By Your Trading Mentor
EVERYONE ISN’T MAKING MONEY FOR THE SAME REASONS
Recently I had to order a new batch of client tickets which means that I have now officially mentored over 100 traders one to one. And one thing I’ve realised is that a lot of them struggle with the same thing. I mentor traders who are complete beginners, anywhere to those with a bit of experience, all the way to those who have been trading for several years and struggling to get the results they want from their trading. Often the traders with a lot of experience feel very frustrated because they have been spending years learning fundamental analysis and technical analysis but are somehow struggling to make all of that information actually equal profits for themselves. And I’ve managed to identify a few common denominators which these traders have in common. When people come to me looking for a forex trading mentor and say they are struggling with their trading I now always ask them the same questions which are:
What time frame are you trading on?
What time of day are you placing trades at?
What strategy are you using to get into your trades?
What lot sizes are you using?
Are you on top of the economical calendar?
LETS BREAK THESE DOWN
WHAT TIME FRAME ARE YOU TRADING ON?
Almost always if a trader has come to me looking to be mentored because they are struggling to get results from their trading, they will either be trading on too small a time frame or the time frames they use are random and inconsistent. Firstly, on the point of the time frame often being too small, whilst scalp trading is a legitimate style of trading and many traders make a lot of money this way, it can also be thought of as being slightly advanced in the sense that you have to react very quickly and have impeccable risk management. I would say scalp trading is what you work your way up to if you have mastered swing trading or day trading first. On the point of the time frames being random and inconsistent, this shows that maybe no real trading strategy is being used here if you can’t say exactly why you are using certain time frames.
I like to start newer traders, or even traders who have been trading for a while but who are struggling to get results, on the 4H time frame. There’s a few reasons for this. Firstly it’s slow enough that you can take the time to analyse your trade set up with enough care rather than rushing into a trade because you are afraid you are going to miss the move. A lot of the indicators actually work better on the four hour as its not as sensitive to small fluctuations and won’t give you loads of false entires. For example, I’m a huge fan of using Heikin Ashi for momentum, it works very well on the 4H but if you go any lower to the 1H chart then suddenly you are getting false entries all over the place. It also works very well for traders who are working another job (as most are when they first start learning how to forex trade). If you only have to check the charts every 4 hours to take a reading then this is a lot more manageable. Trading the 5M chart while trying to hold down you 9 to 5 will lead to chaos in both and perfection in neither. You’ll want to keep your current boss happy as your day job is your main source of income at the moment right?
WHAT TIME OF DAY ARE YOU PLACING TRADES AT?
Another great thing about the 4H chart is it can help to create structure in your trading day. If you are taking a reading every 4H you can work out what time you need to be doing the same thing at every day. If you are taking a reading on 28 forex pairs every five minutes, again, this can lead to utter chaos. A lot of the time when traders first start out they don’t realise how important timing is in trading. I actually think this is up there with one of the most underrated aspects of trading and I don’t hear other trading mentors talking about this enough. Forex markets can often reverse as sessions open and close, they can often spike on news releases and they can be almost static on the lead up to news or during other times of the day. If you are just randomly hopping on your trading desk to place trades when its convenient for you to do so, you will need a lot of luck on your side to succeed as a forex trader. Strategically planning your day and your trades around the 9 trillion dollar market rather then expecting it to move according to your breaks at work is highly recommended.
WHAT STRATEGY ARE YOU USING TO GET INTO YOUR TRADES?
Often when I ask this question to a new trader or a trader who is disappointed with their results, I will get one of two answers. They may have no strategy at all which is easy enough to fix as they just need to be taught one. Or their strategy isn’t diverse enough to be effective. For example, new traders often LOVE indicators and think that if they use enough at once or find the right combination, they will have found the holy grail forex strategy which all traders are searching for. But while indicators can be helpful they are almost always based on lagging information. A good strategy also includes fundamental analysis and price action as well as some risk management and a clear take profit strategy. Trading Angel Academy teaches three different strategies which each go through a seven step process. For more details hit this link:
WHAT LOT SIZE ARE YOU USING?
This information can tell me a lot (lol). Getting the right lot size for you and your account is more of an art than a science I would say. While there are rough guides you can follow you need to consider your own personal risk appetite as well as your risk tolerance (risk appetite is how much you are willing to risk and risk tolerance is how much you are able to risk). It’s important that the lot size isn’t so big that you are scaring yourself every time you open a trade and end up closing the trade early because small fluctuations spook you. But it’s also important your lot size is big enough that you are emotionally invested in the trade and learn from each one you place. Usually new traders are actually using too big a lot size hoping to make money quickly. If you know me at all you’ll know I love a trading analogy and particularly favour car/driving related ones. So here goes; trading with a small lot size is like learning how to drive in a car park before you get on the motorway. No one’s saying don’t get on the motorway in six months time but you never put a new driver there on day one!
ARE YOU ON TOP OF THE ECONOMICAL CALENDAR?
It’s easy to get so all consumed in technical analysis when you first start learning to trade forex , that you forget about fundamental analysis (which I argue is actually the thing which moves the markets). You need to understand technicals and how to read a chart if you want to be a forex trader but lets be honest, the value of a currency is to do which how that country is doing economically rather then if there was an engulfing candle or the RSI showed divergence. Not only does understand fundamental analysis help guide you in the semi long term/long term and short term direction but also knowing when the big economical data releases are due out will give you clues as to whether you actually want to be out of the market at certain time as you might get stopped out on spiking.
I made a video on YouTube recently which goes into this same topic, if you’d like to watch it click this link
Love from, Your Trading Mentor x