“How much money did you make in the Forex market today?” Is it that important and do I really care? Today, I’m going to talk to you about something that may, on the surface appear counter intuitive, but once you hear what I’ve got to say; you understand the principles and the mindset behind it, I think it should have massively helped you in your trading. Now, when you ask most traders how they’re getting on with their trading or are they having a good day, they’ll immediately reply with how much money they’ve made or how much money they’ve lost. Of course this is a very natural approach. Now, if you make money, it feels good you can now go buy the things that you want and that’s a good feeling.
So you’ve had a good day. On the other hand, if you lose money. It’s bad! It means you’ve given your money away to someone else. Someone you don’t even know. You’ve got nothing in return for the hours that you’ve spent at the screen. You may even blame on someone else. You may even blame it on the broker. It’s a bad feeling but quite frankly, this is the wrong way to look at winning or losing in the market. The wrong way to look at a winning trade or a losing trade. The wrong way to look at your trading progress. Now, I hope if you’ve been following me by now, been watching my videos, you would have seen the one on the law of large numbers.
Do go and check it out if you haven’t already done so. So we know that it’s impossible to only have winning trades. We know that when we place a trade in the market we have no idea if that’s going to be a winner or indeed a loser, and we should be caring about even less.We know that we’ve got a strategy and we know the expected return on the strategy based on our back testing, but we have no idea when those losses will com. We also know that when we’re trading, we should be risking the same percentage risk on each trade so in that way, when we’re having the inevitable losing streak, we don’t get wiped out of the market. And also when we’re having the winning streak, that we’re increasing our risk exposure in dollar terms so that we can capitalize on those winning periods, as well. Because all strategies will have the winning periods, and of course, the losing periods.
So once we understand these principles, it stands to reason that a good day or a good trading day, is not about how much money that you’ve made. It’s about did you follow your trading plan? The trading plan that you back tested, in terms of strategy and in terms of risk management. Did you stick to what you know works well? Did you deviate from the plan and let your emotions dictate your action? Listen, this may sound a bit off the wall, but the worst possible trading day could be the most profitable day in terms of the money that you actually made. Our brains are like finely tuned machines. If we make money, which remember, it feels really good because we can go and buy all those things we really wan, but we broke our trading rules, then the chances are, this good thing that our brains love will want to repeat itself.
So we’ll continue to break these rules in the future trades. If our trading plan says we should only be risking, say 1 percent of the account on each trade, but because we decided on this particular trade, it looked really good; high probability that so good that it can’t fail, we decided to increase our risk and it was a winner. Indeed, we were correct. Good feeling yet we’ve conquered the market highly likely that the brains going to want to repeat this feeling of success; repeat this feeling of being able to crack the market and will be increasing the risk on other trades as well. But the laws of probability, would it take that one day you’re going to get wiped out. Same for moving stops. Remember a stop order is where you place an order in the market to exit a losing position.
Now it doesn’t matter who you are. No one likes to get stopped out. But if you move your stop because it was getting too close, and it results in the trade moving back in to break even or even profits, then you might have the feeling of yeah, I’m now a genius! Absolutely wrong! If you move a stop and it turns back into profit, you’ve had a bad day trading. Because your brain now, would repeat this feeling of being a genius and want to repeat this process of moving a stop, as it’s getting close. This is going to lead to a slow bleed of the trading account. Possibly, into a complete destruction. So, a good trading day is not about the dollars that you’ve made in the day . It’s about, did you trade your plan without deviation? Did you stick to the risk management perimeters, and did you stick to the strategy rules that you previously set out? Now, you can still have a losing day in monetary terms but still have a great day if you’ve stuck to your trading plan. A bad day is if you broke new rules and lost money at the same time, but a really really bad day is when you break the rules and you make money, because your brain is going to want to peat this process, time and time again.
And it’s going to result in you not being a trader but ultimately a gambler. So, what can be done to ensure that, going forward, from now on, every time someone says to you, how you’re getting on with the trading, you can say it’s going just great, thanks well? Firstly, you need to have a trading plan which involves a strategy and some risk management criteria. Then you need to make sure that each and every trade that you take is complying with the trading plan. Now, a good way to do this is to have a checklist which is completed on each and every trade before you take it. It’s very time consuming, but believe me it’s a truly worthwhile endeavor. That way, you can ensure that your trades are always good trades and when you’re having good trades you having a good day.
And when you having a good trading day, the profits will be sure to follow. Now, if you don’t have a trading plan or indeed, a strategy you may want to check us out here at Forexsignals.com. Got lots of material on how to construct a trading plan and risk management, and so forth. I also share and teach various strategies which I trade live in front of the members several times a day on our live stream. So, as I say you, may be able to check that out as well. So a good trading day, it’s not about how much money you make,it’s did you stick to yours. I hope you enjoyed the video. Hope you found the content useful. If you did, give me a thumbs up. Giive me a thumbs down if you didn’t. Leave a comment below. I try to get back to as many as I can and of course subscribe to the channel if you haven’t already done so, and make sure you follow us on Instagram. Until the next video! Happy trading! Speak to you soon!.
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