Tag: success

What is passive trading?

When most people hear the word passive, they think of something that can be negative. For me, having a passive attitude in trading has been a really positive thing. Some of my best trading days and weeks have been during times when I have a passive attitude in how I enter trades. To better describe this, my thought going into a trading session with a passive attitude is “I might enter a trade, and I might not.” Some of the worst trading days for me are when I wake up thinking “Boy, I can’t wait to get into a trade and pull some pips!”

What I have found is quite fascinating, it is almost as if I take power away from the market, and the Market Makers when I trade passively. Truthfully, that is exactly what happens when you trade more passively and less emotionally. The market makers make their money by fooling retail traders into entering positions, so the more emotionally you trade, the more you become a puppet on a string. The more passively you trade, the less power and control they have over you. It’s a beautiful thing!

 

The transition

After I talked to Steve, and read his blog post, I started to see the bigger picture, and I started to understand what was going on with my trading. At this same time, there was a period of a couple of weeks where I was really busy. I had to travel to California for work, I had a busy schedule each day, and I was starting work at 6AM, so there was really no way for me to trade during session. I almost tried to, I even brought my laptop with me. But I decided that I would take the week off. I was pretty busy the following week also, so I went almost 2 weeks without trading. This turned out to be a really good thing for me.

Taking time off from trading, accompanied with new ideas and a fresh mindset really helped me to turn things around. Does this mean that I’m pulling hundreds of pips a week? Nope. In fact I think that I’m at 18 pips for the week so far, but I’m ok with that. Slow and steady wins the race. The tortoise wins, every time.

I had always heard Rob G. say that whenever he loses two trades in a row, he takes the rest of the week off (I’m pretty sure he said that). I always thought “Why would he take the rest of the week off? Can’t he just start fresh the next day?” I think I’ve learned a good lesson here. Time off can be a powerful thing. If you find yourself spun out in your trading, take a few days or a week off. I’d bet that you come back with a new perspective. Taking a few steps back is a great way to get a better view of whats really happening.

 

My recent trades

Since this transition I have been doing much better. Once again, I’m not rich, nor am I slaying hundreds of pips but I’m in control and my trading is relaxed. This is such a stark contrast to the cortisol-fueled, greedy, upset, hunched over, anxious, money losing trader that I was a few weeks ago, “gargoyled” over my laptop, hoping and wishing that the market makers would let me have just one little piece of profit. Recently my trading has been much more enjoyable. I am managing my account by keeping a reasonable lot size. I am calm. I sleep in until 5:30 if I want to. I realize that I don’t have to trade. I no longer have to fight myself and make up all sorts of rules because I see the big picture.

            My intention in saying all of this is not to boast or sound like I have it all figured out, but to just point out that we often make things a lot harder than they need to be. Sometimes all it takes is a slight change in attitude, or a simple shift in how we view trading to turn things around. I had taken something fun and made it stressful by focusing in the wrong things in my trading, then adding rules and more stress to correct it. That all went away (for now) when I started focusing on taking things slow and keeping things simple.

 

Conclusion

I encourage anyone who is having a hard time to remember that you have plenty of time to learn to trade (that’s another thing Steve said). Take it easy. It can be challenging but it should also be fun. If you find yourself stressed out, chill. Take a break. (Side note: taking a break helped me a lot, but I think that it is important to note that it wouldn’t have been such a powerful time if it wasn’t for the fact that I got some good advice). With that being said, ask someone for help! Get some advice. Participate and ask questions on the webinar. Read books. Use all of the tools at your disposal. Don’t be greedy. Keep the dangers of the market in perspective. Keep it simple and relaxed. The reason we learn to trade is to take stress out of life, not to add it.

 

Happy Trading,

Chris Gibson

chrisbgibson@gmail.com

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Well it’s 2016, and another year has gone by. New Years resolutions have begun, gym memberships are sky rocketing and everyone is motivated to become more fit, drop a bad habit, pick-up a new hobby, or set new budgets. Although I have never been convinced that the dawn of a new year gives you any advantage of actually accomplishing any goal, what I do believe is that by writing out your goal on paper and establishing a date, will give you a much better chance of completing it.

One thing I have looked at for myself in the past couple years is a specific Money Management philosophy in my trading. At the end of each year, I take stock of how well (or horribly) I have traded for the year and make sure that my strategy is sound and still valid. This is an exercise I wish I learned my first day trading because it would have not only made me more money, but it would have substantially mitigated a good percent of my total losses in my first year. So what I am going to share with you now is a very simple philosophy I follow that has helped my trading massively.

Money Management

The difference between a new trader and a professional trader is this: A new trader thinks about how much money they can make, while a Professional Trader thinks about how much money they can lose. Do you see the difference? The moral of this story is that trading is risky, and although it is fun to think about all of the money you could potentially make, most new traders seldom like to think about the fact that one bad day of trading can cut their account in half, or how a misunderstanding in risk reward ratio can lead to taking far greater losses than positive gains. The market doesn’t care about how much money I have, what I lose or what I win. The market itself is pure and emotionless, but is driven by the emotions and beliefs of the people who participate in it.

This allows me to have a clear advantage over most traders if I can follow these simple rules while trading:

  1. Never risk more than 5% of my total account balance at any time
  2. Identify Profit target and risk out before getting in to any trade ever
  3. Never trade without a stop loss
  4. Use 1:2 risk/reward ration

(I will explain these concepts now)

  1. Never risk more than 5% of your account Balance!

This is very simple math and this will keep you from not only having a really bad day trading, but also helps prevent you from biting off more than you can chew. It answers a very simple question of what lot size should I be trading? Here is an Example:

If I have an account balance of $1,000, then 5% of that is $50. So, if I am trading a lot size equating to $1, then a -50 pip stop out would reduce my account by 5%. This means that the most I am ever willing to lose on any one trade is 5% of my total account. Now I am not advocating take a -50, but you get the idea. The dollar figure and lots size is proportional to your account balance.

  1. Identify Profit Target and Risk Out before getting in to any trade ever!

This is the mark of a professional trader and for me, this was a huge milestone in my personal trading. In order to understand what my risk and profit target is getting in to a trade I needed to really understand how the market works. When I can comprehend what I am looking at on my screen and I can say to myself (or anyone else) “this is good entry because….. and as a result of this I will know this trade is behaving when it does X and I will know it’s time to dump it if it does X,” then I am on my way to making some money in FOREX. This is how you make money. There is no luck involved. It comes down to being able to identify a trade set up and being able to pull the trigger. In actuality, this is the easy part. Let’s talk about where things really get hard…

  1. Never Trade Without a Stop-Loss

If I am trading from a place of indifference all the time, why would I ever need to run a stop-loss? The answer is that we are a human beings and no matter how emotionally stable we think we are there will come a day where the market spins you out and makes you feel like you know NOTHING about trading. Any long time traders know this to be true, no one is immune from taking losses. The mark of a true professional is how clever we can be, and gracefully we can lose (I’ll cover this in the next section). To protect ourselves from ourselves, we need to preset a stop-loss when going into any trade that is automatically set the moment I click in. It is there to serve as a safety net to ensure that my emotions will not get the best of me in the event that things go wrong, which they will.

  1. Using a 1:2 Risk / Reward Ratio

As I mentioned above when explaining the importance of a stop-loss, the next logical question is “what should my stop-loss be.” For me I use a 1:2 risk reward ratio. I will explain how this works. If my target PIP goal is 50 pips, then my stop should be set to -25. This way if I am making smart trades and my win Ratio is 50%, then I am profitable in my account. I’ll give you this analogy: If you flip a coin, you have a 50/50 chance of calling it correctly. Simple right? Trading should be no different and here is why: If I am only winning 50% of the time but I make 50 pips every time I am correct and lose on half that (-25) when I am wrong, then over a long period of time I am going to remain profitable in my account. This is what I meant when I was referring to losing cleverly and gracefully. Obviously, I don’t advocate blindly trading your account but I love the simplicity of this because you can become a profitable trader with a 50% win rate! Awesome.

Conclusion

An experienced trader trusts their methodology. If any strategy is going to be successful, you need to give it enough time to work. In the first year for me, it was all about gaining experience and trying not to lose money in my account. Every year after that has not become about how much money I can make, but about how little I am going to lose. My experience has shown me that the more I can depend on high probability averages (like a 50% win/loss rate on my trade) and trust them to be true, the more confident I become in the methodology. When a trader combines a sound methodology with experience, and solid foundation in Money Management and risk mitigation, then you are well on your way to becoming a Professional Currency trader.

Happy 2016!

Steve Wolf

Director of Enrollment

FX365 Institute.

 

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#FOMO = Fear Of Missing Out.  Fomo is a serious killer for an SMP Trader.

When you succumb to fomo, bad things happen.  The number one issue caused by fomo is massive over-trading.  Over-trading is deadly, so always remember: TRADES ARE GOING TO GO BY WITHOUT YOU AND IT’S OK!  THERE WILL BE MANY MANY MANY MANY MANY MORE TRADES.  When you overcome fomo, you can now wait for clear market conditions with a well defined directional bias.  Once direction has been established, wait for an opportunity like a good pullback, focus on getting great low-risk entry, and just let the directional bias take the trade in your direction.

By overcoming fomo, you end up taking far fewer trades because you are not jumping at every little whiffle and tick in the market.  When you become more selective about your trading, you only enter the trades you feel most strongly about.  Winning trades happen when a trader first gains a strong understanding of the current market conditions and then develops a strong belief about what is about to happen next.

Do NOT tangle with the Fomomonster

The #fomomonster can also cause a trader to start foolishly trying to call the turn.  The reason fomo starts causing you to call the turn is that you’re afraid that this one little area of resistance might be the place that the market suddenly turns around.  You start thinking, “What if this is the new low?  It could be a huge trade.  I don’t want to miss out on that….”   Calling the turn against a clear directional bias is one of the most frustrating and fruitless endeavors on earth (ask me how I know). If you want to steer clear of the monster, ONLY TRADE WHEN YOU HAVE STRONG EVIDENCE TO SUPPORT A MOVE IN FAVOR OF YOUR DIRECTIONAL BIAS.

If we focus on getting great entry, we can keep our negatives quite small.  If we avoid the fomo and only enter trades when we have a strong belief about the upcoming move, we will combine smaller and less frequent losses together with larger, more frequent wins.  Now that sounds like the winning recipe for trading success to me!

I love hearing back from fellow traders!  Please email me at pipaddict73@gmail.com.

-Cyrus

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massive accumulation 7.28

As of 7/28 2014 the GBP/AUD pair has been accumulating on a massive scale leading up to the major news that we have got in the coming days. The news includes the following: EUR German Price Index, USD Gross Domestic Product, USD Rate Decision, EUR German Unemployment Rate, EUR Consumer Price Index, Followed by USD Non-Farm Payroll & ISM numbers. These are all high moving news events, that will push the markets in most every pair due to the large amounts of traders that will be active these days to get a piece of the action.

The way to go about trading this particular set of circumstances is to look beyond the overall direction it seems to be floating towards, and instead trying to identify the belief being created here by the Market Makers. Where are the active highs and lows? Which ones have they pushed through already? How would a person in a long feel about their position? How about a short? Identifying how emotions are moving in the market is key to forecasting a profit release (Click on the picture for a bigger view).

What we can see here is a snap down shortly into the accumulation phase followed by a slow accumulation to the upside. Notice in the picture shown the most recent candle has a wick that comes right down to the middle of the accumulation zone, then starts backing off to head long again . Small details like this can make the difference in our analysis of the market and how a move might play out.

As the week unfolds, watching for these signs the Market Makers have left can reveal the true intention of the Market. There will no doubt be plenty more manipulation leading up to the news events mentioned above, however with the right mindset and fair assumptions you can be on the right side of each of them. Stay tuned for more market analysis as the week unfolds.

 

-Shane Guth

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