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Forex Basics

Signs You’re Actually Becoming a Forex Trading Expert

We all hope that one day we can be considered an expert trader. Being an expert will mean that we know exactly what we’re doing, we know how to profit and we know how to remain safe as a trader. We all want to get there but it doesn’t happen overnight, it takes time and we will slowly start to see signs that we are on the right track and that we are slowly becoming expert traders. So let’s take a look at some of the signs that we may see that will show us that we are becoming expert forex traders.

Profits are not your main priority: When new traders start, there is normally just one thing on their mind, how much money they can make and how they are going to make it. Money is the main driving force behind their desire to trade and it is what will motivate them to learn and trade. For an expert, that priority will begin to shift, you will start to focus on securing and protecting what you already have over making more profits. You will understand that it is more important to stay in the game than to make profits, and you will focus on keeping what you have and adding to it rather than placing too many risks.

You are naturally looking at the news: Looking at the various news sites and economic calendars is not really something that newer traders do, yet when you are becoming an expert trader this should be something that comes very naturally to you. The start of each day, the evening before, anytime is a good time to check the news and the economic calendars. It can provide you with a lot of information. Eventually, you will do it naturally without even thinking about it. 

You follow your rules perfectly: The trading plan that you have created will have a number of different rules setup, these rules are what tells you what you should be trading and when. When we are new we will still get some of them wrong, meaning that we will be placing bad trades. But as we grow as traders and move more towards the title of an expert trader, we will begin to reduce the number of times that we go against them, when we no longer make mistakes surrounding the rules, we can consider that part of our training to be at an expert level.

You maximise the profits on each trade: Sometimes it is not about placing more trades, for many newer traders we see the profits and so close the trades for that profit, only for the market to continue in the same direction. An expert trader will capitalise on this, if a take profit level is set, based on further analysis this can be moved further, you can also use things like trailing stop losses that can help you to maximise profits a little bit more. You will now be trying to squeeze out more from each trade rather than placing more trades.

You no longer blindly follow others: When we start out trading, we don’t really know what we are doing, due to this, we often take the words of others with a little more attention, often we will simply place trades because someone that we think is an expert has placed them without really knowing why they have been placed in the first place. Instead, we no longer blindly follow others now, instead, we make our own trades, or if we do take another’s trading idea, we know why they are trading it and have a full understanding of the trade before we place it.

You find your exit point before placing a trade: When we start all we really think about is the entry, how do we get in, we will then think about getting out once we are in profit or loss. This is simply not what an expert would do, instead, we can sense that we are on our way to becoming an expert when we start to think about the exit point before the trade is made, sometimes before the entry point is even decided. The exit point is what will make our profit, but also to protect the account, so it is vital that we know where this will be before we place the trade.

You no longer dwell on negative days: We all hate bad days, we all hate negative trades. What we often do is find it hard to move on, those negative days or trades stay in the back of our mind, maybe we go to sleep thinking about it and wake up with it fresh in our minds, this can then influence our next day’s trading. An expert trader will not do this, they will accept that the losses were there and that they happen. You now need to move onto the next trade without thinking about the loss anymore, this way an expert trader will not be influenced by their previous losses.

You understand that not having a trade can be a good thing: You do not always need to trade, for a new trader you want to be trading all the time as that is how you make money, what they do not seem to understand is that not having a position is still a position. If there are no good opportunities for a trade, you should not try to force one, instead, you need to be patient. Not having a trade is keeping your account safe from losses, so as an expert you understand this and are happy to sit and wait for the right opportunity to arrive.

You still understand that there is still a lot to learn: You can never know everything, in fact, you can never know a lot, new traders may get the basics and then stop learning, but an expert will do the opposite. An expert will know that there is always more to learn, so much so that they spend a lot of their time still learning. New strategies, new assets or currencies, pretty much every aspect of trading has an unbelievable amount of information that is constantly evolving… So a sign of becoming an expert is the fact that you are able to continue to learn and still have the drive to continue to learn.

You never trade without a stop loss: Stop losses are there to protect your account, you should be using them with every trade. New traders don’t always use them but if you want to be considered as an expert trader, then you need to use them with every single trade, it is as simple as that.

You no longer dream about your trades: A weird one no doubt, but when we first start out we dream about our trading, we dwell on our losses and they often affect our dreams, or we dream of placing that one amazing trade that makes us rich. As an expert, you don’t really have these same dreams, your trading stays with your trading, when you step away from the trading terminal, your thoughts of trading do not come with you and so when you dream, you no longer dream of your trading.

So those are just some of the signs that will help to show that you are becoming an expert trader. There are of course other things and we have to ask ourselves how we would actually define an expert trader. You can never be perfect, but you can certainly start to do things a little more naturally that are in line with your strategy, that protect your account and keep you updated, as long as you are trading well, you can be considered an expert trader.

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Beginners Forex Education Forex Basics

The Forex Experience: What to Realistically Expect

What is makes you an experienced Forex trader? Is it because you have tested thousands of indicators? You have built a system with positive backtesting results? You are have invested a lot of time onto becoming one? If you are not exceptional, you will not be a good one until you have the last element – experience.

Now, you should not be discouraged if you have put a lot of time into making yourself a better trader, even if your system does not show great results. If you got up to that level, you are on the right path, for the next 30, 40 years and more, your life will be financially free. This also induces stress-free and even can be said a healthy life for the long term. Fortunately and unfortunately, depending on how you look at it, money solves many of the problems today. Forex is a blank slate, the internet is also, giving you the opportunity, it comes down if you want it.

And, yes, there are no shortcuts, no easy way to get to this level. Those that seek that easy path will ultimately meet failure. You have invested so much time into Forex trading that you now have a chance to be very close to what is regarded as a “dream job”. Those that reach it are very few, just look around and see all those busy people on the street hasting to get to their workplace in time. A sad truth, many will be frustrated and wonder “why I could not achieve that life I have always wanted”, and they see others do it, just why not me. The opportunity was there, you just didn’t act. Forex is that opportunity, and it will allow you to start again, everyone has the same unpreferred window to study it as long as you live.

Many traders who put in the work, a lot of work, experienced frustrations, and many other negative emotions that are just part of gaining experience. Traders will run into things for what they are not ready yet. It is just a matter of experience, there is no substitute for it. Going forward this article will give you a bit of insight into what to expect, addressing to those who are already into forex trading. All this comes from professional forex prop traders some tips and a practical tool many prop traders use.

Never forget the three pillars of trading: The most important ones are Money Management and Psychology. Trading Analysis is secondary, a far secondary. There is a proven methodology that shows this is the truth. You can throw a coin for every decision to go long or short in a trade, with good Money Management which is followed to the letter, you will still have positive results. Without the right mindset or Psychology, all this can go to waste. Unfortunately, most people just focus on the secondary part, Trading Analysis. Not a surprise the 99% of people do not make it far to reach that stress-free life.

Just to make sure you are on the right trading, your trading system should have three stages. The first test is when you are just building the system and backtest it to make sure you have a much better winning rate than 50-50 as with a coin-flipping. The second stage is where your good-to-go system is put on a demo account and forward-tested. In the third stage, when you step up and say you are ready, you go to a real-life test. You will make different kinds of mistakes in the third stage, and that is alright. This is the experience stage where you will mature as a professional trader. The experience will unavoidably forge you to avoid future mistakes.

At this point, you may think you will not make mistakes, you have made the system that works, but, once it gets serious with serious money put in the trades, it is a completely different world. Forex will be the same market as before but now you have new challenges you have to be ready for. These challenges will be emotions. You better make these emotions happen in the past before you move on but still, some will be new to you. You may have just started to trade your system/plan and you have 4 bad losses right away. The mistakes made will be remembered especially if these decisions were emotional. But this is a good thing and part of gaining experience in a real professional career. Whatsmore, you will have a huge motivation to improve your system.

Know that your system should always be perfected, it is not a holy grail for eternity. Your system is no just a series of indicators for analysis/signals, it is also your emotional control anchor. Trading your system sounds easy but it is not, experience gained from this is essential. Once you realize you had overcome the new emotional challenges, you will realize the Psychology element is the grease for your trading machine. Stop greasing it and it will halt. Confidence will also grow with experience, as well as your balance. Once you have done 1000 trades you will know that the series of big losses you had before was just a normal or nominal statistic.

Every gaining equity curve has these drawdowns, it just happened the drawdown was peaking when you started. Of course, you did not have the experience so you were living in that moment, you doubt is the system works in the first place. At that moment traders do not look at the long game. Once you overcome this, the next series of losses will not shake your confidence. As you move on you will face new challenges yet with every one of those “unforeseen” events patched up in your rule book and the system, you have improved. Those bad situations on the market will trouble you less and less until a few very rare things can surprise. Forex will go out of bad bullets eventually for you.

If you are on to a professional Forex trading career, your path was probably in four stages. The first one is all about demo trading. If you skipped right into real money trading, the odds are it was a huge loss. Consider a lucky event if you have withdrawn after a few great winning trades. It would be smart to stop at that point because you lack experience and the system for the long game. Do not return to live trading before building a system and demo trading. The experience will tell from the demo trading your system works but live trading is now very emotionally different. The third stage is when prop companies want your trading results (note that not every proprietary company needs this when selecting traders).

The best way to impress is by having a demo and live account trading results. At this stage, you have some experience and the system is tight for most of the market situations. However, your trading might be different. When you want to impress, some trades that made you successful off the stage might be missed. After overcoming this obstacle comes the fourth experience stage – actual live prop trading. This is a completely different set of emotions again. This happens to responsible traders, those who are not responsible and do not respect the money are filtered out. At this stage, someone is giving out their capital so your trading can enjoy the “economies of scale” effect.

Bigger equity, bigger trades, bigger responsibility. Losses will happen, they always do, and you might become risk-averse because of a higher scale of responsibility. From an inexperienced trader who went to live trading, risking too much and trading too much now has a risk aversion and trading fear. These emotions will catch you off guard, you might deviate and change your system. There is no other way except to face them, for experience requires time. If you are at this point know the worst thing you can do is turn back. The success rate in this business is so low you cannot afford to drop everything.

Here is a pro tip for traders at this point. These traders should have a system which is backtested, forward tested, and is used in live trading. This system should be considered that will last for life as a profit-making machine in the forex market. Even if you are trading for a prop company or still in the admittance process, put yourself to test – trade an uncomfortable amount of money with your system. By uncomfortable is meant an amount that will seriously hit your home funds balance if you lose everything. This may sound crazy and irresponsible but this money should be recoverable, especially if you have a job or other sources of income. When big money is on the line, this test will help you. Take it as a sacrifice now for the next 50 years or so of your life.

Once this is dealt with, there is not much that can stand in a trader’s way to become a true professional. This emotional experience is so important that it even can be crucial to becoming a professional trader. Forex requires you to lose before you can win. Loses will still be sour and winners sweet but the experience will control the emotions so your final P/L line is just a number. Most coaches will tell traders to hide the dollar amount tied with their trades and trade for the pips. Putting yourself in a very uncomfortable position or out of the comfort zone is beneficial, there is no substitute for that experience gained. This accelerates your learning curve. Some of the great coaches will also say traders are not born but forged. They are forged because they had to go through fire to get to the top.

The tool related to the situation where your system might not work for some time, especially if you are a trend following trader, is the $EVZ. Just a side note, if you are not using any known trend-following strategy, trend following is a way to go for almost all of the proprietary traders. CBOE EVZ volatility is a very important tool for trend following traders, especially on higher timeframes. Since the world where we live is cyclical, so is forex. There are periods of high, choppy, chaotic, low, and other volatility patterns on the market. Trend following strategies need momentum, volatility, or volume to work, this is how trends are created. Most of the traders will find that their system does not work very well during these low volatility periods. Losing streaks will emerge and traders will dip into the emotional zone. Experienced traders will recognize this period and probably will not trade until the volatility/volume picks up again. 2019 was the year of extremely low volatility on the forex market while in 2020 COVID-19 stirred extreme volatility spikes.

Extreme situations are new to you and your system. Do not question your system during these periods, take the $EVZ, and compare your results relative to the $EVZ value. As one prop trader suggests, his trend following system does not work well for anything below the 7.5 $EVZ. If the situation prolongs, like in 2019, he will cut the usual position sizing. If it goes below 6, he completely avoids trading. He may go to Metals markets or Indexes. Simply, the odds for a trend to run in the forex market on his daily timeframe are low so all he gets is breakeven at best. Another tip and always good for Risk Management is diversification. When you perceive low trading volume in the forex market, you can still gain trading Gold or Silver, for example. Metals market requires additional knowledge as they move differently but gains will also affect your emotional state. From a different perspective, the 2019 low volatility is a perfect testing ground for your system, traders that have endured and adjusted are now even more prepared, they have gained experience from an uncomfortable situation.

To conclude, never forget the importance of the Psychology pillar, 99% of people do forget. Experience is a failure and trying again, every top trader went through the forge. Embrace this fact and sky is the limit. Pay attention to the $EVZ and adapt to the situation, markets and economy are cyclical. Finally, do not panic if you make consecutive losses, it is just part of the long game if your system is proven to work.