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Face the Truth of Trading

Emotional Aspects of FOREX Trading

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What is the 'truth' of trading? Is it the secret of wealth? Could it possibly be that, in the long run, your efforts towards trading are wasted? Is it that you must belong to some underground trading cult to succeed? May it possibly be that to trade well, you must know everything about the fundamentals? Maybe it is discovering that one indicator that will tell you where every turn will occur before it does.


Actually, it is neither of the above. It is seldom addressed
by the majority of traders today, yet it has been talked about by many. Most
traders don't really want to hear this 'truth', and continue to fare badly.



The 'Truth of Trading' is this: To succeed in the business of trading requires
an ADJUSTMENT IN BEHAVIOR.



So many traders, new and not-so-new, try to take the easy route, expecting the
market to behave in a straight forward fashion. Although the markets do operate
in a straight forward fashion (relatively), it often isn't what most think to be
straight forward. Yet, this assumption continues from one bad trade to another.
They look at a chart, see a pattern, and then say to themselves, "ah, this looks
like a long to me" and jump in with a buy order of some sort. Once in the trade,
the market then demonstrates to the trader that his assumptions were wrong, once
again, and it moves down.



The ADJUSTMENT IN BEHAVIOR needed here is PROPER PREPARATION. Some
work needs to be done, not only in determining when and where to enter, but ALSO
where to exit.



Have you ever found yourself in a trade that started to go against you, but
instead of exiting and taking a small loss, you hold on because you aren't sure
where to get out? Have you watched prices move against you, and while it is, you
say to yourself, "if it goes below this price, it probably will go lower" but
then you don't exit when it does go below that price because of conflicting
uncertainties in your mind? "I don't want to take a loss now and then it goes my
way after I'm out", you may reason. Or maybe you just don't know what value to
exit as it slowly takes out one new low after another. And perhaps, you're of
the mindset that gets out when you just can't take the pressure any longer?



Obviously, an adjustment in this behavior is seriously needed. And one cure for
this is PROPER PREPARATION. If you thought a particular market was going
to go up, you must have had some reason to believe this. And if you used some
sort of criteria to determine this, then that same criteria should tell you when
you should get out if wrong. How so? Well, it your criteria tells you that the
market will move up because, for example, the current bottom is higher than a
moving average, past support value, or other reference, then wouldn't it be
logical to assume that if price ended up violating this criteria at some point
that it should signal an exit from the trade? Therefore, write down why you
think you should go long and the entry instructions. Follow that will where you
feel this criteria will no longer be valid and determine if you can handle that
amount of risk if it fails. If so, make a note as to where price would have to
go to alert you that you were in error BEFORE you enter the trade, and make sure
you know in advance where to bail out. If possible, make sure to place an
opposing order to get you out of the trade to avoid a possible adverse move.



PROPER PREPARATION should help you to make self-examination of your trade
choices. If you take the time to prepare for both your entry and exits, you'll
have it clear in your mind what you are doing and what the results are. This
will help in making adjustments as well.



Another TRUTH about successful trading that is often overlooked by many
traders is that of TAKING CARE OF YOUR WELL-BEING. A routine should be
followed each day that includes exercise and dress before trading. It has been
suggested by several expert traders that if it wasn’t' for their routine of
getting up the same time everyday, exercising for at least 15-20 minutes, shower
and dress before approaching their trading desk, they would still be in the same
rut they were once in.



It is sad that many will such a suggestion is a waste of time. Of course, to
change ones behavior for the better will require the person to make changes on
their own. Nobody can do this for you. If you are reading this article because
you need to improve your trading, and you currently wake up whenever, rush to
shower and dress and don't take time to get your mind sharpened by exercise, you
have likely left behind some good brain cells that are still asleep that could
have helped you to pull the trigger on this trade or exited quickly with a small
loss on that trade. Don't overlook what you think to be the small things. If you
aren't getting it done in trading, it is the small things that you are leaving
out that is hurting you.



Make sure you are taking care of your body by eating right as well. Exercise and
proper nutrition is paramount to success. Keeps you sharp and on your toes.
Allows you to sit up alert during trading hours and preparation time instead of
going through the motions as if you are in a fog. If you have ever been in a
trade while feeling groggy, you know what I am talking about. You start to
wonder if you should wait or take profits, but your mind isn't clear and you're
feeling worn down. Trading is like driving on a two-lane highway with traffic
moving both directions at a very fast pace. If you start to lose concentration,
you can easily lose your life. The fast pace of the markets require you to stay
sharp and focused. It will also help you to follow your plan without second
guessing it.



Another important TRUTH about successful trading has to do with your
subconscious mind. Some traders, no matter how well they know the behavior of
the market or how precise they are in timing, may have the tendency to
self-sabotage. The subconscious mind is a very powerful thing that can work for
you or against you. Basically, it operates on suggestions that are directly or
indirectly fed to it. If you tend to surround yourself with negative people, or
feed your mind only negative images and thoughts, don't expect your subconscious
mind to be immune from its affects. In reality, it will affect everything you
do, including trading…negatively.



It is extremely important that you take this TRUTH about trading (or
anything else) very seriously. When watching television, do you tend to watch
movies and programs that feature bad news, sad events, gross violence and
vulgarity? If so, you are feeding your subconscious mind with the wrong type of
information. Do you find yourself reading mostly useless fiction (or
non-fiction) of anti-social behavior? If so, you are feeding your subconscious
mind with negative energy.



Many will laugh at this TRUTH, and yet will continue to fail at what they
want to achieve. Or perhaps they are achievers to some degree, but continue to
fall short of their goals. Either way, this is not a laughing matter, and taking
an off-handed attitude toward this powerful force within you will continue to be
your undoing.



When watching television, watch mind healthy programs mostly. The occasional
shoot-em up program is fine, as long as you offset this with mostly mind
enhancing programs, such as can be found on the Discovery Channel or PBS, for
example. These programs will not only make you a smarter person, but your
subconscious mind will be even more receptive to successful endeavors of
discovery and exploration, that which trading is certainly a part of. Just as
feeding your body junk food will cause your health to soon fail, as well as you
mind, feeding your mind with junk information will train your subconscious mind
negatively and affect your overall performance in many aspects of life,
including trading.



Read lots of trading books and watch healthy programs on television. When not
reading trading books, read other pieces of educational material. No, you don't
have to give up your Star War novels. But just don't let that and bad television
be all you feed your mind. Whatever it is you want your mind to be, make sure
you train it properly…and often. By the way, I wish to add one more thing to
this. Some may reason that if they give their mind 75% good material and 25%
junk, that they will end up ahead of the game in the long run. Don't count on
it. It takes only one bad thing to ruin a lot of good things. How so? Well,
imagine this. You are having a great day with your family at the park. Picnic
with friends and family. As the day wears on and you are feeling great, you
decide it is time to head home. On the way home, someone cuts you off and you
put on your brakes. You get upset by this bad situation, and it tends to drown
the great feeling you had. Here it took all day to get this great feeling, and
only a split second to lose much of it, maybe for the rest of the evening. Don't
underestimate the negative power of bad material and association. In 1
Corinthians 15:33 it states (NEB): "Make no mistake: Bad company is the ruin of
a good character."



All these are TRUTHS must be faced up to. To ignore any one of them could
be the difference between meeting your success or continuing to fail. The choice
is all yours. Decide if success is very important to you, and then plan to face
these truths head-on and make the necessary ADJUSTMENTS IN BEHAVIOR.


Note: About the Author
Rick J. Ratchford is President of ProfitMax Trading Inc. He is a full-time commodity trader for his own account as well as assisting other traders. He has been a computer programmer for more than 20 years and a trader since 1990.