Why you need to re-train your brain as a Forex Trader

Can you teach old dogs new tricks? Yes, of course you can if you give them treats and train them correctly through the new learning process. To teach an old dog new tricks the dog handler will be re-training the dog’s brain and so it is with human beings when it comes to currency trading. We need to re-train our brains to learn how to behave properly in the Forex market. Let me explain.

Your entire life as a human you have been accustomed to a high degree of certainty and influence in most situations.  Let’s say you own a business and that business is not doing well. You have the ability to change many things, the staff, the location, the stock, the equipment, the selling method, the price and even the type of customers you are selling too. The bottom line is you have the ability to change and influence virtually every situation and what I am referring too is not restricted to just business owners. As a human being throughout your entire life you’ve had the ability to manipulate situations to get the outcomes you desire. But in the currency markets the level of control and influence you have with respect to your currency trade is extremely limited.  It’s this lack of influence and control that causing so much emotion in so many forex traders. It simply drives them crazy that they can’t influence the price. But if you re-train your brain to think in probabilities it can potentially be extremely profitable.

Forex Trading success is about three important things.

»   Ensuring the trading system has a small edge.
»   Risk Management.
»   Behaviour.

It is not difficult to find a currency trading system that has an edge and it’s not difficult to manage risk, so why is it that not everyone can trade Forex and make money? Emotional discipline is the answer and the behavioural side of currency trading is the most challenging no question but if you can re-train your brain to think in probabilities and not certainties you can potentially profit handsomely.

The trading edge you’ll have using the system you trade with has a random probability of success. Meaning over a series of forex trades it will likely make money however picking the absolute winners is impossible. Finding an edge that has the probability of making money over a series of trades as I said is not difficult but you must understand that it’s a series of trades that matters and not just this trade right now. Think of it like flipping a coin. You and I know a coin is a 50/50 bet, its heads or tails and the odds will never change. But flip a coin 10 times and you could have 7 heads and 3 tails or 6 tails and 4 heads leading someone to believe that maybe it’s not 50/50. Flip it 100 times and you will very quickly see that over time it will always end up being 50/50 as it cannot be anything else.

So to re-train your brain as a currency trader you need to do the following

»   Pick your edge.
»   Apply your risk management to ensure you are not risking more than you are looking to make on each trade.
»   Trade your edge over 20 trades and then judge the success.

Provided the system you have does have a small edge, your average win is larger than your average loss and you do actually take the trade when the edge appears for 20 trades the outcome will highly likely be that you make money.

The challenging part is re-training your brain to think in numbers over a period of time and not thinking in certainties on each forex trade you enter because your human instinct will want to see a winning trade every time. But does a Casino worry if it has a few losing hands? Of course not because over time if it keeps playing the edge which has a better than 50/50 probability they will make money over time. They do not sweat or get emotional about one roll of the dice like many traders do with one trade. They think in probabilities and not certainties.

If you’d like to learn more about how to re-train your brain as a forex trader and learn some trading edges that can be applied successfully in the market over time join me every Wednesday evening at 7pm AEST for a free currency coaching session. To log into the session simply click on the following link at 6.45pm AEST (Sydney time) to ensure you are safely logged into the web conference room.  http://gomarkets.webinato.com/room1

Andrew Barnett |  Director / Senior Currency Analyst Andrew Barnett is a regular Sky News Money Channel Guest and one Australia’s most awarded and respected financial experts, and is regularly contacted by the Australian Media for the latest on what is happening with the Australian Dollar. Connect with Andrew:     Email