The Importance of Trading Concepts for Forex Traders

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We fail in forex trading because we are constrained by ourselves, and unknowingly, by the market. When we seek freedom in forex trading, we are the least free, as our account’s net value shows our dire state. True freedom is achieved when we adhere to certain “precepts,” and then our account’s net value reflects the reality of freedom.

Becoming a consistently profitable forex trader is difficult because we have many bad habits, and the media and “experts” around us encourage these habits, leading us away from success.

Our inner nature, combined with financial media, analysts, and trading books, deceives us, causing our account’s net value to decline. Our attempts to remedy this often worsen the situation, like struggling in quicksand.

Our nature is harmful to us, as are most of the ideas and methodologies in the market. Being influenced by harmful concepts daily shapes us into someone far from success.

A seasoned trader once told me his method for training his child in stock trading was simple: give them 10,000usd in 10 instalments to trade without allowing them to read stock reviews, or books, or discuss trading with anyone. This accelerated their path to success by at least threefold. Success is forged in solitude and reflection, minimizing external distractions.

An old Wall Street adage says the market is driven by greed and fear. While true, it oversimplifies the complex thoughts and emotions that influence investment decisions. To find the key to our inner world, we must look beyond greed and fear to psychological biases that affect our trading decisions.

Understanding psychological biases allows us to overcome them and explore the mental journeys of forex masters. Notable biases include overconfidence—distorting risk perception—and “loss aversion,” where traders treat potential gains and losses unequally.

Media often misleads traders for various reasons: catering to the majority who are naturally unsuited for trading; media owners’ own unsuitable nature for trading; or media owners belonging to interest groups involved in the market. Ultimately, traders are misled due to their own reasons.

Social influences also affect forex trading. The “six principles of influence” include reciprocity (repaying others), commitment (consistency with our decisions), social proof (following others’ actions), liking (agreeing with those we like), authority (obeying figures of authority), and scarcity (valuing limited opportunities).

To escape the “cycle” of nature and market traps, we must start by changing ourselves. It’s difficult to change behavior due to existing beliefs and habits unless strong self-discipline is applied. The best approach is both internal and external—reflecting on principles from classic trading books and following methods aligned with trading principles. The importance of trading concepts cannot be overstated. Changing your mindset makes many aspects of trading easier.

To change your mindset, merely providing methods is not enough; it’s also crucial to understand the importance of changing your mindset. Once you grasp its importance and know the specific ways to do so, you’ll be motivated to change. Why is changing your mindset so important? Because your trading concepts directly determine your level of trading—are you a frequent loser or often hit home runs as a big winner? It all depends on the level of your forex trading concepts.

Most trading books start with what is forex, what are stocks, what are futures, how does the forex market work, how does the stock market work, how does the futures market work, what is “Morning Star”, and how to use MACD... Why do they talk about this? Either because they don’t understand themselves or to cater to the readers’ needs.

What do forex traders need? They need specific indicators and techniques. Are these important? Yes, because trading profits rely on specific operations, not abstract concepts—concepts themselves don’t convert to cash. No, because whether those specific operational skills and indicators are based on correct or wrong principles, effective or ineffective, and whether they align with the trader’s mindset determines the fundamentals of those skills.

Specific techniques are the pinnacle of the tower, while concepts are its foundation. The pinnacle is built upon the foundation; without it, no matter how high, the pinnacle cannot be constructed. Where do superior trading concepts come from? This question hits the nail on the head. Trading is not about doing business or building a career.

Of course, when I meet those who think trading is something smart people can see at a glance and treat as a rough-and-tumble affair, I tell them: you should treat trading as a business and career. If you trade frequently.

Where else can superior trading concepts be found? For example, from position management theories like the Kelly criterion. Superior trading concepts can also be found in statistics; at least understanding the basic theory of expected value is good. Besides these areas where superior trading concepts are deeply hidden, NLP (Neuro-Linguistic Programming) is also a field that hides many secrets about traders themselves. Of course, if you delve deep into it, you’ll find that NLP is very close to Buddhism.

Successful trading requires correcting one’s mindset; similarly, achieving enlightenment in Buddhism requires cultivating one’s mindset. The principles are similar, although the goals differ. Principles must be learned; your trading concept determines your level, but how much you can perform at this level also depends on your experience accumulation. Experience comes from practising concepts; concepts must be tempered by experience.

How to accumulate effective trading experience? It’s quite simple: “rigidly follow through.” Trade continuously for a month every day, and you’ll learn far more than those who claim to be senior forex analysts. Nowadays, college graduates go straight to an MBA program thinking they’re born managers. Without experience—bringing untested concepts directly into practice—is very rash. On one hand, you don’t know whether the concept is correct or not; on the other hand, you haven’t tuned the practice of the concept to the optimal frequency yet. Accumulating experience and improving concepts go hand in hand; practice this saying and you’ll benefit immensely. “Read more and practice rigorously”—that’s the secret.

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