8 of 10: “A Go-for-Broke” Attitude
Awareness # 7- “A Go-for-Broke” Attitude
Demo trading can be fun and we believe it definitely has its place when you are learning to trade the Forex markets. It’s also appropriate when practicing your entry and exit signals.
BUT trading forex in a demo account is NOT a video game where the entire purpose is all “fun and games”. Remember: Demo-trading forex can be fun when it reinforces skills. When a trader has a go-for-broke attitude in a demo account it will short cut their learning process.
What you do in practice trading will transfer to your live trading. If you are serious about trading for profit then trade your demo account like a life account and put all your energies into developing your trading skills.
A trader can not put it all on the line and wait to see what happens. If they do We all can probable tell them before hand what will happen to there account. So we can sit back to wait and see what happens with their trading career.
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7 of 10: Discarding Demo trading Forever
Awareness #6- Discarding Demo trading Forever
One very important part on a trader’s path to success is to continue to demo trade. By all means trade it like a live account.
In our opinion demo trading works when it prepares a trader to become skilled in identifying the proper set-ups, and allowing the trader to uncover their strengths and weaknesses in their trading. If you concentrate more on your strengths than the weaknesses, then the weaknesses will not be as much of a factor. Do what you do well over and over again until it is a mechanical reflex. When you improve your strengths it also helps correct your weaknesses and it is less stressful.
Don’t wait and see your live account disappear. Take charge of both your live and demo trading.
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6 of 10: Lack of Psychological Preparation
Awareness #5- Lack of Psychological Preparation
When a trader is using a live account he pays more attention to the results, the cause and effects, or at least he should. This gives psychological feedback to the trader. In demo accounts the ability to learn from emotions during trading is limited. In fact, they are often non-existent because traders are not accountable for their actions. They have nothing to lose so they think. They are losing valuable time because they are forming bad trading habits they will need to overcome if they get that far.
We suggest that you become accountable to someone else for your trading both live and demo. Have a review of your trades at least weekly, see what you did right or wrong, and see if there were any improvements
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5 of 10: Lack of Performance Analytics
Awareness # 4- Lack of Performance Analytics
Traders have the account history to monitor what they have done on their trades but they lack the discipline or knowledge on how to use this information.
We like to suggest that you take blocks of 20 trades to analyze. Once you have completed the first block keep track of how many were profitable and how many were losers. Keep track of the profit level. Keep track of what you did right and what you did wrong. Keep track of how you felt on these trades. Keep track of why you took each trade and why you closed each trade. Now take a second block of 20 trades and keep the same records you did on the first block of 20 trades. Watch for any improvements or digressions in your trading.
This is the beginning of your trade journal and part of your trading skill assessment. Look at the following record that came form MetaTrader 4 trading platform.
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4 of 10: NO-RISK Control
Awareness # 3- NO-RISK Control
Examples of no risk control are: jumping out of an airplane at 10,000 feet without a parachute, going scuba diving without air in your tanks, or going bungee jumping with out a bungee cord. Trading with out any risk control will have the same disastrous out come. To have a positive out come a trader needs, at least, a stop loss, proper lot allocation, good money management, and a good exit strategy. Anything less is just plain trading suicide.
It is very tempting when trading a demo account to over trade the account. Let’s go for broke, or it’s only a demo or we haven’t got anything to lose attitude. This is where bad habits are formed and they do carry over to the live trading. A trader can get carried away and be in a situation like driving a car without brakes or up a creek without a paddle, not having any control but just going where the momentum takes them.
If a trader is serious about trading then risk control is a must. Risk control falls in the category as one of the basics to successful trading. If a trader is controlling risk they are taking charge of their trading and not waiting to see what happens.
Filed Under Demo Trading Series, Disciplined Trader, Emotions | 4 Comments
3 of 10: Let’s See What Happens Trading
Awareness # 2- Let’s See What Happens Trading
There is NO penalty for just putting on any trade at any given time in a demo account. Because there is no penalty when demo trading a trader can fall into the habit of not putting on a stop loss, not managing the trade, and just letting it go, thinking lets see what happens. They also might think it will come back having the lets wait and see attitude. Every once in a while a trade does go in the favor of the let’s wait and see what happens trader.
When this happens we will hear about how much they made on that trade. When you are around this type of trader you can tell when they were lucky because they tell you how much they have made but they get quiet when they are stuck in a losing trade or are losing on most of their trades.
Traders should never fall into this type of trading because it will set them back in their learning curve. There is a chance that they will never recover and stop trading altogether. They are developing bad habits and they don’t even realize it. They are short changing them selves on their trading education.
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2 of 10: Trading The Big Dollar Moves
Awareness #1- Trading The Big Dollar Moves
When trading, how does a trader know which move is going to be the big move. They don’t. Trying to catch the big trades alone to get rich quick is a destructive habit. A trader should take all good signal trades. By doing this, they will make a lot of small wins and catch a big dollar move once in awhile. Usually by trying to trade only the big moves a trader is tempted to put large numbers of lots on the trade. With the multiple lots on the expected big move the trade will go against the trader often enough to blow up the account. Stick to your trading rules by starting out small then adding onto the trade if it is a good one.
This type of trading problem is that it has NO relationship or correlation to the ability to do this in a REAL trading account. We have seen traders make lots of money quickly just to see them lose it all. They have not learned how to trade, they were just lucky in catching a trend for a good run and not knowing when to determine that the trend will end. They had not developed the money management skills to keep the money they just made.
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Trade Journal Entry 11-21-08
This week has been a productive trading week. I have been spot on in my trades. I am up in all of my accounts for the week by the follow percentages: (1) 3%, (3) 5%, (1) 13%, (1) 23%.
It is Friday morning and I have been at the computer for a little over 30 minutes I have lost 2 trades out of 7 for the morning and am not taking sound signals. Today’s trades are still positive over, but I am tired this week as worn on me I had a rough night sleep last night, trying to get comfortable but unable. This week’s efforts have taken it out of me I guess. I am going to call it a day (early weekend); use prudence and stop trading for the week. I am not at my peak anymore and do not want to jeopardize this week’s gains by getting greedy and letting fatigue get me into bad trades.
Happy Trading All!
-Jed Norwood
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1 of 10: Take Demo Trading Seriously
We are about to begin a 10 post series that we are really excited about. In this series we will go over the importance of demo trading as part of a traders educational process. We will release one post on it for the next 10 tens. Demo trading should not be taken to lightly.
Take Demo Trading Seriously
We feel that demo trading is one of the most important parts of learning how to trade the forex market. A trader can learn how to use the platform, learn how to spot trending markets and flat markets, learn how to use good money management techniques, and learn how to take a loss and get right back in the market on the next signals. Perfect practice makes for perfect execution in trading.
It is a common belief in this industry that traders experience superb performance when trading in a demo account then go on to experience significant loses in their live trading accounts. It is good to experiment in the demo account but you need to take every trade seriously. This is the time to learn how to overcome emotions, the feelings of greed, the thoughts of trying to get even with the market, and it’s only a demo account thinking. Yes it is only a demo account but this is where you learn your strengths and weaknesses so be vigilant at all times as to what the market is willing to give and what you are seeing. NEVER take demo trading lightly. Think of every trade as if it were real money.
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Knowing When To Stop Trading
If you talk to enough traders you will find that most traders can make money in the currency market. The big issue is that most traders cannot keep what they make. We might think it would be easy to hang onto the money because we made the money while trading but as we all know it is not that easy to keep.
Can you think of a couple of reasons why the money is hard to keep? Here are a few thoughts I have had on trying to keep profits.
1. It was luck that the money was made in the first place.
2. The trader was trading without a plan. Just going with the news, a hot tip from a friend, or just the popular guessing game.
3. Over trading the account. Trying to make a fortune all at once.
4. Becoming emotionally involved and fearful about losing the money they made so they make mistakes on their entries, exits, and the money management of the trade.
5. Setting the stop loss to close and not letting the good trades run.
Filed Under Disciplined Trader, Emotions | Leave a Comment
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