'8 Things They Don't Tell You About Forex Trading'.pdf

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8THE THINGS 8 THINGS THEYNOBODY DON’T TELL TELLS YOU YOU ABOUT FOREX TRADING I wrote this to introduce you to the Forex trading culture, the motivating factors, and many of the pitfalls that are avoidable. It is my further intent to caution you that impatience and wishful thinking are everywhere in this market. This happens frequently when opportunity is perceived to be innovative. Even the most intelligent are led astray, thinking that “somehow, this ‘new thing’ changes the rules.” The rules never change.

THE HIGH RATE OF FAILURE IS A REFLECTION OF POOR STRATEGY, NOT LEVEL OF DIFFICULTY. 

Why? Because there is something VERY wrong, and I’m curious to look and see. How do I know something is “very wrong?”

As in all things I write, I submit them to you with a humble spirit, claiming it only to be my opinions and observations, based in real life experience. I hope you enjoy this little report and welcome any feedback and criticisms. There is still much room for improvement in what I write.

I know because numbers are consistent in everything in our world. You see the same numbers over and over again. Take any decent weight loss program, and find 100 people who say they want to lose weight. If you give them the program to follow on their own, 80 will remain the same weight or gain more. 15 will lose some weight, and 5 will reach their targeted goal.

#1 Less Than 1% of the Traders in This Market Have the Skill to Make a Consistent Profit

It’s called the 80/20 rule, and whether you like it or not, it repeats in business, in weight loss, in job performance – in pretty much everything.

Before you lose enthusiasm, let me assure you that this number in no way reflects how easy or difficult Forex trading actually is. I was approached with Day Trading stocks in the 90’s. I heard only 2% were successful, and this information made the opportunity seem much less attractive to me. In any given business in general, 15% make some money. 3-4% does really well, and the top 1-2% does extraordinarily well. Today, if someone tells me that only 2% are succeeding at something, I get very interested.

So if you tell me that only 2% or 1% are able to see any positive results, then I know there is no reasonable strategy in place for winning. Because if there were, 15% would be achieving something, 5% would be doing great. In my experience, generally everything in life works the same way. If you can allow me to operate with this premise, we might be able to see very quickly what is the same about weight loss and business, and what is different about Forex traders. In other words, why do 20% get results in business and weight loss, but only 1% in Forex?

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In business or weight loss, “standards” have been established. There are always going to be people who buy pills to lose weight, or buy business opportunities that are too good to be true, but this is simply because they are impatient and want a quick fix. The top 20% are going to be those who are looking for the right product with the right timing, a good market share, something that is competitive, and something that is not difficult to sell, to list a few examples. The top 5% have it down. They not only understand the basics of business, they have a “do whatever it takes” attitude. The remaining 15% that do get results are still building their skills or mindset. What about weight loss? Is there any doubt in your mind or anyone else’s that in order to lose weight you have to burn more calories than you consume? There are standards we know. We can eat better, exercise more, and stop eating when we are no longer hungry. It’s not really a question of how to lose weight or even what to do to lose weight. It just comes down to either a strong determination or a strategy for developing discipline over time. Is there any standard in Forex trading? Can anyone really define what you need to do in such a way that if you are determined, you will achieve your result? If they do, how can you feel confident that what they are saying is correct? If you were wondering why 80% get nothing or lose in just about anything, you already know the answer: We do things when we are ready -when we get serious. When what we want to achieve is more important than how we feel in the

moment. I had great opportunities early in life. I just wasn’t ready. People really don’t talk about the rate of failure in Forex trading. Because they don’t talk about it, they don’t look for the solutions. Because they don’t look for solutions, nothing changes.

#2 Your Funds in the Brokerage Account are not Insured I am placing this in the number two position only to get it out of the way. Forex is big business. So there is big money, and some of the best salespeople and sales material I have seen are in this market. I had a good friend argue with me (continually) that the broker I use primarily, charges way too much for spreads, and that we are getting “ripped off.” In spite of my best efforts to explain this to him, he would tell me about what he had learned from all of the other brokers (salespeople). For those of you who are new, the “spread” is the difference between the buy and sell price. It is how most brokers make their profit. So to keep this very simple, if I buy the Euro at 1.3000, I start out in that trade -3. That means the market must move up three points (PIPs) for me to break even in the trade. If I am risking 40 points, and I want to get $1 for each $1 I risk, that means price must move 43 points to get to my target and close the trade in a profit. Am I concerned about an extra pip or two? Not in the bigger picture, and here is why:

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In 2005, I and our team of traders had deposits in a Forex broker’s account. Their name is Refco. You can look it up. When brokers argue that they have better spreads and they are the biggest in the world, just remember I told you about Refco. They WERE the biggest in the world. They went bankrupt in just a couple of days. Between me and my network of traders, the loss was about $300,000 on deposit. It used to be that we had 400:1 leverage. We could keep 75% of our deposits in our FDIC insured bank, 25% in the brokerage account, and trade our accounts as though 100% of the money was in the brokerage account. This is because so little margin was required. Recently changes in US law limited our leverage to 50:1 that caused us to keep most of our money in the brokerage account. What I’m saying is that you cannot base your decision on the broker because of the low price of the spreads or even the size of their assets. Refco had massive assets. They were the biggest in the world. In fact, at that time, it was called the “fourth largest bankruptcy in American history.” I offer three things on this subject 1. Do not make your decision on which broker to use because they have low spreads and large assets alone. 2. What you are really doing is placing your trust in the management of that company. 3. You have plenty of time to learn more about this subject prior to opening a live account or risking any meaningful money.

#3 Forex Brokers make the Majority of their Money from Unskilled Traders I was told by a broker in late 2004 that 90% of the traders who open live accounts lose all of their money within 90 days. By that time I was already holding training sessions, and I saw right away that traders were trading live accounts before they were ready. So I emphasized at all times that traders should trade with practice accounts and truly demonstrate consistent success before opening a live account; when they do open a live account, open small live accounts. At the time, I did not know that many of the trainers at the company were sharing in a special profit center. By July of 2005, our trading team had grown to around 800 traders, about 10% of the company. I was recognized for having the highest retention rate of clients: 89%. They asked me to create the next generation of training programs for the then largest training company in the world. What was that 89% based on? It was the number of traders who were still actively trading after one year. But I thought that most traders lose their money in 90 days? They do: just not our traders. The fact that brokers make their money primarily from unskilled traders is not really a “dirty little secret.” I don’t think of it that way at all. In fact, without the tools and services brokers offer, you and I would not be able to trade. If we just take the business on face value, they are not really doing anything wrong. They certainly are not looking out for you, and nor do they claim to be. The National Futures Association (NFA) is doing

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things to look out for you, but it’s not what you need to know, as I explain in Forex Art of War. Ultimately, I believe that if you are presented with the freedom to make a choice, and you are warned about the danger, it is your responsibility to look out for yourself. In business we call this due diligence. If the brokers make their money primarily from new, unskilled traders, what are they going to do? They are going to do what any business does. They are going to target those potential clients. So they are in the business of supplying you the tools to trade with, but they make most of their money from the new, unskilled traders. If you pause and think about it for a moment, they cannot be in the “training business.” If they were in the training business, they would need to focus, as part of that business on protecting their clients. To protect their clients, they would need to do a great deal more to caution them to start with practice accounts, start small when they do trade live, and so on. If they did that, rest assured their revenues would drop off sharply. How would they explain that to their shareholders? They can’t really think about protecting you. They do just the opposite. Instead, they send out emails with offers of a “matching bonus.” As an example, a newer trader called to tell me that he had put in $20,000 to get a matching $2000 bonus. It seemed like a windfall to him. He assured me that he would not trade the account until the time was right. Shortly after that, human nature being what it is, he did trade the account, and not long after that, it was all gone.

I was talking to another broker just a few days ago, as I intend to expand our suggestions for brokers. I told him: if possible, I would like our group not to receive emails about “matching bonuses,” but understood if that’s not something he could accommodate. His reply: “most of our IB’s love the matching bonus because it motivates people to open live accounts.” “…most of our IB’s love the matching bonus.” From his mouth to my ears, to your free report, that brings us to #4.

#4 The Driving Force of Marketing and Training Programs are Kickbacks from Brokers He said, “IBs”. What are IB’s? IB stands for Introducing Broker. An Introducing Broker gets kickbacks that are called “rebates.” It is true, I use the word “kickback” for impact, but it is a kickback. Before I tell you how it works, let me give you an idea of how much money is involved in these rebates. When I was at that large training company, and they asked me to write their new educational programs, that’s when I was given access to information I didn’t have prior to that time. I found out that the Introducing Broker could see all of your trades, and they were getting “a piece” of every trade you take. How much? The piece varies somewhat on the broker and the strength of the IB, but in this case, I can tell you that there were 500 active traders with live accounts. From those 500 traders, the company was receiving as much as $200,000 per month in additional revenue (rebates). You

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might have to read that again. It was then that I found out that the trainers were getting a piece, and a few things that had confused me started to make a lot more sense. As I wrote in my book Forex Art of War, at that time, I was trading longer term charts, while most of the company was trading 1 minute, 5 minute, and 15 minute charts. If you are new, this won’t make total sense yet, but I can tell you this clearly: the shorter the time frame on the chart, the more skill it requires to succeed. I think I could call this a formula for disaster. The new traders WANT fast results. The trainers want to help them get fast results, and probably even believe they can. The trainers get rebates from the brokers when traders trade their live accounts. You can see it shaping up here. If a trader takes two trades a day, the IB makes ten times the amount they would make off of someone trading once a week. Twenty times that of a person who trades once every two weeks. I’m not saying there was any bad intent at work there. I really didn’t see any, and I was in a position to see quite a bit. My experience tells me this: to have success, you must create the right conditions for success. As an example, the trainer would need a direct incentive for their student to become successful. Here they are getting paid regardless of the outcome. So they are there to share what they know, not to do whatever it takes to make progress and find solutions to the difficulties faced by traders. So I don’t fault them. I think most I saw were innocent. What was taking place was just the product of the structure (conditions).

Brokers have this IB relationship with marketers and training companies to bring in new business. As you have seen, it is incredibly lucrative. Prior to October of 2010, anyone could be an IB. There was no regulation at all. It was then that congress put into law requirements such as significant cash deposits, FBI background check, and a Series 34 license. What did this cause? The smaller IBs who didn’t want to be hassled lost their accounts. I can’t really see that anything enacted did anything to change the culture. The big IBs got bigger and the smaller ones disappeared, or made special arrangements (legal as far as I know) to benefit from the larger IBs. I’ve been talking about my experience. But there is a whole world of Forex out there. You need to know that the advertisers, the analyst websites, the news websites, the small forums, the big forums, the small training companies and the big training companies are making BIG money from these rebates. I’m not saying they do a bad job because of it. I’m just saying you need to aware of it, and factor it into your thinking. Always keep in mind that as you look around “out there” in the market place, it is only natural to “want” faster results. But do not attempt to defy good logic. My book explains the sound logic behind good trading methodology. While some will not want to hear it, it is much easier to achieve success if you are “trading in the direction the market at large is moving.” When you drop down to shorter time frames, the lower the time frame, the more difficult it becomes. So if you want “fast,” THEY will give you “fast,” because fast means more

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trades, and more trades means more rebates. But let’s explore this further. How long does it take to achieve success?

#5 The Mainstream Market Does Not Have a Good Strategy By “good strategy,” as you will see in this section, I’m referring to a “complete, well thought out strategy.” The reason why nobody will tell you this is because nobody seems to know. No one I have met yet, anyhow, which would explain why I was working on it. From 2004-2006, I was part of the Forex culture at large. From January 2006 forward, I have ignored just about everything anyone else was doing. It was just always “more of the same.” About a year ago, I paused to visit about 50 different sites to see what, (if anything) had changed. I found the same techniques, the same analysis, the same business models, the same forums, and the same new people focused on the same old things. I assumed this was the case, but I felt I needed to check before I built this new model, with an entirely different strategy for winning. Assumptions can be a major liability. So here is my message to you: There are great people, great trainers, and great companies. In fact, almost everything you find out there has some value, if not great value. None of what I write here or in my book is intended to disparage others directly or indirectly.

It would be unwise and a violation of principles to do so. Brokers provide a great service we need. Training companies and forums are teaching you great knowledge about the market. My focus and my work have taught me that a different approach is needed. One of the things that stood out in my study of Sun Tzu and the Art of War is his “holistic” approach to strategy. In other words, we must “consider all that affects your results.” I say often that everything in life works pretty much the same way. So if we look around, we should be able to find an example in our world to help us understand the problem. Consider the health care issue. Let’s be clear that there is a difference between the “health care crisis narrative in the news,” which I see to be a financial issue, and the issue of individuals’ actual health. In 2001, I began research on food. I was living in Costa Rica at the time. I had two motivations. My first motivation was that I had worked out a certain peace, spiritually speaking. I had figured out how to have the lifestyle financially that I wanted. But for some reason, life was not working the way I wanted. So I decided to focus on more “human” issues – the body. My second motivation: it had been brought to my attention over and over again how much disease and illnesses there were. When I was a boy, there wasn’t 10% of what we hear about today, so any argument of this being genetic doesn’t hold water. At that time a little audio tape found its way to me saying that the American Cancer Society now expected one in two people of

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getting cancer in their lifetimes. A friend of mine had given me a video series made by someone who held a PHD in this field. It was all about food. I watched them, and took a strong interest in the subject. There were many interesting things that I learned that I didn’t know. For example, do you know what the strongest animal in the world is pound for pound? It’s the gorilla. That’s not the interesting part. The interesting part is that the gorilla doesn’t eat meat except on rare occasions. What does he eat? He eats fruits and vegetables. So much for the traditional thought of equating meat with muscle. Another interesting thing I never thought about was our teeth and digestive systems. Remember this was ten years ago. A lot of this is more common knowledge now. Dogs, for example have incisors. This is for tearing meat. They have a short digestive tract because they tend to digest things with acid. Herbivores have very long digestive tracts in order to process vegetables. Bears have herbivore teeth (molars) and incisors. So they are referred to as omnivores (can eat just about anything). We humans eat like omnivores, but what type of teeth and digestive tracts do we have? We much more resemble the herbivore. I went on to learn the building blocks of protein, which are amino acids. So if you want to build muscle fast, you just need the right amino acids. I’m not faulting anyone for eating meat. I eat meat. There are other nutritional values in meat. But when it comes to building muscle, making your body break all of those proteins apart before they can use them can hardly be considered efficient.

There were other things in my past: I was told once [by a friend] when I was 21 that a man had cancer, and was not given long to live. She had fed him nothing but fresh, raw fruits and vegetables out of the garden, and he recovered quickly. I don’t want to bore you with too much detail, so I’ll leave it at that. As a result of this focus, I began a newsletter titled Food For Thought. My idea was to build a newsletter subscriber base on the Internet, sharing ideas about food that most people probably didn’t know. Eating better was certainly part of the problem, and I found that this knowledge did help and inspire me to eat better, and this made me feel better. I also planned to later make and sell quality supplements that were difficult to get in food or that were known to be helpful with certain conditions. My first target was raspberry seeds. It had been found that a cup of raw raspberries each day was reversing colon cancer. Further research showed that this was likely the result of something called Ellagitannin (also called Ellagic Acid). It was considered an antioxidant. I found out it was in the seeds, and was excited to learn that raspberry seeds were being “thrown away” by some manufacturing processes. In my quest to find a source, I met someone who has become a long time friend. His name is Jon Barron. In fact, my son Lucius bears the middle name Jon, for that reason. A small honor, but one well deserved. At that time (2001), Jon had been studying, educating, and formulating for a combined 18 years. He had written a small book called Lessons from the Miracle Doctors. Today it is

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much bigger, though the message is the same. When we met, he suggested I read it. I downloaded it free from the Internet, printed it, and carried it with me on walks on the beach. Reading, I saw that Jon had already spent many years examining the problem and arriving at the best solutions, going far beyond anything I had yet considered. After reading, I felt like I understood the real problem, as well as the best STRATEGY for achieving optimal health and preventing or even reversing catastrophic conditions. While I didn’t have much knowledge or interest in the Art of War back then, looking back, I can see it is a great application of the principles I have used to solve the problems in trading. It is a “holistic” approach. This is really important. If it were not “so” serious, you might chuckle when you first see the common sense in the solution. Raspberries work for some with colon cancer. For others it doesn’t. Here’s what Jon did years before I even thought about health. Traveling and speaking with alternative medical doctors, he found that a natural substance worked for 9% of the people for a particular condition. Then he found another substance worked for 12%. This led him to from what is called the Baseline of Health. Your body is comprised of many different systems, all connected to one another. If the health of one system (i.e. your immune system) is compromised to a certain point, it begins to affect another system in your body. If your lymph system becomes polluted with toxins either from too many toxins or not enough physical movement (or both), that begins to affect other systems, and cause pain. So there are many

systems, and you are only as strong as your weakest link. I’m not making this stuff up. So the best strategy would be to know all of the systems and support all of those systems as best as you can. You begin there. You start with the idea in mind that you need a complete strategy in order to have the best chance of achieving the result you want. What does this have to do with trading? Everything, because: If you don’t understand the problem, you won’t recognize the solution! You will find my favorite Einstein quote in many things I write, “No problem can be solved on the level of consciousness that created it.” He also said “the definition of insanity is repeating the same thing, and expecting a different result.” He definitely understood the human condition. Now our comparison: What is the strategy of most of the world right now in achieving good health? Who is the authority on health in most peoples’ minds? Most people (not everyone) trust their doctor and the FDA. What are doctors trained to do? Doctors are trained to perform surgery and to treat “symptoms.” Just the fact that there is a quest for a cure for cancer and diabetes shouts from the mountain tops that this is all a mystery to them. Granted, in the last ten years, the data has so overwhelmed them from the alternative health field, they are coming around to ideas about diet and alternative treatments. But I can tell you in 2003, the medical community still treated any form of alternative treatments as

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quackery. Some facts they just won’t accept yet. For example, mercury is one of the most toxic things to man on Earth, but they are still putting it in children’s teeth, arguing that there are “safe levels.” Fluorine (natural), not Fluoride (synthetic/patented/profitable) is good for your teeth. The study on aspartame was done for six weeks before gaining approval to be sold. Whatever you do, don’t eat that stuff. In case you don’t know, you get cancer in your body every day. And if you are healthy, your body deals with it, usually with ease. Don’t take my word for it, look it up. So where am I going with all of this? I’m talking about STRATEGY. When you want to achieve a goal, you need a good strategy. Who do you think you should listen to: The person who is showing you how your body works, or the person who has been trained to treat symptoms with pills? Before I move on, I want to say that without doctors, we would be in a great deal of trouble. I would not go to a herbalist or take a supplement for a broken arm. If I was in an accident and injured, I would need a doctor, and they save lives every day. In addition, if a person is taking prescription drugs, they will want to be careful about supplements they do take. For example, someone taking medication to thin blood will want to avoid natural proteolytic enzymes, as they will also thin the blood. Taking both together without medical consultation could result in dangerous blood pressure levels. But see if you can envision this entire establishment: The giant pharmaceutical

companies, the FDA regulators, and the American Medical Association. Are they not considered by most to be the authorities on health? Less and less, to be sure, but I can still make my point. It doesn’t matter how impressive something looks, how big it is, or how many people in positions of power or intelligence subscribe. I know we are busy living our lives. Most people work very hard just to keep up. Just the thought of having to learn all about that and practice a better lifestyle probably sounds far from appealing. My purpose is not to promote your health, but to promote that position at a higher level of consciousness Einstein spoke of. I’m not saying the doctors are wrong. I’m saying that we need to grow out of that modern medical paradigm. If the government really cares about the health of people, let some leader step forward and explain how health really works. Why does that not take center stage in the debate? There’s no money in it. Fortunately a poor strategy eventually will bankrupt any enterprise. That time is nearing. In the meantime, people are learning by the thousands how to take their health back. So in the Forex market, you enter, you see the NFA, the big brokers, the mighty forums, the crack analysis, the people with threads with thousands of posts. It is only natural to “assume” that this is the best strategy. After all, a lot of powerful people here, powerful technology, big money, and big intelligence.

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“Not so fast,” as my first teacher in Forex was fond of saying. The market has great tools available and great education. But are tools and market knowledge all you need to succeed? From my perspective, most traders do not have one or three years of experience as a trader if they aren’t making consistent profits. They have 3-6 months of experience they keep repeating.

prior to October of 2009, I thought/believed the same thing. I was in a position to see great trainers, great traders, and 1000’s of aspiring traders. So we could teach them about basic logic, the language, the tools, and methods. None of this was difficult. It only requires a few months of practicing the right things to become proficient.

In conclusion, good strategy easily solves problems that most people think are difficult or impossible to solve. In life, the rules never change. Technology does not change the rules in health or in Forex trading.

So there was a psychological component. I took it so seriously that I required each of my students to read what I felt was the best book on trading psychology: Trading in the Zone, by Mark Douglas. It is a very insightful book, and as the trader trades, they see themselves having the experience Mark describes. It makes them fully aware that there is a component in trading success that must be worked out by the individual and cannot be taught to them. Working with traders, I went to great lengths. I not only teach, but also test them on each important subject matter to make sure they “got it.” There are no grades. I just want to know they “got it.” I write down their strengths and have them practice more on the weaknesses I observe.

#6 How Success is Achieved is a Mystery in the Mainstream Market This is really an extension of the last section. Of course all things related are connected in some way. I want to emphasize something in this section. In the medical field, they are actively searching for cures to some conditions and spending billions on research to discover something many laymen (the folks) already know. To me, this is a clear admission that there are some “obvious” things they don’t know. The same is true in the Forex market. There is something that top trainers and traders in the world are saying that clearly reveals “what they don’t know.” If you train long enough, or trade long enough, you come to see that there is something going on in the head of the individual trader that affects their ability to succeed. The most common phrase used to describe it is “trading is a personal journey.” I know because

I still do all of that in my online school. However, from that point forward, what I do is very different now. What I did at that point back then is use their strengths and interests to recommend a methodology. Then I worked with them on their rules, and told them that they would just need to continue to trade their method over and over again, pay their dues, get the chart time, and work out those psychological issues. I even shared that I found that I grew faster in my skill when I focused on my own personal values such

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as health, family, relationships, and career. That I believed that ultimately the conditions you create are the most important for the growth to occur.

can consciously go through that process. So there is an example of me relying on intuition when taking risks. But that comes from experience. It is not something that is taught.

I was looking at a problem on the level of consciousness it was created. None of us were actually trying to solve the problem. Why would we? How can we know WHY you do what you do? So while I believed I could teach a person to trade successfully, the meaning of that, as it is for most all trainers and traders who teach is that “we can only take you so far.” From there, you must continue forward on your own, even if supported by a team. But no one claimed that they could show you exactly how profits are made. Well maybe some people “made the claim.” But I’m being really specific here. No one could say, “When you do exactly what I show you, you will understand exactly how consistent profits are made, and you will be able to see clear, measurable progress towards that end.”

What changed in October of 2009? I began my study of Sun Tzu’s Art of War. I then studied how it had been applied to other industries and markets. From this study and my own life experience, I was able to extract the principles that created winning strategy. When I applied the principles to Forex trading, I was able to see something I had never seen before. I could see where the psychological obstacles were, and I could see that the answer was not to address the psychology, but to go around it. But more than that, I saw that addressing the psychology was a waste of time. Remember: “No problem can be solved on the level of consciousness it was created.” This is a catch 22. You see the problem, it keeps you from the success, but you cannot see the solution. The danger is concluding, as we all did: “there must be no solution.”

No one would say that because that is not the standard. The standard is quality education and logic, good tools, and the fortitude to “somehow” develop the discipline to do it. You will hear of successful traders who have done it for so long, they can trade almost intuitively. I have witnessed this. But they cannot teach HOW they trade intuitively. Trading intuitively or doing anything intuitively requires real experience doing the same thing over and over again. As I write in Forex Art of War, I have been riding motorcycles on the street since I was 15. I not only use intuition when I ride, I rely on it to keep me safer. My unconscious can see dangers, process them and react faster than I

The solution was simple, and we all have experience at it already. I said “simple,” not “easy.” The emotions that cause the failure are still there. But in the strategy, you ignore them. You understand where the psychological barriers are, and you learn much of the psychological issues are the result of our resistance to change. So when we break a psychological barrier in spite of how we feel, by carrying out an achievable objective, we break into a new level. From that vantage point, we can look back and see that the emotions were just created by the

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circumstances. Not to be examined or explored, but to be accepted for a little while. Want an example? Simple: In my book I explain how I had 20 annoying pounds I could not get rid of for two years. In January of 2010, three months prior to releasing the Forex Art of War strategy to a few people, I decided to test the principles on weight loss. It took me only minutes to get my initial strategy. I made some adjustments from week to week, and eight weeks later, the weight was gone. Did I feel emotions and discomfort that would usually derail my efforts? Of course, but less than usual, and because of the strategy, I succeeded. In the end, there is no boogie man in the closet. When you get up, go open the closet door and turn on the light, he is never there. So what I’m sharing with you is a real breakthrough in training. I wouldn’t have been able to say that a year ago, no matter how much I believed it possible. But today, I can say that each and every person who has followed the strategy sees very quickly how profits are really made and their forward progress can easily be measured. Once they see how to make profits, they still have a ways to go, but it is not the “unknown” it used to be. Will it take longer than they would like it to take? Probably, but not YEARS as it does doing what the mainstream market is doing. I know the claim is strong. You can read My Story on the site, and from the Forex Art of War book, see how it all works. Very time efficient and cost effective compared to what others do. One of my friends took nine years and spent around $50,000. He’s one of the brightest people I

know. He also contributed a real diamond to our strategy from that wealth of experience. It’s an idea I reserve for those who have chosen a path in trading. It’s in the book in Section 4. How success is achieved is not a mystery.

#7 Making Profit has Little to do With Market Knowledge Once you understand the Forex Art of War strategy, this will be totally clear to you. The mainstream market is preoccupied with pips (market movement), analysis, techniques, tools, methods, gurus, etc. etc. They seem to never get enough market knowledge. If their method is not working, the general conclusion is there must be something more they need to learn about the market or the information the market is giving them. If you are new, you might be surprised at how much this goes on. If you have been at this a while, you already know. I have two sections in the book on market Language, Tools, and Techniques. In terms of “market knowledge,” its pretty much all you will ever need to know. I left thousands of (unnecessary) things out. You can search the net and learn more about anything you like for free. I even give you some things you can look up and learn more about if you like. The point is that market knowledge plays a small role in making profits. The truth is that any method based in good logic is going to work just fine. In our strategy we cover all of the logic. If you are already a trader, but having trouble making profits, you will be able to examine the logic and compare it to what you are

Copyright 2010, Vance Williams, FX Trading Partner, Inc., forexartofwar.com, All Rights Reserved. 

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doing and see how your method compares. How so? As an analogy, if I tell you, “it is safer to get gas in the inner city at 11AM then it is at 11PM. Further, if you are out at 2AM, it is even more dangerous because that’s when the bars close and the most really drunk drivers are likely to be on the road.” So you can look at your situation and how you trade and see if you are following good logic. I’ll give you something specific to think about, for those of you who have been at this for a while. As you know, with any method, there is a period where you can have a series of losses called a draw down. The higher your win ratio (i.e. 70% wins), the fewer the number of losses you will have to endure (emotionally) in a draw down. Draw downs are a part of any trading method. They are a series of losses that can and will occur. The problem for the individual psychologically is this: The higher the win/loss ratio, the fewer the trading opportunities you will get. The mistake that most traders make is they are impatient. They “want” results faster, so then ignore good logic and take more risk to get more trades. When they do this, they have a lower win/loss ratio. A lower win/loss ratio produces a greater number of losses in a draw down. A 65% win rate, for example can result in 8-9 losses in a row. There aren’t many people in the world, who could handle 6 psychologically, let alone 8 or 9. Most will change something about their method at 3-4 losses. They will change methods altogether at 5 or 6, or quit trading. They don’t

realize there is something they need to be managing. A trader with an effective strategy that takes all things into account, and who is able to measure progress can handle 4-5. I’m not saying it is painless. I’m just saying they can “take it” once in a while. So as I discuss in my book, we need to balance some things. We have to add more logic to get our win ratio higher. By doing so, even though we have to endure the impatience, at least we are constantly progressing to our first goal, which is consistent profit. From my point of view, compromise is not possible. If you don’t use enough good logic in your trading, you will not be able to “live with” your method. This creates an endless loop and quest for more market knowledge. The quest for more and more market knowledge is just another effort to solve a problem on the level of consciousness it was created.

#8 You Cannot Trade Another Trader’s Method and be Successful To be authentic, when I say the “The 8 Things Nobody Tells You,” I’m taking some liberty of creative license to make a point. “Some” traders who are trainers know and do teach that you must personalize a method. They don’t tell you how, but those few do tell you. So I ask you to forgive my bending of words a bit. Nonetheless, this is a BIG misconception created by conventional logic. The thought process goes something like this:

Copyright 2010, Vance Williams, FX Trading Partner, Inc., forexartofwar.com, All Rights Reserved. 

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“I’ll watch what you do, and do exactly what you do. It will take lots of practice, I’m sure, but I’ll work hard at it and get it.” No. That doesn’t work, it won’t work, not even if you sit directly behind the best trader in the world, listen to everything he/she says, write everything down and practice it all every day. Not even if you do that for a year. I’m not saying you can’t do it. I’m saying it will take a very long time going this route. I fully explain this in my book, but I’ll illustrate the problem. Most of the good traders that I know do not need any indicators on their charts to trade well. They may still choose to use them, but they don’t need them. Why? Because of a lot of experience, they have become really good at reading price -that is to say reading the patterns being created on the chart. What ends up happening is this: they teach their method to a group of people. The group takes a trade and loses, and the experienced trader does not take that trade. So the people in the group ask “why did you not take that trade?” The trader responds: well, even though all of the criteria were met for taking that trade, I saw that the buyers were still showing some strength. He/she might give an example of a pattern on the chart. How do the newer traders respond? Something like this: “wow – great! That was a good opportunity to learn something new and important about the method.” They make notes, and look for their next trade.

From my point of view and experience, what they “think” is happening, and what “is” happening are two different things. What really just happened is that they added something to the method that requires a more “experienced” eye to see. So here’s what happens next: They see another trade, and low and behold, that pattern the other trader pointed out! They take the trade, it loses, and the skilled trader did not take that trade. Hmm… So again, they ask the trader, “why didn’t you take that trade?” The skilled trader responds, “I was asleep at that time.” The skilled trader tells them that he/she has specific hours they trade. This is in part due to their schedule and the best time for them to trade based on their experience. This is what is known in trading as the “time of day” factor. The shorter the time frame being traded (i.e. 30 min chart vs. 4hr chart), the more subjectivity there is. That is to say: the more you need to be able read price and quickly adapt to what is happening in real time. In this scenario of a skilled trader teaching the new trader, these “things” that the new trader must learn to trade that method, eventually becomes pages and pages and pages long. The different things to look at appear endless. No matter how much they listen and practice, they are continually confronted with the new trader seeing something they didn’t see. Simply stated, this is nothing more than a novice trying to imitate an expert. I have more than 25 years of experience riding my motorcycle. I can see in most any situation

Copyright 2010, Vance Williams, FX Trading Partner, Inc., forexartofwar.com, All Rights Reserved. 

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where the risk is less and the risk is greater. I could write and write about all of these different circumstances. The new rider cannot copy the experienced rider. The new rider needs rules for riding that will give her a greater chance of safety, while getting her to her destination.

By this you will know if you have a winning strategy. You will have foresight. I hope you will proceed forward and experience my book, Forex Art of War. I am quite certain it is something the Forex trading world has never before seen.

So the aim of a new trader would be to recognize that you cannot trade like a pro (just as you do in other areas of your life). Your focus should be on trading a method that you can quickly develop the skills to trade, where the results are known. This way, you can see what you did well and what you did poorly, NOT “what new information you failed to see in the market.”

In Summary You are going to be successful as a Forex trader because you are not overly impatient. You will be a success because you have a very good strategy. A strategy is not a trading method. A trading method is a small part of the overall strategy. A good strategy takes into account all things that affect the outcome you seek. If you are new, while some things may at first be foreign, the strategy by which success is achieved should not be foreign. All things work exactly the same way in life. You already know how to win. Hopefully, I can save you many months and years, just as my friend Jon Barron saved me many months and years when I began my work helping to solve the problems people face in health. I learned from his experience, and saw the good logic in his conclusions. I did not need to believe in him. I just needed to understand the reasons behind his conclusions.

Copyright 2010, Vance Williams, FX Trading Partner, Inc., forexartofwar.com, All Rights Reserved. 

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