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Why Forex Traders Should Think Like Investors

Why Thinking Like An Investor And “Being A Good Loser” Is The Path To Eye-Popping Forex Trading Profit Potential

Successful Forex traders focus on the long-term profits, instead of short term gains. If you are trading with the proper risk to reward ratios, what takes place over the short term does not really matter all that much. 

It is what happens over the long-term that is important, and the goal should always be to be profitable over the long-term.

Think about it like this…

Let’s say you go to the movie theater, enter a theater where the movie is already playing and take a photo. Then you go out of the theater, look at the photo and decide if it is a good movie or not. 

You are not going to be capable of evaluating the entire movie based on that photograph… because it just does not provide enough information.

Remember “The Coin Flipping Exercise”? You did it, right?

In the beginning, with just a few flips, you cannot get a good feel for how using a strategy with a positive risk to reward ratio puts the odds in your favor and sets the stage for long term profits. 

This is why, in the beginning, each flip is exciting. 

But once you’ve done 30-40 flips you start to realize you have an edge, and the short term results don’t matter all that much. By the time you get to 100 flips… you are very confident in your ability to profit if you just keep flipping.

This is how you must think of your participation in the Forex market… as a long term endeavor instead of a short term money making activity.

You need to adopt the mindset of an investor.

Think Of Yourself As An INVESTOR Instead Of A TRADER

Why Forex Traders Should Think Like InvestorsIf you want to be successful, you must start to think of yourself as a Forex INVESTOR… not a Forex TRADER. 

To set the stage for success, adopt the mindset of an investor and stop thinking of yourself as a trader. This automatically causes a fundamental shift from thinking short-term to thinking long-term. 

This shift is an important step towards success.

When you think of yourself as a “trader” you are automatically taking a short term view of your participation in the Forex market. The focus is on the TRADE. And you define yourself and your success by what happens to the individual trades you make.

      • If the trade is a winner… you feel successful
      • If the trade is a loser… you feel like a failure

Thinking of yourself as a trader creates a situation where you are going to be on an emotional roller coaster ride from one trade to the next, or one day to the next. These extreme swings in emotions cause a lot of stress… and not many people can handle the peaks and valleys for very long. 

Eventually you run the risk of abandoning your trading method in search of something that makes you feel like a better trader… for example, looking for a trading system that wins more often, if not all the time.

One sure way to increase your win rate is to reduce your profit targets. And it is my opinion that chasing a high win rate at the expense of risk to reward is a losing venture that cuts your profitability.

I believe that thinking like a trader puts the focus on win rate. And focusing on win rate leads to practices that derail your overall, long term profitability.

However, when you think of yourself as an “investor”, your mindset automatically switches to more long-term. The activity of trading stops being about the TRADE, and becomes about your results over an extended period of time.

      • Investing in the Forex market is no longer about any individual trade
      • Investing in the Forex market is no longer about your results on any given day, week, month or even year

Thinking of yourself as an investor creates a situation where you are much more likely to stick with the trading system no matter what. 

      • There was a losing trade? So what, there will be other trades
      • Losing month? No problem, we are still up for the year
      • Mediocre year? That’s OK, the past 5 years have been great

See how identifying yourself as an investor plays an important role in your success?

      • If you think of yourself as a trader… you’ll most likely fail
      • If you think of yourself as an investor… you’ll most likely succeed

I want you to succeed… so you need to look at Forex trading as a long-term investment opportunity.

Become A Good Loser… To Be A Winner!

There is one guarantee I can make about trading… there will be losing trades. You cannot eliminate losing trades, but you can decide how you are going to deal with the emotions associated with losing trades.

If you understand the concept of risk to reward and how important it is for your long-term success (and you should by now), you should also understand losing trades are not that big a deal.

Yes, nobody, myself included, likes to lose money or see their account balance go down. 

But as an investor, your account balance is going to go UP and DOWN. 

To be profitable over the long-term, you need to make more money on winning trades than you lose on losing trades. And we accomplish this with our risk to reward ratios and using a trading strategy that historically has been proven to give us an edge.

But it only works if we KEEP TRADING.

Why Forex Traders Should Think Like InvestorsIf you stop trading when your account dips… you’ll end up leaving the market a loser.

However, if you keep trading, your account usually recovers and reaches new heights due to the positive risk to reward ratio and strategic edge of the trading strategy. And that is how you become a profitable Forex trader.

In order to keep trading when you suffer some losses… you need to become a “good loser”.

    • You have to understand that losing trades is just part of doing business.
    • You have to understand that losses and drawdown in your account are inevitable.
    • You have to understand that losing trades are going to add up to less than winning trades over the long term.
  • And you have to understand that in the long run, your success is predicated on continuing to place trades.

To be a winner… you need to know how to lose and KEEP TRADING.

Now, accepting loss is not just for Forex investors, but is a prerequisite for success as any kind of investor.

Let’s take a look at the S&P 500 since the year 2000… 

S&P 500

Why Forex Traders Should Think Like InvestorsSource: 1stock1.com

As you can plainly see, not all years were positive. There are losing years along the way… sometimes significant losses. Does this mean fortunes cannot be made in the S&P 500 market? 

Did the S&P 500 “stop working” and need to be shut down?

Absolutely not!

Smart investors who stayed the course ended up being profitable over the long term. And that is really what profitable Forex investing is all about… learning how to lose and keep moving forward.

You simply MUST take the long-term view of an investor to be profitable.

Ok, what about companies like APPLE? Surely they make money for their investors every year, right?



Why Forex Traders Should Think Like InvestorsSource: 1stock1.com

Once again, some years are better than others and there are some losing years along the way.  Losing is just part of what it takes to bank long-term gains.

Apple is still going strong because all the investors did not abandon the company… even when there were losing years.

So, here is the thing…

If I am going to invest in something, and I am going to have to suffer losses (even potential losing years), I want to make sure my investment has the ability to make the most profits possible over the long run.

And for me, this means trading a very simple trading strategy on the Daily charts for 1 minute a day, trading ONE currency pair per account with 5% risk per trade and trading through all market conditions over the long-term.

Doing this, I can greatly beat the S&P 500 and Wall Street traders… so that is exactly what I am doing.

I cannot stress this enough…

You have to learn how to lose. 

You have to learn to take multiple losses IN A ROW… and KEEP TRADING. 

In my opinion, it is essential to take a long-term view and trade without fail for multiple YEARS to reach your true profit potential.

To Be A Winner… You Need To Be A Good Loser!

Why Thinking Like A Forex Investor Fits Perfectly With My Trading Approach

Thinking like an investor and learning how to accept losses not only puts us on the path for long term profits… but it fits perfectly with my trading style as well.

You see, there is a prerequisite I have for trading:

My Earnings Must Exceed My Efforts

It just makes sense.  If I am going to do something for the long term, it must feel “worth it”.  If I feel like I am wasting my time, or not being compensated properly, I run the risk of quitting all together.

Investors are known for investing their money in something to get a return on their investment… not the daily grind of working.  And that is really how I look at Forex trading.  I am putting my MONEY to work to make more money… so the focus of the work is on the money, not me.

By thinking like an investor, I’m forced to make my trading simple and extremely time efficient.  After all, I don’t want to spend hours a day doing battle with the charts and turn my Forex trading activities into a “job”.  

That is not what investors do.

By keeping my trading simple and restricted to minutes a day, it is very easy to meet my prerequisite of having my trading earnings exceed my trading efforts.

Even learning how to be a “good loser” fits with my trading style.

Just think about it.

If I didn’t learn how to accept losing trades, I would have been forced to trade strategies with an extremely high win rate. To achieve this win rate, I would lean to trading strategies with large stop losses and small take profits. And that would have flipped the risk reward on its head… and hindered my ability to be profitable over the long term.

By thinking like an investor and learning how to be a good loser, I can trade strategies with excellent risk to reward ratios that don’t rely on a high win rate to be profitable. Basically, I don’t NEED to win all the time (or even most of the time), to end up profitable over the long term.

And being profitable over the long term, and reaching my financial goals due to those profits, really is the point, right?

In Conclusion

I understand this notion of thinking like an investor while Forex trading might seem foreign. I get it. Since you are performing trading activities, that makes you a trader, right?

But if you can take a step back from the very simple trading activities you perform a few minutes a day, you can see what you are REALLY doing.

You are putting your money to work to make more money. And that makes you an investor.

Yes, this investment method is more “active” than other investment approaches. You are not just putting your money somewhere and then waiting for profits to roll in, independent of any action on your part. You are performing trading actions once a day for a few minutes.

But the essence of what you are doing IS investing. You are putting your money to work with the desire to make more money. That is investing.

So, start thinking of yourself as an investor, and learn how to accept losses on your long term road to reach your potentially life-changing financial goals. 

Edward Lomax

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