Maybe you think expert tactics have to be sophisticated, perhaps it should include cryptic indicators based on advanced math that find hidden patterns in the foreign exchange market. No, this is not about fancy Jim Simons quants. Actually, expert traders simplify things, they don’t use 10 indicators on a chart, they do naked trading or something close to it.
If you’ve read the book “Trading from the Gut” written by one of the legendary turtle traders, you can tell by the title that it’s not going to show you any fancy trading algorithms and yet it’s one of the best books on trading.
When I first started learning about trading I thought all the traders who were making money were math, computer science or physics wizards with supercomputers running secret algorithms. Trading was the domain of the brainiacs who also had the computing power to crack the code of the market.
I was convinced that only by duplicating their efforts would I be able to consistently make profits. I knew that trading had to be super sophisticated and perhaps you feel the same way.
But this is not true.
The best traders in the world share the same secret: They use extremely simple yet powerful, trading systems. Expert hedge fund traders, bank traders, private millionaire traders – all have one thing in common: These people are experts. They do one thing until they master it.
This is not new and you definitely heard it before, but it doesn’t mean it’s not important and maybe you’re still not doing it even if you’ve heard about it. But to sum it up, there are only two expert tactics that you ever need to know to be successful at trading forex:
1. Become good at trading just ONE trading system
This is the secret of the expert traders out in the open. They don’t care about trading with the latest fanciest indicators, they don’t want to code their EA into Pine Script, they’ll just use good old MT4. They just care about making money, so they’ll stick to the system they make money with. Unfortunately new traders are oftentimes just gamblers in disguise, they aren’t really interested in making money but in the thrill and excitement of the markets.
If you want excitement and thrill you might as well go party in Bangkok, you’ll have more fun over there than looking at candlesticks and hoping they go in your direction. Once you know your priorities and you view trading as a means to make money not to have fun you’ll start testing and testing until you make your own system and then you can have both fun and profits because if you make money it will become fun.
2. Risk management
Traders that do not have a risk management system are gamblers. They may not even know it, because they tell themselves they’re traders but act like gamblers so they won’t have a clue until they lose their money.
That’s how you make the difference between serious traders and gamblers. Ask them about their money management rules. Experts have strict risk management criteria.
To learn more about risk management, read this.
To conclude…
This is it! Expert traders focus on one market, one trading system, one edge, and they use this edge in their trading repeatedly. They do the same thing over and over again. Profitable trading is boring, but only from the outside, from the view of the uninitiated who watched The Wolf of Wallstreet too many times. But boring and simple as it may seem, it makes money, and that’s the only real reason to start trading in the first place.