Two Types of Trading Losers

There are a whole host of characters who regularly lose money in the market place, and most fall into two catogories:

1) False Ego Traders

2) Nervous Traders

The false ego mistakes come from a mixture of false pride and bravado and are the most dangerous mistakes to make. The trader, generally a beginner or intermediate -- call him Tader A -- gets an opinion in his head about market direction. His analysis may have even been sound, but his opinion keeps him from reading/seeing the signs that a change is occuring in the market he has targeted. He subconsciously see the changes, but false pride is the devil, and blocks the information from making it into his conscious decision making process. The change he needs to see may even be pointed out to him by a fellow trader --Trader B-- but Trader A's false ego blocks this because he knows "I'm smarter than Trader B...In fact I think its a good idea to fade Trader B".

Trader A is also likely someone who is accustomed to being listened to. He may have been upper management in a company, or even owned the company. "People better listen to me" is how he sees it. He is likely more accustomed to talking rather then listening.

Despite trader A's previous success' Mother Market will bring him down quickly. Any early success he has in the market will only make for bigger losses down the road as he gets caught in the spiral of trying to make up for lost money and still make money. He doesn't just want to get his money back, he wants that and then some. His time is valuable. He is going to make the market pay.

Well we all know how that works out, which is to say we won't be seeing Trader A around for long.

Then there is Trader C, who is a nervous trader. Trader C is nervous because he had a bad day trading early on, and could not stop thinking that if he lost that same amount of money every day, he would be penniless in 54 trading days. Trader C worked hard his whole life, and despite having never got the big promotion or raise Trader C managed to save some money. Trader C is not used to people listening to him. But he is good at seeing things develop around him which makes him sensitive to change. This is a good thing for Trader C, who is more an analyst than a trader. But Trader C can never seem to catch the big one because every time he sees a trade up decent money, he remembers that loser in the begining, and he grabs the money rather then let the profit run. He also sets his stops too tight, and has a hard time following the rules when a trade goes against him. Trader C needs a shot of Trader A's bravado. There are a lot of Trader C's in the market place.

Often times Trader A types who survive will morph into Trader C types. Trader C though is in his rut becasue he can't seem to make more than he risks.

The way to avoid being someone who ends up paying the advertising costs for the big Forex firms like Trader's A & C is to understand how dangerous and competitve trading is to begin with. And prepare for it from that mind-set. Be "reality orientated".

Two things I hear a lot in this busienss:

#1) I wish I would have started out demo trading.

#2) I wish I would have stayed in my demo account longer.

I've been around the trading game since 1980 and I can tell you that most of you will see something in yourself in Trader A & Trader C.

Beleve me, we all have more in common than we are different.

And when you shine a light on something that had been in the shadows, the shadows disappear.


Jay Norris - Trading-U.com

PSYCHOLOGY 101

A good trader does not predict what will happen. however he sees the possibilities that can play out. This way he remains with no bias about whether to short or long and simply follows the price action. if you are thinking of going long ask yourself why, do your indicators tell you so?...is there some pattern you see?...are bulls picking up momentum?...is some critical resistance being broken?


The key to succesful forex trading is to remember it is just a game that involves real money. This keeps emotions in check and equity afloat and multiplying.

Money Management & Trading Habits

Maximum 2% risk per pair. What that means is when you calculate your stop losses your stop loss amount has to be within 2% of your account .If the trade goes against you, the maximum you will loose is 2% of your account. This way it also prevents you from getting panic attacks when the trade retrace against you resulting you close the trade pre maturely. If your desired stop losses do not come within 2% of your account don’t take that trade. As I always say, you may miss one trade but there are millions more to come.

You always have to calculate your risk every time before you enter your trades.
Your risk to profit ratio has to be minimum 1:1. That means if you are taking a 2% risk on a trade make sure your profit target would be at least 2%.
Always have realistic targets. My aim is 300 % capital growth per year. The lesser your target is lesser the risk of losing your own money. Even if you have 50% capital growth per year you are doing better than 90% of the worlds biggest hedge funds.
More trades you take the more you expose your account for losses. No trader in this world can profit from every single market move.

Patience plays a big part in trading. Take the trades only if you are at least 90% sure of profiting from it. If you are not sure stay away from the trade. Staying on the sideline is as good as winning.

Never trade against the trend. Specially with a high volatile pair like GBP/JPY. It may give you couple of winning trades. But it’s going to get you in the long run.
Always have a trading strategy ... make a habit to stick to it doesn’t matter how desperate you are. Always trust your strategy but not bloomberg or some statement from citibank. Don’t go with your gut feeling because 95% of the time your gut feeling is wrong.

Your charts are your forex guru. Everything what you need to know about forex is on your charts. You will learn something new everyday from you charts.

Specialize in one or two pairs. Every single pair has it’s own characteristics. No two pairs are the same. Don’t trade all the pairs your broker can offer. If you specialize in one or two pairs very soon you will be able to read the pair like a road map .

Stay away from the ranging markets. There will be enough of trend break outs on this pair than you ever want. Why take any extra risks trying to chase 20 pips on a ranging markets when you can grab 200 pips on a break out.
As Monarc mentioned traders are a greedy bunch. Less greedy once are the most successful once.

Don’t try to chase every single pip or market movement. Have a realistic weekly or monthly target as a percentage of your account . Not the number of pips. If you have already achieved that target stay away from the market. As I mentioned before.. the more you trade there is more risk of losing your money.

The losses are part of the game. Do not try to cover all your previous losses from your next trade. First your trading plan has to include at least 50% of losing trades. Then you can cut down on the number of losing trades while you gain experience and confidence.

When you start you must demo trade at least for the first 3 months to build a trading strategy. Then for the next 3 months trade on a demo account or a micro account and test your strategy coupled with a good money management strategy. When you are fully confident then trade with your real account.

Use minimum account leverage. Don’t abuse it. My recommendation for new traders is maximum one mini lot for every $2500 or one full lot for every $25000.
At last ... remember there is no easy way to become a good consistently profitable trader. No one can become a profitable trader overnight. As everything else in life it takes time, patience lots of sacrifices and learning. Don’t be afraid of mistakes.
It took me 8 months to make my first consistent $100 per week. Since then making money is like a walk in the park. - Forex Trader Auslanco