PsychologyTrading Systems

Inside the Successful Trader

With the changes in the perception of Forex trading from being a high speed, high risk gamble, to being a scientifically driven investment vehicle, supported by social media, there are likely to be many more Forex traders in the coming years.

All of these will have dreams, big or small; some are destined to fail, many more will make a success of trading and if we were able to see inside the minds of each, we’d find clear reasons why some made it and others fell by the wayside.

Jump in a car for the first time, set off thinking you know what to do because you’ve been a passenger so many times and you’re heading for a crash unless you’re lucky enough to be a natural driver.

The analogy could well be applied to trading Forex where disaster can be just as painful, not just to your purse but also to your pride and emotional well-being. Looking inside the successful trader you’ll see a complex organism where the sum of the parts is greater than the whole.

It cannot be stressed strongly enough that successfully trading Forex isn’t a given just because technology has developed to save time, analyze markets and trends or to automate trades. Forex is a complex beast and unless you spend a lot of time beforehand researching so you know what you’re doing; examining and then preparing yourself so you can leave emotion and psychology out of the process and finally developing the discipline of a monk so you don’t undo all your good work, you are dramatically increasing your chances of failure.

When we’re successful, we are happier – that’s obvious, but in being successful, we can develop an aura of perceived invincibility which will cause us to try things that under rational circumstances we’d recognize as foolhardy. Equally when we’re unsuccessful, we lose confidence and this stops us entering situations, or as a Forex trader, trades that have every chance of being successful. Our low confidence can drive us further and further away from the market and many potentially successful traders have given up completely, perceiving themselves as failures but not recognizing that the reason for it is purely because they weren’t prepared and they failed to practice discipline.

The paths of history are littered with failures; the Duke of Monmouth, Bonnie Prince Charlie. Wat Tyler and other countries can add many more to the list.

These people, whilst filled with resoluteness, failed to grasp the bigger picture and whilst they had the tools to do the job, their egos and their lack of knowledge ultimately consigned them to a list of historical ‘has-beens’.

The opposite can be said of the author of the book, ‘The Art of War’, Chinese military tactician, strategist and general, Sun Tzu. His is not a name that will be familiar to many, but his analysis of previous battles and wars, the psychology of his enemies and his success on the battlefield where, in the heat of the moment, everything could have gone wrong but for his composure, should be the handbook for the aspiring trader.

The Art of War is divided into 13 chapters most of them addressed issues of positioning and directing the soldiers for war and it dealt with these issues from a phycological point of view. However, the Art of War has been applied to many fields well other than that related to military.

if you read the book before, you will find that much of the text is about how to fight wars without actually having to do the battle itself: it gives tips on how to outsmart your opponent so that physical battle is not necessary. As such, it has found application as a training guide for many other fields that do not involve actual combat.

Your first step towards preparedness for what Forex trading will expose you to should be to read the book and, as you do, note down how you think his strategies could be applied to trading. Read it again – and again if necessary, until his tenets are firmly implanted in your psyche. Let Sun Tzu get inside your mind to guide your decisions or steer you away from rash behavior and you’ll have one of the most important tools in readiness for successful Forex trading.

To help you make a start, it’s considered that his book can be reorganized into four sections that make it easier to link it to successful Forex trading strategies

• Purpose: For Tzu it was why you want to fight and why you want to win, for you, it’s why you want to trade successfully.

• Market conditions: For Tzu it was knowing his enemy, knowing the environment of the battle and seeing the consequences of his actions. For you it will be knowing the instruments you’ll be trading, the market sentiment and what effect it will have on your trades.

• Strategy: For Tzu it was matching his tactics against his enemy, identifying the strengths and weaknesses of his enemy and the best way to neutralize the strengths and take advantage of the weaknesses. For the trader, it’s identifying a profitable position, knowing when to enter the trade, identifying risk and reward, sticking to stop/loss level indicators and following the plan to the letter.

• Trading routine: To Tzu, this was making sure he was disciplined, not changing routines, strategies and plans that worked. For the successful trader, it’s much the same.

Tzu’s teachings on strategy:
In battle, where there is no retreat or surrender, soldiers will have nothing to be afraid of and there will be nothing that they can’t achieve.”

It’s easy to give up when you suffer losses but just as Tzu insisted on no retreat and no surrender, a focus on success and achieving it through a positive mind set will help you win.

So in war, the way is to avoid what is strong, and strike at what is weak.” 

If you fully understand what your plan is and where its strengths and weaknesses lie you will be able to take advantage of favorable conditions and learn to avoid the unfavorable ones. A good piece of advice here is to add to your trade only if the trend confirms your decisions. The sensible and profitable trader gets out when he feels doubt.

For should the enemy strengthen his van, he will weaken his rear; should he strengthen his rear, he will weaken his van; should he strengthen his left, he will weaken his right; should he strengthen his right, he will weaken his left. If he sends reinforcements everywhere, he will everywhere be weak.” 

Don’t leave yourself exposed by following every change in trend. Identify the market condition and use an appropriate methodology to win with it.

Outwit the enemy instead of trying to outfight the enemy.”

Play clever with the market, don’t waste time and money trying to outfight what the market is suggesting.

The supreme art of war is to subdue the enemy without fighting.” 

If you’re selective and organized, you can make money with fewer trades, giving you less work to do for the same reward and more time to enjoy your successes with family and friends.

Victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win.” 

Watching the market carefully, analyzing trends and looking for the ideal set up is far more worthwhile than entering every possible set up in the hope of catching a few winners.

In battle, use a direct attack to engage and an indirect attack to distract enemy attention.”

However tempting it is to do otherwise, stick with the major trend, history has shown trading with the trend is more likely to be successful.

Victory comes from deep thinking and detailed calculation.”

An obvious one — if you’re not sure of what you’re doing, you will fail.

Use attack to exploit victory, never use attack to rescue defeat.”

Don’t throw good money after bad. It’s better to take a loss rather than put more money in, hoping that it will come good and repay the loss.

Tzu’s teachings on purpose:
Maintaining the momentum of troops during war is important.”

Not so much the momentum but maintaining a calm, methodical approach whether through gains or losses. Nothing gives a greater risk of failure than leaving a tried and tested methodology because of heightened emotions.

Tzu’s teachings on market conditions:
If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.” 

A basic piece of advice that tells you to make sure you know exactly the mood of the market, including volumes and be aware of the strengths and weaknesses of your methodology before you commit to a set up.

To know your Enemy, you must become your Enemy.” 

Here, the book is saying that you need to get inside the mind of other traders, the market as a whole but not necessarily do what they are doing. By remaining detached from them, yet understanding their mind set, you can formulate your own accurate idea of what is the best approach to trading.

Tzu’s teachings on trading routines:
Superior command structure within the army.”

This means making sure you are sure of what you are doing, knowing how to operate, following tried and tested routines and making sure you don’t deviate from what works.

Even the finest sword plunged into salt water will eventually rust.”

Trading isn’t everything; maintain a balance in your life. Family and friends are important and are a support mechanism for you. If you lose their goodwill or love, all the profit in the world won’t make up for it

However much preparation you do, you’re not going to be the complete trader when you make your first, second, fifth, tenth or maybe even your hundredth trade.

Becoming a successful trader is a long journey and not always on a smooth path. You’ll make mistakes, sometimes big ones, but don’t let that faze you. Learn from them, keep referring back to Tzu, keep a clear head, know what you want to achieve and don’t deviate from the plan that will get you there. Use all the tools that are available to you and success, whilst not a guarantee, will at least be a whole lot more likely!

Razi Hammouda can be contacted at FxLords.com

Razi’s professional experience was gained over the course of more than a decade working with leading Forex market makers in the Middle East, Asia and Europe where he learned about trading, financial instruments and global markets. Being exposed to the wide range of skills he acquired along the years, he continued to develop his trading strategies and further improving his track record in Forex trading. He used innovative business development strategies to find FXLORDS, helping it to rapidly become a major provider of education and trading tools to the successful trader.

He is an enthusiastic individual, motivated by challenge and renowned for pushing the limits, always looking to gain some more experience and help as much as possible along the way.

Razi’s professional experience was gained over the course of more than a decade working with leading Forex market makers in the Middle East, Asi...

aag100

Established member
613 35
i dont get why sun tzu is quoted by so many people in trading.
as traders we're not out to fight wars all we do is click a few keys to try and make a few g's.
we dont need to be positioned on high ground,send in spies into opposing camps to stir dissent,spread rumours and cause panic,travel light and forage on caught enemy gains..........
my only take away from sun tzu was something about order.keep everything tidy and not cluttered.clutter distracts the mind(or something along those lines)
theres no need to pretend we're so macho and some sort of warriors when all we do is hit a few keys.
 
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Forexmospherian

Legendary member
39,928 3,299
i dont get why sun tzu is quoted by so many people in trading.
as traders we're not out to fight wars all we do is click a few keys to try and make a few g's.
we dont need to be positioned on high ground,send in spies into opposing camps to stir dissent,spread rumours and cause panic,travel light and forage on caught enemy gains..........
my only take away from sun tzu was something about order.keep everything tidy and not cluttered.clutter distracts the mind(or something along those lines)
theres no need to pretend we're so macho and some sort of warriors when all we do is hit a few keys.

Hi aag100

i think over time - you will see many similarities with the "art of war"

We as traders are not using guns or tanks or fighter planes

Instead - its money - we want to keep hold of ours and trade and grow it and repeat many many time and then in 10 -20 yrs retire to Bermuda - or wherever

BUT - our enemy - the players - the large Banks -the Hedge Funds - the big boys with the knowledge and the war chest - ie millions and millions - dont want YOU to win - they want your money and my money and everybody's money and will play tricks and games to fool us - and take our money off us

The FX game is a massive table with millions and billions of dollars sitting on it - waiting for it to be taken

The retail traders consisting of millions of trader around the world - ( some say less than a million - other say over 2 million - nobody really knows) only make us say 10 -12% of the massive market - and basically 5 large banks make up over 50%.

The large Banks and 100's of Hedge funds will battle for their share and anyone in the way - will just get trodden - and lose their money

One of the most well know tricks - is false sentiment

Setting up a 4 hr - daily chart up with a pattern saying this currency pair should fall in price and so it attracts all the bears and price starts falling

More and more join the bandwagon and newbie traders think this is a cert 100%

So they either put the farm on it - ie go with it big time - or even to them just 20% of their capital - thinking that's safe - and then we all know what will happen

One hr later price rises - and rises and rises - and rises - and all the bears are stopped out - and many say - dont worry - it will come back - and of course - one year - or a few or certainly within 10 years - they might see it come back to their entry point ;-)

YOU - as a trader are in a MONEY WAR

You don't need a bullet proof vest - or a tank - but your enemy only wants your money - nothing else

Can you compete with them - have you got a few million to lay on the table and say - yes- I am not frightened of you ?

Most of us cannot do that - we cannot out psych them - but we can beat them at their own game -as long as we know what we are doing - and are not too greedy and accept - we are never going to keep winning every trade.

Read the "art of war" - it's can apply to so many things in life - and will certainly make you more "streetwise"

(That remind's me Random 12345 was in the army for 4 years before going into his commercial world - I really miss that member ( honest) he was good ;) )


Regards


F
 
Last edited:

Profitatlast

Newbie
4 0
Intelligent Advice

Thank you for the comments above. Not only have you made me aware of many important factors to consider before entering the traders market, but you have interpreted it beautifully. I feel I have so much to learn and from what I have read above I realise that I am not nearly ready to start trading. I wish I had a GURU to advise me on whats steps to take to become a successfull trader.

However, this forum is full of wonderful advice and I am starting from the beginning and will also read the book by Tsu to prepare myself emotionally and psycologically.

Thanks for the article. It is great!
 

aag100

Established member
613 35
so.........I have to take the samurai outfit off ?
yes and put on a buddhist robe.we dont need to be on a war footing at defcon 5.
we should calm and relaxed,breathing in harmony with the markets.
 

aag100

Established member
613 35
Hi aag100

i think over time - you will see many similarities with the "art of war"

We as traders are not using guns or tanks or fighter planes

Instead - its money - we want to keep hold of ours and trade and grow it and repeat many many time and then in 10 -20 yrs retire to Bermuda - or wherever

BUT - our enemy - the players - the large Banks -the Hedge Funds - the big boys with the knowledge and the war chest - ie millions and millions - dont want YOU to win - they want your money and my money and everybody's money and will play tricks and games to fool us - and take our money off us

The FX game is a massive table with millions and billions of dollars sitting on it - waiting for it to be taken

The retail traders consisting of millions of trader around the world - ( some say less than a million - other say over 2 million - nobody really knows) only make us say 10 -12% of the massive market - and basically 5 large banks make up over 50%.

The large Banks and 100's of Hedge funds will battle for their share and anyone in the way - will just get trodden - and lose their money

One of the most well know tricks - is false sentiment

Setting up a 4 hr - daily chart up with a pattern saying this currency pair should fall in price and so it attracts all the bears and price starts falling

More and more join the bandwagon and newbie traders think this is a cert 100%

So they either put the farm on it - ie go with it big time - or even to them just 20% of their capital - thinking that's safe - and then we all know what will happen

One hr later price rises - and rises and rises - and rises - and all the bears are stopped out - and many say - dont worry - it will come back - and of course - one year - or a few or certainly within 10 years - they might see it come back to their entry point ;-)

YOU - as a trader are in a MONEY WAR

You don't need a bullet proof vest - or a tank - but your enemy only wants your money - nothing else

Can you compete with them - have you got a few million to lay on the table and say - yes- I am not frightened of you ?

Most of us cannot do that - we cannot out psych them - but we can beat them at their own game -as long as we know what we are doing - and are not too greedy and accept - we are never going to keep winning every trade.

Read the "art of war" - it's can apply to so many things in life - and will certainly make you more "streetwise"

(That remind's me Random 12345 was in the army for 4 years before going into his commercial world - I really miss that member ( honest) he was good ;) )


Regards


F
hi F,
i get the analogies.some are pertinent to trading,some not and some i doubt are even pertinent to war in these modern times.
what remains the same is the universal attributes required for success in any field,discipline,focus,patience,practice etc.
i hope a newbie armed with any knowledge he thinks he has gained from sun tzu doesnt think he can now declare war on the markets and annihilate them.read it by all means and know that you have read a classic(why it is such a classic is beyond me,but thats just me)
 

sportbilly

Junior member
37 0
Forexmospherian said: "The retail traders consisting of millions of trader around the world - ( some say less than a million - other say over 2 million - nobody really knows) only make us say 10 -12% of the massive market - and basically 5 large banks make up over 50%."

When you realize that fact about market micro-stucture and being aware that trading is zero-sum game than you realize why most of retail traders will always been on wrong side and there just as piranhas food.

Few retail traders know that big banks (50% of the market) placing the trades continuously because all of us can than easily place the trade at every possible moment. Eventually,when there is enough easy money sucked in the market the big boys start defend their positions gathered through ice-berg trading (they trade big blocks fractionally) and push the market as they want or need.

To stay on topic with "Art of War", only big boys strategy can be aligned with Sun Tzu war philosophy and principles because market information they possess it make them privileged on biased FX battlefield.
 
Last edited:

FXLord

Junior member
19 0
The Idea is the attitude you have to be at to success, the right mind set.
I think Forex trading might be the only profession that you have to "visualize the goal" literally in order to make money and succeed in trading Forex
 

FXLord

Junior member
19 0
Thank you, I appreciate your comments. Make sure you visit my page, there's a lot of articles written differently and targeting real traders