The importance of a long term vision

In the article “Probability with regard to a trading system” you have already learned how very important the influence of probability is with regard to forex trading. However probability is based on the long term. Many forex traders may acknowledge this theory, but they have trouble using it in actual practice. In this article I’ll show you why you need a long term vision to become successful and I’m also going to offer a skillful aid for you to be able to create a long term vision.

Probability is an important issue with regard to a trading system. Consequently you know that you’ll have a fair chance to make a profit by handling a risk/reward ratio, amounting to at least 1:1 and your success rate being more than 50%. This principle seems and in fact is quite simple, but nevertheless you might experience that in actual practice it is not always that easy to handle this.

Using the OFS Trading System , you’ll be able to achieve a profitable success rate, but that does not mean that you are never going to experience loss-making trades along the way. Especially during a less profitable period your attitude will be put to the test. To become successful you ought to have a long term vision.

In actual practice it frequently happens that a forex trader starts to doubt when a loss-making trade appears and this could easily deteriorate when a number of loss-making trades happens in a row. The emotions could take the upper hand and consequently big mistakes could be made like not following the rules anymore or increasing the stakes to try to make up the losses. Unfortunately this often results in even bigger losses….

It’s a pity that the above-mentioned scenario happens much too often and that could be qualified as a bloody shame. It so happens that it could be prevented quite easily when your mind-set is in good order. I’ll be glad to provide you with a number of tools, giving you the opportunity to approach everything in a more abstract way and to develop a clear vision to get successful in the long term.

Be precisely aware of your goal in order to be able to create the right mind-set

It’s very important to keep your goal clear in mind. The purpose of the OFS Trading System is to gain profit in the long term. This purpose is achieved by trading according to fixed patterns, causing the opportunity to succeed turning to our advantage by trading in the direction of the trend and by entering into the trend at the right moment. All this should be combined with favorable risk/reward ratio’s.

Let’s take as an example a success rate of at least 60%, using a risk/reward-ratio which varies from 1:1 up to 1:3. Of course in actual practice the target is often higher, but with a success rate of at least 60%, combined with favorable risk/reward-ratio’s, you are still going to achieve a nice return.

Important: so the main objective is not to conclude all trades in a profitable way, but to be lucrative on the long run!

The key to obtain the right mind-set is to be able to understand what the success rate of 60% really involves. What actually is the meaning of this percentage?

It means that you will conclude your trades with a profitable average of 60%. When we observe the very short term, this means that based on an average of 10 trades, you will conclude 6 trades with return and 4 trades at a loss.

So is it really alarming when you close 1 trade at a loss? Or when you close 3 trades in a row at a loss? No it isn’t, because you should be well aware of the fact that you will close at an average of 4 trades out of 10 at a loss. So it still fits entirely in the line of expectations. So, in fact, why should you bother?

The target is aimed at being profitable in the long term. In that case one single trade isn’t important at all and the same goes for just a few trades. The point is whether you will reach your target in the long term, so focus your eyes on that very same term.

The mantra “Everything’s going to pass away”

Yet for everything counts, that results in the long term are more reliable and that goes for forex trading as well. As a matter of fact the earlier mentioned example of 10 trades isn’t in any sense representative enough to measure your results. Not until having experienced 100 trades you’ll get somewhat of an image of your actual results and even then it could still be a matter of the usual variance.

To allow yourself keep seeing everything in a clear perspective and to prevent yourself from aiming at the short term results, you should use the mantra “Everything is going to pass away”. This applies to less good times, just as well as to real good times!

An illustrative example

Imagine you managed to conclude all of your first 10 trades in a profitable way. There’s a big chance that you’re experiencing an euphoric feeling. You regard the trading system as being absolutely fantastic and your self-confidence is bigger than ever. However, the results of the next 10 trades happen to be nearly the opposite of the previous ones. It’s true that two of them are profitable, but the remaining 8 trades are loss-making. Now there’s a big chance that your euphoric feeling has completely vanished and it seems quite likely that the same goes for the extent of your self-confidence….

Now let’s try to look at the situation from an objective point of view, disposed of emotional feelings. You concluded 12 out of the 20 trades in a profitable way and you concluded 8 out of the 20 trades at a loss. This results in a 60% success rate. Isn’t this 60% success rate exactly the original goal that you had in mind before carrying out the trades?

So you’ve let yourself got carried away by giving in to your emotions, but in the end you’re simply still on schedule when it comes to your original goal. So nothing was the matter at all, there was no reason for euphoria, nor was there any reason whatsoever to go panicking.

By using the mantra “Everything’s going to pass away”, you’ll be able to keep seeing everything in the right perspective and you’re not going to end up in a rollercoaster of emotions, which can only lead to negative consequences. It makes no sense to become euphoric when things are improving more than expected and it neither makes sense to go panicking when things are not exactly developing the way you was expecting them to be!

Try to observe the situation form a certain distance like a neutral spectator. You ought to know that you will not be able to pass a representative judgment until a large number of trades has been taken place and you should not be preoccupied at all with this matter in advance. After all you know that you will be profitable in the long term if you’re able to work up the discipline to strictly follow the rules of your forex trading system. So it’s of no use whatsoever to allow emotions coming into your system.

Conclusion:

However you should keep being realistic. There are but few people who actually dispose of this long term vision and those who managed to create the right mind-set, often did have to put up a hard fight by trial and error. It so happens that this mentality is going against the human emotions, so it requires working hard on yourself.

However, if you are willing to work on yourself, you’ll notice that you can create this mind-set and you surely will do well out of it. As it happens the chance of having a nice forex career will definitely be lying ahead of you!

Summary of the article series “Forex Trading is simple!”:

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