a positive expectancy system), coupled with a set of money management rules which allow your account to grow while giving it enough room to handle a few bad trades without crashing.
Yes, you must have the odds with you, but if you havnât mastered your own self (your psychology) YOU WILL cause a system with good probabilities to fail. When you are afraid or greedy or feel the need to be right you only see what you want to see, not what is actually there. You will enter into a tunnel vision caused by your own emotions that will block or obscure what is actually happening in the market.
Without mastery of your own phychology money managment and a system with odds wonât save you because you will end up inadvertantly sabotaging them both. Then you will likely blame your trading strategy instead of your own mind.
A trader with good psychology will know that a system with a bad expectancy is failing because of the system and not himself and either improve it or move on to something else to test.
You see the problem? The very problem why lots of traders fail? The ones with bad psychology constantly blame either the markets, their system, their broker or the wind blowing in the wrong direction and move from system to system losing money. They see what only what they want or hope for, or fear, in the markets and donât just see the opportunities that market provides.
Itâs not until a trader masters their own psychology and learns to think in probabilities and trade an edge (that they can execute objectively without hesitation or fear because of what happened in a previous trade, that they will become successful consistently.
Psychology can be side effect, but it should not be. If you allow your self as a trader to emotionally effected by wins and losses when trading you will fall into many bad psychological pitfalls and fail.
The market doesnât generate psychology or emotion, only information about itâself. Traders generate their own psychology and emotion, which is why they need to master psychology in order to remain objective. Remaining objective is paramount if you want to be able to execute an edge consistently.
While âpsychologyâ can make you do silly things, itâs not the real problem. Itâs the system. Otherwise, automated systems would be the Holy Grail since they lack of emotions, yet the truth is that most of them just plain suck. And if you have a method (discretionary) or system (automated) which is continuously losing money or the best that it can do is move the equity curve up and down randomly without getting any real money out of it, itâll obviously piss you off, but staying âas if nothing happensâ wonât help.
Trading is, IMO, about finding an edge (a system that works) then milking the darn cow out of it. 
No, sorry you are wrong. Automated systems fail because they are not a human who can think and react to changing market conditions, yet remain objective. They canât change their paramaters or decide based on something changing the probabilities.
As a stated in my last post a trader with good psychology wouldnât continue using a system that wasnât working. Obviously he would realize his system wasnât working and move on or adjust it so it worked.
Get the book the other poster mentioned, read it, then you will understand. Every page is an ah hah moment, because I guarantee unless you already have great psychology, you will find you have already been the victime of many a psychological trap and traded badly because of the way you think and react to winning and losing trades.
And no, itâs not that you remain as if nothing happened after a winner or loser. Itâs that you remain objective because each trade is different than the one before it and can do anything, even if it looks exactly the same as a previous trade.
I gather from your opinion on this you either developed good psychology from years of trading, somehow miracously started with it as a noob, or have yet to do any live trading yet and experience how the psychology effects trading. Which is it?
My experience in Forex is still the âdemo tradingâ phase. I donât see the point of going live without first knowing some setups that work more often than they donât. And yeah, I âsuffer the emotionsâ even in demo. After all, those ânumbersâ are supposed to be mine, right? ;).
As for investingâŚIâm currently on my first long term (think of years) trade, itâs a value stock whose price has been crushed underground. I really like the stock, which I confidently held when the market dropped it 50% below my purchase price. If I keep myself up to the plan, Iâll sell âem when they approach their previous highs. In fact, when the market went against me I wasnât fearfulâŚI rather was pissed of not buying near the bottom! :eek: (my average cost is $1.44, bottom was below $0.70, and currently itâs selling near $1.30). Unfortunately I canât jump in and out constantly of it because Iâm sorta undercapitalized and my brokerâs commisions would kill me, I canât yet afford a professional trading platform such as Interactive Brokersâ TWS or anything which requires a minimum account.
Iâll admit it, Iâm a greedy moon shooter.
IBFX has no minimum and MT4 is a free platform they are integrated with. So, even if you wanted to start really small with $20 and trade pennies, on the forex, you could.
That is one of the reasons I went for forex, everything I read about trading the traditional stock market said that if you didnât have at least 100k to trade with, and probably lose on your first account, donât bother. That and itâs simpler in that you are trading currencies instead of stock in a company, which could be effected by a lot of unknown factors.
Yes, I agree you shouldnât go live until you have at least established one decent edge in demo. I went live after mine worked well over a series of 50 trades with a good win/loss. I donât believe in backtesting or demoing endlessly though, there are too many things that are just a little different live. I also believe the best way to learn to do something is too actually practice doing it for real.
I donât long term trade or invest myself, but I hope those long term trades go good for you. Everyone that I know that invests keeps saying donât let go of your stocks that went down because they are only going to bounce back up.
Forex traders are over confident.
When I first began trading keeping control of my emotions was a challenge. Without emotional control you can think straight and the best system ever created will be useless.
IâLL tell you why most people lose money at forex. Now I donât know if this theory has been proffered already but itâs the NO:1 reason I lose money: Itâs beacuse the market forces you to take your losses but doesnât force you to take your wins. If your stop loss = ÂŁ10 for arguments sake - once the market goes against you ÂŁ8âŚÂŁ9âŚ****! ****!..ÂŁ10 goodbye! thatâs it, BUT! you donât take every ÂŁ10 profit - you always wait for more possible ÂŁÂŁÂŁ, then often price turns round and stops you out, maybe you moved your stop to break even?. The market only has to go against you a couple of times leaving you needing some serious pips to get back to square again.
In my opinion the only reason why people lose money is bad money management, if you only risk a small % of your entire account and aim to earn more than that %, you will only lose money if your system doesnât work (losing too many trades). Emotions canât make you lose money if you control your risk, and have a good strategy for trading of course.
Have to say I agree with you, go live BUT only do it with a $1000 or so, and use a micro lot account. On top of that accept that you WILL lose the money, but trade like your life depends on it. That way you will get valuable experience. In the meantime manual back test each and every system out there, this too will give you valuable experience.
Also on johnnyfxâs point about gold - thats bull. Gold responds better than any FX pair out there, at least on end of day data. You donât need to open a futures account, micro lots are available on gold too. Try a simple inside bar break out system on gold, and then try it on even the Euro, GBP or whatever. Gold wins hands down every time.
Yes, youâre right, and the question that i wanted to ask you is how did you manage to face this?
Well, I faced it by tearing my hair out and punching walls!! then resolved to trade better by cutting out the wrong things and doing more of the right things; stop chasing price, stop trying to get in too early on reversals, only trade in the direction of the trend, strict money management (2% max) coupled with a slight trading edge is all you need really! bigger stop losses, taking 50% profit at first targets or 30 pips, letting trades run for days rather than hours, trading much less, trading off the daily and weekly charts, learning reversal patterns. the list goes on. itâs the constant tweaking and refining of your trading plan/method that will allow you to âown the ATMâ as ICT puts it. Thank God for him is all I can say - if youâre not a follower of his already, get with the program, best fx mentor on the internet by a mile. I reckon Iâm just about at the turning point where my equity curve is now experiencing some uptick! itâs a slog though!
Mistake number 1: Treating Forex as a get rich quick opportunity:
Due to the high leverage on Forex, beginners start to think that they can start with just a small amount of money and get millionaire in a short time span. Well, this is a huge mistake. If you use high leverage, you can double or triple your account in a short period of time. No question about that. However, you can also lose your entire account in less than a day. This is something most beginners forget about⌠If you increase your profit potential, you also increase your risk.
If you want to make money on Forex you need to protect your money. You need to use small leverage or no leverage at all.
Mistake number 2: Beginners want to achieve great returns on a short period of time:
This mistake is extremely connected with the previous one. Most beginners want to achieve great results on the short term. So, they leverage their account too much and try to day trade. This way, they can start making good money daily. Thatâs a thought, but unfortunately thatâs not the reality. Day trading can be profitable but only if made by the most experienced traders on the market. When youâre day trading youâre paying much more trading commissions than on swing trading (remember that commission fees are free, but you always pay the spread). So, in order to make money on day trading, you need to make much more pips than on swing trading.
Besides this, if youâre day trading, you need volatility. Most of the day there is a lack of volatility in the market. If thereâs no volatility you wonât be able to make money. When that happens the only one profiting from your trades is your broker.
Mistake number 3: Thinking itâs easy to make money on Forex:
If it was easy to make money on Forex, everyone would be doing it. Forex is one of the most complex and difficult markets to trade and you can only make money if youâre good at it. The only way you can make money on Forex is to educate yourself and work hard on it. You need to read everything that you can about Forex. The fact that youâre reading this article shows me that youâre on the right track. But donât stop here. Read everything that you can and study the Forex market. Visit our forex trading systems, forex trading courses, forex ebooks and forex softwares sections to find the best products on the market.
You should also open a demo account on a Forex broker so that you can start practicing and improving your trading skills. And you should never ever start trading on a real account until youâre making money consistently on a demo account.
Mistake number 4: Choose the right broker for you strategy:
check the spreads, execution time, comission etc.
Hi zoreli,
How on earth can you compare coding (which is based on logic: âif this, then thatâ) with trading (âif this, then MAYBE thatâ)??? Of course you donât need any luck in your work as a programmer: you put in the code and the program behaves the way you intended (1+1=2); whereâs the link with the randomness of the forex markets? Trading would be easy, if price direction could be mathematically predicted, but since price is mainly moving as a result of manipulation and human emotion, your statement is totally bogus, with all respect (not discarding the messenger, only the message).
Cheers
It is true that 90% to 95% loose their money, even if you follow âthe systemâ as you say, that system is not 100% guaranteed, so there is a risk factor, and that risk literally means that you might eventually loose rather than win on certain trades. Most automated systems will start showing flaws one way or another after a few months, make sure that this system is tested on Live account not demo. Then you have to ask yourself the inevitable question of âthe brokerâ as they can also interfere with the quality of the execution, dealing desk or no dealing desk, same thing. Personality is important when assessing the appetite for risk. also the psychology of each one of us plays a role when trading.