Often times, sticking with a tested game plan is the best way to win. In this episode of Truth About FX, Walter talks about the possible dangers of drastically changing your trading system vs. mastering the system that you have right now and try to look at the big picture.
Hugh has a great tip on gaining confidence and control in your trading.
Download (Duration: 04:05/ 4.67 MB)
In This Episode:
00:53 – focus on one thing
01:33 – bump in the road
02:28 – wanting to win
03:04 – biggest danger
There’s a certain power in specializing at using a particular trading system [Click To Tweet].
Are you really gaining with your trading or are you just spinning your wheels with your system? [Click To Tweet].
System hopping is the fastest way to losing for most new traders. [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: Alright, Walter, today’s question is: my number one challenge was, and still, is trading system hopping. I can’t stick to one trading system before I finish and look at another one. Am I doomed or what?
Walter: Well, other than suggesting that you read some books about some of the most famous — and there’s some very famous people who have a huge pile of money, and the reason they have this huge pile of money is because they focus on one thing.
You can find private funds that focus on one thing. There’s power in just getting really good at doing one thing. I’m not saying that you should only trade one system or one currency pair, but in the beginning you certainly should.
You should choose. I’m either going to be a specialist in the GBP or the EUR or whatever it may be or I’m going to be a specialist in this trading system and trade that over multiple market.
The real issue here is, probably — and this is what happens in most cases. This is what happened to me. It probably happened to you. I’m guessing, Hugh, when you start out with the system and you get really excited it goes really well. Hits a bump in the road, you get a little bit of a drawdown. Then, you find yourself wondering and looking for something that’s better.
That’s really the danger; that you’re sort of Jack of All Trades, Master of None. You get to this point where, in my case, to look back and say: “well, it’s been three and a half to four years. Where am I really going with my trading? I’m not really going anywhere, just spinning my wheels.”
The reason why is that I’m looking for a new system when my current system, which is probably pretty good way to trade, is just running into a bad luck streaks. That’s what I would say.
I would say that the best thing you can do as a trader is get really, really good at one thing. Then, when that thing gets really boring after a couple of years, maybe you add another thing. You have two things to do, really, but if there’s really no need to have a system that you feel like it’s going to make money every time.
A lot of traders get into this problem of wanting to win all the time. A few traders I know can mend two or three times out of ten and still be happy but it’s quite rare. I would say, really, the way you want to do this is approach it methodically, test your system, get a lot of data through forex tester, doing your back testing.
From there, you can look at the big picture and say: “would have I made money if I trade this over the last ten years?” The answer is usually, yes. And then, you say “why wouldn’t I stick with this even if I do have three unlucky weeks?.
That’s the kind of way I approach this. System hopping is the biggest danger I believe that most new traders run into. It’s the fastest way to losing… Basically, it’s the key to trading. That’s what would I say.
Hugh: I know, totally. I was reading a book recently. I think it was “The Happiness Advantage” or something like that. He made a point that if you do too many things at once, you don’t feel the control. But, if you can control this little circle like, I think “The Star of the Sorrow” or something, he started off in this little circle and you’ll master your sorrow in that circle and you gain confidence and then you can build on that.
Walter: That’s a great analogy. That’s a great way to look at it. In life, that’s a great way to look at it. I agree that’s a great analogy. Thanks for your time, Hugh.
Hugh: Yeah. You, too.