psychology with money plays a massive part in forex. greed and fear. Is it true that you either have it or you dont in terms of the right psychological make up - is that why only 5% ‘make it’.
How can you improve self discipline when the only person you are accountable to is yourself?
Hi, Herbie
You’ve asked 4 questions, all related to one another. Here are the short answers, as I see them:
[B]Q[/B] Is it possible to develop the right mindset?
[B]A[/B] Yes, absolutely.
[B]Q[/B] Is it true that you either have it or you don’t in terms of the right psychological make-up?
[B]A[/B] To be a successful trader, you need many tools, including the right psychological make-up. If you were born with that, then you have a natural head-start on the rest of us. But, if you weren’t born with it, you can acquire it, if you are teachable.
[B]Q[/B] Is that why only 5% make it?
[B]A[/B] It is often said that 95% of those who try forex trading will fail at forex trading. Although we have all repeated this statement, who knows how accurate it is. In any case, the wash-out rate is high. But, there’s nothing unusual about that. A similar failure rate occurs in many high-risk, high-reward, high-stress professions. Mental/psychological/emotional problems probably account for most of the failure in forex trading, but I doubt that anyone can put a firm percentage on that.
[B]Q[/B] How can you improve self discipline when the only person you are accountable to is yourself?
[B]A [/B]It would take a textbook to answer that one. Fortunately, a number of good textbooks have already been written on this topic, and you should track them down and start reading. Many of those books have been recommended on this Forum. You might start your search here:301 Moved Permanently That link will take you to the first post on a thread about trading books.
Two books that I highly recommend are: Alexander Elder’s [B]Trading for a Living[/B], and Mark Douglas’ [B]Trading in the Zone[/B].
There are many other books devoted to the topic of trading psychology. After you have searched BabyPips, do a Google search.
Maybe other members of the Forum will post their favorites here, and save you some searching.
I hope this helps.
Clint
cheers thanks for that information and insight. much appreciated
I second, “trading in the Zone.” It sets up very clear rules on how to at least think like a successful trader. That is to think in probabilities and how to find an edge. (A strategy that wins x out of x times, over a large sample size of trades)
To anyone who is new to trading I recommend reading this book first, BEFORE, trying to even fool around with your first demo strategy. That way you can head down a good path the first time out.
I think the most important part in this book, is that it details why traders respond emotionally the way they do, instead of advocating silly concepts like trying to think like a robot without emotions.
I agree with both clint and thephoenix.
you must take out the emotions from all trading and action. if you trade because of a “gut” feeling it will probobly bite you in the butt.
one “trick” to doing this is once you have a strategy write it down on a notebook.
This should have things like your Entery requirements like for instance if X MA and X MA cross ect ect. and Exit strategy which means if you for instance have a rule that your stop loss will allways be 15 pips and tp be 30 pips you allways set them at that and whichever one is hit is hit. after your strategy is set up and you begin to folow it write down your trades entery exit sl tp and comments. the comments are for what happend and what you see that you could do to improve. if your strategy keeps getting stoped out because 15 pips for your strategy is to thin then write that down and ajust accordingly.
i hope that helps and good luck on your trading career =)
pip out~
I did not say, “take out the emotion from all trading,” in fact I said the opposite. For some reason many traders get it into their heads that they must learn to trade like a robot or EA with not emotion, or intellect or thought. That is wrong, wrong, wrong, your brain is what is going to make you a better trader than an EA that just pops and trades at x set of paramaters. Your brain lets you see what is in front of you and react.
It isn’t taking emotion out of your mindset, it’s knowing how trading effects emotions and not falling into emotional traps.
Anyone who think they are going to remove emotions from their selves while they trade is deluded.
i agree with phoenix here this is a good post … its been said everywhere but ill say it again to a good way to develop this is realizing that this is a business and acting accordingly. journalize everything understand why you did what you did notice the trends in your actions and once a problem area is identified fix it. I think i read a stat survey done by a BLAH PR guy that said it was 88% that fail 7% are break even and 5% roughly is successful … and it said that the 5% had a huge failure rate and made only a small few successful trades but they were huge trades… another problem is that when noobs create a system they dont create complete systems. there is more than just a trigger… there is entrance tactic, exit tactic, money management, precision entrance, ability for adaptation to market changing events… one of the biggest problems ive seen is most people will curve fit their results and say if i do it this way i can expect… etc… the point is not addressing all sides of a complete system and having a complete system when you trade will cause you to doubt your trades and cause most of the mistakes that most traders face… IMHO
EDIT: oh yeah and another huge thing is leverage… if u trade to much size it may be out of your risk level most people dont realize that they are trading sizes to large for their level. its easier to just go ahead an take ur losses when its less money