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How Do I Find A Forex Strategy That Works?

Get yourself fixed and a strategy will find you…

Seriously that’s How you find a forex strategy that works.  And it works really well.  It’s probably not what you wanted to hear but the truth rarely is.

How it all begins is the same for the majority of us. It’s all about the money.  We get seduced by the adverts of fast and easy cash.  Working from home or the beach for a couple of hours a day.  From here we are transported to a webinar where a voice of authority shows us how easy it is to make money…

Draw a line here and buy or sell the break.  Buy low and sell high… God this really is easy.  I do believe at some point there was an advert in America showing it was so easy a baby was doing it.  And to be fair it probably is a lot easier for a baby, as we haven’t given them a need to be right bias yet!

right time

 

Time Frame Correlation

Be honest you weren’t expecting that title, were you?  Neither was I, but I wanted a link as to why I am writing this post.

The idea for the post actually came from a friend who posted in a Facebook group that I am a member of.  Have been for a long time actually.  This was his post…

“I think, as a technical trader if you can learn to master the comprehension of this… half your psychological battle is won.” And below was this pic…

right chart

 

Which by the way is a very nice pic which shows nicely how at any given point in time we can be in two different trends.  How is this so you may ask or not if you totally get this concept.  For those of you that haven’t fully grasped Time Frame Correlation

If we look at the pic, the monthly is in an uptrend. But if we were to pick the middle of the first retracement as our moment in time.  We can see that the daily chart would show a down trend.  This is powerful stuff and it is absolutely one of the first things people should learn as a trading skill… without doubt.

Will your psychological battle be half won?  Not in my personal opinion.  The roots of psychology are always deep in our past experiences more often than not formed in our early years.  You can know all about time frame correlation and still lose in the market due to deep rooted psychological issues.

 

Pompous Knob

So, of course I wanted him to see the error of his ways.

I only ever want to help… let me get that straight.  I want to help everyone succeed. The trouble of course is that when talking psychology, it is rarely simple enough to answer in short posts in a FB group…

It’s not a great defense I know.  But seriously, I read my own replies next morning and wondered who that pompous knob was… ah… erm… it was me.

The reason I pipe up in the first place is to help struggling traders.  And in my opinion letting them believe that by mastering this skill of time frame correlation (which is very, very important) they would be half way to winning their psychological battle, would be wrong.

So, I replied. It’s making me cringe even writing this…

“If you mean” not a good start.  By writing those three words I have already alienated my friend. Put his back up or put him in defense mode.  Those three words are basically saying your wrong and I’m right and what follows is why.  Hence the title of this section. The conversation went on and I continued digging a bigger hole…

And because of those first three words we actually spoke AT each other making statements that were valid and true.  But not actually taking much notice of what each of us were writing.  Me trying to be right and him politely telling me to stop being a knob.

 

The Conversation

ME: If you mean by giving you confidence because it will keep you out of some bad trades. Then yes it does help with your psychological battle.  Time frame correlation is so important but so frequently over looked.

FRIEND: Yes confidence, not just to keep you out of bad trades, To really comprehend this is to just about lock in your success at this.

ME: You’ll find that success often finds us when we stay out of bad trades and don’t over trade.  All of a sudden you are trading profitably while only changing the above.  (I was taken over by an alien, made me type it honestly).

FRIEND: After you need to choose, what type of trader you will be, will you look to get in on predicted turning points, or will you wait the market tell you it has turned.  Most of our battle, is finding and choosing what type of trader we will be, the problem being we need to see returns before really trusting what we are using. forcing yourself through this period of finding trust in yourself and what you are seeing, is the tipping point.  Of course, finding equity management plays important role, that will come under our fight of greed.  Personally, I think fear is given to much emphasis, fear is just something that will all ways be there back ground noise. fear is stemmed from our other emotions, greed, excitement, hope and dis pear, these are the emotions which control our progress.

ME: The biggest killer of traders. Is the need to be right… 90% of all struggles and mistakes come back to that.  (ok not an alien, it was an AI bot got berserk)

FRIEND: There’s a few opinions on the top reasons, this being one, for myself, it was greed, setting time limits to be at a certain point or be making X amount of $ per month. Getting your expectations in line with reality and building a real equity management plan together is how you fight that greed, with over trading, over exposing and over leveraging.

GUEST SPEAKER: 100% agree with what you just said FRIEND. I’ve learned through my own mistakes that Risk Management keeping to your set rules come rain/shine is far far more important that choosing the right trades. Used to make 20%+ a month and then some almighty crash 9 months down the line – great thrills but I ended a loser. Keeping to the rules I’m making 3 – 7% a month with a drawn down less than 7%. Not getting rich too soon but steady grafting will get me there.

right and left hand dirty

 

Hindsight

Would show us that we both have valid opinions.  Just that mine are more valid than his… haha he can’t reply here.

First let me structure my reply more clearly and then I will share with you my experience both with myself and my clients.  Here’s what I should have replied:

“Great post my friend.  Too many people overlook the importance of Time Frame Correlation and get themselves into bad trades which can erode their confidence.  If they keep their mind on where the market is in relation to the higher time frames it may even stop them over trading also a confidence killer.  So, your right knowing all this certainly helps with improving their psychology.  It may not be half, but it is certainly a great start.  Keep up the great posts.”

And let’s face it, it is still only my opinion.  But I think this would have been a better comment to make.  And it would certainly have saved my blushes the next day when reading my own words.

Looking back the funniest comment was actually my third one.  Trying to explain the importance of the need to be right bias that thwarts all traders while… trying to be right.

Something I spent years working on in my trading but obviously still needs tweaking in my Facebook comments.  We are always learning.

 

The Truth Behind the Madness

So, what was I really trying to point out…

To start with Time Frame Correlation itself is a great skill.  But will not solve half of your psychological issues.  It will give you confidence by giving you better results.  As it will keep you out of some of your bad trades and may stop you over trading in the wrong areas.

Secondly there are a great deal of traders out there who are on the brink of success.  If they could just cut out their mistakes.  A mistake being to not follow your rules as pointed out perfectly by guest speaker.  If you don’t have rules then everything you are doing in the market is a mistake.  And that of course, that could all be down to learning something fairly simple ideas like Time Frame Correlation.

Which leaves us with the big one, our need to be right bias.  As guest speaker rightly pointed out our rules and following them are far more important to profitable trading than picking the right trade.  However, picking the right trade is only a small part of the need to be right bias.

 

Our Fundamental Need to Be Right

Unless you were born and raised on the moon or possibly raised by one of the remotest tribes on the planet.  You will have this need to be right bias.right-side of the moon

We were not born with it admittedly, but we are given it from the word go… this is a tree, this is a car, this is a house.  As children we have no concept of what things are or what they are called.  We are taught that trees are trees and that leaves are green.

“No Johnny that’s wrong it’s not a pink leaf it’s a green leaf” now that you have told Johnny what is right and what is wrong you will expect him to always be right in the future.  This starts the need.

And then we have school and exams.  Did you know for example that some traders without any psychological work can be happy with a success rate of 70% ish and yet some need 80% and there are even some who get quite upset with themselves if it falls below 90%.  Can you see where I am going with this…

Which is why some of the best people to learn to become traders are foot soldiers.  They have the discipline to follow orders without questioning.  So, they can follow rules without wanting to know why they work (which again is a need to be right bias problem) and they’re used to getting low grades… or a smaller winning percentage in the case of trading.  As long as they are making money they don’t care.  Their need to be right bias is less than say a grade A student.

Even over trading can be seen as a need to be right, even when the results are telling you to stop placing so many trades. “But my system works”  So you keep trading and lose all your money.

 

How Do I Find A Forex Strategy That Works?

Back then to the original question. Firstly, I have two problems with that statement:

  1. Most people who say that actually want a system not a strategy.
  2. Why would you only want one. No one system can work on all curriencies, time frames and market conditions.

The need to be right bias even affects us adversely as may be the case of guest speaker.  I have not spoken to him, so this is just speculation.  I have however come across this with clients as well so let me explain.

“Used to make 20%+ a month and then some almighty crash 9 months down the line – great thrills but I ended a loser.”  The need to be right may have kept him trading while refusing to see that the current system isn’t working. Resulting in being a loser.  Of course, I am interpreting being a loser as giving all his profits away.

“Keeping to the rules I’m making 3 – 7% a month with a drawn down less than 7%”  Some people are more affected by drawdown than others… the need to be right bias.  Being happy to settle for 3-7% in order to be right that his other system doesn’t work.  3-7% per month is brilliant don’t forget that. If guest speaker does that month on month for years that puts him in the top 5% bracket.  This is step one for any trader and is the hardest thing to achieve.

But if I were his Trading Coach I would simply check that his reasons for changing system completely were for his best results.  Because that system worked for 9 months and produced 20% a month.  There may have been a use for it if he understood how the losses occurred.  Again, pure speculation on my part to try and get across my point.  It may not have been a viable system…

 

The Elite Trader Program

Which is why we have the Elite Trader Program.  My friend was right about knowing what type of trader you are so that you can design several systems to suit you and your style of trading.  Don’t you think it would be even better though to have the psychology of a great trader first and then design your systems to fit that psychology.  That’s part of what we do…

Rather than trying to find what kind of trader you are by trial and error.  Let us give you the perfect psychology and help you determine the type of trader you are.  And let us show you how to properly and rigorously test your systems before going live with your own hard-earned cash.  This installs in you the necessary discipline to be consistent and in turn confident in not only your systems but yourself.

And I’m afraid my FRIEND fear is emphasized for the right reasons.  It is not stemmed from an emotion… because it is an emotion and a strong one to boot.  And it can put a knot in your stomach and uneasy feeling in your head.  It will make you feel uncomfortable so that you do something stupid.  Like not follow your rules.

The fear of being wrong and the fear of being right being the two hardest to shift because of the need to be right bias. That is ingrained in us throughout our childhood.

But in the Elite Trader Program with the help of your coach we move you past all these mental blocks and get you trading not just profitably but quit your job live on your terms profitably.

We will be opening up our next cohort soon… get a head start and contact us today.

support@specialfxacademy.com

Or comment below

 

P.S. As we are limited by time, our student quota this cohort will be 20.  To give you our very best. we cannot take any more students than that.

 

 

 

 

 

 

 

 

 


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Callum McLean

Co-Founder and Trading Psychologist at Special FX Academy
Trading Psychology Coach and Certified NLP Coach. It is my belief that trading is 99% Psychological. And it is by understanding and improving your psychology, that you can be a successful trader. Success is a formula that everyone can and should learn.

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