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The Forex Traders Holy Grail – What Most Forex Mentors Won’t Say

December 06
07:10 2012

The contents of this article are critical to success. Take the time to read it carefully!

Napoleon Hill once said that, “Concentration of effort and the habit of working with a definite chief aim are two of the essential factors in success which are always found together. One leads to the other.” As traders it is essential that we focus our effort and most are able to do so, but as Napoleon Hill said we must also have a definite chief aim that we are working towards. In last weeks training article we discussed the importance of a trade plan. A trade plan is a traders roadway to success and gives us a clear path to follow. In order to have a complete well rounded trade plan however we must understand what the definition of success really is in regards to trading. How then would you define what a successful trader is? Though this training article we will make an honest examination of that question. Hopefully through this article the holy grail of successful forex traders will be made clear to you as we discuss what the proper understanding of success in this market really is. I urge you to read this article 2 or 3 times as I have seen the contents of this article literally determine whether someone will succeed or fail in the world of trading!

Selling Your Soul For A Dollar…

In 8 years of educating traders one point became very apparent to me. You can give two traders the same information and some will succeed while others will fail. That is a cold hard fact most willfully neglect to tell those they mentor and train, but it is true! Why does this happen? Very simply it comes down to our mental ability and belief system. I can assure you that if you believe you will not succeed, you won’t. However if you believe you can succeed, you will. In no way am I say all you have to do is believe you can succeed and success will have no choice but to follow. On the contrary we as traders must have a clear definition of what trading successfully really is. Once we gain that proper understanding, only then can consistent profitable trading be achieved.

As a general rule of thumb traders have the wrong view of what a profitable trader is and thus changing this belief is the first key to a successful traders mindset. In general I do not blame traders, rather I blame the forex industry overall for the mentality that it creates in most that are new to the marketplace. Most in this industry are willing to lie to make a buck…and lets face it the truth doesn’t sell very well. How do they do this? Simply put mentors and educators sell the idea that successful traders are winning 70% of the time or more. They do this by pitching their strategy, system, or EA as having a 70%, 80%, or more percent win/loss ratio which conveys the idea that this is what success truly is. Are those types of a winning percentages in the forex market possible? Of course they are! Just because something is possible though, doesn’t mean it is easily achievable. How many reading this article can say they have won 70% of the time over the course of the last year? My guess is I could count the number on one hand AT BEST!

A Traders Best Friend or Worst Enemy

Setting the high goal of 70% win/loss for traders who are failing only instills in the subconscious mind that success is not possible. The more years that pass without hitting the classic definition of success, the more this is instilled in you. The subconscious mind can therefore literally be a traders best friend or worst enemy. Most top scientist who have researched the subconscious mind will say it is at least 100 times more powerful than the conscious mind. Therefore as you repeatedly fail you instill in your subconscious mind the belief that successful forex trading is not possible. Remember though, just as it can be your worst enemy in trading, it can also be your best friend. We have reached the crescendo in this article where we go from identifying the problem to recognizing the solution. I urge you to put the rest of this article into practice for three months and see if you are not trading more successfully. What we will talk about next is extremely simple yet powerful far beyond what you might imagine at first glance.

The Secret Equation For Trading Success

Many who read what I write next will disagree with what I term as the “equation for trading success”. These same traders who pass judgement have extremely strong opinions but lack any level of success in the markets by which they could back these opinions. I’m not going to get on a high horse here but I think everyone should understand the position I write from. For years I proved in our live forex trading room that I along with the trading strategies we teach are profitable. Unlike most educators who may have a good theory, I got in front of the group and took every trade live for nearly 3 years. Like every other trader I took losses and still do, however overall profitability was never a question as it was all live.

You cannot argue with profits, and thus why I so strongly urge those struggling to give this equation your full attention. I have literally seen this methodology or way of thinking transform traders who failed for years into successful ones. Its one thing for me to trade profitably, but does this actually work for YOU and other traders like you? I can confidently say yes it does! We see success stories happen frequently with our members. What then is the equation for trading success. First we will break each individual piece of the equation down, and then we will walk through a real life example.

1.) 50% Win/Loss Ratio

The first key to this equation is a goal of winning 50% of the time. Everyone of these 4 keys to success has a massive psychological factor involved. Remember what we said about 2   traders having the same strategy but one will fail and the other will succeed? That is a matter of their mental ability to handle the stresses of trading. Those who constantly shoot for a higher winning percentage and never achieve it consistently begin to doubt trading all together…this will only lead to more failure. When you think about only having to win 50% of the time does that seem attainable to you? Do you feel like you could achieve that goal? No doubt it does and that is exactly the point! If you set a goal you BELIEVE is attainable it will be attainable!

2.) 2/1 Reward/Risk Ratio

This is a massive key to the strategy. Because we set a goal of winning 50% of the time we have to make our profit from somewhere else other than our win/loss ratio. Risk/Reward is the key to successful forex trading. The psychological effect of knowing 1 winning trade will wipe out 2 losses is eminence. The contrary can be said for those who trade with a negative risk/reward ratio.

3.) 2% Risk Per Trade

Using a risk of 2% OR LESS is critical to your success as a forex trader as well. Have you ever wondered why there is such a difference between a live account and a demo account? Many will find success trading with a demo, however they fail miserably with a live trading account. The emotion of trading live is completely different and effects your decision making process massively. This phenomenon is one of the most visible signs that shows just how much emotions can effect your bottom line. Simply put the ability to control your emotions properly is often the difference between profit and loss.

The same principal is true when it comes to the percentage of your account at risk on any one given trade. When someone risks over 2% of their account they tend to make poor decisions. If you have been risking 5% of your account on each trade and you wonder why you have not achieved profitability, you should look not further than the amount per trade you are risking! This is a must if you are to succeed as a trader.

4.) 3-5 Trades Per Week

Two habits of successful traders are the ability to remain patient and disciplined. Without these abilities it is very difficult if not impossible to trade profitability. One very common trait among new or inexperienced traders is over trading. I will frequently get emails from traders who take 3-5 trades per day and they wonder why profits continue to allude them. Through the years, and after dealing with thousands of traders I have noticed a strong correlation between the amount of trades someone takes and how profitable they are overall. In general the more trades someone takes the less chance they have of being profitable. There are always exceptions to the rule, but if you are struggling you want to focus on what will give you the best odds of success and take fewer trades. Taking less trade will hands down increase your odds of trading profitable long term. A good number to shoot for is 3-5 trades per week.

If you are ever going to succeed in the markets you must be ok with NOT taking the trade. You and I will never catch every trade and we should be completely ok with not taking a trade for an entire day. If you struggle with over trading use this simple trick. Every week you have a limit of 2 trades for the entire week. If you know you can only take two trades you will force yourself to become patient and disciplined. You will not want to waste one of your two trades on a “so-so” setup in the market. Becoming a disciplined and patient trader will be a great asset to you in your career as a trader!

Lets Do Some Math!

In the beginning of this article we talked about your subconscious briefly and the importance your internal belief system has when it comes to trading successfully, and for that matter in life. We all have those friends who say things like “nothing good ever happens to me”, and guess what, nothing good does ever happen to them. On the flip side of that coin those who remain optimistic and always believe things will turn out ok usually manage to work through life with much less trouble. The power of your subconscious is infinitely larger than most people understand, and when it comes to trading a firm belief that you can and will succeed is a precursor to success. Therefore lets break down the parts to the equation for trading success we have listed above so you can see the power for yourself.

In this real life example we are going to assume you are trading with a $5,000 account. You can do the math on your own for the size of the account you will eventually open once you have at least 3 months of profitable demo trading. For now we will use 5K as it is a good average that retail traders deposit.

Example #1

1 trade per day X 22 trading days in an average month = 22 trades per month

At 50/50 win/loss 11 trades will lose you 2% each, and 11 trades will make you 4% each (Reward/Risk is 2/1)  = Total Monthly Profit Of 22%

Now lets see how 22% a month compounds over the course of a year on a $5,000 account.

Jan                 Feb                Mar                   Apr                    May                   Jun

$6,100            $7,442            $9,079            $11,076          $13,513            $16,486

Jul                 Aug                 Sep                    Oct                    Nov                    Dec

$20,113         $24,538          $29,937           $36,523           $44,558            $54,361

Example #2

1 trade per day X 22 trading days in an average month = 22 trades per month

At 50/50 win/loss 11 trades will lose you 2% each, and 11 trades will make you 3% each (Reward/Risk is 1.5/1)  = Total Monthly Profit Of 11%

Jan                 Feb                 Mar                    Apr                  May                   Jun

$5,550         $6,160            $6,838             $7,590             $8,425              $9,352

Jul                 Aug                 Sep                     Oct                    Nov                    Dec

$10,380       $11,522          $12,790            $14,196             $15,758            $17,492

In the first example there was nearly a 11 fold increase in your trading account over the course of 12 months. In the second example the only thing we changed was the Reward to Risk, which we lowered to 1.5 to 1. In this example winning only 50% of the time and only going for 1.5 times your initial risk you would have roughly a +350% gain on your account after 12 months. You can do this, you simply need to readjust your thinking.

You Can Trade For A Living

The bottom line is you can trade forex for a living! Unfortunately many people have a mental perception that drags them down. If your perception of success is so high that you consistently never achieve it month after month, year after year, then it will begin to create self doubt in your subconscious mind. Remember the power of a demo account vs. a live account and the difference it often has on traders? This proves beyond a shadow of a doubt that your mental ability can, and often is the difference between success and failure as a trader. If you shift your perception of what success is to the above equation for successful trading I’m sure you will begin to see the powerful results for yourself. Once you see success is well within your reach and you begin to believe it at your core, you then give yourself a chance at becoming a profitable trader. The key to winning 50% of the time is the positive Risk to Reward ratio. In example #2 again we ran a reward to risk of ONLY 1.5/1. An example of this would be using a 20 pip stop and a 30 pip take profit on your trades. Even with a risk/reward like this it still results in a +350% gain for the year.

Learning to trade and then trading for a living is everyone’s goal. You cannot get to this point overnight, and growing your account will not happen overnight. So many times people rush to grow their account and end up wiping themselves out time after time….more than likely you can relate. I urge you to give the equation above some serious consideration. It is also important to have a strategy that allows for a higher risk/reward ratio on your trades. If you are struggling to find a profitable strategy that allows for higher risk reward setups then check out our advanced bank trading forex course. We provide members daily support in our video daily market review/preview, where I not only give the expected market direction for the day but also the EXACT price points I expect the market to move from! Members also have lifetime access to our live forex training room in addition to our bank trading community forex forum and live daily member chat. As always if you have any questions feel free to shoot us an email. I hope you take this training article to heart and put it to use. Happy trading!


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