In this episode of Truth About FX, Walter goes dip into live trading experience and execution. Whn do you say that you’re ready to trade the real thing? Walter also shares what keeps his trading excitement burning and how he tackles those lonely times when the markets are asleep.
Download (Duration: 07:02 / 8.04 MB)
In This Episode:
00:43 – great progress
01:33 – keen to jump
02:06 – graduated account
03:23 – excitement
04:43 – magic system
05:48 – create and try
Tweetables:
Focus on how did you execute your trade [Click To Tweet].
It’s all about position sizing [Click To Tweet].
You don’t have to be trading all the time. [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. Here is a good question that we’ve got, this person is asking: I wonder if a new trader like me should stop trading if I reach my monthly goal or continue taking trade just to get more experience. What do you think about that?
Walter: Yeah, this is a really good question. This trader, I’ve known him for a while and he’s making great progress but, I guess the main point here that I would dig into is this idea of trading in your live account to gain experience.
I think that there are some truth to that but I believe that the bulk of your experience as a trader should come through other means. What I mean by that is — again, if you’ve heard this before — I am a big proponent of forex tester, then demo account, then a small, tiny, teeny money account and then your live account.
You can even put more phase to it like a medium size account before you go to a live account, if that is something that you really want to but most traders aren’t going to do this. And so, when most traders don’t do this, they look to their live account to get their experience as this trader is suggesting.
I am not saying that he’s a bad trader because this is really a common thing. People aren’t keen to jump into the live money trading and they want to take advantage of their system when they are convinced that it is going to work but the problem with that is when you hit a drawdown, it’s going to shake your confidence.
It’s not going to be the same as if you’ve had 700, 800 trades in the bank from forex tester. Another 200 trades in the bank from your demo account, another 2 or 300 trades from your small money account.
That is the kind of thing. I think that only comes with experience and building up your experience by taking those graduated account is really the way to go. So, what I told him, I said, “Look”, — obviously this came through on text message, I just text him today — and I said, “Look man, you really” — because he’s hitting his goal — I said, “look, you really should be like, all the deciding stuff should happen when you are testing out new ideas”.
Everyone celebrate your wins and, yeah, it sucks when you get a loser in your account but at the same time, you shouldn’t really be looking for excitement in your trading account. Excitement is what you get when you put all your money on black on the roulette table in Vegas, right?
Or, excitement is when you go on your first date and you don’t know what is going to happen. Excitement is when you get to roller coaster and you’ve never been on it before. Those are all exciting things.
Trading isn’t necessarily going to be that exciting for you if you are good at it because you know the end result before. I mean, you might not know what’s going to happen on the next trade but you know that over the next hundred trades, your win rate is going to be about whatever it is — 52% or 49% or 72% or whatever it is.
That is what I said for this trader was if you’re getting excitement, if you’re trying to get experience and you’re doing it in your live account, that’s the wrong spot to do it. That is basically my take.
I know you’ve been trading different systems over time and do you find that by the time you go live, you’ve tested so much? I mean you’re furious backtester, Huh. I’ve seen your backtesting posts and stuff. So, tell me kind of how you approach it.
I mean, do you see it as really boring when you’ve finally moved live? Or, how do you see it?
Hugh: Yeah. I don’t know if it’s necessarily boring. I think it’s still interesting but definitely not exciting. I just take the trade and see what happens then review. I guess, that is not exciting or anything.
Walter: Yeah and your journal is really good because having a journal, you can look back and really the thing to focus on is not, whether or not the trade was a winner or a loser but how did you execute it. How well did you do that, sticking to your rules. Did you get you get out early because the last trade that you had barely miss the target or pull back really hard?
Those are the sorts of things you need to pay attention to with your trades. It’s execution. It’s not necessarily the end result which I know sound counter intuitive especially if you’re new to trading.
It really comes down to that, position sizing and execution. That’s where you are going to make your largest gains as a trader as you get deep into this stuff. In the beginning, of course, you are just looking for the magic system.
It’s not really that though in the end, it’s all about position sizing, risk management and working on yourself so that you can execute well, basically. That was a great question.
Hugh: Totally, for sure. I think, reading his text message a little deeper also, this person mentions that they got bored after they reached their goal. I think that instead of being bored, I think you could, like you said, do some testing, do some research, figure out a good journal. Use that time in other ways. You don’t have to be trading all the time.
Walter: Yeah. My excitement comes from testing new stuff from forex tester. I really like doing that. I find a lot of ideas don’t work but I also find some occasionally that I’ll move on to demo then to live account.
I’ve got one right now that I’ve got on a minute little account and just seeing how it goes, I don’t technically trade the 5-minute charts but I’m doing it on this one just because I have that urge to create and try new things.
I just moved along that process that we’ve talked about and I find that that really works well because if I were trading the 5-minute charts with this new system I’ve back tested in my standard account, that’ll drive me nuts.
Even though I’ve got all these rules in place trying to stop myself from self sabotage and things like that. I still know that I would probably run into trouble. It’s a really good thing that you can find excitement in trading.
It’s just maybe it’s a, like you say, you still never know what’s going to happen when you’re trading. Trading can be fun but the real exciting stuff to me comes in when you are testing new ideas. That is where you can and that’s great too. Do it.
I know traders that they have to have tiny account that they use just for these sorts of things because, otherwise, they know they will move that system over to their live account, their main big account, their source of income and then they will kind of… It’ll all fizzle out. This is a great question. I’m glad it came up.
Hugh: Yeah, totally. Thanks, Walter.
Walter: Thanks, Hugh.
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