The author is an expert in the field of multi-asset trading.
7 Most Important Lessons from Long-time Traders
Anyone who’s been trading forex for a long time knows that experience is the best teacher, and that the best way to learn is to go through all the motions yourself. But you can take the lessons veteran traders have learned from years of trial and error and give yourself a head-start. Here are some of the most common realizations people come to after years of daily trading and contact with the ever-shifting markets, including the good, the bad, and the ugly.
Lesson #1 – Have a plan… and follow it
The two major things that constantly impede traders are number one - having a strategy. Not just having a strategy but having tested that strategy and knowing that historically it will produce a profit, because the surest sign that something is going to produce a profit in the future is what it’s done in the past. Of course, we cannot ever be certain of the future so it’s by no means a guaranteed indicator of future results, but the best thing that we can do is to try and find a formula that over time has shown to produce a profit.
And the second major thing is having the discipline to follow that plan. Having one helps you have the other so having a plan that you've tested and that you've gone through the process with and that you have clearly defined the rules for helps you in the discipline process. When you are confident in what you are doing, you will confidently do it no matter the obstacles. Many traders underestimate the importance of trading psychology and the daily process you go through in order to keep yourself on track and following a plan.
Lesson #2 – There is no perfect formula
One thing that traders with years of experience have to their advantage is a historical perspective and the benefit of having traded a system for a long enough time to see it be successful. Some people haven’t traded the same system for more than two hours in their entire trading career, and some other people start modifying their system and start changing things up every time they have one or two losses.
People search for a perfect formula where they’re not going to lose or where they can win 80 or 90 percent of the time. What you should be focusing on instead is refining your trading plan and getting very specific about the rules. After which you should spend every day running through the process and going through your trades to analyze what is a good trade and whether it fits into your trading plan and the rules you’ve set, and then trading it with consistency.
Lesson #3 – Consistency doesn’t mean winning all the time
Consistent profit doesn't mean that every trade is a winner, and consistency doesn't mean that you’re winning five in a row every single day. Being consistent means getting results over time. The key is in the discipline and in trying again and again and seeing failure after failure but continuing to come back and continuing to trade the plan because eventually, those volatile movements ease back and eventually they turn into great trading opportunities which ultimately turn into winners.
Lesson #4 – No matter how diligent you are, the market won’t always respond favorably
You may think that you’re being really good and really diligent about everything, but there are periods in the market where it looks like what you're doing just absolutely doesn't work, but what ends up happening is (picture this) consolidation leads to expansion or a broken trend in the market breaks the structure and false breakouts lead to incredible trend following opportunities and what you find out is that you can actually make money in the consolidation and you can also make money in the trend, all you have to do is be consistent with what you're doing.
Lesson #5 – Everyone Loses Sometimes
If you watched other traders, you’d get to see every day whether they're making money or losing money and you’d get to hear from them talk about the losses that they’ve had. Sometimes those losses can last a day, sometimes they can last a week and sometimes they can last a whole lot longer than that. If you were able to see a large pool of traders you’d see that even though there certainly are people out there making money every single day, not everything that they touch turns to gold and there really is a battle going on and some days really are bad days and some weeks are really bad weeks.
You might not have thought so, but even professional traders have bad weeks. Sure, you may have suspected that they have an occasional bad week, but you probably didn't know that this was a common thing all around and you shouldn’t get discouraged by it. You can be hitting 50 percent or 60 percent winning trades off the get-go, but what many realize only after spending some time with other traders is that down days and down weeks happen all the time, at the end, it’s the cumulative P&L that does all the talking.
Lesson #6 – What Matters is the Long-Term
A trader’s cumulative profit and loss statement (P&L) says it all. Any trader would have certainly had a bad week here and there, sometimes a terrible week, but what happens over time is what really matters. You will come to realize that having a system and having a process will trump everything else. If you continue to work on your plan and continue to trade your plan because you know that your plan is profitable then having losing days or even a string of losing weeks won’t stop you. Maintaining your discipline and continuing to trade through your plan is the surest path to success.
Lesson #7 – You are always learning
Traders who have been active in the markets for a long time treat trading not only as a job with the professional approach and attention it deserves but also as an educational experience, constantly learning and evolving. You are here trying to understand the world of forex and trading and you're trying to figure it all out, but keep in mind that this is not a game that you learn overnight. Trading is not a skill that you pick up after watching a two-hour webinar or after attending a thirty-minute presentation of a new trading strategy. Those things are useful, of course, but they won’t magically make you into a trading master all on their own. There are always new ideas or new ways of doing things, the trick is to take all you can get and incorporate the good into your own trading.
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