Trading Mindset & Risk Management – Page 3

9 Questions For Traders

About a week ago, I took a training (not related to trading) which was a tremendous learning experience. It was a deliberately small group of highly successful people so we could get more personalized training.

In the group were the following professionals;

1) Aerospace Engineer for Test Pilots/Mission Control (ya know ‘Houston, we have a problem‘…he is a part of that team)

2) High Profile Trial Lawyer – Billion dollar cases vs. multi-national corporations, music artists, murderers, you know…the easy stuff

3) Three gun national champion (pistol, shotgun and rifle) – working towards a world championship.

4) And me – y’all know my story.

All of us were there for one reason; to either go from good to great, or great to dominant. Ironically, we all had the same Achilles heel. Keep in mind we all came from different backgrounds, fields, training, etc. Yet, we all were standing in front of the same mountain.

This training sparked all kinds of things in me about trading, my students, and how to increase both trading performance and one’s learning curve.

I’m already building this material for students, but wanted to ask a series of questions which I think would be highly revealing as to where you are in your trading process, and how you could increase your learning curve in trading.

Here are the trading mindset questions below. Read them all, think about the answer, and then share your answers in a format of 1: answer, 2: answer, 3: answer…

You get zero benefit for not participating, yet there is only upside for answering these trading mindset questions, so the best R:R trade you can embark upon.

Question #1: For each trade, I either win or ______________________?

Question #2: I control _________ % of what I think about during each trade?

Question #3: I have a daily, weekly or monthly goal in terms of how much profit I make (yes/no)? Which one?

Question #4: I train to _____________________?

Question #5: How much of the time am I thinking about the outcome (profit/result – win/loss) of my trades in % terms?

Question #6: How do I label each trade, such as a win, loss and break-even trade? Use the same language that pops in your mind when experiencing a win, a loss, and a break-even trade.

Question #7: For every 10 trades I take, how many do I go back and forth on my decision?

Question #8: I have a goal in trading which is related to making x% or x$ in profit (yes/no)?

Questions #9: The most harmful thing for my trading is _____________________?

If these 9 questions for traders have provoked something on the inside, how you look at yourself and trading, then that is a really good thing. If it provoked no reaction in you at all, then either a) you’ve mastered trading, b) you have to develop your level of self-reflective awareness, or c) you are not engaging the markets enough.

But I look forward to seeing your answers as they will reveal a ton of information about your trading mindset, your psychology of money, and how you relate to your learning process in trading.

Looking forward to your responses.

Trading Like A Sniper – What It Really Means

About three days ago, I was given an interesting question by a student. They asked the following;

“Out of curiosity, how many trades do you take in a month? Is it like sniper trades, as in one trade a week or so?”

After reading the question, I realized they had a confused assumption about what it actually means to trade like a sniper. There have been all kinds of forex trading frequency articles written around this vein, such as trade like a sniper, not a machine gunner. It should be known that if there are machine gunner traders out there, they are HFT’s. And FYI – the top HFT firms are making millions, but I digress.

The Confusion
There seems to be this confusion trading like a sniper means you only trade a few times a week, perhaps even a handful a month. This is furthered by the idea of only trading on higher time frames, such as the daily and 4hr charts. But this is highly inaccurate of what it means to trade like a sniper.
Now, before we get into the subject of foreign exchange trading frequency and how it has nothing to do with time frames, I’d like to share a few interesting facts about snipers.

Fact #1:
Most snipers going through training will fire 1000’s of rounds. This is referred to as their ‘rounds down range‘ training. General estimates are about 1800-2000 rounds over a 35 day period. If you do the math, that’s about 50+ shots per day every day for 35 days straight.

Now try and bridge the gap for the daily chart trader that only does 2-3 trades per week, maybe 5-6 per month. At that pace, a daily chart trader doing 10 trades per month on average would have to trade for +180 months (or 15 years) before they accumulate the same amount of basic training a typical sniper does in 35 days.
There is a reason in sniper training you do so many shots in a day. Because shooting only 2-3 per week doesn’t build your skill set. In fact, for 99.99% of all skill based endeavors, executing something only 2-3x per week will not build your skill set. Trading is no exception.
You cannot fire three shots in a week and expect to be proficient. You cannot do three free throws and expect to be a good free throw shooter. Why would you ever expect this to be the same for trading? However, doing something over and over again dozens of times a day does build your skill set.

Keep in mind, a sniper doesn’t just do their 2000 rounds and stop shooting from there. They continually train day in-day out to sharpen their skill, shooting dozens of times per day. Thus, before a sniper will ever be given that chance to make a single shot in a real world situation, they will have taken thousands of shots prior. Food for thought.

Fact #2:
Sometimes you will have to pull the trigger quite often as a sniper. Some examples of famous snipers in history;
1) Simo Hayha – had 505 confirmed sniper kills in the Winter War, which lasted only 100 days. Do the math: 505 kills over 100 days = 5.5 kills per day. Obviously quite active on a daily basis.
2) Vasily Zaytsev – over 225 kills over a 5 week period during the Battle of Stalingrad: 225 kills / 35 days = 6.42 kills per day. Again, quite active on a daily basis.
3) Clive Hulme – Fought in the Battle of Crete (11 days), and is credited with 33 confirmed kills (of German Snipers!): 33 /11 days = 3 per day.
What does all this mean? When engaged in an active environment, they can and will pull the trigger many times.

Translating This to Trading
Anyone who is properly trained will find several high quality signals a day. Only someone who is improperly trained will be unable to trade below the 4hr or 1hr charts.
This idea of only trading on the higher time frames to be a sniper trader is a confused logic. If you have setups according to your system, you pull the trigger – period. If that happens 1x / day, or 10x / day, its irrelevant. And do you really think bank traders are being paid to sit on their hands all day to only trade 2-3x per week? Do you think prop-traders are only pulling the trigger a few times throughout the week? In what fantasy-land does that world exist?

I consider myself a ‘sniper’ in terms of trading. I observe, I stalk, I study my targets, and when the opportunity arises, I pull the trigger. On average, this happens to me 3-5x per day, sometimes over 10 trades in a really active day.
If you are actively engaging multiple markets, there is no reason why you shouldn’t be finding several high probability setups every day. Even if you just focused on forex, across the most liquid pairs daily, you could easily trade several times per day.

The ‘Noise’ Argument
One thing commonly heard from the trade like a sniper camp is anything below the 1hr chart is just ‘noise‘. I have one thing to say to this;
Put me in some strange country on a busy street where everyone is speaking a foreign language. Most of what I will hear will be ‘noise’. Now give me 6 months to learn that language, and it will no longer be ‘noise’, but a conversation full of information.
What is the difference between the noise I heard earlier, and the conversations I clearly hear later? Training. What seemed like ‘noise’ on that 30m or 5m chart will start to sound like a conversation – one you can translate.

In Closing
You will not become a ‘sniper’ if you are only pulling the trigger 2-3x per week. To become one (or a highly trained individual at anything), it takes thousands of reps. And it should be known snipers become less accurate the longer the distance.

The ‘sniper’ difference comes down to training. If you do trade on the daily/4hr TF’s only, there are ways to accelerate your learning curve. So consider alternative forex trading frequencies and methods to building your skill set.

Forex Strategies, Trading Mindset & Risk Management

Reactions to Stress in Trading

Tell me if this trading situation below has happened to you before.

You’ve just had your largest loss ever (or big one), and you are feeling incredibly risk averse, almost to the point where nothing looks good to trade. With each new setup that comes, you find yourself still recalling that big loss and hesitate, or fail to pull the trigger.

This common experience amongst traders has a biological root, and most often creates a negative psychological effect on you. These biological and psychological causes can have a tremendous impact on your trading mindset, perhaps writing the future history for your trading career. The good thing is, your brain and trading future can be changed.

Biological Reactions to Stress in Trading
Losses no doubt can have an effect on your trader psychology, but also your biology and brain. Cumulative losses can create a huge increase in cortisol in your system. Too much cortisol over a long enough period can cause neurons to fire, where you can no longer concentrate effectively to make a good trading decision.

But take a huge loss, and now your brain is likely re-wired for more losses – minimally in a poor state for trading.

What Happens When You Take A Huge Loss?
There are two regions of the brain that work together in remembering stressful events. They are the ‘hippocampus‘ and ‘amygdala‘. We’ve actually talked about the amygdala and how it impacts your trading which you can read about here.

To clarify between the two, the hippocampus will record the factual details of the big trading loss, while the amygdala will encode the emotional significance of it. Both of these are affected by stress, which releases stress hormones that can heavily affect brain performance.

Now as stress and cortisol levels rise, with continued exposure, our tendency to recall any trading events stored during this neurological state increases.

For a really good graph about performance and a stress curve, see the graph below.

Getting back to the big loss, the experience becomes quite intense emotionally, almost as if it was burned into your brain. This is because of the intensity of those hormones present during this loss. This imprinting in your mind becomes corrosive to your trading, particularly your mindset.

You start to remember negative experiences, that may or may not have anything to do with trading. Just recalling these memories will affect your performance, but there are additional consequences.

Anytime you are analyzing the price action in real time and a new setup forms, you will with greater intensity, draw upon those negative feelings and memories, one of them being the big loss itself. This only makes you increasingly risk averse and afraid to lose, almost to an irrational level. This could happen despite a high-quality signal being right in front of you. In essence, you become paralyzed by this risk aversion, unable to pull the trigger.

Another scenario could be that you are ‘shell-shocked‘ from the trading loss, yet still are able to make a trade. Unfortunately, your trading decisions are totally off kilt. You think you see setups, and start making trades, only later to realize there was no price action setup at all. While reviewing your trades, you actually see now there was no pattern at all.

This is from a biological reaction to the stress you experienced. In some traders, without the proper tools, it becomes so damaging, that it affects them for weeks, months, perhaps even years. Some traders may never even recover from this. Even though that huge loss was ions ago, you still remember it vividly and often recall it when trading. Has this ever happened to you before?

If so, do not worry, as most have had this experience.

Can You Change This?
The good thing is you can re-wire your brain, almost like re-writing your hard drive on a computer. Neural connections can be rebuilt and tuned for success. You can also build new connections which overpower this experience, to regain your confidence and make great trades.

One Way to Change Your Brain for Success
One of the best ways to re-wire your brain for success, and erase these negative trading experiences is to enter a ‘Whole-Brain State‘. This is where your brain operates in an integrated balance. Your left and right hemispheres are working well together. You are not pumping unnecessary stress hormones into your system. You avoid entering a ‘fight or flight‘ response, or being overly emotional, or too intellectual.

In essence, your brain operates in a balance which the Whole Brain State induces. When you think about it, which state would you want to be in for trading? A fight or flight state? Being too intellectual or emotional? Having massive amounts of stress hormones pumping through your brain? Or be in a balanced whole brain state?

Yoga and meditation are notorious for helping to put you into a whole brain state, while tuning your central nervous system.

Another powerful method is ERT Training, which we’ve specifically built for traders. If you’ve had similar experiences to the ones I listed above, and still keep recalling negative trading experiences even today, then you’re likely not in a whole brain state. But if you want to learn how to be in a whole brain state while trading, then you definitely have a tool to build a successful trading mindset.

Forex Strategies, Trading Mindset & Risk Management

Sports, Forex Trading & Mentorship

Those familiar with my blog will know I’m a big sports fan (you can read a recent post on sports and trading here). Now I cannot say I’m a hard core fan of one sports team, as I have a few and enjoy some. But more importantly, I’m a fan of sports, particularly professionals. These are the top in their profession, and every time I see them, I learn something.
They have trained for thousands of hours. They work on every aspect of their game. The best work tirelessly to take things to the next level, and yet consistently practice the basics.

I appreciate the wisdom they show to us, their athleticism, and their mindset of success.
Now along those lines, what do Tiger Woods, Peyton Manning, and Georges St. Pierre have in common besides what I listed above?
They all work with coaches and mentors. Tiger has one coach he works with, Peyton has several, and Georges can have up to 20! Yep, the best in their field who are paid millions yearly to do what they do, work with coaches.
No champion or elite athlete reaches their top performance levels without coaching and mentoring.
NOTE: For a couple of good books on elite performers, training and mentorship, check out these books by Coyle and Colvin.
Now the next natural question to be asked is, ‘why do you think trading is any different?‘
It’s not, and there is a reason for this. Woods has spent his entire life perfecting his golf skills, yet works with a coach daily. Peyton is setting records this year at age 37, yet trains with several coaches. Georges is a record setting UFC champion with 4 different black belts. He too has coaches.

Hopefully this is clarifying why you should be working with a mentor as well.
I recently heard the most ridiculous argument that everything you need to learn about forex trading you could on the net. How ridiculous! If that were the case, why would banks spend hundreds of thousands each year training their traders? Why would Top hedge fund traders working with $250m (million) books+ have coaches and mentors they work with? It should be painfully obvious why.
I myself work with several people. There are two I work with specifically on my trading mindset and am about to add a third. I have a programmer with a graduate degree in financial modeling I consult with for risk models and money management strategies. I pay these people a lot of money, but there is a specific reason I work with them. Simply put – they enhance my performance, help me see things I am missing, and provide support along the way.
How to Find A Trading Mentor
If I had to break it down simply how to find a trading mentor, I would suggest looking at a few things;
1) Does their teaching style make sense to you and what they are saying clarify things?
2) Can they simplify things without making them to basic or freshman?
3) Do they respond quickly to all your questions and seem supportive?
4) Do they offer insights beyond trade setups, such as building a successful mindset, and obtaining the proper skill set?
If they offer the four above, and you have a good feeling about them, then that is someone to work with. Now whether you choose me or not, is less important to me personally. What is more important is finding the right person for you.
Regardless of who that inidividual is, find someone to coach, mentor and train you as it will definitely accelerate your learning curve, and increase your chance for success. There is a difference between being interested and being passionate about trading. Look behind all elite performers across all fields, and you will almost always find a mentor.
One more thing I’d like to mention before going that Tiger, Peyton and Georges all have in common. They all train incessantly and are constantly working on their game.

Forex Strategies, Trading Mindset & Risk Management

Set and Forget Trading – How to Really Maximize It

Let’s face it – not everyone has the ability to sit down for hours a day building their trading skills. Many of you have full time jobs, families, etc., yet still want to participate in the market.

If this is you, I generally recommend using forex set and forget trading strategies to trade the market. This is done by using rule based systems for to find your entries, exits, stops, & take profit levels. The ‘rules’ save you time as you just have to spot the conditions for a legitimate setup, then put in your order.

The problem is, the more popularized version of this ‘set it and forget it‘ investing style is to set your trades and then ‘walk away’. Perhaps you go read a book, golfing, or hang out on the beach. This is a completely ridiculous idea which actually harms your learning curve.

In this article, I’m going to share the major flaw in set it and forget it forex investing, then explain how you can accelerate your learning curve.

Walking Away – The Major Flaw

Let’s say you only have 2 hours per day to analyze & trade the market. According to the more popularized version of ‘walking away’, you spend say 30 mins to find your setups, put your trades in, then do something else.

Why does this harm your learning curve? Because you already have two hours set aside for trading. If you walk away after 30 minutes, you are missing out on 1.5 hours of screen time and an opportunity to build your skills.

I know what you are thinking – if you have no more trade setups, why sit at the charts?

Wow – great idea. So if I’m not actually in a golf tournament – I shouldn’t practice my golf swing? If I’m not playing a live baseball game, I shouldn’t go to the batting cage, or work on drills, or throws? Ridiculous – and I hope you can see this as well.

What You Can Do Differently

Perhaps your strategy trading pin bars with trend. You have no more setups for the day as you’ve put in your one trade. Does that mean you cannot increase your screen time or learning process? No, have two hours, so USE IT. How so?

Get Trade Interceptor or Forex Tester 2 where you can go back historically to any point in time & trade price action doing live forward simulation testing. Trading pin bars with trend, open up a daily chart several years back on your favorite or weakest pair. In testing mode, it will move the actual bars at a speed workable for you & of your choice.

Anytime you have a pin bar setup that meets your qualifications – trade it the way you normally would your real system. This will give you both increased reps and screen time – both of which will enhance your learning curve. In an hour of live forward simulation trading, you could actually trade 30-50+ pin bars.

What will this do? It will;

a) Enhance your pattern recognition skills
b) Build neural networks in your brain to recognize high probability setups using your strategy
c) Give you more practice and execution using your method, which will
d) When it comes to live trading, increase the chance you just pull the trigger with less emotions or analysis paralysis

By Comparison

What does the person who ‘walks away’ from their computer, gain during their remaining time? Nothing! They build no screen time, have weaker neural circuits for making trading decisions or pulling the trigger, let alone pattern recognition skills.

Yet the trader who practices that extra 1.5 hours doing live forward simulation trading will improve at a much faster rate.

A Top Professional

Just recently, I got a perfect reinforcement of this from a top professional. Peyton Manning is one of the best quarterbacks in this generation – perhaps top 10 of all time. He’s 37 and is still playing at a top level.

Yesterday he was in a high intensity back and forth game that went down to the last two minutes to decide the winner. He’d score – then the other team would score, quarter after quarter, both taking the lead at some point. He just scored the 4th touchdown of the day to take an 11 point lead. What was he doing right after this? Take a look at the photo below.

Is he ‘walking away‘ watching the time go by till his next drive? Nope. What is he doing?

Looking at the plays they just made on the winning drive. He’s looking at the formation of the opposing defense, analyzing what he could exploit, what mistakes they are making, etc. This is maximizing your time.

He’s one of the best ever, yet he’s not ‘walking away‘ from the game. He’s engaging in it every moment he can, looking for patterns, reviewing plays, looking to spot what he missed earlier.

This is what you should be doing if you are trading set and forget strategies – using every moment you have. Each practice trade you do on Forex Tester 2 is like an extra lap on the track. Who do you think gets faster and more conditioned? The person who does 2-3 laps per week, or the runner who does 30+ a day? Rhetorical question – but had to ask.

So don’t be a ‘lazy trader’ and just ‘walk away’ as you’re just losing valuable screen time to do more laps. Utilize your time to the max. Trading, is just like any skill as you need practice, lots of screen time, & a successful mindset.

By doing using your time doing live simulation testing and reviewing trades, you are accelerating your learning curve, creating stronger neural networks for trading, and building screen time which is critical to trading success.

Forex Strategies, Trading Mindset & Risk Management

Reviewing Trades – Two Crucial Tips

Being a huge football fan, on Sunday my monitors are littered with NFL action. Since I don’t have a TV, I watch all the games online. Before or in between games, I’m glued to the NFL network which is both highly educational + entertaining.

Yesterday I heard a great example of a player who went to a team building exercise on a non-practice day. They went bowling. With 4 on each bowling team, plenty of down time before tosses. What was this defensive lineman doing in between tosses? On their iPad reviewing plays. That is someone who recognizes the value of reviewing their work.
In the NFL & Trading
Reviewing your work is critical because it helps you to see where you are trading well, what you need to improve on, and how to direct your energies going forward. All great professionals review their work, both in the NFL, and especially in trading.

Those traders who do not review their work (+ prepare mentally each day) are what I term ‘Trader Philanthropists‘. I call them that, because they are donating the money to the market. Traders who make money come prepared, are passionate, work hard and are well trained. You have to do the same.
Below I will share 2 crucial tips for reviewing your trades.
Review Tip #1 Catalog Each Trade via Screenshot or Video Recording
For the traders in my private members forum, I teach them to minimally take a screenshot of each trade showing the actual entry and exit points on the chart.
Why?
Trading is a highly visual process, and having the actual charts of the trade we took gives us a lot of data to work with. Seeing those trades with the green arrows (winning trades) time and time again builds confidence while increasing pattern recognition. Below is a typical screenshot saved for a trading journal.

Yes we get experience from making actual trades, but reviewing them is like doing an additional trade. This is because the mind doesn’t differentiate much (from a learning perspective) between real trading, and reviewing your trades. Every time you review a trade, its like doing another lap around the track. Each lap builds those trading muscles in your trading brain.

My two suggestions for doing this are via screecast (screenshots) and camtasia (video recordings).

*NOTE: Here’s a cool trick in MT4 for getting screenshots of your trades; 1) go into your trade history, and find the actual trade, then 2) drag the trade onto the pair and chart. You’ll then see two arrows with a line showing your entry and exit, SL & TP (example below).

Review Tip #2 Journal Each Trade At a Set Time
I know journaling trades may not seem like fun. That is because you haven’t tasted the value in it yet. 13 years ago I started practicing yoga. Within the first year, I was practicing it daily, along with meditation. Why?
Because I had a taste of the benefits. I felt stronger, more flexible, relaxed, creative, energized, and healthy. When things got challenging and I wanted to slow down, I just remembered the benefits outweighed my temporary discomfort.
Journaling & reviewing trades is the same.
I recommend journaling at the same time each day. By building habits and these mind programs around trading, you build the neural networks to become disciplined.
Being disciplined builds confidence and communicates something important to your self-image.

It builds confidence because when you stick with it during tough times, you get through them faster in the future knowing you’ll keep moving forward.
It communicates something important to your self-image by strengthening the feeling that ‘I will do what it takes to be successful at trading‘. That belief becomes empowering to your successful trading mindset.
I fill in my journal at the New York Close being a natural impasse in my trading day. For you, try to find a low activity moment, or at the end of your trading day. Try not to do it when you are exhausted, or you’ll likely imprint the idea of ‘exhaustion‘ with ‘journaling‘.
Just like my dentist suggested brushing my teeth while doing something fun – by association, you are more likely to do it.
In Summary
If making more money trading, increasing your consistency, and getting better at something that can last you your life is not inspiration to review your trades, then I’m not sure what will be.
We all know plenty of people who played an instrument for a while, but eventually gave up even though they showed promise. Don’t be that person. Be the one who plays guitar at gatherings and wow’s an audience.
Life wants us to be skillful, to be good at things, to be professionals at life. Be that football player who in between turns at bowling, is reviewing their work to see how they can improve. The learning process of a trader never ends, and requires some ‘sweat capital‘. The rewards are far worth the effort, especially in trading.
Now it should be noted these tips are ‘mechanical’ in terms of process, meaning they are sharing with you the ‘what to do’. In the following article, I will share with you the ‘how to’ in filling out your journal to enhance your trading mindset.
*Please make sure to share your comments, whether you agree or disagree. And if you do disagree, please make sure to share why as I value different points of view on this.

Forex Strategies, Trading Mindset & Risk Management

The Difference In Trading Between Passion & Being ‘Interested’

Many people come to the forex market with ideas of trading successfully, visions of traveling to postcard beaches, and having all the free time they want. But many do not make it and usually give up before getting to their pot of gold.
Week in-week out I hear from developing traders who say something like, “I really want to be a successful trader, but I’m not finding consistency in my trading. I’ve taken so many courses, read many books, traded so many hours, but I don’t know what I’m doing wrong.”
Anytime I hear this, I ask the following questions;
1) Do you have a trading plan?
2) Are you filling out your journal every day?
3) Do you have set trading times?
4) Do you have a pre-game mental routine where you prepare for your trading day?
5) Using proper Risk Management?
6) Are you filling out your performance journal regularly?
In about 8, maybe 9 out of 10 cases, I usually get the following response, “No, I haven’t been doing any of that.”
For the record, your’s truly has started several things that never culminated in any sort of success, growth or happiness. A great example would be going to the gym regularly 🙂
I definitely understand this experience many of you are going through.

Recently I read a blog article by James Clear where he talks about focus when you feel bored. He had asked a coach who trained thousands of Olympic athletes about what they do differently.
The coach responded, “it comes down to who can handle the boredom of training every day and doing the same lifts over and over and over again.”
James goes on to share his take on this:
I think many people get depressed when they lose focus or motivation because they think that successful people have some unstoppable passion and willpower that they seem to be missing. But that’s exactly the opposite of what this coach was saying.
Instead, he was saying that really successful people feel the same boredom and the same lack of motivation that everyone else feels. They don’t have some magic pill that makes them feel ready and inspired every day. But the difference is that the people who stick with their goals don’t let their emotions determine their actions.
First off, James makes a crucial point here how successful people stick with their goals, regardless of the emotions they experience. They do not let their emotions dictate their work, practice, and training.
One of my students shared a great video of Floyd Mayweather Jr., and you can see the resilience in his mindset. He is a winner and sees his training, practice and work to the end.
Imagine if regardless of the successes or failures in trading, of feeling confident or doubting yourself – that you still did the work, and filled out your journal day in day out. That you still kept your risk management tight, went to bed early so you could wake up on time. That you still prepared mentally and did all the steps regardless of the losses from yesterday?
What would this do to your trading mindset?

Imagine how your performance and mindset would change around trading. You would no longer be dependent upon the next win or loss to determine your level of confidence, skill, or how you felt about yourself. This would take you off the roller-coaster rides emotions carry you on.
In all aspects, you’d likely be a different trader, and have a different experience of trading. Food 4 thought.
One thing I do feel James misses, is his assessment on passion and motivation. Yes, successful people in all fields experience some sort of boredom at one point, and they keep working regardless of this boredom.
However, the reason why they stick with their training, work and discipline, comes from their passion and motivation for the process. The coach was saying they have an unstoppable passion – it’s unstoppable because in the face of boredom and the difficult emotions, they use this passion for the process to keep moving forward, to not skip the little details in trading. This is how they don’t let their emotions determine their actions, which is the link I think he misses.

Regardless, some insightful thoughts by James.
But this is the difference between being ‘passionate’ about trading, and being ‘interested’. This is what Kevin Spacey was talking about On Being Successful. Pay attention to where he talks about desire.
People who are passionate about trading will not skip the little details, will make the adjustments over time, will move towards being uncomfortable. They will not be deterred by their emotions, nor let these emotions define them, or their experience. At the end of their trading week, they will be reviewing the tape.
However, people who are ‘interested’, will work hard when it’s easy, but will skip the little things when it gets hard. They will pass over filling out the journal, will not maintain proper risk management, and will let their emotions define their experience. And they will rationalize not doing these things.
The key to being passionate is falling in love with the process, with the challenges you face, is moving towards the areas in trading which make you feel uncomfortable. One could venture to say it’s getting excited about those challenges, realizing what lies beyond that obstacle to your growth.

Going back to our student in the beginning, they weren’t doing any of those things. Turns out they were exhausted from their business, and were trading at random times throughout their day. I asked them how could someone be a good basketball player if they never do the drills, practice free throws, passing, shooting, blocking, etc. He knew the answer, and the same goes for trading.
After making the adjustments with his business and schedule, he was able to finish the month green – his first in many.
There is one crucial point about doing all this extra work and what it does for you mentally, however, I will share this in another article.
But find out where you are on on this scale between being ‘interested’ and being ‘passionate’. This will likely tell you why you are performing the way you are, and how much you are progressing.

Forex Strategies, Trading Mindset & Risk Management

Why We Are Afraid to Lose & How to Transform This Fear

Have you ever failed to the pull the trigger, even though your ideal setup was right in front of you? What about feeling paralyzed to hit the buy/sell button after a big loss? Have you noticed how your mind tends to race right before you fire off a trade as you think about your last loss?

All of these debilitating experiences tend to follow our fears, particularly being afraid to lose. Ironically, our ‘being afraid to lose’ often times goes beyond the potential loss of money. In most cases it has to do with something beyond the pure dollars at risk. In many cases, it becomes one of the primary hurdles a trader faces and never overcomes.

This article will first go into the underlying reasons why we are afraid to lose. Then I will share a method how to transform this fear to enhance your trading performance.

Behind The Curtain
In reality, there are several ‘reasons’ why we experience being afraid to lose when we are trading. A few examples are;

a) Perhaps we have an unconscious fear of making a mistake and what that might bring (i.e. a parental punishment)
b) We fear the potential loss in money and our ability to make it back
c) Making another mistake will only confirm our suspicion that we cannot trade

I could probably spend an entire day listing dozens of reasons why we experience this fear. But behind the curtain of it all I find are two variables which remain constant;

1) The anticipation of what has yet to come
&
2) An unconscious or limiting belief that perceives the potential outcome as a threat, dangerous or painful

The first one is something the Buddha once said, that ‘Fear is the anticipation of what has yet to come‘. Imagine if we approached our next trade and had no anticipation of what was to come next. We just trusted our system and pulled the trigger, then let the system play itself out.

More than likely you’d experience a lot less emotions and the debilitating physical responses that tend to affect our thinking. Although many people get this idea ‘intellectually’, it is easier said than done. Often it takes years of practice, training and experience to have happen moreso than not.

As to the second one regarding ‘unconscious or limiting beliefs’, most of the time, we are not just trading the price action setups in front of us – we are also trading our thoughts and beliefs about money, our ability to make money, what our perception is of our P&L, our current trading skill, and more. In most trading situations, we are not just trading setups at key levels – we are trading our unconscious limiting beliefs + our motivations for why we are trading.

How To Transform These Fears
There are three things you can do help reduce and transform these fears. They are;

1) Expand Self-Awareness

2) Awareness Practices In The Moment

3) ERT to Remove Unconscious or Limiting Beliefs

Expanding Self-Awareness
The first step to expanding your self-awareness is to recognize how our thinking, emotions and perceptions in the moment affect our interpretations of things, particularly related to trading. When you do this, you begin to realize how these ‘perceptions’ of your trading will color your experiences and memories around trading. This can have an empowering or debilitating effect on your trading performance.

A trading journal also helps us to see how our trading behaviors often repeat, and thus help us to become aware of the mistakes we make frequently. This is to help keep us honest and in check about how we are really doing from day to day.

Awareness Practices in the Moment
One awareness practice that helps us in the moment is a silent meditation practice. I am not talking about a guided visualization, but a mindfulness practice designed to help us become aware of our mind, thoughts and mental activity in the moment. By sitting every day before you start trading, you can calm your mind and see how the traffic of thoughts can affect your trading.

If you think your mind is busy while you are just sitting trying to focus on your breath while little to nothing is going on – imagine what its like during trading?

Meditation and mindfulness practices shed a light on how our mind works and is working in the moment. By having a contextual experience of calm, clarity and focus, you can recognize when you are not calm, clear and focused.

Also, meditation and mindfulness practices help tremendously in expanding your self-awareness, so taking out two stones with one.

ERT to Remove Unconscious / Limiting Beliefs
Sometimes we have unconscious or limiting beliefs which interfere tremendously with our trading. If you find yourself repeating the same mistake without knowing why, in 99% of the cases, it has to do with an unconscious or limiting belief.

Our mind stores memories like a bunch of pictures stuffed in a shoebox, so your memories around money when you were a kid could be right next to your memories around trading. Activating memories of one can excite the other, and thus affect your trading performance in real time.

These often take the longest to uncover, transform and remove, and could take years of both meditation and awareness practices. One short cut to this process is ERT Training which helps you to discover and transform them quickly. We actually have an ERT Training program specifically built for trading. Many traders have already gone through the program and noticed tremendous changes in their trading.

One final note about doing the three above is they inevitably lead to greater market awareness and more profitable trading. This comes from seeing more of what’s going on in the markets finding clues others would not since you are less inhibited by your fears. Intuition, confidence and your learning curve all tend to increase heavily when you build self-awareness, expand your awareness in the moment and remove your limiting beliefs.

Forex Strategies, Trading Mindset & Risk Management

Money Management, Performance & A Secret

Did you know you could have a 50% accuracy ratio for your trading, always have a 2R profit target, and still lose money? Its true, (although its a low probability), but remains true nonetheless. How? Because of two key factors: % account risked and your risk of ruin ratio. At a bare minimum, you have to understand 4 things about your trading to know mathematically if you will make money.

What are those 4 things? That is what this forex money management plan article is going to cover in detail. I will begin by discussing what these 4 things are, and how not knowing them will hurt your account. Then I will describe the risk of ruin formula and why its essential for your trading performance. I will end by sharing a forex money management secret that will impact how you think about money management and risk.

The 4 Things You Need To Know
Any article discussing forex money management plans and performance without discussing risk of ruin is incomplete at best and detrimental to your account at worst

Why?

Because at a bare minimum, you need to know 4 things about your trading to know if you will make money or not. They are the following;

1) Risk to Reward Ratio
2) Accuracy
3) % Risked Per Trade
4) Your Risk of Ruin

Simply put, you could be trading a 1:2 reward to risk ratio, and still lose money. You could know #1 along with your accuracy, and still lose money. You could know your % risked per trade and still lose money. But if you know those three + #4, you can mathematically know whether you will make or lose money.

How?

The Risk of Ruin Formula

What is the Risk of Ruin formula, how does it apply to my trading performance?
The risk of ruin formula is designed to communicate statistically if you will make or lose money trading. You can mathematically know for a fact if you will make, or lose money by knowing your risk of ruin. But you cannot calculate the risk of ruin formula without three key pieces of data. They are:

1) Risk to Reward Ratio
2) Accuracy
3) % Risked Per Trade

Combined together, these above will give you your risk of ruin (ROR). The ROR is a number representing the % chance you will ‘ruin’ your account, e.g. blow it up. Not a pleasant thought, but a highly useful piece of data and essential for your success.

What you want is a 0% ROR (risk of ruin) or a 0% chance of blowing up your account. The inverse of this is you mathematically will make money.

Now remember the first thing I said about how a trader with 50% accuracy always having a 2R reward could still lose money? Let me share why via two risk or ruin tables below.

Trader A Risking 10% of Account Equity ROR Table

Win Ratio %	Payoff Ratio 2:1 (2R Profit)
Win Ratio 40%	14.2
Win Ratio 45%	3.41
Win Ratio 50%	.813
Win Ratio 55%	.187
Win Ratio 60%	.0401
Win Ratio 65%	0

Looking at the chart above, by risking 10% of your account equity per trade, having a win ratio of 50% and a payoff ratio of 2:1 (2R per trade), you have a .813% chance of ruining your entire account. Although this is a low probability, it is still a possibility. You actually have to be 65% accurate to mathematically ‘know’ you will make money.

Now lets take the same win and payoff ratios (50% / 2R), reduce the risk per trade to 5% of your total equity, and see how the numbers change.

Trader B Risking 5% of Account Equity ROR Table

Win Ratio %	Payoff Ratio 2:1 (2R Profit)
Win Ratio 40%	2.03
Win Ratio 45%	.116
Win Ratio 50%	0
Win Ratio 55%	0
Win Ratio 60%	0
Win Ratio 65%	0

In this second table, only those with a 40-45% accuracy have a mathematical chance of losing money. But those at 50% accuracy have a zero % chance of losing money, thus mathematically will make money. What is the key difference? The % risked per trade. This is why it is absolutely critical to your money management strategy to use a % equity risk model, not a meaningless ‘dollar risked per trade’.

Also notice how risking 5% per trade instead of 10% drastically changed the accuracy levels needed to make money? Trader A needed a 65% accuracy level to be certain they could make money, while Trader B only needed a 50% accuracy level – a 10% difference!

It should also communicate an essential point;
Any forex money management strategy article or website talking about trading without mentioning the above, is giving you totally incomplete information about money management which could kill your account. In essence, you could be trading blind to the numbers which hugely determine your success or failure in trading.

A critical piece of information? Absolutely. Something you’d want to know? I’d certainly hope so.

One Last Point (A Secret About Money Management)
There is one thing almost never talked about when discussing trading money management strategies. It is a huge point why working with a % equity model is far superior to ‘dollar risked per trade’. And it has to do with your mind.

If you are setting the risk per trade based on a ‘dollar value’, that dollar value actually means more to your mind (and thus emotions) than an ‘neutral’ % of your account. Why? Because you spend money in terms of dollars (or euros, or whatever your local currency is), not %’s of your account.

So if you are making a trade, and thinking ‘Oh, I’m going to risk $5,000 on this trade‘, that very thought of ‘$5,000’ can (and most likely will) conjure up a host thoughts about rent, bills, car payments, or a wave of other things.

These thoughts are far more likely to engage any fears you have about the ‘dollars you are risking per trade‘ than a neutral 1 or 2% which has ‘no reference‘ to how much you spend, may need, or what it could buy. In essence, there is no ‘trigger‘ in your mind about % risked per trade, but there certainly is about the ‘dollars risked per trade.’

By shifting your trading money management strategy and trading mindset towards a % equity model, your mind will be more focused on the actual trade. This is opposed to dealing with the thoughts ‘Oh, that $5,000 is a lot of money to me. I’m about to risk $5,000 which could pay for my rent, my mortgage, or my debts‘.

This mind trick actually helps to reduce the emotional triggers when trading, thus leaving your cognitive mind less burdened with thoughts of the money, and more focused on the trade. This is a huge reason why a % equity model is far superior from a trading mindset perspective than a ‘dollar risked per trade’ model. Food for thought, but I hope this clarifies the huge advantages and information available when thinking about forex money management in terms of a % equity of your account.

Forex Strategies, Trading Mindset & Risk Management

Success in Forex Trading: What It Requires

I recently had a great opportunity to see a host of famous actors speak along with meeting several of them. They shared a lot of stories about their experiences throughout their career, including several of the roles they are famous for. One story in particular made me think of trading.

What most of us see when we witness actors is the success, fame and money they have made over the years. But many actually have a story to tell that is unique to them. This story, if you listen carefully, often highlights a wisdom which can be useful for our lives (even trading).
Although I cannot say he is my most followed actor, after hearing some of his personal stories, I was impressed and appreciate his ‘wisdom qualities‘.

William Shatner is most famous for his role as Captain Kirk in the popular Star Trek franchise. If you were to interview 10,000 people and say his name, probably the first words from 95+% of them would be ‘Captain Kirk‘ or ‘Star Trek’.
What most do not realize is he originally trained as a classical Shakespearean actor with his first minor roles in the early 50’s. Slowly working his way up to small TV/Broadway/film roles, it wasn’t until 1966 that his most famous role as Captain Kirk.
The original show ran from 66′-69′, but was then canceled after receiving moderate reviews. The year it ended was also the same year he went through a divorce. This is where it starts to get really interesting.
After being typecast as ‘Kirk’, he had a hard time finding roles. Never mind the fact he went through a divorce (difficult in itself), he had three kids to feed and lost his home. He lived out of a truck bed camper for a quite a while, where he had days without food in the fridge. He took whatever small roles he could to support his kids.
During the 1970’s, he got small roles which eventually led back him landing a film role in the first Star Trek film again as Captain Kirk. Six more Star Trek films, along with two TV series roles led to a new level of fame that would last him a lifetime.
To Recap
He worked for 15+ years before landing the Kirk role, to which he played for 3 years and then lost his job. He lived in a camper with no food for days on end, and did whatever it took to make it work. He never stopped working towards his goal, no matter how hard it got, even after two+ decades with no/little money for his hard work. Yet after 27+ years of this, he finally landed an opportunity which lasted him a lifetime.
He has demonstrated the mindset of success, a determination and willingness to keep going after his goal after incredible hardships and failures. Ironically, these are the same things required to be successful in forex trading.
One last note I’d like to share about Mr. Shatner before discussing another subject.
Through some really savvy business deals, he has become a deca-millionaire several times over. He is now 82 years of age, yet still works incredibly hard – traveling to conferences, TV projects, one man shows, competing in horseback riding and more – all at 82!
He doesn’t need the money at this point (hasn’t for decades) – yet works tenaciously hard. Why? Because he is passionate about what he does. He likes to create, produce and continually challenge himself.
Underneath the unique history of his failures, work ethic, and successful mindset is another critical point. That is – most people think of success as a straight line, but in actuality it is nothing from it. It is beset with years of hard work, preparation, and overcoming challenges. It is wrought with failures, mistakes, and low points.

Most people go through these things, whether its acting, sports, or trading. The difference between successful and unsuccessful people is how they respond to those moments, particularly when things go wrong or become difficult. Successful mindsets keep moving forward and find solutions.
They are willing to work hard whether their fridge is empty or full – have a home or not. They are passionate about what they do, and meet each failure with more effort than before. What is required to be a success in forex trading is the same.
Your path as a trader and equity curve will in all probability not move in an upward 45 degree line. It will require you to work when you do not want to, and make decisions that feel incredibly uncomfortable (almost irrational). They will not be your preferences, nor will they be easy.
You will need to prepare day after day, and the work never ends. It will require you to maintain a high level of energy, and will demand you to get up from each failure. Your emotions will fight you at almost every step in the way – yet you need to be calm and clear.
This is what is required to be consistent and successful at forex trading. Whether you meet this challenge will be entirely up to you, your mindset and choices from this moment forward.

But I’d like to end with a hats off to Mr. Shatner for sharing some of his wisdom qualities and stories. He has earned his success, traversing difficulties where most would fold, while never stopping to move forward.

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