winning forex edge
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Winning Forex EdgeBy: Matthew Lee
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Table of Contents
Introduction
Chapter 1: Learn to ACT and THINK Successfully
Chapter : The Art of Money Mana!e"ent
Chapter #: Is $our LA%IN&SS Holdin! $ou Bac' (ro" Bein!
Successful)
Chapter *:Are $ou A Losin! Trader +ue to ,-&&+)
Chapter .:Are $ou Cut /ut to Be A Trader)
Chapter 0:Co"poundin! -is' Control and Le2era!e 3
&2erythin! you N&&+ to 'now
Chapter 4:(ine Tunin! $our Tradin! Beha2ior
Chapter 5:How $ou Should Act and Beha2e 6hen
$ou7re 6innin!
Conclusion
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Introduction
What if I told you that being successful in trading Forex is 50% the
responsibility of technical market decisions you make and 50% psychological
decisions you make? Its true, almost 50% of hat makes a trader pull the
trigger on lot si!es and entry and exit points relies on psychological and pre"
determined decisions based on hats happening in the traders life at that
present point in time# If more traders could make rules before they e$en sit
don to trade and actually stick to their plan of action, there ould be many
more millionaire currency traders in this orld#
Instead, day after day traders push the button on their trades for
psychological, emotional, and hesitant ays# ne of the most common
mistakes I see traders make day in and day out is thinking about a large loss
they had in the markets as they are making their ne trade# &he trader ill
literally start to seat bullets as he executes a trade that he knos is
technically right but fears emotionally# 'y ob(ecti$e in riting this book is
to sho the inning Forex traders mindset and ho you can ork to re"
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program your mindset to trade like a inner# Its not easy to change your
psychological thoughts of trading or to lea$e your emotions at the door, but
Im going to do my best to sho you the possibilities of trading like a inner#
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Chapter 1: Learn to ACT and TI!"
#uccessfull$
I made this )hapter * because I firmly belie$e this is one of the most
important aspects of being successful in anything in your life# If you cant
learn to act and think like a successful person, then youre going to fail or be
mediocre in e$erything you do in your life# +$erybody knos that pessimistic
person ho looks at e$ery single e$ent, (ob, and action in his life as bad#
Who ants to be around a person like that? If youre unhappy and you
already think your trade is going to be a losing one then youre se$erely
stacking the odds against you to in#
In Forex, especially for ne traders, it seems as if they dont e$en care
about learning the language and nature of the market# I$e seen countless
numbers of traders that dont ha$e any business making trades solely because
they dont e$en understand hat the ord I means# -et, these are the
same traders ho are trading half of their life sa$ings in the market on a daily
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basis# &here are many people in this orld you are setting themsel$es up for
failure in e$ery ne business $enture, (ob, and relationship in their life#
-ou ha$e to ha$e the determination to be successful in trading# -ou
ha$e to be able to spot your flas that you make day in and day out and sit
don to really fix them# eople act in hat I call .cycles#/ &hey make actions
in a ne$er ending cycle that usually ill go on for their hole life, or until
they learn they ha$e a real problem# In the human race this is most
noticeable in social, relationship, and addiction problems# I hate to say it,
but the decisions humans make ith money act in the same ay# &here are
people ho ill li$e in debt their hole life and then there is the opposite
end of the spectrum of those ho ill be frugal and sa$e their hole life#
From this point on, I ant you to start to think 1))+F122-# If you
dont understand something, back up and learn it3 Winning at anything in
life is determination# 2ook at 4## 6oling, the author of all the 7arry otter
books# &he lady as homeless riting her books on notebook paper# 7er
determination to be successful is hat got her to here she is today, 8
BILLI/NAI- If she can go from rags to riches riting books then you can
sit don to thoroughly learn ho to be successful before exchanging
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currency# It all starts ith education# If you do not understand e$ery aspect
of trading Forex then from this point on you need to follo this plan of
success9
*# top trading3 -oure ne$er going to be as successful as you potentially
could be if you do not stop to learn about e$ery aspect of the currency
exchanging market#
:# Write don +;+6-&7I
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B# nce you understand e$ery aspect of trading, its time to trade 28-
money#
I ant to touch on this topic for a momentC some of the most successful
Forex traders out there today got their start trading play money# Its true#
&hese guys kept strict records and spreadsheets on their ins and losses ith
F8+ 'o you e$en keep strict records and spreadsheets on your
ins and losses ith 6+82 '
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nce you sit back to reali!e the errors youre making in trading currently,
its generally all uphill from there on# &he rest of this book is going to ork
on finding your flas and errors in (udgment you are making as ell as ho
to fix them so you can ork on changing the ay you make trades#
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Chapter %: The Art of &one$ &anage'ent
&he most important tool in any traders arsenal is their bankroll#
For that reason, I am going to try and teach you the art of money
management from the perspecti$e of a successful trader# First off, my E* rule
in trading currency is .ne2er trade "ore then you can afford to lose89 If a
losing trade is going to affect your standard of li$ing then youre trading ay
too much money# -ou ha$e to learn ho to make trades ith money that
has nothing to do ith your .li$ing/ money# Ay ha$ing a set bankroll for
your trades, you ill not think of trading as9
.If I lose 0 pips this trade, I shouldnt be able to go out to a nice
dinner this Friday night#/
r
.If I lose G,000 this month, I shouldnt be able to go on a nice $acation
next month#/
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If youre making your trades based on emotional and real"life decisions,
then its going to be impossible for you to e$er gro as a successful trader#
&he second the money goes into your trading account, it needs to be
remo$ed from any real life decision# When you lose 50 pips, you cannot
compare it to losing hoe$er much in numerical dollar sense, it (ust has to
be, I lost 50 pips today, Ill stick to my plan and get it back tomorro#
6hat is the proper a"ount to e set aside for strictly tradin!)
Well, nobody can anser that but yourself, but I alays recommend :0% of
your sa$ings# If youre a beginner, I recommend e$en less, *0"*5% is
sufficient#
The Most Co""on -easons New Traders -is' More Then They Can
Afford To Lose:
*# If I can make H amount of dollars, I can ork from home ith no boss3
:# If I can figure out to make enough money to pay my bills, I can @uit my
(ob and trade full time3
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# If I can figure out a secret trading strategy, I can become rich and ne$er
ha$e to orry about dri$ing in traffic anymore#
# I can @uit my (ob3
+$ery ne currency traders has dreams of finding that golden techni@ue or
system that ill allo them to turn the markets into their on personal 8&'
machine# &he truth is that the market does not operate in that fashion#
&here is no .set pattern/ that the market mo$es year after year# 8 real trader
ill make smart financial decisions based on real technical patterns on a pre"
determined plan# 8 proposition trader ill make not so smart financial
decisions based on present financial needs, greed, and dreams#
Which trader are you going to be?
-ou ill be the real trader that has a +& trading bankroll# -ou ill make
smart financial decisions on real technical patterns# -ou ill ha$e a pre"
determined plan3
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kay, enough ith my story, lets address the to different types of
la!iness9
;roducti2e la
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&his type of la!iness is $ery dangerous because its hard for the person to
change to either producti$e la!iness or belie$e that he or she can be
successful again#
-ou ill see destructi$e la!iness commonly in people in the folloing
situations9
4ust laid off or fired from (ob
Aad in$estment decision lea$ing them torn financially
6elationship issues
Aad business decision
estructi$e la!iness is directly related ith depression and can at times take
the ork of a licensed psychologist to mentally fix the person#
&he 8merican ay is that e$ery citi!en ants more than can ha$e# eople
ant the easy ay out and ill do anything to get there#
2ets touch on ays you can moti$ate yourself to stop being la!y9
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7a$e a set schedule +;+6->8-# 7ere is mine9
4 AMM Wake up# Immediately drink a full glass of ater# Kater is said to
be the best energy pro$ider of your bodyL# +at a healthy cereal ith
banana and milk# 'ake coffee to drink as I check my e"mail, morning
nes, and anything Im curious about#
5AM 3 hoer# &hink of hat I ant to accomplish today# onder on the
day of the eek and here I ant to be by the end of the eek#
>AM 3 tart my day# =lance at morning currency nes and setup my
charts#
1?AM 3 N//N 3Follo my plan of trading# )ontinue to trade until
lunch time#
1:#? 3 2unch# =reen &ea ith either a sandich or a healthy fro!en
lunch meal#
1:#? 3 .;M 3 )ontinue my trading# Work on any other business that
needs attention
0;M 3Workout at the local fitness center and listen to my fa$orite music#
onder on my days acti$ities#
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&he rest of the day is (ust dinner, researching on the internet, and
relaxing# I am as producti$e as possible for a good six hours, hich I$e
learned is my most producti$e time of orking# 8ny longer, I burn out, any
shorter I feel lackluster and non"producti$e# I$e orked on tuning my
'onday through Friday schedule for the past couple years into the most
comfortable but most producti$e ay of orking#
&he hole purpose of ha$ing a schedule as that setup is it puts you in a
routine here la!iness is not an option# If you find yourself performing non"
producti$e tasks e$ery single day of the eek, then you 78;+ to put yourself
on a strict schedule or youll ne$er get out of the habit# &he habit ill
essentially follo you into e$erything in your life that re@uires your brain and
any real ork#
8ll the time I see loer and middle class people look at rich people in
nice cars and nice houses and say, .Wo, that guy must ha$e got lucky/ or
.7e must ha$e inherited all of that#/ For some reason, people ithout money
ha$e a firm belief that its something that is (ust so damn hard to achie$e#
Well, thats not true friends# &hese people used their mind and applied a
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strong ork ethic to better their life# -es, there is a small percentage of rich
people ho achie$ed their ealth through lucky occurrences such as the
lottery, inheritance, or competition, but the ma(ority of upper class and
higher income citi!ens orked hard to make it to the le$el they are at no#
Isnt it time you rid yourself of all la!iness and made a change for the
better? =et in a set routine and learn currency trading as much as you kno
your fa$orite hobby or sport# Its a rearding hobby that could bring you a
skill that pays you for life3"N
: hours of orld currency market nes research# 8 good ma(ority of
times you can tell the direction a market is heading during the day
simply by reading about the current nes of the economy
hours of strict chart analysis# +$en if you are not making trades for
large sums of money its alays a good idea to get in the habit of
analy!ing charts, pi$ot points, and indicators on a daily basis# In Forex,
charts are your best friend and should be taken $ery seriously3
* hour of Forex education# &here is so much to learn about Forex and
nobody ants to learn it all in one day# =et in the habit about learning
something ne about the markets e$ery day# >o research on a ne
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Chapter .:Are )ou A Losing Trader /ue to
0EE/-
=reed is considered the E* reason that destroys corporations,
partnerships, and businessmen and omen e$ery year# When does one reach
a le$el of money that is +
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based on current market conditions and hat my system is telling me#
8bout hours later I reach my 0 pip in and think to myself, .'an3 &he
market seems to really be mo$ing today, e$en though I decided earlier to
only bank 0 pips, maybe I can try for another 0 pips before the end of the
day# Im going to hold on to it for a little hile longer and see hat
happens#/
Well, Im sure you kno hat happens times out of *0 next, I end up
losing the 0 pips I banked plus some more# It happens all the time3 Its
such a rush to in that you dont ant to let it go and you truly belie$e you
can (ust keep on inning for the next hour, day, eek, and months to come3
'y E* rule of a$oiding losses such as the one I (ust described is9
+eter"ine your entry and e=it points B&(/-& you "a'e your trade
and STICK T/ IT N/ MATT&- 6HAT@
If you can learn to control your urge for greed, you ill essentially put
yourself ahead of 0% of other traders out there# 8ny professional in$estor
ill tell you they alays ha$e a plan no matter hat3
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7ere are a couple important facts to remember about greed9
*# -our ill to in '1& exceed your greed# &his simply means you
$alue being a inner at the end of the day as opposed to ha$ing a
71=+ in or 71=+ loss# -ou $alue ha$ing a real stream of income as
opposed to being on top of the orld or being at rock bottom#
2. =reed gets its fuel from fear# >o you kno hat fear is? Fear is the
emotion that results from belie$ing a negati$e outcome is more certain
than a positi$e one# 'any traders ill F+86 that they ill ne$er see
such a prosperous position in the market again, and for that reason
they must take full ad$antage of hat is occurring in front of them#
Well, I got nes for youC I find prosperous positions on a daily basis#
ure, some of them $ery much so extend beyond my expectations after
I sell, but I ne$er look back# 2earn to be comfortable ith entering and
exiting the market as pre"determined positions3 >ont let your
emotions take o$er your trades#
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Chapter 2:Are )ou Cut 3ut to +e A Trader-
I purposely made this )hapter 5 because I kno a lot of you are
sitting there and thinking, .Wo3 I make all the common mistakes the
beginning traders and unsuccessful make on a daily basis#/ ure, you
might make some of them, but +;+6-&7I
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-ou are cut out to be a trader if the markets honestly excite you and
you ant to do nothing but continue to learn about e$ery aspect of the
market# If youre here to simply make a lot of money ithout doing a lot
of ork then you are not cut out to be a trader# >espite popular belief,
being self employed as a trader is not easyC there are a lot of ups and
dons that one must be able to deal ith on a eekly if not daily basis#
Its been pro$en that people ho choose their career or make career
changes solely based on financial moti$ation almost ne$er become large in
the field they are aspiring to dominate# Its true3 &he people ho really
make the big bucks are people that ha$e an undeniable passion for their
(ob# 8 great example is a realtor# -ou can $isit almost any real estate
association and
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same realtor, thus the reason hy 5% of realtors in e$ery community
through 8merica are making 0% of the money#
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Chapter 4:Co'pounding5 is, Control5 and
Le6erage 7
&2erythin! you N&&+ to 'now
)ompounding is simply ho you ill make money during you e@uity
run ups or your inning streaks# 6isk control refers to ho you ill retain
your account e@uity during the losing streaks or setbacks# -ou should alays
try to adopt a strategy that uses money management as a basis for setting a
strategy to maximi!e your e@uity gains and minimi!e losses to a minimum in
order for you to gro at the highest rate possible#
I$e learned through years of trading that the best money management
scenario is to use the most aggressi$e strategy possible during the good times
and exposing your account to the loest risk possible during the bad times#
-ou must be able to change your psyche of thinking and be able to absorb
losses, sometimes large losses# 8s long as you can deal ith the losses, youll
be able to take full potential of the large ins# 6emember, one of the most
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common mistakes failing traders make is exiting a losing position in fear that
the position is going to continue to be a losing one# Fear is hat makes the
seller bail hile many times the position ill turn around and make a nice
profit for the traders ho ere able to handle the small loss#
6hat is le2era!e how does it wor')
2e$erage is basically using money you dont ha$e3 Isnt that the 8merican
ay?
-ou are essentially using a line of credit# 2ets say your account has G50,000
and you$e decided you ill ne$er risk more than G50,000 at one point in
time, then youll ne$er ha$e a use for le$erage# &he second your account
controls a great position then G50,000 you are using le$erage# If you ha$e a
G*00,000 position and your account only has G50,000 then your le$erage is :9*#
Its really simple# -oure basically controlling a position ithout actually
ha$ing the real money# With this concept comes a lot of danger, so listen up3
8ny professional trader ill tell you that hile le$erage can be a blessing to
ha$e it can also destroy your account and finances# -ou must learn to use
le$erage to your ad$antage during a prosperous trade and minimi!e its
effects during a negati$e trade#
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2ets look at $arious pros and cons of using le$erage9
;-/S of Le2era!e:
8llos the trader to reap the benefits of profits he or she ould of not
ha$e been able to other ise accrue#
Forces the trader to learn as much as possible about the markets in
order to loer risk#
8llos the trader to control a large position ith a small amount of
money#
C/NS of Le2era!e:
8llos a trader to lose much more money then he or she had planned
on losing#
+xposes a trader to a great amount of financial risk#
&raders belie$e its .play money/ and thus abuse it#
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2e$erage is great for disciplined in$estors but disastrous for ne in$estors or
compulsi$e in$estors KgamblersL# 2earn hat type of trader you are and act
accordingly3
How to "ini"i
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youll @uickly find yourself back don to s@uare one# nce youre back
don at s@uare one, youll finally learn that your risk tolerance is hat ruined
you and hopefully not make the same mistakes again# 8$oid becoming bra$e
and stick to a solid plan of in$esting3
How do you control your e"otions)
+motions are a $ery tricky sub(ect as it affects people differently# &here are
many different ays in hich e$ery person has in dealing ith stress, (oy, and
fear# 'ore often then you e$en reali!e your emotions ill @uickly take
control of a situation#
What happens hen emotions take control of a situation?
'ore often than not, the outcome is horrible# -our angriness or (oy is the
force pulling the trigger for the trade rather than hat is 6+82#
8 $ery smart man once told me, .on, you gotta learn hats real in life and
hats (ust feelings#/ I$e folloed that one sentence of ad$ice into becoming
a professional trader# When the market turns south and you cant handle it,
close out for the day and go do something non"trading related# nce you let
your emotions take control of your trading position, you$e lost control and
are no longer a professional technical trader#
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+motions of anger hen Id take a large loss influenced my trading decisions
for a long time, but sloly I ould analy!e trades Id make hen angry and
reali!e ho much money I as actually losing#
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Well, first off, if you are a beginner trader I highly ad$ise creating your on
system of indicators# )hances are youll use false indicators hich ill result
in you losing money#
I dont ad$ise against using professional systems, but you must be able
to sort through 0% of the A systems and find one that is suitable for you
and really profits in the long run# I suggest looking for systems ith pro$en
and documented track records# &he last type of system I ad$ise not using#
&he trading softare orks ith a program that actually enters and exits the
market for you# -ou ha$e !ero control of your money as ell as your entry
and exit points in the market# &he reason I ad$ise against using automatic
softare systems is the lack of control and the possibility for errors that can
occur# &hink about it, hat if one day youre aay from your computer and
the system crashes after it has already entered the market# -our position
heads don *00 pips and you ha$e no ay of knoing hat is going on,
meanhile your program has crashed3
Aelie$e it or not, e$en ith a real system in place many traders do not
follo the rules of their system# Its ama!ing to me ho many traders ill
trick themsel$es into really belie$ing that their system is telling them to open
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Chapter 8:Fine Tuning )our Trading
+eha6ior
In order to be the best and most profitable trader you can possibly be,
you must learn to be able to thoroughly examine e$ery aspect of your trading
beha$ior# Its your trading beha$ior that ill determine hether you are the
trader that has G*00,000 in profits at the end of the year or don G0,000
dollars#
Are you really ale to ta'e action)
Well, you should be able to kno this about yourself by no# -ou must be
able to take action on your plans, ideas, and concepts if you ant to be a
successful trader# &here are people that are born to act and ill take action
e$eryday in their li$es# &hen there are others ho literally ha$e to be forced
to take action on anything in their life#
Are you ale to deal with the decisions you "a'e !ood or ad)
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nce e make a decision, no matter the result, e ha$e to li$e and belie$e in
the result that e are about to make# If the action of the decision you make
does not act in a particular ay, e still ha$e to be able to li$e confidently
ith the decision e ha$e made# If you think about life in general, its (ust a
result of all the pre$ious decisions e ha$e made# 8 person simply cannot
li$e ithout making decisions for him or herself#
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For example, lets say you spent a couple of hours doing technical and
fundamental research on the +16O1> pair# -ou belie$e the euro is going to
rally on the dollar based on $arious researches you$e performed# In
addition, your friend ho orks as an in$estment banker has also confirmed
that he belie$es the euro is going to ha$e a strong rally on the dollar once
nes is released# 8round pm 'onday nes is released in hich the exact
opposite occurs# &he euro begins to drop rapidly and youre stuck ith the
position#
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times it leads the trader on a destructi$e path here the trader begins to
make trades on hunches and beliefs rather than real statistics#
Are you ale to handle ein! wron!)
I kno it sounds like such a stupid @uestion, but its really a huge deal# If you
cant handle being rong, then making trades on a daily basis is going to
become a $ery difficult task to accomplish# &he sub(ect of being rong
comes up $ery often in the trading orld due to the amount of times e$en
the best trader in the orld is rong# Its a feeling of outright inferiority
hen e follo through on a decision and it turns out to be dead rong#
&he real danger of being rong is hen a person starts to attach their ego to
the money they make# +go is a dangerous trait as it ill make people take
actions and make decisions based on !ero merit# &raders ill build up such
an ego about trading that hen they are rong they feel like a complete
loser# When this occurs, the temporary loss of money fuels our anger and
ants to get the money back into our account immediately# &his stage is
here 0% of beginning traders ill break rules in an effort to recoup the
losses that had (ust occurred hours before# * in or * in times the trader
ill be successful hen breaking the rules of the system, but the other
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B0"J0% of the time, the trader is rong and ends up losing more and more#
-ou must be able to handle being rong hen youre rong about your
trading decisions#
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Chapter 9:o )ou #hould Act and +eha6e
When )ou;re Winning
Its often said that hen a trader is right you can begin to $ie his true
skill and pride for his or her ork# &heres not a better feeling hen trading
then being consistently right# I can remember times hen I ould go on a
string of *5":0 trades here hat I predicted ould happen in the market is
hat exactly happened# Its like the market as playing to the tune of my
brain a$es# &he most common mistake people make hen ha$ing a string
of good trades is upping their unit si!e ith the belief that their inning
streak is going to keep going for months to come#
6hat should you do when you are on a winnin! strea')
When you are on a inning streak, instead of upping your unit si!e
temporarily I recommend treating yourself in the outside orld# =o out for a
nice dinner, take your lo$ed ones out for a mo$ie, buy something nice for
yourself, but do not up your unit si!e3 +$ery trader should ha$e a ay of
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rearding themsel$es for a nice inning streak# -ou deser$e it after you kept
to your strict plan of trading and practiced great discipline to beat the
markets#
6hat you should not do when you are on a winnin! strea'
-ou must learn to think that e$ery trade is .(ust another trade#/ Aefore
you e$en sit don to trade you should ha$e a pre"determined plan of
groing your account and gradually upping your unit si!e, under no
circumstances should the unit be increased based on a recent inning streak#
)ountless numbers of traders ill begin to feel like they are superheros in the
market and ill start to enter the markets for @uick scalps# &he larger the
ego, the more often a trader ill enter in an effort to ha$e a small rush to
pick up a fe pips# 6emember the kid in preschool ho ne$er anted to
follo the rules? &hats ho many traders ill act hen they are on a
inning streak# &hey begin to honestly belie$e the market ill act in their
fa$or no matter hen they decide to enter or exit the market# +$entually,
this type of beha$ior ill catch up ith the trader and the result is the trader
ill become stubborn and push him or herself into a hole that they ill ha$e
trouble getting themsel$es out of# nly hen the trader really sits back to
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$ie the beha$ior they$e (ust exhibited due to a fe inning trades do they
reali!e the long string of mistakes they$e made due to their inning streak#
8fter the trader starts to hit a small losing streak, no hat I call
.market re$enge/ kicks in and the trader goes into full blast mode here they
ill do anything to get their money, ego, and feeling of superiority back# Im
sure you kno at this point hat happens next, the traders initial inning
streak turns into a losing streak here the trader returns all the pre$ious
innings plus a lot more pips and actual money# +$entually, a trader that
acts in the ay I (ust described ill reali!e that a inning streak is actually
detrimental to being a consistent inning trader# &rading on re$enge is a
concept that (ust does not make sense# 6e$enge is usually an act of getting
back at someone, but hen you make a rong trade and use re$enge as your
moti$ation, you are actually (ust setting yourself up to get back at yourself#
-oure trading against yourself, hich is impossible to do3 In order to be
successful you must be able to take your ins and stride and not become
emotionally in$ol$ed hen you make a rong trade#
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Conclusion
Aeing a professional trader is a lifelong experience in hich you learn
one more skill of piece of information ith e$ery trade# If I ere to start my
trading career all o$er again from s@uare one, I ould ha$e set aside six
months of strict market education# Instead, I as gullible enough to belie$e I
could (ump right into the markets and start to make a stable income
immediately# I as lucky enough to meet experts in trading that taught me
the ropes and helped me to keep e$erything in perspecti$e# If I hadnt of met
those people, I probably ould of ga$e up trading a long time ago# Ay
building a good support netork of both traders and non"traders, you ill be
able to build more as a trader and a person#
While the life of a trader may seem glamorous at first look, it actually is
a long and hard grind for years# nce you become an expert trader and put
in years of experience, trading ill appear as normal as aking up in the
morning# -oull be able to steadily enter and exit the market ith no
hesitation at all and ill ne$er second guess yourself# &rading could be one
of the most rearding tasks you e$er learn# 8s long as you are able to keep
your ins in stride ith confidence you ill be able to gro your confidence
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ith the least amount of risk# &he loer the risk, the more comfortable you
ill be able to feel on a daily basis#
=ood luck out there, its a great orld3
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