What The Best Traders Know That Can Help Your FX Trading Part I

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Trader's Wisdom Unveiled.

 Wisdom is needed when trading FX for many reasons. Cooler heads often prevail in a market where so much leverage is available. Naturally, the availability of leverage doesn't necessarily mean it should be applied to a heavy degree as low probability events like the SNB pulling the Swiss Franc caused many FX traders and a handful of brokers to feel the negative effects of leverage. 

Trading Wisdom

Wisdom and information are similar but not identical.

 While there are a handful of trading books and courses out on the market that provide information about trading and trading well the ability to embody that information is rarer still.  In the wisdom traditions of the world, there is a saying that the greatest distance that information must travel is the 18 inches from the head to the heart. Today, we're going to discuss some of the critical albeit rather simple truths that need to make it to the heart of the trader in order for the trader's career to flourish. 

You Don't Have to Catch Every Single Move

Traders often feel like they're thrown into the shark tank so to speak and have to decide what moves they'll trade and how long they'll stay in a move. A misnomer about many traders is that they feel they must be trading all the time.  Some of the brightest and well respected traders have clearly refuted that fact.  Here is Jesse Livermore , the famed early 20th century trader, on the fallacy many traders are maligned by at the start of their careers, "The desire for constant action irrespective of underlying conditions is responsible for many losses in Wall Street even among the professionals, who feel that they must take home some money everyday, as though they were working for regular wages."

Put in layman's terms, which I can attest to, they lure of the market is that there is always a move or news event to trade.  This benefit can be a huge problem if a trader without discipline to take a loss finds themselves taking on too many low probability opportunities with high leverage only to see those moves go against them.

However, the best approach for most traders is to find only the opportunities that align with your rules and even be impatient with those if they don't pan out. 

Staying In the Strong Trend

You can look at the second point of trader's wisdom as the other side of the same coin. The second point is to make yourself available to stay in the trends that haven't invalidated your rules.  Some traders look for a simple tools like moving averages, RSI, or Ichimoku in order to help them see which trends are worth trading. However, just as important as the trend and some may say more important is the time you spend in the trend.

Obviously, the benefit anyone trader will derive from the trend will depend on the time they spend in the trend. As Jesse Livermore, who was referenced earlier once said, "don't give me timing, give me time." Put simply, the exact entry price is less important than the time spent in the trend.  Looking at this wisdom piece from the other direction, some of the biggest mistakes I've made from a net profitability standpoint is exiting a perfectly good trend, which ended up costing me tens of thousands of dollars per year. 

Stay tuned for the next Wisdom Piece.

Happy Trading!