A sad fact of forex trading is that the vast majority of aspiring traders never achieve the success they desire when they first begin trading. There are several psychological hurdles that every successful forex trader must overcome before they become consistently successful, and we’ll focus on one of the major hurdles in this article.
A common misconception shared by most new traders is that in order to become a successful forex trader you must load your charts up with indicator upon indicator; the thinking is that unless you’re using every charting weapon in your arsenal that you’ll miss that all important entry or exit point. Quite the contrary – using too many indicators only serves to confuse and mislead the trader into making the wrong decisions. What professional traders have discovered is that by clearing your charts of almost all indicators it becomes much easier to make successful trades.
The irony in this is that most new traders begin with very clean charts, and only add more indicators after they start losing money. They think that the reason they are losing is that they are missing some key indicator that will give them the perfect entry and exit point for any trade, so they begin adding indicator after indicator to their chart. Before too long what was once a nice, clean chart becomes a tangled mess that is impossible to read. The problem, as any professional forex trader will tell you, is that most indicators are lagging, meaning that they’re telling you something that has already happened. Making money in forex is all about speculating what will happen in the future, so most indicators are of no help whatsoever.
It’s human nature to over analyze and over-complicate, especially where forex trading is concerned. After throwing every indicator you know of at your chart you soon find that you’re still consistently losing money on your forex trades – it’s only then that you overcome that major psychological hurdle of over-analysis. You’ll soon come to realize that simplicity is the answer, and that there is no Holy Grail of forex success. No single indicator or piece of software can ever give you consistently profitable trades. There are, however, simple trading strategies that you can employ that will remove emotion from your trades and make you a consistently successful trader over time.
The first step to take when devising your own trading strategy is to remove all indicators from you chart, so that only the candlesticks remain. This is essentially all you need – what is happening in the market right now. By placing too much focus on indicators you create too many reasons to stay in a trade, when the current price action is telling you to get out. Indicators act as a mental crutch, so that as bad as things are currently going in a trade you believe that the indicator is telling you that things will turn around in your favor. What happens, of course, is that they usually don’t and you let your emotions pull you into yet another huge loss.
Trading with simple price action charts will build your discipline and remove emotion from your trades. Emotions may be what make us human, and they may be hugely beneficial in all other aspects of our lives, but as far as forex trading is concerned they are a hindrance. Trading a simple forex strategy, such as using price action only, helps to remove emotion from your trades and is a necessary step to take to becoming a consistently profitable forex trader.