Trading Psychology Podcast Ep58: The Good and Bad of Forex Trading

Summary

In this insightful episode of the Trading Psychology Podcast, VP, the creator of Non-Nonsense Forex, and author of the book 'Non-Nonsense Forex Trading Psychology,' engages in a deep discussion with Rob Reinhold. They explore the nuances of Forex trading, emphasizing its universal aspects across different markets and the importance of understanding the basic mechanics. The conversation delves into the advantages of Forex trading, such as its 24-hour market accessibility, the absence of inherent biases, and the reduced impact of news events, which allows for a more chart-focused approach. However, they also candidly discuss the potential pitfalls, particularly the misuse of leverage, which can amplify the psychological challenges faced by traders. The hosts share personal anecdotes and strategies, highlighting the importance of finding a trading style that aligns with one's personality and lifestyle. They conclude by encouraging traders to explore various markets and utilize demo accounts to discover the best fit, emphasizing the need for a disciplined and patient approach to trading.

Takeaways

• 📈 **Trading is Universal**: The core principles of trading apply across all markets, whether it's Forex, stocks, or bonds.
• 🚗 **Driving Analogy**: Trading different markets is like driving different cars; the basic mechanics are the same, but each vehicle has its own characteristics.
• ⏰ **24-Hour Market**: Forex offers a continuous market that suits various schedules, unlike stock markets that operate on fixed hours.
• 🔍 **Reduced Bias**: Forex trading naturally eliminates certain biases since it's not focused on a single entity like a company's stock.
• 💲 **Leverage Risks**: High leverage in Forex can amplify the effects of mistakes, making it a double-edged sword for inexperienced traders.
• 🌐 **Liquidity Advantage**: Forex's high liquidity allows for tighter spreads and less slippage, which is beneficial for automated trading systems.
• 📊 **Chart-Centric**: Forex trading is heavily reliant on technical analysis, providing a 'blank canvas' for those skilled in reading price charts.
• 🚫 **No Gaps**: Unlike stocks, Forex doesn't have price gaps within the trading week, which can cause sudden and unexpected losses.
• 📉 **Low Volatility**: Relative to other markets, Forex is considered lower in volatility, but the leverage provided can make it feel riskier.
• 🤑 **Psychological Challenges**: The constant availability of the Forex market can lead to overtrading and burnout, especially for those prone to impulsive behavior.
• 🌟 **Finding the Right Fit**: It's important for traders to explore different markets and trading styles to find what best aligns with their personality and lifestyle.

Q & A

What is the main theme of the trading psychology podcast?

The main theme of the podcast is to discuss trading psychology, focusing on the Forex market, and to share insights and strategies that can help traders improve their trading skills.

Why does Rob Reinhold believe that 'trading is trading'?

Rob Reinhold believes that 'trading is trading' because the fundamental dynamics of trading are the same across different asset classes, such as stocks, Forex, bonds, and others. It's about understanding supply and demand, which affects the current market price regardless of the specific asset being traded.

What are some advantages of trading in the Forex market according to the podcast?

Some advantages of trading in the Forex market include the 24-hour marketplace, the lack of long-short bias, the ease of entry compared to stock trading, and the fact that Forex is a global market that is less affected by news events and company-specific issues.

How does the 24-hour nature of the Forex market affect traders?

The 24-hour nature of the Forex market allows traders to fit trading around their schedules, which is particularly beneficial for those who cannot trade during regular stock market hours. However, it can also be a disadvantage for some, as the constant availability of the market can lead to overtrading and poor trading decisions.

What is the impact of leverage in Forex trading?

Leverage in Forex trading allows traders to control larger positions with a smaller amount of capital. While this can amplify potential profits, it also increases risk, and novice traders often misuse leverage, leading to significant losses.

What is the significance of the 'no gaps' feature in Forex trading?

The 'no gaps' feature in Forex trading means that there are no sudden price jumps between trading sessions, which can happen in stock markets due to overnight news. This allows Forex traders to better manage risk and avoid unexpected losses.

Why do Patrick and Rob suggest that traders should try other markets besides Forex?

Patrick and Rob suggest that trying other markets can help traders find a trading style and market that fits their personality and lifestyle better. It can also help them overcome certain biases and challenges they might face in Forex trading.

What is the importance of understanding one's own trading psychology?

Understanding one's own trading psychology is crucial because it helps traders recognize their biases, manage risk effectively, and make better trading decisions. It also aids in finding a trading style that aligns with their personal preferences and goals.

How does the podcast address the issue of biases in trading?

The podcast addresses biases by discussing how Forex trading can help eliminate certain biases, such as the long-short bias, that are common in other markets like stocks. It also emphasizes the importance of being aware of these biases and how they can affect trading decisions.

What are some of the psychological challenges that traders face in the Forex market?

Some psychological challenges in the Forex market include the misuse of leverage, the temptation to trade excessively due to the market's 24-hour availability, and the potential for overconfidence after a successful trade, which can lead to riskier trading behavior.

Why is it recommended to use a demo account when trying out new trading markets?

Using a demo account allows traders to practice and develop their trading strategies without risking real money. It's a safe way to learn about different markets, test various trading systems, and understand the unique characteristics of each market before committing to actual trading.

Outlines

00:00

📚 Introduction to Trading Psychology

The podcast begins with an introduction to trading psychology, focusing on the importance of understanding the mental aspects of trading. The host, VP, discusses the significance of stepping back and evaluating the basics of trading, particularly in Forex. The conversation emphasizes the universality of trading principles across different financial markets and the need for continuous learning and self-improvement.

05:01

🚗 Trading as a Universal Skill

The host uses an analogy of driving different vehicles to explain that trading, regardless of the market (stocks, Forex, bonds, etc.), shares the same fundamental principles. The conversation highlights the importance of understanding the basic mechanics of trading and how they apply to various financial instruments. It also touches on the different characteristics of trading 'vehicles' and the need to choose the one that suits the trader's personality and goals.

10:03

🌐 The Advantages of Forex Trading

The discussion shifts to the benefits of Forex trading, which include the 24-hour marketplace, the lack of biases, and the ease of entry compared to other markets like stocks. The host shares personal experiences and emphasizes how Forex trading's flexibility and global nature make it an attractive option for many traders. The conversation also addresses the psychological aspects of trading, such as the tendency to fall in love with a particular currency or trade based on biases.

15:04

🎨 Forex as a Blank Canvas for Traders

Forex is described as a blank canvas for traders, allowing for pure technical analysis without the influence of external factors like company CEOs or news events. The host appreciates the lack of gaps in Forex trading, which contrasts with the stock market's potential for significant price jumps, or 'gaps,' due to after-hours news. The conversation also highlights the equal playing field in Forex, where retail traders are less affected by the actions of large players.

20:05

🤖 Automation and the Impact of News in Forex

The benefits of Forex trading for automation are discussed, with the host noting that the market's liquidity and tight spreads make it ideal for automated trading systems. Additionally, the impact of news on Forex is considered less significant than on stocks, allowing traders to avoid news events and their immediate aftermath. The host shares a personal story about the dangers of over-reliance on leverage and the importance of trading with discipline.

25:07

🚨 The Disadvantages of Forex Trading

The conversation turns to the disadvantages of Forex trading, particularly the risks associated with high leverage. The host warns about the dangers of trading with leverage as a novice and the potential for significant losses. The discussion also addresses the psychological impact of leverage and the importance of managing expectations and treating trading as a long-term business rather than a get-rich-quick scheme.

30:08

⏰ The 24-Hour Market: A Double-Edged Sword

The host reflects on the challenges of the 24-hour Forex market, especially for extroverted or impulsive traders. The constant availability of trading can lead to overtrading and poor decision-making, driven by boredom or the thrill of trading. The host shares personal anecdotes about the negative impact on his sleep schedule, relationships, and overall well-being, and the realization that a more balanced approach to trading is necessary for long-term success.

35:09

🤝 Finding the Right Trading Niche

The host encourages traders to explore different markets and trading styles to find the best fit for their personality and lifestyle. The conversation concludes with a call to action for listeners to share their experiences and misconceptions about Forex trading. The host also invites feedback and comments, emphasizing the importance of community and shared learning in the trading journey.

Keywords

💡Trading Psychology

Trading psychology refers to the emotional and mental processes that traders experience while trading. It is a critical aspect of successful trading, as it addresses the psychological challenges and behaviors that can impact decision-making. In the video, the hosts discuss the psychological pitfalls and advantages of trading Forex, emphasizing the importance of understanding one's own psychology to improve trading outcomes.

💡Forex (Foreign Exchange)

Forex, short for Foreign Exchange, is a decentralized global market where currencies are traded. It is the largest and most liquid financial market in the world. The video focuses on Forex trading, discussing its pros and cons, and how it compares to other forms of trading such as stocks or commodities. The hosts share their personal experiences and insights on trading Forex.

💡Leverage

Leverage in trading is a loan provided by a broker, permitting an investor to control a larger position than their equity would allow. It amplifies potential gains but also potential losses. The script highlights the dangers of high leverage, especially for new traders, as it can lead to significant losses if not managed properly.

💡Liquidity

Liquidity in a market refers to the ease with which an asset can be bought or sold without affecting its price. High liquidity is a key feature of the Forex market, allowing traders to enter and exit positions quickly and with minimal price slippage. The hosts mention liquidity as one of the advantages of Forex trading, noting that it contributes to the market's efficiency and the ability to execute trades smoothly.

💡Volatility

Volatility is a measure of the magnitude of price fluctuations in the market. While Forex is often perceived as highly volatile, the hosts clarify that in terms of percentage change, Forex can be less volatile than other markets like stocks or cryptocurrencies. They discuss how the perception of volatility can influence trading behavior and the importance of understanding true market dynamics.

💡Bias

Bias in trading refers to a tendency or inclination that can lead to irrational decision-making. The hosts talk about various types of biases such as familiarity bias and confirmation bias that can affect trading choices. They note that Forex trading can help eliminate certain biases since traders are not emotionally attached to specific currencies.

💡Gap

In financial markets, a gap refers to a price jump between the closing price of a security and its opening price at the next trading session. The hosts mention that gaps are less common in Forex because it operates 24 hours a day, which can be an advantage over other markets that close and open with potential for significant price jumps.

💡

💡Scalping

Scalping is a trading strategy where traders aim to profit from the small price movements of a security. It involves making numerous trades throughout the day, typically holding positions for a very short time. The script does not explicitly mention scalping, but the 24-hour nature of Forex and the tight spreads due to high liquidity make it a suitable market for scalpers.

💡Risk Management

Risk management is the process of identifying, analyzing, and mitigating investment risks. It is crucial in trading to protect against large losses. The hosts discuss the importance of risk management, particularly in relation to the use of leverage in Forex trading, and how it can help traders to preserve their capital.

💡Demo Account

A demo account is a practice account provided by brokers that allows traders to simulate trades using virtual money. The hosts recommend using demo accounts to try out different trading strategies and markets without risking real capital. This approach can help traders gain experience and identify the trading style that best suits their personality and lifestyle.

💡News Impact

News impact refers to the influence that economic news, political events, or corporate announcements can have on the financial markets. The hosts talk about how Forex is less susceptible to news impact compared to stocks, which can be a benefit for traders who prefer technical analysis over fundamental analysis.

Highlights

The concept that 'trading is trading' regardless of the asset class, emphasizing the commonalities across different trading vehicles.

An analogy comparing trading different assets to driving different cars, highlighting the basic mechanics that remain consistent.

The benefits of trading Forex, including the 24-hour market accessibility that suits various schedules.

How Forex trading naturally eliminates certain biases, such as long-short bias, that are common in stock market trading.

The lack of gaps in Forex trading during the week, which reduces the psychological stress associated with overnight risks.

The high liquidity in Forex allowing for effective use of automated trading systems and reducing the impact of slippage.

The impact of news on Forex being less significant compared to stocks, allowing traders to avoid news events and their aftermath.

The importance of finding a trading style that fits an individual's personality and lifestyle, which may not always be Forex trading.

The dangers of high leverage in Forex for new traders, leading to amplified losses and account blow-ups.

The psychological challenges of a 24-hour market, which can lead to overtrading and lifestyle disruptions for inexperienced traders.

The recommendation for traders to explore different markets through demo accounts to find the best fit for their trading style and personality.

The personal stories shared by the hosts about their experiences with Forex trading, including the pitfalls of overleveraging and the importance of risk management.

The advice against treating Forex trading as a short-term hustle and instead focusing on long-term, sustainable strategies.

The discussion on the importance of sleep, relationships, and a healthy lifestyle in conjunction with trading success.

The hosts' consensus on the necessity of risk management and the potential for Forex trading to be both rewarding and detrimental to one's life if not approached correctly.

The encouragement for listeners to share their misconceptions about Forex trading and the time it took them to debunk those myths.

Transcripts

this is the trading psychology podcast

this is VP creator of non-nonsense Forex

and author of the book non-nonsense

Forex Trading psychology and with me as

he is every week it is the benevolent

despot himself it's Rob Reinhold well

thank you I'm going to have to look all

those words up um I know what a

desperate is I know what benevolent is

okay I can handle that one thanks for

having me here Patrick always fun to

talk with your subscribers and really

anyone who wants to get better at

trading because this is where the game

is is one and lost and what I thought

we'd do this week is I mean not what I

thought I would do this is a Rob put

together episode but I thought now would

be a good time to talk about it since

it's early in the year and we spent so

much time really drilling down deep and

getting into the nitty-gritty on things

let's take a step back let's you know

kind of take a breath and do something

that really is for everybody because if

you're new or newer I think this will

help a lot but even if you're

experienced it's nice to kind of take a

step back every once in a while and say

hey why do I do this why do I love doing

this and just what are some of the real

basic things that I have to watch out

for in trading the Forex market so we're

just going to keep it to Forex for this

episode we may do other avenues later

but Rob go ahead and get us started off

here and as as I always do I will jump

in where I feel like it's appropriate

thanks Patrick I'm going to start out

with the saying I've been saying for

years trading is trading now you might

be thinking to yourself wait a second

that literally doesn't make any sense so

let me explain what I mean by trading is

trading I don't care if you're trading

stocks I don't care if you're trading

Forex I don't care if you're trading

bonds I don't care if you're trading

anything it's really the same game and I

I liken it to an analogy of a car when

you get into a car we all know it's the

basic things you got your gas you got

your brake some cars have a clutch

you've got your gears and really it's

driving is driving no matter what car

you getting you can probably get to

where you're going based on the basics

that you know so driving is driving

whether you're driving a go-kart whether

you're driving a truck whether you're

driving a minivan or whatever it's the

same mechanics so when we talk about

trading is trading really everything is

the same dynamic because in the end

everything is simply a symbol that is a

current market price and that current

market price will go up and down based

on supply and demand so really trading

is ubiquitous it really cares across all

the asset classes Forex stocks bonds

Futures gold whatever it is with that

being said when we go out and we take a

look at

cars cars are different so yes we might

know how to drive them all but some cars

are slow some cars are very very fast

some cars are used to go very very slow

so they can pull very large things so we

have all this variability in this world

of driving and we literally have the

same thing in the world of trading is

that there are different vehicles that

are going to go different speeds and

that's what it really comes down to when

we get into trading whatever it is

you're trading you've really picked a

vehicle and that vehicle is going to

have certain characteristics that come

with it and those are the

characteristics that we want to talk

about out in this episode and we're

going to talk about the good and the bad

so if you have chosen Forex and you say

hey Forex is what I'm going to go with

I'm going to trade it these are the

problems and some of the advantages that

you're going to get along with it yeah

and the way you have it written out here

I like it because we'll go ahead and

start with the

advantages and most of these really

don't have a lot to do with trading

psychology but it's almost an

advertisement as to say Hey look if

you're not trading this now you need to

be or if you are currently trading it

you've chosen the right path because

there are so many advantages and I've

talked about this early on on my own

channel to trading the Forex Market that

you're just not going to get anywhere

else so Rob go ahead and start off the

list here I'll jump in and then I have

some of my own that I added towards the

end I personally started trading forx in

2007 I started trading in 1997 so this

was 10 years

after and when I got into it I remember

making my first couple trades and not

understanding position sizes not really

understanding much there's so much

better information out there about Forex

Trading but I fell in love with it right

away and it because of these advantages

they did so many great things for me and

my personality that it just absolutely

fit like a glove now I'm going to jump

into the advantages here but I really

want to talk about how where you are

right now as a Trader and especially

where you were in the first year of

trading there's lots of different ways

to trade you can scalp you can day trade

you can swing trade you can do longer

term stuff you can do any of these

Styles eventually you're going to find

the one that's right for

you I found the one that was right for

me that doesn't mean that you can come

in and do the same thing because just

what we're talking about here there are

some trading products that my

personality my psychology it fits like a

glove and there are some that really are

very difficult and if I went to go try

to trade those I would likely fail

because of the psychological problems

that come up in those products so I

really wish that before every Trader got

started as a Trader you literally could

have a questionnaire and you could like

have a list of all the advantages and

disadvantages of Forex Trading all the

advantages and disadvantages of stock

trading so you could actually go through

it's like a menu and be like hm which

one do I want let's see that one's a

little bit too slow that one's a little

bit too fast oh this one is just

right so again Forex for a lot of you it

was a really good fit I fell in love

with it and let me tell you my first

thing I loved about it 24hour

marketplace now I told you that I am an

extrovert I love action I love to trade

I love to I love all of it one of the

saving Graces for me as a beginning

Trader was that the stock market has

only open 7 and 1 half hours a day I

couldn't make any mistakes outside of

those times but when I got to be where I

was consistent all of a sudden Forex to

where I can now trade pretty much 24

hours a day it was really really good

for me and it fit really really well

what about you Patrick Yeah somebody

who's in the restaurant industry and

likes to get up at 10 or 11 o'clock in

the morning yeah mean it just makes

perfect sense um I could have traded

probably stocks too um but the fact that

even if I had an off day I could still

come back in at night now they don't the

markets don't move a whole lot at night

during the Asian session but at least I

can get in there and trade if I wanted

to and then you know because of my hours

I stay up pretty late as well so late at

night if I wanted to I could come home

from work and get started that's often

what I would do it was a real nice

luxury to have I think really though and

this kind of leads into some of your

other points though Rob is it's just a

lot easier than the stock market there's

things you know the only thing I knew at

the time back in 2009 or 2010 that I

could trade that anybody could trade was

stocks and commodities and there wasn't

really any there weren't any really

great platforms for that back then I

always thought you had to go to school

and you had to try to get on Wall Street

or do something like that like I didn't

really understand the business too much

and it just seemed really

overwhelming and plus you just you don't

it seems like you have so much less

control over what these stocks do I

didn't understand technical analysis you

know so it was ignorance on my part but

when I got to learn and study the forx

market I I thought right away man this

is just so much easier in so many ways

exactly and let me give you a personal

story here uh my son he uh graduated

high school a few years ago and was

getting into trading and he's got a

trading account here's the problem he

does not wake up easy in the morning

it's always taken him a long time since

the day he was born I'm telling you this

kid could never fall asleep at night and

then he would sleep until really he

would sleep until 1: or 2 p.m. if we let

him and he could just never go to sleep

one time when he was about 12 I went up

he was awake I said oh you can't sleep

yeah I can't sleep went back up about

two hours later he had finally fallen

asleep and I looked through his search

history on his little iPod there and the

last search he did was how can I fall

asleep that is the saddest Google search

a 12-year-old boy can do so for him he

literally cannot he now lives in the

Pacific time zone the Stock Market opens

up at 6:30 for him to wake up at 6:30

and trade it's it's not going to happen

it's just not who he is so I love in

Forex and other markets it doesn't

matter for him it makes it to where he

doesn't have to fight this battle of

sleep he can actually do it on his own

time so that's just the wonderful part

about the 24-hour Marketplace and I know

there's a lot of creative types that

also do very very well in the Forex

Market because that Stock Market opens

up so early and it just doesn't Vibe

with them Patrick have you ever thought

about that at all not so much I just

know that even today U that I don't work

Hospitality anymore I still you know

usually get up right about 9ine 9:30

which is which is weird for a lot of

people uh but it's never been that way

for me I'm still on Vegas time even

today and I get a lot of work done at

night and then that's just how it is and

so something like that again if if I get

up at 9 or 9:30 I could still trade most

of the stock market if I wanted to I'm

on Central time now so that helps but

just not having those limitations being

able to sit down and do it whenever I

wanted to was something that really

appealed to me back then now as most

people know I don't need I don't need to

be awake for 15 minutes out of the day

to trade the way I trade now but that's

not most people you know so for most

people just that flexibility I think is

really really key and each session of

the day has its own little

idiosyncrasies and you can learn those

too so it's it just seems like it's much

more tailor made for most people and

that's just the Western Hemisphere you

know most people if they trade stocks in

other countries you know they're going

to trade the most liquid markets and

that's going to be in the United States

that's going to be really tough if you

are in Pakistan or if you're in

Singapore Australia or someplace like

that so Forex is the I I always say I

compare it to soccer it's the world's

game everybody trades it and it makes

sense you know the the market itself

just allows you to do that the US trades

stocks the World trades Forex you're

exactly right 100% the next one I want

to talk about and this is one of my

favorites because we've spent a couple

episodes talking about biases

familiarity bias confirmation bias all

of these biases that are inherently

built into how we look at things here's

the thing I love about

Forex it automatically gets rid of a lot

of biases the first bias it gets rid of

is what I call the long short bias bias

now in the stock market you have people

that are permes everything is always

great and you should always buy stocks

even if the economy is like in the pits

they're like you should still buy stocks

well wait you told me to buy stocks six

weeks ago and now the Market's down 20%

and they're like yeah but now you should

buy more stocks because they're cheaper

so you got the Perma bulls and then you

got the Perma Bears the Perma Bears

where everything is always terrible and

it's no matter how well the market is

done the disaster is right around the

corner I just read an article today

saying that 2024 is going to be down

60% some guy said and look what happens

is these guys they have them on CNBC

over and over and over again for years

and then when the market finally

collapses they're like see I'm right

it's the old adage even a broken clock

is right two times a day so you get a

lot of that bias that just inherent long

short bias

in the stock market but in

Forex everyone understands that there is

no long bias like I don't want to be

long the Australian dollar for the rest

of my life that's the silliest thing in

the world but people want to be long

Tesla for the rest of their life they

want to Long be long Bitcoin for the

rest of their life but in Forex everyone

understands there is no long-term long

short bias and that gets rid of so many

psychological problems and you can't

fall in love now I say this but I've

seen it a couple times you can't fall in

love with a currency like be like oh man

I just love the pound and I think the

pound is is going to go up forever look

I have met people that have thought that

and especially when it's like their own

currency like when I have Canadian

Traders and they're like like 75% of

their trades are Canadian crosses I'm

like hey look that's ridiculous soly you

still have some issues but the fact that

there's no long short bias there's no

CEO at the head of any company it makes

it to where when you can trade Forex you

are purely trading the charts that's

what I love the most about Forex yeah so

a couple things on the bias end of it um

I had I had a small bias not when it

came to trading I was able to put that

bias away but I was uh I was really Pro

USD not just because it was my home

currency and I wanted to travel uh but

at the time when I first started the the

dollar is pretty weak and the euro is

pretty strong and a lot of other foreign

currencies were pretty strong against

the dollar and so those people from

those countries would come to Vegas and

take advantage of that the currency

Arbitrage and those people would sit in

my section in the restaurant I worked in

and tip me poorly and so I was like man

we really need the dollar to get

stronger so these people stop coming

into my restaurant and making me work

for $5 um but apart from that um biased

aside sorry people from other countries

but do better I totally agree with you

on this this is something I've said in

on my channel so many times Forex is the

closest thing to a blank canvas in terms

of trading you're ever going to find and

because of that if you're good at charts

you can be good at Forex it's literally

that easy now there there are of course

landmines we have to Dodge in terms of

news that's no fun but if you can trade

your system and you can stick to it you

can do well there are so many less

external factors that can come in and

ruin your perfectly good trade and I

love that and Forex Traders out there

sit they're thinking man there's this

this this okay so there's this this this

there's five times that in the stock

market you know which one would you

rather have so yes um it's as blank

canvas as it gets it's I said this at

the very beginning of my trading

psychology book it's open to everybody

some people might start a a little

further back but at the end of the day

we're all rich or poor um educated or

uneducated we are all pretty much

starting at the same place when this

game starts and that is really really

awesome I've never heard that before but

I love that Forex is as close of a blank

slate as you can get in the world of

trading so true like like I said if I

take someone in who hasn't traded before

and I'm showing them just currencies

there's there's no bias there's no has

already built in they don't they don't

know or care about anything in Australia

like they don't they didn't even know

that the Reserve Bank of Australia met

two weeks ago so all of a sudden it's

such a blank slate and they can purely

react to the charts it's beautiful all

right let's get to the next one no gaps

now I know that gaps will still happen

on weekends but throughout the week

you're not going to get any gaps now for

those of you that don't know what a gap

is in the stock market the stock market

closes at 400 p.m. eastern time in the

US if there's any news that comes out on

that company when it opens up for

trading the next day the price is going

to be wildly different I mean there are

stocks that were $100 and they open up

tomorrow at 50 there was no opportunity

for you to get out of them between and

50 so you can't ever really quantify for

Max risk because of gaps so because of

that that always leads a lot of people

to trade

scared and they're always like when they

get a little bit of a gain and they go

into a weekend they say oh a weekend's

coming up why don't I just sell it now

um because it's it's just I don't want

to hold it over the weekend there's too

much risk it causes them to deviate from

their system because of these fears of

gaps and trust me if you trade stocks

this is going to happen to you and you

carry it with you PTSD I remember the

very first time time I had a stock

everything was going great the next

morning I woke up the stock was down

like 15% and I'm like what the hell is

going on uh an analyst over at Bernstein

whoever a place I'd never heard had

downgraded it so one dude one dude

decided I don't like this very much

anymore and it ruined my entire trade I

carried PTSD and every night I had some

worry about my positions and so if I was

up on the positions I would take them

why because I didn't want to wake up to

another Gap that is one of the best

things about Forex as well look you have

very fast moving markets you have

slippages to worry about with Forex but

you don't have any gaps except for

weekends yeah and back then they had

after hours trading too which was such

because only certain people and

certain firms had access to it and

nobody else did it's like what the hell

is that you know in Forex you don't have

that not only don't you have things like

that I even said and I don't know how

true this is but it's a lot less likely

that and he was more relevant back then

when I said it but it's it's it's not

very likely that even Bill Gates could

come in and ruin your euro dollar trade

like he might move it a few Pips but

that's really it's so liquid that you

know people who have these special

privileges can't just come in and screw

things up the way they do in stocks in

Forex nobody has special privileges

unless you're the big Banks you know we

talk about that too but when it comes to

retail trading when it comes to spot

trading again everybody is on the same

playing field which is really nice and I

think that liquidity plays a big part

well that liquidity is a great great

benefit to Forex Trading because that

liquidity is going to allow you to do a

lot of things that will get rid of

psychological problems so for a very

very liquid

Market automation works very very well

in these kind of mar markets why because

there are going to be tight spreads and

there's going to be low amounts of

slippage now look when there is a news

event none of that stuff that I just

said applies but in normal

trading forx is probably the best market

for automation if you're going to be

setting up a system that enters and

exits at predetermined points it's

probably the best Market to do it in and

why do people automate well we talked

about it in our episode automation is a

good way to get rid of some of the

psychological traps and disadvantages

that comes with trading Forex and really

trading anything I agree yeah that's

that's always been a big one for me and

if I can transition into the next one

because this is the one I added and

we've touched on this a little bit

before but news affects Forex a lot less

than it does stocks overall in

particular because you know when a lot

of news events are coming and you can

easily avoid void them and then just

jump right back into the game you know

I've taught people how to do this on my

channel and again it's not super fun

news can still get you anyway but the

likelihood of it happening is so far

less than it happening in stocks and

it's really the only I guess fundamental

Factor you really need to consider when

it comes to actual trading if you're

investing longer term okay some of these

other things in that are going on in the

world geopolitically do matter but on a

day-to-day basis they really don't and

like I said you can just you can shut it

all down wait for the news event to go

by wait for the the after effects to

occur and then jump right back in and

resume and that's really nice you don't

have to worry about balance sheets and

CEOs doing this and lawsuits and recalls

and you know the price of oil and all

this other stuff that goes into to the

price of an actual stock and the way

Wall Street interprets that on a

day-to-day basis that's just measurable

you know and I was still willing to do

do it anyway but then I found Forex and

I'm like oh I don't need to do any of

this stuff I just need to watch out for

this small handful of things and go

about my day and then use my charts for

everything else it's it's fantastic it

absolutely is fantastic so let's cover

the advantages 24-hour marketplace where

it's available for everyone's schedule

other markets are not available for

everyone's

schedule I love that it comes without

biases a lot of biases are just gone you

no longer love Tesla sock because you

love your Tesla car like that's a real

thing or I have people that worked in a

certain field like in engineering and

they only will buy like semiconductor

stocks like in Forex you can't have any

of those biases it's so great you don't

need to worry about gaps you have a

24-hour market and you've got this huge

liquidity that allows you to do a lot of

things and Patrick you mentioned you can

jump out and jump back in that almost

cost you nothing in Forex like the cost

to jump out and then jump back in is so

negligible in Forex but in other markets

like an options Market if I had to

liquidate a trade and then get back into

it five minutes later that's going to

cost me a pretty big percentage of my

investment so there's so many great

things and in the end we both agree and

I love what you said it's a blank slate

for perfect charting you don't have any

of the biases you can just just follow

the chart love it love it love it now

look as you could tell Patrick and I

both love Forex Trading but there are

definitely

disadvantages that come for it now one

of the most controversial things I

always tell people is I tell people well

when you look at Forex Trading it's

actually quite low volatility relative

to other

products and people always say what the

hell are you talking about Forex is is

the riskiest game out there is is the

most

volatile when you look at

volatility on a percentage change a big

24-hour move in a currency is 1% that's

a that's a big move in a

24hour go look at the stock market go

look and just see what did what did

Google do today or what did Tesla

they're up and down four five 6% and

then you go out and take a look at some

of the other crazy ones they can easily

be up you know5 20% we had a big run in

crypto today and I think I saw micro

strategy which is a big holder of

Bitcoin I think they were up like 25%

today oh sorry up 11% today but these

moves that you see in other markets are

huge when you look at Forex so Forex is

actually one of the lowest volatility

when compared to others here's the

problem when you open up a Forex

brokerage they give you the leverage to

make it the most dangerous game in town

so the disadvantage of Forex is when you

go in and trade it and you're given that

leverage you start to see all these

dollar signs in your eyes and you think

oh I've got the ability to trade a big

account or a big amount why shouldn't I

trade it that is really negative for the

Newbie very negative for the new person

and I know that I'm guessing that 7 80%

of the people listening to this if

you've traded Forex you blew up your

first account why not because Forex was

so volatile it's because the leverage

that the Forex Brokers were willing to

give you made it to where if you lost

three in a row you were done so the the

disadvantages is the leverage in my

opinion is way too big way too big is

what they allow you to do so here here's

the irony about Forex Trading you've got

all this leverage but if you want to

trade it correctly you're not going to

use it what do you think Patrick I will

only push back on that very last point

that if you really want to make any kind

of meaningful difference in your account

year to year Leverage is necessary now

the way we look at it when we first

start no you're you're right about all

that that is what kills everybody's

account everybody knows I blew out my

first three accounts and this was a big

reason why I was really excited to see

that for every dollar I put in I could

get up to 50 in the game in the United

States that's that was really really

exciting uh because I didn't feel like

one: one was going to get me out of my

situation anytime soon but 50 to1 is

certainly could and I didn't understand

the rest of that it's yes 50 to1

certainly could get you out of a bad

situation dot dot dot if you do

literally everything right which you

know nobody does early on so and yeah to

what you said too a 2% move on a Forex

PA in a day that's that's significant

like you really notice it and you really

hope you got a piece of that if not

you're pissed off because that's 2% is

gigantic 5% is a flash crash for God's

sakes but yeah not only that I was even

looking for more volatile pairs on top

of the leverage I was already using so I

was doing some deep deep research on uh

the dollar Swedish Crona and the

Canadian dollar versus Swedish cron and

I thought I found some really cool stuff

there I'm like oh man look how many Pips

this thing moves in a day it's wild I

mean if I can just figure this out I

mean I'll really get out of this

industry quick so just the stupid crap

we think of early on in this game and

Leverage is really responsible for a lot

of that I shouldn't blame leverage we

should be blaming ourselves but if

leverage wasn't there we wouldn't have

these wild dreams when we first start

this business so um I had to I know on

my channel have a a real come to Jesus

moment on the podcast with a lot of

people and say hey look you know I know

Leverage is there but but if you're

starting with a $200 account and you

think you're going to turn that thing

into a th000 or anything meaningful to

get you out of a bad situation it's

never going to happen so just stop and I

got a lot of push back from that they're

like you know people are arguing with me

saying no no you can do it I saw this

guy do it over here I'm like yeah he

told you he did it but did he really you

know did he catch lightning in a bottle

and then have the presence of mind to

take all of his profit off the table I

really really doubt that this is not

realistic you're going to have to treat

this like a long term business not like

a short-term hustle and I'll bet you I

lost some subscribers that day but you

have to dash those people's dreams

because there was nobody there to dash

mine and that's why I blew out three

accounts so and I'm sure other people

have had it even worse so you're right

this this is I think is the biggest

disadvantage out there when it comes to

Forex it's not anything the Forex Market

did to deserve this reputation but that

leverage right there has taken so so

many people down and just completely

knocked them out of the game before it

even started Leverage is simply the

volume knob so as a new Trader who is

bound to make some mistakes and again

all the psychological mistakes that

we've talked about you're going to make

some or all of them if you have the

volume up louder those mistakes are

going to be more painful if you have the

volume down lower they're not going to

be as painful you are going to make them

that's a guarantee the question is did

you turn the volume up full right when

you started trading if so it was very

very painful so just like with music the

volume knob you turn it up when you can

handle it and so when I said you never

use Forex leverage that's not true you

want to use the Forex leverage when

you're ready to use it my favorite

strategy in Forex is pyramiding or what

I call legging in where I'm trying to

build the biggest position that I

possibly can like I'm trying to build

huge positions and what I'm trying to do

is I'm trying to catch a major

Trend and if I can catch that major

Trend and buy an appropriate amount here

and then put in a stop once it gets to a

certain point I want to buy more and

then move my stop up to where I have an

appropriate amount of risk and then if

it goes for me more I want to get more I

want to get more and look I'm trying to

build these positions and I'm using lots

of the leverage that's afforded to me

but my stop is always moved up each time

I take a new position to the original

risk amount that I took a lot of times

these trades Do What I Call fizzle out

where I didn't get the big move I

thought and I built up a 6X position

over like two or three weeks and then

they fizzled and I ended up breaking

even or having a loss that's really

frustrating but look I know the game I'm

hunting for I'm hunting for the big one

nothing's better when you

catch a big move like this the biggest

move I caught per personally in Forex

was in 1998 when the markets were

crashing I was short aie Yen and I had

40 lots that I built up over about two

weeks as the markets were falling and I

built it up to a 40 lot

position and the Aussie Yen pair dropped

400 Pips well that's what I ended up

making on the profit that was my biggest

win in Forex really that still is my

biggest win in Forex and I did it using

Leverage but I did it

correctly so look I'm not saying you

can't use leverage ever all I'm saying

is it's a real negative until your

psychological problems are fixed and I

haven't ever come close to trading

anything resembling 40 Lots so good on

you for at least getting to that point

well wait Patrick let me tell you the

rest of the story because that was the

the next trade was the last major

trading mistake I've made in my career

at least what I consider to be major

trading mistake that was so euphoric it

was just so awesome I mean fist pumping

and I rarely fist pump but I was fist

pumping I'm a very mellow guy the next

trade I made was a 100

lots and the second I hit the button my

p&l showed

$3,500 and I knew immediately oh I

think I've made a problem it went

against me I took the loss luckily but

that to me again we've talked about my

um my cycle is when I have a big gain I

want bigger gains and I want bigger

gains it just encourages me to take more

risk that was the last major mistake I

made and it hurt it hurt I lost about

40K on that one button click so the

other disadvantage that I can think of

then apart from The Leverage is an

advantage we talked about earlier

because I think it cuts both ways forx

being a 24-hour

Marketplace uh is a problem sometimes

because you can really do this wrong and

I'm speaking from somebody who did do

this very wrong um there there's a lot

of different you know bad routes you can

take here Rob go and start us off um

because I have some thoughts that aren't

even on the sheet here as an extrovert

this was my Achilles heel and I said

earlier how when I started trading and

there wasn't really after hours trading

I could only be an idiot 7 and half

hours a day and then I had to wait for

the next day for the marketers to open

up

again I've said this for years and years

and years I'm going to say this to

everybody if I started in Forex I'm not

sure if I would have made it or

not just think about that I don't know

if my Capital would have held out long

enough for me to figure out not to be an

idiot with a 24-hour a day Market place

so so for someone like me an extrovert

it is such a Negative for it to always

be open and look I used to trade out a

boredom a ton a ton the good thing was

when I started out you had to go to an

office you didn't trade at home you

literally had I had to drive 30 minutes

to an office and then once I left the

office there was nothing I could do now

it's on your phones it's at your house

all the time at any time you can just

click a button and you're not bored

anymore you you get all the feelings all

the rush it's a really really negative

thing for extroverts and as I said

earlier I I don't know if I would have

made it had I started with Forex I

needed to learn the discipline and learn

how to curb that yeah because the

biggest psychological hurdle of having

leverage mixed with a 24-hour

Marketplace is when you're first

starting out especially it allows your

mind to run completely wild with the

possibilities of what you can make

should you one leverage up as much as

you can two trade as often as you

possibly can you know there's two really

big sessions you have London and New

York you know if I'm looking at this I'm

like man if I just grind it out and

trade London and New York ratchet up my

leverage as high as it can go you know

what are the possibilities and I'm sure

this sounds absurd to a lot of people

but it doesn't sound absurd to a lot of

firsttime Forex Traders I'll tell you

that and that's where you know I don't

think YouTube and Twitter does them any

favors because you see these people with

these big home setups with you know six

8 10 monitors and you're just like all

right this is the grind I need to be set

up for and that's so not the case it on

top of that it's a terrible lifestyle if

you do it this way uh you're not going

to make any friends God forbid you live

with other people they're not going to

like you and the sleep schedule has to

be atrocious I had a terrible sleep

schedule it it was ruining me it was

ruining every relationship I had it was

ruining my my body was ruining my my

state of mind everything because I

thought I had to conform to this certain

way of trading and just so you know if

if you didn't know this already it

doesn't have to be that way at all

episode three of the 4X Q&A podcast I

just looked over 158,000 views on an

audio podcast there's a reason for that

and that's because it was the big

Awakening moment where so many people

who thought you had to do things one way

said oh wait

I can do things a different way in terms

of how I approach this on a day-to-day

basis and it works better and it gives

me my life back that can be really good

but I'm I'm not going to sit there and

say it's like BC and AD or anything like

that but before that video came out most

people hadn't even really thought of

that and they were grinding themselves

down to the bone doing something that

should be somewhat enjoyable or else why

else would you do it uh I'm just going

to sigh and just after what you said

it's it's so true I said for a few years

um again Forex for me has always been

one of the things I trade and so when

Forex gets good I always become very

excited about it and say hey let's spend

some time over here I started trading

Forex in the really right before and

right during the crash of 2008 2009 it

was great and then it really died down a

bit it really wasn't a great market for

like 2009 2010 but then in like

2012

201122 the Euro Zone started to look

like it was going to break apart and oh

my gosh Forex Trading was awesome I mean

I've never seen a market that good I

don't know if I'll ever see a market

that good again I'm hoping I do but for

a good two to three years and then we

got brexit it was

amazing my sleep schedule and I'm not

just talking about my sleep schedule I

was waking up multiple times a night

checking quotes checking things I

remember one time I woke up and I was on

my phone and my wife looked over and

looked at my phone to see what I was

looking at like she had caught me and

she said uh why can't it just be porn

and then she fell back asleep uh could

can you imagine that the wife's like H I

wish he was just looking at porn not the

forx market but it was porn I mean you

had the Eurozone collapse you had drogy

you had grexit you had the taper tantrum

all those things happening at the same

time you know go look at the ATR dayto

day from back then it was so different

than what you see now you know

volatility was everywhere and you had

these huge moves almost every day you

maybe had one day of consolidation a

week but that was it like that sucker

was moving it was so exciting it really

was but I do remember telling people

this multiple times during that

period I love Forex Trading but has

completely ruined my

life and look it's a little bit of an

exaggeration ruin life but really it was

I was tired all the time it was a mess

my sleep schedule was screwed up again

relationships were

strained I really had to decide hey

Forex needs to take a backseat for a

while I need to get back on track and

now there are times I will still check

things during the night uh but it's not

very often not very often because I've

decided this isn't the life I want to

live so I'm going to do my trading a

much different way than I was back then

and Patrick you're right it was a

different Market to where you could make

a lot of money in just a few hours it's

just a different market today and I'm so

happy about that because now I can sleep

yeah and um yeah I I'll second that it's

it's it's calmer now but you can make

pretty much the same amount of money uh

dayto day if you wanted to because with

less inv volatility comes less spikes

less chance to lose money at the same

time so yeah I agree now in terms of

solutions there's really not going to be

many this episode because we've touched

on most of that we've touched on a lot

of Solutions in this episode itself or

I've done it on my Channel or we've done

it here on the podcast so Rob is there

anything you kind of like to say to wrap

things up here yes I just want to say if

you're fairly new to this or even if

you've been doing this for a long time

you don't know until you've tried other

things out so I highly recommend if

you've only traded Forex uh go dabble in

the soccer Market a little bit go dabble

in in the options Market go in the gold

market in the crypto market and really

you can do this all through a demo count

you don't have to put real money online

you will find what fits you best but

you've got to be looking for it so if

you're if you're really loving Forex now

but then you go and you try the metals

Market or you try something else you

might find that it fits you better it

fits both who you are personality wise

and it fits your lifestyle better and it

also helps you overcome some of your

failings that you're doing so my advice

to everyone is if you've only traded

Forex go out and play around with other

things go read some books on some other

things go open up demo accounts and play

around with it see if you can develop a

system that's profitable it's going to

be really good and like I said

eventually you will find the thing that

fits you like a glove and that's where

you're always going to get your best

success and I want to hear from all of

you too so those of you who are on

YouTube or those of you on the podcast

players go to YouTube go to the comment

section let us know if there's something

we haven't covered in terms of let me

just ask you this what what was the

dumbest misconception you had about

Forex before you actually started

trading it and how long did it take you

to realize that you were completely off

base with that misconception I'm curious

to hear if it's something we haven't

covered on this episode I'd like to hear

it from you but on top of that thank you

for joining us here at the training

psychology podcast and Rob and I we'll

see you next week have a good week

everybody