PAST 2016-8-6

Forex Traders: Are We Too Hard On Ourselves?

Hello there PAST Traders

Who do you think of when you hear the words “great trader”?

For me, when I think of great traders, people like Stanley Druckenmiller come to mind.

Jesse Livermore.

John Paulson.

When I think of great traders, I think of impressive returns.

Asymmetric risk and reward.

The ability to generate returns regardless of market conditions.

When we think about these great traders though, we have to make sure we don’t fall into a trap.

That trap is thinking how they make it all look so easy.

Here are guys going around making spectacular profits with little fanfare.

The huge returns. The staggering wealth. It seems like they can’t put a foot wrong.

It all seems to come with such little effort

We should strive for that too, right?

We expect that we should be able to just sit down in front of the screen each day and crank out profits.

Day after day.

That’s what we expect of ourselves, isn’t it?

To be able to generate impressive returns in all market conditions – and to do so without any huge drama.

But is that realistic?

Sometimes I think we’re in danger of setting our goals too high. I think we can be guilty of trying too hard, and striving to meet expectations that are unnecessarily ambitious.

Take Stanley Druckenmiller for example – he’s a titan of the trading world, and has my utmost respect. Whenever he speaks, I devour every syllable that comes out of his mouth.

But in his own words though, he got “killed” during the tech bubble in late 1999. He bought the bubble right at the top, lost a fortune, and ended up leaving George Soros’ Quantum Fund.

Take Jesse Livermore as another example.

He is an immortal icon in the trading world. He’s probably the most quoted trader that has ever lived. I can’t tell you the number of times I’ve read “Reminiscences of a Stock Operator”.

But he too had plenty of bust accounts in his trading career. He recovered from his first bankruptcy in 1912 and then made another fortune. But he was suspended from the Chicago Board of Trade after being declared bankrupt again in 1934. He took his own life in 1940.

John Paulson has never reached the depths of despair experienced by Jesse Livermore. But despite being the subject of a book entitled “The Greatest Trade Ever”, his two funds endured 52% and 36% drawdowns in 2011, the year straight after that book was released.

Unattainable standards

Sometimes we set standards for ourselves that even our trading heroes could never reach.

We’re guilty of focusing on the mind-boggling returns and ignoring the long periods of strain and strife that these icons go through.

There is one particularly unrealistic demand we often place on ourselves. That’s the expectation that we can make money regardless of market conditions.

It seems as though we expect ourselves to make money, consistently, no matter what the market is doing.

This is an impossibly high standard to meet for the vast majority of us.

Lately I’ve been struggling with the ranges that many currency pairs are in right now.

My trading strategy suits markets that are moving in large swings on the longer timeframes – (weekly and above).

Those swings are in short supply right now. So it’s natural that I’m going through a period of underperformance.

But all the traders I look up to all went through periods of underperformance – that’s just trading.

  • If your strategy is betting on economic recovery but a European debt crisis is raging, you’re going to suffer. Like John in 2011.
  • If your strategy is long USD but the USD is in a protracted range, things are going to be tough for a while. Like me right now.

If our strategy is at odds with the market (and it often is) all we can do is batten down the hatches and ride it out.

At the last Pro Workshop we spoke quite a bit about goals, setting goals, and how to develop a plan that moves us towards those goals.

The first of those goals has to be to avoid losing money. Especially when markets are not being particularly kind to you, just hanging onto the bulk of your account is a huge achievement.

Everyone struggles at times in trading. Even the greats.

Don’t expect too much of yourself

Be careful that you aren’t expecting too much of yourself. The way the markets are now, If you can just hold onto your money, you’re beating most of your competition.

The returns might not be coming for us right now, but that’s entirely normal. Keep the head down, keep doing the right things right, and keep pushing.

The goal is just to be still be here when the market comes back around to suit you and your strategy.

When that happens, trading will feel like the best job in the world again. But until then, we have to stay realistic and understand that tough times come with the territory.

It’s part of the job.

For everyone.

All the best,



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This update is based on my analysis on my charting package. It may differ to yours as it can be affected by time, market movements, charting packages and broker prices. I accept no liability for loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on any information in this report or analysis.