Updated from its original posting on 2011-12-28
If you fail to prepare, you are preparing to fail.” – John Wooden.
For those of you who don’t know who John Wooden is, here’s a brief background.
Mr. Wooden is considered by many to be the greatest coach of all time. His resume includes winning 10 NCAA National Championships for Men’s Basketball. Mr. Wooden isn’t only known for his winning ways, but more so for his approach to basketball and life in general. He was always prepared and he paid attention to even the smallest details, no matter how obscure it may have seemed.
The reason? He didn’t want any creases or folds in the socks, which might cause blisters, and potentially injure one of his players.
Wooden felt that you should always give your best in whatever you set out to do and that part of giving your best was being on top of whatever was within your control. That is why Wooden always came prepared. He outlined every practice down to the last detail, so that when game time came, he knew he had done all the preparation possible to help him succeed.
Certainly, this can also be applied to forex trading. In trading, there is only one thing you are in control of: yourself.
The forex market can move this way and that, you can score some winning trades, and you may wind up losing some of your trades, but the bottom line is that the amount you win or lose is still under your control.
Of course, research and analysis plays an important role in coming up with good trade ideas, but there will always be those market-shocking events that you’ll never see coming. This is where preparation and proper trade execution becomes crucial to reduce your potential losses from unexpected events.
Preparation involves having an optimal risk-reward ratio, placing good stops, determining your position size based on your risk and stop loss, and sticking to your forex trading plan. These are the aspects that you are in control of, and if you want to be the best, you must do everything within your control to be the best.
So what kind of habits should you develop to help you become prepared?
1. Have a forex trade journal.
One good habit is keeping a journal of your trades. Documenting your trades will allow you to review your rules, spot your mistakes, and even learn new trade ideas. This will also help you avoid making the same missteps in your next trades.
2. Eyes on the details!
Another good trading practice is paying attention to details. Just like John Wooden avoided injuries by instructing his players to put on their socks in a specific way, small details that you spot or miss can have a huge impact on your trades. That extra “0” in your units, for example, can unintentionally multiply your losses exponentially.
3. Establish a routine.
Last but not least, the best way to consistently be prepared is to develop a daily routine. Whether it is spending a few hours reading up on news, or setting up your charts, developing a daily routine can go a long way in preparing you for the day.
Bear in mind that the forex market can get tricky and price action will not always go your way, but always remember that you are in control of yourself. By preparing for your trades you minimize the chances of repeating a mistake or making new ones.