Fatal mistake that stops you from becoming a professional trader

Jarratt Davis

Special Consultant to the FPA
Messages
1,495
What stops you from being a professional trader

If you can not make it as a professional trader, I can almost guarantee that the reason will be down to the issue of ‘switching’.

‘Switching’ is a major obstacle to almost every single new trader. And is the main reason why so many traders struggle to achieve consistent profitability.

If you are worrying that you may be suffering from this fatal syndrome, let me outline the main signs:
  1. Does it seem that every strategy you have traded doesn’t work’?
  2. When you find a really great strategy, do you ‘back test’ it for a few days and then as soon as it goes ‘live’, it stops producing altogether?
  3. Have you traded more than three strategies in the last six months for no real reason other than they all seem to ‘stop working’?
If you have answered “yes” to one or more of the questions above, then I am sorry to tell you that you test positive for the deadly disease known as ‘switching’. There is also no easy way to tell you that unless you can overcome the symptoms, the prognosis will be grim.

However, selecting and exploring different trading strategies is not a bad thing. In fact, it’s a critical component of a trading plan. Just be conscious.

Why trading large size is so much different to trading standard retail accounts?

When trading large size (100 standard lots or more) you will encounter ‘slippage’; sometimes up to one or two pips each way (three to four pips per trade) and this can have a significant impact on your overall profitability.

When I began trading my first large account, for instance, I was risking ten pips and taking ten pips profit. Of course, effectively, this was ‘scalping’, but when ‘slippage’ was taken into account, I wasn’t losing ten pips, I was losing thirteen pips! Furthermore, I wasn’t making ten pips on my profitable trades, I was making seven pips. So, from an initial reward risk ratio of 1:1, I was now almost at 1:2 which, needless to say, the strategy couldn’t sustain. It was time for me to reconsider my plan and think of something different.

Which trading strategy to pick?

The main reason that I do not advocate ‘scalping’ to clients that are looking to eventually break into large-size trading, is because the margins are simply too tight. The last thing you want to be doing just after getting a large account to trade is coming up with a entire new trading approach!

So if you want a system that will be robust enough to stand up to the tests thrown at it by fund trading, I personally recommend something with a minimum Stop Loss of 30 pips and a ‘take profit’ of about the same or more. Ultimately, the higher the better.

This will dilute the effects of any ‘slippage’ and allow you to trade confidently!


P.S. - If you want to learn more about how I trade, check out the link below

Jarratt Davis - Free Forex Course
 

ElaineMDG

Corporal
Messages
119
Thanks again Jarratt!! Another timely article that I needed to read!
I started going through my worst stretch of drawdowns a few weeks ago, and after 2-3 days, instead of taking a break, stepping back and reviewing exactly what happened in those trades; I thought about what a well-known CTA said to me a month or so ago, and began trying out different strategies. Obviously, it made things worse and it wasn't until I took several days AWAY from trading, then got BACK to my original strategy, reviewed my trades and discovered had I just put the SL a few pips further, I would have avoided those losses.
I'm back on track and back in profit (mostly ;)!

Cheers & Thanks for Everything!
e
 

Anomilus

Private, 1st Class
Messages
39
I actually love this. So many gems on this forum.

Thanks for sharing this insight.
 
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