Why Strategic Planning Is More Important Than Skill To Finally Achieve Forex Trading Success & The Potentially Life Changing Profits You Deserve

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As I’m sure you know, many people have tried to become profitable Forex traders… and failed. I knew this when I began learning how to trade nearly 20 years ago. And I desperately wanted to be one of the people who succeeded.

In fact, due to the circumstances of my life, I felt I NEEDED to succeed as a Forex trader if I was to have the financial future I desired.

And I’m not going to lie, I was not an immediate success.

I went down many of the dead-end paths that plagued other struggling traders. But I refused to give up.

And then I had an epiphany.

If so many people are trying to trade Forex and failing… I needed to stop doing what they are doing.

It just makes sense. If I avoid or eliminate the pitfalls other traders are suffering from that lead to failure… the path to success should be clear.

Instead of just doing what everyone else was doing (and that didn’t seem to be working), I needed to strategically design a successful way of trading based on what most people were NOT doing.

This task is probably a lot harder than you think. I had to avoid getting distracted by the allure of “quick, easy profits” and truly define what I wanted to get out of trading and what was possible. But by concentrating on my desires and emotional reactions to claims of success, I was able to identify a lot of the pitfalls facing struggling traders.

Before I explain what some of these pitfalls are, I want to talk a little on strategic planning so you can fully understand what I am talking about.

What Is Strategic Planning?

Here is a simple definition of strategic planning...

“A systematic process of envisioning a desired future, and translating this vision into broadly defined goals or objectives and a sequence of steps to achieve them.”

http://www.businessdictionary.com

OK, that is a mouthful. I look at it as PLANNING an approach, steps and rules to achieve a desired result (profitable trading), in a way that is STRATEGIC and based in reality.

A better way of wrapping your head around this is to look at some examples…

Sun Tzu, author of The Art Of War

Finally Achieve Forex Trading Success Sun Tzu’s teachings are so important, they have been used in everything from politics, to marketing, to sports… and yes, even to trading. And with good reason. What he teaches is smart… and it works.

If you’ve read Sun Tzu, you know he spends a lot of time on things that don’t seem to be about the skills of war at all. The number of troops to use, how to move them, how to feed them, how to make sure they have water, etc. are all things that can determine success.

And these considerations don’t really have anything to do with the specific military techniques needed to defeat the enemy.

And frankly, if you do everything correctly BEFORE you engage the enemy, success is guaranteed and a smart enemy will simply surrender.

My takeaway is this...

Instead of being opportunistic and jumping into the market looking for trades, we need to spend time planning our success before the first trade is placed. The goal is to set up a situation where our long-term success is achieved by following a well thought out plan.

I came to realize that successful Forex trading is much more than simply finding good entries. The overall approach to trading is just as important to my success as the specific trading strategy employed to engage with the markets.

And if I could create an approach to trading that dramatically puts the odds in my favor before the actual trading activities… I would be much more likely to succeed if I simply stuck to the plan.

The Red Baron: Flying Ace Of WWI

Let’s look at a passage from Wikipedia:

“Instead of using risky, aggressive tactics like his brother Lothar (40 victories), The Red Baron observed a set of maxims to assure success for both the squadron and its pilots. He was not a spectacular or aerobatic pilot, like his brother or the renowned Werner Voss. He was a noted tactician and squadron leader and a fine marksman. Typically, he would dive from above to attack with the advantage of the sun behind him, with other pilots covering his rear and flanks”.

This brings up an interesting comparison between The Red Baron and his brother, Lothar. Lothar was a better flyer. He had better flying skills and was more acrobatic. As a result, he would use riskier tactics when confronting the enemy and rely on his superior flying ability to beat his opponents.

On the other hand, The Red Baron was less skilled than his brother, but used strategy and tactics to his advantage. He would engage the enemy only when his victory was practically guaranteed. As a result, he was TWICE as effective as his more skilled brother.

The takeaway is this…

Strategic Planning Can Be Better Than Skill

Many traders think Forex success is determined by becoming a skilled trader who can read the markets and correctly predict future market action. Their superior skill at making snap judgements of when to get into and out of the markets is key. In this case, success rests solely on the shoulders of the trader.

On the other hand, if I could take “skill” out of the equation and rely on strategy instead, I felt I could be much more successful. In this case, success is more about the strategy and my ability to trade it properly rather than me personally.

To create my rules-based way of trading, I decided to identify pitfalls that were leading other traders to fail… and design a way of trading that avoided these pitfalls.

Identify Mistakes Traders Make -> Eliminate Mistakes = Clear Path To Profits

Here are some of the pitfalls I identified as leading to failure…

Automated Trading
Complex Trading
Trading On The Lower Time Frames
High Frequency Trading
Placing Numerous Trades On The Same Account
Jumping From One Trading Strategy To Another
Having Unrealistic Expectations

Let’s go through these one by one and identify the solutions…

Automated Trading (Using “robots” or preprogrammed Expert Advisors)

Sounds easy. Just use a preprogrammed expert advisor to make all your trading decisions for you on autopilot and nothing can go wrong.

The problem is, they rarely if ever work over the long term.

And the reason these robots don’t end up working is because either the robot itself or the user of the robot falls into some of the other pitfalls I identified. So, who cares if the robot does things automatically, if it is making the same mistakes unsuccessful traders are making.

My solution: Manual Trading.

I wanted a way of trading where I am making the trading decisions and performing the trading actions. I am responsible for my trading after all, so it only makes sense that I am the one deciding when to put my money at risk with the goal of making more money.

Now don’t get me wrong, I do use TOOLS to make trading easier and more adherent to the rules. For example I use (and provide) Scripts to make placing trades with the proper lot size, stop loss and take profit easier. I also use (and provide) the Forex Trading Troll with my trades for Forex Signals Blast Off that automates some of the trade management after the trade is placed.

But I feel the path to Forex success lies in placing the trades manually.

Complex Trading

I believe a lot of unsuccessful traders use complex strategies in an attempt to win all the time. The thought is if you take every variable into consideration you can accurately predict exactly what the market is going to do and win more often.

The problem is, complex trading strategies create more problems than they fix. They make it very confusing when a decision has to be made and filter out just as many good trades as bad.

My solution: Trading an extremely simple trading strategy.

I understand losses are going to happen. That is simply the hard truth of trading. So, if I am going to accept losing some trades along the way… why overcomplicate things?

The truth is, trading decisions should be easily identifiable. There should be no guesswork or doubt about what to do. Remember, I want to take as much of “me” out of the successful process as possible.

Trading On Lower Time Frames

A lot of people think day trading on the lower time frames is the best way to make a lot of money. This is because lower time frames, by their nature, present more trading opportunities.

The truth is, trade setups on lower time frames are less reliable and more susceptible to random market movement or news events. Yes, there are more trading opportunities, but this means there are also more BAD trading opportunities.

Additionally, this kind of trading is extremely stressful, keeps you chained to your charts for hours and can lead to very destructive emotional trading.

My solution: Trading off the Daily charts in 1 minute a day.

I wanted to slow things down. Plus, I wanted to be able to trade the simple strategy perfectly. This means no missed trade opportunities or mismanaged trades.

Since I did not want to automate my trading, and cannot be available for trading 24 hours a day, the only way to get strong setups I can trade perfectly is to trade off the Daily time frame.

This has the added benefit of making trading less time consuming and far less stressful.

High Frequency Trading

Going hand in hand with trading on the lower time frames is placing a lot of trades. It only makes sense… if there are a lot of trade setups you are going to place a lot of trades.

More trades placed means more losing trades to contend with emotionally. There is just no way around it.

My solution: Take a smaller number of trades.

Here is the important part to remember: Taking more trades does not necessarily mean you are going to be more profitable.

Let's say you place 10 trades in a short period of time and get these results… +20 pips, -20 pips, +45 pips, -20 pips, -20 pips, +105 pips, -20 pips, -20 pip, +20 pips and 0 pips. Congratulations, you just made +90 pips.

Compare that to this… +190 pips and -100 pips. Congratulations, you just made +90 pips.

Which way of trading do you think is going to be easier to trade emotionally and less time consuming?

Placing Numerous Trades On The Same Account

Most traders look to trade multiple currency pairs on the same account. This falls in line with the “more is better” mentality. Just think, if you want to place a LOT of trades, what better way than to trade on the lower time frames AND multiple pairs at once.

Then the discussion focuses on WHICH currency pairs to trade together and looking for non-correlated pairs.

What really is happening is the success of the trading account is now determined by the results of ALL the trades over ALL the currency pairs TOGETHER. To be successful, the combined results need to end up being profitable.

To place so many trades, you need to use a very small percentage of your account for each trade (if you’re smart). Some currency pairs will outperform others. And while your equity curve might be smoother this way… the profits don’t end up adding up to much unless you have an extremely large trading account.

My solution: Trading only one currency pair per account.

I treat each currency pair (or other asset), as a separate and independent trading business. Therefore, I only trade ONE thing per account.

This way, each currency pair is responsible for its own success. That means when a currency pair is performing well, the power of compounding can kick in and dramatically boost profits.

And since each currency pair traded is separate and independent, we don’t have to worry about trading correlated pairs. We only need to focus on the currency pairs that work best with our strategy… and take those profits when the market gives them to us.

WARNING: This is the hardest concept to grasp.

I must warn you, this is the hardest thing for people to adopt. But in my opinion, this is the most significant change to the way I trade compared to how so many others trade. And with so many others failing, this might be the biggest change to your trading approach you can take to get firmly on the path to success.

Jumping From One Strategy To Another

This is what I call “The Cycle Of Failure”.

Finally Achieve Forex Trading Success As soon as the strategy suffers some losses, or a losing streak, the trader is off looking for something “better”. Unfortunately, they make the same mistakes with the new strategy as they made with the old one. And what results is a never ending search for the perfect trading strategy that never materializes.

My solution: Master one trading strategy and trade it through all market conditions.

Here is a statement that really bugs me: “The strategy stopped working.”

The truth is, well thought out trading strategies that are traded correctly don’t “stop working”. They will work better under some market conditions compared to others, yes. And maybe over the short term it might look like the strategy is not working.

But over the long term, if the strategy is profitable overall… it worked, and the assumption is it will keep moving in the upward direction as time passes.

It is so frustrating to me to see traders look at charts and see the up and down movements and can determine the chart is TRENDING UP. With all the up and down movements… The overall trend is positive.

But when they look at their own accounts, if the results are not consistently positive over the very short term, they think the strategy stopped working. They completely miss the point that if the OVERALL trend of the account is positive over the long term… the strategy is still doing what it was designed to do.

A well thought out strategy will produce long term profits. But it will work better under some market conditions compared to others. There will be times of growth, consolidation and loss. Period.

Thinking you are going to predict which market conditions are coming and for how long, and change your strategy to fit these future market conditions is just ludacris.

Unrealistic Expectations

Most failed traders have unrealistic expectations to begin with, meaning it is impossible for them to be a success story from the get go.

This usually takes the form of wanting to make a lot of money very quickly starting with a very little amount of money. This resembles gambling more than trading, and is the fastest way to failure.

Dreams of doubling your account every month are just that… dreams.

My solution: Compare my results to other investment opportunities and keep my expectations in the realm of reality.

I am a trader. But I think of myself as an investor. And as an investor, I look to beat the performance of other investment opportunities, especially the S&P 500.

Since the S&P 500 is commonly used as the benchmark for investors, being able to beat this benchmark means I am doing better than most. And beating the benchmark also means I can accumulate wealth faster and make meaningful profits in a shorter amount of time.

In Conclusion

Putting everything together, this is what I came up with as the best way to trade with the highest probability of success:

My trading method uses a manual trading strategy, meaning I personally make all trading decisions.
My trading method is easy to learn and easy to trade.
My trading method is traded on the Daily Charts and only takes minutes a day.
My trading method focuses on taking a limited number of trades.
My trading method only trades ONE currency pair per trading account.
My trading method is traded consistently through all market conditions.
My trading method is extremely profitable over the long-term compared to other investment opportunities.

By eliminating many of the pitfalls that sabotage other traders… I have the kind of CONFIDENCE in my trading style that can keep me trading (and profiting) for years to come.

It is no accident I manually trade a simple strategy on the Daily charts with the goal of beating other investment opportunities. This is done by strategic design to give me the highest probability of success.

If this overall trading style appeals to you, and you want to follow what I’m doing, keep in mind that ALL of my trading resources are designed to function taking everything mentioned above into consideration. So don’t expect complex strategies that require extraordinary skill and sitting in front of the charts for long hours every day.

Edward Lomax