We’ve all heard the expression that two heads are better than one. This statement is very applicable when it comes to trading. I have heard of people forming trading teams, which I think is okay as long as there aren’t too many people. A team of three is probably the most I would have. When you get teams with more than that you might feel like your opinions and ideas aren’t heard or will be over-looked. There are many advantages that you get with a partner that you wouldn’t get trading solo.

1. Accountability

Whether you trade with a partner or alone you need to be held accountable for the trades you take. If a trading partner isn’t an option, then you still need to find someone who can hold you accountable for the trades you take. In Rob Booker’s book Adventures of a Currency Trader the main character Harry Baines runs his trade ideas by his wife.

2. Back Testing

It’s nice to have one person find the trades on the charts while the other loads in the trade data on an excel spreadsheet. Also having another set of eyes helps you to see things that you might not have noticed by yourself. Plus back testing can be an daunting task at times, and can be very time consuming. It helps to have someone who will push you to work harder.

3. Motivation

Through my trading career there have been times when I was just about to throw in the towel. Having someone there to lift you up and encourage you when you’re down is critical. It’s important to keep each other excited about trading; talking about things you want to do with the money you plan to make is okay. So if ever your trading partner asks you to stick a fork in them, you refuse.

Make sure that you take advantage of all the benefits of having a trading partner. Learn from each other and make sure you work as a team. Listen to and carefully consider any suggestions your partner may have. Don’t try and take charge and think you’d be better off on your own. We all know what happened with Kobe and Shaq. Try and take more of a Stockton and Malone approach to it. You and your partner should compliment each other with the skills and ideas that you each bring to the table.

There are three different types of traders: Those that make money, those that lose money, and those that are just kind of dormant and don’t really go anywhere. I think most successful traders you will find have been all three types at some point in their trading careers. Looking back on my own trading, I found 5 common things that I consistently did wrong.

1. Trading without back testing first - When I first started trading, I was very eager to start placing trades, just like a lot of new traders are. I made the mistake of trading based off of “eye-ball” backtesting, which is when you just scroll through the charts without actually documenting anything. I also made the mistake of trusting other peoples’ trade ideas without knowing what they were based on.

2. Trading without stop losses - I think we’ve all been guilty of this at one time or another. I know how easy it is to see consecutive trades get bottom ticked and decide that you’re going to get rid of stop losses, or just close them out manually. This is a bad idea. You just have to accept the fact that getting stopped even though you picked the right direction is a part of trading. The stops shouldn’t discourage you though as long as you have a back tested system that you know is profitable over time.

3. Small winners, big losers - This is the easiest concept to grasp, but probably the hardest to actually implement. “It’s easier said than done” is a gross understatement. It’s so easy to be in denial and think a losing trade will turn around. It is also very easy to worry about a winning trade turning around and becoming a loser, causing you to close the trade early.

4. Over leverage - It is important when deciding how many lots to use on a trade that you think about how much money you are willing to lose and not how much you want to gain. My suggestion is to never risk more than 1% of your account balance. The lot amount should always be based on where the stop loss is and not the profit target.

5. Revenge trading - After a devastating loss it is human nature to want to win it back. Revenge trading is a very reckless way of trying to get that money back. If you get stopped out of a trade, don’t get back in the market in frustration. If your system is such that after the loss it produces another signal, then definitely take the trade. After a loss, it is also common to want to leverage more money to not only make up for the loss, but make a bit more to make it a profitable day. Be very careful with this “Martingale” style trading, as it can quickly lead to blowing out your account. Remember, losses to a trader are the same as business expenses to a business owner.

If I could go back and start all over again I would do things a lot different. I would have spent more time backtesting. Nate and I would often try to reward ourselves for backtesting by going to the movies, but would often put in only an hour or so of actual testing.

Backtesting is a lot of work. For a lot of people it is the only part of trading that’s not really that fun. That is why it is so important, and will separate a good trader from the bad ones.

There is an allure to scalping that I just can’t put my head around, pun intended. There are different definitions of what scalping is exactly, but for sake of simplicity I consider it to be any trade that is opened and closed within 90 seconds. Why? Because this was the general description that was used at the forex broker I used to work at.

There are probably a number of reasons why people do scalp:

• Looking for quick profits to compound over and over.
• Impatient: They want money now.
• Fear: It is hard to watch a trade once in profit turn around for a loss.

Here is my counter-list of reasons not to:

• Usually a bad risk to reward: You want 5 pips, but won’t close a loss until 50.
• One loss can wipe out countless winners.
• You really have no idea where the currency pair is going in the next 90 seconds.

…Really those just name a few of the reasons I think scalping is the worst way to trade forex. Of course I have to throw a disclaimer in here. I KNOW that somewhere out there, there will be someone who is going to tell me they have made millions scalping over the last five years. I know this. This is a generality, but I think it is a safe one. It only took a small amount of research at a former place of employment to realize that there was a very strong correlation between length of trades and profit. Don’t lose your head!

How many times have we been told money doesn’t buy happiness? This is a very commonly used expression that you will probably hear several times throughout the course of your life, but probably not from the mouths of the independently wealthy. Granted, there are probably wealthy individuals out there who work some ridiculous 60-hour weeks to attain their wealth, but I am not referring to these people.

It is true that money does not buy happiness, at least not in a direct way. I do believe most people under estimate the power of money. There is also a common misconception that all rich people are greedy, or that they are all snobs. I’m sure we all know some wealthy people who are jerks, but I bet we also know some poor or middle class people who are jerks. And I don’t think that it is fair to assume that every guy we see in a $3,000 suit driving a Ferrari has an “I’m better than you” attitude.

When most people think of what money is good for, they think that it basically just buys stuff. And that is why people say that money doesn’t buy happiness; they are confusing it with stuff. Stuff in no way, shape or form buys happiness; I think that goes without saying. The most important thing money can buy is time, and time gives you freedom, and I think freedom is what brings you the happiness. Freedom to do what you want, to go where you want to go, and to be able to do it whenever you feel like it. Having money can also provide better health, peace of mind, it can strengthen marriages or relationships, give you self-confidence, allow you to pursue your hobbies, and gain knowledge or useful skills.

Let’s face it, not having money really limits how fulfilling your life can be. Not only that, but it also can add a lot of unneeded stress to our lives. Just ask pretty much any married couple if they have ever had a money fight. I have laid awake many nights myself worrying about how I was going to pay my bills and get rid of all my credit card debt. Bottom line is that money is not the root of all evil. The saying actually says that the love of money is the root of all evil. Money isn’t evil, it is a useful tool that can be used to better our lives. And yes, I do believe that financial security can bring happiness into our lives.

Anyone with more than a week of experience in the foreign exchange (forex) market has heard the term, “the trend is your friend”. Yet in my experience most traders aren’t trying to follow any sort of trend at all. They are merely trying to day trade the market, in hopes of essentially scalping a few pips here and there.

Try an exercise with me. Open your platform or your trading charts, pick your favorite pair, and zoom out. Way out. Can you begin to see how when a currency pair starts to trend in one direction, it can continue to go that way for a long time, with only minor hiccups along the way? It’s not until you zoom back in that you begin to see all the noise of the markets.

These are the movements that need to be capitalized on. It might be tempting to try and take advantage of every little support level, resistance level, trend reversal, retracement, etc. along the way; but don’t fall into the trap of thinking that you ever really know exactly when the market is going to turn around each time that it does.

I once heard a wise trader say, “look for any excuse to join the trend”. Never have truer words been spoken about this seemingly chaotic market. There are probably a million and one (excuse the hyperbole) ways in which you can trade the trend. Stay tuned while we at Legion Forex gratuitously share a few of the ways that we’ve been able to successfully follow the trend of the forex market.

If you got into currency trading in an effort to get rich quick, chances are that you’re in the fast lane on your way to blowing out your account. Forex trading really is a marathon, not a sprint. The tortoise trader is much more likely to be able to trade for a living than the hare trader. Most rookie traders blow their accounts out because they are over leveraged. Before you enter into a trade, you need to decide how much you are willing to lose on the trade (and yes, that means using stop losses) . My suggestion is to never risk more than 1% on any trade.

As a new trader your focus should not be on how much money you can make right now, but on how much money you can make later. You need to trade conservatively enough to be able to weather the storms. The less you risk, the longer you can last. You should be able to have 10 losing trades in a row without it having a devastating effect on your account balance. If you take 10 losers in a row and lose, let’s say, 80% of your account, you’d probably be second guessing your system, and give up. But if you only lost 10% of your account with these 10 losers, you might be discouraged, but you’d still be trading when the 10 winners in a row followed.

Treat your $2,000 account like it’s a $2 million account. Ask yourself how long you want to be a trader. Manage your losses, and don’t worry about wins. Discipline yourself now, and down the road when you have a time tested system (6-12 months minimum, depending on how active of a trader you are) with a consistent track record, then maybe you can consider risking a bit more.

Welcome to legionforex.com! This is the first of many posts to come. I won’t get into the reasons this blog was began or who is behind it, as this can all be found in the about Legion Forex page. Let me just say that I am confident this forex blog will be of much value to anyone who is looking to become a better forex trader. Feel free to take a look around, I hope you enjoy your stay.