A Winning Forex Trading Philosophy

I'm starting to believe that being successful trading Forex has more to do with your philosophy than anything else.

You cannot trade based on how much money you want to make. You cannot trade based on how much money you need to make. This means that you can't push money into the market, desperately searching for opportunity, risking a large portion of your net asset value in the process.

You must trade lightly.

When you trade lightly, you simply let the market give you the returns that it is willing to relinquish to you. Quite simply, it is not a process of taking.

If you can change your mindset it will give you a lot of peace compared to the level of stress that many generate. Dip your toes into the market, following your strategy, with a level of investment that simply cannot begin to raise your blood pressure.

A little bit of market wisdom, developed with experience, combined with an appropriate philosophy will generate profits. I know that this is difficult to consider or even believe in today's rational calculating world, but the only way to win is to not fight the market. It is way too big for you.

Stop trying to generate winning positions and simply let the market give them to you.

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Forex For The Small Speculator

Today was a banner day for me... trading the AUD/JPY with a return of more than 10% NAV. The market simply walked up and down my trend lines bringing me profits with every pass. How come this doesn't happen more often?

Anyway, as a small time speculator I thought I'd outline some issues that we face compared to some of the larger traders:

• We trade in very small lot sizes
• To make any meaningful revenue we may trade with a large percentage of our NAV.
• Carry trading strategies may be meaningless

Each of these issues is something that we need to think about and potentially make some adjustments to compensate.

Small Lot Sizes
If you want to trade in small lot sizes you need to find a broker that doesn't charge you an arm and a leg for the privilege. I trade at Oanda and they let you trade with any lot size without any adjustment in spreads. I recommend them and I'd give a referral link if they had an affiliate program.

Trading Large NAV Percentags
There is nothing wrong with trading a large percentage of your NAV as long as you know what you are doing. It's a problem if you are trading this way because you keep acquiring positions as the market moves against you. It's okay if you take a measured defined risk because the market has entered a condition that you have decided represents an opportunity. It is very important to get out of losing positions once you know that your market position is unfounded.

Carry Trading Becomes Useless
If you only have hundreds of dollars in your Forex account, then there is no point trying to take advantage of carry trades. If the market didn't fluctuate so much it might be worthwhile, but in all likelihood you'll make a few bucks here and there and end up wasting your time. So what if you make 200% over a year, you still only have several hundred dollars in your account.

Concluding Thoughts
When you are trading relatively large positions relative to your account size, it can be exciting. You'll quickly win or lose tens of percentage points. If you are good you'll be able to build up a bit of a nest egg before too long and then start trading more appropriately for the size of the account you've built up. Quite simply, as your account gets larger the need for large risks dissipates.

Get out there, take your time, make sure the market sets itself up for you just right, and then stomp around and rip a few dollars out!

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