How do you feel when you wake up to find that your position you were so confident about has moved against you for a loss? If you’re like most traders, feelings of frustration or even hopelessness probably come to mind.
The setup looked so favorable and yet it still resulted in a loss. You start to wonder what the heck it’s going to take to make it work in this crazy business of Forex trading.
But here’s the kicker, not all traders feel this way after a loss. In fact those who have found their trading edge don’t even flinch at the thought of a loss because they know that their winning trades are in front of them; they understand that losses are just part of the game.
What does it mean to know your winners are always in front of you? That’s what you are about to find out…
A Game of OddsTrading Forex or any other financial market for that matter is simply a game of odds. There is no such thing as a guaranteed result in this business, regardless of how favorable a setup may look.
Like any game of odds you are going to have winning ideas and you are going to have losing ideas. The goal, of course, is to put yourself in enough favorable positions to come out ahead over an extended period of time.
Those are the key words, “extended period of time”. It doesn’t mean you have to wait for a year to see profits, but it does mean that you shouldn’t get wrapped up in trying to win every trade; it simply isn’t possible nor is it necessary to turn a profit as a Forex trader.
What I’m about to say may surprise you. For reasons I just mentioned your win percentage is the least important statistic as a trader. I get emails every week asking what my win percentage is and truthfully, I have no idea what it is and I don’t care enough to find out.
The only thing that matters to me is how much I make when I’m right and how much I lose when I’m wrong. Everything else is irrelevant.
Why then is this statistic so prevalent in the world of Forex, particular black box trading systems? Because the sellers of those trading systems are preying on your ego. They know that a high win percentage looks and feels good because after all, who doesn’t like to win more than they lose?
What is Your Trading Edge?Trading edgeIf you don’t have the kind of confidence to know that your winners are always in front of you, chances are you don’t have a defined trading edge. In other words, you haven’t established an approach that gives you the upper hand in the market.
Think about it this way, even sports teams that win championships have losses during the regular season. The only way they are able to go on to win the championship is by having the ability to bounce back after those losses.
In the same way a championship sports team remains confident despite losing, you need to have confidence in your trading edge so that you too can bounce back from trading losses in the Forex market.
Without that confidence each loss becomes a mental setback rather than an experience from which you can learn from your mistakes and ultimately become a better trader.
Confidence Before Success or Success Before Confidence?A common question that is often directed at those who have found success is – did your confidence breed success or did your success give you confidence?
I think any successful person, trader or otherwise, will tell you that it’s a bit of both. You must have confidence in your trading methodology if you intend to find success as a trader. At the same time, finding success is a journey during which your confidence will grow as you learn what works and what doesn’t work.
What does this have to do with knowing that your winning trades are always in front of you?
It all comes back to your trading methodology. Great traders don’t mind taking losses because they know their winners are always in front of them. They know this because their trading methodology is sound, which in turn gives them confidence to know that they can easily rebound from a loss or even a series of losses.
Final WordsThe most important aspect of becoming a successful Forex trader is having a well-defined trading strategy. Not only will it stack the odds in your favor and allow you to profit consistently, it will neutralize the negative feelings that are often associated with losing.
Of course developing such a strategy and having the discipline to follow it are easier said than done. But it must be the starting point for your journey to consistent profits in the Forex market. Otherwise you will quickly find your emotions running wild and your account balance spiraling out of control.
