Stop, Reflect, Reset ………Focus on your Goals for the upcoming week!

Forex Trading Psychology

Trading Long Term – What’s really involved?

I was just discussing a few trading outcomes with a client and it dawned on me that the person has no clear plan beyond tomorrow.

Sure they have a trading plan but what I mean is they have no plan for the week ahead, no plan for potential opportunities, no plan for the future except to trade and make money.

That’s not going to work long term!

It was such an enlightening conversation I thought I should share it with all of you as I’m sure many ‘new traders’ are in the same boat.

I know everyone wants to make money trading but it doesn’t always happen.

The reasons behind why they fail are many: traders have no idea what they are doing, they don’t understand the market, they don’t know how to manage their cash, they solely rely on indicators for their trading decisions, or a combination of all of these.

To be a long term successful trader you need a lot more than just a plan to ‘trade and make money’.

It’s the minute detail that makes the cash, not the big details, because you never miss them.

So let me start from the beginning and explain the minute detail that will set you aside from the wannabee’s and I think this will turn a lot of people’s trading around.

Trading is all about Management

Management of risk, management of the market, management of your capital and most of all management of your own expectations.

All of these are important components but the last point I would say is the most important for your overall longevity and success as a trader.

You have to manage your expectations each day, each week, each month….. it’s imperative.

Unfortunately because most traders have no ‘long term’ experience in trading to fall back on they generally have ‘NO’ expectations except for “I want to make money”. And that just ain’t going to cut it.

Now I’ve been an FX trader for 28 years…. that’s right 28 years. Almost 20 of those were on the front line of some of the biggest most aggressive FX trading teams in the world.

It was dog eat dog and if I failed there was 100 other guys ready to jump in my seat. Managing expectations in a banking environment is difficult to say the least and that’s why most guys burn out after 10 years.

 

To last almost 20 years is ridiculous. When I look back on it I can’t believe I survived so long. It was relentless and in the end it wears you down until you’ve had enough.

In fact the last 5-6 years the parties take over and you don’t even know who you are or where you are… it seems amazing…but really it’s not. (Well maybe a little amazing!)

But you know what my whole career feels like a week and I’m excited everyday at the possibilities of the market.

Anyway I’m getting sidetracked, I’ll save those stories for another day.

Let’s get back to managing your expectations as you’re not going to have to deal with the pressures I did in the banks but all the same your pressures will feel much the same to you.

First of all don’t isolate yourself!

Trading can be quite a solitude pursuit. You’re sitting at home or work with generally no one to talk to and trying to work out what currency pair to trade and whether to buy or sell?

It can be daunting to say the least especially when ‘loved ones’ are really depending on you for an income.

To be honest that’s why we set up Traders4Traders, to provide the connection to a trading community so you do have ‘like-mined’ people to discuss opportunities with and that should alleviate the ‘isolation factor’ as I call it.

So get involved in the “Live Trade Zone”. You’ll find what you put in, is what you get out!

So HOW do I manage my expectations?

Every trader has to manage their expectations regardless of their level of experience.

If you don’t you’re left with no goals, no focus….and trading will become a drag! Does that sound familiar to anyone?

So let me give you some of my first hand experience as to how I manage my expectations.

It’s a process that I go through each week almost subconsciously now because I’ve been trading so long.

Each week you need to: STOP, REFLECT, RESET …… and FOCUS on the GOALS ahead.

What’s your Goal each week… do you even have one?

It should be… Where is that next best trade going to come from?

FOCUS: Where is the next 3% return going to come from?

FACT: 1 good trade per week should see your capital increase by around 300% per year. Crazy right… so there’s no need to chase 20 trades each week.

But we need more detail to find that Next Best Trade …. the devil is in the detail!

Don’t worry about the cash…. if you find the right trades the cash will follow.

So the secret is to find the good trades and at the same time what you are doing is ‘setting the expectations’ for yourself straight away.

Back to the process ….Set your Expectations for the week ahead, every week!

You can do this by simply asking yourself a series of questions and this really needs to become a habit.

Q1. Do we have any good technical set ups? Yes OR No

This too is massively important. Trading is easiest when we have clear trendlines to utilise.

This also comes back to the ‘trading process and making it a habit’.

 

You should check your charts everyday at least once because that’s where the best trading opportunities start to develop.

If the answer is YES – perfect we’ve got the starting point for a good trade.

If the answer is NO – stop and wait there’s nothing to do right now. Maybe check the economic data calendar to see what’s coming up.

Q2. Do we have clear USD sentiment? Yes OR No

This is massively important. Trading is easiest when we have clear trends and the biggest currency pair on the block that is the global benchmark is the USD.

If the answer is YES – you should be excited because that generally means it’s going to be an awesome trading week. In fact when we do have it I’m always pissed off when the weekend comes because we lose that edge.

So already your expectations are increased and that’s a good thing. All the major currency pairs will be active and it’s game on.

 

If we also have good technical levels on the majors then we really are in for something big…. because that’s the perfect ingredients for a great trade!

If the answer is NO – well that’s unfortunate but it happens a lot. It doesn’t mean there’s no trading ahead but we’ll have to look further into the market.

There maybe some short term trades around the economic data releases but since there’s no strong momentum you don’t expect to make a cart load out of these trades, more to simply keep adding cash to your account.

You should already be getting a little relaxed about the weeks potential though and that will take away a bit of the pressure to make money out of nothing.

Q3. Do we have clear sentiment on the other currencies: the EUR, GBP, CHF, JPY, AUD, NZD or CAD? Yes OR No

If the answer is YES – well we may have some good isolated trades. Start to focus in on that pair and potential economic data release for the week around that pair.

If we get the economic data releases running with the ‘sentiment’ and through trendlines then we’ve got a great trade on the cards!

Also check out the crosses related to that currency as they too may provide a great trading opportunity.

 

More often then not a great week can come out of no where because you know where to look and when to trade!

If the answer is NO – well once again your expectations for a big week are reduce.

There maybe some short term trades around the economic data releases but since there’s no strong momentum you don’t expect to make a cart load out of these trades, more to simply keep adding cash to your account.

Keep checking your charts but with the expectation that you’re not trading. Remember there’s no good trades so there’s no pressure to trade.

Q4. Do we have any major Economic data releases or central bank announcements this week? Yes or No

These events are potential major momentum ‘boosters’ for the market and it’s absolutely imperative you know when they are coming out.

If the answer is YES – OK let’s isolate the data and the time and date for the release. What currency pairs is it going to impact?

Adjust your expectations. It’s going to be busy and aggressive. Don’t chase all of them. Isolate the pairs that you understand and that work for you.

 

 

If it’s a major central bank decision than prepare….. it will be quiet leading into it and then we usually get an explosion afterwards if there is a change.

If there is no chnage then calm down, relax and focus again on the technicals.

If the answer is NO – OK no worries this could be good. We’re in for a great “technical trading week”. It will be a slower move perhaps but that’s also more relaxing.

Adjust your expectations accordingly as we may only have 1 or 2 trades this week.

Q5. Does the USD sentiment work with or against the other currencies? With OR Against

This is extremely important to identify because this is where the best long term trades come from. We haven’t had many long term trends for quite awhile but you need to continually analyse the markets with this in mind.

If the answer is WITH – OK it’s massively game on because we could potentially see a 300+ move for the week.

This is where the currencies RUN and we want to make sure we are on those.

 

 

If the answer is AGAINST – damn shame! That means we’re in for choppy trading.

Drop your expectations as it;s going to be a tricky week. You should be thinking if i can stay out of trouble and add ‘anything’ to the account this week well then that’s a great result.

Q6. Do we have Technical levels, Clear USD sentiment that is working WITH the other currencies and ‘driving’ Economic data? Yes OR NO

If the answer is YES – OMG this week can’t last long enough. If we could ‘bottle it I would’. This could potentially be our best trading week of the year.

So if the economic data lines up and/or the central banks line up correctly and we have clear trendlines in play then we should see a solid medium term move and that means 500-700 points in one direction.

Your expectation levels at this point should be peaking! That will make you focus and pay attention. You’ll be jumping out of bed each day ready to trade!

 

This is where all your hard work managing your capital comes into play.

Trading is going to be extremely easy. We will have clear direction, clear entries and a ‘driver’ to keep the currencies going.

As I mentioned Oh My Goodness. Please, Please, please happen every week!

But sadly it doesn’t. But if you don’t plan each week or take time to look at the detail behind the market you’d never know it was about to happen.

If the answer is NO – then you’ve really go a slow week ahead.

It’s time to relax and plan to do something else with your time because spending time in front of the computer is only going to cause problems….. you know what I mean, trading because you are board or worse still trading because you have the wrong expectation for the week.

These Questions Intertwine

If this weekly process is confusing then slow down and let it sink in.

Print out this article and post it on your wall.

Now start to put it back together in your own writing so you understand it.

What you’ll find is you will start to manage yourself and your expectations better.

The pressures of trading generally come from yourself, not from the market.

If you manage the expectations around the day, the week and the month then generally your expectations for the year take care of themselves.

You’ll find you’ll reach your goals much quicker and almost without effort.

Prepare yourself Mentally

You need to get hyper when it’s on … almost frothing at the mouth ready for the best trades!

And then at the other end of the spectrum you need to ‘cool your jets’ when there’s no potential in the market.

Also make sure if your partner or family are interested manage their expectations as well.

If we have great opportunities then tell them. “This could be a cracker of a week”… they wont bug you at all because they know you’re hard at it.

And at the same time if it’s a week with very little on offer…. “There’s not much on this week, can I help around the house or with anything else”?

Believe me this is important in creating harmony around your trading and overall relaxing you to concentrate on finding the Next Best Trade.

I hope this helps you develop the plan and the process.

It sure as hell allows me to trade and it gets me jumping out of bed everyday with clear intentions.

I’d love to get your feedback if this was helpful or not…. so feel free to comment at the bottom.

Brad

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  1. Great article Brad, makes sense and is right on the money , well written and easy to understand , as a new trader I definitely relate to everything in this article ,thanks.
    Reagrds
    Jeff