Last month I got an email from Chris Lori saying that he would be in town. Fortunately we were able to meet up and hang out for a coffee and a burger before he had to head out again. We talked for awhile and I learned a lot about what he has been up to.
If you haven't been following this blog, Chris was the first educator that I was introduced to in Forex that helped my trading significantly. I still believe that his courses are some of the best in the business.
In this post, I thought that I would recap the most important lessons that I have learned from Chris. These lessons are universal, so if you have not studied any of these areas yet, I would strongly recommend that you do some Google-ing and start learning about them. It doesn't matter if you learn them from Chris or any of the other quality educators out there, but doing so will help you a lot, especially if you are still struggling with your trading.
Knowledge Of Price Action Is Key
This is the most important one, in my opinion. As I mentioned before, when I finally understood the concept of price action trading, I never saw a chart the same way again.
The price fractals that exist in the market are amazing and while you can trade on price action alone, understanding price action is a fundamental skill that needs to be integrated into any discretionary trading method. If you have never heard of price action trading before, it is the concept that the behavior of the price of a currency pair on a chart will provide clues as to where price is going next.
It may sound a little like voodoo if you have never seen it in action. But once you do, you will never see a chart in the same way again.
You Need To Be An Independent Thinker
This is the second most important lesson in trading that I learned from Chris. He strongly believes that no matter what you learn in any course, you need to mold that information and make it your own. This means testing it yourself, figuring out what works for you and either changing what doesn't work, or discarding it.
I feel that too many people get caught up in following a system to the letter, that they do not realize that changing the system could make it work for them. Even if they are trading it profitably, they could possibly be trading it even better. This also leads them to exclude other trading methods that could be incorporated into their current system to make it better.
Remember to absorb as much information about trading as you can, but be an independent thinker and determine what works for you and what doesn't. You could be trading on the wrong timeframe or you could be trading a counter trend system, when you are wired to be a trend trader. Figure out what works for you and discard what you don't need.
Understand The Fundamentals
There are some traders who only trade on technical analysis and that works for them. In my opinion however, I believe that you should also have at least a basic understanding of what is going on in the world because they really do drive currency prices.
Chris posts a lot of great information on his personal blog, including some bank reports. He also has a lot of excellent free educational videos available on the site. You have to sign up as a member, but membership is free.
Professional Traders Are Usually More Conservative
I was really surprised as I went through Chris' course that many times he uses very low leverage, 1:1 in some cases. It depends on what kind of account he is trading of course. But even the amount of his total account that he risks per trade is low, many times less than half a percent.
Back when I first started trading, I thought that money managers were all about high performance, shooting for 100% per year in gains or more. But the reality is that money managers are primarily looking to limit their drawdown and volatility.
Learning this really opened my eyes and showed me that I did not have to be going for the big gains all the time. Regardless if you are managing money or not, the name of the game is capital preservation. That starts with risking only a small amount on each trade.
Forex Is The Best Market To Trade
I have traded pretty much every major market and even worked at a fixed income hedge fund. Forex is the most liquid market, with the lowest transaction cost of any market that I have seen. Although the leverage aspect of Forex can be dangerous, if you manage the risk correctly, it can be a lot of fun to trade.
When I traded futures and options, I had some trouble with a corn trade being filled incorrectly. It took a week to straighten out. I have traded a couple of stocks that didn't have enough float and led to losses very quickly. Trading is not for everyone, but if you are doing to trade, start with a demo account when you start and take it from there.
Those are the most important lessons that I have learned from Chris Lori. If you want to check out his course and my other recommended courses, you can find them here. There are many other lessons that I have learned over the years, but I hope that these have given you something to take action on. Figure out what you need to learn, and start now!
What is the most important lesson that you have learned in trading? Let us know in the comments below.
Photo Credit: Thinker