A Lesson In Trading – Patience And Risk

New traders / technical traders tend to move too quickly in looking to take advantage of short-term price action.

Looking at this morning’s “risk event” and the markets “completely insane near term reaction to it” would most certainly have any short-term “short time frame” trader ( anything under a 1 H time frame ) up to his/her elbows in sadness – scrambling to find a life line.


Then, with little knowledge of the fundamentals and a heart beating out of your chest you come to understand that: “I’m way too leveraged”, “My position is too huge” , “I’ve gambled here” , “What have I done??” – and you’re wiped from the planet.

We all make mistakes granted – and I’m the first to tell you – I can’t stand watching this “continue pushing higher” against every fundamental known to man but…..the key point being – “I’m watching”.

Trading within your means, and exercising “sick” levels of patience are extremely difficult psychological hurdles to overcome……….yet essential for long-term success.

“Patience young grass hoppa……..patience!”

9 Responses

  1. David October 22, 2013 / 10:43 am

    The psychological aspect of trading is by far the hardest part and I recommened anyone who has not yet read the book “Trading in the Zone” to immediately get a copy. Kong’s advice of trading smaller and adding positions while the market grinds along is great advice that will help keep your emotions in check (helping the psychological component). Simple test, if you’re not sleeping (b/c you’re worried about your position), then you’re trading too Big.

    After the report this morning, I seen nothing but opportunities to add and/or close certain positions. Years ago this move could’ve wiped me out, as I’m sure it did many new traders who were caught on the wrong side (but only b/c they were overleveraged).

    • Forex Kong October 22, 2013 / 10:56 am

      Absolutely David – very well said.

      I think my most satisfying accomplishment with respect to “this trading thing” has been the psychological aspect as…….once you’ve “finally tamed the beast” you are able to move forward with all the “nit picky” things like technicals on smaller time frames etc…..

      I’m certain that the majority of people get “cleaned out / scared shitless” long before they’ve really even had a good crack at – with the psychological barriers being so high.

      It’s kind of a shame that “trading” and “forex trading” in particular get such a bad name as “risky activity/ gambling” when…only a handful of people are able to get past their own inabilities to mange risk and exercise patience to see it for the “art” that it truly is.

      Those damn emotions…..get the better of people before they’ve really had a chance.

    • Jworthy October 22, 2013 / 12:09 pm

      Thanks for the book recommendation David. I just ordered it.

  2. JSkogs October 22, 2013 / 11:38 am

    Something that helps me keep the patience level high, other than small positions and adding, which I do believe is the cornerstone to success, is hedging from time to time when things get a bit whacky. If I am trading oil I can offset my long contract with a short mini to reduce my exposure temporarily and ride out a move. With index futures you can always offset by going forward one month (lack of liquidity though can result in a teeny bit of slippage but whatever). And with currencies I usually keep one high volatility commod pair open in the yen crosses and USD crosses that I can potentially use to offset my exposure, depending on whether I am currently trading Yen or USD or both. When doing this though you have to be aware of the econ calendar because if you choose the wrong one that has an event it can make it a poor hedge very quickly.

    • Forex Kong October 22, 2013 / 11:48 am

      Truly advanced JSkogs….and alot to absorb for those not so “gifted”.

      Getting “caught in the cross fire” certainly makes the idea of hedging difficult for me as……it’s also proven to be a great way to make a losing position – an even bigger loser.

      You’ve obviously got a handle on it. All power to you my friend.

      • JSkogs October 22, 2013 / 12:04 pm

        HAHA totally man. I roasted myself a couple times but I generally do ok at it now. There are several things that go into good hedging……timeframe (generally quite short term), only do it at points of broken resistance (and I mean right at that time so be sitting staring at your freaking screen) and support depending on what the primary trade is you have taken… if the hedge goes in to a losing position with vigor get rid of it immediately and then make a decision on the primary position. I generally look at overnight numbers and how US trade reacts to those levels as well when making a decision to hedge or not. As you said it is complicated and took me some time (and some money) to figure it out but it does work now.

  3. tio October 22, 2013 / 9:39 pm

    where is my patience !! why i think about reward first ! and always forget my risk …
    risk .. first. Survive .. first . Why its so easy to forget IT in the middle of my road ! WHY ?

    • Forex Kong October 22, 2013 / 9:54 pm

      As well Tio – forex markets actually move “slower” than most people realize in that…..

      It’s “rare” that you need to “jump on a given price” as it will likely be revisited many, many times in a relatively small period.

      Look at GBP/NZD for example – and my entry price….and the last few days action. A trader could have entered “anywhere” in a 100 pip range, and just now be seeing the rewards “days” later.

      In all there really is no such thing as “day trading forex”.

      • Forex Kong October 22, 2013 / 10:04 pm

        As well guys……you’ll have noticed via the previous posts that I had been “looking short AUD” several days ago……

        Looking…..planning…..watching…….not “going”.

        Only to “begin entries” today, and “even at that” after the morning risk event – and with small enough positions to add many, many , many more times over the coming days in order to catch the larger term move lower.

        Planning….planning…..patience etc….

        Then the rewards start coming.

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