The following post was written by world-class trader Nial Fuller who specializes in price action analysis.
You can find the original text here – “Set and Forget Forex Trading – Keep Your Day Job“
Forex trading with the Set it and Forget strategy is as simple as its name implies; you simply “set” the order and then “forget” it for a period of time. This approach has two main advantages: it is much easier to maintain emotional discipline, but it also allows you to lead a “normal” life, without spending many hours in front of the computer and constantly analyzing the markets … It often happens that novice traders are overwhelmed by the amount of data that is available to them. they flow from various financial media present on the Internet or television. It is extremely easy to experience a kind of “paralysis” when analyzing and trying to trade Forex or any other financial market. There are truly countless competing trade ideas out there, and it can be overwhelming to even try to make sense out of it all and come up with a plan based on this amount of information. One of the biggest psychological mistakes aspiring traders make on their road to success is believing that the amount of economic data they analyze and/or having a technically complex or expensive method will help them be profitable in the market. However, as many professional traders can attest, in reality the number of factors taken into account usually has the opposite effect on the profits achieved. This in turn means that once we have analyzed a certain amount of market data, the next time we spend analyzing that data is likely to negatively affect our trading, causing us to lose money.
Why analyzing too much market data is counter-productive
It may seem a bit confusing or counter-intuitive to the novice trader when he or she first hears that analyzing too much market data can actually cause you to lose money faster than the other way around. The belief that “more is better” is a psychological trap that keeps novice traders out of profit and is why so many of them wipe out their accounts and eventually leave the profession. The main reason for this is the inborn human need to feel in control of one’s life and the environment. It is an evolutionary trait that has allowed our species to survive and ultimately brought us to the modern level of civilization we are in today. Unfortunately for aspiring traders, however, this genetic trait works against them when they try to successfully trade Forex. In fact, most of our normal feelings of wanting to work harder than others or spend extra time doing better research at work or school don’t work at all in trading. Thus, the root cause of the failure of beginners in the Forex market is the thought that causes them to feel a psychological need to control their environment, and when this emotional state meets the uncontrollable environment that is the Forex market – it almost always has a negative effect. consequences. This problem snowballs because when a trader loses a few trades, they get angry and want to “get back” to the market. The way they do this is by reading another trading book, or buying a system they think will “work better,” or analyzing internal reports on the performance of every economy they can find to predict how selected factors will affect to market movements.
Once this process starts, it’s very hard to stop because it seems to make logical sense. After all, if we spend more time and do more, we will eventually find out how to make money faster in the market. The hard-to-accept truth is that, as stated before, once you have reached a certain degree of understanding of technical and fundamental analysis, further research or “tweaking” the system beyond this point actually works against us and the rate at which you learn more and more more research, probably is the rate at which you will lose your money in the market.
Less is more in Forex: “Set it and forget it”
So how is a novice trader supposed to consistently make money from Forex trading if we are genetically wired to overcomplicate? The first step in this process is to simply accept the fact that you cannot control the unbridled Forex market and leave your ego at the door. The market doesn’t care what you’ve done in your life before; he has no emotions and is not a living being. It is an arena where people act on their beliefs about the rate of a particular currency pair. These beliefs are driven by emotions, and human emotions are very predictable when it comes to money. The point here is that the people I mentioned in the previous chapter, doing extensive amounts of research and trying to find St. The grail is those trying to control the market, and therefore trading based on emotions. These people are characterized by predictability that professionals can use to gain an advantage over them. The paradox is that professional traders can actually do less technical and fundamental “homework” than amateurs; pro-traders have mastered their strategy and just stick to their own trading routine, knowing when an opportunity arises. If nothing in their strategy shows up at the moment, they step away from the monitor for a while because they know that the Forex market continues to flow with opportunities that will generate themselves. Therefore, they do not feel pressure or anxiety related to the transaction. When their advantage shows up in the market, they set orders and walk away, while accepting that any further action is likely to be to their disadvantage, as it will be a futile attempt to control something that cannot be controlled, and therefore difficult to see as objective action. The set-and-forget logic is this; if your advantage arises, then you take action and do not engage in the process further unless you have a valid price action reason to actually do so. Traders who choose to mess up or “enhance” their trades once they enter them almost always end up on an emotional rollercoaster that leads to over-trading, increasing positions, moving the stop loss farther away from the entry, or moving the take profit order without any logical justification. These types of actions almost always lead to the trader losing money because they were objectively deliberate, but they were under the influence of an emotional reaction to trying to control something that cannot be controlled. In the chart below, we see an example of how traders get into trouble by being too involved in their trades. When the market pulls back towards an entry that occurred after a pin bar signal, emotional traders are likely to exit the trade with a small profit near the break even level because they felt “scared” or “nervous” of losing money on the trade.
In the chart below, we can see how the market moved lower after a selling pin bar where most traders could have entered. However, before that happened, the market stalled for a while. Disciplined traders who don’t mess with their trades for no reason were probably still short and managed to make a really good profit. Also note that traders may have been waiting for an obvious price action signal in the opposite direction to exit the trade… this is just an exit based on logic and price action, not emotions like fear or greed.
Earn money and save time by doing… less
It is a well-studied fact that traders who trade high timeframes, i.e. H4, daily and weekly, and hold their positions for many days, make more money over a longer period of time than day-traders on intraday charts. The reason why many people are attracted to day trading is because they feel in control of the market by looking at low time frames and entering and exiting trades frequently. Unfortunately for them, they didn’t realize they had the same amount of control over the market as swing traders who hold their positions a week or more and only look at the market for 20 minutes a day, maybe even less. This means that no trader has control over the market, but day trading and scalping gives traders the illusion of feeling more in control. The only thing we can really control in trading is ourselves. The ironic fact about Forex trading is that spending less time analyzing data and looking for the “perfect system” makes us make more money, and faster because we are more relaxed, less emotional, and therefore also for over-trading and excessive leverage of your account. Many people are attracted to speculation because they want a way to make money that will be “easier” than their current job, but they quickly forget about it and start spending countless hours analyzing it, thus falling into a psychological trap most of them never realize won’t get out. All you basically need to consistently make money in the market is to master an effective trading method, develop a written trading plan based on that method and have a solid risk management strategy, then check the market one to three times a day for 10-20 minutes each time. If your advantage shows up on the chart, you set an entry order, stop loss and take profit order, then walk away only to come back at your scheduled time to see what’s going on with your trades. Trading in this way actually creates a snowball effect of positive habits that help consolidate further trading successes. The whole article can therefore be summed up in the following two sentences. People who spend more time analyzing market data and trying to perfect their system inevitably trigger a cycle of emotional errors that increase the chance of trading failures and ultimately waste of time and money. People who realize that the market is uncontrollable and build their trading plan based on this fact inevitably implement a set-it-and-forget-it mentality that creates an emotional state conducive to trying to succeed in the market and make consistent profits. The trading method we use is not as important as the psychological aspect and the risk management aspect, but in general a system that offers a simple advantage but with high probability such as price action is the best way to maintain a “set and go” mindset. forget.”
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This post was written by world-class trader Nial Fuller and is based on his own price action trading strategies.
You can find the original text here – “Set and Forget Forex Trading – Keep Your Day Job“
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