I welcome you to the second edition that continues the Trader's Corner series that has been appearing on the front page of Daily Technicals report. Please feel free to email me at sshenker@fxcm.com with your comments.

Meditations of a Trader:

I'm a trader, that what defines me as me. In order to become a trader, a person must identify him or herself as a trader. In order to be a trader one must become one with the market, with the price, with one's self. As I meditate on the price there is nothing else, no time, no distractions, and no world outside of the purity of the price. As I mediate on the direction of the price and ask market for guidance, I remain humble and thankful for every lesson the market is willing to teach me for I'm a willing student, a trader and myself. As I become one with the price and seek the future path, I'm a trader and understand that there is no direct route where I want to get, but I'm not lost because I follow the price. Only the price knows where it wants to go, it speaks and I listen, and if I listen correctly I will be rewarded and if I make a mistake I will be punished, but I remain a patient and willing student, a trader and myself. And I thank the market for every lesson that I learned, continue to learn and will learn in the future, for I'm a trader and that is my true self.

Traders Corner:

As a trader I learned how to learn from my own mistakes and from the mistakes made by other traders. The most common mistake is not to admit that you are wrong, accept the consequence of the wrong decision and close the trade. Instead what most traders do, they let their pride takes over and they hang on to a losing position because they are afraid to admit that they were wrong. Pride has no place in the market, pride can lead to devastating losses, especially when the trader had a successful run and feels invincible. I'm only proud of one thing, that I have no problem admitting when I'm wrong and move on to another trade, which is why I use stop loss to minimize the damage of my mistakes. Mistakes should be used as a learning experience, I may not know all of the things that work, but I do know what does not work and will not repeat the same mistake twice, or at least not the third time.

As a trader I have learned that size of the position does matter, because size is a double-edged sword, it magnifies both profits and losses. The most common mistake made by the novice traders is to instantly increase the size of their positions in an attempt to magnify their profits, but instead they mishandle the size and increase the loses, and by doing so the trader gets aggravated and yet once again increases the position size of the next trade in an attempt to bring back the account balance, thus exposing the account to a bigger potential loss. Another downfall of an increased position size is that any normal price fluctuations will be magnified proportionally by the size of the position, and if the trader has leveraged his of her account in an attempt to maximize the profits, he or she will face a possibility of a margin call, loss of capital and loss of a position. The worst outcome of overleveraging and sizing up is a margin call, a loss of capital and subsequent move in the right direction, thus leaving the trader to blame him or herself for the mistake. The key to trading is to know that profits do not happen instantly and by increasing size of the position, the trader will not only maximize losses, but will also maximize losses. In order to stay in the market and withstand the short-term volatility, a trader must learn how to adjust the position size according to the account. In order to maximize the profits and minimize the losses, this trader uses a "perfect" leverage technique, where the size of each individual position will not affect the overall account, even in times of extreme volatility.

As a trader I learned that one of the cornerstones in trading, and I mean successful trading is money management, and what fascinates me about most traders is how they trade without protective stops. A stop is not an option when it comes to trading, its mandatory for preserving the capital and must be used to take out the guessing of should I close the losing trade or maybe it will turnaround, This type of thinking can sink trader's account deeper into loss, because no stop and no decision combined with hesitation and wishful thinking is a recipe for disaster.
Stop is a hard loss, a trader MUST NEVER TRADE WITHOUT THE STOP LOSS.
Trading without a stop exposes trader's capital to an unlimited loss; trader must never enter a trade with potentially unlimited loss. Key to trading is to keep the losses to the minimum, while maximizing profits.
Losses are inevitable; it's how soon the trader is willing to deal with them, because a small loss without the stop can easily snowball into an avalanche and wipeout the trader's account. Do not be proud, use stops; no one is right 100 percent of the time, NO ONE, including myself. Every time I enter the trade, I already have a predetermined stop; because the only known in a trade is how much I'm willing to lose, and I never lose more than I risk. A trader must never lose more that he or she risks on a trade while keeping the risk/reward positive.

As a trader, the most valuable lesson I have learned is to adapt to changing market conditions, because what worked yesterday will not necessarily work today or tomorrow. Most common mistake made by traders is to stick to the strategy that stopped working, it does not matter is the strategy produced favorable returns in the past, now is the present and tomorrow is the future. As traders we do not trade the past, we trade the future. As time progresses market participants change, rules change, price action changes, so why does the trader persists on doing something that does not work anymore, answer is simple human pride, do not be proud, admit that you are wrong and change what does not work. My advice has always been to traders, "If it works use it, if it does not change it". I utilize an adaptable and self-learning fully discretionary trading system, which I constantly adjust to changing market conditions, because if the trader does not change with the market, he or she will be left behind. My advice for my readers is to follow the 3C's and 3L's of trading and you will be successful.
"3C's: Confidence, Consistency and Compounding and 3L's:
Levels, Leverage and Liquidity".

As with any markets there are times for action and there are times for inaction. This trader believes that in order to be successful, trader must remain vigilant and not tire him or herself out by chasing everything single price tick. Price chasing must be replaced with caution, patience and vigilance. As a trader I learned that it's impossible to trade every day, I do not trade every day, I trade when there are trades and I stay out of the market when I do not see any.
Trader must not be in the market when there is nothing going on, do not trade if you do not see any trade setups or the market conditions do not conform with your trading methodology. Trade only when you see something; do not trade when you don't see anything. NEVER TRADE JUST TO BE IN THE MARKET

As a trader I'm constantly reminded by the market to remain humble and respectful, because when I forget and fall into a trap of thinking that I'm better and more skillful than I'm actually am the market will remind me and give me a warning. Most common mistake made by traders after they make just a few successful trades is to fall into a mental trap and think that they are good, really good and that they can do anything and the market is their playground. WRONG. The market has a tendency to warn and remind you of whom you are, the key to becoming successful trader is to listen to the market and heed to the warning.
It's important for the trader to remain humble and learn the limits and capabilities that he of she posses. Because going beyond individual limits and capabilities will only lead to a loss, or even worse a series of losses, which can have a devastating impact on a trader both emotionally and psychologically. NEVER THINK THAT YOU ARE BETTER THAN YOU ACTUALLY ARE, NOBODY IS THAT GOOD, NO ONE, NOT ME, NOT YOU, NO ONE.
Always be humble and you will become successful.

As a trader one of the lessons I learned is how to take losses.
Learning how to take losses is one of the most important lessons a trader must learn if he or she wants to remain in the market. Losses are inevitable, no one is 100 percent right all the time. There will be trading streaks where trade can have a number of successful consecutive trades, but sooner or later the streak comes to an end and he or she will take a loss. As that point it's very important not to lose one's head, a trader must remain in control of him or herself.
After taking a loss, take a break and after regaining clear mind and an ability to think logically only than trader can choose to reenter the market. Don't hang up on a loss and never carry a prejudice against a loss, the key to handle losses is to cut them quickly before a small loss becomes a large one. Never think that you will escape losses, losses are just like profits, it's all part of the trader's universe. LOSSES ARE INAVITABLE, GET OVER THE LOSS AND MOVE ON TO THE NEXT TRADE.

As a trader one of the lessons I learned the hard way never to be eager to enter the market. Eagerness tends to lead to excitement and in turn it tends to cloud rational thinking, which can lead to a loss or a series of losses as trader did not allow him or herself enough time to asses the market for potential trades and just entered the market because it's moving and the trader does not want to be left behind.
Its ok to miss a trade, in order to be successful a trader must learn how to control his or her emotions, never be eager to establish positions and never enter the market on a whim, just because it's moving. Trader's strongest asset is patience to wait for a high probability setup to materialize, because if the trader is not patient, he or she will not be trading for very long. If you feel the urge to trade just because you are bored, get a cheaper hobby. Be patient and listen to the market and you will be successful. PATIENCE IS A CORNERSTONE OF SUCCESS FOR A TRADER.

As a trader I learned the hard way that not every trade will be profitable there will be losses, it's inevitable. One of the most common mistakes made by amateur traders is that profits are easy to come by; WRONG losses are easy to come by, not profits. Every time when I enter a trade I know that I can and will lose on some of my trades and I accept the reality of trading. Key to successful trading is to differentiate what kind of trades dominate your trading, losing trades or wining trades. If my losers exceed my winners I stop trading because its obvious that something is not working or my trading strategy is not in tune with the market. If I'm wrong on high number of my trades I liquidate everything, because if I hold on to the positions in a situation where my losers exceed winners, it's only a matter of short period of time before my winners will also turn into losers. The best thing to do is to take a break and start with a clean slate. IN THE MARKET LOSSES ARE EASY, PROFITS ARE HARD.

As a trader I learned the hard way that if I want to become a trader I must first unlearn everything I knew about the market. As I began my trading career my first lesson was never assume anything or take anything for granted in the market. Most common mistake made by novice traders is to think that trading is easy and fun, WRONG; trading is hard and grueling task. Yes, I agree with my critics that trading can be extremely rewarding, but it can also be devastating, both financially and emotionally, for both experienced and inexperienced traders. In market only the strong survive, and by strong I mean consistent traders, consistency is one of the pillars of successful traders. By being consistent trader will overtime build up his or her confidence as well as the trading account. It's important to remember that it's not how big the profits are its how consistent the trader is. Always remember 3'C of trading: CONFIDENCE, COMPOUNDING AND CONSISTENCY.

As a trader I learned through my experience that there is no bull or bear side of the market, there is only one side, which is the correct side. Most of the novice traders lock themselves into one way thinking, they make the most common mistake of choosing a side. As a trader I'm neither bull nor bear, but a trader, I do not have a favorite side, I trade the side that moves, and it does not matter whether the price is heading up or down, as long as it moves in one direction and has a follow through. As a trader I'm constantly on both sides of the market at the same time, because in order to succeed I always maintain a buy and sell scenario. I do not sell when the market goes up and do not buy when the market goes down; I trade with the market and never against it.
In order to become successful a trader must remember, THERE IS NO BULL OR BEAR SIDE IN THE MARKET, BUT THE CORRECT SIDE.

As a trader I learned the hard way that there is no instant gratification in the market. The most common mistakes made by novice traders are that they expect constant price action and instant profits.
Market does not always move and there are periods where the price action is almost non-existent, and as a trader I learned to stay out of the dull market or at least not to carry a large position during those periods. But what a novice trader does, he or she instantly sizes up the position in order to maximize the potential return, because the market is not moving and there is a need for gratification, price action and instant profits. That is where the trader becomes a danger to him or herself, because if there is an unexpected move against the trader, he or she will be devastated by the size of the position. A trader must remember that bigger size not only magnifies potential profits, but also magnifies losses; never trade size in a dull market, patience is a key to success because nothing ever happens instantly. THERE IS NO SUCH THING AS INSTANT PROFITS, ONLY INSTANT LOSSES.

As a trader one of the lessons I learned the hard way is never try to trade everything I see and to keep my trading universe limited. Most common mistake made by novice traders is trying to take on too many positions at once. A danger of trading too many positions at one time is losing one's focus thus increasing a chance of a loss. A trader must understand that he or she is only human and must focus on a limited number of opportunities. A higher number of instruments traded does not necessarily translate into higher profit, instead as trader adds more and more positions while trying to keep track of the previously opened positions and the price action, he or she will eventually burnout and lose focus. A loss of focus for a trader will translate into a loss in the account because if he or she can't keep track of positions no one else will, remember only you as a trader have vested interest in your own success. Remember KEEP YOUR TRADING UNIVERSE LIMITED AND DON'T LOSE FOCUS.

Good Luck Trading!!!

Sincerely
Sam Shenker

Forex Capital Markets LLC
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