Forex Trading – Are you really focusing on the right things?


Here’s what I realized during my last hike over the mountains, that mountaineers and forex traders has a lot in common.

First mountaineers need tools to make the trip easier. You have a lot of things to carry and all of it must fit in your backpack. Only necessities are needed. Forex traders are the same thing. They need tools to get better trades.

But things gets a little nasty when mountaineers and traders fall into the trap of having too much of the needed things. Mountaineers who bring with them more than anything necessary will suffer the burden of carrying that to the top of the mountain. Just like forex traders suffer from analysis paralysis when there’s too much clutter and information.

In short, too much of something is bad for both.

I have seen mountaineers pack so much stuff in their bags to the point that they can not carry anymore. Stuff that they don’t need. It does defeat the purpose of the trip. They avail the services of “porters”. Which defeats the purpose of the activity. To survive using the bare essentials. They try to use money for their lack of physical fitness. For forex traders, this is sometimes the same. Newbie forex traders will gladly spend money on seminars that won’t help them be able to stand on their own. To survive. Just like a newbie mountaineer’s mistake. Paying money for the lack of experience. As if you could instantly learn how to trade.

Well, maybe you’re not focusing on the right things. Though paying someone to carry your stuff works. Is it the right thing to do? I mean, you went mountaineering probably to become fit right? Why not harden your body so you could enjoy the trip. Are you going to pay for someone to carry your stuff all the time? You don’t need someone to carry your stuff, you just need a fitter body or lesser stuff to bring.

Same goes for forex trading, are you really focusing on the right things? Even if your mentor taught you how to trade. I wonder how far could you go with that system. I doubt it, its not very far. Why? Because you paid someone to tell you how to trade. Its not something that would stick to you like a true experience of losing and winning on your own trades. Just like a body of a mountaineer won’t get tougher by choosing the easy way of paying someone to carry your stuff. And, do you really need 10 indicators on your chart? Tell me how that’s working for you.

A lot of good things in life, like mastery of skills or improvement of body and health, comes from the fact that you went into a lot of hardship to learn. This is not something you should ran away or “trick” yourself into. Thinking that someone, something or any outside force can teach you how to trade. It will not. “I can’t not trade, I need a mentor.” Well, maybe not. Maybe what you need is a little more experience…

Things I Learned from Contrarians

It is in our human nature to follow the herd. Because our brain is engrained to be a follower, we always seek groups and crowds to help us in our survival. That is the reason why a trend keeps on trending and why new comers in any walks of life seek groups to help them. It is true in forex trading, we want to follow gurus, trends, priests, leaders and crowd to decide our trade and sometimes our fate. But humans have evolved far better than that. Our brains are larger now and are capable of thinking for ourselves. There are no more sabertooth tigers to eat us if we are left alone. On the contrary, being left alone could mean the birth of creativity and innovation.

Contrarians think for themselves. Not in a selfish way. But more of a philosophical way. They view the world in their own eyes without being affected by other’s opinions. No matter who is the opinion giver. In trading, a contrarian trader will decide where is the reversal point. He will bet against the prevailing trend and eventhough he gets hit a lot of times, he will enter the same position again and again until he is proven right.

In that regard, contrarians have the courage to follow their heart. Not only did they have their own world view, but they have the courage to follow that world view. You will get hit. A lot of times. Accumulate losses, get criticized, go bankrupt, humiliated, but until that world view becomes false in your eyes, you know you have to keep on fighting. It is liberating to fight for what you believe in. And I think forex allows contrarian to express themselves and profit immensely at the same time.

Contrarians are expressive. Forex trading, stock trading and making money for contrarians is not about money. Its about sending a message. Kind of like the Joker in Dark Knight. Most of the contrarians I know doesn’t really care much about money, its about sending a message either thru donating to charity, changing the world, innovating technology or blowing the whistle. And I aspire to be like them. Its freeing to the mind and soul to not be attached to money. To smile at its lost and its gain.

Why Do You Trade Forex?

A friend of mine asked me this question. Why do you trade forex? Why not get “a real job”? Its too risky in forex and you’re playing with it like a gamble. You should be finding a job that gives you a stable income. Not wasting your money and always checking your phone for quotes. You will settle down sooner or later, why not just save the money for your future family?

In life, there are people who will try to impose their beliefs into you. Religion, politics, society and opinions. What they think is good, what they think is right. These people may also be your friend, family or acquaintance. Some are hard to convince. Some have hidden agenda. Some are manipulative. And some are just plain concerned for you. But even though these people would try to convince you, you should always have a reason for doing something that you really believe in to the point that it looks weird, stupid or obsessive for the people looking outside. You can never go wrong if you follow what you truly believe in.

Before I even started my own business. I was just your normal employee. It was a graveyard shift 11PM to 8AM. Then on 9AM I will go to university. My class ends at 9PM. Then 11PM I will work again. There’s only 2 hours for me to have sleep. So I usually sleep during work or during class. I will say that this experience developed my determination and hardwork and I did this for 3 years.

Graduation comes, I got recruited to a more well known company. Offered a better salary now and I work mornings. During the first 5 months I was happy. I thought I’ve made it. I have a stable and good paying job working in a good company.

Every morning, after the bus stops near our company building, I always take the long walk route. I savor each moment going to the office. Because I always dreamed of this moment when I was still working on my previous job. I don’t have to beat myself to earn money.

I got to meet great people at work. People that I would say, at the top of their chosen field. People that really have the skills. And I also met people who only used their mouths to get where they are.

This is the reason why I quit my job. I’m a person who seem to have too much “hero” character inside me. “Truth and Justice”, being fair to everyone. When one person gets promoted from running his mouth, instead of the geeky nerd who does all the work. I get irritated. I have little to no tolerance with office politics. Its not fair. I am not the geeky nerd that got robbed of the position. Though I would say that I am a nerd. So I quit my job and started my own business.

Long story short, having a business is fun. After 4 years of growing my business I started to wonder. There is something that I don’t particularly like about having a business. Customer support, accounting, book keeping, inventory management, and managing employees. Is there such a business that has no customer to support? No more accounting? No more employees? Yes. Welcome to forex.

Forex trading opened my eyes. I used to wonder, if there are rich people and poor people, there should be a superhighway in which money flows from one person to another. And when that money get’s into the rich people’s hands, where do they go? You can’t just put it in a bank. Or if its a bank, where do they put the money? Well, this is it. It is the largest market in the world. It is basically, where all the money go. Floating around. Money flowing like a river. All you have to do is stretch out your hand into this stream of flowing money and grab how much you need. But there’s a catch, there’s only a few people with enough skills that can “fish” in this river. That skill is called forex trading. You must learn how to trade forex before you can make money.

But now, the reasons for trading forex only piles up. The more I trade, the more I realize its beauty.

The Beauty of Forex Trading

I trade forex because:

  • I love to travel
  • I can pursue my other passions in life
  • I am my own boss
  • I can work / trade anytime I want
  • Anywhere I want – I traded on top of a mountain
  • Intellectually challenging
  • Instills discipline and patience
  • Less capital needed compared to real estate
  • Easy to get leverage
  • Less pain in the ass. No lawyers, contractors, or government officials to talk to

How about you? Why do you trade forex?

Forex Trading is Just a Tool

Being successful in any endeavor means being able to focus your energy on one activity. Being good at it and enjoying the process. Many people would want to have all the best things in the world for free. They want to live the good life without giving anything or sacrificing anything. They want the instant gratification instead of the pleasure of enjoying the journey. We see all of these things when you look harder. Within ourselves especially.

How many times have I caught myself trying to do all the things I want at once. Doing this and that and part time this and that. What you get is mediocre result. I want to be successful at forex trading. Before, I thought, I can do this part time. You see experts trading easily, earning money as if they are hardly putting any effort at all. But the truth is, those experts and experienced traders, especially those who have survived for 5 or more years, put in the effort to master their craft as if they were easy.

You can not simply earn full time living thru part time effort.

Long story short, experienced traders put in a lot of hard work and time to get where they are now. Don’t be tempted to think that you could be as successful as them doing this part time. If you think about it, if they are doing this full time… How can you beat them doing it part time? You can not simply earn full time living thru part time effort.

But all this hardwork is only a tool. Being good at forex trading only opens new doors for you to enjoy life. If you ever dreamed of traveling the world, forex trading is the best tool to achieve your dream. Pursue a childhood dream. I have seen a lot of people do this already. And for me, I’m trying to do that as well. Its the journey and the thought of “its really possible” that is thrilling. Its more like of a feeling of being alive.

Forex Trading and Gambling Similarities – Words from William Eckhardt

A basic theme that runs through Eckhardt’s comments is that what feels good is uaually the wrong thing to do. As one example, decision theorists have demonstrate that people consistently prefer to lock in a sure win rather than accept a gamble with a higher expected pay off. They also prefer to gamble with a loss, even when the bet has a worse expected outcome than a sure loss alternative. These instinctive preferences runs counter to perhaps the most fundamental principle of successful trading. Cut your losses short and let your profits run. Just because this aphorism has becom a cliche makes it no less valid.

Another example of counterproductive instincts is what Eckhardt terms “the call of the countertrend.” Selling on strength and buying on weakness appeals to people’s desire to buy cheap and sell dear. While such trades may feel better at the moment of implementation, following a counter trend strategy is almost inevitably doomed to failure.

Trader’s excessive concern regarding their current positions involves yet another example of the detrimental impact of gravitating toward comfortable actions. Taking profits before intended objectives are reached so that the market won’t take away the gains, holding positions beyond intended loss liquidation points in the hopes that the market is only witnessing a retracement, and liquidating positions before stop loss points are reached because of the fear of losing are all examples of actions intended to make current positions feel better. However, all of these actions are likely to negatively impact long-term performance.

People’s natural inclinations also lead them astray in systems trading. The more closely a system is fit to past price behavior, the more impressive the historical simulations will appear and the better the trader will feel about using the system. Yet, ironically, beyond a very limited point, the more effort expended to make a system fit past price behavior more closely, the worse actual future performance is likely to be. The desire to design a system that looks great also leads people to accept favorable simulated results without sufficient scrutiny. Very often, great results are simply the consequence of error or naive methodology. Eckhardt’s advice is that system designers should believe their results only after they have done everything to prove them wrong.

Eckhardt proposes that the tendency to do what is comfortable will actually lead most people to experience even worse than random results in the markets. In effect, he is saying that most people don’t lose simply because they lack the skill to do better than random but also because natural human traits entice them into behavioral patterns that will actually lead to worse than random results – a particularly compelling observation. If Eckhardt is right and I believe he is the critical implication is that our natural instincts will mislead us in trading. Therefore, the first step in succeeding as a trader is reprogramming behavior to do what is correct than what it feels comfortable.

Forex Trading Principle Proving to be Effective

Last weekend, I started learning a forex trading principle. It means, that its not a forex trading strategy and in the realm of how you would react in a certain situation. Its not a rule or guide. More like of a mindset.

As you see, I’ve been a contrarian trader. I love going against the trend and picking tops and bottoms. And that is what I have been up to. Being fed by gurus to never hunt tops and bottoms, I rebel and hunt tops and bottoms.

I stand at the top of the candle stick while I sit back and watch the bulls and the bears kill themselves.

Who says you can’t hunt tops and bottoms? This is GBPJPY. The forex market is a lone wolf’s business where going against the crowd is rewarded by fortune.

Weakness in my Trading and Patience Development

Monday have been a great trading day. Just after the market opens I already profited a lot. But all of this went out come Tuesday as I added more positions. The weakness in my trading is when there is a pull back or false breakouts. I added more positions and when pullbacks and false breakout occurs, stop loss gets hit and my profit down to the negative red.

The reason I am writing this is to document in this journal that I have messed up. And realized that there is one weakness in my trading style. That is, when pullbacks and false breakouts are coming, I don’t have any way of knowing or reducing the risk. This is the 2nd time that happened to me. Right after the EURCHF breakout, I made quite a little bit of loss after the breakout because of position sizing when the short pullback occurred.

Maybe the reason I messed up is because I am too greedy. I always think that “it might go on some more so I will add more positions”. But the pig gets slaughtered. I must be wary that things will need to rebound for a while. The solution would be knowing when.

How Would I Know This

The only thing that comes to mind is patience. Patience to wait for a confirmation bar that the trend have ended or a reversal is coming and accepting it. Party’s over, you need to get out. Easier said than done. Because patience is not a system but a character trait of the trader, a virtue if you will. Practicing patience would more of a challenge than testing any trading system. Add more positions only after the bar for that day has ended. And it has indicated of a clear signal that a reversal is not yet coming.

Patience is

Patience is the state of endurance under difficult circumstances, which can mean persevering in the face of delay or provocation without acting on annoyance/anger in a negative way; or exhibiting forbearance when under strain, especially when faced with longer-term difficulties. Patience is the level of endurance one’s character can take before negativity. It is also used to refer to the character trait of being steadfast. Antonyms include hastiness and impetuousness.

In evolutionary psychology and in cognitive neuroscience, patience is studied as a decision-making problem, involving the choice of either a small reward in the short term, or a more valuable reward in the long term. When given a choice, all animals, humans included, are inclined to favour short term rewards over long term rewards. This is despite the often greater benefits associated with long term rewards.

Patience to wait for the right time to re-enter the trade. Wait for each bar to finish when trying to re-enter.

Patience is a protection for your assets:

“Patience serves as a protection against wrongs as clothes do against cold. For if you put on more clothes as the cold increases, it will have no power to hurt you. So in like manner you must grow in patience when you meet with great wrongs, and they will be powerless to vex your mind.”
Leonardo Da Vinci

Practice and improve patience:

“Patience can’t be acquired overnight. It is just like building up a muscle. Every day you need to work on it.”
Eknath Easwaran

If you think there is no clear signal, walk away. WALK AWAY! WALK THE FUCKING AWAY! If you trade with a chance of 50% and it goes well. In the long run, you are building the wrong kind of habit. And that would kill you later on. What you want to do is develop the trait of patience. Walking away and not looking back if the chances are 50%, 60% or even 70%. You want to be sure to profit. Protect your assets and money. Trade only when you are 100% sure that you will win. A sure bet that you can risk all your assets on a single roll of the dice. Waiting for the perfect moment to strike. That’s how wars are won. That how you will win in trading.

“He that can have patience, can have what he will.”
Benjamin Franklin

Build the habit of patience. Improve your patience. Practice patience.

“Have patience with all things, but chiefly have patience with yourself. Do not lose courage in considering you own imperfections but instantly set about remedying them – every day begin the task anew.”
St. Francis de Sales