Trader Psychology: Playing the Waiting Game

In an aim to increase our focus on the importance of psychology in your trading, Littlefish FX Analyst Nathan Batchelor brings us a new series on Trader Psychology. Here he discusses the importance of favouring slow and steady gains over increasingly impossible big wins…

I was talking with a long time friend (of nearly 20 years) of mine the other day, and he told me some sad news: his 93-year-
old grandfather had passed away. We spoke at length about his grandfather’s life and smiled at some of the wonderful stories about this lively character.

Like many other people of his generation in the UK, my friend’s grandfather kept a large part of his hard-earned cash savings under his bed mattress, a not inconsiderable amount (we’re talking thousands).

Being a man of some business acumen, he would wait and wait until the right deal came his way and then he would buy something at rock-bottom price, having the cash there ready and waiting to make a killing on a house, car, plot of land or whatever the bargain in question was. I guess we call that distressed assets nowadays.

Most of the time he would be able to get nearly 50-100% in % return for his purchase and sell it on in no time at all; weeks to months mostly, making a very healthy profit for him in a short turnaround period.

A few days after I had this conversation, so many things struck me when I related this to Forex trading and indeed the generation we live in now, thinking of the possible returns we can make in our day and age. Times truly have changed – everyone seems to be an entrepreneur in some way nowadays, whether on TV shows or the Internet, yet those 100% return deals simply don’t exist anymore, or are extremely rare.

Very few people would store money under a bed these days, and many things have changed because of the digital trading world we now live in. You can now take numerous amounts of trades at any time of the day via your brokers’ platforms, and the temptations are all there to take too many trades you do not understand and too much leverage – the opposite of my friend’s grandfather’s approach.

So how does this relate to Forex and to you and to me? After all, we are all looking for a return on our money.

Firstly, returns like 100% in a few months are just not achievable in this current market environment, in trading and, I would suggest, the investment world as a whole. At least, not unless you are willing to take huge risks where it would be entirely possible to lose all your initial deposited capital.

So that then poses the question of what is acceptable and what is even possible nowadays when trading your own account or looking for someone to manage your money. I would say 1-2% per month is an entirely safe and achievable benchmark, and I think we all need to sit back and re-adjust our thinking towards huge return. The new world we live in means slow and steady returns really are the way forward.

Putting this in terms of trading psychology is an incredibly relevant and easy fit. Simply put, instead of looking for the big “home run” that may not exist, we should be taking well planned out trades using great technical analysis or quality programming from our Algo or manual strategies, with the appropriate risks. That is how time has evolved.

Thinking back to my friend’s grandfather, who would sit tight and wait for the right opportunity to near double his money on one deal – well, that is incredibly hard to do in Forex.

Considering the patience, timing and experience you would need to able to get 50-100% for one trade and have the exact market timing and not be over leveraged, it’s fair to say the odds are stacked pretty heavily against you. In such a short space of time it becomes a nearly impossible high risk manoeuvre, and one you would be waiting years, not months, for.

But that’s not to say we can’t combine the old and the new in trading nowadays – indeed, waiting for the right trading opportunity is a great ethos to have in trading. There are many chances each month to make money in Forex, so don’t be afraid not to trade a few times a month, and take only the best trades out there. It will serve you well in the long run and keep you mentally and emotionally in a better place whilst trading.

Trading present day, we now must look for what is achievable. That is small, steady realistic gains to build your trading account into a steady revenue generator focused around stability; well thought out gains that are realistic with hard work and total mental and emotional discipline.

Want to put any questions to Nathan? Email him at nathan@littlefishfx.com, while you can find him in our Live Trading Room every day of the week – sign up for 30 days free access to our Trading Hub here.