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EP122: What Should a Trader be Mentally Prepared For?
In this episode of Truth About FX, Walter breaks down some of the stickiest situation every trader (whether you’re a noob or a pro) should be prepared for… And how to have the right mindset to get past them. He shares a “special email” from a friend and how you can benefit from this.
Download (Duration: 08:42 / 9.95 MB)
In This Episode:
00:31 – the biggest one
02:06 – wiped out
04:03 – real approach
07:14 – call an ambulance
08:05 – funky market
Tweetables:
Prepare to deal with risk. [Click To Tweet].
Make yourself an exit plan. [Click To Tweet].
Take a break. [Click To Tweet].
Announcer: Sometimes, forex trading is a wild and wooly place to be. That’s why Hugh is here, to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.
Hugh: Hi, Walter. What are some of the situations that traders should be mentally prepared for before the situations happen?
Walter: What a great question. The biggest one is that you’re going to have a drawdown. It’s going to suck and you’re going to have to figure out a way to get out of it. That’s the biggest one.
Mentally, also making mistakes. You’re going to make mistakes whether it’s in execution, or somewhere along the line you miscalculated your risk or you chose the wrong broker.
Somewhere along the line, you made a mistake and you’ve got to deal with that too, as a trader. But, the biggest one and the number one thing that I believe separate those traders who make a living from this versus those traders who really struggle is that the traders who do well are able to pull themselves up out of the drawdown.
I mean, it’s as simple as that and it sounds crazy that, of course, I can withstand a 35% drawdown but it’s so true that people freak out. They do their backtesting and they go, “Oh, okay”.
For example, I’ve got an email here from a guy yesterday and he said… He was saying that he did a backtest. He tested a system that we we’re talking about and I was sharing with him.
My friend, he messaged me in the forum and he said… He quoted this thing up and it’s for the H4 GBP/AUD and he found that it turned a $100,000 into $2 Million in two years. That’s the system that he traded, that he tested, which is great but then in the next two years, it completely wiped out the account.
Here is the thing, this is what you’re dealing with. You’re dealing with risk. The things that you need to be mentally prepared for are dealing with the risk issues. That really comes down to drawdowns.
You have to mentally prepare yourself for the drawdown that is going to occur and that you will be able to pull yourself up out of. You can do it. It’s possible. It might seem like it’s crazy and if you do crazy things, it will be difficult to get out of.
Like, if you’re in a 10% drawdown and you start taking twice the risk to get out of it or if you start Martingale trading or whatever, that’s where the problem is. The biggest thing you need to have is a plan.
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By Walter Peters (FXJake) and Hugh Kimura (Trading Heroes)In this episode of Truth About FX, Walter breaks down some of the stickiest situation every trader (whether you’re a noob or a pro) should be prepared for… And how to have the right mindset to get past them. He shares a “special email” from a friend and how you can benefit from this.
Download (Duration: 08:42 / 9.95 MB)
In This Episode:
00:31 – the biggest one
02:06 – wiped out
04:03 – real approach
07:14 – call an ambulance
08:05 – funky market
Tweetables:
Prepare to deal with risk. [Click To Tweet].
Make yourself an exit plan. [Click To Tweet].
Take a break. [Click To Tweet].
Announcer: Sometimes, forex trading is a wild and wooly place to be. That’s why Hugh is here, to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.
Hugh: Hi, Walter. What are some of the situations that traders should be mentally prepared for before the situations happen?
Walter: What a great question. The biggest one is that you’re going to have a drawdown. It’s going to suck and you’re going to have to figure out a way to get out of it. That’s the biggest one.
Mentally, also making mistakes. You’re going to make mistakes whether it’s in execution, or somewhere along the line you miscalculated your risk or you chose the wrong broker.
Somewhere along the line, you made a mistake and you’ve got to deal with that too, as a trader. But, the biggest one and the number one thing that I believe separate those traders who make a living from this versus those traders who really struggle is that the traders who do well are able to pull themselves up out of the drawdown.
I mean, it’s as simple as that and it sounds crazy that, of course, I can withstand a 35% drawdown but it’s so true that people freak out. They do their backtesting and they go, “Oh, okay”.
For example, I’ve got an email here from a guy yesterday and he said… He was saying that he did a backtest. He tested a system that we we’re talking about and I was sharing with him.
My friend, he messaged me in the forum and he said… He quoted this thing up and it’s for the H4 GBP/AUD and he found that it turned a $100,000 into $2 Million in two years. That’s the system that he traded, that he tested, which is great but then in the next two years, it completely wiped out the account.
Here is the thing, this is what you’re dealing with. You’re dealing with risk. The things that you need to be mentally prepared for are dealing with the risk issues. That really comes down to drawdowns.
You have to mentally prepare yourself for the drawdown that is going to occur and that you will be able to pull yourself up out of. You can do it. It’s possible. It might seem like it’s crazy and if you do crazy things, it will be difficult to get out of.
Like, if you’re in a 10% drawdown and you start taking twice the risk to get out of it or if you start Martingale trading or whatever, that’s where the problem is. The biggest thing you need to have is a plan.