Focus on The Process and Steady (profits) As She Goes!

Whilst chatting online last week to another student who had recently completed a personal mentorship programme with Sunil Mangwani, I asked how their trading was going?

The answer came back, rather melancholy, that ‘I’ve only made XY% profit this year’.   To which my reply was great, that’s a neat profit!  The ensuing online chat was then along the lines that constant steady profits no matter how big or small when compounded grows ones trading account nicely over time.

When starting out in the world of Forex if you can consistently make profits, whatever their size, then you are moving in the right direction.  So if you are learning how to trade Forex, then set your overall expected profit targets at a realistic level and over time these will be exceeded and you can set a higher bench mark for yourself.  The more pressure you put on yourself to make money, the less well you are likely to trade.  Far better to focus completely on the process of trading than on the expected outcomes, as they will take care of themselves if you can get the process right and down to a fine art.

Top Trading Tip:  Focus on the process of trading such as implementing your chosen strategy to perfection, along with good trade planning, risk and money management and the profits should take care of themselves.

Less is More and More is Less – Don’t Over Trade!

When I first started trading I felt I had to be in a trade or I was going to miss out on a move and as result I found myself over exposed to the markets even though I was managing my risk on each trade properly.

I soon began to realise that over trading can kill your account quite rapidly.

I now plan all my trades down to the last detail and only take those which appear to have a higher probability of succeeding.  Sure I still have losing trades but the profits from my winning trades by far offset those losses, which are inevitable.

So following on from my previous Blog about trying to have the Patience of a Saint and the Discipline of a Soldier when trading the markets, if we apply those ideas to our trading and stick rigorously to our Trading Plan, Trade Plan, Strategy and Risk & Money Management we should be able to stop ourselves from Over Trading.  After all we need to preserve our trading Capital to take best advantage of those moments in the market when we have total clarity of the likely direction and are thus in for the kill at the right moment.

These events tend to take place when we get what I and Sunil call confluences taking place, where everything seems to come together at one point in time across several timeframes, but more on that topic in a future blog article.

So even if you only take one good really good well planned trade a week it will most likely pay well and you will minimise your losing trades and on balance will see your account grow faster.

Top Trading Tip:  Try not to take impulsive, unplanned trades and don’t Over Trade and kill your account, pick and plan your trades carefully, as Less really can mean More.

Don’t Force It – Patience Pays

A common problem encountered by novice retail traders is their overwhelming desire to trade, no matter what the market is doing.  They switch on their laptop or PC check their charts and expect to get into a trade and make some money during the time they have allotted.  Many end up ‘Forcing’ a trade and this approach can lead to losses.

We have found that waiting for a quality set up and entry signal pays greater dividends over time.  Yes, you will be in fewer trades, but that doesn’t mean less profits, in fact the opposite is nearer the truth of ‘Less can mean More’.

To be successful with this approach, as Sunil Mangwani so often says and constantly reminds me, you need the ‘Patience of a Saint & the Discipline of a Soldier’ to be a consistently profitable Forex trader.  Waiting for a quality set up may mean you miss what seems like a potentially good trade but it also means you don’t get sucked into a losing trade.  If a slightly dodgy set up occurs and goes in the desired direction, don’t chase price, wait for a decent pull back and then join the party but when you take that trade make sure it is a quality set up based upon one of your chosen, tested and proven strategies.

Endless entries into poor trades will eventually cause one’s trading account to be quickly depleted.
So try and think of yourself as a soldier waiting in ambush or a wild animal waiting for its prey to come by and then at the right moment pounce and execute the trade.  For both these examples failing to pick the right moment could mean the difference between life and death so try trading as if your life depended upon it and bring some real focus, patience and discipline to your trading and let me know if it makes a difference.

Top Trading Tip: It is better to be Patient and wait for a quality trade set up to occur before taking a trade than being impatient and trying to force a trade.  Try and be patient and disciplined in your trading as this should reap dividends over time.  Remember ‘Patience of a Saint and the Discipline of a Soldier’ and lie in wait for your foe!  Less can really mean More.

FOREX-CRAZY.COM

Who or What Is Pulling Your Strings?

When you are trading do your emotions drive your actions?  Do you chase price, only to have the market turn as soon as you pull the trigger? Do you bail out of a trade as soon as it looks like it could go against you? If so you are probably at the mercy of the 2 key emotions that can stop you becoming a successful consistently profitable trader, and they are FEAR & GREED.  Fear can lead HESITANCY which can make you fail to take a potentially good trade and Greed can lead you to take on too much Risk and make poor unplanned entries and eventually probably blowing up your account.  Lastly the result of poor trades due to all the above can lead to UNCERTAINTY, with you wondering what the heck is going on in the markets

The best traders have learnt to control their emotions when trading.  How have they achieved this?  By knowing their chosen strategies inside out, backed up by a robust Trading Plan and historic data which proves their strategy works, if implemented with constancy and accuracy over a period of time.  If ever uncertain about the markets or a particular trade then check your plan and if necessary stay out!

All traders have losses but the best traders minimise their losses by precise implementation of their strategies and using strict Risk and Money Management.  Having such a robust Trading Plan and following it to the letter, provided the right market signals are given, leads to unemotional trading, but you do need to understand and work on one’s own Psychological Trading profile.

My own Psychological Trading profile is that I have an impulsive nature when trading and thus I have worked on developing my trade planning, patience & discipline, but more on the latter two topics in a future blog.

If you need help with any of the any of the above here are a few pointers:

• Great Book on Trading Psychology:    
• Personal Mentorship & Workshops
• Trading Beliefs

Top Trading Tip: Try and plan down to the last detail every trade you take as this can take the emotion out of the equation.  Try and focus on the process and not on potential gains or losses.  Also give some thought to and try and identify and analyse what your own Psychological Trading Profile is, as once recognised, you will be half way to addressing it and improving your trading.  And If you are ever in doubt then stay out!

Stop, Stop, Stop!

It is often said that ‘the best Stop is a great entry’, meaning that as soon as you enter the market price moves in the direction of the trade and never goes near your Stop.  This takes time and practice to achieve but is a laudable target to aim for.

I also remember being at an International Traders Conference a few years back and trading live with some top traders and as the novice traders inevitably asked the question ‘Where would you put your Stop?’ you could see the expert’s eyes glaze over!

So to answer that novice’s question and put it to bed, here goes ……

·          

• Firstly, I recommend always use a Stop Loss to manage your Risk.

• Secondly, it depends upon what strategy you are using and what that requires, which you will, of course, have back tested a thousand times over before trading live. 

• Thirdly, your Stop Loss should be placed just beyond a particular technical level, plus an allowance for the spread, beyond which your trade plan is wrong and you definitely want out.

• Fourthly the size of the required Stop will dictate (along with your account size) your position size.  So if you have a tight Stop your position size can be larger, but if you have a large Stop you will probably have to reduce your position size, so that your risk on any one trade remains fairly constant.

A technical level is above or below a key support or resistance level, beyond a pivot level or a key fib level and so on, but a point beyond which you know your trade was in the wrong direction.  If you can’t manage you risk because the Stop is too big then stand aside and wait for a better setup. If you need help with these concepts then maybe you could benefit from attending our next Forex Mastery 2 Day Workshop in London.

Top Trading Tip: Always use a Stop Loss and place it beyond a technical level (also allowing for spread) and manage your risk by altering your position size to match your Stop size, so that your Risk remains fairly constant for every trade.  If you can’t do that because your Stop is too big, then stand aside and wait for a better set up to occur.

Go Go Go & Get Organised

I have found setting up and sticking to a daily routine with regards to trading can pay dividends.  Establishing a routine means getting organised with regards to your trading.  So what sort of things can you do to get organised and establish a trading routine?

• If you get up early for a particular pre-market and market opening then when you wake switch on your laptop and internet and log on, whilst everything loads, go and do whatever your morning routine is.  It may help to be washed/shaved/showered and dressed, breakfasted and watered before you start.  This will help the brain and how you feel.
• Make sure you have your Trading Plan and Check Lists available & use them.
• Manage any open trades by moving stops and taking profits/cutting losses etc.
• Check the likely news flow for the day to make sure you don’t get caught out.
• If there are certain strategies you employ on certain timeframes, then set up templates if you use MT4, and then scan the currency pairs for any potential trade setups.  This quick scan routine can get you focussed in quickly on the currency pairs that matter.
• Once your quick scan is complete then conduct your Top Down/Bottom up analysis and apply any filters you use to establish if any of the potential trades are worth taking.
• Then plan out any chosen trades that pass the filters and analysis test, making sure you know the market context in which the trade will be taken, if the entry criteria are met.  Remember the 5Ps (trade context; risk:reward; entry; stop; profit targets etc) before entering the market.
• If the identified trades are some way off entry then set up alerts if you use MT4.
• Next comes trade execution, make sure you follow your plan.
• Take a screen shot of the trade and file for reference.
• Annotate your records and note any specifics.
• During your chosen trading session plan some breaks when the market goes quiet and there is no news expected and keep hydrated and have a snack if needed.
• On quiet days go do something else or hit that list of back testing to be done, or go over your performance thus far or research an aspect of trading that you’d like to know more about – just Google or Bing it!
• At the end of the day or even weekly keep a journal record of your thoughts and feelings with regard to your trading.

Top Trading Tip: Establish a daily trading routine and get organised, treat your trading like any other business.  Keep records and review your performance and aim to improve on identified  weak areas. If you need help the maybe we can do that

The 5Ps!

Over time I have learnt that the best trades often occur as a consequence of the effort and attention to detail that I put into the planning stage, prior to pulling the trigger.

A great acronym for this, which can be applied to life in general, is the 5Ps or PPPPP:

Prior Preparation Prevents Poor Performance!

So before you make that impulsive trade and just jumping into the market stop and think about the 5Ps, it may just prevent you from blowing up or seriously damaging your account.  If you need help in developing into a consistently profitable trader then we can help you.

Top Trading Tip: Before taking any trade, ask yourself have you planned it out, are you following your (back tested) strategy to the letter and do you understand the risk you are taking and the potential reward you may gain?  Remember the 5Ps!

Safe trading!

Martin W

Forex-Crazy and FxTribe

How Much Time Do You Have?

Time is an important factor when learning how to trade Forex or any other financial market.  So how much time do you have to dedicate to:

• The ‘Learning to Trade’ process (each day/week/month)?
• Analysing your chosen financial market(s) when seeking potential trades?
• Managing your open trades?

What other distractions and responsibilities do you have in your life?  You may have to do a bit of rebalancing to fit everything in and even give something up or let go of negative people.

The more focussed you are and given sufficient time, the more successful you should be as a trader.

Conversely, if you have too much time, it is easy to waste it staring at your charts all day long, like watching paint dry!

It’s all about getting the balance right and worth some thought.  We’ll take a look at getting organised as a trader in a future article and what things we can use to help us be more time efficient.

Top Trading Tip:  Dedicate sufficient time to the ‘Learning to Trade’ process each week if you want to progress up the Learning Curve, however, if you find yourself just flicking through the charts and time frames, looking at the same things over and over again in a day because nothing is happening in the markets, then STOP and go find something else to do, be it seeking out new trading knowledge or a job that needs doing or go see some friends or spend some time with family.

Will You Survive?

Have you got what it takes to SURVIVE in the markets whilst learning to trade Forex?

Will you survive to trade another day?

Whilst learning to trade Forex or any other financial market there are certain things that you must do and that need to be in place, if you are to stand a chance of surviving to trade another day.  What are they?

• Don’t trade live until you have learnt your strategy inside out in a Demo account and preferably to have back tested it hundreds if not thousands of times to prove that it is, and you can be, profitable.
• When you do start trading in the Live markets make sure you start off in a Micro-account and trade cents per pip. 
• Make sure you employ strict Risk and Money Management. 
• Make sure that you do not take unplanned impulsive trades!
• Make sure that your account is sufficiently capitalised so that you only risk 1-2% Max of your account balance on any one trade and no more than 5 trades open at any one time, but preferably less.

Most people when they start to trade live will lose money and you have to persist until it all clicks and comes together and then you will start to make gains and recover the account.  Even when profitable there will be periods when nothing seems to go right, your account needs to be able to absorb these periods as well.  As well as the above, the key things which will get you through this learning process are:

• Practice, Practice, Practice!
• Determination (stick ability) and Drive (motivation) to see you through this period of initial loss making until you get to that tipping point of profitability.
• Experience counts – if you stick with it and learn from your mistakes you will get there, provided you have sufficient funds to carry on trading live.
• Vision – if you have a clear vision of what you are trying to achieve and why then this will keep you focussed through the ups and downs.
• Having a Forex Mentor should shorten this painful initial loss making period.

Top Trading Tip: Make sure you have everything in place as above and the expectancy to lose money in the first instance rather that make millions overnight and have a clear vision of why you are trying to learn to trade Forex and you may stand a good chance of succeeding as the odds against you will have been lessened significantly.  So make sure you will survive and if you need help then we can do that.

Do You Have a Trading Plan?

At a recent Forex Mastery workshop I was involved in, the topic of Trading Plans was raised and I delved into one of my folders and retrieved my rather scruffy Trading Plan.  It is hand written on one side of a plain postcard.  It was written a couple of years ago and suffices to this day. It covers:

• WHY I trade (My Vision of where I want to be in Life).
• WHAT I trade (e.g. Forex/Commodities/Indices - Spot/Futures).
• WHEN I trade the Forex markets. (e.g. The London Session)
  
• HOW I trade the Forex markets - the strategies I employ and my style of analysis.
• RISK & Money Management details that I employ.
• REWARD to me for doing well – Salary as a % of monthly profits.
• PSYCHOLOGY – my psychological trading profile and what I must do to improve on that.

That’s it in a nutshell!

I look at it every trading day and it helps keeps me focussed.

Note: A personal Trading Plan is different from individual Trade Plans, the latter being the plan of a specific trade.

If you need help with your development as a trader then you might consider a personal mentorship plan.

Top Trading Tip: Spend some quality time researching and deciding what you require in your own Trading Plan, it’s a personal thing and should be meaningful to you and help you become a more focussed and better trader.

The Best Times To Trade Forex

Although the Forex market is described as a 24 hour market when open Sunday (5pm EST) through to Friday (4pm EST), there are times in that when there is greater movement or volatility than other times, when the market tends to stagnate.

As a trader, particularly for Day and Intra-day and scalping, the periods of largest movement or range will offer the greatest potential for achieving profits and should be the time when a trader should be trading.  For a swing trader on the higher time frames this is less important.

The 3 main geographical areas which are open for trading at differing times are:

·        

• Australasia and Asia
• Europe
• America

It is when these areas overlap in their trading times that we tend to get the greatest movement in the Forex markets.

When translated into GMT we have the following overlaps:

• Asia/Europe:  7AM – 9AM GMT        (2AM-4AM EST)

• Europe/America: 1PM – 5PM GMT    (8AM-12PM EST)

 

So these are the times when we may wish to trade and focus our efforts.

Additionally, different currency pairs have different average daily ranges across the differing trading areas and time zones, so it is beneficial to know which pairs are statistically likely to have a greater range during the periods we are available to trade.

If you would like to know more about the Best Times To Trade Forex and which currency pairs to pick and really get into the detail and thus improve your knowledge and edge then download our free report and watch Sunil Mangwani's video on this subject by putting your name and email in the pop up window on the FxTribe Home page, if you don’t see it then just try it in a couple of days and it should appear.  Thanks.

Top Trading Tip: If you want to find a greater number of profitable trades, focus your trading on the hours in the day (and the relevant currency pairs) when the markets tend to make their biggest moves, i.e. when the major market overlaps occur, as these are the Best Times To Trade Forex.

What Type of Trader Are You?

What Type of Trader Are You? 

What Type of Trader Do You Want To Be?

These are key questions that every aspiring trader needs to answer.  If you are new to Forex or any other form of financial trading, then you will certainly have to do some homework before you may even be ready to answer these questions, but let’s see if we can help.

Most people when they are learning normally have a day job which restricts the times of the day when they are available to trade the markets.  If this is the case then there are probably 2 options for you to consider:

·         Swing or Position Trader - trading mainly on higher timeframes such as the 4hr and Daily charts but also the 1hr and aiming to hold positions over several days to even weeks in order to make several hundred pips or more.  This style of trading may provide you with a greater range of currency pairs to trade as the spread will be less of an issue.

      Scalping is trading on the shorter term time frames such as the 1min and 5 min charts and aiming to make 3-10 pips per trade.  So you get in, get out, and get done in the short time window that you may have available, or may open and close multiple trades in a day.  You may focus on one or 2 currency pairs which have a decent daily range and a typically low spread such as the EURUSD.

If you have more time during the day then you could be one or both of the above plus you have the third option of:

·         Day or Intra-Day Trader - trading where you would be trading on the 15min, 30 min and 1hr charts and aiming to make anything from 20 to 100 pips.  In this case spreads may be of some concern but less so than Scalping.

The point is you need a trading style (one of the above) that suits your lifestyle and then you need a strategy or strategies that suit that style of trading and then currency pairs which are also best suited to that style.

So if you are an aspiring Swing or Position Trader then higher time frame Harmonic Trading strategies fit nicely with this trading style and you have more choice over which pairs to trade.

If you are a Scalper then again Harmonic Trading strategies can be adapted to achieve this trading style but your choice of suitable currency pairs will be limited.

Lastly for Day and Intra-Day trading again Harmonic Trading strategies can be used to match this trading style and you will have a reasonable range of currency pairs to trade.

How can Harmonic Trading strategies be used for all 3 trading styles? You may ask.  Well, harmonic patterns are naturally occurring and repeating patterns in any liquid financial market on any timeframe.  You just have to have the training to know how to identify them, how to trade them to maximum advantage and how to adapt your Harmonic Trading strategies to match the chosen trading style.

Top Trading Tip:  Think long and hard about what style or type of trader you want to be.  It may be that you can adopt all 3 trading styles depending upon your available time, on any particular day, provided you have the right trading strategies (the tool box) and the right mind set and necessary focus.