The failure of a trader to make a profit can be the consequence of a number of failings in the trading process. More frequently than not is the combination of failures that lead to poor trading performance.
Staking the odds in your favor is key when it comes to following a simple Forex strategy and for this reason it makes sense in this article to outline the many areas where a trader can often fail. When in the possession of this knowledge it is then down to the trader to use corrective actions to address each of these areas. The result of this exercise is to reduce the risks and ultimately instigate a shift closer to profitably.
With this aim and without further ado, I will list the key areas that often impede performance. At the same time, I will offer some solutions to help each trader address these areas.
A key problem that I see with many traders is that they open themselves up to too many views and opinions.
This can happen on a number of levels including making use of too many trading indicators or simply following too many market analysts. Often struggling traders will fall into this second category as they seek ‘confirmation bias’ to help them back up their own trading decisions. Or after a poor run they make see consensus before entering the market again.
In either of the scenarios the problem is that they expose themselves to too much market ‘noise’. This is detrimental to the decision-making process. It can also damage levels of confidence in trading convictions.
The way around this is to stick with a single method or financial commentator, accepting that making 100% calls is never going to happen. If you suffer from this at present reduce your research, the number of indicators that you use or the commentators that you follow. Navigating the markets is difficult enough so it is important to keep a clear head and follow your own convictions.
The above issue can arise from not having a clear plan for trading. This is the point that I’d like to address next.
Trading plans are an essential part of trading. However, few bother with them and prefer to take a direct and often random approach to their trading. For most who do, success is never an option. By not creating guidelines to trade to inevitably risks increase. The result is that accounts get overexposed and at some point, will cease to exist altogether.
I am a great fan of trading plans and as a result I suggest that everyone should have. This is sage advice, however the caveat I have to this is that the trading plan must suit the individual. The journey into financial trading is not easy without a plan. Countless market guru’s will advocate the use of blueprints but frequently forget to point out that it needs to be tailored to the individual.
In setting up a plan you need to be first and foremost be happy with it. If you are not then it is unlikely that you will stick with it. Even if the plan is wrong and you go bust you will at least have a point of reference as to why things went wrong. Without a plan you won’t be able to define, in black and white, you points of failure. Remember that if a plan is wrong you can address and fix it. However, if you don’t have one then will have nothing to improve.
What should you include in a trading plan is the question that most students ask? My answer is everything!
If you have ever started a business, no matter how small, you will probably need to have opened a bank account. If you have you will now exactly how hard this can be when it comes down to filling out the forms.
Banks these days will want to know everything about your business. Forms are filled with questions such as how much will you make? What is your turnover? How do you expect to achieve this? What if it goes wrong?
Now think about your trading career.
Financial trading the markets is a business. Whether you plan on trading Forex, Stocks or Shares you need plan to work to. Think of it as your business plan.
Sticking to your plan is the hardest part. That is why you need to be happy with it and believe in it!
Traders of stocks, shares, binary options… whatever, will all benefit from a plan.