In forex trading we have to try to give ourselves some of the qualities that successful forex traders have. This way we can achieve great success in forex trading.
Jon Najarian believes that competition, self-discipline, and admitting losses are three qualities that can help us succeed in forex trading.
I. Competitive Mindset
Jon Najarian emphasizes some qualities that a good forex trader must have.
"When my broker guided us into the trading circle, he also picked a few professional athletes, because we have self-discipline, extroverted personality, and strong competitive desire. For floor trading, introverts are hard to succeed."
"I think he was right. I am currently recruiting traders through these quality conditions. The desire for competition makes you dare to pull the trigger and enter the forex market. Self-discipline lets you know when to admit losses. These may be the two most important psychological qualities for floor traders. For those upstairs traders who trade off the floor, self-discipline is their most important tool to compete with us."
Floor forex traders need to have a strong competitive desire because they have to spend a long time in a circle that is men, who smell weird, squeeze each other, and swear all the time. For every trade, they almost have to provide both bid and ask prices. In this environment, it is easy to feel exhausted.
II. Self-discipline
Staying within the "comfort zone" of self-discipline.
In every interview, one thing is very clear: self-discipline is the number one principle, the most important quality that a trader must have. Self-discipline is "doing what should be done": but in the trading field, what should be done is often the hardest to do.
"Self-discipline is the most important. You always have to have self-discipline, because you have to cut your positions at any time. When necessary, we cut off the positions, regardless of how big the loss is, or how high the potential is. In short, cut it off, admit the loss, and move on. Sometimes, you have to be a brave man and cut off your arm - close your eyes and cut it off."
"I tell the forex traders in the company: 'Forget your buying cost, forget your shorting price, is the current position a good trade?' If the forex market will continue to be unfavorable to the position, it is a bad trade, no matter how high the cost is, admit the loss immediately."
"If the risk factor is too high if the trade has crossed the appropriate threshold, if you have stepped out of the comfort zone, the forex market will blindfold you, you can only see the loss, and you can't see any other opportunities. So, you will be tied up, and you can only hold the loss and fall into the abyss."
"In this case, you have to admit the loss, and then everything becomes clear, you enter the comfort zone again, start over, continue the next trade, and figure out how to get out, you must not have a fluke mentality, hoping that a home run will turn the tide.'"
"So, you can't trade smoothly and get a dollar or fifty cents, and lose two or three dollars when it goes wrong. Even if you have a 70% accuracy for the so-called judgment, if you make a dollar when you are right, and lose three dollars when you are wrong, you are probably spinning in place."
As Najarian explained, forex traders need self-discipline, the key is to be able to admit losses. Admitting losses is not only to avoid the expansion of losses but also to avoid the distortion of the trading mentality.
The snowball that comes to your face gets bigger and bigger, and it will inevitably take you out of your comfort zone and affect the trading of other positions. In other words, the loss of one position may lead to the loss of other positions, or miss the profit opportunity.
III. Psychological benefits of admitting losses
Timely admitting losses of self-discipline can also bring some emotional benefits.
"If your emotions are too involved, this industry can swallow you alive and gnaw your bones. Our forex traders are very emotional, but the timing must be right. When you face losses, you have to be ruthless, cut them off, and move on."
"I also heard some opposite stories. I think it was Jesse Livermore, he was a great forex trader. It is said that people around him can understand his trading situation from his reaction."
"But when he was in a loss state, he was witty and joked with everyone. If the position develops unfavorably, he is very relaxed, because he admits the loss. His mentality is, 'When the forex market develops unfavorably, it is easy to deal with, because I have self-discipline, as long as I admit the loss, everything becomes easy."
"Our situation is similar, the position loses, we admit the loss decisively, and then move on. We usually feel unhappy. But when the forex market develops favorably, we feel happy, because the position continues to accumulate profits."
"So, the psychological reaction may be different from Livermore, but the basic concept is the same. Admitting losses is simple because this is a mechanical behavior, we have a method to deal with it, and then move on, make another trade."
Therefore, admitting losses of self-discipline makes the situation simpler, especially treating stomach pain, and insomnia, and allows you to move on. As Najarian explained, admitting losses is equivalent to abandoning pain, allowing you to continue trading. If you are still taking care of the wound of loss, you will inevitably have no time to look for other opportunities.
"Some traders say: 'God, I'm a fool. It's all because I didn't go to church this week. After all, I broke my mother's vase when I was three years old.' These people look funny, looking for some strange reasons to blame themselves."
"For us, 'this is part of the game, part of life'. Every once in a while, you have to burn the sugarcane crops, let the ashes nourish the earth, and make the land more fertile. Learning from mistakes is an inevitable process. When mistakes happen, you have to learn from them, because you have paid the price."
"When I pat myself on the back, I don't break my arm. Also, I think I'm good at dealing with bad situations. When everyone feels panicked, this is also the time when my mind is the clearest."
"Many forex traders can do this because they always trade within their pain tolerance threshold. Everyone has a tolerance limit, even George Soros is no exception. As long as the pain exceeds the limit, you should not sit there stupidly and endure it. Whenever I make a mistake, I naturally admit the loss, and when others panic, I will never panic."
So, there are at least six reasons to admit losses quickly:
- The final result may be a bigger loss.
- You miss other trading opportunities.
- You may end some profitable positions that should not be ended.
- You may cause losses to other positions.
- Tie-up funds and cannot be used for higher return opportunities.
- You should ease the pressure, calm your emotions, and improve your control ability.
Let's gradually refine these three qualities in our daily forex trading. This way we will get closer and closer to success in Forex trading.