Why You Need To Think Like An Investor weekly video
In this weekly video:
00:29 – Think like an Investor
00:50 – It takes time and effort to become a good Forex trader
01:25 – The retail trader chases the money
02:10 – Don’t try to live off your gains when you start trading
03:06 – An Investor looks to place less trades and is prepared to wait
04:40 – The longer term perspective – the bigger picture
06:30 – Make a percentage gain
I'm going to explain why you need to think like a true investor in order to become a successful Forex trader. Let's get into that right now.
Hi, Forex traders, this is Andrew Mitchem here, The Forex Trading Coach. Today is video and podcast number 216.
Think like an Investor
In this video, I'm going to be talking about why you need to think as an investor in order to become a successful Forex trader. Not just as a gambler as someone who sees Forex as a get rich quick scheme or someone who sees Forex as a way of solving financial problems that you may have or an easy solution, because it's not.
It takes time and effort to become a good Forex trader
Now, Forex trading, like all good things, takes time. It takes an understanding. It takes knowledge, investments, all those type of thing. You're going to get good times and bad times, without a doubt. The overall theme that I want to talk about and help you with today is you must think of trading Forex as an investor thinks. There's a big difference between most retail Forex traders who have maybe one or $5,000 and an investor who has maybe millions of dollars, certainly hundreds of thousands of dollars. There's a big difference in their mentality and their thinking.
The retail trader chases the money
You see, the retail trader … Too many retail traders, they're chasing the dollar or the pound or the yen. Whatever it is you're trading. They're chasing the money right now because they need to make so many dollars per week or per month in order to live and survive and pay their bills.
I truly understand that. I truly get that, but you cannot become a Forex trader just for the reason of trying to pay your day-to-day grocery bills, because that's not the way that you're going to learn to be a good trader. Once you understand how to be a good trader, paying your grocery bills is really … It doesn't even come into the equation, because you'll do really well from your trading.
Don’t try to live off your gains when you start trading
But when you start, don't try and live off your gains of being a trader. Another reason for that is, for most people, their account size is not big enough. It's important when you start that you realise you need to get into this in order to learn how to trade. Look at making a percentage gain.
Don't go chasing trades. Don't feel that you‘ve got to be forced to be in trades all of the time. That's another problem that I get with so many traders. I say, “Look. Just send me some screenshots of your trades,” and they're taking 20, 30, 40 trades in a day. I'm thinking, “Why would you do this?” All you're doing is just basically just placing trades and hoping that some of them are going to come right, and more than not will, and therefore you're going to make some money. All you're really doing, apart from tiring yourself out by sitting at the computer screen all day, is you're feeding your broker's pocket. You're lining their pocket, because you're taking multiple trades, and every time that you take a trade, they'll clip the ticket and make money from you.
An Investor looks to place less trades and is prepared to wait
An investor looks at less trades. They look at high reward to risk trades. They look at high probability setups, and they're prepared to wait. It's really important that you do that. I'll give you an example. I held a live two-hour trading room webinar with my clients just last night. On that webinar, I'm trading live. I'm looking for trades in real time. I've got hundreds and hundreds of clients on from all around the world. In some ways you could say there was a bit of pressure on me to take trades live because we were there. It's all well and good to show historical trades, but we're there to look at live trades.
However, I saw just one trading example yesterday. It was right near the end of the webinar. It was a sell trade on the Australian Canadian dollar. That one trade made a 2.8 to one reward to risk, so with a half a percent gain, it made me a 1.4% gain on my account just from that one trade. I didn't need to sit there taking multiple trades over and over again. I just needed to wait to see the one setup. It was showing it had high probability. I explained all the reasons for the trade. I saw the trade. I took the trade, and it made a 1.4% gain on my account just on that one trade with very low risk.
That's what an investor does. They're not sitting there forcing lots and lots of trades just because they feel they should. If that trade didn't appear and didn't show as a setup, I wouldn't have taken any trades on the webinar. It wouldn't have bothered me, because there was nothing there to take.
The longer term perspective – the bigger picture
That's where you need to look at that bigger picture, that longer term perspective. Think of an investor. It's a bit like if you're watching a video. I've planted lots of trees and ferns and bushes and things in my property here. I'm not expecting these to suddenly become massive next week or next year. I'm looking at this as an investment. I'm looking this as long-term future about growing a property and growing trees, etc. because I want to enjoy this in five and 10 years time. Same with your trading. Look at your trading as a bigger perspective, longer term thing.
Think about what your gain's going to be in six months time or a year's time or two year's time. Don't worry about this trade right now lost me money, therefore my system's no good. Another example, I had an email this morning from a guy who said, “Andrew, I'm just not making money. Maybe my system's wrong.” Not a client, by the way. He said, “Whatever I do, it seems to be going wrong.” Yet, just a few days prior, he had some good trades, and he said, “I'm just doing really well.” There's these big swings, these ups and downs and emotions that the retail trader gets into those problems.
The investor looks at the bigger picture, the bigger, longer term perspectives. Do that. Take less trades, higher probability trades. Don't feed your broker. Feed yourself or save even taking the trade if they're really not there. Think of your trading differently, a different perspective. Think of making a percentage gain on your account. Don't think, “Well, I've got a thousand dollars in my account. I'm going to try and live off that.” It's crazy. Don't think about I need to double my account every month, because again, it's crazy.
Make a percentage gain
Yes, you may do that, but I guarantee you're going to lose it at some stage. Think of it as in I've got a thousand dollars. Now, let's say over the course of the year, I can make 30, 40%, 50% even. You'll go, “Well, that's just $500, Andrew. That's crazy.” I'll go, “No, it's not. That's fantastic.” $500 is a 50% return on that account.
Now if you can do that with really low risk and controlled emotions, you can do that on a far bigger account, and a 50% return on an annual basis is absolutely outstanding. You cannot get those kind of returns from most other investments out there. Think of that investment mentality and approach, and it will really, really help your trading.
Once again, this is Andrew Mitchem, The Forex Trading Coach. Hope you've enjoyed a little look around outside in summertime New Zealand. I've had a lot of emails from people saying, “Love the outside videos,” so I hope you've enjoyed this one as well. I'll catch you this time next week.