I’ve set up some pretty lofty expectations, haven’t I? So how serious am I about doing this in approximately one hour a day? No joke. No hype. I mean it. Time spent does not equate to success. In fact, I’ll go so far as to say that if you were to reduce the amount of time you spend analyzing and trading—starting today—your returns would improve. Why? Well, Las Vegas knows why. They don’t build billion-dollar casinos because they look majestic in the desert. While almost everyone you and I know tells us that they always leave Vegas a big winner, money in their pockets, someone has got to be telling a whopper because I’m pretty sure that the water bill alone at the Bellagio is enough to make my eyes cross. Now if you think I am comparing trading to gambling, I am, just a little.
While it may be blasphemy in certain circles, comparing trading and gambling there are similarities that it would do us good to notice. What I have observed is the time spent sitting at a casino will eventually empty your wallet if you don’t know when to walk away, and I don’t even gamble. The fact that most traders don’t know when to stop does draw some similarities to their gambling cousins. Is trading gambling? Sure, professional gambling. I’ve worked with a professional gambler; he was written up in Forbes and was one of the most disciplined guys I have ever met. He regulated his diet on days he worked, which is to say the days he would gamble. He had a strategy, stop loss, money management . . . the works! I can’t dismiss that as merely gambling. There are trends in games like craps just as there are trends in the EUR/USD or crude oil. Yes, I know there are differences, but I think we can learn a lot from professional gamblers, and I believe the main lesson is this, given enough time, the house will always win. Not because they are better, but because they are patient and will play every hand, every card, every roll. They know they are better funded than you or I. And that alone lets them be wrong longer. They wait us out.
Gamblers make small decisions by noticing the small nuances. Who hasn’t watched 14 hours straight of the World Series of Poker marathon and noticed how the players size each other up? I’ve watched players at the craps table, and they will vary their bets according to hot streaks—is that much different than trading a trend? My point in all this is that much of trading is psychological, and you are already in many ways equipped to trade. You just don’t know it yet. So what are those nuances traders need to notice to play the market? They are visual tools, but instead you will use a price chart. Price is how we measure market psychology. It’s a gauge of exactly what the buyers and sellers are thinking and doing.
So how do we know when to sit and play and when to watch? That’s the key, isn’t it? Well, playing more is not the answer. Observing helps. So does becoming a student of price action. Learn to watch price action without feeling a compulsion to play. That’s discipline. The next step is knowing when to rejoin the game. For us, traders, we can rely on financial centers opening, closing, market overlaps, and scheduled news releases to signal those times. That’s part of it. While we want to join the game at the right time, the other half of the equation is the market behaving in a way that we can capitalize on.
The three most common mistakes losing forex traders make are:
While it may be blasphemy in certain circles, comparing trading and gambling there are similarities that it would do us good to notice. What I have observed is the time spent sitting at a casino will eventually empty your wallet if you don’t know when to walk away, and I don’t even gamble. The fact that most traders don’t know when to stop does draw some similarities to their gambling cousins. Is trading gambling? Sure, professional gambling. I’ve worked with a professional gambler; he was written up in Forbes and was one of the most disciplined guys I have ever met. He regulated his diet on days he worked, which is to say the days he would gamble. He had a strategy, stop loss, money management . . . the works! I can’t dismiss that as merely gambling. There are trends in games like craps just as there are trends in the EUR/USD or crude oil. Yes, I know there are differences, but I think we can learn a lot from professional gamblers, and I believe the main lesson is this, given enough time, the house will always win. Not because they are better, but because they are patient and will play every hand, every card, every roll. They know they are better funded than you or I. And that alone lets them be wrong longer. They wait us out.
Gamblers make small decisions by noticing the small nuances. Who hasn’t watched 14 hours straight of the World Series of Poker marathon and noticed how the players size each other up? I’ve watched players at the craps table, and they will vary their bets according to hot streaks—is that much different than trading a trend? My point in all this is that much of trading is psychological, and you are already in many ways equipped to trade. You just don’t know it yet. So what are those nuances traders need to notice to play the market? They are visual tools, but instead you will use a price chart. Price is how we measure market psychology. It’s a gauge of exactly what the buyers and sellers are thinking and doing.
So how do we know when to sit and play and when to watch? That’s the key, isn’t it? Well, playing more is not the answer. Observing helps. So does becoming a student of price action. Learn to watch price action without feeling a compulsion to play. That’s discipline. The next step is knowing when to rejoin the game. For us, traders, we can rely on financial centers opening, closing, market overlaps, and scheduled news releases to signal those times. That’s part of it. While we want to join the game at the right time, the other half of the equation is the market behaving in a way that we can capitalize on.
The three most common mistakes losing forex traders make are:
- Risking too much on a single trade
- Trading during the doldrums between the London close and Sydney open and overtrading during Asia without regard to the European open
- Trading at the moment of news releases
And those are just a few examples. But the topic here is how to analyze the market quickly, and sometimes it’s just as effective to discuss what not to do because you and I are going to spend the better part of the rest of this book discussing what to do.
The lesson here is not that I want you to be Vegas or Wall Street; we lack the capitalization. But I do want you to begin noticing what losers do. Vegas, Wall Street . . . they know what losers do, in fact they count on them. Losers behave the same way. They congregate in little herds of losers because they think and behave the same way. You know the old saying: If you can’t find the sucker in the room, it’s you.
Knowing when you play or walk away is a function of knowing what will make us act. I call them “decision levels.” The market seduces traders. It’s a siren song that is hard to resist when you feel that the next price could be a reason to act. The reason why Forex in Five traders will be able to resist is that price becomes our ally; specific price will cue our interest and begin analysis, and then, maybe, trigger a trade. Most traders make knee-jerk reactions because they incorrectly believe that any and all price moves are an invitation to trade. Watching the market this way is both unproductive and exhausting. Knowing that you have a price at which you have planned to act is instrumental to your success in trading.
The lesson here is not that I want you to be Vegas or Wall Street; we lack the capitalization. But I do want you to begin noticing what losers do. Vegas, Wall Street . . . they know what losers do, in fact they count on them. Losers behave the same way. They congregate in little herds of losers because they think and behave the same way. You know the old saying: If you can’t find the sucker in the room, it’s you.
Knowing when you play or walk away is a function of knowing what will make us act. I call them “decision levels.” The market seduces traders. It’s a siren song that is hard to resist when you feel that the next price could be a reason to act. The reason why Forex in Five traders will be able to resist is that price becomes our ally; specific price will cue our interest and begin analysis, and then, maybe, trigger a trade. Most traders make knee-jerk reactions because they incorrectly believe that any and all price moves are an invitation to trade. Watching the market this way is both unproductive and exhausting. Knowing that you have a price at which you have planned to act is instrumental to your success in trading.
