- Trading is a discipline that takes time to gain competence
- While you need talent, you also need mental strength to suceed
- To be a winner you first need to learn how to lose
- This means understanding how you make mistakes, and learning from them
By Max McKegg
Forex trading is a fascinating and potentially rewarding undertaking. Over the past three decades I have earned my living as a forex professional; providing trading forecasts to institutional as well as individual subscribers around the world, as well as trading on my own account.
It has been a highly rewarding experience (both financially but also in terms of quality of life, enabling me to work where, when and how I like) in which I have been able to provide a more than satisfactory living for my family over the years. Furthermore, I have found it to be a thoroughly enjoyable way in which to earn a living and I still do (which is why I have no plans for retirement).
Tennis player Roger Federer was a temperamental youngster, something he had to learn to control before becoming the champion he is today. Photo: iStock
Trading is a discipline that requires time to gain competence and, as with other pursuits, to learn to be a “winner” you must first learn how to lose. Using a tennis analogy, sure, to be a world-class player you need to have the talent but to consistently succeed at the highest level you need mental strength.
This means understanding that you will make mistakes, that you will have good days and bad ones, that you will not always feel like “taking the court”, that you will come up against difficult opponents and that you will not always execute points as well as you do in practice. You will also receive many “bad umpire calls” and then there is the crowd to contend with. How you react to all these challenges will ultimately determine your success.
The great tennis champion Roger Federer didn’t always exhibit the poise and decorum, mental fortitude and placid acceptance of umpires’ decisions that has characterised his playing career for over a decade now. In his youth, while learning his tennis craft, Federer had a fiery temperament and despite obvious boundless talent, he had to conquer his inner demons and perfect his temperament on court before he was able to rise beyond the level of a very, very good tennis player, to that of a champion.
It’s the same in forex. FX trading is a tough business, where many try but few succeed over the long haul. If you can't tolerate (or become upset) with losses, then trading is simply not for you. Inevitably, losing is a part (a big part) of the forex trading experience. Also inevitably, even the very best of traders will suffer trading draw-downs (frequently) and this too is all part of the trading experience. It’s vital to accept losses in your stride but it is also critical that stringent risk/money management is employed at all times to ensure that these losses are minimised.
While I am content to give my personal trades every reasonable chance of working out, I will not let profits “come too far back on me” and I will never let losses persist. In this way, my trading losses (and there are plenty of them) are kept relatively low, relative to my winning trades which really work out. This provides the essential trading edge required to enable long-term success.
– Edited by Gayle Bryant
Max McKegg is managing director of Technical Research Limited. If you would like an email notice each time Max posts a trade or article then click here or post your comment below to engage with Saxo Bank's social trading platform.