Stepping stones to successful forex trading

It seems the many countless hours I have spent in conversations with several trading buddies, with the discretionary trader here at the hedge fund, and sharing offices with several full-time retail traders over the years have turned me into a bit of a trading therapist and actually put me in a relatively good spot for helping other traders with various aspects of their trading, such as money & risk management, understanding of probability, routines workshopand processes and strategy development.

Thus on Saturday, I spent two hours with someone who has been urging me to give him some coaching on the trading front.  Despite having difficulty generating consistent profits, I was able to share a good amount of valuable and useful knowledge with him.

Here’s the outline of what I discussed this with him – came up with this after thinking hard about what i consider are the cornerstones of becoming and being a successful trader. Thought this might be of interest to other traders and people considering getting into trading.

What is the aspiring Trader’s trading experience?

  1. Chronological review of trading activities – identify the main chapters
  2. Idea of time spent – length of trading phases, full-time/part-time
  3. Idea of executed trades – frequency, timeframes, approach
  4. What were main breakthroughs/signs of progress?
  5. What was motivation to start trading – and what is the motivation today?

 

Forex Trading Strategy

  1. Exposure
    1. What market(s) do you trade?
    2. Do you trade them with a specific trading strategy (or strategies)?
  2. To what degree is the strategy documented?
    1. Setup parameters
    2. Entry, exit and trade management rules
    3. Examples of executed trades
  3. Has the strategy been tested?
    1. Identifying setups on the chart
    2. ForexTester
    3. Microsoft Excel
    4. Back-testing application e.g. TradeStation, AmniBroker, RT software

 

Forex Trading Processes & Routines

  1. Pre-Session checklist (physical and mental)  https://trick-or-trade.com/2016/09/05/pre-market-trader-assessmentreadiness-matrix/
    1. Eating, Drinking, Sleeping, Exercise
    2. Impact varies depending on type of trading
  2. Check-lists for various aspects
  3. Trade Documentation
  4. End of Day session Reviews
  5. Psychological Reviews
  6. Trade Diary/journal/blog
  7. Blog Post detailing my processes of typical trading session

 

Forex Trading Operations

  1. Progress as a trader – how should this be measured?
  2. Hours invested in trading – targeted learning – look for good yield on time invested
    1. Monitoring charts and actual trading
    2. Documentation of trades and market situations
    3. Review of documentation
    4. Studying new technical material (books, webinars, webpages, forums, seminars) – technical areas, processes, psychology
    5. Strategy development & testing
    6. Practice – simulated trading such as ForexTester
    7. Coaching & Mentoring
  3. Charting Packages, news feed

 

Risk/money management/understanding of probability

  1. Understanding of transaction costs  https://trick-or-trade.com/2015/06/22/226-trading-results-graph-a-word-on-transaction-costs/
  2. Trading Frequency, win rate, RR ratios
  3. Expectancy Model & expected variance
  4. Trading Capital – many trading related costs are fixed e.g. cost of PC, seminars, books, subscriptions, coaching – the costs decrease relatively depending on trading capital size

 

Trading Psychology

  1. What are examples of trading psychology issues?
    1. What are the root causes of these issues & how can they be avoided?
  2. At what stage of one’s trading career does psychology become important in trading?
  3. Does psychology impact depend on the type of trader?
    1. Discretionary with no rules whatsoever – trades by the gut
    2. Discretionary execution with well-defined rules
    3. Following a lead trader in a live trading room
    4. Automated execution – near 100% systematic trading

 

In my view, this shows that there are many areas to work in becoming a successful trader. Many of the above points and topics are discussed throughout this blog – use the keyword search and category search to start looking.

Questions and discussions welcome.  Happy reading & good luck!

This entry was posted in Financial Markets 101, Psychology, Risk & Money Management and tagged , , , , , , , , , , . Bookmark the permalink.

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