After surviving and prospering in this industry for over 25 years, you learn some things along the way…what is important and what is trivial. Consider risk/reward, writes CBOT veteran Jeff Wecker.  Look for more Trading Lessons every Friday on MoneyShow.com.

I started in the pits of the CBOT trading 30-year bonds against the best in the world, and I have all the scars to prove it. But the learning was what propelled the next 25 years of success and prosperity.

The first thing you learn is that what everyone knows is not worth knowing. And you know what those things are…they are what you read in books and learn in lectures and webinars. There are only two important things in trading…control of your emotions and risk/reward.

Control of your emotions allows you to be patient, get out of losers quickly, stay in winners for the duration, reverse your position when necessary, keep your fingers off of the buttons, and not fretting over every trade. 

A bad trade is like a missed golf shot. It should leave your head in a second because the only thing that counts is the next shot. If you have trouble with this part of the trading equation, the best thing for you to do is use an automation tool (AT). There are many on the market, but Forex Forager is by far my favorite.

ATs allow you to set entry points, fix your risk per trade, take partial profits as you go, put in trailing stops, and ultimately exit the trade. They are “set it and forget it” tools, ideal for people who can’t keep their fingers off of the buttons or who have full time jobs and can’t look at the screens all day.


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The second part of the equation is risk/reward. You’ve got to be able to find pivot points where you can risk as little as 5 pips per trade. If you lose 5-6 trades in a row at 5 pips (plus the spread), you are only down about 40 pips or so.

You can recover from these types of losses quickly. But if you are risking 30-50-100 pips on each trade and lose 5-6 in a row, you are stuck, and recovery is like climbing a mountain.

Again, an automation tool is the perfect mechanism to solve the risk/reward issue. You can set it to take as many pips of risk per trade as you want and you can set your take profit points. An AT like Forex Forager, for example, may only win about 17% of its trades, but the risk/reward is about 20:1, so the math is on your side. And that’s what counts. Ask Las Vegas Casino owners if having the math on your side is important.

When you go to webinars or the like, what do they teach you….order flow, order imbalance, Fibonacci, moving averages, fractals, and on and on……so obviously 90% of traders know these things….but 90% fail….that has to tell you something.

So I urge you to work on your emotions and concentrate on risk/reward. The combination of a great coach and an AT should put you on the road I have travelled….longevity and prosperity.

The Currencies, Coffee and Croissants group is open to all traders interested in currencies. Just contact Jeff Wecker here to join CCC.

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