Serious in Forex

I received an email from a prospective buyer of my online trading course this week. His question caused me to think about the wisdom of pursuing trading as a worthy venture. I know that a lot of readers of this column are investors rather than traders, but regardless of your trading horizons, the skills and concerns of active short-term trading are relevant to us all.

Question: There are a lot of people who say that day trading is for “fools” and that it is very difficult to make a living from Day Trading. What are your opinions?

Trading is like most business: it requires commitment and perseverance. It is never easy to make money, but people who have mastered a skill make it appear easy. The really successful pit traders that I have known made trading look very easy, tantalizingly easy; but they all had many years of experience behind them. For every successful trader there has probably been a few hundred who have tried and failed.

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Trading is not an exact science. You can’t do X and get Y every time. It is as much an art as it is anything else. There is no magic formula. Trading is all about probability. It is the art of correctly applying a set of carefully thought out rules and allocating the probability of that event to result in success.

Each trade is an independent event. The market does not remember if you lost or made dollars the last time you traded. The way you approach the market psychologically has as much to do with your success as any trading plan.

Risk management is crucial if you want to have any hope of becoming a successful trader. Matching a method of trading with your personality is the only way you will ever feel comfortable in the markets. An adequately funded account is necessary — not only to be able to take the trades you want, but also so you don’t feel every trade is a live or die situation.

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Now you have decided that you are going to trade a particular security and you need to find a way of entering and exiting the market. So, how do you approach it, do you just jump in with a gut feeling or do you use some kind of system to help you make the decision. We will look at a few ways traders decide on the best way to make a decision.

First there is just guessing which way the market is going to go. Now as surprising as it may seem there are many trader who do just that. They take a look at a chart or some news and then decide if they should buy or sell. If they make money consistently then it is hard to argue that this is the wrong way to
trade the market.

The problem I see with this type of trading is that it is almost impossible to reproduce results consistently. In other words the trader that trades by instinct can never really pass on his knowledge, as there is no clear rules that he applies to the market on a regular basis. I know a few trader who trade like this but unfortunately I don’t know any who have gone the distance and are there year after year.

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