Successful traders are, by their nature, perfectionists. They seek alpha (maximum profit) in each and very trade they execute, on every trading day. They’re constantly looking for methods and micro adjustments, as they fine tune their strategy, to squeeze as much profit as possible from the market. However, they often have to control their perfectionist traits, due to the forex markets being an imprecise business. Whilst that description of our FX markets as an “imprecise business”, may sound counter intuitive to conventional thinking, it stands up to scrutiny; despite an FX pair being measured in five digits, in a $5.2 trillion per day turnover market place, it’s impossible to be too precise regarding trading, whilst it’s equally impossible to attain perfection.
The markets are in many ways random, you can’t predict, with any
level of certainty, what will happen in the next half an hour, attempting to
predict direction and market sentiment over the next day or week, is an
impossible and pointless task. You can’t predict what price will do, you can
make a judgment as to where price may be headed based on: the historical
patterns you’ve previously seen, current price action (measured and compared on
various time frames) and upcoming calendar events. But you don’t know what’ll
happen, you’re simply taking educated and calculated guesses.
Even the most diligent and disciplined trader can at times, witness
their carefully manufactured method and strategy, rendered irrelevant due to an
outlier event, or breaking news. You can live with this uncertainty, you can
work with it and you can most definitely profit from it, but you must accept
the limitations of market precision and your own limitations, as soon as
possible. Failing to recognise these limits can leave you frustrated in your
efforts to progress.
You must quickly learn what trading issues you can’t control and
just as rapidly, you have to adapt to what trading concepts you can control.
You can’t control market movements of, for example, a major currency pair,
which generally occurs as a consequence of either economic calendar events, or
political developments. You can’t control the quotes you receive and you can’t
control the fills and exact spreads you’re quoted, at any given time in the
market. But you can control the choices you exercise, which are an extremely
powerful trading factor, choices which can set you on the path to potential
profitability.
You can decide: what broker you trade through, which market access
you experience and into which environment you place your trades. For example,
you could trade through an STP broker, into an ECN environment, whilst placing
your trades on your customised version of the MetaTrader MT4 platform. You can
control which markets you trade, which securities and at what times.
These are examples of you exercising your choice and striving for
excellence. As retail traders, employing three of the afore mentioned factors;
STP, ECN and MT4, represents one of the most critical choices you can make, as
you’d be trading in a transparent manner, through state of the art facilities.
Therefore, your fills and spreads should be as tight as you can achieve, as a
retail trader.
When it comes to you actually trading an individual trade, once
again you have to aim for excellence and not become obsessed over illusory,
trading perfection. You have to allow for a degree of imperfection regarding
your trading. Your actual fill mightn’t be exactly as quoted on your platform;
particularly during times when the market moves quickly; due to breaking
calendar event news, quotes can rapidly change. Similarly, when you close the
trade, your profit might not be precisely as you’d calculated. In any trading
plan you develop, you have to allow for a small percentage of variance
regarding your quotes, they are after all, quotes and not guarantees.
A trading plan is similar to a business plan and many start ups will
testify to the fact that their plans evolve to become unrecognisable from their
original, after only a few months of business trading. No matter how you
perfect a trading or business plan, it will change, due to the external factors
out of your control, that you have to adopt and adapt to.
Where you place your stops and take profit limit orders, may be
absolutely critical to your trading plan and potential outcomes. Once again,
you may have to consider allowing a degree of latitude where these trading
tools are concerned. In fast moving markets, your orders might not be filled
right on the pip and this phenomenon is identical, whether or not you’re a
retail trader trading micro lots, or an institutional level trader who trades
considerable size.
It’s important to not only take into consideration both the lack of
perfection and precision that applies to the FX market, it’s also essential
that you acknowledge there will be times, when your method and strategy is
simply incompatible with overall market conditions. Irrespective of your
excellence (as you strive for unattainable perfection) there will be times when
you fail; you simply predict the trading direction of a security incorrectly.
Rather than admonish yourself you could take satisfaction from the
situation if you’ve accounted for such eventualities, by way of applying stops
to limit your drawdown. Or if you’ve applied control over your daily losses,
through circuit breakers, warning you to end trading during a particular
session. This highly disciplined approach and attitude is indirectly another
example of you trading excellence.
Planning your trades and trading the plan, retaining a high level of
personal discipline, exercising control over what you can control, trading
through an STP broker into an ECN, via MetaTrader platforms, these are all
indications of your attempts to attain excellence.
Strive for excellence in your FX trading, not perfection.
May 8 • Forex Trading Articles, Market Commentaries • 2630 Views • Comments Off on Strive for excellence in your FX trading, not perfection.
Successful traders are, by their nature, perfectionists. They seek alpha (maximum profit) in each and very trade they execute, on every trading day. They’re constantly looking for methods and micro adjustments, as they fine tune their strategy, to squeeze as much profit as possible from the market. However, they often have to control their perfectionist traits, due to the forex markets being an imprecise business. Whilst that description of our FX markets as an “imprecise business”, may sound counter intuitive to conventional thinking, it stands up to scrutiny; despite an FX pair being measured in five digits, in a $5.2 trillion per day turnover market place, it’s impossible to be too precise regarding trading, whilst it’s equally impossible to attain perfection.
The markets are in many ways random, you can’t predict, with any level of certainty, what will happen in the next half an hour, attempting to predict direction and market sentiment over the next day or week, is an impossible and pointless task. You can’t predict what price will do, you can make a judgment as to where price may be headed based on: the historical patterns you’ve previously seen, current price action (measured and compared on various time frames) and upcoming calendar events. But you don’t know what’ll happen, you’re simply taking educated and calculated guesses.
Even the most diligent and disciplined trader can at times, witness their carefully manufactured method and strategy, rendered irrelevant due to an outlier event, or breaking news. You can live with this uncertainty, you can work with it and you can most definitely profit from it, but you must accept the limitations of market precision and your own limitations, as soon as possible. Failing to recognise these limits can leave you frustrated in your efforts to progress.
You must quickly learn what trading issues you can’t control and just as rapidly, you have to adapt to what trading concepts you can control. You can’t control market movements of, for example, a major currency pair, which generally occurs as a consequence of either economic calendar events, or political developments. You can’t control the quotes you receive and you can’t control the fills and exact spreads you’re quoted, at any given time in the market. But you can control the choices you exercise, which are an extremely powerful trading factor, choices which can set you on the path to potential profitability.
You can decide: what broker you trade through, which market access you experience and into which environment you place your trades. For example, you could trade through an STP broker, into an ECN environment, whilst placing your trades on your customised version of the MetaTrader MT4 platform. You can control which markets you trade, which securities and at what times.
These are examples of you exercising your choice and striving for excellence. As retail traders, employing three of the afore mentioned factors; STP, ECN and MT4, represents one of the most critical choices you can make, as you’d be trading in a transparent manner, through state of the art facilities. Therefore, your fills and spreads should be as tight as you can achieve, as a retail trader.
When it comes to you actually trading an individual trade, once again you have to aim for excellence and not become obsessed over illusory, trading perfection. You have to allow for a degree of imperfection regarding your trading. Your actual fill mightn’t be exactly as quoted on your platform; particularly during times when the market moves quickly; due to breaking calendar event news, quotes can rapidly change. Similarly, when you close the trade, your profit might not be precisely as you’d calculated. In any trading plan you develop, you have to allow for a small percentage of variance regarding your quotes, they are after all, quotes and not guarantees.
A trading plan is similar to a business plan and many start ups will testify to the fact that their plans evolve to become unrecognisable from their original, after only a few months of business trading. No matter how you perfect a trading or business plan, it will change, due to the external factors out of your control, that you have to adopt and adapt to.
Where you place your stops and take profit limit orders, may be absolutely critical to your trading plan and potential outcomes. Once again, you may have to consider allowing a degree of latitude where these trading tools are concerned. In fast moving markets, your orders might not be filled right on the pip and this phenomenon is identical, whether or not you’re a retail trader trading micro lots, or an institutional level trader who trades considerable size.
It’s important to not only take into consideration both the lack of perfection and precision that applies to the FX market, it’s also essential that you acknowledge there will be times, when your method and strategy is simply incompatible with overall market conditions. Irrespective of your excellence (as you strive for unattainable perfection) there will be times when you fail; you simply predict the trading direction of a security incorrectly.
Rather than admonish yourself you could take satisfaction from the situation if you’ve accounted for such eventualities, by way of applying stops to limit your drawdown. Or if you’ve applied control over your daily losses, through circuit breakers, warning you to end trading during a particular session. This highly disciplined approach and attitude is indirectly another example of you trading excellence.
Planning your trades and trading the plan, retaining a high level of personal discipline, exercising control over what you can control, trading through an STP broker into an ECN, via MetaTrader platforms, these are all indications of your attempts to attain excellence.
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