5 Lessons Only Experience Can Teach You About Forex Trading

What is the most important factor in Forex trading?

It’s the one thing that takes the longest to gain…

Experience.

I have over 17 years of trading experience and I have learned a lot over that time.

So I thought I would share some lessons that I had to learn the hard way.

If you incorporate these lessons into your trading you can greatly reduce your learning curve, so let’s get started!

Lesson #1: You don’t need to take a trade every day

New traders tend to think that real traders enter trades every day.

This is simply not true.

Real traders wait for good trading opportunities and only then do they enter trades.

There will inevitably be some days where good opportunities simply do not arise. There will be days when volatility is too low to get any decent trades and there will be days when volatility is too high to enter trades safely. There can be hundreds of valid reasons when it’s smartest not to trade.

The best traders know when it’s time to sit on their hands and wait.

Whereas most new traders force themselves to take trades because they think they should be trading.

And what happens?

They enter bad setups and take a loss when they should have never traded in the first place.

If you force yourself to take trades when there are no valid trade setups you will lose more than you need to, which is never good.

The number one rule of trades is not to lose money.

You do not need to trade every single day in order to be a trader. Sometimes the smartest move you can make is to wait until tomorrow.

Lesson #2: Losing streaks are normal

Losing streaks are a normal part of trading and you will never eliminate them.

With a 60% win rate it is statistically normal to experience 5 losses in a row over the course of 100 trades.

losing streak calculator 60%

It’s not easy to calculate expected losing streaks based on win rate as it involves complex probability mathematics. Which why I had the calculator in the image above created for Forex Mastermind members.

So if you have a losing streak you are not doing anything wrong!

It is normal, every trader experiences it. Even traders with absurdly high win rates in the 80% range suffer losing streaks of 3 statistically.

Losing Streak Calculator 80%

So next time you are in the middle of a losing streak do not freak out and make changes to your strategy.

Just keep on trading because your next winning streak is just around the corner!

Lesson #3: The most powerful tool in trading

There is one powerful tool that improves my trading every year…

A trading journal.

No other tool has helped me develop so much as a trader.

Now, when I say journal I do not mean the “dear journal, today I took three trades” type.

I mean a spreadsheet that allows me to track important information about my trades.

Forex Trade Journal

The image above shows only a small part of the trade journal I use and as you can see it goes far beyond the simple trade log provided by your broker. In a proper trading journal you can include much more information.

Why is this useful?

Imagine being able to look back on your last 50 trades and identify similarities between all your losses and all your wins.

If all (or many) of your losses have something in common then you can eliminate that factor or put something in place to limit it.

Logically this is going to lead to less losses and higher profitability.

Trading is all about refining your trading strategy and refining yourself as a trader.

A trading journal allows you to spot faults in your trading that you would never be able to spot otherwise.

And when you spot those faults you can get rid of them!

It also allows you to spot what you are doing right, so you can do more of that.

A trading journal is without a doubt the most important tool in my trading. Without it I doubt I would still be trading today.

You can check out my journal template here (you need to be logged in)

Lesson #4: Sometimes you need a break

Looking at your charts for several hours every day of the week can lead to chart burnout.

What are the symptoms of chart burnout?

Seeing trade setups that aren’t really there (I don’t mean hallucinations) – What I mean is that you will spot a really crappy setup that is not tradable and convince yourself that it’s worth entering.
Trading out of boredom – If you stare at a chart long enough and you do not spot setups you might find yourself jumping into weak trades out of boredom.
Dreaming of candles – This may sound like a joke but it’s not. I have had this happen to me many times and I know a lot of traders who have. Staring at charts so long day in day out that candlesticks start invading your dreams… this is usually a bad sign.
Getting bored of trading – Chart burnout can lead to you simply getting bored of trading and trading becoming a chore.

There are more symptoms but these are the main ones.

Chart Burnout is a very real thing and it can have a negative impact on your trading results.

You need to take a break from your charts for a few days every month. I like to take a three or four day weekend once a month at least!

To be honest I usually end up doing this twice per month. However, I have a large enough trading account that I do not need to trade as often so this may not be a good idea for everyone!

Lesson #5: Have an emergency fund

This is just a general rule of thumb that every self-employed person needs to consider.

If Forex trading becomes your main source of income (or your only source) you need to have an emergency fund for when you cannot trade.

Anything can happen…

The market can become very hard to trade for a few weeks or even months. In 2014, we had a three month period of extremely low volatility. While you could still trade profitably in this period, there were far less trading opportunities than normal.

Most traders did not hit their usual profit targets in this three month period.

It doesn’t even need to be an issue with the Forex market itself.

You could get hit by a bus and end up in hospital for three months recovering from injuries.

I know this is an extreme example but you never know what can happen.

Having an emergency fund that can get you through 3 months of no trading or longer is always a good idea.

Some of my students have gone through situations in which an emergency fund helped them immensely.

Even better is having a secondary source of income which is part of the reason I run forex4noobs!

Hope you’ve learned something valuable!

I had to learn these lessons the hard way over my 17 year trading career.

You can learn them much easier and quicker by bookmarking this article and referring back to it regularly!

Also, don’t forget to share it with anyone who you think would benefit from some insider knowledge!

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353 comments

Johan L

January 21, 2019

Hi Nick,

I entered forex4noobs in September 2018. i told myself to learn for at least 2019 on demo and to
study any content you where offering. I improved as a trader a lot. not yet there i can feel it. sometimes i can get trades now that work out perfectly with my own input and your rules. i am going live in 2019 with a small account to get to the real thing.
i am starting a new traderjournal to review my trades as now.

this just now because
i know NOW what i am doing so also what i am doing wrong.

Before it doesn’t matter, as a starter you don’t know what you are doing at all.

Keeping a journal from day 1 is too difficult Nick. After wondering around and playing some trades i suggest to restart as i do, with all the material you gave and recording the trades.
at the beginning there will be to much trades taken not knowing what we are doing.
It gives to the starter false information. you can only really say this trade is risky or easy or whatever when you know what you are talking about.
trading is hard. i am being impatient. i want to see it going my way. i like the 1 hour chart 25 /40 pip trades. i have to learn i guess …. it’s a journey …. thanks to you and the crew for being so kind and patient and let the charts be with us in 2019. looking forward to more scalping stuff.

Nick

January 21, 2019

No problem, I am glad you are finding the site useful to your trading journey!

Ranny

January 21, 2019

Good information. Thank you sir

Tony B

January 21, 2019

Nick – all very good information!

Bandile Dladla

January 21, 2019

wow very insightful

Oneil

January 21, 2019

Hi Nick,thank you for going out of your way to put together the information you always share with us.Ever since I joined Forex 4 noobs,it have change the way I see thing in forex.I just want ti take this moment to tell how much I appreciate what you do for us and I’m sure I’not the only one.I wish God rewards you for your selflessness.Thank you.

elliotmonwane@gmail.com

January 21, 2019

Very much appreciated, thank you Nick

Benjamin Nzegenuka

January 21, 2019

Thanks, it is a good stuff

Selwyn

January 21, 2019

Hi Nick,

Thank you very much for sharing this. It made so much sense and a lot of it is very relevant to me as a new trader.
The portion you mentioned of your trading journal did not download, would you be able to re-send please,

Regards,

Selwyn

Ruslan Yacht

January 22, 2019

thank you! as always great value.

Nick

January 22, 2019

It is not a direct link to the file. Downloading the file requires you to be logged in to forex4noobs.

Step 1: Log in to the site.
Step 2: Visit this link https://bullrushacademy.com/topic/how-to-track-progress/
Step 3: Follow the instructions to download.

Nick

January 22, 2019

Thanks, glad you found it useful.

Nick

January 22, 2019

Thanks for reading, glad you liked it.

Nick

January 22, 2019

No problem man!

Nick

January 22, 2019

Thanks for the kind words, I am glad to help.

Nick

January 22, 2019

Thanks Bandile!

Nick

January 22, 2019

Thanks Tony, glad you like it.

Nick

January 22, 2019

No problem Ranny.

Cisse

September 19, 2021

Hi Mr i m from west Africa and i just discovered your website. Only one think in my mind now just follow the man he will help you along with your trading career. I have fund a truthfull person. Thank you all the best in your family and very long life to everybody