The Difference Between Winning and Losing in FX

Want to make sure you wake up on time? Put your alarm clock away from your bed forcing you to get up in order to turn it off. It a simply trick but it works like a charm. Take it fro guy who has had to get up at 2AM New York time for every working day of the past 8 years.

Here is another behavior modification trick to consider. My teenage son, who like all boys has difficulty sitting in one place for more than a minute has been having problems with schoolwork. So I cut his allowance. He in turn proposed that I pay him for homework in order to motivate him. We agreed on a buck per each assignment (hey this is New York), but taking some inspiration from Mr. Market I added the following caveat -- any time he didn’t do his homework I would take away a dollar from the ones he had already earned. In short I created both positive and negative incentives. Net result? His butt has been nailed to his desk all week long and all work has been done on time.

I’ve been thinking about behaviour modification as I looked at my “junk” trading account today. Those of you who have been regular readers of my column know that I have blow up lots of money in my spec accounts over the years by martingaling straight into margin calls. However since the start of the year an interesting thing has occured. My junk account has been oscillating a couple of hundred dollars on $5,000 just as I had hoped it would. This despite the fact that I laid on hundreds of idiotic trades as I experimented with various strategies.

What’s been different this time? Two things. One, I preset my standard trade to only 2 times my equity (ie trading on 2:1 lever factor). Two, I auto attach a stop to every trade I make. It been amazing how those two minor behavior modifications have basically kept me alive and trading in my “junk” account, allowing me the experiment and extract the best ideas into my “real” accounts.

Looking at those trade results I realized that in trading as in life it is the process rather than the strategy that determines long term success. Ideas after all are a dime a dozen. Some are great some are horrible some start our great and become horrible others start out horrible and become great. What really matters is how approach the business. We all know that we are just one bad trade away from ruin in FX, which is why behaviour modification is the difference between winning and losing.

Boris Schlossberg

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