Below I will state in stages what I was guided by and what I ended up with. As I later found out from other traders, this “hit parade” is quite universal, so use it for health – it may be easier for someone to track themselves. I caution only – try not to be mad at yourself for being “still here”, and not “already over there”. Give yourself some time.
And the second point: I simply outline the stages without blaming anyone. The fact that we initially make mistakes and do not do it right is completely normal. We do not yet know how to =)
So, the first stage is an “outside observer”:
The stage begins almost immediately after you find out how much they earn on Forex and for the first time install the trading terminal on your computer. The most accurate phrase that characterizes an “outside observer” is “What if it turns around”. This means that when we entered the market (not even according to the system) and the price went our way, we are happy to sit. Then, when there are first signs of a reversal – we do not want to take profits – “what if it turns around?” After all, then we will miss the profit, right? =)
If the price went the opposite way against us – we are in no hurry to fix the loss: “what if it turns around?” Then we get a loss, but we might not get it.
About risk management and money management and, especially, psychology, we have not heard at this stage. They simply have nowhere to apply.
Stage No. 2: – overclocking of the deposit.
After reading about “money management” with its “risk of not more than 1% of the deposit in the transaction”, we grin and get down to business. When I read about these rules, I figured that with my first deposit of $ 50, I will save up to the amount of 30 years for norms, and this naturally didn’t work for me =) And we remember that at first, we need VERY QUICKLY everything to do because itchy with us. And of course, the recommended risk, by chance, is materialized by exceeding commercials by a factor of 10. Because at least there is a chance (if everything goes well) to disperse at least a year or two.
At this stage, as a rule, the trader already has some kind of trading strategy, but a characteristic feature is that he trusts her very much. And if he doesn’t really trust, he really hopes he will be LUCKY. At the risk of 10% of the deposit in the transaction and earning 20%, he decides: “Pfff, I’ll manage for half a year, what’s complicated.” Then another deal, and again profit – he is on a horse. Then there was one more profit, he had not $ 50, but almost $ 85 on his account, and so far the market seemed to “praise” him for such an individual approach and for not listening to too cautious advice from books. And then again, both the loss and the account are $ 72.5, but the trader already considered those $ 85 OWN. Do you understand? And what does he feel now? The fact that he took away part of his money. And therefore, what needs to be done? They must be returned by force! The one who took it away, of course.
Stage number 3: “Market – a goat.”
Here we begin to take revenge on the market, and this is probably the most dangerous stage for your deposit. At first, we can trade according to the rules of the trading strategy – set stop loss, take profit, enter the system. However, it is worth working in a row to the 2nd or 3rd stop-loss in a row, as we begin to get angry and take revenge – it is at this stage that traders usually trade “all the way.” We see the market as a crazy overseer that you cannot please – we kind of expected a purchase, and the market went down. And, wishing to take revenge on him (“Well, if you want down, let’s go down”), we open a sale, and the market goes up. “Well, are you a fool, or what?”, Asks our brain from the market and begins to come up with conspiracy theories – that the market is deliberately controlled against him in order to take away his $ 100 (lower is the turnover of the Forex market)
Also, at this stage, many people use a martingale method – when the price goes down, and we buy, each time increasing the volume of the transaction. It is even lower, and we are still buying, because it will “roll back sooner or later.” But such an approach is the same “revenge on the market” and the desire to prevail over it because it did not live up to our expectations. This is an aggressive attitude towards the market, resistance to it, struggle with it.
Someone uses the method of “locking” here – this is when we have a loss on a deal to buy, but we do not close it, but open a deal for sale. And on the one hand, we are not letting the loss grow, but we are not fixing it, we are not agreeing with it, in the hope that “the situation will become more clear” and we can reduce this loss, for example. But the irony is that there are NO situations in the market where something is clear – the price can go either up or down at any given time. I will disclose this thesis below in more detail.
In general, I can not advise anything here – any advice will most likely be ignored. Just keep in mind that such a stage exists. I wish you to go through it, and preferably on a demo or at least a cent account.
Stage 4: “I just don’t understand something.”
At this stage, the trader more or less calms down and realizes that God is with him, with quick enrichment. He decides that the problem is most likely that he does not know something about the market. That entry point is wrong. This is a logical conclusion because a lot of stop-losses have already worked for a trader up to this point. A stop loss is, in fact, a confirmation of the incorrectness of your forecast. And since you did not know where the price would go, then you know “little” and you just need to “learn more” to make mistakes “less often”. Right?
But here we are faced with a small problem: The problem of the fact that the market is not some kind of mechanical device. You can’t “study” it in the sense that we are studying the device of some device: “yeah, if this cord goes to the outlet, bread pops up from here”, etc. In relation to the market, bread can jump out not only from the hole but also from the switch and from the cord for current =) But in the first place, when we start to study all kinds of “heads/shoulders”, “double bottom” and so on, our brain is waiting for it a similar learning process. He is waiting for certainty. “If you broke the neckline, then go down.” And the market is a fig, up! How so? So, probably, “this is not a head and shoulders” =) The brain is not yet able to realize that any situation in the market ALWAYS has 2 outcomes. And wanting to “learn more” about the market, we, in fact, we want to never make mistakes, i.e. so that stop-loss triggers less often or never at all. The desire is aimed at “avoiding stop losses,” “avoiding mistakes,” because they are already tired of at the previous stages.
The market cannot be “studied” in the sense that we are studying the device of some device. The market is a process, not a device.
Here, the trader starts off “in all serious ways” already in a different way – sorting through strategies one after another, attending training courses, reading forums, studying all sorts of theories about where “big money” comes in and where “the crowd is bred into stop-losses,” which NEVER and NEVER confirmed. For the sake of interest, you yourself can ask the adherents of the theory of the “big player” – why did they get what he is?
In general, here the trader wants to find a magic method. He wants to study the market, thinking that he is hiding something from him. It still seems to him that stop-loss is a kind of “condemnation” on the part of the market, such as “you have poorly analyzed”. But this is not quite so.
Imagine a cat. You are shining a laser near her. You know that she will either pounce on this whole ray or simply hit it with her paw. You think that the whole will attack, and she just hits him with his paw. The fact that she hits him with his paw is your stop loss. You expected one, but another happened. Does this mean that the cat could NOT pounce all over? Not. Could you know in advance what she will do? How to calculate this by the cat’s gaze, by the position of its head, by something else? Of course not.
When this realization comes, it begins …
Stage number 5: “This is not a market, this is me.”
That’s just here we begin to peer into ourselves. We understand that the market is not our enemy. This feeling arose only because it was unpleasant for us to receive stop loss. The market did not do anything bad to us – it did not beat us, it did not force us to experience this inconvenience and anger. He, so to speak, “was himself.” And the problem was in our expectations from him and that he did not justify them.
The trader begins to “peer into himself” and realize where and why he is experiencing certain emotions. And the more this understanding, the less intense these very emotions become and the less often they arise. Attitude to trading is becoming more and more work, you begin to perceive the market as a “research environment”, and not as an enemy or rival.
The market never did anything bad to us – it did not beat us, it did not force us to experience this inconvenience and anger. He, so to speak, “was himself”? followed his laws and regulations. And the problem was in our expectations from him and that he did not justify them.
If you manage to get to this stage, then it is no longer possible to say that you will trade “in all serious ways.” Yes, non-systemic transactions will happen. It is even possible that you will sometimes “risk a little more” than necessary. But there will be no such emotions as before – you simply realize that there is no reason for them.
At this stage, as a rule, thoughtful testing and improvement of the trading strategy and parallel work on yourself begin. Risk management and money management here is that we simply take some fixed percentage of the deposit and tear off our system with it, revealing whether it is profitable in general or unprofitable.
In general, it is at this stage that the understanding comes that stop loss will ALWAYS be. That “stop-loss” and “take profit” is like “expenses” and “incomes” in business or as “goals conceded” and “goals scored” in football – nowhere without them. And professionalism is that the monetary difference between taking and stop is positive.
Stage number 6: “Trading as a business”
In general, when a trader stops playing with the entry and exit points, he (oh gods!) Begins to understand that he NEEDS MANI MANAGEMENT. Roughly speaking, at this stage, a positive answer has already been received to the question “is it possible to make money on Forex?” There is also no question about the rightness/wrongness regarding entry into the market – it’s trading strategy IN COMPLEX is seen by it as a kind of “profitable business” in which you need to invest wisely (!). If you invest more than necessary in any business, an “excess of products” may arise, so to speak, which is not good. If you don’t invest enough, then you can get less profit. The analogy is not entirely accurate, but the emphasis in both cases is precisely on the EFFICIENCY of cash investments, as the rule “invest a lot to get a lot” – does not work either in business or in trading.
Work on the part of risk management and money management is already, so to speak, the “cosmetic stage” when we simply try to increase the effectiveness of our system. And here, as a rule, there are no strict rules, because everyone has different trading strategies, with different profit/risk ratios, with different probability of profitable/loss-making transactions. A trader is simply experimenting with what will be better specifically for him.
In general, this stage is followed by the stage of “improve until you get bored”, about which there is nothing special to paint. I will be glad if you reach him.
In short, this is something everyone will encounter with a beginner. If you try to do everything calmly and steadily, then all this “staging” will take a little less time. If you do everything in a snap, as I and the vast majority did, the process can drag on. The only thing I want to emphasize once again is to try not to be too strict on yourself in all this. The more calmly you approach trading at the initial stage, the faster you will cease to see an “enemy” in the market, and the more painlessly everything else will go through.
If you try to do everything calmly and steadily, then all this “staging” will take a little less time. If you do everything in a snap, as I and the vast majority did, the process can drag on.