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Overcome 4 Fears that Cause 90% of Trading Losses

It’s estimated – and rightly so I think – that the root cause of about 9 out of 10 losing trades can be traced back to one of four basic fears that cripple one’s ability to be a consistently winning trader: fear of making a bad decision, fear of losing money, fear of missing an opportunity, and fear of leaving money on the table. These four basic fears are something that all successful traders have to confront and overcome in order to BE successful traders.
As I’ve said before, fear is crippling and disastrous for successful trading. It paralyzes you, and it skews your perception, totally taking away your ability to rationally analyze the market and trade profitably. Therefore, overcoming, getting past these four basic trading fears is both an essential and a huge (since they lead to about 9 out of 10 trading mistakes) step toward becoming a successful, consistently profitable trader.
So, let’s simply go through and look at each of these fears, one by one, and address the question of how to overcome them.

Fear of Making a Bad Decision

None of us ever likes to be wrong in our choices. We like to think of ourselves as capable of making good, solid, rational decisions and choices. Plus, we’re embarrassed by other people seeing us be wrong (as I was just the other day when I tweeted that I was buying Gbp/Usd at 1.6800…right before it promptly dropped down to about 1.6770, making a new low on the day). Finally, being wrong in trading means losing money, and it’s very deeply ingrained in all of us to absolutely hate losing money (more about this when we discuss the second main fear).
But here’s the thing – part of being a successful trader involves taking risks, taking the chance of being wrong.
Therefore, if we can’t overcome our aversion to ever risk being wrong, we simply cannot become consistently successful traders. So how do we do that? – Simply by recognizing the reality of trading, namely that it necessarily involves taking risks, and that some of those risks are not going to work out. Winning trading necessarily includes some losing trades. We have to fix it firmly and clearly in our minds that successful trading means risking being wrong, and that, in fact, if we aren’t willing to risk being wrong, we will never be consistently profitable traders – because our fear of being wrong will make us miss out on taking winning trades.

Fear of Losing Money

This one is very similar to the first, but still stands on its own as a huge stumbling block in the way of becoming a successful trader. Winning traders are risk-takers. But the average person never wants to risk losing a penny – they want that guaranteed 1% annual return on their bank savings account – and losing money upsets them terribly, totally throws them for a loop. This is another basic, primal, ingrained fear that one has to overcome in order to become a winning trader. And again, it’s simply a matter of recognizing the realities of trading, of seeing clearly what successful trading looks like. Successful trading, consistently profitable trading, looks like a record of making a lot of money through winning trades AND losing some money on losing trades. Those losing trades are simply part of trading. Therefore, if you aren’t willing to have losing trades, you don’t have the willingness to be a winning trader. Simple as that.
Just realize the fact that you are going to lose some money on some losing trades – but also realize that losing that money is just an essential part of making a lot more money. The only road to big, consistent profits passes through some small losses.

Fear of Missing an Opportunity

The fear of missing out often manifests itself in the form of one of the classic trading mistakes – “chasing the market” – and also often follows from one of the first two fears, fear of being wrong, fear of losing money. We’re looking at a market, thinking from logical analysis that we should buy, but our fear of being wrong or losing money prevents us from doing the right thing – taking the trade – and so we don’t buy. Then, all of a sudden the market starts shooting to the upside, moving up 10 or 15 pips or more in perhaps less than a minute. In a panicked fear of missing out on “the big move” (due to our initial fear of being wrong), we jump into the market when it’s already run up 20 or 30 pips…only to have that turn out to be the short term top, and then see the market roll almost all the way back down to its initial take-off point. Our fear of missing out has caused us to take a disastrous trade, one that is now a significant loss.
What will save us from this mistake? Only the coolly rational mindset of a winning trader, which realizes two things: One, you aren’t going to catch every opportunity that comes along – the simple fact is that you are sometimes going to miss out…but Two, there are always more opportunities rolling round all the time in the forex markets, and you don’t need to catch them all in order to be a winning trader. And finally, chasing a market very, very rarely ever works out profitably. It is one risk that is not worth taking as a trader. 99 times out of 100, it will cost you money – so don’t do it.

Fear of Leaving Money on the Table

“Pigs get slaughtered” is a classic trading axiom. Greed will kill your trading profits. Winning traders are perfectly happy with making a nice profit, and not bothered by the fact that they could possibly have squeezed 10 or 15 more pips out of a trade. You’re simply not going to buy the absolute bottom and sell the absolute top. So just recognize that as a fact of trading life, and stop trying to do it – it just doesn’t happen. What does usually happen is that trying to push for that extra 10 pips at the absolute top costs you 10 or 20 pips that you could have had if you’d simply cashed in earlier.
Again, it’s all about recognizing and accepting the simple realities of trading. One of those realities is that even the very best trading is still always going to leave some money on the table.
But instead of focusing on that, be happy that you were able to grab some money off the table. Instead of being upset that you didn’t buy lower or sell higher, be happy that you did buy low enough to be able to sell out nicely higher and thus make money. As long as you turn an overall profit, you’ve done your job as a trader.

Bottom Line
There are some basic fears ingrained in all of us that we have to actively work to overcome in order to be winning traders. These basic fears – the fears of being wrong, losing money, missing something, and leaving money on the table – can cripple our ability to practice overall profitable trading. To overcome them, we have to put forth the necessary effort to learn to think like a trader. Force the proper trading mindset into your brain. Plaster trading axioms that reinforce a winning trader mindset all over your house or office, to continually remind you to think like a trader, to recognize and accept the realities and truths of winning trading.

Summary
 You have to risk being wrong in order to be profitably right. Trading involves risking your opinion being proven wrong.
 Losing trades are part of winning trading. You should just accept them as part of the game, and not let fear of losing money prevent you from making money.
 Don’t take trades based on fear of missing out – there are always plenty of new opportunities for profitable trades, so there’s no point in chasing a market that already made its move.
 Don’t be greedy. Be thankful that you were able to grab some money off the table, and don’t begrudge the fact that you left some money on the table.

Want a slam-dunk, guaranteed winning forex trading strategy? – Go here and access it – No-risk, Guaranteed Profit Strategy 

Jack Maverick

Zero to $1 Million in 18 Months Trading Forex

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Is it possible, as a forex trader, to go from nothing – start from absolute scratch, zero funds – to being a millionaire in 18 months?  That’s right, I said 18 months (or less – I vote for less, because I have no patience at all, really).  IS that possible?  Sure it is.

All right, we’re going to do the following:

-We’re going to make a million dollars (or more) through forex trading.

-We’re going to do it in 18 months (or less).

-And we’re going to start with next to nothing – $50.

I’m going to give you the basics of my trading strategy today and then I’ll share more details about it in future follow up articles.

This strategy IS designed to consistently offer excellent risk/reward opportunities, and, executed with some modest amount of intelligence (lucky for me that’s all it requires), should consistently produce winning trades that far outnumber and outpace losing trades.

MY 15 MINUTE CHART STRATEGY

HERE IT IS, the deep, dark, mysterious, intricate, secret system, worked out by an ancient Chinese Taoist sorcerer, and kept closely guarded for centuries by inscrutable Zen currency traders:

Open a new chart, set the time period to 15 minutes.  Load 3 EMAs (exponential moving averages) – the 5, 10, and 50 EMA.  When price and the 5 and 10 EMA lines all cross above the 50 EMA line, buy (or, conversely, when they all cross below the 50 EMA line, sell).  I know, I know – the complexity of it is staggering, right?

You can also add the 21 and 35 moving averages – as well as the 100 and 200 SMAs (simple moving averages) just for higher time frame reference – but the 5,10, and 50 provide the basic trading strategy.  I use EMAs weighted to the close – but that’s just my personal preference.

I’ve adjusted things a bit to my own personal trading style, but the credit for this outstanding strategy goes to a friend and fellow trader, Clay Ferrell, who was nice enough to share it for free at the Forex Factory forum (you can read more there at “Trading Systems”à”CHOROS System”, but fair warning, there’s 500+ pages of discussion – and that’s not even the original discussion thread!).  The original rule is to enter on the first retrace touch to the 10 MA (after price and both MA’s have crossed over the 50 MA).  However, I often enter when price has crossed and made a 15 minute candle close past the 50 MA.  I do that because I’ve found that price itself is a better indicator than any moving average (and because patience is not one of my virtues).

The initial stop loss shouldn’t be more than 10 or 12 pips, at most, below (or above, in a sell trade) that 50 MA line, nor more than 10-12 pips away from your entry point.  One of the main strengths of this strategy is its low risk.  The theory behind this strategy is that once that 50 MA line is crossed by all three – price, the 5 MA, and the 10 MA – that 50 MA line should pretty much hold as support/resistance.  It works best when the 5 and 10 Mas are both rising at a fairly steep angle.  The 10 MA line should continue to rise (in a buy trade), and also act as initial support for price.  Eventually price will come back through the 5 and 10 MA lines and test either the 35 or 50 MA line.  The FIRST time this happens, the 50 MA will usually hold – that is, there probably won’t be a 15 minute candle close significantly (i.e., not more than 4-5 pips) to the other side of it, and often price will just touch the 50 MA line and immediately bounce off of it.  The game is often over the second time that the 50 MA is challenged – it’ll give way, and price and the shorter moving averages will all decisively cross back over it in the opposite direction.

This is a short term trading strategy and it’s important to move your stop aggressively once you have a profit of about 10 pips – better to get stopped out with just a small profit than to let a profit turn into a loss.  Many times I’ve been stopped out with a small profit and initially wished I was still in the trade and been tempted to jump right back in…but an hour later ended up thinking, “Boy, I was sure lucky to get out with a profit on that”.

Below is a screen shot of a 15 minute chart showing movement both above and below the 50 EMA line.  Note how once there’s a significant move above or below the 50, the 10 EMA tends to act as support/resistance.

Trading Strategy Example one

And here’s another – note the pin bar that precedes a cross up and over the 50 EMA, that could then have been ridden for a very nice profit.

 

Trading Strategy Example 2

I urge you to set up your  own charts with the three moving averages and watch the market action for yourself.

That’s my basic 15 minute trading strategy.  Of course it’s not quite that simple in actual trading and there’s a bit more to it than that, too much for me to cover in the space of one article.  I’ll provide more rules and trade filters for using the strategy in upcoming articles, so stay tuned.

Believe it or not, if we can simply average catching one good trade a day with this strategy, we will make it to our goal of a million dollars in 18 months or less.

3 KEYS TO SUCCESS! (applicable to ANY trading strategy)

1 – Learning.  You have to become an expert in your business, and that’s certainly true if your business is currency trading.  You need to put in the time and effort to always be learning how to improve your trading.

2 – Patience.  Starting a business with less than $100, and making a million dollars in less than two years sounds fast.  And it is.  But it can seem oh so slow in the beginning.  When you’re only seeing $5 or $10 profits, it doesn’t feel like you’re getting anywhere.  You want to be already up there making the “big coin”.  But you simply have to steel yourself to being patient, to being content with gradually increasing your equity.  Just averaging small daily profits will make that million dollars a reality.  You might even try reminding yourself every day you make a small gain, “I’m doing it – I’m making a million dollars.”

3 – Diligent adherence to a good, solid trading strategy.  It’s amazing how many traders discard a basically sound strategy just because it has a few losing trades.  They forget all the times it worked wonderfully.  No trading strategy is going to work every time – nothing’s perfect.  But I’ve found that a number of times when I thought, “Oh, this strategy doesn’t work”, that I’d often lost money not because of the strategy but because I’d departed from the strategy.  For example, sometimes I’ve jumped the trade too early, getting in as soon as price moved across the 50 EMA line – I looked back later and saw that there was never a 15 minute candle CLOSE across the 50 EMA – I’d violated the rules of my own strategy.  The trading strategy wasn’t at fault – I was.

NOW…WANT TO SEE A GENUINE NO-RISK, GUARANTEED PROFIT EVERY SINGLE TRADING DAY STRATEGY? – ACCESS IT HERE NOW BY CLICKING THIS LINK—>http://www.tradingfo.com/TradingOffers/TradingfoTradingStrategies – THE ONLY REASON NOT TO USE THIS STRATEGY IS IF YOU DON’T LIKE FREE MONEY IN YOUR ACCOUNT EVERY DAY

 As always, I welcome comments, suggestions, prayers and gifts of chocolate and liquor.

“As you have freely received, freely give…” – (Matthew 10:8)

 

 

FOCUS in 2013

We often fail to get much done because we’re so mentally “scattered”, simply failing to ever focus our efforts on accomplishing ONE LITTLE THING.  We’re too easily distracted (if you don’t believe that, just yell “SQUIRREL!”, and then watch lise react).

So, in 2013, I offer the suggestion that we think about just one or two things that we’d like to accomplish for the year (like, say, getting the coffee made), formulate a plan of steps to take in order to achieve this or that thing, and then set aside time to work on the plan.  It sounds simple enough, but as soon as someone yells “SQUIRREL!”…

Here’s a fairly recent photo of my long-lost wife, Jackie, hiding behind my step-granddaughter, Eliza, despite the fact that she seems to be having a pretty darn good hair day.

This photo, of course, has nothing to do with this post.
I got distracted.

Jackie Playing with Eliza

Jackie Playing with Eliza

How Can I Advance the Kingdom of God? – Be Nice to a Dog

After the Fall, when all the other animals feared us (and occasionally ate us!), God left us one friend in the animal kingdom – dogs.  One species that still joyfully came when we called, and happily followed us around.

Have you ever noted the fact that dogs have one peculiar trait, unique to their species – they’re happier to see a person than they are to see another dog!  You know how they’ll stand still sometimes, head cocked to the side perhaps, looking up at you quizically, wondering, “Is everything okay?  Are you mad at me?  Do you still like me?” – But all you have to do is smile and say a kind word, and you can see their whole body relax as they happily wag their tail, just delighted that you like them.  (I wish some people were that emotionally moved by my greeting them nicely.)

So, whenever you have the chance, show your appreciation for God’s merciful gift to us of animal friendship, and be nice to a dog. They like us – they depend on us – They trust us, and it’s an especially horrible sin when we betray that trust by treating them cruelly.

Dogs – they’re our friends.