In this video:
00:53 Having the mindset of an investor
02:45 Trading by maximum 0.5% of your account per trade
04:58 The Holy Grail strategy
06:32 Got some trades working really nicely
It's time to Think like an Investor in order to be a Profitable Forex Trader
In today’s video I want to talk about why you need to be thinking like a true investor and not like a gambler in order to be a profitable Forex trader. Let me explain exactly what I mean right now.
Hi traders, Andrew Mitchem here the Forex Trading Coach. Today is Friday, the 11th of October 2013. And I want to talk about using some common sense around your trading. Think of your trading as an investor, it is an investment. Look the money that I’ve got invested in my accounts here behind me, you know there’s a lot of money involved. It’s no different to any other investment. It’s no different to buying art, or property or metals or vehicles or whatever it is that you invest in. Forex trading is exactly the same and you need to have that mindset of an investor and not a gambler in order to be a profitable trader. I know that as after ten years of trading I’ve never blown an account. I’ve always used very low risk trading but there’s a lot of other things that I’ve developed that I can really help you with. So let’s talk about them right now.
Having a good Trading Plan
You see the last couple of weeks I’ve talked about of these videos and podcasts about having a suitable trading plan. Now my trading plan might not suit you. It’s what suits you that is important. It’s the time of day that suits you to trade or night. It’s the time frame, it’s the length of, you know what do you like to trade and be in out of trades within a matter of minutes, or hours, or days, or weeks. It’s what suits you that really important.
The extra strategy and what I’m using here behind me will work on any time frame and any pair; that’s not the issue, I can help you with that. The thing that you need to understand for yourself is what kind of person you are, what kind of trader you are, what suits you realistically. You see you have to have realistic expectations not only in terms of how much time you can dedicate to your trading and your learning of your trading but also in terms of your returns. And what I mean by that is that there are so many traders especially when you go through the forums etc., and you read about the sales picture robots and people and people try selling things and trying to make an absolute fortune you know hundreds of percent per month or you know thousands of percent in a year. It’s just rubbish. Don’t believe it. It’s not realistic. Yes you could do it by risking huge amounts of your account in your capital but again it’s not treating your trading like a true investor; it’s gambling.
Low risk trading approach will win in the end
So if you come back to the strategy and the philosophy that I teach in our years of very low risk trading. Now I mean low risk trading by maximum 0.5% of your account per trade – very low risk trading. It means that your emotions are controlled. It also means that yes your profits are not going to be astronomical but you don’t need them to be.
50 – 100% return per year
You know if you’re looking work on let’s say an average between 1 and 2 percent gain on your account per week, that’s a huge return. Now to me I’m more than happy with that. You put that across the course of a year and with that compounding let’s say 2% a week. Well that compounding that’s over 100% return per year. Now that is pretty outstanding. When you look at the Fund Management companies, when you look at the interest rights that banks and other investments around the world are paying, if you can achieve somewhere 50 to 100 percent return per year, I’m certain you’re going to be very happy in a year from now. Almost guaranteed; if you’re not then you should be doing something else or you are gambling. Because to me anywhere like a hundred percent in a year is just a fantastic return considering your risk is very low and that’s the important part of it. It’s all risk to reward.
Yes you can risk 5% per trade. Go and do it but see how long your account will last. I can guarantee it won’t be very long. So that’s why I come back to low risk per trading, keep your emotions in control and trade what suits you. When it suits you, even the currency pairs that suit you, the time of day, the chart time frame that suits you. Have that in your plan and also think of this:
Don't chop and change your trading style – The Forex Holy Grail doe NOT exist
When trading, your trading plan doesn’t work don’t just go throwing it out the window, chopping and changing and adding more indicators and optimizing and going back to the Forex forums and trying to find the latest, greatest, holy grail system, EA, indicator, whatever it might be. Don’t do that. It’s almost certainly going to end in the same result and that’s it won’t work. And again I can tell you that from my own and from the experience of my clients who tell me they’ve done that exactly the same thing. And everybody does go through that same cycle when you’re learning to trade and you’d looking for that strategy – that Holy Grail strategy. Well I’m here to tell you that hard work, sticking to a plan that suits you and dedication; all things that turn your trading from the average to be an exceptional. And so don’t rely on that $97 robot to solve your life's financial problems; it’s probably not going to happen. But there is certainly great money to be made from trading but it’s about doing the same thing consistently, looking for the same setup, the same pattern, doing it consistently. I don’t go “Uh, I can’t be bothered to trade or today or Uh, I’ve had two weeks of not making money therefore I’m going to change systems.” And I get emails like that from time to time.
Don't give up on Forex trading
I had an email just yesterday from a person and said, “Look I’ve made nothing in three weeks, I’m giving up on Forex, I’m going to find something else to do or I need some other strategy.” And that’s like well, three weeks is such a small time. If you go and buy a house for example, you can’t expect that house as a, let’s say it was an investment property, a rental property. You can’t expect that property to keep going up and up and up consistently every single week of the year, even every year, it’s not going to happen. So why should Forex be any different? You’re going to have losing trades, losing days, losing weeks or even losing months; it’s going to happen. If you can’t accept that then you shouldn’t be trading. So you need to think as an investor and have low risk throughout your trading.
Japanese Yen Weakness
The other thing I just quickly want to mention at the end here is I’ve got some trades working really nicely behind me. I’m looking for JPY weakness today; it’s probably going to continue into Friday and if that happens then we’re going to see some great trades. I’ve got a number of trades on here looking for a JPY weakness to continue.
I’ve mentioned to my clients on about Tuesday or Wednesday, there’s a lot of indecision in the market and some potential reversal pattern showing a likely weakening of the JPY. Now Thursday and again today into Friday that's showing through on the charts so the candle patterns always show us well and advance of what is likely to happen and I was still waiting for the October Non-Farm payrolls which is now over a week late; that is anticipated to be Tuesday. I believe Monday or Tuesday of next week so that’s the latest news that I have but with the government shut down in the US who knows what’s going to happen?
So keep your eye ahead of those fundamental news announcements and treat your trading as an investment, as would any other investment. This is your money, you’re investing here, it’s your real money, treat it as such. If you do you make some fantastic returns for trading.
That’s all for now, this is Andrew Mitchem from the Forex Trading Coach. I’m here to help. If you need anything just email me [email protected]
Talk to you this time next week.
Bye for now.