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A Simple Lesson in Risk ManagementUtilising a Risk to Reward Ratio How many of you obsess over an 80% profitability rate? You may feel the need to be right all the time and cannot accept a large amount of losing trades. OR You may think in order to become a profitable trader you need to win more than you lose. Well it's time to put that aside. You do not need to have a high profit/loss ratio or profitability rate to become a profitable trader, you can be right just 50% of the time (as shown on the chart) and still make an excellent profit by utilising a strict risk to reward ratio when trading. You can actually have a profitability rate of 40% with a 1:2 risk to reward ratio and still be in profit! The higher your risk to reward ratio the less you need to be right, many professionals use a minimum of 1:3 meaning they will risk 100 pips to make 300 pips. I personally use a minimum risk to reward ratio of 1:2... But in order for you to do the same, it has to align with your trading strategy. Do not set unrealistic profit targets in which you will not achieve! To round off this post I truly hope this explained the positive effects of applying a strict risk to reward ratio in your own trading. I am available via private message for any questions you may have. Here's to your success!!!
Education
by LewisGlasgow
17
EUR/GBP - Bearish 5-0Hello traders, here we have another 5-0 pattern but this time on the 1h timeframe with EUR/GBP. Price has formed a valid head and shoulders pattern within the 5-0, I'm expecting price to complete the right shoulder at the D point followed by a sell-off to 0.83300. This is an excellent shorting opportunity with over a 1:3 risk to reward. The measurements for a valid 5-0 pattern are detailed below. B: 1.13 - 1.618 C: 1.618 - 2.24 D: 0.50 I hope your week is full of profit, safe trading everyone!
Short
by LewisGlasgow
NZD/JPY - Bullish 5-0We're looking at NZD/JPY on the daily chart with a potential bullish 5-0 pattern, this is an excellent buying opportunity with over 1:3 risk to reward... Keep an eye on this setup completing! The measurements for a valid 5-0 pattern are detailed below. B: 1.13 - 1.618 C: 1.618 - 2.24 D: 0.50 Price has formed a cup and handle pattern which indicates a move higher to complete the C point, you can buy once price closes above the resistance level or wait until the bullish 5-0 pattern completes to enter your position. I hope you all have a great week, safe trading everyone :)
Long
by LewisGlasgow
NZD/USD - Three Drives (Confluence)Hello traders, following up from my previous post on NZD/USD with a bearish cypher pattern (shown below). I have now spotted a bullish three drives pattern that aligns with the D point of the cypher and it looks insane! This has opened up an opportunity to trade with over 1:4 risk to reward, I'll be selling upon the breakout of the trendline. Do not forget we have the FOMC rate statement on the 1st of February and NFP on the 3rd of February, this provides additional reasoning for a 600 pip move. As always, trade safe everyone!
Short
by LewisGlasgow
31
How to Trade the AB=CD PatternHow to Trade the AB=CD Pattern Hello traders, following up from my previous educational post I received several requests via private message for my take on the AB=CD pattern. This structure represents the basic foundation for all harmonic patterns, it is one of the classic chart patterns which is repeated over and over again. It was developed by Scott M. Carney and Larry Pesavento after being originally discovered by H.M Gartley. Firstly to spot this chart pattern like any other, you need to train the eye. It may be difficult at first but over-time it will become natural through repetition. How do I measure the move? Grab your fibonacci retracement tool and draw from point A to point B of the initial move or impulse leg to get point C. This must hit the minimum 0.618 (61.80%) retracement of the A to B move but not exceed 0.786 (78.60%). A valid C point is illustrated on the chart with two horizontal lines and a grey box. You're now looking to complete the pattern by locating the D point which is the potential reversal zone (PRZ), this represents a critical area where the flow of buying and selling is potentially changing. The D point is an extension of the A to B move that must hit the minimum 1.272 (127.20%) extension but not exceed 1.618 (161.80%). A valid D point is illustrated on the chart with two horizontal lines and a grey box. Or alternatively you can measure this move by using the ABCD pattern tool provided by TradingView. To summarise, the measurements for a valid AB=CD pattern are detailed below. C: 0.618 - 0.786 D: 1.272 - 1.618 The measurements for a perfect AB=CD pattern are detailed below. C: 0.618 D: 1.618 Trading Rules Wait until the pattern fully completes at the D point before buying or selling. Here are a few tips on finding a pattern with a higher probability rate (although not essential for a valid pattern): The length of line AB should be equal to the length of line CD. The time it takes for the price to move from A to B should be equal to the time it takes for the price to move from C to D. Stop Loss When looking to place your stops there are many ways this can be done depending on your trading plan, but it should always be placed below the D point. Your risk to reward ratio should be a minimum of 1:2 on every trade, if this cannot be achieved then I would not personally take the trade. Take Profit When using take profit targets I highly recommend having two and not just one, meaning you can close the trade after your first target has been reached or move your stop loss into profit (risk free trade). Just like your stop loss there are many ways this can be done depending on your trading plan, but I recommend setting your take profit levels at the highs or lows of C & A. Timeframes & Currency Pairs This pattern like any other and is more profitable with certain currency pairs and timeframes, you should do your own back testing before trading the pattern. Personally speaking this pattern holds and better structure and performs best on higher timeframes such as the 4h and daily rather than the 5m. To Round Off I truly hope this post explained how to trade the AB=CD pattern. I am available via private message for any questions you may have.
Education
by LewisGlasgow
4
USD/SEK - Market DirectionToday we're taking a look at the future market direction of USD/SEK on the daily chart. You can clearly see price was trading within a horizontal channel since the beginning of 2015 and broke out during October 2016, driving price right up to 9.44500. Price has now reached this crucial pivot point in the market, providing an excellent opportunity to go long (trading just above the 200 EMA). If you have any additional analysis feel free to leave it below.
Long
by LewisGlasgow
How to Trade the Inverted Head and Shoulders PatternHow to Trade the Inverted Head and Shoulders Pattern Hello traders, following up from my educational post on the Head and Shoulders pattern I felt I should provide you with the bullish equivalent... The Inverted Head and Shoulders pattern. Featured on the chart is an illustration of a complete Inverted/Inverse Head and Shoulders pattern including the rules I personally use to trade it. This is an easily identifiable pattern which can be traded across various timeframes which means it can be used by day traders, swing traders or even position traders. Why the Head and Shoulders pattern? It has an excellent risk:reward Appears on all timeframes and markets Easy to remember and find It has a precise entry, stop loss and take profit This formation is mainly seen at market bottoms. It is rarely perfect in appearance and you may need a good eye to spot one (check my inverted head and shoulder trading ideas for an example). You can draw this pattern by using the TradingView tool found on the chart section named "Head & Shoulders" or by using trendlines. From personal experience the best performing Head and Shoulders pattern will have a right shoulder that is a 0.618 retracement of the head. The correct way to trade this pattern is to wait until the entire pattern has formed, then once price closes above the neckline... You can enter your position :) To round off this post I truly hope this explained how to trade the Inverted Head and Shoulders pattern so you can use this for your own trading. I am available via private message for any questions you may have.
Education
by LewisGlasgow
5
AUD/NZD - Bullish Bat + Bearish Bat + TrendlinesHope everyone had a great weekend! Marks are about to open and I am PUMPED! Just now, we are looking at the AUD/NZD on the 4h chart. I have targeted strong trendiness in the market along with TWO bat patterns! The bullish bat has just finished completing at the end of last week. Looking at the bigger picture, price points in the bullish bat compliment a much larger bearish bat that we can look to for a completion in the days to come. Some might argue that some of the price points on these patterns are not spot on, however, the trend lines I have marked on the chart compliment the patterns shown, adding more confirmation to the prediction in price movements. The measurements for a valid bat pattern are detailed below. B: 0.382 - 0.50 C: 0.382 - 0.886 D: 1.618 - 2.618 Final X to D: 0.886
by cdschultheis15
Trader QuestionnaireTrader Questionnaire The purpose of this post is boost your overall confidence as a trader, to show you how much you have achieved since the beginning of your journey. A personal assessment review is an excellent way to outline your personal beliefs and expectations of trading in general. Write down your own answer to each individual question and review these questions/answers from time to time as you progress throughout your trading career. 1. When did you start trading? 2. What is your favourite trading pair or asset? 3. What is your preferred timeframe for trading? 4. What was your best trade? 5. What was your worst trade? 6. What is your greatest trading strength? 7. What is your greatest trading weakness? 8. What areas of trading do you think you need to learn more about? 9. What is your greatest benefit of trading outside of the money? 10. What do you expect to get out of trading? I am available via private message for any questions you may have.
Education
by LewisGlasgow
6
GBP/JPY - The Bigger PictureFollowing up from my prediction last week which resulted in 500+ pips, I'm now revealing my long term view for GBP/JPY. I'm expecting the Great Britain Pound to continue all the way up to 156.500 to complete this bearish shark pattern! The measurements for a valid shark are detailed below. C: 1.13 - 1.618 D: 1.618 - 2.24 Final X to D: 0.886 - 1.13 I'm still holding my position from last week with my stop loss in profit, I plan to continue holding it until we complete this shark pattern at 156.500. Safe trading everyone :)
by LewisGlasgow
3
10 Rules of Successful Trading10 Rules of Successful Trading I personally feel these are the 10 most important rules to follow, especially as a beginner in order to become a consistently profitable trader. You can refer back to these rules whenever you feel lost or confused about what’s going wrong with your trading. 1. Stick to one strategy, and master it. 2. Plan your trade, trade your plan. 3. Never trade without stops and limits. 4. Record, journal and review your trades. 5. Find a mentor. 6. Don't let your emotions dictate your trading. 7. Never risk more than 1-2% of your account. 8. Accept that losses will occur. 9. Don't focus on the money, focus on the trade. 10. Be patient, be consistent, be disciplined. Here's to your success!!!
Education
by LewisGlasgow
10