Howtotrade
The Hardest Part of Trading (Not what you Think)Seeking More information - When first introduced to markets, every beginner immediately thinks he must learn the rules of the market in order to succeed. He initially believes there is a "holy grail" a system, a leader, or a mathematical equation like Fibonacci levels. He believes these will protect him in the market, and will lead him to a profit once he understands them.
The problem is, there are no set rules which work consistently in the market. If there were, the institutions and everyone else would simply use them. What would happen then? Well, there would be no one or institution to take the opposite trade, and the market would cease to exist altogether.
And so the new trader changes from one system to another, from one guru to another, and constantly thinks he must learn more information in order to succeed. What he believes to be preventing his success is a lack of knowledge, a lack of information. But you see, the more information you have does not necessarily lead to better decisions. There is a lot of evidence to support the contrary, and suggests that too many choices actually impair decision making skills.
On top of this, most of the information in the trading world is quite simply wrong. There are 10 x more scam artists who claim to "know" and will take your money to teach you how to trade than there are profitable traders. These people do not understand markets them selves, and cannot make money in the market, so instead they prey on new market entrants. This is the primary reason I started my trading website; to provide high value information at a low cost. And to give those who are serious about trading an actual chance to make it in the markets.
Dealing with Uncertainty - The reason most traders seek new information is because they are afraid of uncertainty and want certainty. They seek something to protect them in the market. Something to protect them from themselves. A system that will guarantee a profit. But there is no such thing. Markets constantly change and evolve through the market cycle. And there is no system that works across all three parts of the market cycle. The sooner you realize this, the closer you will be to making a profit.
It is very hard to learn how to deal with uncertainty. But you do it every day. When you wake up in the morning are you certain you will live through the end of the day? No, and you can never be completely certain of this. Certainty is an illusion. There is no certainty in this life. The only certainty is... uncertainty!
Patience and Discipline (Ability to Do Nothing) - Every profitable trader uses these two terms (patience and discipline) when asked how they are profitable. When a beginner hears this, he rarely understands what this means. Discipline means doing something even when you dont want to do it, or doing something you dont want to do. Patience means waiting for your turn, or waiting for something to happen.
In other words, when the time is not right you must do nothing. This stokes a fear in most people, especially in today's give me distractions, social media world. They say "Well what am i supposed to do if i am doing nothing?" Doing nothing seems contrary to getting what you want, getting somewhere. In and outside of the trading world everyone believes in order to be a "trader" you must trade - constantly. This is why most lose money. Because they do not understand that there is a time for doing nothing. And that time is most of the time!
See more on understanding markets (Price Action Trading) and yourself (Trading Psychology) at my website below.
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The Start of A Trade-Along : How to trade the Dollar Index In this video I show you how to profit in the forex market with the dollar index and the pairs that make it up
What I'm Watching for the Next Week of Trade + Updateadded a few more pairs to the watch list and I show you how to trade a few pairs
The Truth About Trading - how long to be profitable?Trading is hard work - But no one wants to hear that it is hard work. Everyone wants a short cut. A short cut does not exist. If it did - everyone would use it and the market would cease to exist. Everyone who starts out trading is lured in by the profit potential. You might get lucky and make a quick buck. But over time you soon realize that trading is a job, and a hard one at that. The markets offer the highest paid profession in the world - and it is the hardest profession. There are no set paths, clear schooling or achievements which put you into a position of earning a living.
This is an entirely different world. It is you and the market. You are responsible for the actions you make, and the repercussions or rewards which come with those actions. It takes a lot of time and effort on your part if you truly want to succeed long term in the markets. This does not just mean learning about the markets and how they operate. It also requires skills that no other job does - understanding and working on yourself internally.
Remain Humble - We all know of someone who brags about their position, their entry price or whatever. But there is something they likely do not have.. Profits. Ever wonder why the top traders dont brag or choose to talk about a position or how much they make? Because they are humble. If you do not remain humble when it comes to markets, they will humble you. If you are attached to your Ego, you will fail in the market, without question. The only question is how long will you survive?
How long does it take to be a Profitable Trader? Every beginner wants to know how long it will take before they can make a profit. This is a loaded question - with no answer. I am often asked how long until you knew you had it? Or how long does it take to become a profitable trader? People are confused by my answer when I say "you never have it, or anything." Even wildly profitable traders lose money, sometimes all of their money several times.
Trading is not about getting something, or somewhere. It is a journey, a dance. Do you dance or play the guitar to get to the end of the dance or end of the song? No, otherwise you would play or dance really fast! (Alan Watts). You play to play. You trade because you enjoy the act of trading. In other words the act of doing is the goal, not the end result. The market is a teacher who teaches you about your self. If you chose to ignore it and instead focus on what you want out of it; you probably wont get it. If instead you open yourself up, give in to it and what it is showing you; you just might get what you want.
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How to Be a Successful Forex Trader Segment 4Trade Identification
How many times have you "Missed" a trade. Once traders have a trading plan, they spend their time looking for set-ups. I would urge to take the next step which is Trade identification. I am not talking about clicking on a chart and seeing if your set-up is there. You want to be able to look and a chart and project what it can do and determine if market action will create a tradable set-up. This morning, as you can see on the chart above and my posted trade idea, when I was analyzing GBPNZD, I did not have a valid trade set-up. Specifically, although Price was below the Daily and 15 minute Kijun-Sen, as well as the cloud, it was above the 60 minute Kijun-Sen...which makes it a no-trade for me. However, I understand and recognized that if price closed below the 60 Kijun-Sen, I would have a valid Type 2 Set-up. I was able to post as such and better yet able to Bank some profit :)
Most traders study price action but they do not forward think what the market can do. Thinking about what the market can do (up, down, sideways), and then applying that to your trading methodology to determine trading opportunities will, imho, greatly enhance your trading skills and you will enjoy watching the market play out the way you predicted (and so will your Bank account)
I Hope this helps, stay Green my Friends
Allen
PS If you like this education material, please push like and follow me, so i will post more :)
Trading To Win "Those who lose - trade not to lose. Those who are successful - trade to Win."
Losing Vs Winning
Most traders are more focused on not losing than they are on winning. Do you understand what this means? This means you are acting not in your best interest, but against your self. By focusing on how much you can or might lose, or on not losing, you increase the likelihood of making mistakes which ultimately lead to a losing traders equation, and a negative equity curve.
Profitable traders do not care about losing. They understand it is part of winning. They focus on winning. What is the best move in this moment? Should I get out or continue to hold based on what the market is telling me? Winning traders accept the risk totally and completely; before getting into the trade. In other words, they have already lost what is on the line. Therefore they act in their own best interest, not based on their thoughts about what they could lose, but based on what the market is telling them to do in this moment.
Other than this psychological difference, here are a few other key components on How to Trade To Win.
Defined Edge - Every trader who is making money in the market has some form of edge which he employs. Even if his edge is purely intuitive. This is extreme and rare however, and most traders have clearly defined their edge and will only trade that edge. This removes randomness. Many beginners think they are going to study the market and be able to trade the market no matter what it is doing (trade intuitively). This is simply not the case for most. The purpose of studying the market is to identify opportunities in form of an edge. An edge is a setup or context which repeats itself over time. It might occur once a day, once a week, or once a month. It does not matter. All that matters is that you only trade your clearly defined edge, and leave the randomness behind.
For more information, you can read about the edge I use in every market I trade. We also describe how you can develop your own edge, and trade it in any market.
Stop Doing, Relax Efforts - If you are losing in the market, chances are you are doing too much. Many beginners, and even experienced traders think they must be trading in order to be a successful trader. This leads to random trading, over trading, and mistakes which compound themselves. You end up digging a hole, and instead of looking for a way out, you look for a different shovel.
The harder you try to make a profit, the more you do, the more actions you make, and the more you lose. The market rewards those who are observant, disciplined, and most importantly patient. The market takes from those who try too hard, and do too much. If you dont believe me, try as hard as you can to make money, and see how you do!
By relaxing your efforts, you relax your mind. In turn relax your actions and decision making. You do not have to trade every day to be a profitable trader. It sounds paradoxical doesn't it? How can I make money trading if I dont trade? By only trading when it is appropriate like when your edge is present, you better your odds of success.
Profitable trading does not come from trading constantly. Profitable trading comes from the act of non-doing, and out of a state of emptiness. Profitable trading is effortless, it comes out of waiting for just the right moment before taking action. And then waiting some more while the market proves you right or wrong. Profitable trading is not forced; it just happens.
Active VS Passive Trading -
This is very similar to the previous topic. Active trading is a trader who is constantly in the market, trading whatever he see's or feels right. This trader is often wrong, and when he is right he makes the mistake of exiting too early due to fear. This leads to a negative traders equation as he continues to struggle to do the right thing. An Active Trader mentality is one which does not believe in "non-doing." He believes he must, and can, do something. He is afraid of missing out and is often swayed by thoughts and emotions. So he continues trading never looking back, and at the end of the month cannot figure out why his account is in the red.
A Passive Trader is the opposite. He passes on more trades than he takes. He does not care about what he misses out on. He only cares about what he takes and the actions he makes in the market. He does not force trades, he just watches the market until he knows what to do. Or he waits and waits until his edge finally sets up. He is passive in his efforts, rather than active. He does not care if he doesn't trade today, this week, or even this month. Trading is not what is important to him; winning is. He knows that profits come from sitting, waiting. Because he is willing to wait, he is peaceful. And profits continue to come into his account, effortlessly.
For more information on developing this type of mentality, see below. We also detail how to understand markets through price action, how to create, define, and employ an edge, and how to develop your traders mentality to succeed in markets.
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DXY Daily ChartI am going to start posting mostly DXY charts here now, specific pairs or questions are available to followers or email trader.constantfx@gmail.com
The Advantages of Technical Analysis (Price Action)Technical Analysis (AKA Price Action)
Technical analysis is the understanding and observing of markets through the only thing that matters; price. Prices generate similar patterns over time, in every market. A single price chart contains more information than you would ever imagine at first glance. Everything you need to know about any company, or market is on the chart in front of you. The current price is what the true value of the market is, regardless of news, indicators, or anything else.
The Advantages of Technical Analysis (Price Action)
No News - Everything you need to know is on the chart in front of you. Completely disregard all news and outside information. All news is already built into the current price. The price action of the market is all you need to know. Once you understand how institutions operate, you can follow them.
No indicators . All indicators are a derivative of price. For example a Fibonacci level. Every price on a chart is a Fibonacci level of some other price on the chart. Although they appear to work, these levels do not work because of Fibonacci. But instead due to the traders equation, which is the mathematical formula institutions use to enter and manage trades.
Clearly define support and resistance. You can see on a chart where prices are likely to do something. These are "Key entry points" or "Buy and Sell Zones."
Clearly define risk and edge. With technical trading, you have the ability to define your risk before getting into a trade. If the market does not do what you expected, and instead goes beyond your stop, you exit. Without needing to wonder about why this happened, or constantly observing the news.
Identify the strongest markets without relying on outside information like news, indicators, someone else, or a "tip." Become independent and trade for your self.
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Day Trading - Only Strong Trend Days (Can also be used on HTF)Day Trading - Only Strong Trend Days (Can also be used on HTF)
There are generally only 2-5 strong trend days a month. The majority of trading days are some form of trading range days, either within a range or a weak channel which reverses and forms a trading range. On strong trend days the market offers what most traders want - a high probability of a large reward, with a tolerable risk. Usually the risk feels greater (and often is) on a strong trend day because there is a sense of urgency, and the bars are often bigger than normal.
On trading range days the bars tend to be smaller, offering what appears to be a lower reward, but there are many more failures and reversals. This makes it very difficult to identify a good setup, and even when there is one the market does not make it very far before there is an opposite reversal. This lures unsuspecting traders in, who continue fighting the market taking every trade or only the losers. This type of market is like a boa constrictor. The more you fight, the more you struggle, the tighter its grip and the harder it is to overcome the draw downs and emotional fatigue.
Because these types of days are hard to trade and do not offer what I want (a good chance at a large reward), I choose to sit these days out. Instead, I wait for a strong trend day, and then continue to wait some more for a pullback and my edge. Does this mean I miss out on some good moves? Sure. But I do not care. I trade to win, not to trade for fun. It does not matter what I miss, it only matters what I take and the actions I make in the market.
So how does a trader know if the day is a trading range day or likely to become a strong trend day and should be traded? In order to help guide you, here are some common characteristics of a trend day.
"......"
After the above has been identified - it is still better to wait for a pullback and an edge like a "......."
This increases the likelihood of a good trade with a strong traders equation. It also helps decrease stress of prices going against the position as it often does when you just enter at the market or without an edge. Of course, waiting is not easy. Just like Tom Petty said "Waiting is the hardest part!"
Does this mean you are less likely to lose? Usually, but not always. Even with trend trades fail, although less often. It is absolutely possible to lose money selling in a bear trend or vice versa. The key is to continue onward, and enter the next with trend trade if there is one. If not, or it also fails, prices are more than likely in a trading range and you just haven't yet realized it. If this is the case, it is often better to stop trading and wait for a strong trend day, rather than continuing to fight the market when it is not offering what you expected.
**These ideas and strategies can also be applied to higher time frames and long term investing.
"..." = withheld material from original post (members only material).
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Day Trading Trend or Trading Range? Can be applied to investingIn the previous article we discussed only trading on strong trend days or strong markets. We also identified what increases the likelihood of a day (or market) becoming a strong trend. As said before, there are only a handful of strong days a month (or only a few strong markets at any given time). Because of this, it is just as important to identify and understand when a market is likely not a trend and more likely a trading range.
Within the first hour or two of the open (when day trading), it is often obvious if the day will likely become a trend day or a trading range. Once the market has been identified as likely a trading range, it is unlikely to become a trend day as the market tends to continue what it has been doing. In this case it is more likely to continue to have heavy two sided trading and less likely to convert into a strong and healthy trend.
But wait - most channels are some form of trading range right? Yes. This is a form of slanted trading range, or a trending trading range. This is where the market is technically in a trend but it is very weak and likely to reverse at any time. In fact, by the close it will likely reverse and the trend is unlikely to remain intact.
Characteristics of a Trading Range Day
"............"
So if most days are not trend days and are instead some sort of trading range, cant a day trader use this information to his advantage? Of course, if it aligns with your trading style or method. But you must understand that you are not likely to win on many trades, or win a large reward. Instead most trades even strong ones, only go for 1X the risk. On top of that there are many trades to take, most of which fail. This makes it difficult to remain focused and continue trading without emotions and without missing the trades you need to win to recover losses.
What about only taking strong trades ".......?" That is a reasonable thing to do, but the probability is still often lower and the reward is as well. And on these days most stop order entries fail, resulting in repeated failures. This is a "............." If not, you will likely get stopped out just before prices go your direction! Or the market will only go in your favor temporarily before stopping you out.
This makes trading difficult for beginners and even for those with experience. However most do not realize they should simply remove themselves from the market during these times. Instead they continue to trade as they think they should, and continue to grow losses, making it harder to recover even on a good trading day.
"I do not like to trade when the market is likely to reverse at any time. I only like to trade when the market is not likely to reverse at all." - Josh Ridenour
**These ideas and strategies can also be applied to higher time frames and even long term investing.
"..." = withheld material from original post (members only material).
If you found this helpful please like! Feel free to comment or ask questions
Day Trading Trend or Trading Range? Can be applied to investingIn the previous article we discussed only trading on strong trend days or strong markets. We also identified what increases the likelihood of a day (or market) becoming a strong trend. As said before, there are only a handful of strong days a month (or only a few strong markets at any given time). Because of this, it is just as important to identify and understand when a market is likely not a trend and more likely a trading range.
Within the first hour or two of the open (when day trading), it is often obvious if the day will likely become a trend day or a trading range. Once the market has been identified as likely a trading range, it is unlikely to become a trend day as the market tends to continue what it has been doing. In this case it is more likely to continue to have heavy two sided trading and less likely to convert into a strong and healthy trend.
But wait - most channels are some form of trading range right? Yes. This is a form of slanted trading range, or a trending trading range. This is where the market is technically in a trend but it is very weak and likely to reverse at any time. In fact, by the close it will likely reverse and the trend is unlikely to remain intact.
Characteristics of a Trading Range Day
"............"
So if most days are not trend days and are instead some sort of trading range, cant a day trader use this information to his advantage? Of course, if it aligns with your trading style or method. But you must understand that you are not likely to win on many trades, or win a large reward. Instead most trades even strong ones, only go for 1X the risk. On top of that there are many trades to take, most of which fail. This makes it difficult to remain focused and continue trading without emotions and without missing the trades you need to win to recover losses.
What about only taking strong trades like ".......?" That is a reasonable thing to do, but the probability is still often lower and the reward is as well. And on these days most stop order entries fail, resulting in repeated failures. This is a "............." If not, you will likely get stopped out just before prices go your direction! Or the market will only go in your favor temporarily before stopping you out.
This makes trading difficult for beginners and even for those with experience. However most do not realize they should simply remove themselves from the market during these times. Instead they continue to trade as they think they should, and continue to grow losses, making it harder to recover even on a good trading day.
"I do not like to trade when the market is likely to reverse at any time. I only like to trade when the market is not likely to reverse at all." - Josh Ridenour
**These ideas and strategies can also be applied to higher time frames and even long term investing.
"..." = withheld material from original post (members only material).
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ABBV Sell Vacuum - Understanding Climaxes and VacuumsABBV is selling off this week in a third leg down from the buy climax and all time high. Although it looks strong at first glance, this is more likely a sell vacuum (sell climax) than the start of a strong bear breakout. A vacuum is created when strong bulls step aside and wait for prices to reach a location they want to buy, and the strong bears continue to hold for the same price level (and some continue to sell). This creates a temporary one sided market. This sell off is likely a test the previous converging triangle, and middle of the trading range preceding the bull breakout. The bulls will look to form some sort of double bottom which could be a failed breakout below the 60 or 50 lows, or an actual double bottom. If there is a reversal up next week, it would form a parabolic wedge bull flag, bears will look to take profits and bulls will look to re-establish longs. If instead there is continued selling and a strong breakout below the 50 low, the bears will likely get a test of the opening tight trading range around 40.
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How to be a Successful Forex Trader Segment 3DCCS Disease:
CCS Disease is a disease many new traders are afflicted with and it can be fatal!! CCS disease is short for "constantly changing strategies". Certainly, I firmly believe that a trader must find a trading strategy that fits both their personality and the time they have to trade. However, once you find a strategy that you like, imho, you must back test the heck out of it!!. Figure out how it responds to different market conditions, is it a strategy that can only used when the market is in a range or trending, can be used before news, after news. How big of a stop is needed, How far will it run... trade parameters are essential but more importantly, Build confidence in your strategy. without the confidence that your strategy will work, you leave yourself susceptible to the psychological terror the market can cause.
I have tried alot, probably well over a 100 strategies in my trading career. the truth is that if I would have properly back tested then and stuck with them I would have been successful sooner. if you test a strategy and it has an 75% win rate (which is pretty damn good), that still means you will lose 25% of the time. Unfortunately, it does not mean that out of 100 trades your first 10 won't be losses and which point you give up and move on. Been there, done that. So I would urge you to back test your strategy so you have at least 100 trades and then forward test the strategy for at least 100 trades before you change.
I hope this Helps, stay green my Friends
Allen
** The Above chart is an example of how I document my trades-- every trade. I also use a spreadsheet to keep track of the data.
GOLD Video - Pure PRICE ACTION Top Down AnalysisOANDA:XAUUSD
- Weekly (Bearish) : Doji at a weekly level indicating indecision and momentum loss with a wide swing divergence
- Daily (Bearish) : Pinbar rejection with divergence
- 4hr (Entry) : Double top with a trendline break
EP: 1336.25
SL: 1360.36
TP1: 1311.47
TP2: 1290
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What is Price Action? All Indicators are a Derivative of PriceThere is no one clear definition of price action. It can be as simple as "Every tick on any given chart, of any given market." However this definition is too broad and does not adequately describe the term. A better definition is "The collective result of buyers and sellers entering the market for any logical reason, which together create reoccurring patterns that can be analyzed and capitalized."
Price action is based on humans behaving rationally, logically, and similarly in similar situations over time, and is the cumulative effect of institutional trading. It has been, and always will remain fundamentally unchanged. If you compare a chart from 100 years ago (such as the crash of 1929) with one of today with the time scales removed, you will not be able to tell the difference between the two. It does not matter if you compare a yearly, monthly, daily, or even 1 minute chart with any other chart of a different time frame. Price action appears the same and works the same in every market, and on every time frame. The institutions cannot hide what they are doing; price action is their foot print.
Price action can be used to invest long term, or day trade any market. It allows a trader or investor to identify opportunities without the use of any indicators. In fact, all indicators are a derivative of price action in one form or another. Interestingly, the patterns which repeat as well as trend tendencies can be observed on different charts, even outside of markets.
Can you tell a difference between these two charts? The first is a daily chart of CSX. The second is a 5 minute chart of the MES (micro s&p). All markets and charts look the same, and behave similarly. Once you understand the information within, you can understand what the institutions are doing at any given time.
EURUSD Video - Price Action Timeframe CONFLUENCE FX:EURUSD
- Weekly (Neutral) : At a weekly level where price historically reversed. I can see the price is in a downtrend.
- Daily (Bearish) : Inside bar with a bearish engulfing daily candle of yesterday indicating sensitivity at this level
- 4hr (Bearish) : Price has broken the trendline and Moving Averages has crossed over
- 1hr (Entry) : Structure has switched to Lower High & Lower Low
EP: 1.12770
SL: 1.13522
TP1: 1.12019
TP2: 1.11338
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How to be a Successful Forex Trader Segment 3CBACK TESTING CONT.:
High probability set-ups
To be a consistently good trader, you must trade in a consistent manner.
As those of you who follow me and review my trade idea’s know, they are the same, almost boring. You see Type 1 (Shown above) or Type 2 trades all the time and they look all the same. EXACTLY!!! That is what you need.
If you have taken (either live or back tested), and documented, the same set-up numerous times, you can develop a statistical basis for the probability of that trade type’s success. IMHO, this is a critical element to achieving long term Success. I believe, if you know statistically, the probability of a trades success then you will be more confident in it and allow it to play out. Moreover, if you have a method that is not quite up to snuff, then get rid of it. I would urge you to be more selective in your trade process and only look for trades that you know, through your back-testing, have a high probability of success. This is Quality over quantity.
Stay green my Friends
Allen
** The Above chart is an example of how I document my trades-- every trade. I also use a spreadsheet to keep track of the data.
Bitcoin Short-term: Support and Resistance analysisHello, Artem is back! Here we are on XBT chart, it showing us two types of wedges: Ascending Wedge on the left with dark blue colors, and Descending Wedge on the right with red colors.
Now we in a middle of descending wedge, rebounding from dynamic support *7600$ and going to resistance area of 0.618 Fib at around 8250$.
Stochastic RSI already topped and looks like I will make lower high, while price will hit higher to 8250$ to complete local bearish divergence. So this will be our signal for rebound and reentry for longs I expect around 6800$ support level.
If something will opposite to this idea we should be ready, so our bullish breakout should be supported by breaking out from 9000$ level. Bearish breakout should be supported by 6800$ breakdown.
Good luck and feel free to share your ideas to make any contribution to this analysis.
How to be a Successful Forex Trader Segment 3BBACK TESTING CONT.:
Picking up from my last Educational post, Segment A...
Pip Potential (PP) is a key component for me as it allows me to statistically determine how far a trade will run. In all my trades, I want, at the very least, a 3-1 risk to reward ratio (RRR). Basically I want to make $3 for every $1 I risk. Please understand and, this is very important to long term success, if you use a 3-1 RRR, or better, you can have a win rate of approximately 35% and still be profitable. YES, only 35% and still be Profitable!!!
That is how you stack the odds in your favor :)
Determining how far a trade is likely to run can be done a number of ways, you can use the daily ATR, pivot points, support/resistance or, as I do statistically. Any way you do it, you NEED to do it. Unfortunately, I know several traders who get into trades without thinking about where they are going to get out and that is problematic in the long term. (I always reference the long term because that is where you need to focus on, not 1 trade but rather 100 or 1000 or 10K trades...that is how your trading success will be determined).
All off the above can be revealed through back testing :)
If you think about your maximum draw down you can determine your stoploss, similarly, if you determine how far a trade will, probably, run you can determine your profit target. Combine the 2 and you have your Risk to reward ratio (RRR) and from that you can determine, if you should even take the trade. Personally, I never, ever, buy into resistance or sell into support. it may turn out to be a great trade but for me the Risk outweighs the reward.
I hope this helps and please comment and ask questions or even make suggestions as to a topic you would like me to address.
In my next post, I will cover how to determine High probability set-ups.
Allen
