Simplify everything when you can. In the age of people possessing the ‘I want to do it his/her way’ mentality to appease society, practicality and simplicity triumphs in Forex’s field. Marketing and the ‘keeping up with the Joneses’ mentality are clouding the judgment of these Forex traders. What worked for others may not necessarily work for you so do not blindly copy others in hopes of emulating their success.
The Forex Exemplar
A new hotshot trader arrives on the scene making decent gains and holding sky-high expectations, but with petite knowledge. Then, the hotshot trader wants more so he/she looks up an exemplary trader who is smashing in all corners. Or, he/she comes across an advertisement elaborating the be-all-end-all strategy to dominate the competition. A trader who does not research the background of the person he/she is mimicking ends up in the gutter sad and broke with the added fatigue.
Does sophistication beget more success?
The entire point being sophistication is a natural progression once you have mastered and applied the fundamentals grounded on practical and empirical evidence. It is something a trader can venture into but must never be an obsession. It is not that you are forbidden from using sophisticated techniques, but rather use these methods with a solid fundamental foundation. Speculators, people who make guesses and extrapolations, squander money on average.
Points of Focus:
1. Run into the Forexbattlefield with a knowledge repertoire of economic data and contemporaneous events from both countries you are about to trade currency with. It is also necessary that you are aware of the international relations between countries and the trade revenue routes.
2. Always stick by your concocted elaborate stratagem. If you cannot explain the said strategy to a 5-year-old, you have not understood it yourself let alone applied it. It is prudent to test your strategy forwards and back or rationalize a compelling reason before loading the money in.
3. Exercise restraint when trading. Emotional trading never ends well. Keep track of your leverage and introduce stop orders on each trade that you do. Finally, promise yourself to only spend a certain amount of money and not exceed it. Match this with your overall liability.
Risk Tolerance Management
Bear in mind the risk you are putting forth. Record the gap on your stop-loss from your opening trade on every trade. Never forget to set the maximum amount you can lose sans screwing yourself over into a deep financial abyss. Disregard this rule at your own peril. You will spiral down emotionally if you risk all that you have for an uncertain result that is not guaranteed success.
In summary, everything you once knew about the simplest traders raking in the most success, and the most elaborate and sophisticated traders garner innumerable victories are false. The crème de la crème of traders are individuals who are conscious of simple realities occurring in the forex market.