In this episode of Truth About FX, Walter talks about the impulse control and the psychology of overcoming this trading barrier. He shares some cognitive tricks that can help you work on your trading impulses. He also lets some other tricks off his sleeves on how you can work around your trading discipline and manage your risk.
Download (Duration: 06:15 / 7.2 MB)
In This Episode:
00:50 – block off
02:00 – flashing colors
04:05 – impulse control track
Announcer: Sometimes, forex trading is a wild and wooly place to be. That’s why Hugh is here, to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.
Hugh: Hi, Walter. We’ve got an interesting question here. Somebody asked: Somehow I’m in love with the Naked Forex trading system but — and “but” is capitalized — I’m always stuck into the M5 and M15 charts because there’s action.
This person saw your video when you’ve talked about trading lower time frames and how it can activate certain parts of the brain that are similar to doing drugs. This person asked “How can I avoid this? Would it be best to just block off the lower time frames in MetaTrader and what’s your best trading style?” How should they go about figuring out which style is best for them?
Walter: This is a tricky one. Really, what’s going on here is — and this is pretty common — you want to feel like you’re doing something. You want to be a trader which means you’ve got to go trade. You’ve got to take some trades.
A lot of traders, such as myself, I’ve learned though is that overtime if you’re able to just take a step back and do a lot more planning and anticipating and lot less reacting and sort of just going wherever the market sends your way. If you look at it, if you look at the platform — I’m sure you probably noticed this — it doesn’t matter if it’s MetaTrader or any of the other platforms, if you put someone who knew nothing about trading, someone who didn’t know anything about trading, the first thing at all, you plump them in front of the trading platform, typical forex trading platform and then you would plump them in font of a video poker machine in Vegas, there’s no difference.
It’s the same thing. That’s why they make all these noises and flashing colors, it’s to get your attention. That’s exactly what it is. So the question is how do you get away from that?
It all comes down to, in a Psychology term, it comes down to “impulse control”. It means you’re not able to control your impulses. People that have brain damage, this is the number one thing.
If someone has brain damage in front of their head, the frontal lobe which is that part of your brain that basically suppresses you from killing and raping everyone you see, these people go crazy. They try to kill and rape everyone they’ll see.
What we want to do is we want to trade from that area of the brain, not the reptilian emotional part of the brain. We want to trade from the front which means planning and anticipating instead of reacting and getting really emotions, getting full of emotions and letting your emotions get the better of you.
I would recommend — and I’ll put a link in the shownote. There’s one subliminal CD. You don’t have to believe in subliminals but I would just say give it a try for a month. Listen to this in the background when you’re in front of your trading station or doing your backtesting or reading your emails or whatever. Just have this little track in the background and that should help you with your impulse control but beyond that, you need a plan.
You need to have a plan and you need to have a trading buddy who will make sure that you are following your plan. What you’ll do is, let’s say you just want to trade the D1 chart.
That’s really what you want to do so that you can let these candles print very slowly so you’re not reacting. Instead, you’re just sort of planning out your trade and letting it fall, go ahead and do what’s going to do.
Now, you need to have a plan and you need to talk to your trading buddy every week and go over your trades to make sure that you’re actually doing this. Of course, it’ll all start in Forex Tester or whichever simulator you want to use. You really need to build up your confidence in your system first before you do that but, that goes without saying, you really need to do that.
We’ve talked about that plenty and you and I both agree on that. It’s just something that you need to do. Then, once you’re live trading, keep a journal, try and listen to impulse control track that I’ll link up in the show notes and have a trading buddy that keeps you on track so that they’ll say, “Wait a minute. Hold on. Why were you trading the H1 charts on that trade? You should’ve been trading the D1.” These are the sorts of things that you want to do.
It’s okay to have 35 different markets and trade the D1 charts. You’re going to get plenty of trades. If you watch lot of markets, you can watch depending on where you’re at, you can watch CFD’s like oil and natural gas or coffee and S&P500 and the footsie. There’s a lot of opportunity out there.
That’s not really the issue. It’s not about opportunities. It’s about controlling your impulses and operating away from that area of the brain where you make these horrendous mistakes.
I’ve heard a story yesterday, actually. Someone was talking about a trader that they knew and the trader knew that he had to get out of this trade. He was in a bad trade and he knew he had to dump it and the trader said, “Hey, you need to get out of this trade.” And he goes, “Yeah, I know.” “At once, you get out of the bloody thing.” He was like, “I can’t do it.”
He literally sat there and that afternoon, he lost $300. He lost his trading account because he could not face up to what he had to do. It’s really important that you’re accountable to somebody.
I would say try working on the impulse control, keeping a good record in the journal of all your trades, the reason why. Show that journal to your trading buddy every week and even if you don’t believe in subliminals, just go ahead and download that subliminals that’s linked up in the show notes. Try it for a month and see if that makes a difference. Just try it. It’s just an experiment and see how things go. That’s what I would probably do.
Hugh: Okay, cool. Thanks, Walter. That’s awesome.
Walter: Thank you.