Saturday, July 23, 2011

If I Were a Trading Neophyte…


“If a trader believes that a talent or ability is trait-like, and unchangeable, he or she will be crushed after a failure. If, on the other hand, the person believes that a talent or skill can be improved and honed through experience, he or she will be less upset, less likely to internalize the losses under the same circumstances.” – Joe Ross


If I were a trading neophyte, I’d be wary of those who promise 50% - 1000% returns on a quarterly basis, let alone on monthly basis. If making profits like that was easy, they’d never have to market their secret to colossal wealth. Going after huge profits is no different than courting financial disaster. Based on my personal experience, I’ve realized that there’s always a price to pay for stupidity. It’s better to learn lessons from others’ harsh experiences than from one’s harsh experiences.

If I were a beginner trader, I would ask prospective coaches to show me their own track records and forward them to a professional trading risk manager to interpret for me. I’d be suspicious of trading results that look too good to be true. I’d never be lured by account histories that use high risk to achieve huge profits in a short period of time or account histories in which stops are absent. I’d never trust any results that come from any source other than those that can be accessed by a valid login and investor’s password of a reliable brokerage account, live or demo. I’d also believe experts who make trades in live trading rooms and survive the uncertainty of the markets. By doing this, I’d escape the wiles of sham trading experts who’re out there to capitalize on my ignorance. The trading world is replete with criminality and hypocrisy. How could someone be callous enough to offer to give people what he/she doesn’t have? Many of them are out there. I can’t imagine how someone who can’t deliver consistently would ever offer to train others. Even if a trainee wouldn’t trade exactly like a coach, the coach should show him or her that they’re also surviving in the markets (if trainees would still choose a trading method that fits them). Who could be a more shining example than the best in their trades? A mentor should also be a successful trader, not just an adviser or educator. If a trading educator can’t show me his/her track records, I’d conclude that they’re not successful, and therefore, they aren’t qualified to teach me. The only criterion I’d honor is not university degrees or fame or business attire, but good trading track records.

If I were a trading neophyte, I’d create demo accounts on trading platforms of brokers whose demo accounts don’t expire. I’d practice, practice and practice on the demo accounts until I reached the level of consistent competence. Those who open live accounts when they’ve no good track records on demos may think they know what they’re doing, but the markets would soon prove them wrong. I’d never open a live account until I reached the level of competence, no matter how long it took me. It’s easy to open an account: it’s also easy to receive a margin call.

If I were a beginner trader, I’d choose only the brokers that allow excellent money management flexibility. I’d choose a high leverage to significantly increase my buying power, but I’ll keep my account intact with safe and stingy lot sizes. I’d never put $1000 into a standard account: plus using 0.1 lots for a position on $1000-capital is completely out of the question. Using 1% or less of my capital ensures that if and when a period of drawdown does occur I don’t lose too much!

If I were a trading neophyte, I’d discard any trading system that doesn’t include satisfactory risk management recommendations. I’d stick to a positive expectancy system I use despite occasional losses. I’d bear it in mind that complicated strategies can never achieve better results than simple ones. I’d simply cut my loss if I’m wrong and run my profit if I’m right. I wouldn’t complicate my trading strategies or add many more indicators.

If I were a beginner trader, I wouldn’t give up in the face of discouraging advice from those who are ignorant of what trading is all about; neither would I feel inferior to the so-called top or institutional traders. Losses don’t discriminate. A committed private trader may even be more skillful than an institutional trader. The biggest difference between retail and professional traders is that professional traders have someone else as a risk manager who forces them to follow sound money management practices. Retail traders have the difficult task of monitoring themselves.

If I were a beginner trader, I’d never forget that I’m a student of the markets. Trading is hard at best; losses and difficult adjustments abound. When a trader shouldn’t sustain heavy losses or a margin call, accepting the reality of the market unpredictability, intermittent loss, and discipline can lead to happily brighter experience. Trading success is more about discipline than talent. It's built on the back of the habits you form, and the commitments you make. It’s worth noting the fact that there are substantial differences between traders. There’s no single blueprint for market success. Instead, there are many paths to success and this means that each individual can find their own way.

If I were a trading neophyte, I’d never give up despite the challenges the markets would throw at me. I’d stick to trading until I find the secret to success. Those who explore other areas of human endeavor also face stubborn challenges. Life out there is very hard. Too often, we run from challenges. Yet successful traders whose results we wish we could duplicate continue getting impressive trading results because they battled challenges. Would life not be better if you were free of the daily grind – the conventional job and boss – and instead succeed or fail purely on the merit of your own trading choices? We’re the masters of our fate.

NB: Please watch out for my coming articles with these titles: ‘Testimonies from My Subscribers,’ ‘Excellent Money Management Flexibility – Make the Best Choice!’ ‘Resist the Lure of High Risk – Part 3,’ ‘Carrying Out Stealth Raids in Weak and Strong Markets,’ ‘Worst-case Scenarios – Facts Are Sacred,’ ‘Effective Swing Trading in Forex,’ ‘Advanced Gap Trading – Trading with Insane Accuracy,’ ‘3 Recent Gap Trades,’ ‘Trading for a Livelihood – One of the Best Jobs in the World,’ ‘Developing the Right Attitude towards Losses - Part 3,’ ‘The True Holy Grail – The Long Sought for,’ ‘Achieve Success through Sensible Risk-to-reward Ratio (An Interview with a Trading Enthusiast),’ ‘ Clarifying Some Issues – Part 5,’ ‘ Trade to Win!’ ‘Optimization of the USDCAD Hedging Strategy – Bringing the USDCAD to Subjection,’ ‘A CHF Breakout Strategy,’ ‘Overview of My Signals Strategies,’ ‘Is It Realistic to Give Guarantees in Trading?’ ‘Monthly Trading Report (July 2011),’ etc.

This article is ended with a quote from Louise Bedford, an experienced female trader:

“When you truly desire something, your habits and actions will align themselves with your priorities. You'll find yourself doing things that are congruent with where you want to be in life, and you'll be granted some bonuses along the way as some things you've been desiring miraculously fall into your lap.”

Your questions and opinions are highly welcome.

Thank you.

With best regards,

Azeez Mustapha

Forex Signals Strategist, Funds Manager &Coach

Senior Analyst

FX Instructor, LLC


Yahoo! Messenger ID: saazalmu

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NB: There is risk of loss in trading, but it is possible to be a successful trader.

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