The Unspoken Rules Of Trading

Hello forex traders. It's weekend and I would like to share few things that I consider interesting and is essential for forex traders to read to widen our general knowledge, especially for newbies. I would like to post a fantastic advises from a successful trader with user name FUDOMYO from one of the best forex forum site I've known. Here it is:

"I can only speak for myself, but I actually do make a living at trading. It was hard won. It took intensive study and a level of due diligence and discipline that most jobs don't require.

It is a certain breed that rises to the challenge and thrives in this environment.

So cutting the wheat from the chaff starts at the bottom. If anyone finds themselves in any one of the categories of the "people who shouldn't trade" below, then save yourself a lot of money and give up now. What I'm going to share may sound harsh, but it's not mean spirited in the least. The market is brutal and honesty is critical. Anyone giving people false hope or encouragement is doing a great disservice.

The Unspoken Rules of Trading

1. Stupid people shouldn't trade.

It takes a level of mental acuity that pushing the button for the fries doesn't. Trading is professional work and requires an aptitude for strategic thinking as well as a high level of problem solving skills. Here's a link for industry IQ averages. http://iqcomparisonsite.com/Occupations.aspx The chart includes administrative functions as well as professionals, so you need to look at the 50% mark and above. In Finance the cutoff is 110 IQ for professional work, for general employment the cutoff for professional work is 100. There is another statistical table here http://www.geocities.com/rnseitz/Definition_of_IQ.html. Remember these are minimum cutoffs, not levels of excellence. These polls are based on actual employment figures, so it isn't an opinion whether someone has what it takes, it's just reality. Do yourself a favor and take a simple IQ test online. There are plenty.

You are going up against the top minds in the world in this market, so you need to ask yourself, "Do I really have the necessary fire power?" The market isn't an equal opportunity employer, it's a predator.

2. Lazy people shouldn't trade.

It's hard work. Anyone who thinks they can cut corners are deluding themselves. The problem is most lazy people don't realize they're lazy. I don't mean the people who can't be bothered to get out of bed kind of lazy. I mean the one's who went to college, got a degree and spent their time until now being handed work to do rather then ever taking an initiative to improve upon a process, to strive for a level of excellence above the bare minimum of what was expected of them, and always sought the line of least resistance kind of lazy. Trading takes a high level of commitment, a willingness to make sacrifices, and an ability to innovate. If you've never risen to the challenge or developed these skill sets, putting large sums of money on the line is a tough way to find out you don't have them.

3. Emotionally weak or unstable people shouldn't trade.

You need to have a high degree of emotional intelligence, stability, and self awareness to make it. If you don't have the constitution for it, or haven't dealt with your emotional weaknesses they will interfere with your decision making process and you will lose. Fear, greed, ego, hope, and anger are obvious things that need to be overcome. More serious maladies will have an even greater impact so it's up to the individual to introspect if they have the emotional stamina for this profession. Trading will push every button, bring out every demon, and then some you never knew existed. If you haven't seen the "coffee's for closers" speech on youtube, it's worth watching, and if you think that's abuse, then you have no idea what you're up against.

4. Substance abusers, alcoholics shouldn't trade.

For obvious reasons besides drunk courage and nodding off for 12 hours while a trade's going with no stop loss at 500:1 leverage.

5. Unlucky people shouldn't trade.

If you've never won at anything in your life why would trading be any different? There is an underlying cause for unluckiness. I don't buy into the notion that some people are naturally lucky and others aren't. We create our own luck and lot in life. If you are a glass is half empty person, or constantly of the view that the deck is stacked against you, it will be. State of mind defines our path. Losers love to be proven right. The "see I told you, no one's a winner" types.
With that vantage point someone has already cast their own misfortune. They usually try to find like minded beings to substantiate their view so they can blame it on the system and not take personal responsibility for their own failings or correct them. Misery loves company.

Naive people don't really belong on this list, but should always trade demo first. We all have to start somewhere. So being new to something doesn't mean you are not going to make it. But heading into this with a notion that it's easy or listening to people brag about their winnings on a forum and thinking "I can do that too" is a completely false impression. I watch the Interactive threads and from half the stuff I read you'd think people are making a fortune.

This is just not true. There are a handful of good traders, but you need to understand enough about the market dynamics to know who is good at this and who is full of it or just demo trading.

Then there are the scammers. The people who shake down newbies by throwing fairy dust in their eyes. So be cautious of trading systems and signal services that sound too good to be true. They are.

No trading system will replace real knowledge. People who put their faith in a trading system will lose. You need to study from the bottom up. Candlestick patterns, chart patterns, price action, all the components that create market dynamics. If you can't understand what's happening on a naked chart, no indicator is going to help. There is no holy grail, no magic bullet.
There is only thousands of hours of chart time and studying everything you can get your hands on for technical analysis, trading psychology, and learning how the global financial market operates.

Then there's money management, risk reward, and overcoming negative expectancy. Trading is a business, not a game. It needs to be approached with a high level of professionalism. The bottom line is critical. You are the President, the Trader, the Analyst, Systems Technician, and Accountant. You have to wear each hat equally well and your business is only as strong as it's weakest link. If you have no prior experience running a business, then you need to learn. Trading is more than just placing trades.

After you've put all this together, then there's the market, which is a fickle beast. It eats the best and brightest as a snack before lunch. It's unforgiving, uncompassionate, and unrelenting. If you get cocky, or complacent, it will rip you to shreds. Even if you do everything right, sometimes you get broadsided, which is why money management is so important.

The last one's standing are the one's you're up against. And they are 10 moves ahead, have years of collective experience and inside market knowledge that retail traders don't.

No mean feat. But if you think you've got what it takes, great.

Trading is not a glamorous job. It's a boring, rote, solitary activity. You need lots of patience and to remain passionate about it at the same time. Personally, I love it. It's like playing financial chess against a thousand Kasparov's. When you get the moves right there's an indescribable satisfaction to it. Making money is the end game, but the side effects are personal improvement and self autonomy, and an in depth understanding of how the global financial system actually works. All good stuff.

Anyway, that's my take on it.

I hope some of this is useful to someone just setting out on the path."

Source: www.forexfactory.com