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Unraveling the bitter truth about compounding in trading"I'll start with $100 and flip it to $10k" is one of the lies we tell ourselves when we first start trading. Although compounding can do some wonders, without realistic expectations and targets, you will not reach your goal. Illustrated on the chart, we can see a sincere and a deceitful statistical representation of a compounding system based on a year-long tracking. All numbers depicted in percentage-based returns are for example purposes. For both cases, we will have a $5000 beginning capital to work with. Looking at the left hand-side of the screen where the realistic statistics are, we can observe that the ROE (return on investment) numbers differ from one month to another. Some months result in a small loss, some are in deep profits and so on. Just like every single trade, every single month should result in the following: - A big win - A small win - A small loss - A breakeven On the contrary, looking at the table portrayed on the right side of the screen, we can see a blurry image of compounding. Expecting to make a fixed return of 10% every single month is nice, but unrealistic. No matter how well-backtested your trading strategy is, in the world of business and finance, nothing is 100%. Plus, there are several factors influencing our trading life: changing market conditions, negative impact of the surrounding environment on our everyday lives and so on. What we are trying to emphasise is that mentally and psychologically, it is impossible to make huge returns consistently on a monthly basis. The bottom line: have a trading plan that fits your lifestyle the most, be disciplined, risk-tolerant, cold-blooded. And most importantly do not rush the process, as good things come to those who wait.
BITSTAMP:BTCUSDEducation
by Investroy
122
How to spot and avoid Stop Loss hunting: a complete guide Stop Loss hunting happens every trading day, and it's not something you would want to let fly under the radar. We have carefully orchestrated some examples on the graph to give a clear picture of what this phenomenon really is, and listed some tips on how to avoid getting into this mouse trap. In basic terms, Stop Loss hunting is the strategy of the price action spiking above/below key levels to enter the pool of Stop Loss orders and take the masses out of their positions before moving the price in the destined direction. Looking at the first example, we can observe that a nice double top pattern has been formed. This is one of the clear indicators that the price might potentially drop after failing to rise above and forming a new top. Thus, a trader would most likely go short and set his Stop Loss a few pips above the freshly formed area of resistance. What happens next is obvious - a trader gets liquidated. Why? because him and tens of thousands of other market participants had set their Stop Losses at a very obvious key level - above the local zone of supply. After successfully spiking up and grabbing some liquidity, the price peacefully continues its bearish movements in the predetermined direction. The second example is a similar one as well. "What a beautiful ranging market. Let's buy at support and sell at resistance." Only if it was that easy... What happens next, the price spikes below the lower boundary of the sideways-moving range and grabs liquidity before moving in the upside direction. Stop Loss hunting scenarios will always happen, and to be honest, we cannot really avoid them all. However, there are some tips that we can follow in order to evade these traps. Firstly, you should never rush into entering positions. Eventually, the price will come to your levels and develop into some patterns (Double Top, Head&Shoulders etc.) before starting its big moves. With that being said, no FOMO either. There will always be fish in the sea, just like there will always be opportunities in the market. Be patient, cold-blooded, and wait for your time. Do not set a tight Stop Loss, because you will most likely get taken out immediately. Either set a wide one so you can escape hunting in case the price starts spiking up and down, or wait for cases of a fake breakout a.k.a liquidation before entering a position. Last tip is a pretty smart one: set your entry orders at levels where masses would put obvious Stop Loss orders. Then, you will notice how many times the price goes in that direction. Hope you enjoyed this Educational Post, dear TradingView community members! If you have any suggestions or recommendations for the next educational idea, feel free to let us know in the comment section below.
BITSTAMP:BTCUSDEducation
by Investroy
50
Questions to ask yourself before entering a tradeThere is a set of questions to ask yourself before opening a transaction and we will talk about some of the common ones. 1) Are my entry criteria met? Undoubtedly, everyone has his own style of trading. Entry and exit strategies should be included in each and every trading plan there is. Only if the entry criterium is met, should we enter a position on any security. No FOMO, if our entry criteria have not been met, we sit on our hands and patiently wait. 2) Am I being risk tolerant? Am I risking my usual 1-2% per position or I am too confident in this setup and would rather go all in? If you see yourself risking more than you usually do on a single trade, pause for a minute and thoroughly reflect. Yes, you can have some winners while risking a big portion of your total capital on a position, but does that not make you a gambler? Always remember that it is a marathon and not a sprint. 3) Have I set a Stop Loss? Many people will say that it is not mandatory to set an SL if you are a position trader. Let me tell you this: a trade without a Stop Loss is like jumping off a cliff without a parachute. No matter how confident you are in your analytical skills, you can never be 100% sure that a trade will play out thoroughly according to your technical setup. Use a Stop Loss and carry on! While there are many more questions that you may ask yourself before executing a position, we have addressed some popular ones. Of course, it solely depends on your trading plan, but the aforementioned questions can be implemented in every strategy. Hope you enjoyed the read and thank you!
BITSTAMP:BTCUSDEducation
by Investroy
29
5 Reasons for and against trading forex 🤷‍♂️They make it look easy, posting lifestyle posts all over your Instagram feed.⠀ ⠀ Truth is, that's not real. 😒 Sorry.⠀ With that being said lets break this down into reason you should and shouldn't trade forex. The reason I'm covering this as a forex idea is I am predominantly a forex trader and made my way to where I am trading forex. This however does apply to any trading you might be thinking of getting involved with. So lets get into it👍⁠⠀ FIVE REASONS NOT TO TRADE FOREX 1. Can you afford to lose money? If you cannot afford to lose money or you are desperate to make money then this really isn't for you. Only trade with money you can afford to lose. If you are trading with money you really need to survive then your problems are about to get a whole lot bigger! 2. You don't know what you're doing! We have all been there at some point of not knowing what we are doing. But before even considering placing a life trade focus on learning and developing strategies. Focus in on the process and the desired outcome will naturally happen. We live in a world with so much resource and information at our finger tips. Go do the research before getting in to deep to quickly. 3. You can't handle it when you're wrong or you're losing. You will be wrong at times and that's okay. So long as your winners cover the losses. You also have to handle and learn that no matter how good of a strategy loser runs and periods of draw down happen to every trader. No one can be 100% right all the time. 4. You are risk averse. In any form of trading you are taking a risk. If you are to risk averse then it's really not for you. Risk management is key but if you are to averse trading wont fit your personality. 5. You don't have time. A lot of people say they want this and then say time is a factor stopping them. That's fine if you either make time and sacrifice or simply forget about trading. If time is precious and you really don't have time due to important life commitments then focus in on them. If you spend all your time on PlayStation and Netflix and say you haven't got time. Well then it comes down to lifestyle choice. We all want trading success few realise how time consuming especially at the start when learning it can be. There are also 5 good reasons why you should take up trading so lets cover them now. FIVE REASON TO TRADE FOREX 1. You want freedom Bored of working 50 hour weeks? Be your own boss take control of your own destiny. It's hard work but when achieved you'll wonder why you didn't do it sooner. Very fulfilling seeing your kids grow up instead of getting in at 7pm as they are tucked up ready for bed. ⠀ No more missing school sports days or the certificates in assembly.⠀ Time for more golf maybe? ⠀ Remember to do it for these reasons and not a big shiny Lambo. 2. You have learned the basics and understand the upsides and downsides. It's crucial to get educated and then still understand you will have up days and down days in trading. Don't even trade until you are emotionally sound with all possible outcomes when placing trades. You understand what is required along with being aware of the positives and the dangers. 3. You can deal with a high risk environment. You understand the risk at stake but above all else you understand and practise good risk management. Anxiety, worry, stress, not sleeping, losing money - I could go on.🤦‍♂️⁠⠀ If you're feeling any of the above you haven't ticked the box on this one. If you don't feel any of these you on the right path. 4. You are patient and will persevere. We all want that quick money. Social media makes us think it's easy Fast money fast cars, trips to Dubai. Commitment patience and dedication are the most important traits in trading. This is not an overnight success game it takes time and will to learn the skills needed. If you haven't got patience or commitment don't even bother. So much more to this than just placing a few trades on your tea break. 5. You can stick to a plan and understand probabilities. Once you have a plan that you have tested and take confidence in, understand probabilities and stick to it. If you're hoping from one thing to the next with no real time spent on one plan you not got the traits needed. If you understand probabilities and can let a proven plan with a known edge play out then your on the right track already. FINAL THOUGHTS Most fail - the common denominator in the ones that make it work are they don't quit.👍 Simple as that.😎⠀ Trading isn't for everyone. 🤯⁠⠀ ⁠⠀ Yes, there are upsides for sure - I touched on them. ⁠⠀ But it can be f**king horrible. 😢⁠⠀ The negative emotions when trading can hit hard. ⁠⠀⁠⠀ That's not how trading 'should' be or feel, but its still a reality for a lot of traders.⁠⠀ ⁠⠀ If you're chasing money, if you're desperate to make a quid or three - don't do it.👌⁠⠀ ⁠⠀ This isn't the game for you.⁠⠀ ⁠⠀ There is simply no room for desperation - it will quickly find you out.⁠⠀ If you can get emotions on point and a proven plan however the upsides are massive. The key here is knowing to grow and get to where you want to be will take time. ⠀ If you had more time doing whatever you wanted each day, that's pretty cool right?🙌⠀ ⠀ Going on holiday whenever you want - like tomorrow? Just because you can.⠀ ⠀ Or just chilling in your garden on a nice day ☀️⠀ ⠀ Whatever floats your ⛵.⠀ ⠀ Time for you? Prioritising your health and fitness because you have never had time before?⠀ ⠀ Exactly - the benefits are endless. But be ready to put the long hard miles in to get there and make sure you're doing it for the right reasons. ⠀ ⠀ Also, the cost to start this is like no other 'business' you could go and start.⠀ ⠀ No stock, no big start up costs - just you and your initial deposit. ⠀ ⠀ However big or small that may be it doesn't matter.⠀ ⠀ Learn to trade properly and there are now a wealth of funded trader programmes that can give you the freedom you crave without you having to save up for a lifetime. Focus on getting your process right and then enjoy the inevitable outcomes. Thanks for looking and enjoy your weekend. Darren 🙌
Education
by pow_removetheguesswork
1
Different strategies of setting a Target ProfitSetting a Target Profit is an inalienable part of every individual's trading strategy, and each trader has his own plan and tactic of integrating a Target Profit into his or her trading style. While there are different ways and types of setting up a Target Profit, we are gonna go through four common and most well-known ones. 1. Key zones Setting a TP at a crucial zone of support or resistance is a strategy used mainly by swing traders. If the market is ranging, buying a security at the lower barrier of the rectangular box and aiming for the upper barrier of it and vice versa is commonly implemented in the market by middle or long-term speculators. 2. Risk-to-reward This technique is mostly utilised by day traders and it implies setting a fixed risk-to-reward ratio for every trade and use the "set and forget" logic. On the illustration on the top right graph, it can be inferred that even thought the price has more potential to drop to the downside, a fixed RR of 1:3 has been set. 3. Logic and intuition The more you trade, the more experience you gain. After some time on the markets, you will easily spot some patterns and price movements in advance, without being in need to have more confluences than usual. On the 3rd chart, we can observe that the price is forming a "Triple Bottom" pattern on the 50% Fibonacci retracement level. Our intuition tells us that after some consolidations, an impulsive move should take place, and there is a high possibility for the price to keep rising and reach the zone of the Higher High illustrated on the graph. 4. Open Target Lastly, there is a group of traders that prefers having an open Target Profit and letting their trades run for weeks or even months. This tactic is commonly used by position traders, where they set a Stop Loss, but leave their Target Profit open, making it possible for them to hold a transaction open for long periods of time.
BITSTAMP:BTCUSDEducation
by Investroy
20
How to remain consistent while trading the financial marketsToday is a big day for us, as two years ago, on the 6th of June in 2020, we launched our company in attempts to be a valuable contributor to the trading industry and help all types of traders: beginners, advanced traders, those who are lost in the journey and so on. However, our personal trading experience goes way back, as we have been trading for more than five years. Throughout this long and interesting journey, we have had many ups and downs. After all, nothing in life is easy, and you have to overcome some obstacles in order to become consistent in what you are doing. Reaching the doors of consistency is the main aim of every beginning and practising trader. Although many individuals may think of consistency as an upward-sloping straight line, years of practice and experience show us that it is rather an ascending channel. Being consistent does not necessarily signify that every trading day/week/month must be a winning one. You will always have losing streaks, unsuccessful trades and so forth. Instead, it indicates that by having a working trading strategy and obeying it, you are gonna be profitable in the long run. Below, we have listed and scrutinized some of the rules that you can implement in your trading that can give you a hand in becoming and remaining consistent: 1. Have a clearly identified trading plan and stick to it This may seem like a pretty basic rule, but believe me, most people never go past this pretty fundamental stage. It is really straightforward and crucial that you need to have a backtested trading strategy, and it could be anything you feel comfortable with. Whether you like to open positions once two Exponential Moving Averages cross each other, or once specific patterns are formed and the price is ready to move according to your bias and so forth. 2. Stop changing your trading strategy every time you encounter losses and feel frustrated Trading is a game of numbers. Yes, you will experience many losing days. Yes, you will feel frustrated and angry to the stage that you might smash the screen of your computer. After all, emotions and psychology play a huge role in trading. Believe me, changing your strategy every week and trying to do something new will never be an option in this case. I see many people make this mistake and get perplexed on why they are not profitable yet. The right thing to do is to stick to one single trading plan and ride along till the end. At the end, if you are risk tolerant and patient, you will always be profitable in the long run. 3. Manage your risk This can’t be said enough. I see people trade the markets like a casino in attempts to be profitable and successful in the long run. Just because you think the setup is perfect, or that you have seen your favourite author’s technical analysis nicely align with yours, you should not be risking big portions of your account on a single position. You should have a well-defined risk management plan. Whether it is risking 1% on all positions, or risking 5% per position on Friday afternoons in order to drink lots of champagne on the weekends. Bottom line: whatever you do, do it with a plan and keep things consistent. Personally, we have always been risking 1-2% per single position, as this is something we are comfortable with. If you feel like you are not mentally ready to trade a live account, you can start even smaller (0.5% per trade) and then gradually go bigger. 4. Do not overtrade and learn to stay off the markets when necessary Many people think that opening more trades will generate them more profits. However, less is always more, and quality will always be over quantity. Depending on what type of a trader you are and what your trading strategy looks like, there should be an average number of trades that you enter every day/week. If you are a swing traders that tries capturing nice long-term waves, 3-5 trades per week would most likely be more than enough. If you are a scalper that loves sitting in front of the charts for hours, your strategy would probably consist of entering 15-20 short-term positions per day. Long story short, have a predetermined range and do not go off the barriers of it. The above stated points are some of the tips and strategies that could help you in remaining consistent in the markets. They may seem pretty simple, but remember that beauty lies within simplicity. There is no need to make things more complicated when you can simply stick to basic principles and succeed in this industry. Have a great trading week, family! Investroy
BITSTAMP:BTCUSDEducation
by Investroy
17
4️⃣ Trading habits that have to go 👋We've all done it. At some point in your trading journeys bad habits set in. Here is my four trading habits you've got to kick in order to stay profitable. 1. Overtrading We all been there with this one. We think we have to be in the market all the time. We don't and its okay to be flat at times. No strategy should have excessive trade volume. More time in the markets the more chance of catching a cold. Overtrading can happen when we also start revenge trading. You've caught some losses and your trying to get it all back. Don't overtrading combined with revenge trading is a no no. Take a break. Trading with no strategy or system Should never be in the markets with out a plan or system. More importantly no trader should be entering markets with out a proven edge. Back test and forward test your strategy and make sure you are entering markets with a proven plan. Psychology wise it makes trading so much easier to deal with. No plan will lead to nothing but stress and losses. No stop loss Trading with no stop loss is biggest sin of all. It's just not worth risking huge amounts of your trading capital on the line. One big crazy move in this uncertain world could do damage. Plus how can you develop a proven plan if stop loss is not included. Also moving your stop loss should not be part of your trading. As you've just altered any strategy being trading into the unknown category. No risk management So I've mentioned stop loss but that is only one element of risk management and it doesn't stop there. Risk management includes many aspects you'll need to consider. That includes position sizing relative to your capital size. The psychology behind losing runs and how they are factored into your trading plan. Work to set and proven trading rules as part of your risk management. Be sure not to add to losing positions. Know when you are wrong and move on to the next. Failure to follow risk management means you will essentially be gambling. Be realistic in expected returns is a big factor in risk management. Sticking to all of the above and not allowing these habits to enter your trading will ensure you keep that trading account growing. Thanks for taking the time to read my idea. Darren 👍
Education
by pow_removetheguesswork
1
The Rule of 72 😃📈Time for a educational post from me. At some point as traders we have all had the thought of how long will it take to double my account. The rule of 72 is the easiest way to work that one out. The rule of 72 is a handy mathematical rule that helps in estimating approximately how many years it will take for an investment to double in value at a specified rate of return. Rule of 72: If 72 is divided by an interest rate, the result is the approximate number of years needed to double the investment. For example, at a 1% rate of return, an investment will double in approximately 72 years; at a 10% rate of return it will take 7.2 years. But the example above is based on a 10% return per year. We as traders have the chance if our strategy is consistent and profitable to return good percentages on capital in a matter of weeks. Time for more examples. Some traders can return 6% a month So 72/6 = 12 months to double the invested capital in your account. Lets say a trader returns 4% month on month 72/4 = 18 months to double your investment. The rule of 72 servers two purposes to us as traders. 1. I personally feel it helps to keep us grounded as traders. To many enter this game thinking they will flip 1000 into 10000 in a matter of weeks A 4% return per month is a good return and from the equation above it would take 18 months to turn 1000 into 2000! So I would like to think the rule of 72 acts as reminder of the challenges we face when it comes to expectations. 2. Having said the above the rule of 72 also serves as a reminder that as traders who do or potentially can go on and achieve consistent profits especially monthly we can make way more returns than what a instructional bank or establishment would offer to you as an investor. The rule of 72 then becomes an inspiration to take control of your own money game and aim for growth that no one else can offer you. Thanks for taking time to look at my idea. Darren 👍
Education
by pow_removetheguesswork
Power of Having Multiple Confluences in TradingThe more confluences you have, the more confident you are in the fact that your technical setup will play out according to the plan. Confluences come in different shapes and styles, whether it is combining some Moving Averages and Bollinger Bands with price action, or having your grandma flip a coin a decide the faith of Bitcoin. On the graphical illustration that you can see on the screen, 3 confluences have been utilised to back up our idea and they are the following: 1) "Break + retest" formation 2) "Triple Top" pattern 3) Fibonacci retracement tool It can be noticed from the left hand side of the screen, that the price has nicely broken out of the ascending channel and re-tested the local key structure. Moving to the next step, it can be emphasised that a nice "Triple Top" pattern has been formed. Lastly, we add another confluence to back up a possible scenario that we have eyes on by using the 61.8% Fibonacci retracement level, which is referred to as the "Golden Zone". Taking a look at the chart, we can clearly observe that long candle wicks are nicely rejecting this very zone. All in all, combining multiple confluences give us enough confluence to back up our sentiment. However, nothing is 100% guaranteed in the markets, meaning that it is not promised that your trade will play out perfectly no matter how many confluences you have. Thus, be risk-tolerant, patient, and cold-blooded! Have a great upcoming weekend, everyone!
BITSTAMP:BTCUSDEducation
by Investroy
7
Trading in Books vs Trading in RealityWhat we study in the books is always different from what we have in real life. For example, French language that people learn and exercise in textbooks is slightly different from the French that we speak in France, as we tend towards using informal language and slang phrases. Same rule applies to trading, as the market is not 100% accurate with what we have in the books that educate us on trading. What we have in the books is absolutely crucial to learn the basics and even more. However, while applying the learned theorem in practice, in our case in the real-life markets, we notice that things are different. Thus, it is important to combine these two elements (on and off the market education) to master the craft. Furthermore, beauty always lies within simplicity. What's written and illustrated in the books, is the most understandable language of trading. Hence, the expression "textbook stuff" exists. The more experience you gain in this field, the more you will realise that it is crucial to keep things super simplistic if we want to have a crystal clear vision of the market.
BITSTAMP:BTCUSDEducation
by Investroy
21
IGNORE THE NOISE AND NEGATIVE EXTERNAL ENERGYTrading is a one big system that consists of various different components: technicality, psychology, money management and so forth. The most difficult one out of all the elements is definitely psychology. Human psychology is a perplexing system that studies our mental process and behaviour. Our behaviour and mood rely on multiple internal and external factors. In our everyday life, our behaviour towards something can easily change when being affected by negative energy. The very same principles apply to trading. Our decision-making process can easily get fogged and mood get ruined after experiencing some losses, opportunity misses and so on. Even worse, our desire and will to keep trading and striving for success can get intercepted by some negative opinions and attitiudes of surrounding people. It is totally acceptable to live a life that others do not understand. If you want something really bad, nothing can get in your way and stop you from achieving it. Block all the negative energy. Keep prospering, working towards your ambitions, and proving all the people that did not believe in you wrong! Investroy
BITSTAMP:BTCUSDEducation
by Investroy
19
What Traders Want vs What Traders Get"It is a marathon, not a sprint". One of the statements that perfectly describes trading. But what does this proclamation really mean? I quote William Shakespeare: "Go wisely and slowly. Those who rush, stumble and fall". Great things take lots of time. 90% of all people get false expectations about trading before they enter the industry. They think it is a "get-rich-quick" scheme. In reality, it takes months/years of practice, hard work and experience to reach the doors of consistency and profitability. Furthermore, consistency in trading does not necessarily imply that every trade will be a winning one. It just indicates that if you keep following your trading plan, be risk tolerant and disciplined, you will be profitable and successful in the long-run. We encourage you all to be patient and just ride with the trend as there is no need to rush anywhere. After all, Rome was not built in a day. Hope you all enjoyed this quick educational and informative post! The purpose of this publication was to give you all some guidance and keep you motivated so you can continue your journey to the top of the mountain. If you have any more suggestions and recommendations on what our next educational idea should be about, feel free to let us know in the comments section below. Investroy
BITSTAMP:BTCUSDEducation
by Investroy
19
Stop Loss hunting: the whole truth and the logic behind itGood time of the day, dear TradingView family! Welcome on another educational post by Investroy. Today we are gonna be talking about Stop Loss hunting. We will scrutinise what it is, how it happens and what's the logic behind it, and how to possibly avoid being "liquidated". Have you ever had the price trigger your Stop Loss before impulsing all the way to your Target Profit and hitting it? If the answer is yes, then you have probably been a victim of Stop Loss hunts. But what is Stop Loss hunting? In simple terms, it is a strategy that forces some participants out of the game by driving the price to the level where they have set their Stop Loss orders. As we all know, retail traders always look for some sort of confirmations before entering a position. It can be a candlestick pattern, a moving average cross, a double top / double bottom formation and so on. They enter a position and set their Stop Loss a few pips above/below the local supply/ demand level . What happens 90% of the time is the price spikes up/down, hits the Stop Loss, liquidates so many positions and participants from the trade, and then continues moving alongside the trend. Why does it happen? Institutional traders know exactly what they need to do and which levels they need to buy/sell. Consequently, they set their buy/sell limit orders at places where they know retailers would set their Stop Losses, because they need to generate liquidity before jumping in the train. It does not necessarily signify that they track where retailers put their Stop positions, it is just they are more than sure which levels are crowded with Stop Loss orders. We have prepared some examples in order to better elaborate on the issue and scrutinise how the case looks visually. Of course, these are only simple exemplars. It does not unquestionably mean that the price will always behave this way as the market conditions change quite often. Looking at Example #1, we can see that the price spiked above the level of the right shoulder of the formed H&S pattern before continuing its downside movements. Now, which action do most retailers take once they spot these textbook patterns? They execute right away with their Stop Loss above/below the structure, which results in the positions getting wiped out. Example #2 shows how the price spikes below/above obvious levels of support/resistance before continuing movements in the deliberate destinations. Example #3 illustrates how obvious ascending/descending/sideways channels are, and how easy it is to get liquidated instantly, before the price carries on moving in the destined end. How to avoid being eliminated? Well, you won't always be able to run away from Stop Loss hunting, but if you develop a proper working strategy against it, you will be able to identify possible zones filled with Stop Loss orders and avoid setting one around that area. If you are not gonna think long and hard about where you are gonna put your Stop orders, you will easily get eliminated in a sea of Stop Losses. Thus, think outside of the box and have patience before jumping in a particular trade. Hope this educational idea is useful! If you have any comments or enquiries, do not hesitate to ask in the comment section below. Also, if you want us to make an educational post on a topic that interests you, feel free to drop your recommendations and suggestions in the comment box as well! Have a great rest of the week! Investroy
BITSTAMP:BTCUSDEducation
by Investroy
16
Trading Mountain: How to reach the top step-by-stepHey, family! Good time of the day and welcome on another educational post. As we all know, the road that leads to successful and consistently profitable trading is a pretty difficult and long one. It takes years of hard work, patience, dedication, and experience to reach the top of the trading mountain. Many beginners make similar mistakes before starting their journey. They tend to have false expectations and a distorted vision of the big picture. As it can be inferred from the graphical illustration, the mountain pattern connects dots and shows a realistic path of a successful trader to the top of the hill. We all start somewhere, right? We start taking our first steps and making ourselves familiar with the thing we are interested in. In the example of trading, it can be the first YouTube video that we watch, a chapter of a book related to investments that we read, first chart analysis that we make and many more. What comes next? We decide on the type of a trader that we are. Do you have enough time to sit in front of the charts for several hours and press BUY/SELL buttons, or you are busy 90% of the time and prefer having a portfolio full of long-term positions? After we have decided what our strategy will look like, we build a trading plan around it and make it a part of our lifestyle. We identify our trade entry criteria, risk management plan and so forth. Backtesting our trading plan is a vital part for the journey. It can take days, weeks or even months. However, it will be worth it at the end of the day, as it is crucial to link our strategy with the trading plan and find out how profitable it will be. Executing, optimising, journaling. Where did I make a mistake? What could have been done better? What should I change in my trading plan? It is important to stick to one single trading plan and optimise it along the way. Before trading with real money, it is recommended to open positions on a demo account with virtual money. Getting a hand of things, practising the market and gaining experience is important. After having traded on a demo account for several consecutive weeks, months or even years, we can move to a real trading account. Demo account is completely different from a real account, both psychologically and mentally. Putting real money on the line is much harder than playing around with fake simulation money. Thus, it is advised to start with a small amount and get used to it before moving to larger sums of money and increasing the trading capital. After everything is went through and all hills are climbed, the top of the mountain will be reached. Of course, being a professional trader does not necessarily signify that there will be no failing trades and the win rate will always be above 90%. Losing days, weeks and even months will always happen. However, as long as you diversify your portfolio, stay cold-blooded, disciplined, and follow risk management principles, you will be profitable in the long-run.
BITSTAMP:BTCUSDEducation
by Investroy
21
The Power of a good Risk-to-Reward ratio. Reality of tradingRisk Management, alongside with discipline, experience and skillset, is one of the keys to unlock the doors of successful and profitable trading. As it can be inferred from the table, even with as low as 40% win rate, it is more than possible to stay consistent and make nice returns, as long as risk management principles are followed. *We used 30 pips Stop Loss and 60/90/120 pips Target Profits as a projection. It does not necessarily signify that 1% risk equals 30 pips Stop Loss, as different pairs have different pip values, price differences etc. Moreover, we determine our Stop Loss based on the amount of capital we are willing to risk on a particular trade, price action, intuition and other factors.*
BITSTAMP:BTCUSDEducation
by Investroy
19
Journey of a Trader: All of us have gone through this!Good time of the day, dear TradingView family. Happy new month! May March bring you lots of happiness, love, and profits. Today we are gonna be doing a quick reality check and scrutinizing a long way every trader goes through before becoming successful and consistent. All beginning traders get super motivated and excited before beginning this long journey. Instagram “gurus” create false expectations and trick people into thinking they will be making quick profits and becoming millionaires with a $100 capital. Beginner’s luck is real and super relevant in this case. Without having a proper trading plan and a backtested strategy, newbies jump into the markets and start trading full-speed. “Wow, I made my first profits! I can keep going like this and make lots of “Benjamins”. Overtrading, greed and self-confidence lead to a losing streak, panic, anger, and loss of faith. Solutions need to be found, and therefore traders start changing strategies and trying to find a way to the doors of success. They lack motivation and hunger to keep going. They start questioning themselves and thinking whether they should quit or keep pushing. At this stage of the journey, around 90% of beginners give up and leave the markets. The remaining 10% still have hope, so they keep grinding and enhancing their trading capabilities. After some time, they start seeing some progress in their abilities. They start having more winning trades now, and they become breakeven traders, meaning they neither make any profits nor encounter any losses. They stick to their strategy and optimize it along the way. They plan, execute and journal all trades. After a few months, they finally reach the doors of success and profitability. Of course, they do not get greedy or self-confident. Though, they still have losing days/weeks/months, their main focus is concentrated on long-term growth and prosperity. They know that if they keep following their trading strategy, obeying risk management principles and being disciplined, they will always be profitable in the long run. To sum up and to motivate the beginners reading this: if you are going through hard time in the markets, if you do not know what to do or how to make thing work, keep pushing more and more. There is always a golden sky at the end of every storm. Therefore, never feel discouraged, do not give up, and keep grinding. YOU WILL ALL MAKE IT!
BITSTAMP:BTCUSDEducation
by Investroy
25
Why do most traders fail? Common reasons that lead to failureWe have listed some of the main reasons that incline most traders towards lack of success. After being in this industry for quite a few years, we have noticed that 90% of beginner traders make the same mistakes all over again. We would like to address those issues below, and provide some recommendations: 1) Overtrading is a problem that many beginners and experienced players in the market face. Quality will always be over quantity. Taking a few high-probability trades is much more convenient and professional than buying and selling many positions at the same time. 2) Risk management should be strictly followed in all cases. Many traders tend to risk 5-10% on a single position and end up blowing their accounts. It is much safer and better to risk 1-2% per trade and keep things consistent. 3) Adding 10s of indicators into their charts and making their graphs messy is what many participants of the markets do. Making trading decisions based purely on indicators lead to failure 90% of the time. It is essential to rely on price action and use indicators as confluences. 4) "I will start trading with $100 and flip it into thousands of dollars in a few months, because I have seen a guy on Instagram do the same". That's such an unrealistic and distorted statement. Always set your expectations low if you want to be profitable in this field. Moreover, do not trust fake Instagram "gurus". 5) Never ignore the major fundamental drivers, as in some particular cases they can easily make the market jump around. 6) "Many authors on TradingView are going short on BITCOIN! Let's go and do the same". Never rely on randomness and other people's opinions and analyses. Make your own chart analysis and use other authors' views as a means of confirmation. 7) Always and always journal your trades. It will help you a lot in identifying your errors and fixing them. 8) Patience is always the key. Those who rush, stumble and fall. 9) Do not let a win get to your head and a loss get to your heart. Always remain cold-blooded and emotionless. 10) It is impossible to be profitable and consistent in this sector without having a valid trading strategy. Create a trading plan that works for you the best and stick to it for the long-run. 11) Many novices tend to increase their risk in order to make more profits. Instead of increasing the risk, increase your trading capital! 12) Getting aggressive and trying to open a trade every minute is not a way to go. It is important to remain calm, trade with caution, and be patient! 13) If you want it, you will get it. Most of beginners do not treat trading as a serious business and they spend less time practising it. In order to be successful and make money, you need to put in work! 14) Greed is not an option! Always set realistic target profits and enjoy your gains. Holding a trade forever is not a way to go 15) Giving up is for the weak. If you ever feel like giving up and quitting it all, think about that one reason that made you start
BITSTAMP:BTCUSDEducation
by Investroy
8
How to build a Trading Strategy?Hey, fam, welcome on another educational post! The topic is the following: step-by-step guide to building a working trading strategy The process of building a trading strategy that will lead one to the doors of consistent and profitable trading is a pretty difficult one and it takes quite some time and effort. 1) Firstly, it is crucial to identify what kind of trader you are. If you have plenty of time in your hands to to sit in front of the monitor and go through the charts 24/7, then scalping or intraday trading would be suitable for you. If you enjoy clicking “Buy” and “Sell” buttons and opening 10-15 or even more transactions per day, then two of the above listed styles would be suitable for you. On the other hand, if your timetable is packed with different activities all the time and you do not have enough time to sit in front of the charts, swing or position trading would work the best for you. If you are aiming for making big gains instead of small “quick profits”, then both swing trading and position trading can fill your needs. 2) Moving on to the next step, it is crucial to have a watchlist, or in other word, a "favourites" list. It is better to have a batch of 5-10 favourite tradeable securities, than trading random things all the time. Let’s bring a real-life example: Would you prefer having 5 pets and take care of them individually, or 40 pets? What we are trying to emphasise, it is better to make yourself familiar with a pair and be able to read it like a book. Moreover, it is much easier to monitor 10 familiar setups rather than 50 random pairs. Thus, take some time skimming through various setups, and add them into your watchlist upon “falling in love with them”. 3) Always have a clear entry and exit strategy, and always ask yourself the following questions before entering a trade: “Why am I buying/selling this security?”, “Where are my Target Profit and Stop Loss set?”, “What portion of my trading capital am I risking on this trade?”. Every trader has his or her own entry and exit plan. Try to thoroughly examine all possibilities and see what works best for you. For example: enter when a nice wick candle has been formed around the area of demand/supply that aligns with 61.8% Fibonacci retracement level, set a fixed Target Profit of 1:3 Risk-to-reward, set the Stop Loss below the formed Double Bottom . 4) Execute, journal, optimize! If a trade goes wrong, ask yourself a question: “What went wrong and could I have prevented it?”. Make some modifications in your plan if necessary. 5) Never underestimate fundamentals and heavy economic or real-life news. Some examples are NFP, Markit Manifacturing PMI, quarter/annual GDP growth news. Moreover, wars/conflicts between two countries are crucial to be aware of as well. These heavy news have it all to mess the market around. Therefore, always consider these events, make your fundamental analysis and trade accordingly. Move your Stop Loss to the Breakeven point, or even exit a trade earlier in loss if needed, in order to stay safe before the news hit. 6) Last but not least, and most importantly, always stay patient, disciplined, free of emotions, cold-blooded, and remain loyal to your trading plan! “But my plan is not working. I endured 3 losses in a row. Should I immediately change my plan?”. The answer is a big fat “NO”. Instead of changing your strategy that took you so long to put together, think of identifying the week points and optimizing the plan.
BITSTAMP:BTCUSDEducation
by Investroy
7
Traders vs Gamblers: Know the main differences!Hey, fam! Happy Friday and welcome on another educational post. The topic is the following: differences between a trader and a gambler. We are gonna go through 6 crucial points and elaborate how traders are different from gamblers. 1) As a trader, one’s aim is to focus on the next 100 trades instead of the next 10. Long-term success, profitability, and consistency are two of the main things traders should target. However, a gambler’s wish and desire is to make quick money. 2) A successful trader/investor has a backtested trading plan that he sticks to and optimizes along the way, adapting to changing market conditions. On the other hand, gamblers like to trade based off what other people think and tweet, or by simply opening a random Buy/Sell position and hoping it plays out successfully. 3) Profitable traders always diversify their portfolio and risk no more than 1-2% per trade. On the contrary, gamblers go “full margin mode” on a single trade without setting a Stop Loss and end up blowing their accounts and blaming the markets. 4) Chasing markets and rushing the process is not what real traders do. Instead, they follow their plan and wait for the price to play out and match their entry criteria before executing. Nonetheless, gamblers like to overtrade, open positions based on nothing, make biased decisions. 5) When enduring a loss or two (or three), traders neither get emotional nor try to revenge the markets. They know that if they obey risk management principles and open high risk-to-reward positions, they will cover all their previous losses and get back to making profits. Gamblers, on the other hand, get angry and start attempting to revenge the market by making foolish decisions and entering many illogical trades. 6) Last but not least, if you want to be successful and profitable in this field, you have to treat trading as a business and take things seriously. Those that think markets are a playground or a casino machine will never succeed in this space.
BITSTAMP:BTCUSDEducation
by Investroy
255