Everyone, even long-term traders can learn (or relearn) something from brand new traders. All this week, my 19 year old niece, Emily has been looking over my shoulder while we were in the Explosive Growth Mentoring trading room. She’s decided that maybe Forex trading is something she wants to learn, so she started a list of rules this morning and I thought they were so insightful that I would share here. Pretty sharp for a teen who didn’t even know what a “forex” was until late last week. In fact, she didn’t even have a clue what trading was. It was one of those situations I think anyone who has traded Forex for any time has run into; how do you explain to someone what you do? But that’s a subject for another day.
I was scanning the charts looking for a good entry. The markets started moving early today – before the typical New York market opening – so many moves had already happened, or were not quite ready. During that 30 minutes of silence, Emily was busy writing in her ever-present journal. In a few minutes she told me she had written a list of rules to start her trading plan. She wanted me to read them. Here’s her list:
- Don’t be stupid.
- Don’t be greedy.
- Look to the left to see patterns.
- Listen to Tim, he’s a smart guy (awwwww).
- Winging it may work for birds but never for me. Make a plan.
- Always try to salvage a bad situation.
- No trade is worth Everything.
- Don’t Be Stupid.
- Don’t trade scared.
- To be reckless is to be stupid and what did I say? Don’t. Be. Stupid.
So, I’m thinking that #4 is the best, but I may be prejudiced.
I think as Emily goes forward and learns more about Forex trading, she’ll be adding to this list, but for someone who has only been listening for a few days I think it’s pretty perceptive.
The Most Important Thing
I’m thinking actually the most important thing in the list is exactly what Emily believes is the most important thing: Don’t Be Stupid. We are constantly doing things that we know we shouldn’t be doing. Telling ourselves not to be stupid – before we actually do something stupid – is a very wise thing to do.
While on the subject of trading rules, it’s important as a trader to have well-defined trading rules. When you’re in a crunch, you want to be able to fall back on your well-established rules, rather than emotions, to handle the situation. In addition to Emily’s list, your plan should include what pairs you will trade, what strategies you will use, where your stop losses and take profits will be, how much you will risk on each trade, when you will trade, when you will stand aside.
My Favorite Mantras
In addition to the plan, I have several mantras that I repeat to myself when I’m about to enter a position. Things like “Don’t be an idiot”, “I’d rather be out of a trade wishing I was in it, than in a trade wishing I was out”, “What if this goes against me, am I willing to sit here until I can work it out”, “Have I hit my daily profit target? If yes, pass this trade by” and so on. And yes, “My Favorite Mantras” is a nod to a 60s TV show some of you may remember.
Psychology is 90% of trading, the mechanics of the trade (entry, exit, size, etc.) are the other 10%. Make sure you have the psychological part right.
Have a great trading day,
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