What if I told you that there is a guaranteed way to secure your place in the top 10% of profitable Forex traders? And not just within any old period of time. This method will get the job done in about a week.
Don’t believe me?
I can’t say I blame you, but it’s true. There is in fact a guaranteed way that you can join this elite group of traders from around the world. It’s also 100% risk-free and requires no effort.
At this point you’re either thinking that this sounds like a bad sales pitch or you’re convinced that I have completely lost my mind. But I assure you that neither of those is the case.
So what is this risk-free, guaranteed way to join the top 10% of Forex traders?
Read on to find out…
Too Good to Be True?
If this sounds too good to be true, I can assure you that it isn’t. The way to secure your spot among the elite is to simply do nothing.
Yep, that’s right. Sit back, relax and don’t even think about pressing that “buy” or “sell” button on your trading platform.
Think about it, if 90% of Forex traders lose money on a consistent basis, then doing nothing for a week or even a month will immediately catapult you into the top 10% of successful traders.
Now I know what you are probably thinking – I may not lose any money by doing nothing, but I certainly won’t make any money, either.
And you’re absolutely right. But then again, I never said this was a viable long-term strategy. In fact it isn’t a strategy at all. Rather, it’s a way of understanding just how powerful doing nothing can be when you’re trading the Forex market.
The Best Setups Are Rare
Here’s a question for you – how many trades do you need to take per month in order to make good money?
Of course your answer will depend on what your definition of “good money” is, but my answer is – one. It’s true, one quality trade setup per month is all it takes to make good money in the Forex market.
Of course not every position is going to make you money, but if you are being that picky to only place one trade a month, I bet you are only taking the very best setups. If that’s the case, and you extrapolate your end-of-month performance out over a year, I bet you would make money in the end.
What is also true is that this is a hypothetical example. Most Forex traders, including myself, will trade more than once a month on average. But this idea of less is more is still just as valid.
On average I take a handful of setups each month. Some of those positions make money, some of them lose money. But one thing is true regardless of the outcome…
My potential reward from any single trade is always far greater than any potential loss.
This fact alone allows me to be extremely selective about the trades I take, because I know that a single profitable position can net me 6% or more (using a standard 2% risk). This is because my minimum risk to reward ratio is 3R, which means I need to see a potential profit of at least three times my risk before I’ll even consider a setup as valid.
And how many of those do you really need each month to make good money?
You may be resistant to this idea, especially if you come from a background of scalping where a fraction of a percent in profit is common. But my members will be quick to tell you that the power of doing nothing and being extremely selective about the setups you take can have an immediate and lasting positive affect on your trading performance.
And if you think this concept is only applicable to retail Forex trading, you would be wrong. A recent study by BMO Capital Markets Investment Strategy Group found that more than 50% of America’s 200 largest mutual fund managers have failed to outperform the S&P 500 since 1980.
What this means is that you could have outperformed more than half of America’s top 200 mutual fund managers over the last 30+ years by simply buying an S&P 500 index fund. These are funds that essentially mimic the performance of the S&P 500.
This study helps to confirm something that we already knew – that navigating the financial markets is tough. Whether it’s Forex or the stock market, there are always challenges.
It also tells us that the common “more equals more” mentality won’t suffice. The large funds like the ones in this study will often have dozens if not hundreds of various assets under management. So clearly more is not always better.
We don’t have enough information to say that these fund managers would have performed better had they practiced more patience. But I do wonder if they would have fared better had they been more selective about the positions they put on…
Now this is something you don’t hear about often – the idea that being in a trade is an opportunity cost in and of itself. This comes from the fact that in order to see a favorable setup develop, you must be in a neutral state of mind.
Said another way, the emotional discord that stems from being in a losing trade can prevent you from seeing favorable developments in the market. This emotional imbalance can also lead to the taking of unfavorable setups in an attempt to win back any money that may have been previously lost.
The best way to maintain emotional stability and thus keep your mind open to opportunities along the way is to do nothing (aka trade less frequently).
Fact is, most of the trade setups you come across won’t make you money. So if you find yourself chasing these setups left and right, it means there is a good chance that you are constantly facing unrealized losses. These losses, though unrealized, create emotional turmoil, the same disturbance that prevents you from seeing the setups that are in fact worthy of your money.
So the next time you go to put on a trade, remember that there is more than just the money risked for that single position at stake. There is an opportunity cost in the form of emotional energy and stability – an essential ingredient for your longevity in the market.
The Market Will Be Here Tomorrow
One of the most common objections when it comes to doing nothing as a Forex trader is the feeling of missing out on profits. It’s something I see and hear about every day from traders from around the world.
These traders feel that they must always be in the market in order to make money. What exactly causes this perception, I’m not sure. Perhaps it’s the fact that life tells us, “you aren’t getting any younger”, or “time is money”. Common sayings and idioms such as these create a sense of urgency; a feeling that you need to make your money today. Not tomorrow, today!
The truth is that becoming a great Forex trader is a marathon, not a sprint. Sure, you have to trade to make money. You would never make a dime from trading if you never opened a position. But this idea that money needs to be made today is nonsense.
Between the market and your money, the market is the only thing that isn’t going anywhere. Your money on the other hand, well, that’s up to you. But knowing that the market has an unlimited lifespan while your cash does not should certainly magnify the importance of capital preservation.
If you are ever unsure about a particular price structure or setup, the best thing you can do is nothing. Always remember that the Forex market will be here tomorrow, your cash may not be.
Beware if You Have a Smaller Trading Account
One observation I have made since I began trading the Forex market in 2007, is that this feeling of needing to constantly be in a position is most common in traders with smaller accounts. This makes sense considering that a smaller trading account won’t net you as much profit from a single trade as that of a larger account, all things being equal.
For this reason alone, I’m opposed to any individual opening a live account with less than roughly $1,000. Of course this is just my opinion. At the end of the day it’s your decision.
I know that many Forex brokers offer micro accounts where you can even start with less than $100 bucks, but this may not be the best idea. Just because you can open a live trading account with less than $100 doesn’t mean that you should.
These brokers are in the business of making money, so chances are they probably don’t have your best interest in mind.
By saving up until you can fund a decent-sized account, you put yourself in a position where a single trade can net a decent profit. Knowing that a single favorable setup can produce a meaningful amount of money will allow you to remain content from day to day; a necessary state of mind if you intend to harness the power of doing nothing and become profitable.
In most areas of life, doing nothing is considered lazy. It will not move you further along and it certainly won’t allow you to accomplish your goals.
However in the world of Forex, your ability to do nothing is directly correlated with your ability to make consistent gains. Those who fail to grasp this concept are left stabbing at the market in an attempt to force things to go their way, an exercise that never bodes well.
If you truly want to make it in this business, you have to not only learn to do nothing at times when market conditions are unfavorable, you have to embrace it.
Only once you’ve learned to love being out of the market will you be able to make money in the market.
What do you think about the power of doing nothing? Do you think it’s downright lazy or do you think it’s a profitable mentality to have while trading the market?
Share your feedback or ask a question below.
Wise, as always. Once you learn what a good setup looks like, and see lots of pips accumulating and locked in then it becomes easier to ignore potential trades with a “Nah, forget it”. But until then it takes discipline to sit on your hands, and time to develop that discipline. Good post, Justin!
Kiwi, thanks. You’re absolutely right. Staying patient is the hardest part but it’s well worth it in the end.
I agree with a lot of what you say Justin. Even If you have £1000 in your account you would only be able to risk a £10 stop loss at a max risk level of 1% which is what I have been taught to use. This level of stop loss won’t allow you to place big enough trades i.e. maximum reward of £30 per trade.
Steve, yes, the reward from such a small account is tough to accept is meaningful. Of course it depends on the individual, but from my experience most traders are in a hurry to make the “big bucks”, which is hard to do with a smaller account.
Thanks for the article Justin. I just joined DPA. I used to feel guilty for making money on forex by just holding positions/options and going surfing and doing fun stuff while everyone else was out working! So I’ve been experimenting with day trading and it drives me mad and has cost me money! So, I’m taking your advice and going sailing for a few days up the cost of Western Australia to clear my head. Less is more… counterintuitive… but I think essential for peace of mind. Looking forward to being part of this community. Risk to reward is everything! I suspect you’re a Van Tharper… wonderful!
Gina, that sounds like a brilliant plan. Have fun and don’t forget to send a postcard. 😉
I think your absolutely right about this. It’s much better to wait for the “perfect Setup”.
Patience is key in this Business. Most Traders just want to make fast Money and end up in making up Setups.
Oliver, you got it. I took 3 trades in November, and while I won’t say what my return was, I will say that it was more than most fund managers make in a year. And my risk was on the conservative side the entire time.
I’m not saying this to brag, just supporting the idea that less is more when trading Forex. 🙂
That was difficult for me. The fear of missing out trades. Now I know that we as traders are going to miss trades I just accept it and don’t worry about it now.
I am still new in this forex business but this article has opened my eyes, i always thought, for one to make money, you must always put positions. Thank you.
Justin you nailed the points. In fact, the time I trade very less is the time I saw my account consistently growing and made me step into a “secured” way of trading. I only trade once a week or sometimes thrice a month if there is no quality set-up in a week I wait for another week, of course using only the DAILY CHART. I only trade in key levels with only 2 price action style such as the Pin bar and FAKEY set-up and that’s all. Clear, Simple, Profitable.
it was a wounderfull lesson i ever read about the forex justin i just fall in love to your way of teaching, you are great man,
i learned from this lesson is that be patient and findout a strong opportunity to trade where your risk is 2% and profit is atleast 6% & if you dont found a signal today wait for tommorow,
love and respect for you from pakistan sindh,
Great article Justin….I agree with you..that it right.. “doing nothing”..
Thanks! Glad you enjoyed it.
Thanks much for sharing your ideals. Justin
My pleasure. Happy to help.
Thank you so much Justin.. I have actually lost a lot trying to force the market, it has given me more headaches and emotional disturbance.
You’re right about those with smaller accounts. I have a micro account and that’s the feeling I get.
But is it not possible to build the small account through this skill of doing nothing to a good capital before actually talking of taking profits from it?
Need your input.
Very helpful. Thanks Justin. I counted the amount of trades i opened in the last month and it’s over 100, i felt like crying while counting and i decided to reduce it to 20 per month, 5 trades a week. Thanks a lot for this insight. You always make me realize my mistakes
Dear Justin, I do agree with you that ‘doing nothing is the best (though toughest) way of making money in forex/stock. I have a q’s 4 u. Many brokers arrange contest and they offer prizes as well. My q’s is, what strategy to follow to win a contest, like is it the same strategy or any extra effort should be implemented? Kindly write something on this. I did not find any good article in internet on this topic.