Having the Right Mindset to Trade Well
In this video:
00:29 – Controlling your emotions as a trader
01:12 – Made money every year since 2010
02:06 – The problem with a small sample of trades
02:42 – Look at the bigger picture
04:49 – Understanding win rates
Trade psychology is a massive part of trading, and it will make a huge difference to your overall success if you can master it. Let's talk about that and more right now.
Hey, Forex traders. Andrew Mitchem here at The Forex Trading Coach with video and podcast number 341.
Controlling your emotions as a trader
I want to talk about a very, very important topic, and it affects probably most all traders. It's all about trade psychology, and how you can control your emotions, and how what goes on in your head has a massive impact on the overall outcome of your Forex trading journey, whether it's going to be successful or not.
It comes down to a few things that you can do to help yourself and improve things. You see, unfortunately, as traders, most people expect instant results, winning trades, high win rates. They don't like losses, they cannot accept losses, and they jump from system to system. Unfortunately, people do this all too often and all too quickly.
Made money every year since 2010
And I even see it here at The Forex Trading Coach. If you did absolutely nothing else, if you joined our course, did nothing else other than copy my daily trade suggestions each day of the week, which was going to take you five minutes once a day at most to do, you'd make money. Absolutely guarantee you'd make money, and how do I say guarantee that? I know that because since 2010, every single year, we have made money on those daily trade suggestions, and so it just shows how big an impact psychology and your mindset is because it doesn't matter how many graphs I can show people of all these winning trades consistently over time. People still decide to offer a couple of losing trades to give up or to change systems, or it doesn't work, and it's a real shame because we've proven that.
The problem with a small sample of trades
You see, the problem is if you strike a system and have like a small sample of trades, and you have some winning trades, you think the system is marvellous. You strike that same system and have a small sample of a few losing trades. You may have been seeing all these previous fantastic trade results that someone like myself has shown you, and then you go and trade the system live, and you have a few losing trades or even a losing month, and people give up. That's a real problem in trading. it really is a massive problem.
Look at the bigger picture
You see, you have to look at trading as a bigger picture, even on our daily trade suggestions. By the way, there's just one timeframe chart. That's all this is. You've got all the other timeframe charts that we talk about that we post on our forums site, on our live webinars. We put the weekly and monthly chart trades on our membership site as well. I'm just talking about one timeframe chart, daily trades. That's all. That has made money every single year since 2010, and so it's just mind-blowing why people don't just continue to follow that. You would have made money month after month.
I went back through my records just now. The biggest losing months since 2010 was in February 2014 when we lost 5.15%. We went backwards just on the daily trades, 5.15% negative. That's the very worst we have done, and here we are almost at the end of 2019. That's the worst because we're trading with low risk, half of 1% risk portrayed, high-reward risk, so it's a proven H, and as I mentioned, one timeframe. That's all that is. You can go on and take the same strategy, the same methodology against all other timeframe charts when you see suitable trade setups.
So it really is amazing how that can affect people, but it's important that whatever your strategy, whatever your system, you analyse it over time. You look at a big sample of trade numbers. You look at a big period of time, length of time before making that decision to go, “You know what? This doesn't work. I'm going to change on to something else,” because small samples are dangerous. Random events happen too easy to say, “Yeah, this is magic,” or too easy to say, “This is terrible,” so you need to have a good strategy with an edge, with high reward to risk.
That's exactly what we have, and it's proven since back in 2010. I've been trading that personally since way before that, but on our membership site, we have all the trades taken back from that date right through to today.
Understanding win rates
So understanding win rates, accepting that your win rate is not always going to be massively high. Don't worry about having a win rate of 90% winning trades because most of those systems, you end up losing overall anyway because they have lots of small gains, one big loss. Lots of small gains, one big loss. They generally go backwards. You're going to find that your best trading strategies have somewhere between about 40% and 60% will be my estimate. 40% to 60% winning rate for their trades, yet they have high reward to risk, so important balance that you understand.
Now, of course, if your system has a 40% or 50% win rate, that does affect your head. You know that's psychologically quite hard to understand from time to time when half the trades that you have are going to be losing trades, but you need to know that consistency of doing this time after time. Again, history is proven, number of trades are proven, and that if you stick to the system and the methodology with the edge that you have with the high reward to risk, that you will do very, very well from it if you stick to it.
So I hope that helps. A bit of trade psychology, a bit of mindset there. You can have the best system in the world, but if you don't trade it, just look at the turtle traders example. If you stick to a system that's proven, it will work, and that's exactly what we have here at The Forex Trading Coach, so I hope that helps.
Once again, this is Andrew Mitchem and The Forex Trading Coach. I'll see you this time next week for more trading tips and information. Bye for now.