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TRADING PSYCHOLOGY


FX


results. Our strategy defines where we are among traders – among the 75% of losers or among the 25% of winners.


Every successful or professional trader has a trading plan. It is quite difficult to create a proper trading plan according to our style. Trading without a plan is like gambling, in the long-term we will definitely be among the losers. Te trading plan should be followed precisely, and each break of its rules could be the reason for a distraction from the plan and future failure.


Figure 2. Winning Traders Decision Process Relationship trader. Casinos know that


statistically


their chances to win are higher than their chances to lose. Tey do not know in which particular game they will win and in which one they will lose. Tey only know that in a certain number of games there is a certain probability to win and a certain probability to lose.


It is the same with trading. We have to develop an edge, meaning that we should have more probabilities to win than to lose. In order to reach this we need to have a method in place. Like the casino, we also cannot know the outcome of a single trade, but we may know that a certain trading strategy will have a certain outcome. Tis strategy has produced a certain percentage of profitable trades and a certain percentage of losses in the past. We should always remember that past results do not guarantee future profits, but this strategy gives us confidence that there is a higher probability to be profitable. Our skills must help us to make this probability higher.


Our experience will help us notice changes in the market conditions and adapt our system to the new circumstances.


PRACTICE CREATES CONFIDENCE


We have to go a long way in order to start thinking in terms of probabilities instead of predicting the outcome of every single trade. We have to create a system and test it until we are confident in its execution and in our post-trading management abilities. We cannot build our confidence only on theoretical knowledge. Confidence is created by experience and results, not vice versa.


Here is the paradox. We need to be confident when paper trading that our efforts will bring us positive results. We will be really confident that we have developed a successful trading style and a strategy when we have real


I strongly recommend practicing on a trading simulator on a regular basis: you will be able to test or streamline your strategy, improve your execution skills, build positive results and gain confidence. Confidence will be the key to your trading success. Use the Traders Gym it to test your strategies with various securities on various time frames, and see how your strategy would have performed with past market data. Try your strategy on a demo account and practice with real-time data. When you feel confident switch to real-money.


Te mind is a crucial macro area in trading. In order to be profitable, we need the right mindset. If our minds are busy with the fear of losing, we will never be successful traders. We have to avoid creating expectations for every single trade and learn how to think in terms of probabilities. Tis is a major key to success.


Rodolfo Festa Bianchet


Founder of Trade Interceptor ThinkMarkets


FX TRADER MAGAZINE April - June 2019 35


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