One Good Reason To Exit a Forex Position Early

Ask my subconscious self why I exited my position "early" today and he might tell you that it was due to fear.  Ask me why and I’ll tell you that it was not fear but a necessity to boost my psyche.  Let me explain why.  

I measure my performance month to month.  I may have gained 7% in January and 10% in February but to me, March is a whole new month.  So when March 1st came, in my mind, I was at 0%.  I like measuring this way for two reasons.

1. If you had a bad month, it gives you a chance to reset and start over from 0.  Why carry over the loss and put that additional pressure on yourself to "get it back."  Technically, you are still down compared to the previous month but I think it just puts you in a better state of mind.  On the flip side, if you had a profitable month, why risk the chance of instilling overconfidence or invincibility.  Reset.
2. A month typically gives you enough time to come to that average win/loss percentage.  Measuring week to week is too short. What if you had only one trade.  This wouldn’t accurately reflect your overall trading performance.  Measuring longer than month to month and you might miss the chance to assess your trading before it’s too late.  End of month performance assessment can lead to important changes that may improve your trading.   

So why did I exit my position early this morning? I entered a long AUD/USD position yesterday with the intention of holding until I obtained at least a 200 pip target but the pair shot up nicely this morning and I was quickly up 100 pips.  I exited here for one reason, to kick the month off on a positive note.  This was important for my confidence going forward this month.  Exiting a forex position is also a good idea if you’re stuck in a losing streak.  Why risk the chance of losing the profit and losing even more confidence? Take the profit and put an end to the losing streak. 

Check out these other forex blog posts.

1. Forex Trading Profit Up 9.6% In February
2. How Many Times Have You Exited a Position Early?
3. Forex Trading in the Black
4. The True Test
5. Six Percent Loss This Week

Popularity: 4%

Down 400 Pips and In Denial

I don’t give personal trading advice for two main reasons:

1. I’m not confident enough with my skills as a forex trader (yet.)
2. I’m not a financial advisor and don’t want to be responsible for your money.  That’s your job.

Popularity: 4%

What Makes an Expert Forex Trader

While I’m not avid reader of Brett Steenbarger’s blog, I found his post titled, What Makes an Expert? Three Surprising Research Conclusions very interesting.  There were several conclusions made by the researcher regarding expertise (referenced from http://www.psy.fsu.edu/faculty/ericsson/ericsson.exp.perf.html) 

1. Measures of general basic capacities do not predict success in a domain. No general superiority was found in speed, memory, or intelligence of the expert.
2. The superior performance of experts is often very domain specific and transfer outside their narrow area of expertise is surprisingly limited.  In other words, just because a trader excels in futures trading doesn’t necessarily mean he/she will excel in forex trading.
3. Systematic differences between experts and less proficient individuals nearly always reflect attributes acquired by the experts during their lengthy training.

This flies in the face of those who may believe that expert traders are born with the qualities that make them experts.  It also gives me the impression that with a lot of deliberate practice, anyone can be an expert in their field of study.   Steenbarger believes a structured curriculum can progress a novice to exhibiting competent expertise.  

You can’t go to college to get a degree in Forex trading so where do you go to get a structured curriculum? I don’t know? I’ve been trading for about three years now but I don’t have any formal training.  I’ve read a lot of books, studied a lot of charts, managed a plethora of trades, read a lot of blogs, and listened to a lot of so-called experts.  I think that with discipline and self-motivation, it may be possible to structure your own curriculum.  It may take longer than formal training and may require a lot of trial and error but it may be possible.  On the flip side, maybe formal training is necessary to narrow the gap between novice and expert.  

I feel a lot closer to becoming an expert trader than I did last year but by no means am I anywhere near an expert.  I guess the best way to know if I’ve become an expert is if I can consistently be profitable. 

The questions I pose to you are, do you feel like you need a structured curriculum to become an expert trader and what attributes do you think you need to be considered an expert trader? 

Popularity: 5%

Come into my trading room

I was interested by some of Alexander Elder's comments in his book, "Come into my trading room." For those of you who have never heard of him, he is a professional trader who at one time was a psychiatrist.  

He states that a successful trader needs to stand apart from the crowd and one way to do so is to be unique in choosing your timeframes.  I've always used the 60-minute, 180-minute, 240-minute, and the Daily timeframes.  Elder says that it pays to use uncommon parameters for charts and indicators.  Most traders use the default timeframe configurations in their trading software but since thousands of people use half-hourly charts, why not be the minority that use 25-minute charts.  The benefit to this also is that you may get signals a little faster.  

I was reading more about his Triple Screen Strategy not really because I'm looking for a brand new strategy to use (I'm always open-minded) but because it stresses the use of multiple time frames for entering and exiting positions.  I've always treated each timeframe as a totally separate entity mostly because it simplifies entries and exits and also because I adopted this style after reading Raghee Horners first book.

Elder seems to have a lot to offer in the way of trader psychology and money management.  I'll continue to post anything interesting if I come across it.

Popularity: 2%