To start this trading lesson I want to ask you two questions. To get the most out of this exercise and the concepts discussed in this article, you really need to answer these two questions honestly. Here they are:
1) Do you find it difficult to not be in a trade?
2) Do you find that you’re unable to remove yourself from your computer after entering a trade, or that it is very difficult to do so?
If you answered “yes” to either of these two questions, it’s fairly safe to say that you are addicted to Forex trading. Being a Forex trading addict is one of the fastest ways to lose your money. Just like an alcoholic or any other drug addict must keep taking more of their chosen substance to feed their urge, a trading addict needs to keep trading…almost all the time, in order to feel fulfilled or “in control”.
The minute a trading addict is not in a trade they begin to get anxious or perhaps feel as though they are missing out on a really great trade that will make them a ton of money. Instead of damaging their body like a drug addict does, a trading addict mainly damages his or her bank account, and as we all know, it is far easier to spend money than it is to make it, so if you are a trading addict you need to read this information very carefully…
1) Focus on higher time frames
Most traders who are simply gambling instead of trading, are not focusing their efforts on the daily charts. In fact, one of the quickest ways to induce a Forex trading addiction is to start trading lower time frames. I teach my students to begin by learning to trade the daily charts, only after mastering my price action setups on the daily charts should they move to the 4hr and 1hr time frames. The 1hr time frame is the absolute lowest time frame you should ever consider trading on. Anything below the 1hr is too “noisy” and random to be meaningful. I think traders often view a signal as a signal, when in reality a signal on a daily chart is significantly stronger and thus higher-probability than a signal on a 1hr chart or below. Check out this article for more on trading higher time frames in Forex.
2) Forex addicts are not accountable….just like drug addicts
Just like alcohol and other drug addicts, a Forex trading addict lacks accountability. Drug addicts long ago lost a sense of accountability to themselves; or a sense of staying disciplined and honest with themselves you might say. Forex trading addicts are also not accountable to themselves, they do not have a tangible Forex trading plan, and they do not record all their trades in a concise yet comprehensive Forex trading journal, because if they were doing these things they would very likely not be trading addicts.
If you want to avoid becoming addicted to trading or stop being a trading addict, designing a tangible and effective trading plan and recording all your trades in a trading journal to develop a track record, are two of the easiest and most effective things you can do right now to get you back on track
3) Being out of the market is a valuable position
Many Forex traders vastly underestimate the value of being out of the market. Indeed, being flat the market can actually be a very lucrative position. Think of it this way; by over-trading and reducing your overall winning percentage, you will have less money than if you just did not trade at all, thus, by simply avoiding over-trading and becoming addicted to trading you are actually further ahead financially than if you had lost money due to over-trading. Therefore, not trading can actually be a profitable or lucrative position. Do not underestimate the importance of this position. Many amateur traders are surprised to find out exactly how often professional traders actually trade.
Being flat the market also helps you stay calm and collected, and being a calm and objective trader is extremely important. Forex trading addicts are emotional and frazzled; they do not give themselves proper time off between trades and this works to keep them in a perpetual cycle of over-trading and over-analyzing. You need to think of trading as a game of patience; the more patient you are the better you will do over the long-run. If you can learn to cultivate and harness the discipline and patience needed to succeed in Forex over the long-run, you will trade like a sniper instead of a machine gunner. You can learn more about this higher-time frame style of sniper-like Forex trading in my price action trading training course.