On Sunday you would have found me at the biggest Teddy Bear’s picnic imaginable…

It’s a charity do they put on every year down the road at Cholmondeley Castle. Thousands of Mums, Dads, Kids, Grandparents (and teddies of course) all sat out on the lawns, fighting off wasps and scuttling under trees to escape downpours of rain!

And despite getting a bit wet this year it was still a great day out. The kids loved it. Especially the un-PC Punch and Judy show. I’m surprised they still get away with that these days to be honest, Mr Punch beating every other character senseless with his stick!

But I’m sure you know how it generally goes on days out like this…

“Dad, can I have an ice cream now?”

“Dad, is it time for lunch yet?”

“Dad, can we go paddling in that pond (pointing to the ornamental lily pond hosting several rare species of water lily)?”

Anyway, we’d just settled down outside the café for a coffee and a cake when sure enough, I was dispatched to go and track down some straws for the kid’s milkshakes…

Rooting around at the back of the café (a kind of garden pavilion tucked away in some woodland) I saw a curled-up obituary pinned to a notice board.

It was titled “The Sad Passing of Common Sense”. I took a quick picture on my phone (see below). If you can’t read it very well I’ve found it out in the wild on the internet.

Here’s the link.

Now I love stuff like this… slightly subversive messages secreted in woodland cafes. You certainly wouldn’t find anything like it in your high street burger franchise or coffee chain!

It’s obviously been doing the rounds for few years. There was even mention on a website of it having been published in The Times. I’m not sure if that’s true, but I’d never seen it before and it certainly got me thinking…

I mean, don’t even get me started on “Someone else is to blame” and “I’m a victim”…

I firmly think the only thing any one of us is entitled to is opportunity.

Whether it’s the opportunity to start a small business, to ask out the girl of your dreams, or to jump on the next Forex trade your strategy generates… It’s the ability to spot the chance, claim it as your own, and do something with it that separates the victors from the victims.

Now common sense can easily fly out of the window in today’s digital age. I’m sure you’ve seen those stories of people driving into canals and lakes because the sat-nav in their car told them to turn right!

Well, it can be a similar case when less responsible traders go after the huge opportunities the markets present.

One example is the trader who becomes blind-sided to the bigger picture developing in the market by only focusing on very small timeframes…

His automated system tells him to buy on a signal from the 5 minute chart. But it doesn’t take into account the huge level of resistance looming overhead on the daily chart which is, of course, a much more powerful feature in the market. He then sits scratching his head (or blames the ‘broken system’) when his trade takes an immediate nose-dive.

Another example is the trader who expects a strategy to continue working year after year without adjustment for changes in market conditions.

He wouldn’t expect his car to run for years on end without taking it in to be serviced, for the various components to be adjusted or replaced. Even a bicycle will need the tyres replacing or brake cables adjusting at some point. So is it reasonable to expect something as valuable as a profit-producing trading strategy to run without a bit of ‘service and maintenance’ along the way?

I’ll bet many trading systems (the ones that had a positive edge in the first place, anyway) now tossed aside as junk could easily be resurrected with a bit of fine-tuning to match current market conditions.

Things change. I mean, look at the very low levels of volatility in the Forex markets we saw in recent months. The responsible trader would take notice and be prepared to adapt accordingly. He’d perhaps rein-in his profit targets a bit. Just the same as he’d sit up, take notice, and get his car’s gearbox looked at if it started to make grinding noises.

But let’s leave the narrow minded traders to do their thing and focus on our own wellbeing…

The obituary mentioned five other qualities which lend themselves nicely to a ‘common-sense’ trading approach.

They were Truth & Trust, Discretion, Responsibility, and Reason.

Let’s see how we can take those five qualities to double-check we’ve got a well-rounded trader’s outlook in place.

5 Qualities of Common Sense Trading

Truth: Does your strategy or trading approach have a logical basis? Does it take into account the ‘truth’ of real-time trading?

I’m a big believer in Price-Action trading (trading without indicators) because it lays the market completely bare, you’re letting the market reveal to you what it is thinking. But make sure you’re not trying to force your own will on the market by expecting a fixed amount of profit every day, or a set amount of trades per week…

Let the market show you when you can trade and when you can rake-in your profits.

Trust: Do you have complete trust in your trading system? Are you willing to accept a random distribution of winning and losing trades knowing you’ll make money over the long term? Can you pull the trigger on your trades without hesitation? Having trust in your system, and your abilities to trade it, are the essential building blocks of trading with discipline.

Discretion: ‘The freedom to decide what should be done in a particular situation’. Do you have a ‘safety-catch’ built into your strategy; do you know exactly when you shouldn’t trade? Perhaps you should avoid trading when an economic report is due out or extreme volatility hits the market and you don’t know the reason why (it could be some geo-political event yet to hit the news – bombings, political assassinations etc…) Make sure you know when to stand aside and let the dust settle.

Responsibility: You simply must be willing to take responsibility for your actions as a trader. There’s no shame in making mistakes, it’s the ability to learn from them that can give you your biggest breakthroughs.

We’ve all placed trades the wrong way around – buying instead of selling – or entered a typo on the price and missed a good trade, or any of a hundred other ways you can trip yourself up. Keep a daily journal of your trading adventures and read back through in from time to time.

You’ll be surprised at how far and how quickly you make progress without even noticing.

Reason: You must be able to think things through, to understand what’s going on when you look at a chart, and to arrive at your trading decisions logically. If you’re at the start of your trading journey you will need to build-up your knowledge of the markets. The best way to do that? Do a bit of background reading and then jump straight in and get some experience!

Be Prepared: Market Moving Data Coming This Week (London Time):

Wednesday 27th August:

– No big reports

Thursday 28th August:

13:30 USD GDP
15:00 USD Pending Home Sales

Friday 29th August:

10:00 EUR CPI Monday

1st September:

All day US Labor Day Holiday
07:00 EUR German GDP
09:30 GBP Manufacturing PMI

Tuesday 2nd September:

15:00 USD ISM Manufacturing PMI

I hope you enjoyed this week’s eletter. Do you have any of your own common-sense trading rules? Drop me an email and let me know.