(excerpts in this series were taken from the book “The 4-Hour Work Week”  By Timothy Ferris)

“Uncovering Fear Disguised as Optimism”

“There’s no difference between a pessimist who says, ‘Oh, it’s hopeless, so don’t bother doing anything,’ and an optimist who says, ‘Don’t bother doing anything, it’s going to
turn out fine anyway.’  Either way, nothing happens.”

“Fear comes in many forms, and we usually don’t call it by its four-letter name.  Fear itself is quite fear-inducing.  Most intelligent people in the world dress it up as something else:
optimistic denial.

Most who avoid quitting their jobs entertain the thought that their course will improve with time or increase in income.  This seems valid and is a tempting hallucination when a job is boring or
uninspiring instead of pure hell.  Pure Hell forces action, but anything less can be endured with enough clever rationalization.  Do you really think it will improve or is it wishful
thinking and an excuse for inaction?  If you were confident in improvement, would you really be questioning things so?  Generally not.  This is fear of the unknown disguised as optimism.

*Note we are not implying that you should quit your job without a sound exit strategy.  In fact, keeping a job while growing your trading career is the best move in our minds. You can use the
J.O.B. as a tool to accelerate your situation.  So quitting does not need to happen until you are financially sound and capable to transition to a full time trader.  Remember we are not talking
about taking backwards steps here.

So, work into your plan of attack how you will use the job to meet your obligations.  Work towards paying off debts to increase your freedom,  Focus on the entire financial picture.  It is
all connected.  Seriously, you can trade part time and make really good money.  But it is a riskier investment than your 9-5 job.  So take care and caution to preserve your stability.

GOOD TRADING

(excerpts in this series were taken from the book “The 4-Hour Work Week”  By Timothy Ferris)

“Conquering Fear=Defining Fear”

In the last post 2-4 “The Power of Pessimism”  I talked about facing your fears by using a plan of attack and addressing what those fears are that are keeping you in place.
I would like to define this process in greater depth.

Define the nightmare.  Create in your mind what that trading experience would be: whether it is a first loss, a streak of losses, or a serious drawdown causing a set back in
your trading account.  Create that scenario in your mind and then live as if you are there in that moment. (possibly you have already experienced it or are living inside that
nightmare right now?)  Either way put yourself there and record the emotions that you feel.  Once you have defined the emotions you are feeling, refer back to your plan of attack.
Make sure that you have defined the fear as it really is, then make any adjustments to how you will cope with the emotions that you are having and define a plan to extinguish them.

GOOD TRADING

(excerpts in this series were taken from the book “The 4-Hour Work Week”  By Timothy Ferris)

“The Power Of Pessimism: Defining the Nightmare”

“To do or not to do? To try or not to try? Most people will vote no, whether they consider themselves brave or not.  Uncertainty and the prospect of failure
can be very scary noises in the shadows.  Most people will choose unhappiness over uncertainty.”

The solution is to develop a plan of attack.  If you find yourself unable to pull the trade trigger because of uncertainty.  Take some time to write down on a
sheet of paper what the fear is, distinguish what the pros and cons of this uncertainty that you face in your trading.  With that clarified you can now
devise a road map as to how to avoid the pit falls and what you will do if you hit a pit fall.  For example:  I will only trade 2% of my account on any given trade.
I will place a stop loss on all trades at the resistance level or at no less than a 3% draw down on my account. If I do encounter a drawdown of this amount I will
return to demo trading until I have had twenty positive trades in a row.

It is simple things like this that can make all the difference in defining the nightmare and facing that fear.  As a little boy, when I had a bad dream my mother would
comfort me and tell me that I had the power to change that dream at any time I wished.  As a father I find myself guiding my children through the same process of
mental control.  As Traders we need to empower ourselves with the same mental control to face our fears and plan our attack.  Remember the noises in the shadows at
best are just noises.

GOOD TRADING!

Trading is all about making money.  If you are doing it for any other reason then you are doomed
for failure.  You need to trade from good old mechanical thinking, which is a mark of a good
trader.  You get a signal you make a trade you get another signal you exit a trade.  Large profit,
small profit, or small loss it is all part of the process in becoming a good trader.

Now you need to meet people, get out and do things, find other interests.  Remember what you did
before you started trading.  Spend time with your family, friends, and anyone that does not deal
with trading.  When you have a life other than trading you will be a better trader. 

This will help you keep emotions, fear, and greed out of your trading.  You will have more fun
and be in a frame of mind to make more money by seeing and acting on the proper signals.

Question:

Okay great and thank you for your reply. I’ll go through all of the Webinars for the jump-start program and if I have any questions I’ll send them to you if that’s okay. Also, in your experience was the demo helpful? The only reason I ask is because I have never been good about demo trading because it doesn’t seem to simulate real spreads on your entries and it doesn’t account for things like slippage. Also, there is no emotional aspect of it so that’s tough too. I have made myself a demo account fortune but it didn’t prepare me for the real game. Do you see a big value in demo trading first or should I just begin trading with small leverage and pay a "learning tuition" as I begin. Thanks for your help.

Reply:

We feel it is wise to learn how the tools work.  First the trading platform, then the trading strategy by simulated trading, demo trading, then live trading.  If you go through the motions of spotting the entry signals, placing the orders, managing the trade, getting an exit signal and closing the trade then when you go live it is all natural and can cut down on the emotions. 

Vince Lombardi was big on doing the basics over and over again and again so you don’t even have to think when the big one came along you just react, you do not have to think about it just do it.  I think demo trading is great for the above reason it develops your skills and trading reflexes.  All traders can do what they would like in the way they would like.  The most important thing is to learn how to use the tools.  Why should you have a draw down in your live account while learning?  We also feel that you should never stop demo trading. 

If you have been away from the market for a while then you can demo trade to get back in the flow with the market.  Not for long, just a few quick entries.  If the demo trades start to work for you then you can move to your live account and hit all the, add on signals.

Demo trading is not to make a lot of money; it is to develop the reflexes and skills to trade well.  The slippage has nothing to do with being a good trader the spread being a little wider says you are trading the news.  Usually when the spreads come back to normal there will be some good entry signals as well.  The spread can act as a barometer for the sentiment of the market, is it settled and has it found a direction to go or is it bouncing up and down.   

We hope this is not too strong.  Everyone should treat the demo as if it were a live account, having the emotion and being invested in the trade. 
 

….Yesterday afternoon, I closed down the platform, walked away from the computer and went for a walk with my little girl while my wife was still at work.  I returned about 4 p.m., put daughter down for a nap, and then meditated upon the wins and losses and tried to determine what had happened and what I had let myself do in going against my trading rules.
 
At 7 p.m., I logged on to www.forexsrtrategysecrets.com, went through all of the videos, took notes, and refreshed my memory on the simple things that I had become somewhat complacent in doing.  I went through videos a second time, a third time, and then a fourth time before finally going to bed (LOL) at 3 a.m.  This morning I woke up, was excited to get the day started, made breakfast for my family, and then opened up my platform.  Around 9 a.m., I was able to see wonderful setups from several currencies.  I was back, my mind was clear, my confidence had returned and I was ready to go.

Suffice it to say, the account has grown $7,000 this morning up to the capital amount of $29,400 (1:100) because of one reason!!!  I stopped, went back to basics that you both teach so well, refreshed my memory of these basics, took notes, and then started repeated the process four times.

This has become longer than I thought, but I do appreciate all that you two do in helping people like me learn that forex trading is actually fairly easy when keeping it simple and using the tools necessary.  I  appreciate everything you’ve done, everything you’ve taught me, everything you’ve written on your blog, and everything you’ve given free of charge because of your willingness to help others.

You’re great people!  You’re great mentors!  And I only hope to continue to associate myself with you both.  Thank you!!!  Thank you!!!  Thank you!!!

-One Happy Trader!

P.S.  Below are my trading rules:

1.  Always trade with a stop loss.

2.  Always trade with a stepping trail stop.

3.  Always trade with the larger trend from H1 or H4 periodicity.

4.  Always trade with between two to five percent of capital per position.

5.  Always lock in pip profit with hard stop loss at 125 – 150 pips while letting remaining continue.

6.  If three consecutive losses occur, stop live trading for 24 hours, return to notes, books, graphs, and trade demo.

7.  Always keep it simple!
 

Kirk and Jed,

I wish not to make this eloquent or excessive in verbiage.  With this being said, let me continue.

This week was a difficult week.  Trading was down as were my emotions and confidence.  In times past, I would not let any given loss disrupt that which I was trying to obtain.  However, a very good friend of mine asked me if I would manage about $18,000 for him on the foreign exchange.  Reluctantly, I agreed to so do.  (He had been trading a bit on his own, had used Launch Pad, the Norwood Stop, et cetera, but wasn’t accomplishing a lot in his own trading.)  He let emotion get in the way.  He had suffered a few severe losses while trying to get even with the market.

I began trading his $18,000 first thing Monday morning with excitement, anxiety, expectations, and goals.  Monday’s trading went well, and we were able to grow the account to $21,500.  Tuesday, likewise.  However, on Wednesday I took shorted GBP at exactly the wrong place and it turned to go against me.  Because of my desire to make sure this individual’s account remain positive and "impressive," I let it go against me about 70 pips.  Not a huge loss, but not terribly small either.

It happened again.  And a third time.  I was worried about that which he would think and feel regarding my abilities to manage his funds and/or trade my own funds.  He has seen my trading reports and knows that I have had great success in trading the forex.  However, because of perfectionism, I wanted his account to remain perfect.  So, I went against my rules of trading and placed another trade following three consecutive losses in hopes of "making up" that which I lost.  Unfortunately (and fortunately) it happened again.  Being frustrated, I entered a fifth trade which … again … went against me.

By this point in time, my own confidence was drained, my emotions were utterly wrecked, and I hadn’t the faintest idea what to do.  Now, the account was still positive from the beginning capital of $18,000; however, I had grown it to $25,600 in 2.5 days.  (The five consecutive drawdowns brought it to $22,600.) So, what did I do?….
 

She did not know all that she needed to know to be a successful trader.  The main thing she was lacking was money management.  She would take a demo account and in two weeks she would double the account.  Then in the next few days she would lose it all and blow up the account.   She really knows what to do when the market was moving but she did not realize there is a time to stop trading and let the market regroup.

She would get frustrated and quite trading for a while then start again.  This went on many times until she decided that she would learn what she was doing wrong and ask some questions.  Once she started to follow some good solid trading rules and discipline then she really started to make money.  She took one account from 2600 to 4500 and another account from 700 to 936 in one month.  The target is to double each account then she would get a live account to trade and would be able to keep some of the money she makes.  She would leave some profits in the account each month so the account can grow and make it easier to make more money.  Now she is really motivated to follow the rules.  It is amazing to see the discipline in her trading habits.

I asked her what was helping her to make money now and keep it.  She told me the following:

==She now only trades when the market is moving.  She now trades during the US session between 7am and 10am mountain, and between 5pm and 9pm mountain.  Before she would trade when she had a minute, which was when the market was going sideways.

==She finally grasped the concept of looking at the trend on a larger time frame and timing her entry on a smaller time frame.

==She now trusts the indicators.

== She will close a losing trade rather than let it run and hope that it will come back.

==Confirming of the indicators.  She has to have two or more confirming signals before she will enter the market.  This increases her chances of a profitable trade.

This is a short overview of one traders journey until the light came on.