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Well, this week has been ok, albeit a little slow. I’ve had a nice little winning streak (12 in a row) and am currently 6.5% up for the month in terms of profit and I am investing small amounts each month to steadily grow the size of my account.
I had to really fight off the emotion on Monday though – I had two trades open that had started reversing against me (I was Short on the NZD and GBP). When you are in profit for the month it can be very difficult to keep that emotion off.
The ‘Walk Away Approach’ works a gem for me… that is as long as my S/L and T/P is in place I just shut MT4 down all together as I feel emotion creeping up and reflect on the fact that if the trade does not succeed than it is not a loss; it is a business expense… A small cost incurred while heading to the ultimate goal – trading a fund.
I have to say I was relieved to log back on and see that the trades had actually succeeded.
Here’s what a learned this week upon reflecting on my experience and some of the books I’ve read and recommended in previous posts… system chasing is the main killer of noob traders.
So, what if we get rid of the words ‘system’ and ‘strategy’ all together, just for now? After all, most novice traders think that the system is the most important thing to be a successful trader, yet most fail!
So this approach MUST be wrong.
I’ve been helping a new trader as he had been “developing his system” this week and while my advice was something he had not heard before it really did help him. Here it is:
FORGET about finding a ‘system’ (for now)… instead concentrate on RULES… we are operating in an environment with no rules and no boundaries… something we are not humanly raised to comprehend… no wonder so many fail. The first thing I recommend from experience and various trading materials – establish your RISK before ANYTHING else… on ANY trade I have a maximum of 1% equity risk – I never break it. I know then that no matter what the market throws at me I’m not going to be one of those 95% who sit back in 3 month’s time and realise that they’ve blown an account!
Next, establish some basic rules for entry and exit. Market Flow is an important one for me… but of course there are other factors to consider such as support and resistance, market volatility, trends etc.
CONSISTENCY is the next important factor – never EVER break these rules… of course when starting out there will be some tweaking – on demo of course… but you will establish a defined set of trading rules…
Now, just by following some simple processes which I believe are fundamental to anybody wishing to trade, a system has created itself… I’m finding more and more as I go along that a consistent, low risk approach to trading is far more important than ANY ‘system’…. Its basic stuff yet we can all easily fall prey to the implications of not trading in this way.
That’s it for now, but I’ll be back next week!