I recently conversed with a trading chum I’d lost touch with, we met on a trading forum approximately seven years back. He’s still quite active on the forum, I tend to avoid forums for many reasons, but don’t let me put you off posting on forums, or reading them. If you have the patience and single mindedness to trawl past the multitude of scammers, trying to sell you a trading system “out of a box” etc., then forums can be an extremely valuable resource of information and (at times), great entertainment.
They’re especially useful for novice traders when they’re attempting to navigate the huge complexity of forex trading. And it’s easy to forget the bewildering challenge forex trading represents in those early days, it’s no wonder many fledgling traders don’t get past that first few months, which can be a baptism of fire.
I’d offered up some advice to my novice trading contact (let’s call him Bill), back in approximately 2012, regarding the usual trading challenges; overtrading, money management, less is more, patience, risk, position size, realistic goals, creating a trading plan, fundamental analysis, using an economic calendar etc. As usual my advice didn’t even touch on the subject of developing an edge/method/strategy, until he fully understood the impact these critical success factors would have on his trading. Apologies if at times I sound like a broken record on this subject, but as a theme throughout our articles, I always attempt to hammer home the “make or break” aspects to your trading success.
Don’t get me wrong, finding an edge/a trading strategy, is absolutely crucial, but the edge can’t exist without sound money management and a complete understanding of the impact risk control has on your bottom line. And there could be an argument that we tend to overrate our ‘edge’. In theory there’s thousands of edges that traders (retail or institutional) are successfully using right now as you read this. What we regard as “an edge”, isn’t as unique, or as special as we first imagine, when we suit up in our armor and head of in search of the “Holy Grail”.
Anyhow, Bill had been through an interesting journey over recent years, he was still trading, he was profitable, relaxed and had got his game together. He was no longer the anxious, overtrading, individual desperately searching for a solution and fast track to success. He agreed with a contention I’ve held for many years; that eventually by accident and experimentation, as much as by design, many traders stumble upon their own eureka moment, when they eventually discover a reliable method, to take profit out of the market.
For Bill it came by matching his trading to his full time job and persevering with learning how to day trade/swing trade and only trading the one forex pair, EUR/USD, with one trade in the market at any time. He eventfully realized that he couldn’t spend hours diverting his attention from his full time job and career to monitor trades, it wasn’t fair, or ethical regarding his employer and it was counterproductive.
He’d also realized that many trading strategies work. He stopped chasing the illusory Holy Grail of trading methods, he was using a simple indicator based trading strategy involving the: MACD, RSI, Bollinger bands and the DMI/ADX, he was obeying the signals generated with ruthless efficiency. When the signal was generated to close he closed, when the signal was generated to swing he swung. He realized that at times there was profit either left on the table or ‘scrubbed off’, but he rolled with the blows and had become completely comfortable with his gains. He was risking circa 3% on every day trade/swing trade and generating a return of circa 36% per annum. He’d now abandoned his dreams of making the kind of fantastic returns quoted on trading forums, and had managed to leave his gains untouched and enjoy compounded growth above the 36% per annum.
One trader, making one trade, focusing on the one outcome, having been through the usual endurance trials involved with retail trading. Bill had finally arrived at a contented place where everything had come together.
