In this episode of Truth About FX, Walter talks about ways to reap profits even if you only have one successful trade in a month. He also talks about the human psychology about what holds you back from trying to take on other markets and exploring other options.
Download (Duration: 05:24 / 6.18 MB)
In This Episode:
00:49 – gambling mentality
01:57 – spiral of trying
04:12 – real focus
05:08 – downfall
Tweetables:
Get a broker who will let you trade all the other markets. [Click To Tweet].
Get really good at trading one pair then expand your horizons. [Click To Tweet].
Remember: Accounts are not built overnight. [Click To Tweet].
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. This question comes from a trader and this person is asking… They basically backtested a system and they only got one trade per month. How are they going to be getting money on this trade? It is insane, basically.
Walter: Yeah, and that is a pretty common one. Let’s talk about this. There’s a couple of things that really get traders into trouble. Number one is getting into that revenge trading or gambling mentality.
The easiest way to do that is to sit down and trade the five-minute charts. It’s true. Have you done that before?
Hugh: Yeah. I’ve tried the one-minute chart and the five-minute chart. It’s crazy.
Walter: Yeah, I have too. I probably have the same experience as you. Here’s the thing. Actually, just setting this aside, I was talking to a trader — I recently went and met some traders over in the UK.
He trade the scalping system and what he does is brilliant because he says “Look, what I do is I allow myself one trade.” He trades, basically, the scalping system during the Asian session so that is a night in London — that’s a night time in London.
What he does is he goes “Look, if I get a trade that is a loser, my first scalping trade is a loser then that’s it. I shut down my platform and go to sleep, that’s it. No more.” But, if he has a winner then he’s allowed to take another one.
I think that is brilliant because if you are disciplined enough to stick to that, that is the way that you avoid getting into that spiral of trying to make it all back on the next trade and all that sort of stuff.
The reason why I think trading these system that do not offer very frequent trades is because you are avoiding that gambling mentality. When you do trade lower timeframe, it activates the different area of your brain.
I’ve got a whole webinar on this and I’ll post it in the shownotes. If you really want to see the neuroscience behind it, you can click on that video below this episode and have a look but, for right now, I just want to point out that just because you get one trade per month on this system doesn’t mean that you can’t trade thirty three different markets.
You know what I mean? Thirty three different trades a month so that is… The big thing here is it makes people freak out and say “I can’t believe it”. I’ve got these guys on Youtube, they say it all the time. “Oh, I can’t believe it. Great system, you’ve got one trade over the last three months” or whatever.
Here’s the deal: that is one currency pair. You could add copper and oil, silver and SMP500 and the Hang Seng, trade the GBP/SGD. There are so many different pairs out there. Trade them all because if it is a simple enough system, that’ll work on all of them.
And, so then, what you do is you’ve only got twenty three trading days a month on average. If you are trading twenty currency pairs or you are more on that, you can easily follow thirty five and you are trading the daily chart. You’ll only get one per month.
You can have more than one trade a day and that is plenty of opportunities. What will happen, of course, is the profits will catch up. The trades take a little bit longer sometimes to come to a fruition.
You may not find it the first month you’ve been booking these trades but two, three months down the line, these trades will start coming good. You’ll be closing your winners and your losers and all that. I mean, usually, the losers close pretty quickly but the winners are the ones that take longer. You’ll get into a groove after that.
If you are used to trading the one-hour charts or whatever, I would encourage you — and you are worried about the number of trades. Obviously, people worry about this because they want to build their account up really quickly so the real focus should be on getting really good at one thing and then just expand in your horizons and look at things like copper.
If your broker does not offer that, find another broker. Get someone who will offer you copper, silver and gold, the Hang Seng, and all those other markets out there that you can trade. You can trade all those out there and they are available.
There’s no reason why you cannot do that so that is my solution. If you have a job and you are trading these daily charts, you can easily sit down and in 15 minutes, go through thirty five charts and know whether or not you’ve got a trade on.
It is not that difficult to follow that many markets especially when you are looking at the weekly and the daily chart. That is what I would say.
Hugh: Yeah, great answer. Like you say, people can get caught up in trying to build their account too quickly and that is usually the downfall always, or anything. Alright, appreciate it, Walter. See you!
Walter: See you, Hugh.
SHOWNOTES
Short Term Trading and Your Brain
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