There are two types of traders... Which one are you?

There are different ways in which we can classify traders:

By the time frame they use to trade: there are long term traders who use the weekly or daily charts to open their trades, swing traders who use the 1H and 4H (some even use the daily chart) to look for trade opportunities, there are also day traders who use from the 5M to the 1H charts, and very short term traders or scalpers, who use the 1M and 5M (some even use tick data).

By the way they trade: Some traders like to trade based on fundamentals, other based on technical indicators, some others use forecasting tools such as Fibonacci or Elliot waves, others base their trades on price action, chart patterns, planetary cycles, some even use their pets :) to determine which currency pairs to trade.

But the one I like to use its much simpler: Disciplined and undisciplined traders.

Which one are you? Here are a few characteristics of each type of trader:

Undisciplined Traders

1. They don’t have a system, if they have one, they don’t follow it
2. They don’t understand that each trader is different
3. They take trades following advices from other traders, internet, forums, etc (when not using the same methodology)
4. They don’t use money, risk or trade management
5. They are looking for quick gains here and there...
6. Because they don’t have a system, the trade based on their emotions
7. They think trading is easy, and will become millionaires after a few months

Disciplined Traders

1. They do have and follow a system, every single rule, they understand it’s the only way to achieve consistent results.
2. They know that it is important to trade a system that fits their trading style, this way they’ll be able to follow it
3. They never take someone else ’s, they only take trades when their system gives them a signal
4. They understand that using money, risk and trade management it’s even more important than the signal itself. It’s what will keep them alive when things go wrong, and increase their profitability then the market behaves well
5. They no longer look for quick gains, again, they just follow their system
6. They understand that emotions play an important role on their trading, they try to use them on their favor
7. They know trading successfully come with experience, and they rather have steady results than trying to hit home runs

So which one are you?

Really, try to think about this, read each one of the points discussed above and see what type of trader you are.

To be a discipline trader is no guarantee of achieving consistent results, but let me tell you something, in order to become a successful trader, you first need to become a discipline trader, it’s like: to go from point A to point C, you need to get through point B, there is just no other way.

How much time would it take a discipline trader to become a consistent trader?

There is no right answer here... but I assure you, not much time...

Is it possible for an undisciplined trader to become a consistent trader?

No.

What can I get from this article?

It’s not important the type of trader you were yesterday, or last week or on the last X years. The past has passed, and the past does not dictate the future. So I want you to think now, Today, what type of trader do I want to be? You know the characteristics of them, you know which one is more likely to succeed. So again, what type of trader do you want to be from now on?

Feel free to comment, even if you don’t agree with me – the discussion might get interesting :). And don’t forget to “like it” or +1 it to share it!

Do you think a winning trade is always good?Think twice...

What is the first idea that pops up in your mind when you lose a trade? “There must be something wrong with my system”, or “I knew it, “I shouldn’t have taken this trade” (even when your system signaled it). But sometimes I think that we need to dig a little deeper in order to see the nature of our mistake, and then work on it accordingly.

What Mistakes really are

Most of us relate a trading mistake to the outcome (in terms of money) of any given trade. The truth is, mistakes have nothing to do with it, we make a mistake when we don’t follow our system, when the rules you trade by are violated. To have a better understanding of this, take in consideration the following two scenarios:
First scenario: The system signals a trade.

Action: Signal taken and trade turns out to be a profitable trade.

Outcome of the trade: Positive, made money.

Experience gained: It’s good to follow the system, if I do this consistently the odds will turn in my favor.

Confidence is gained in both the trader and the system.

Mistake made: None.

Action: Signal taken and trade turns out to be a losing trade.

Outcome of the trade: Negative, lost money.

Experience gained: It is impossible to get them all right, a losing trade is just part of the game; our raw material. Even with this negative trade, the trader is proud about himself for following the system. Confidence in the trader is gained.

Mistake made: None.

Action: Signal not taken and trade turns out to be a profitable trade.

Outcome of the trade: Neutral.

Experience gained: Frustration, the trader always seems to get in trades that turned out to be losing trades and let the profitable ones go away. Confidence is lost in the trader self.

Mistake made: Not taking a trade when the system signaled it.

Action: Signal not taken and trade turns out to be a losing trade.

Outcome of the trade: Neutral.

Experience gained: The trader will start to think “hey, I’m better than my system”. Even if the trader doesn't think on it consciously, the trader will rationalize on every signal given by the system because deep in his or her mind, his or her “feeling” is more important than the system itself. From this point on, the trader will try to outguess the system. This mistake has catastrophic effects on our confidence to the system. The confidence on the trader turns into overconfidence.

Mistake made: Not taking a trade when system signaled it

Second Scenario: System does not signal a trade.

Action: No trade is taken

Outcome of the trade: Neutral

Experience gained: Good discipline, we only need to take trades when the odds are in our favor, just when the system signals it. Confidence gained in both the trader self and the system.

Mistake made: None

Action: A trade is taken, turns out to be a profitable trade.

Outcome of the trade: Positive, made money.

Experience gained: This mistake has the most catastrophic effects in the trader self, the system and most importantly in the trader’s trading career. You will start to think you need no system, you know better from them all. From this point on, you will start to trade based on what you think. Confidence in the system is totally lost. Confidence in the trader self turns into overconfidence.

Mistake made: Take a trade when there was no signal from the system.

Action: A trade is taken, turned out to be a losing trade.

Outcome of the trade: negative, lost money.

Experience gained: Next time, the trader will think it twice before getting in a trade when the system does not signal it. The trader will go “Ok, it is better to get in the market when my system signals it, only those trade have a higher probability of success”. Confidence is gained in the system.

Mistake made: Take a trade when there was no signal from the system

As you can see, there is absolutely no correlation between the outcome of the trade and a mistake. The most catastrophic mistake even has a positive trade outcome, made money, but this could be the beginning of the end your trading career. As I have already stated, mistakes must only be related to the violation of rules a trader trades by.

These mistakes were directly related to the signals given by a system, but the same could be applied when getting out of a trade. There are also mistakes related to following a trading plan. For example, risking more money on a given trade than the amount the trader should have risked and many more.

How to Avoid Trading Mistakes


Most mistakes can be avoided by:

1. Having a trading plan. A trading plan includes the system: the criteria we use to get in and out the market, the money management plan: how much we will risk on any given trade, and many other points.
2. Secondly, and most important, we need to have the discipline to strictly follow our plan.

We created our plan when no trade was placed on (I hope so), therefore no psychological barriers were up front. By following our trading plan, we are making sure that all trading decisions will be taken on our best interests, and in the long run, these decisions will help us have better results. We don’t have to worry about isolated events, or trades that could had give us better results at first (monetary), but then they could have catastrophic results in our trading career.

Understanding the fact that the outcome of any trade has nothing to do with a mistake will open your mind to other possibilities, where you will be able to understand the nature of every mistake made. This at the same time will open the doors for your trading career as you work and take proper action on every mistake made.

Now, we are all human, and human make mistakes, we all do, but we can grow from them, mistakes; mistakes are a learning experience, we can learn invaluable lessons on every single mistake made. Every mistake is just one more chance to try harder and do it better the next time, because we don’t know if we are going to get another chance next time.

What do you think?

Feel free to comment, you don’t have to agree with me in order to leave a comment. And don’t forget to like it if you found this article useful.

Forex Market vs. Futures & Stock Markets

* Remember leverage could work in your favor as well as against you.

Things You Should Know About Forex Trading

How difficult is it to make money trading the Forex market? How much time does it take to actually be able to make a living trading the Forex market? These and other important aspects of trading are to be discussed in this article.

Trading the Forex market has many benefits over other financial markets, among the most important are: superior liquidity, 24hrs market, better execution, and others. Traders and investor see the Forex market as a new speculation or diversifying opportunity because of these benefits. Does this mean that it is easy to make money trading the Forex Market? Not at all.


Forex brokers agree that 90% of traders end up losing money, 5% of traders end up at break even and only 5% of them achieve consistent profitable results. With these statistics shown, I don’t consider trading to be an easy task. But, is it harder to master any other endeavor? I don’t think so, consider musicians, writers, or even other businesses, the success rates are about the same, there are a whole bunch of them who never got to the top.

Now that we know it is not easy to achieve consistent profitable results, a must question would be, Why is it that some traders succeed while others fail to trade successfully in the Forex market? There is no hard answer to this question, or a recipe to follow to achieve consistent profitable results. What we do know is that traders that reach the top think different. That’s right, they don’t follow the crowd, they are an independent part of the crowd.

A few things that separate the top traders from the rest are:

Forex Education: They are very well educated in the matter; they have chosen to learn every single and important aspect of trading. The best traders know that every trade is a learning experience. They approach the Forex market with humility, otherwise the market will prove them wrong.

Forex trading system: Top traders have a Forex trading system. They have the discipline to follow it rigorously, because they know that only the trades that are signaled by their system have a greater rate of success.

Price Action: They have incorporated price behavior into their trading systems. They know price action has the last word.

Money management: Avoiding the risk of ruin is a primary subject to the best traders. After all, you cannot succeed without funds in your trading account.

Trading psychology: They are aware of every psychological issue that affects the decisions made by traders. They have accepted the fact that every individual trade has two probable outcomes, not just the winning side.

These are, among others, the most important factors that influence the success rate of Forex traders.

We know now that it is not easy to make money trading the Forex market, but it is possible. We also discussed the most important factors that influence the rate of success of Forex traders. But, how much time does it take to have consistent profitable results? It is different from trader to trader. For some, it could take a life time, and still don’t get the desired results, for some others, a few years are enough to get consistent profitable results. The answer to this question may vary, but what I want to make clear here is that trading successfully is a process, it’s not something you can do in a short period of time.

Trading successfully is no easy task; it is a process and could take years to achieve the desired results. There are a few things though every trader should take in consideration that could accelerate the process: having a trading system, using money management, education, being aware of psychological issues, discipline to follow your trading system and your trading plan, and others.