Forex: The Patient Approach

Filed under: Learn Forex Trading |

Many novice traders seem to take a scattershot approach to trading and trade every possible setup that they see. Conversely, many professional traders seem to trade more like a sniper, waiting for the perfect setup and striking when the time is right. Most novice traders give up in their first year of trading, while professional traders turn a profit year after year.

 

To use an analogy from nature, the crocodile, which is one of the oldest and most successful animals on the earth, hunts by waiting patiently, sometimes for days and weeks, until the biggest and juiciest meal comes along. He does this so that precious calories are not wasted. By going after small meals, he will waste precious calories, so he just hides and waits for that big meal.

 

This information can be used and applied to the world of forex trading. By taking lots of trades, you are wasting your precious time and energy, and you are also losing more profits by way of the spread. However, by waiting for only the highest probability setups, what you are doing is minimising the effect of the spread, and maximising your probability of success.

 

There might only be ten or twelve really good trading opportunities in any given month, and for most people, it takes a lot of patience to wait for these trading opportunities. If you only get two or three good trading opportunities in one week, and the first two trades you make are losers, can you continue your patient approach, or would you start taking weaker trades in order to ‘catch up’? If you did start to take weaker trades, then you could dig a larger hole for yourself, and then you might start to take even weaker traders in order to try and get out of the hole. As such, at some point, trading would become mere gambling. I think that the patient approach is a much better, and (according to 200 million years of crocodile existence!) more proven strategy in forex trading. What kind of creature are you?

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