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5. Graduation Speech

Love The Forex Game

In his prime, NBA legend Kobe Bryant MADE 1,000 shots a day in practice to increase his chances of making the 20-30 shots a game he takes.

Along with team practice, Peyton Manning (NFL legend) watched hours and hours of tapes of opposing teams every day (even during the offseason) to develop his uncanny ability to read defenses and score against them in one 60-minute game a week.Tiger Woods’ job in his prime was winning golf tournaments for a living (among other things). Before the injuries and personal drama, he won 14 major golf tournaments and 79 PGA tour events – more than any active golfer. He practiced religiously every day for 15 years before winning his first pro event at the tender age of 18.

The obvious commonality between these champions is that not only do they work their butts off, but they also love with they do.

They love the challenge and the competition.

Their passion for the game is so strong that it gets them through the hours upon countless hours of tedious tasks that others may not enjoy like tape watching, suicide drills, weight training, putting drills, etc.

To them, these things are fun!

Again, we’re not gonna sugar coat things. You’re all big boys and big girls.

There will be days when trading SUCKS!

It will get to the point where you think “Gosh darnit! &#$(*&!! I wanna quit now.”

There will be days when you will be totally clueless. You won’t understand why the market is not moving with the news or why your mechanical system is getting chopped up.

There will be days when you will feel extremely lazy. You won’t feel like journaling. You won’t feel like reviewing your trades.

Trust us, you will experience a lot of these days. Especially in the beginning.

On days like these, it’s the “love of the game” that will keep you doing the things you need to do to become a good trader.

To become a good forex trader, it doesn’t take a genius IQ, an Ivy League pedigree, or the need to have three arms and three eyes.

It will take hours, LOTS of hours of market study, chart time, and deliberate practice to trade well.

If you embrace the challenges of trading the currency market and have fun picking it apart, your chances of surviving and thriving will be improved immensely!Okay, that’s it!

Thanks for listening and completing the School of Pipsology.

We really appreciate that you decided to begin your forex trading journey with us.

Once you’re all set up and ready to trade, it’s up to you from then on out.

Grind it out.

Never quit improving every day and you could change your life for the better.

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5. Graduation Speech

Be Patient. Stay Disciplined.

Patience.

It’s a virtue…Especially with forex trading.

Arnold H. Glasgow, an American humorist, once said, “The key to everything is patience. You get the chicken by hatching the egg, not by smashing it.”Developing your currency trading plan will take time. Developing skills will take time.

Waiting for the right trade opportunities requires patience. Entering and exiting a trade at the right moment requires patience.

Discipline.

Discipline is also a virtue, and it means doing the things you need to do to progress and get better….even if you don’t want do it.

This means preparing for each forex trading day or week with research and chart study.If you’re a mechanical or automated trader, this means back testing systems and constantly trying different settings and strategies as the environment changes.

And of course, don’t forget about keeping a trade journal and reviewing every single day you trade.

Journaling is the one trading task that separates the wannabe traders from the real deal traders. Unfortunately, most newbies won’t do it.

Forex trading concepts and techniques are simple and easy to learn.

What’s hard to learn is how to be patient and disciplined to do the right things and make good trading decisions. Truthfully, it will be one of the most difficult endeavors you will ever take on.

To a newbie, sitting on the sidelines and watching the markets move while you wait for your best setups means you’re missing out on profits.

This way of thinking leads to a failure of patience and discipline and causes some of the most notorious trading mistakes in the book:

  • Impulse trades
  • Letting losers run too long
  • Cutting winners too quickly
  • Revenge trades

These actions will kill your account!

Remember that your job as a newbie is to learn how to make good trading decisions and SURVIVE!

The best thing you can do to stay patient and disciplined is to look at your career as a trader as a marathon and NOT a sprint.

Trading is a Marathon, Not a Sprint!

Trading is not an overnight, get-rich-quick scheme.

This is a commitment to build skills that will allow you to profitably trade in any environment the market will throw at you at any time.

And essentially, free you from the chains of the “Man.” Fight the Power!!

If you stay patient, maintain discipline, and commit to constant improvement, then your results today as a forex noob will probably be nothing compared to the results of the trader you will become after years grinding it out in the markets.

Another thing….

Always remember that opportunities for good trades occur often.No need to rush into bad currency trades. They will only set you back from reaching your goals.

Stick to your best ideas and trade setups.

If they don’t come that session, just wait for the next.

Unless the world stops trading currencies (knock on wood) then there will always be opportunities around the corner.

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5. Graduation Speech

Holy Cow! There’s No Holy Grail!

Ask any quant on Wall Street (the super geeky math and physics PhDs who create complex algorithmic trading strategies) why there is no “holy grail” indicator, method, or system to pull profits 100% of the time.

You will probably be given two reasons:

1. You can’t predict the future.

Is there any way to know what a central bank head will say during a speech?

Or maybe what a super famous investor or hedge fund manager says during a random TV interview?Do you know when the next terrorist attack will hit and cause risk aversion?

How about a natural disaster like an earthquake or tsunami?

The list of unforeseen market moving catalysts is infinite and when they happen, they can rock the markets and your forex trading system.

Understand that this is part of trading and the best you can do is be prepared to limit your losses if they occur.

Be ready to have your world rocked. And we don’t mean that in the way you think it means.

2. Data doesn’t move the market. Humans do.

There will be times when data or market themes do not mesh with price action.

Why is that?

Maybe the outcome was priced in ahead of time? Maybe forex traders weren’t focused on the data that was released?Maybe there was an institution covering a huge position that was on the wrong side of the market?

Would all players in the market react to an unforeseen catalyst the same way?

Whatever the price behavior may be, the decisions that lead a trader to take action aren’t always logical or congruent to the information out there.

When you multiply this by the millions of players with different goals/strategies and different sized trading accounts, it becomes impossible to tell where the overall market will go every single time.You can’t quantify or calculate human behavior and unknown future events into an elegant mathematical equation to completely get rid of risk.

There will always be some level of uncertainty and there will be times when you will be on the wrong side of a currency market move.

Actually….there will be MANY times when you will be on the wrong side of a currency market move.

Perfectionists should probably stay away.

For those of you who always feel the need to be correct, we must warn you now…

Nobody can perfectly predict the market every single time.

Nobody.

All hope is not lost though if you decide to stubbornly not listen and continue your search for the Holy Grail.

Rumor has it that if you can find a pink unicorn standing under a rainbow, you will come across an invisible leprechaun who will give you the Holy Grail. Good luck.

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5. Graduation Speech

Focus on the Process. Not on the Profits.

We’ve made the School of Pipsology as easy and fun as we could to help you learn and understand the basic tools and good practices used by forex traders all over the world, but remember that a tool and technique is only as good as its handler.

A painting does not become a beautiful masterpiece by the brush alone. It’s the vision and skillful hand of a painter that creates a work of art.

A football doesn’t find its way to the end zone by itself. It is the quarterback’s ability to read a defense, position his players accordingly, and send the football to the right spot at the right time.

It’s not the “ridiculously awesome” indicator, the Cowabunga system, or the “super duper” forex strategy that gets your account in the black at the end of the year.It’s your ability to read the market, execute the correct strategy for that particular situation, and consistently apply proper risk management techniques that hopefully get you more profitable wins than losses in the long run.

Like in art, sports, or any performance endeavor, forex trading is a multi-faceted skill. The tools alone won’t make you successful.

A dedicated effort towards education and application of what you learn, as well as the constant review of your performance, is the only path to success.In the beginning, that process of learning and deliberate practice should be your main focus, NOT the profits.

Continuing with the basketball analogy, if your goal was to reach the NBA, would you get to the level of performance you desired by playing games only?

Or would you develop faster by focusing on physical conditioning, developing different skills (a jump shot, dribbling, footwork, passing, etc.) in practice, as well as playing games?

Probably the latter right?

If you went straight to the NBA without any training, do you think you’ll score many points or win games?

Nope. We didn’t think so.

Learn the market. Learn forex trading techniques and high probability setups/systems.Learn how to manage risk with proper position sizing and stop losses to limit risk and maximize reward.

Learn how to put it all together in DEMO.

Over time, this process will lead you to a forex trading method or system that works for YOU and that’s when your winning trades begin to outweigh your losing trades.

Successful Habits
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5. Graduation Speech

Never Make the First Move

Unless you’re a good lookin’ dude (like Pip Surfer – holler!) who’s trying to win over his lady crush, never make the first move.

What we mean by this is that you shouldn’t always jump in when you see the market moving so quickly.

Dealers know that, about 80% of the time, markets are ranging.This means that sharp and sudden moves are most likely to be faded. This represents a good opportunity for dealers to make some profits.

First of all, why will it most likely be faded?

Remember, dealers work for banks, so they’ve got two “advantages” (more like tricks if you ask us!) up their sleeves.First, they can see the orders that retail traders have and want to take.

Secondly, they’ve got a ton of cash to help back them up and move the market.

Let’s take a look at a chart to see how dealers can use these tricks to their advantage.

Below is a 5-minute chart of EUR/USD. Here we see that the German ZEW economic sentiment index, a high impact report, has just been released.

Retail traders are looking at their charts and see that EUR/USD is dropping, so they decide to get in on the action.

They figure, “It’s looking pretty good. EUR/USD just dropped 20 pips in the last 5 minutes!This will probably keep falling and test the daily low!”

But wait, that’s what the average retail trader is thinking. What are dealers focusing on?

Dealers know that the release of data normally causes spikes in price as traders are jumping in and out quickly.

They also know that most of the time, the first move after a news event is a fakeout and that price normally REVERSES to levels before the data was released.

What happens is that dealers, with the financial backing of their respective banks and hedge funds, will take on the opposite position and fade the move.

And since their collective efforts (cough… money…) outnumber those of us retail traders, our positions get stomped on like little, little ants.

In the chart above, we see that the down move wasn’t sustained. The dealers’ position is now pushing price up to the point where…

…all of a sudden, price reverses! And this is where the magic happens!

Chances are most people had set their stops just above 1.2900.In order to reach those stops, dealers probably took on even more buy positions using their own money in order to push price up to those levels (we’ll explain this more in detail later).

Once retail traders saw that price was making a new daily high, they probably thought, “Oh man, this baby is gonna keep trading higher! I need to buy, buy, buy!!! *click, click*”.

Now that retail traders have changed their mind and wanna buy EUR/USD, dealers can now take advantage yet again and close their former long positions, while making money off the spread! Ka-ching, ka-ching!

But of course, the dealers, banks, and trading institutions are the true playas in the market!

That’s why they are called market makers – they make the market move!

Once all those retail traders get in their long positions and place their stop orders below the 1.2900 resistance, dealers can once again make a run for those stops and make money off the spread!

And will ya take a look at that! Price did trade a little bit higher, but then it faded and dipped back down under the 1.2900 handle.

All those retail traders who decided to go long on the break for new highs probably had their stop losses hit. As it turns out, that 1.2900 resistance ended up holding the rest of the day.

You can see here how dealers use their considerable advantage to move the markets in their favor!

This is why you shouldn’t always go and take the first move as chances are, you might just get caught in fakeout.

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5. Graduation Speech

Trade Like an FX Dealer

Meet Arnold.

Arnold is from Pipfornia and is a bodybuilder chef who trades.

Like many other traders, he has a mechanical system based on breakouts.

Arnold even has a special name for it: the Terminator System.

He follows his system with rock-solid discipline (which is how he got his abs and bazooka biceps) and with no emotion.

He hopes to terminate enough pips so that he can buy his own Harley Davidson and drive down Pip-nice Beach.

Unfortunately for Arnold, despite following his game plan and not letting the markets get to him, he struggles to make consistent profits.

A typical scenario for Arnold

Arnold gets a buy signal from his Terminator System, as EUR/USD is breaking out of its current resistance level.

He buys at market.

After being up a couple of pips, price reverses and stops him out. Minutes later, he gets another signal. This time, it’s to short EUR/USD.

Like any good trader, Arnold follows his system faithfully and sells at market price.

In just a few seconds, he’s up 10 pips, and it looks like the pair is headed for more lows. Then, all of a sudden, the momentum is lost and the pair begins to consolidate.

Another couple of minutes pass by… then suddenly, price reverses back up and hits Arnold’s stop loss order….but only to shoot down another 100 pips!

He keeps telling himself, “I’ll be back…”

Only if Arnold knew the simple truth…

It’s a Zero-Sum Game!

As we’ve said time and again, trading in the forex market is not an easy task.

You can be the most disciplined trader, who always follows his trading plan, keeps within his risk management rules, but still see a majority of your trades be losers.

What’s worse is that after getting stopped out, you see price eventually go your way and hit your profit targets.

One has to remember, forex trading is a zero-sum game.

Whenever you put on a buy or sell order, there is SOMEONE OUT THERE TAKING THE OTHER SIDE OF YOUR TRADE.

Someone wins and someone loses.

Most of the time, the one who’s taking these positions is a forex dealer.

Forex dealers are professional traders who take on the opposite positions of retail traders, thus providing the liquidity needed for the forex market to work efficiently.

However, banks are in the business of making money as well, and dealers actually can earn tons of profit by quickly unloading their positions, making money via the spread.

The truth is that forex dealers actually do win most of the time. And for this reason, you should try to trade like a dealer.

You must be thinking… “A dealer? I’ve heard so many bad things about dealers – they never fill in me at the right price, the spreads are wack. Why the heck would I ever wanna be like one?”

Well, to be honest, dealers are just like you, someone who’s trying to make some moolah every time the market moves up or down.

But because dealers have so many advantages (the spread, information on order flows, etc.), retail traders are at a major disadvantage.

If you know how dealers think and trade, then you can overcome these disadvantages and become profitable as well.

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5. Graduation Speech

Time Is Your Most Important Investment As A Trader

A common mistake by many new traders is that they think they can make money… fast!

While it’s true you can make money in a short amount of time, it doesn’t mean you will end up profitable in the long run.

A typical scenario is that a new trader reads a little bit about trading forex, finds a system online that claims to make money quickly, and then jumps right into trading because he feels like he’s got enough of a background to make millions of dollars.Unfortunately, after the “honeymoon” period is over and the excitement settles down, this new trader now realizes that trading isn’t as easy as he thought.

The system doesn’t seem to be working like it claimed it would and he has no idea why the market is doing what it’s doing.

The most important thing you can invest in as a forex trader is your TIME!

Time is Money

Every single trading day is a learning experience and if you stop learning, then you will never become a truly successful trader.Take into account how much time it will take you to learn the basics. Then consider how much time it will take in your daily routine to read charts, news reports, record your trades, and be in the markets.

For someone who can dedicate a “full-time” job mentality to forex trading, then this is no problem.

However, if you’re like most people, you may have a job, school work, tuba lessons, Crossfit sessions, so you cannot exactly dedicate your entire day to trading.

This doesn’t mean that you can’t trade, but it should give you some realistic expectations when it comes to determining your trading style.

You probably can’t be a scalper or day trader, but maybe longer-term trades will work better for your schedule.

Each day requires your time to analyze the market. Because news makes the market move, it’s important to consider the economic developments going on around the world and to make it part of your daily routine.

Four things to consider in your market analysis:

Forex Trader

1. FX Market Developments

Look at what the “talk of the town” is in the forex world. See what the analysts are buzzing about and how the currencies reacted.

2. News Releases

Know what news reports are coming out each day and how they affect the markets.

The more important the news report, the more movement you can expect to see in its currency. Make sure you check out our Economic Calendar

3. Market Prices of Other Asset Classes

The price of oil or U.S. Treasury yields can affect the way currencies move so it’s important to find out why these things are rising or falling and keep that in mind when trading currencies. 4. Current Events

Check out many news websites and get to know what is happening across the globe.

Events such as major elections, military conflicts, and political scandals can all affect currency movements or global risk sentiment.

5. Review the Charts

Finally, after going through your daily economic analysis, you have to look at the charts.

Charts will give you insights into key support and resistance levels, trends, and possible price points in which to enter the market.

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5. Graduation Speech

Graduation Speech!

Congratulations! You made it!

You’ve read all six gazillion pages of the School of Pipsology and now you have everything you need to conquer the forex world, retire in a year or two, and then go travel the world in your Gulfstream G650 jet, right?

Think again NOOB!

I’m still a noob!

Sorry to burst your bubble, but you have just barely scratched the surface.We’re not going to sugarcoat things. We told you early on that it was going to be difficult.

If you’re a noob and just finished the School, you’re most likely going to be horrendously bad at trading.

But that’s okay. Unlike noodles, there’s no such thing as an instant expert currency trader. Anything that’s worth learning well takes time. That’s why instant noodles taste disgusting.

Going straight into the markets and trading a live account would be like trying out for the NBA just right after reading “Basketball for Dummies.”

You’d probably get out-smarted, out-hustled, out-muscled, and out-maneuvered. You just haven’t developed the skills or mental/physical conditioning enough to hang with the pros yet.

It’s the same thing with the forex markets.

Forex Shark

The currency world is dynamic and complex. It’s ruled by brainiacs with PhDs and MBAs from Ivy League Schools, who have huge amounts of capital, and all the technological toys money can buy.

When you enter the forex trading world, you have to be ready to dive in and wrestle with the biggest sharks. And they love feasting on noobs.

Are you scared now?

Good!

We just did that to make sure you understand that even though you’ve got to have fun in everything you do, forex trading is serious business and you have to approach it that way.With all that said, anyone with the passion and commitment to learn this business has the chance to get their small piece of a very, very big pie and then some.

Yes, you can make it, but before beginning your forex trading adventure, here are a few lessons we’ve learned that we’d like to share to help you get started on the right path.