In this episode of Truth ABout FX, Walter exposes some insider trading psychology techniques to help you focus on your goals. What are these two steps to profitable trading? And how can you effectively apply this to your own strategy. You would also know what the biggest difference between a successful trader and the gambler is. All this and more in this episode of Truth About FX.
Download (Duration: 03:13 / 3.9 MB)
In This Episode:
00:53 – the next piece is YOU
01:36 – focus on the process
02:08 – self-talk
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. Somebody asks, they want to learn some trading Psychology techniques that would keep them focused whether they make profits or not. What would you say to that?
Walter: The two steps to a profitable trading are: having a system that has a positive expectancy. You can google that and figure out expectancy is pretty simple. You just need the win rate, the average winner and the average loser.
Of course, average winner and average loser will also tell you the reward to risk ratio which is how you calculate that. Now, assuming that you have a positive expectancy, the next piece of that is YOU.
You have to execute your strategy and not stop and not quit and not give up and not go, “Oh, this is broken” or “The markets have changed”. The way to do that — the best way I found to do that — is to simply treat it as a game.
And so, you know how we have like the Apple watches and all those things? Well, you do the same thing with trading. What you’ll do is you go, “Okay, I am going to take this trade because it’s given me a signal and it’s this system” and then you give yourself a score.
9 out of 10 or 7 out of 10 or whatever the entry is for you, then you do the same thing on the exit. “I’ve got a 7 out 10 on my exit. I checked all my rules and I got 9 out of 10” — or 10 out of 10.
What you are doing right now is you are shifting the focus on the process because experienced traders know that the process is what gets you results, not focusing on the end result.
It is the same thing with the gambler. A gambler understands that he or she is going to give back money to the house. Give back money to the casino or wherever they’re gambling. They know that’s the case but over the long haul, if they’ve got a positive expectancy, they’re going to pull money eventually.
It’s the same thing with trading. What I would say is you can work with things like your self-talk. You can learn to self-hypnotize yourself and then repeat positive beliefs like “I am a profitable trader. I execute my system as I should execute it. I find profits in the markets. I am a winning trader.” These sorts of thing. That’s one way to seed your subconscious but the overall process of trading is really like playing a game.
That is why I think playing the game, rewarding yourself when you do well at executing the trade regardless whether it’s a winner or not, that’s the best way to focus on the process that I found. I can’t find anything better than that
Hugh: Okay, very cool. Thanks for that, Walter.
Walter: Thank you.