The Art of Trading Forex – Part 1

In war, you cannot control the enemy nor know exactly what they will do. In trading, you cannot control the market nor know for sure what it will do. In both war and trading the only variables you can truly control are your own mind and your own actions. The better you control your mind and actions while trading, the better you will do. In war, one side will naturally be less prepared and trained than the other side, and this is usually the side that loses. Just as a military can tilt the scales of success in their favor by out-preparing their opponents, you can put the odds of trading success in your favor by being as prepared as possible before you go to “war” trading the markets.

Now the general who wins a battle makes many calculations in his temple ere the battle is fought. The general who loses a battle makes but few calculations beforehand. Thus do many calculations lead to victory and few calculations to defeat: how much more no calculation at all! It is by attention to this point that I can foresee who is likely to win or lose. – Sun Tzu’s Art of War

The above quote is from the famous Chinese book The Art of War by Sun Tzu, it is one of the oldest and most successful books on military strategy ever written, dating back to the second century B.C. This book on military strategy has many similarities to the world of trading. War and trading both deal with constantly changing variables that cannot be predicted with 100% accuracy. Thus, in both war and trading the best way to put the odds of success in your favor is by being as prepared as you possible can BEFORE you enter the battle, or before you enter the markets.

Trading truly is an art

To be a successful Forex trader means that you have developed the internal ability to control both your mind and actions. It also means you have polished your chart reading skills and market analysis skills to the point of having supreme confidence in your ability to “read” the market. Reading the market is not a technically difficult thing to do, however, there is certain element of discretion and “gut” trading feel that sets the top traders apart from the masses. For some traders, fully developing this discretionary trading sense comes sooner than it does for others.

Trading cannot be approached in a mechanical fashion because the markets are dynamic and changing all the time. The only way to effectively navigate such an environment is to follow a method or a guide that gives you some sort of framework to work off of. The obvious choice here is price action, because it is the price action of the market that displays the underlying sentiment of all participants. So, by becoming a successful Forex trader you are also becoming a successful “artist” of the market by learning to read the ebb and flow of price.

Prepare your mind for the “war” of Forex trading

Preparing your mind for the battle of trading is essential for success. The battle consists of you vs. your own emotional urges and impulses, so essentially you are battling yourself… not other traders like many people seem to think. You need to enter the markets with a clean mind, free from confusing trading systems or over-analysis of news and fundamental data, and be consciously aware of the reality of trading.

You can prepare you mind by accepting the true nature of trading and the reality of what is possible given your individual financial situation. If you have a $1,000 trading account, you aren’t going to earn enough to live on and quit your job, it’s just that simple. You need to focus on the mechanics of proper trading and proper forex money management first, and then the money will come. Most beginning traders do the opposite; they focus on the money first and proper trading and risk control techniques later only after losing more money than they care to admit.

The best traders do not care if they win or lose on any given trade, because they are aware that trading is about proper execution of their trading edge and proper risk management, and they know that losing some trades is just part of the game. Another reason successful traders do not care if they win or lose on any given trade is because they don’t put unnecessary pressure on themselves to make a certain amount of money. Trading is profession where you never know for sure how much you will earn each month, so you have to learn to master your trading strategy and follow it to the T, whatever gains you make on top of that should be seen as success.

When you enter the market with unrealistic expectations about how much money you can make given the amount you have to trade with, you set yourself up for failure right out of the gate, obviously this is not the best way to get started. Also, when you put pressure on yourself to make money on every single trade you are setting yourself up for failure. You need to approach the markets from a realistic attitude about what’s possible with the money you have available and given the fact that you MUST manage risk effectively on every trade, if you can achieve and maintain this attitude, you will develop an effective trading mindset.

Being mentally prepared for trading on an on-going basis

What happens when you fall off the track and your emotions get the better of you in the markets? You know when you spin out of control and lose a bunch of stupid trades in a row? I’m willing to bet this has happened to you but only after it’s all said and done do you realize the mistakes you’ve made.

The way around committing these huge emotional trading errors is to make sure you are mentally prepared not just as you start trading, but every time you trade. You need a Forex trading plan to condense all of your trading strategies and money management ideas into one concise and practical format. This will give you a framework to base your trading off of and will hopefully act as a guide to keep your mind on the right track. You need to include your trading strategies, your money management plans, and any important insights for staying motivated to remain disciplined.

The next thing you need to employ to help you remain mentally prepared on an on-going basis is a Forex trading journal. Keeping a track record of your trading is of paramount importance to your on-going success and to maintaining the proper mindset as you trade the markets. You need to see via hard evidence how your trading is progressing (or not progressing), this will give you some much needed insight into what you are doing wrong or right, and then hopefully you can learn from these insights and become a better trader.

In the final part of this article series we are going to talk a lot more about trading journals and trading plans, for now you can learn more here: forex trading plans and forex trading journals

Part 1 Conclusion:

The art of trading is something that takes time and effort to become proficient at. There’s no “magic bullet” to making money in the markets like so many scam artists and marketers in the Forex world would like you to believe. You have to learn to trade effectively from a real trading methodology like price action, and you have to combine this with the proper trading mindset and the proper tools to help you maintain positive trading habits.  You can read Part 2 Of the “Art of Trading Forex” Here

Nial Fuller

About Nial Fuller

Nial Fuller is a Professional Trader, Investor & Author who is considered ‘The Authority’ on Price Action Trading. His blog is read by over 200,000+ followers and he has taught 25,000+ students since 2008. In 2016, Nial won the Million Dollar Trader Competition. Checkout Nial's Professional Trading Course here.