How Detachment Can Make You A Better Forex Trader
Detachment is an important concept from Taoism that can easily be applied to trading the Forex market. A good trader should be detached from greed, emotion, as well as any preconceived notion on trend direction. Let’s examine this last issue on trend direction a bit closer.
Having a preconceived idea about which way a currency pair is headed is quite dangerous in my opinion. I have seen many traders become 100% convinced that a pair was going to continue heading South, simply because that is the direction the pair had been heading for the last 5 days. This is showing attachment. The trader has become attached to trading Short, perhaps because they have made some easy pips by following the current downtrend.
It is important for traders of every market to be focused in the present moment; detached from what Price has done in previous trading sessions and focused on what it is doing at the moment. Obviously we want to use the past as clues to the future through technical analysis, but the key word here is “clues”. We should not be so focused on the past that we forget about the present. Far too many times I see traders in the forums become attached to a trend, even to the point where they will use enormous stop loss levels, no stop loss, or continue moving their stop loss level further and further away in hopes that the trend will reverse and continue in the direction they desire.
Be detached in your trading and your profits will increase. Find the flow and truly see the market instead of injecting your preconceived notions upon it. Most people live a little bit in the present or the past. They worry about what they should have done and they worry about what they are going to do next. When you learn to find the flow you stop fighting yourself and things come much more naturally. You are finally living in the present. This takes practice and hard work…but it does pay off!
Patience is another key aspect to trading, and just as important a concept to master as detachment.
These are all just pieces of the puzzle, but I believe that once you put some of the pieces in place, you can at least begin to see where the other pieces fit. Consider patience as being the center piece that you build everything else around.
There is a popular English phrase that states, “good things come to those who wait”. While I can agree with that statement to a certain degree, a person, particularly a trader, needs to know when it is time to act. That is why I think the Tao Te Jing, perhaps the most famous of all Taoist texts, does a better job of outlining patience in regards to trading and even life in general.
The Tao Te Jing talks about patience in Chapter 15.
Do you have the patience to wait till your mud settles and the water is clear? Can you remain unmoving
till the right action arises by itself?
A trader can learn a lot from that verse. Most traders enter without their minds being clear and focused. They enter on a whim, because they are impatient and cannot wait for the trade direction to become clear. If you cannot easily tell in which direction price is trending, don’t enter! Wait for the mud to settle and the water to become clear. Wait until Price moves to a logical entry point.
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