What Pilots Can Teach You About Day Trading Successfully
One of the sought after benefits to trading forex for a living is the freedom that it allows. When learning to trade I remember dreaming of one day learning to fly and thus being able to go where I wanted, when I wanted. Eventually this dream became a reality. Earlier this week I was taking a short trip along Lake Michigan and strangely enough I couldn’t help thinking about all the similarities between flying and trading. In this weeks lesson we are going to break down some powerful parallels between the two, and more importantly how these parallels can improve your bottom line.
Pilots Always Use A Checklist
One of the first things you learn as a pilot is the importance of a checklist, and the importance of never deviating from it. As traders we too have a figurative ‘checklist’ otherwise known as a trade plan. Human error is a killer in both trading and flying. No matter their level of experience pilots always go over the checklist as it is the only sure way to verify all your t’s have been crossed and your I’s have been dotted. What happens when this checklist is not followed? Every year, in fact every month countless FAA accident reports are filed due to ‘gear up’ landings. Even pilots with thousands of hours have been guilty of making this extremely costly error. As traders, no matter your level of experience you need to have a clear well defined checklist you run though before each trade! Much like the experienced pilot with thousands of hours of flight time, and thousands of successful landings, you can and will make trading mistakes without a trade plan.
What should be included in your check list? For each individual person its going to be slightly different depending on the trading strategy that you use but there are some basic criteria that all should include. So many times entry is the sole focus of a trade plan. While entry is critical, trade management and stop loss placement as well as trade exit are just as important if not more so. The key to a good trade plan is details. Have a plan for dealing with every possibility that you feel is likely to arise. Undoubtedly new situation will arise for which rules must be created. As these situations come about take the time to revise your trade plan so as to deal with that situation consistently. Doing so will give you a foundation to judge that rules effectiveness. If you do not yet have a detailed trade plan or have a very week plan laid out then I urge you to spend the time. I can guarantee you it will improve your consistency. In doing so it will allow you to see the areas of your trading strategy that are the weakest thus allowing you to make improvements. I cannot say stress enough the importance of a trade plan!
Good Pilots Avoid Risk
In the aviation industry there is an old saying that, “there are old pilots and there are bold pilots, but there are no old bold pilots”. Without a doubt the same could be said about traders. Over trading and a general desire to go after risky market conditions is a prevalent attitude among struggling traders. Instead of looking at the market from the perspective of why they should NOT be taking a specific trade they search for reasons why they should take a trade. This desire to always be in a trade is often a common trait among unsuccessful traders. What then are some simple ways you can start limiting your risk. While I could easily list off 10 or more, we are going to stick with 3.
- Limit The Amount Of Pairs Your Trading ~ There is no reason to look at 10 or 20 pairs. When someone asks how many pairs I recommend trading I always recommend just 2 or 3. If you cannot trade successfully with only 2 or 3 pairs, then looking at 10 or more will only serve to hurt your trading profits further. Every pair has a personality and you must learn the personal traits of each pair to trade is successfully. This can only be done if you focus on a select few.
- Trade Only During Active Market Conditions ~ In our day trading education course we teach members to only look for trade setups during the first 3-4 hours of the European and New York Session. Only trading from 2:00-6:00 AM Eastern (6-10 AM GMT) and 8:00-11:30 AM Eastern (12:00-3:30 PM GMT) means that we are only in the market during the most active times of the day. During these times the market is much more likely to make a trending move by which to profit from. More importantly for us these times are when we can trade market manipulation as the Mega-Banks that run the market are most active during these times, and thus much easier to track.
- Limit The Amount You Risk Per Trade ~ If your risking 5% of your account or more, and you wonder why you keep blowing up accounts you don’t have to look any further. Emotion is one of the biggest killers in trading and thus why it is important to avoid situations that promote emotional responses. With so much of your account at risk on every trade making logical decisions is impossible. You may be able to hold it together for a few months, but I can promise you a high risk per trade will always come back to bite you. Much like there are no ‘old bold pilots’, there are no ‘old bold traders’. Save yourself the time, money, and headache and start trading smart by never risking over 2% of your entire account value on one trade.
Experience Is A Pilots Best Friend
Every pilot learns from someone who came before them. My instructor had logged over 11,000 hours as pilot in command. During that time he no doubt had encountered anything and everything I will ever experience as a private pilot. Not only that but he had taught those struggling with the same things I did. He knew what I was going to do before I did it and that was simply irreplaceable to me. Ask any struggling trader if they would simply jump in a plane and fly it with no training, and all with any common sense would answer the same….NO!! Why not? Simply put they all understand the results would more than likely be negative and it might even cost them their life. Why then do these same traders feel like they can trade the largest market in the world successfully with little or no education? This is an important question that deserves careful and thoughtful consideration.
If your a struggling trader where should you start? Number one you have to believe in what you are learning and use common sense. If its a main stream trading strategy that everyone else is using you can be sure you will have the same losing results as everyone else. History has proven this, and more than likely you have proven this to yourself by not producing consistent results. Therefore avoid EA’s and indicator based strategies. If they worked they wouldn’t be for sale for $79. Learning to trade is not easy, it does take time and hard work. A simple rule of thumb is RUN from anyone telling you otherwise. Next, I recommend learning something that makes sense to you and then STICK WITH IT! If your jumping strategy to strategy every month your never giving yourself time to effectively test a strategy out, and thus you’ll never really know if it was successful or not. If your serious about learning to trade and want daily support, weekly live training, and a proven technique to track the banks then check out our bank trading course & members forex forum.
P.S – On a personal note I wanted to share some of the video I took from my iphone on the way back from Ludington, MI. There are some great views of Lake Michigan. More importantly if your still working towards success I want you to hold on to what trading for a living is going to mean for you. I wish you all the best and feel free to email us with any questions you might have. Sorry for the grainy video BTW….I’ll get a better one next time:)
Make Full Screen & Change To 480p For Better Clarity:
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