I admit that I have been guilty of the title Forex Trading Gambler. During my first few years and quite some of the time, I trade forex because of the adrenaline rush and the thought of easy money. I get excited on every high risk trade that turns out to be a winner. It was my high. I was addicted to the feeling. Like a gambler who doesn’t care about the risk, odds or the probabilities of winning or losing. He just wants to experience that same high that got him hooked.

As if I were a junkie.

Then comes the realization, I continue to lose and I kept increasing my trading size. Only to burn even faster. With that good feeling that you miss, you just want to trade more and more, larger and larger, only to experience the bottom faster. Trading this way will not work.

It is not about the feeling in trading. How much money you made or how much you lost should not be the basis of trading. The more I trade, the more I realize that. Money doesn’t matter in trading. For me, being right matters most.

Its all about the odds and probabilities. Its all about timed aggression and patience. A little bit of luck may help. But don’t depend entirely on luck. Because even though luck is involved, there is a reason why the final table have so many familiar faces.

It is a different kind of feeling that the thrill of winning big. Being right is better than breaking the bank. This is not a sprint, its a marathon. Trading larger size may give you great gains, but also great drawdown, and greater risk to go bankrupt. What we want is to make the right decisions each and every time.

The more I read about the stories of successful traders, the more I realize that trading is much like poker. Some people treat it as gambling, some treat it like a sport, a mental sport like chess. Some play poker just to have fun, feel the rush, some play poker as a profession, as a business. We should approach forex trading the same way. Its all about the odds and probabilities. Its all about timed aggression and patience. A little bit of luck may help. But don’t depend entirely on luck. Because even though luck is involved, there is a reason why the final table have so many familiar faces.

Happy trading!

USD/JPY right after the Dollar Sell off, I placed a buy trade. Contradicting the market sentiment and news. And it paid off greatly with minimal risk.

There are a lot of forex traders out there and hundreds more forex trading system to choose from. But why I settled with contrarian trading is more of its match to my personality than any amount of percentages any system can deliver.

I would not promote my system to be the best trading system nor all other analysis are crap. I won’t even go far to say that one system fits all. The points of having the best forex trading system lies within the individual. Its like finding your soulmate, it must be a match.

A match to your personality. And that’s the beauty of trading, its both an art and a science. Its a science because you can explain all the data with numbers and predict some events that may occur based on that data, but its art to express your views of the world based on your strategy. Its a wonderful feeling. So finding the right strategy, system or method based on your world views and personality is the best forex trading system that you can use.

Stop searching for the holy grail. Stop going from one forex trading system to another. Know thyself and pick the right system for you. Make it your own then customize it to better fit you.

I am a contrarian trader. And has always been a contrarian all my life. I am the problem employee and the jerk in the group. My strong point is, I know what am. So I know what fits me. I don’t go pretend I’m a sheep just to be accepted. And forex trading is the best vehicle to express that view and be rewarded. When the whole world frown upon who thinks differently and does not conform. In the market, you get to be rich for thinking differently while staying anonymous in the process. Got to love that!

A lot of people will enter the market with the wrong misconception about the forex. Diving in, nose first without the proper mindset on what they are getting into. I hope this list will clear your mind and hopefully give you a healthy dose of forex trading success.

Forex trading is never easy… What is easy anyway? Picking your nose perhaps?

1. Forex trading is easy. Many people that want to dive into the world of the foreign exchange market believe that the Forex trading is easy — you just read a book or two and then you will be able to earn daily profits with just 2-3 hours trading daily. Others think that they can buy a profitable strategy and it will make them rich in Forex. In reality that’s just a myth. Succeeding in Forex isn’t easier than mastering any other profession — it takes time, money and a lot of practice.
2. “I will make money in Forex, if I can trade stocks successfully.” Success in stock market doesn’t imply that you will get success in Forex market — there are many differences between trading stocks and the spot currencies. First of all, Forex market requires a lot of hard work and dedication as this market is open for 24 hours a day. You cannot just sit in front of your computer for the whole day and night, so the best way is that you should find the most suitable time periods for trading. Second, “buy&hold„ strategy simply won’t work in Forex market. Third, you don’t have that much information about currencies as you can get from the companies’ reports and statistics.
3. “I can make profit whenever I want if Forex market is open 24 hours a day.”Once again, you won’t be sitting in front of your PC for the whole day to be able to trade 24 hours. You’ll have to develop automated trading software to get the advantage of 24 hours a day working schedule.
4. “I can be a successful Forex trader just following someone else’s signals.” Many beginning traders get burned by the blind signal-following. That’s like putting away the whole responsibility for your actions to someone else. That may sound cool, but in reality you end up with the huge losses. Learn to rely on your own knowledge and skills. Remember that there were no great signal-followers in any financial market.
5. No commission is to be paid in Forex market. You only have to pay the spread, but you don’t have to pay the commission. And what’s spread? It is the difference between the buy and sell price of the currency pair at the same moment. You may end up with the major part of your profits in the broker’s hands if you plan to rely on the short-term trading.
6. Forex is a scam. Some skeptics and disappointed traders think that Forex is just some new fad to scam people for their hard earned money. Although there are many scams that are hiding behind the “brand” of Forex, that doesn’t mean that the Forex itself is a scam. There are many institutional Forex brokers, regulated Forex account managers and other solid companies in the market to whom you can trust.
7. “I need to exactly predict the market outcome to be profitable in Forex.” There is no scientific method to know something in advance in the market with a 100% certainty. There would be no Forex market if you could know the exact currency rates beforehand. Trading is not the game of certainties; it’s a game of odds. One of the first things that new traders learn is to think in the terms of probabilities and risk-to-reward ratios.
8. “I need to use a very complex strategy to be successful in Forex.” It’s a popular myth, in which many on-line sellers would want you to believe. The main requirement to be successful in Forex is a self-discipline and money management. There are many traders that make consistent profits with rather simple and old strategies.
9. “I need to have a lot of starting capital to get profit in Forex.” Big capital investment won’t help you in Forex. You don’t need a lot of money to diversify in currencies and you can’t move the currency rates with your trading orders (you’d need billions of dollars to do that). Actually you can trade with a very a little capital, because Forex trading is almost always leveraged with the broker’s money.
10. Forex is gambling because it’s completely random. Although there is no certainty in Forex (as in any financial market) it doesn’t mean that it’s completely random. And it’s certainly not a gambling, since your success in this market depends mostly on your skills and experience, not on your luck.

Job Security is an Illusion.

Many people want to be a forex trader. And I know a lot of people in my social circle who wants to be a trader. I even teach them how. Recommend them books, websites and strategy. But there seems to be people who is just damn scared to let go of their day job. Afraid to take the plunge. Afraid to be laughed at. Afraid to make something happen in their life.

They are just too contented by the way things are. Perhaps, too fucking contented… Safe, secure… “But I really want to be a millionaire trading forex”. Do you see what’s wrong there? There’s a lot of contradiction in that statement. Being a millionaire is NOT synonymous to being safe in a day job. Being a millionaire is synonymous to risking, having the balls to follow what you want in life and most importantly, its ignoring what other people may say to you. Be it “bat shit crazy for quitting a high paying job.”

Have The Balls to Follow Your Dreams

The hard working people that goes to the office everyday to work 9 hours a day. Be stuck at traffic, be soaking wet during the rainy seasons, are probably the most common. Talk to them and ask them if they want to have a business. 100% of the time they will answer something like this “I really want to have a business, but I don’t have any funds right now.” or “I want to have a business but I don’t know how or have no time”. Or whatever other reason they have. Its all wishy washy. I’ll do this after I do that then I pray to the flying spaghetti monster in the sky to let me win the lottery. Before they know it, they are 40 years old. Now, they have a different problem and a little different reason. “I’ll want to have a business but I’m not sure if I’m still young enough to learn all that.”

Hesitate and you will age. Run and you will die.

Ohh… How time flies…

Lose Your Ego

There’s nothing I enjoy more in watching other traders is their ability to talk about how confident they are in a market (stocks, bonds, commodities, forex). yet they can’t seem to accept the fact that they are wrong. And sometimes, which is more dangerous, they think they can predict where the market will go.

Forming a forum so you can exchange ideas (or persuade other traders) that your analysis is correct so you have a better confidence in your analysis. I don’t think that will do any good. Knowing first hand where your trade will go, before it even go there makes your mind closed. You are not open to the possibilities that your trade may reverse. Or it may give you a profit then reverse. The decision is based on ego that you are correct. And it will be harder for you to take a loss. And thus, you are fucked up inside. You can’t trade.

Think For Yourself

Does it matter if your friend is also LONG position on the same currency pair you are in? Does it matter if your technical trading mentor is SHORT on the EURUSD? Would you try to rationalize the idea that your LONG position on the EURUSD is wrong so you can join your mentor on the SHORT side?

This is the reason why I don’t like groups in trading. I think trading is like a boxing match. And I like it that way. You don’t need the spectator’s shout of advice. You are the one that’s getting hurt. Shouldn’t you worry about your own ass?

Have the Discipline

Of all things, discipline is probably the most important. It takes the most time to develop. And takes the most effort to practice. When lose control of yourself, you don’t even know. You sometimes don’t know that you are being greedy. Or being afraid. Self discipline makes you aware of those feeling and act accordingly. And most importantly, its the best skill to have if you want to learn a new skill. It is the trait of all successful trader out there.

Discipline is what makes the rich not use their money for parties or fancy cars. Not spend on hookers or drugs. Instead, use the money back into investing. That’s discipline. Focused on a goal. Whatever your goal is.

The more I lose in forex trading, the more I learn. I learn more things from losing than from winning. And as time goes by, I learn to adjust my thinking and strategy and learn to have a fixed set of ideas about the market that I use to trade with. These set of ideas are based on rules to help you become more successful in trading. These rules have changed the way I trade for the better and I hope it change yours too.

#1 – Never Lose Money

Rule # 1 is the most basic. Never lose money. The more you trade, the more you lose. That is why, you need rule number 1 to be picky on trades that will only result in winning. Keep in mind this rule every time. Before entering, while in the trade and before exiting the trade. Never lose money. You’ll last longer and learn faster.

#2 – Think For Yourself

Learn a forex strategy then stick with it. You enter and exit by those rules defined only by you. What your peers or your guru tells you is irrelevant. If he tells you to enter the trade, you are not trading, but he is. You are now dependent on him when to exit. Will you ever know when that is? Will you ever sleep at night?

#3 – Use A Non-Negotiable Stop

Stop loss should be non negotiable. You do not use a stop then try to adjust it because it will be hit by the price then hoping that the price comes back. Stick to the plan. Have a defined amount of risk, accept that risk and don’t whine if it got hit. Man up, take the loss, move on to the next trade.

#4 – Let Your Profits Run

I used to have a take profit when trading. But I soon realized that it doesn’t make sense. Why would I settle with a fixed profit if the market is willing to give me more? Throwing your greed aside, putting your stop loss on break even, then letting the trade run is a 0% risk with greater profit potential. Its definitely better than a measly profit for small risk.

#5 – Define Your Risk and Forget About The Target

In any trading and investing books that I read, these lines always comes up “Cut your losses short and let your profits run”. Its a combination of #3 and #4. In my own words, this also means, never add to losing positions or adjusting your stop loss because you are “afraid” to take a hit and then defining your profit target instead of “risking” for a chance to earn more.

#6 – Take Note of Your Mistakes

Reflect on each losing trade. What made you lose it? Did you follow your plan? Is it you who messed up the trade because of greed and fear? Or is it some underlying factor that you might have missed like news? Whatever that is, always reflect if you are following your system and what is wrong or missing with your system so you can adjust and adapt to the ever changing market.

#7 – Victory Loves Preparation

Waiting for the perfect time to enter is what makes forex trading exciting. Its damn hard to sit still while you wait for the perfect time to make that order. And then wait some more for the trade to unfold itself. Trading is waiting game. Its a damn exciting game I must say and usually, the person who waits and “prepare” himself for the high probability trade would be the winner. Not being swayed by the crowd is the hallmark of a great trader.

I got burned a few times because I got in so early. And got frustrated when I got left out by the trend. Patience is a virtue they say, but in forex trading, patience is money.

Forex trading is a damn risky business. Many people have went from millionaires to homeless in less than days trading the markets. And this week, aside from upping my equity to another 13.06%, I learned that it pays to be calm and collected when your trades goes against you. It is a must that you believe that you can not control the market. And you do not own the market. The market does not need anything from you, that is why, you don’t need to expect anything from the it. It is you, who needs money from the market. A place of unlimited wealth. So do not get angry if your trades goes against you. Always remember that you are in this, to get money. Why would you be angry if you lose money?

Many systems and techniques are there for the taking, but I will be bold enough to say that all of these systems DOES NOT WORK 100%. They can not predict market movements, they can not predict when the trend will start, stop or reverse. It has been a perversion of many people to control things and the market is one of those things that they can not control. You may hear alot of conspiracy theories, from your friend stock trader’s stories of why the stock will go up or news flash from your commodity trader friend, but all these are just odds and percentages that your decision might be right or wrong. But still you can not predict it.

Thinking that you can predict the market is all BULL CRAP! Here’s why.

What makes the price go up or go down? If many people buy, certainly, the price will go up. If many people sell / short, the price will go down. Let’s say you are a technical analysts who spends a lof of time drawing trendlines, graphs, fibonacci retracements and then finally you decided you wanted to buy and calls it a day, after drawing the hell out of the graph and make it look like a renaissance painting. Then you woke up the next morning seeing you are down 10%. Why?? Why is it wrong? You continue to ask yourself. “I spent the whole fucking day analyzing this god damn chart!”.

My friend, never fear, all those technical traders forgot to tell is that, not all elements in price action are included in the chart. Elements that can affect the price movement greatly, but are not included in the charts. And I’m here to tell you just that. Why? Because we’re friends.

Price, reacts to supply and demand and is reflected on the price chart. May it be candle stick or bar chart. “Yeah, so what? We already know that!” Well, do you also know when the other investors, traders that are on the sideline, will join the trade? How many of them will go against you? How many traders will get out? Most importantly, how many institutional traders will join in and trade with or against your position.

You can not see all of these in a chart. And you can not control it. So why bother?

Before you start trading forex for full time, make sure that you have everything covered. Though, not all people are risk takers and will quit their day job on a whim (like me), you must be prepared on to a new journey of your life. You will look back and if you become successful at this, you’ll realize that its the best decision you’ve made in your life. There’s no better feeling than being your own boss and eating your own kill.

#1  – Money To Keep You Afloat

Save at least 8 months worth of your expenses. Compute all of your expenses per month and then set aside money to pay that expenses for 8 months. This should keep you out of worrying where to get the money to pay for your rent, electricity, water etc. should you take consistent lose on your trading.

#2 – Trading Capital

This is probably will come from a personal preference. But for starters, I’ll try to give a more concrete estimate on how much should your trading capital be. Forget about the trading system for now. Let’s say that your trading system (thru backtesting) produces consistent profits at the rate of 10% per month. And your monthly expenses is let’s say, P20,000 per month. How much funds do you need to produce P20,000 for 10%?

x = TARGET INCOME / % RETURN
x = 20,000 / 0.1
x = 200,000

The answer is P200,000. If you need P20,000 to live with 10% increase per month. You need P200,000 of initial funds. Whatever your target income per month, just use the formula above.

#3 – Money Management System

You also need, and probably the most important thing, to have a money management system. This is not merely how much money should you risk per trade. This is also, how much money should you risk again should you know you are right. And how much money should you take out if you’re right and how much money should you cut off if you’re wrong. There’s a lot of things going on in a money management system, please do a careful research first before trying to broke yourself in trading. Victory loves preparation.

There’s a lot of books in money management. But there’s only one that comes to mind.

Trade Your Way to Financial Freedom

#4 – Trading System

A trading system is a system that will tell you when you will enter and exit the trade. In searching for a system, give more emphasis to the exit strategy than the entry strategy. Why? Because it can either be the profit taking or the cutting of losses in which either case can affect your account and your mental state. Don’t get too hang up on trading strategy, just a simple trading strategy will do. The most important part in your trading is money management and trading psychology.

There’s a lot of books that teaches trading systems. But I guess its up to you on what you will choose. I’ll just refer you to a book about different successful traders of our time so you will know what trading strategies they are using and decide for yourself:

Market Wizards: Interviews with Top Traders

#5 – Trading Psychology

Emotions are the main enemy in trading. That’s why you should learn to control them. Read books about trading psychology to be aware if you’re acting on emotions or rational decisions. There are times when you will suffer consistent winners and consistent losing streaks. Having the mental toughness to overcome that will make you a great trader so never try to skip step and proceed trading without practice. If there is one book I would recommend for this topic, its:

Trading in the Zone