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26 October 2018

 

25 Powerful Trading Lessons From Jesse Livermore

By Jesse Livermore

Born in 1877, Jesse Livermore is possibly the most famous trader in history.

He started trading at the age of 14 from bucket shops. His tape reading skill was so good that these bucket shops eventually didn’t want to do business with him.

At his peak in 1929, he was worth $100 million. Ultimately, he lost his entire fortune when he broke his trading rules.

The same trading rules which made him millions, caused him to lose everything when he lost control of himself.

Still, there are valuable lessons to be learned from Jesse Livermore’s trading experience.

Jesse Livermore’s 25 Trading Lessons
1. Watch the market leaders.

Watch the market leaders, the stocks that have led the charge upward in a bull market.

That is where the action is and where the money is to be made. As the leaders go, so goes the entire market.

If you cannot make money in the leaders, you are not going to make money in the stock market. Watching the leaders keeps your universe of stocks limited, focused, and more easily controlled.

2. Markets are driven by humans and human nature never changes.

There is nothing new on Wall Street or in stock speculation.

What has happened in the past will happen again, and again, and again. This is because human nature does not change, and it is human emotion, solidly build into human nature, that always gets in the way of human intelligence. Of this I am sure.

All through time, people have basically acted the same way in the market as a result of greed, fear, ignorance, and hope. This is why the numerical formations and patterns recur on a constant basis.

I absolutely believe that price movement patterns are being repeated. They are recurring patterns that appear over and over, with slight variations. This is because markets are driven by humans — and human nature never changes.

3. Markets are never wrong but opinions often are.

The market will often go contrary to what speculators have predicted.

At these times, successful speculators must abandon their predictions and follow the action of the market. Prudent speculators never argue with the tape.

Markets are never wrong, but opinions often are. Remember, the market is designed to fool most of the people most of the time.

4. It was never my thinking that made the big money for me. It always was my sitting.

They say you never go broke taking profits. No, you don’t. But neither do you grow rich taking a four-point profit in a bull market.

I did precisely the wrong thing. The cotton showed me a loss and I kept it. The wheat showed me a profit and I sold it out. Of all the speculative blunders there are few greater than trying to average a losing game. Always sell what shows you a loss and keep what shows you a profit.

The market does not beat them. They beat themselves, because though they have brains they cannot sit tight. Old Turkey was dead right in doing and saying what he did. He had not only the courage of his convictions but also the intelligence and patience to sit tight.

After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting.

5. You can win on a stock, but you cannot beat Wall Street all the time.

First, do not be invested in the market all the time.

There are many times when I have been completely in cash, especially when I was unsure of the direction of the market and waiting for a confirmation of the next move.

Second, it is the change in the major trend that hurts most speculators.

Always remember; you can win a horse race, but you can’t beat the races. You can win on a stock, but you cannot beat Wall Street all the time. Nobody can.

There is the plain fool, who does the wrong thing at all times everywhere, but there is also the Wall Street fool, who thinks he must trade all the time.

No man can have adequate reasons for buying or selling stocks daily– or sufficient knowledge to make his play an intelligent play.

Remember this: When you are doing nothing, those speculators who feel they must trade day in and day out, are laying the foundation for your next venture. You will reap the benefits from their mistakes.

6. It is what people actually did in the stock market that counted – not what they said they were going to do.

7. Successful trading is always an emotional battle for the speculator, not an intelligent battle.

8. I believe that the public wants to be led, to be instructed, to be told what to do.

They want reassurance. They will always move en masse, a mob, a herd, a group because people want the safety of human company.

They are afraid to stand alone because they want to be safely included within the herd, not to be the lone calf standing on the desolate, dangerous, wolf-patrolled prairie of contrary opinion.

9. I believe that having the discipline to follow your rules is essential.

Without specific, clear, and tested rules, speculators do not have any real chance of success. Why?

Because speculators without a plan are like a general without a strategy, and therefore without an actionable battle plan.

Speculators without a single clear plan can only act and react, act and react, to the slings and arrows of stock market misfortune, until they are defeated.

10. If you can’t sleep at night because of your stock market position, then you have gone too far.

If this is the case, then sell your position down to the sleeping level.

11. Remember that stocks are never too high for you to begin buying or too low to begin selling.

12. I never argue with the tape.

When I am long of stocks it is because my reading of conditions has made me bullish.

But you find many people, reputed to be intelligent, who are bullish because they have stocks. I do not allow my possessions – or my prepossessions either – to do any thinking for me. That is why I repeat that I never argue with the tape.

13. Not taking the loss — that is what does damage to the pocketbook and to the soul.

Losing money is the least of my troubles. A loss never troubles me after I take it. I forget it overnight. But being wrong – not taking the loss – that is what does the damage to the pocketbook and to the soul.

14. I trade on my own information and follow my own methods.

15. Trade along the path of least resistance.

If after a long steady rise a stock turns and gradually begins to go down, with only occasional small rallies, it is obvious that the line of least resistance has changed from upward to downward.

Such being the case why should anyone ask for explanations? There are probably very good reasons why it should go down.

16. I don’t buy long stocks on a scale down, I buy on a scale up.

When I’m bearish and I sell a stock, each sale must be at a lower level than the previous sale.

When I am buying, the reverse is true. I must buy on a rising scale. I don’t buy long stocks on a scale down, I buy on a scale up.

17. Don’t be fooled by the charisma of other traders.

It cost me millions to learn that another dangerous enemy to a trader is his susceptibility to the urging of a magnetic personality when plausibly expressed by a brilliant mind.

18. Know yourself.

A man must know himself thoroughly if he is going to make a good job out of trading in the speculative markets.

19. Fear and greed are your greatest enemies

When the market goes against you, you hope that every day will be the last day – and you lose more than you should, have you not listened to hope.

And when the market goes your way, you become fearful that the next day will take away your profit and you get out – too soon. The successful trader has to fight these two deep-seated instincts.

20. Trading is not a get rich quick scheme.

The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick adventurer. They will die poor.

21. Being a little late in a trade is insurance that your opinion is correct.

Don’t take action with a trade until the market, itself, confirms your opinion. Being a little late in a trade is insurance that your opinion is correct. In other words, don’t be an impatient trader.

22. Never average losses.

It is foolhardy to make a second trade if your first trade shows you a loss. Never average losses. Let this thought be written indelibly upon your mind.

23. The trend is your friend.

Successful traders always follow the line of least resistance. Follow the trend. The trend is your friend.

24. Always trade with a stop loss.

When you make a trade, “you should have a clear target where to sell if the market moves against you. And you must obey your rules! Never sustain a loss of more than 10% of your capital. Losses are twice as expensive to make up. I always established a stop before making a trade.

25. Don’t try to play the market all the time.

Every once in a while, you must go to cash, take a break, take a vacation. Don’t try to play the market all the time. It can’t be done, too tough on the emotions.

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18 October 2018

 

The One Day Reversal pattern – Jesse Livermore


The one day reversal pattern was defined by the well-known trader Jesse Livermore, who considers it a strong signal. As the name implies this pattern is used on day charts.

A one day reversal long pattern occurs when the low of the candle is lower than the low of the previous candle, but the close of the candle is above the close of the previous candle. A one day reversal short pattern occurs when the high of the candle is higher than the high of the previous candle, but the close of the candle is below the close of the previous candle.

Jesse Livermore often used the volume indicator (only available for exchange traded instruments) as confirmation. When a one day reversal pattern occurs, the order volume corresponding to the signal candle must be higher than the previous day's order volume.

This example shows both a short sell signal and a buy signal. Jesse Livermore would reject the short sell signal because the volume corresponding to the signal candle is lower than the previous day's volume.




16 October 2018

 

Richard Dennis: 17 Trading Advice from a Market Wizard

Credit: Rayner Teo

Richard Dennis was a Systematic Trend Follower who trades the Futures market (during the 70s and 80s)

His rise to fame came when he was featured in Market Wizards as he took a $400 trading account and turned it into $200 million.

He is also the founder of the Turtle Traders (which came from a bet he made with his partner to determine if trading can be taught, or not).

And yes, he won the bet that trading can be taught.

However, not all stories have a happy ending.

According to sources, Richard Dennis’s hedge fund suffered huge drawdown (in excess of 50%) due to aggressive risk management, and he eventually shut it down.

However, there are valuable lessons you can learn from Richard Dennis — which are still applicable today.

And I want to share them with you right now…



1. Whatever method you use to enter trades, the most critical thing is that if there is a major trend, your approach should assure that you get in that trend.
If you think about it…

Breakouts are the only entries that will ensure you’ll catch every single trend — every single time.

And that’s why most Systematic Trend Followers trade breakouts as their entry method.

You might be wondering:

“But what about pullbacks?”

I know pullbacks are psychologically easier to execute because you’re buying low and selling higher.

But it comes with a price — and that’s missing the entire trend because the market didn’t offer a pullback.

So if you want to be involved in every trend that comes along, then you must trade breakouts.

2. A good trend following system will keep you in the market until there is evidence that the trend has changed.
Here’s a fact:

There’s no way to predict how high the market will go.

So, the next best thing you can do is trail your stop loss as the market moves in your favor.

However, you don’t want to have a tight trailing stop loss as you’ll get stopped out on the retracement.

Instead…

Widen your trailing stop loss to accommodate the deep retracement that might occur — and you have the best chance of riding a trend.

And chances are if you get stopped out, it’s because the trend has reversed.

Pro Tip:

You can use indicators like Moving Average or the Average True Range to trail your stop loss.

3. When you have a position, you put it on for a reason, and you’ve got to keep it until the reason no longer exists.
This is the opposite of what most traders do — and it HURTS them big time.

Here’s why…

Most of you tell me you want to ride big trends.

And it’s no secret that the KEY to riding massive trends is to trail your stop loss (I covered that earlier).

However…

You have difficulty holding on to your gains because…

You see profits.

You see green.

You see money.

BUT…

You have the FEAR of losing those gains.

So, you exit your trade even though the market hasn’t hit your exit signal.

The end result?

Big losses and small winners.

So here’s the lesson:

If you want to be a consistently profitable trader, you must follow your rules and exit your trades ONLY when the reason no longer exists.

4. You should expect the unexpected in this business; expect the extreme. Don’t think in terms of boundaries that limit what the market might do.
Look at the chart below:



You’re probably thinking:

“Insane! The price is so high. I’m sure the market is about to reverse lower.”

And here’s what happens next…



BOOM!

The market exploded even higher.

I know it’s hard to believe the market can just continue to make new highs especially when it looks “overbought”.

So the lesson is this:

You can never tell if the market is too high to buy or too low to short.

Because what’s high can go higher and what’s lower can go lower.

5. If there is any lesson I have learned in the nearly twenty years that I’ve been in this business, it is that the unexpected and the impossible happen every now and then.
If you saw the earlier Bitcoin example, you might think that such “extreme” moves rarely occurs.

Wrong!

Here are more examples…







Now don’t get me wrong.

You shouldn’t expect these moves every week or month.

But chances are, you can find these trends once every few years (and they can last for YEARS).

The bottom line is this…

If you have the discipline to ride your winners, it’ll be a matter of time before you catch one of these “monsters”.

6. Trading decisions should be made as unemotionally as possible.
If you trade based on emotions:

You’ll buy at the highs when things are moving “fast”, hold onto your losses hoping they will rebound, trade larger hoping to make back what you’ve lost, and etc.

Clearly, you know that trading based on emotions is a recipe for disaster,

Instead, you’ve got to think, act, and trade like a machine!

Now the question is, how?

Here are a few tips to get you started…

Develop a trading plan with clearly defined buy & sell rules
Risk not more than 1% of your capital on each trade
Focus on executing your trading plan consistently (this is so important)
Don’t get swayed but the short-term results, think long-term
If you want to learn more, then go check out this trading guide: How to be a Consistently Profitable Trader within the Next 180 days.

7. Trade small because that’s when you are as bad as you are ever going to be. Learn from your mistakes.
Let me ask you…

If you want to be a brain surgeon, will you immediately operate on a live human brain?

Of course not!

You’ll probably start off practicing on a “dummy” brain.

As you get better, you’ll work on a live human but only on a minor segment of it (so it doesn’t cause danger to the person).

Then as you level up, you’ll work on the major parts and finally, you have the confidence to do it on your own.

And it’s the same for trading!

You want to trade small because you’ll make mistakes — plenty of it.

So, why pay more in “tuition fees” to Mr. Market when you can do so at a fraction of the cost?

8. I could trade without knowing the name of the market.
You’re probably wondering:

“How is that possible?”

Well, that’s because you’re trading the price in front of you without concerning where the price is derived from.

It could be Soybean, Crude Oil, Copper, Rubber, or Cotton, who cares.

The only thing that matter is price, and nothing else.

Because the price is moved by an imbalance of buying & selling pressure which is based on emotions like fear, greed, hope, and regret.

These emotions or biases can last for a long time which in turn becomes a trend — something Trend Followers can capitalize on.

And that’s why you don’t need to know the name of the market.

All you need to know is…

Buy what’s going up
Sell what’s going down
Repeat
9. In the real world, it is not too wise to have your stop where everyone else has their stop.
Let me ask you…

Do you always get stopped out only to watch the market reverse back in your intended direction?

Because you put your stop loss where everyone else puts it (like below Support) — which creates an incentive for the “smart money” to hunt your stop loss.

So, how can you avoid it?

By setting your stop loss AWAY from the obvious market structure.

This means don’t place your stop loss smack under Support, or just above Resistance.

I cover in more details here: How to Avoid Stop Hunting While Other Traders Get Stopped Out

10. You could publish trading rules in the newspaper and no one would follow them. The key is consistency and discipline.
This is true for 99% of traders out there.

Most would not have the conviction to take someone’s trading rules and trade it consistently even though its profitable in the long-run.

Why?

Because when the drawdown comes (which all systems will have), they will abandon it and look for the next trading system — and rinse repeat this cycle again.

So, the question is…

How can you gain the confidence in your trading strategy or even someone’s trading system?

There are 2 ways you can go about it…

1. Backtest the trading strategy

This allows you to understand how a trading strategy performs historically.

If it’s proven to work in the past, there’s a possibility it could continue to work in the future (although no guarantee since it could be curve fitted).

2. Understand the logic behind WHY a trading strategy works

Most trading strategy that works have an underlying logic behind it.

For example:

Trend Following works because human biases and emotions cause the market to trend.

So, if a trader can cut his losses and ride his winners, he can capitalize on the long-term trend that comes about.

Or how about Value Investing?

It works because investors dump stock during “bad news” and that pushes the price of the underlying security below its intrinsic value.

This allows savvy investors to buy low (below the intrinsic value), and sell high (when the price increase back towards the intrinsic value).

11. There are lots more false breakouts, perhaps because there are more computer-based trend followers.
Here’s the deal:

Not all breakouts will work out.

In fact, half or more of your breakout trades are likely to fail.

However, it doesn’t mean trading breakouts is a losing strategy, far from it.

Remember, it’s not how often you win that’s important.

It’s how much you win when you’re right and how much you lose when you’re wrong — that’s what matters.

Also…

If you want to increase your odds of capturing a trend, you must trade across different markets.

This includes Forex, Indices, Energy, Metals, Agriculture, and etc.

If you want to learn more, then go read The Ultimate Guide to Trend Following.

12. It is misleading to focus on short-term results.
I’ll tell you this:

Your short-term results are random.

Because when you’re dealing with probabilities, anything is possible in the short run.

It’s only in the long run (after a large sample size of trades) that your results will align towards its expectancy.

Don’t believe me?

Then let me prove this to you…

Look at the performance of this trading system over the last 5 months…



Now, most of you would say this performance is crap and you’ll likely abandon this system after few losing months.

Now, look at this trading system below…



This looks like a much better system, right?

But guess what?

This is the same EXACT system as the one above.

The only difference is I’ve shared with you the results over the last 18 years instead of the 5 last months.

Do you see my point now?

In the short run your trading results are random but eventually, it’ll align towards it’s expected value.

13. You have to minimize your losses and try to preserve capital for those very few instances where you can make a lot in a very short period of time. What you can’t afford to do is throw away your capital on suboptimal trades.
Here’s the deal:

No matter which trading strategy you’re using, there will come a time where trading is so easy and it feels like you’re “printing” money.

But don’t be too happy just yet because…

There are also times where it sucks so bad you feel there’s no light at the end of the tunnel — and you just want to quit trading altogether.

So…

The “trick” is to minimize the damage during the bad times so you can survive and THRIVE during the good times.

This means:

Have proper risk management in every trade
No revenge trading even if you’re angry with the markets
No over trading hoping you can make your losses back quickly
Follow your trading system no matter how hard it is to pull the trigger
If you can do it, then you’ll likely overcome your drawdown and reach new equity high again.

14. I learned that a certain amount of loss will affect your judgment, so you have to put some time between that loss and the next trade.
There are 2 ways to look at this…

If you’re a discretionary trader, then yes, it makes sense to put some time between your loss and the next trade (especially if you have sustained a series of losses).

Because as a discretionary trader, your trading decisions are based on your analysis of the markets.

If you are carrying emotional baggage, you won’t objectively analyze the markets which lead to sub-optimal trading decisions.

However, if you’re a systems trader, then things are different.

Because the more losses you face, the closer you’ll be towards your next winning trade.

So, if you have a proven system that works, the last thing you’d want to do is to skip your trades because you have the fear of losing.

Instead, you must trade your system consistently so you don’t “mess up” the results of it.

15. Trading has taught me not to take the conventional wisdom for granted. What money I made in trading is a testimony to the fact that the majority is wrong a lot of the time.
The reason why most traders fail is because they want to be spoon fed.

They don’t want to put in the hard work to find out what works and what don’t.

They trust what “gurus” say instead of spending time and effort to figure things out themselves.

Now, is it no wonder that most traders never make it?

So here’s the deal:

If you want to succeed in this business, you must TEST everything.

Trust nothing but question EVERYTHING.

If you’re unsure, backtest it, forward test it, and use your brain to think about it!

16. Almost anybody can make up a list of rules that are 80 percent as good as what we taught people.
You’re probably thinking:

“What? I could never come up with a profitable trading strategy.”

Here’s the deal…

Trend Following isn’t a difficult concept.

It’s basically…

Trade a broad basket of markets
Ride your winners
Cut your losses
And that’s it!

How difficult can it be to come up with a set of trading rules based on the above criteria?

Still, I’m going to spoon feed you further.

Go read the book Following the Trend by Andreas Clenow.

This book provides you with the exact strategy and markets to trade — so there’s no excuse anymore.

But please do your own backtesting first before trading it live.

Now…

The difficult part isn’t formulating the strategy but the execution of it — especially when the drawdown comes.

Will you be able to execute your trades consistently when you’re down 10%, 20%, or even 40% of your trading capital?

17. I’ve learned that markets, which are often just mad crowds, are often irrational; when emotionally overwrought, they’re almost always wrong.
After many years of trading, the one thing I’ve learned is to NOT trade with the crowd.

For example:



Back in 2017, Bitcoin was making new highs with a lot of attention from the media and the public.

To an astute trader, it’s a warning sign that the “party” is about to end.

Now, I don’t expect you to short Bitcoin because the market could continue to trend higher.

However, if you’re long, then you should tighten your stop loss and be prepared to BAIL OUT the moment the market show signs of reversal.

Because when the whole world has already bought, who’s left to buy?

Nobody.

And if there’s no one left to buy, the path of least resistance is DOWN.

Here’s a quote by Warren Buffet that says it best…

“Be greedy when others are fearful and fearful when others are greedy.”

Conclusion
The wisdom shared by Richard Dennis is still as applicable as they were decades ago.

Now, some of you might argue that Richard Dennis strategy doesn’t work anymore.

Well, the exact parameters he used to trade might not work anymore.

But the principles of Trend Following still works and is currently used by some of the biggest hedge funds in the world (like Winton Capital).

So, don’t get caught up by the specific tactics but look at the big picture and understand the concepts behind it.

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11 Top Lessons From Veterans

Credit: Rayner Teo

Who are these million dollar traders?
It is very well known that trading in the market has a high failure rate. However, the traders who have made it can go on to become very wealthy and successful. Imagine if all of us could learn from veterans in any field and drastically reduce the time to be good and not suffer some devastating lessons along the way.

Unfortunately, us humans are a complicated bunch. Most of us would rather suffer and learn the hard way ourselves than to follow the advice of the wiser. Don’t be too hard on yourself though because learning from our mistakes is part of the journey.


These millionaire traders have stood the test of time and learned some harsh lessons. An unfortunate but necessary step in anyone’s path to profitability.

The list of traders range from millionaire day traders to option traders. Some of these top traders:

Mark Minervini
Ed Seykota
Nathan Michaud
Marty Schwartz
Jesse Livermore
Richard Dennis
Paul Tudor Jones
William O Neill
David Ryan
Larry Hite
Some of you reading this are struggling to become consistent. Read through these lessons and really try and take away something from them. You will notice that the advice given is from traders old and new.

The same lessons are applicable today as they were in the past. So that leads me nicely on to the first lesson.



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1. Wall Street Never Changes Because Human Nature Never Changes
A great lesson from top trader Jesse Livermore. Some of you might think that ‘it’s different in the markets nowadays‘ or trading was easier back then. While the rise of HFT’s may have caused some new problems for the average trader, fundamentally the principles remain the same.

The stock market never changes. Why? Because human nature doesn’t change. We are all fearful, greedy and emotional. (some more than others) and this is what causes us to lose money.



How many times have you been up nicely on a trade? Then decided you wanted to make more money and moved your exit point to a more ambitious target.

This is just one example of greed in place. We’ve all done it. And yes it’s bloody annoying ! But our human nature can get in the way.

Human nature means the patterns in the markets are repeatable over time. That lesson was given over 100 years ago and it is still well and truly relevant today.

Ask yourself, Do I allow my human nature to get in the way of my trading decisions?

If the answer is an absolute yes, then you have your first problem to work on! Again, it’s human nature. We all suffer from it in some form or another. The trick is being able to control it.



2. Being Wrong Is Acceptable, But Staying Wrong Is Unacceptable
Here’s a very important lesson from Mark Minervini. It really illustrates the importance of risk management. Every one of us will have losing trades. It’s part of any trading system.

The important thing is we cut our losses short. If we don’t and continue to stay wrong, we could run the risk of going broke. This is one of the most important yet basic lesson in this list.



Don’t let trades get out of hand. Accept you are wrong and move on. Unfortunately, it take some a few very large losses to learn this lesson. If you can loss small while you are learning to trade, you’ll have cash available for when things start to get consistent.



3.Investment Psychology Is By Far The More Important Element, Followed By Risk Control.
A great lesson by Tom Basso. If you’re completely new to trading, this might be lost on you. But very the rest of us, it’s important to remember how much psychology plays a major role in our trading decisions.

Feeling anxious to pull the trigger, betting too big, whatever the problem, these issues are all psychological. They are something that must be controlled. many of us, (myself included in the beginning) don’t understand the importance of psychology in trading.

I would love to be a stone cold emotionless trader but the truth is that it’s an ongoing struggle to remain fully emotionless.

How can you work on psychology and get better? Well, check out this trading psychology post for assistance. This took me years to master and even today I sometimes find myself angry over a mistake I made etc.

So don’t be too hard on yourself. It takes time but always understand that psychology is so very important and you should always be aware of how you feel and your overall emotions when trading.



4. Even A Poor Trading System Could Make Money With Good Money Management
While this can be a controversial lesson, there are some key points to take away from it. Alright, I get it. Some of you will say if the system is poor than you’ll lose money and that may very well be the case.

But the point here isn’t the trading system. It’s about money management. So many of us go from one strategy to another.

Why? Because we try to find the holy grail.

The truth is there’s no holy grail. And if a poor system could make us profitable with good money management, wouldn’t it be better to focus on the money management side of things as opposed to finding the perfect strategy?

Have a look at the equity drawdown graph below and what it would take to make back the money you’ve lost.

millionaire traders



Could you make 400% and come back from a 75% drawdown on equity? These figures are eye opening. Managing risk should always be the number 1 priority.

5. Find A Trading Style That Suits Your Personality
So what is this lesson all about? Well, let’s take an example. If I’m naturally lacking patience, do you think I would make a great position trader? I don’t think so. My personality would be at odds with my strategy and I would find it very tough to have the discipline to follow the strategy.

The same goes for you. Find a trading style that suits your personality. This article on finding the right trading style may be of assistance.



If you find the right style, you’ll find it much easier to remained disciplined during the inevitable drawdown period every strategy goes through.



6. If Most Traders Would Learn To Sit On Their Hands 50 Percent Of The Time, They Would Make A Lot More Money
A lesson by millionaire trader Bill Lipschutz. Fear of missing out or always entering and exiting trades can really eat into your performance. If you can have patience to wait for your trading setups ( yes even as a day trader or scalper) you will see a very big improvement in results.

How many times have you entered a trade early because you couldn’t sit on your hands and wait for the right time?

It happens I know but learning the discipline to follow the strategy is very important. How many times do you wish you didn’t enter a trade or waited? All these errors can ad up over time to something much more problematic.

If you struggle with trading errors, you can download this trading error template to keep track going forward.



7. The Single Most Important Thing Is To Learn From Failures
Ray Dalio believes failure plays an important role in the journey of a trader. Throughout life, we are taught to avoid failure (exams, driving tests etc) but it is a necessary part of anyone’s journey.

Why?

We learn far more from failures than successes. So with that in mind, don’t be afraid to fail. Every billionaire once failed at something. The important part is you learn from the mistakes.

You’ve more than likely heard it many times but the Thomas Edison quote rings true here.



“I have not failed. I’ve just found 10,000 ways that won’t work.”

Talk about never giving up! But as long as you are improving and learning from different mistakes you are making, don’t be discouraged. You will question your own sanity sometimes in this job (I have on countless occasions) and it can really be tough.

But my greatest breakthroughs came right after I made some monumental failures.



8. Perfection In Trading Is Not Necessary
Okay, you are reading that and think what ?? But think about it. Larry Hite said it is incredible how rich you can get by not being perfect. You will encounter many setbacks on your journey but if a trader of his level says this, you should take note.

So many of us want to be perfect. In trading that could manifest itself through wanting to always be right in trades and have a high win percentage. However, that is nonsense.

You see how trading is doing exactly the opposite of what we grew up learning? We should only focus on risk reward. That is a far more important aspect of a trading system than the need for perfection and a high win percentage.



9. Don’t Do What’s Comfortable, Do What’s Right
Picture for a moment you just had a string of losing trades. You followed your trading plan perfectly and still had these losses. It’s normal to encounter these losses. But now imagine another trade is setting up and you are fearful of entering the trade so you don’t pull the trigger.

That trade turns out to be a big winner that would have wiped all those other losses away. Have you ever been there?

In this scenario, you did what was more comfortable, not what was right. Again, don’t be too hard on yourself. We all do it. Learn from it and move on but top traders always pull the trigger.



10. Consistency Is Key
Nate, a day trading millionaire says consistency is key. Wild violent swings in your profit chart is not healthy for the mental health. Keep things simple and follow a proven approach and you are ahead of many in the industry.

Would you rather bet the house on a trade and potentially make or more importantly lose a ton? Or have small consistent gains which add up over time?



I know what I’d prefer. Keep things simple and consistent. Your health is more important 🙂



11. Win or Lose, You Are Responsible For Your Trading Results
How many of us have blamed the markets, the weather, our neighbor or whatever for a poor trading result?

We’ve all made excuses,( well most of us anyway) at one point or another. And where do you think it has gotten us?

Absolutely nowhere!

The trading result didn’t change and we were in the exact same position. So take responsibility for your own trading. How can you ever improve if you don’t take full responsibility for anything you do?

Sure you might feel better blaming others but does it change the outcome? More than likely it doesn’t. So knuckle down and start improving. In the future when you look back with a smile, you’ll be glad you took charge sooner.



What Can We Learn In Summary From These Lessons?
There is a common theme among all these lessons which can be summarized into the following:

Risk Management is EXTREMELY important
Trading psychology plays a MASSIVE role in performance
Failing is part of learning
Risk/Reward is more important than perfection
Focus and discipline are VERY important
Patience is a virtue in trading (wait for the right setup as part of your plan)
More than likely if you have read any trading literature, you’ll have read these lessons before in some form or another. There is good reason you hear it over and over again.

Why? Because it works. Plain and simple.

Final Words
There is a lot to take in from these lessons. I would suggest taking it one step at a time. Focus on getting good on one lesson and then move onto the next one. These millionaire traders have stood the test of time. They were not some overnight success stories so the lessons are tried and tested.

We all have failures but Ray Dalio highlights the importance of failing and learning from it. I’m fully aware some of you are struggling in your trading. I’ve been right there so I know first hand the struggles you are going through.

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Paul Tudor Jones — 21 Trading Rules That Have Stood the Test of Time

Credit: Rayner Teo

21 trading rules that will improve your trading
1. When you are trading size, you have to get out when the market lets you out, not when you want to get out.

The old high was at 56.80, there are probably going to be a lot of buy stops at 56.85. If the market is trading 70 bid, 75 offered, the whole trading ring has a vested interest in buying the market, touching off those stops and liquidating into the stops.

If I want to cover a position in that type of situation, I will liquidate half at 75, and the remaining half beyond that point.

2. Never play macho with the market and don’t over trade.

My major problem was not the number of points I lost on the trade, but that I was trading far too many contracts relative to the equity in the accounts that I handled.

3. If I have positions going against me, I get out; if they are going for me, I keep them.

4. I will keep cutting my position size down as I have losing trades.

When I am trading poorly, I keep reducing my position size. That way, I will be trading my smallest position when my trading is worst.

5. Don’t ever average losers.

6. Decrease your trading volume when you are trading poorly; increase your volume when you are trading well.

7. Never trade in situations you don’t have control.

I don’t risk significant amounts of money in front of key reports since that is gambling, not trading.

8. If you have a losing position that is making you uncomfortable, get out. Because you can always get back in.

9. Don’t be too concerned about where you got into a position.

The only relevant question is whether you are bullish or bearish on the position that day.

10. The most important rule of trading is to play great defense, not offense.

Every day I assume every position I have is wrong. I know where my stop risk points are going to be.

I do that so I can define my maximum possible drawdown. if my positions are going against me, then I have a game plan for getting out.

11. Don’t be a hero. Don’t have an ego.

Always question yourself and your ability. Don’t ever feel that you are very good. The second you do, you are dead.

12. I consider myself a premier market opportunist.

I develop an idea on the market and pursue it from a very low-risk standpoint until I have repeatedly been proven wrong, or until I change my viewpoints.

13. I believe the very best money is to be made at market turns.

Everyone says you get killed trying to pick tops and bottoms and you make all the money by catching the trends in the middle.

Well, for twelve years, I have often been missing the meat in the middle, but I have caught a lot of bottoms and tops.

14. Everything gets destroyed a hundred times faster than it is built up.

It takes one day to tear down something that might have taken ten years to build.

15. Markets move sharply when they move.

If there is a sudden range expansion in a market that has been trading narrowly, human nature is to try to fade that price move.

When you get a range expansion, the market is sending you a very loud, clear signal that the market is getting ready to move in the direction of that expansion.

16. When I trade, I don’t just use a price stop, I also use a time stop.

If I think a market should break, and it doesn’t, I will often get out even if I’m not losing any money.

17. Don’t focus on making money; focus on protecting what you have.

18. You always want to be with whatever the predominant trend is.

19. My metric for everything I look at is the 200-day moving average of closing prices.

I’ve seen too many things go to zero, stocks and commodities. The whole trick in investing is: “How do I keep from losing everything?” If you use the 200-day moving average rule, then you get out. You play defense, and you get out.

20. At the end of the day, your job is to buy what goes up and to sell what goes down so really who gives a damn about PE’s?

21. I look for opportunities with tremendously skewed reward-risk opportunities.

You should always be able to find something where you can skew the reward-risk relationship so greatly in your favor, that you can take a variety of small investments with great reward-risk opportunities, that gives you minimum drawdown pain, and maximum upside opportunities.

Conclusion
Do you want to learn more?

Click on the link below to access the Top 100 Trading Rules of all time.

These trading rules are personally handpicked by me and include the biggest names in trading, like Jesse Livermore, Paul Tudor Jones, and Ed Seykota.

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10 October 2018

 

How to Profit From the Head and Shoulders Pattern

By Justin Bennett

https://dailypriceaction.com/free-forex-trading-lessons/head-and-shoulders-pattern

The head and shoulders pattern is by far my favorite way to trade reversals in the Forex market. They don’t come around often but when they do the profits can be considerable.

It isn’t abnormal to see moves of 500 pips or greater from these patterns. We’ll take a look at one that formed on the GBPJPY that resulted in a very profitable 1,800 pips.

But what actually qualifies as a head and shoulders? Where should it form on a chart and what attributes does it need to have?

Exclusive Bonus: Download the Head and Shoulders PDF Cheat Sheet that will show you everything you need to know to make money from this reversal pattern.

Then there are the questions about entries, exits and of course the often-confusing measured objective. All of these unknowns can lead to an endless stream of confusion.

If you find yourself asking these same questions, then you’re in luck.

By the time you finish this lesson, you will know how to identify the very best reversals and how to enter and exit for a profit. I’ll even show you how to determine a measured objective so you can squeeze out as much profit as possible while managing your risk.

Let’s begin.

Key Attributes of the Head and Shoulders Pattern
Before you can trade it, you must first know the key attributes of the pattern. That way you can easily spot the most favorable head and shoulders to trade.

Let’s start with the illustration below.

head-and-shoulders-pattern
As you can see from the drawing above, the head and shoulders pattern has five attributes.

In order of occurrence, they are:

Uptrend
Left shoulder
Head
Right shoulder
Neckline
Notice that I placed the “neckline” last. At first, that may seem like a mistake.

However, we need both shoulders and the head of the pattern before we can identify the neckline. If that sounds confusing, don’t worry. It will make more sense as you progress through the lesson.

Now let’s discuss each step in greater detail.

Step 1: Uptrend
The very first part of a head and shoulders pattern is the uptrend. This is the extended move higher that eventually leads to exhaustion.

As a general rule, the longer the uptrend lasts, the more substantial the reversal is likely to be.

Step 2: Left shoulder
The market moves down to form a higher low. At this point, things are starting to come together, but we don’t quite have enough to draw the neckline.

Step 3: Head
Now that the left shoulder has formed, the market makes a higher high which forms the head. But despite the bullish rally, buyers are unable to make a substantially higher low.


At this point, we have the left shoulder and the head of the structure. The neckline is also beginning to take shape, but we need the right shoulder before we can draw the neckline on our chart.

Step 4: Right shoulder
The right shoulder is where things come together. It’s an indication that buyers are tiring and that the market may be gearing up for a reversal.

As soon as the right shoulder begins, we have enough to start plotting the neckline. But because the pattern isn’t yet complete, it’s best to think of it as a rough draft rather than a final version.

Step 5: Neckline
Now that we have a defined head and two shoulders we can draw neckline support. This level will become a key component when we get into how to trade the breakout.

Think of the neckline as the line in the sand between buyers and sellers.

What Is It and Why Does It Form?
All price action carries with it a message. Some messages are easier to read than others, but they’re always present.

Concerning the head and shoulders pattern, the message is that buyers are tiring and that you’d best prepare for a potential reversal.

But what is it about the pattern that causes the market to reverse? How can a few simple swing highs accomplish this?

These are the kind of questions that will help you unlock the clues and take you to the next level.

But there’s a problem…

The way I phrased the two questions above fails to capture the essence of the head and shoulders pattern.

You see, it isn’t the price structure itself that causes the market to reverse. It’s the transition that occurs between buyers and sellers. The pattern is just the outcome or byproduct of that process.

To better explain things let’s look at it from a different perspective. For this, we’re going to use a real head and shoulders formation that occurred on the GBPJPY weekly chart.

gbpjpy-head-and-shoulders-reversal
Notice how after carving out a higher high (head) and pulling back, buyers were unable to push the price back above the head. This eventually formed the right shoulder.

The lower high would be a big red flag if you were a GBPJPY bull during this time.

Let’s take another look at the same GBPJPY chart.

gbpjpy-highs-and-lows
If you’ll remember from the lesson on how to determine trend strength, the telltale sign of an impending trend change is a shift in the sequence of highs and lows.

For example, a market that’s been carving out higher highs and higher lows may be in trouble with a single lower high.

However, a trend is not technically broken until we get a lower high and a lower low. Note how the price action inside the second red circle above took out the last swing low.

As soon as that low was taken out, the GBPJPY signaled that buyers were in trouble.

The head and shoulders reversal doesn’t work because of the pattern itself. It works because of the way in which the highs and lows develop and interact with each other at the top of an uptrend.

Always remember to keep it simple. All we’re doing here is identifying a potential shift in trend by focusing on the relationship between highs and lows.

Head and Shoulders Breakout
One important thing to keep in mind about the head and shoulders pattern is that it’s only confirmed on a break of neckline support.

And by break, I mean a close below it.

A common mistake among Forex traders is to assume the pattern is complete once the right shoulder forms.

In fact, it’s only complete and thus tradeable once the market closes below the neckline.

head-and-shoulders-breakout
Notice in the illustration above that the market has closed below the neckline. This confirms the head and shoulders pattern and also signals a breakout.

Pro Tip: If you are on the daily chart, you would want to wait for a daily close below the neckline before considering an entry.

Now let’s go back to our GBPJPY example to see where the pattern was confirmed.

gbpjpy-confirmed-reversal
Notice how it took a daily close below neckline support to constitute a confirmed break. While there were a few previous sessions that came close to breaking the level, they never actually closed below support.

Next, we’ll discuss a few entry methods for trading the head and shoulders.

How to Enter a Break of Neckline Support
So far in this lesson, we have covered the five attributes of a head and shoulders pattern. We have also discussed how to differentiate a formation that’s still intact versus one that has broken down.

Now for the really fun part – how to trade and of course profit from a head and shoulders reversal.

There are two schools of thought on how to enter a breakout. The first is to use a pending order to go short just below the neckline. Note that those who use this method are not waiting for the market to close below the neckline.

The problem with this approach is that you leave yourself exposed to the possibility of a false break. You’ll often see a pair dip below support on an intraday basis only to close back above the level before 5 pm EST.

Which brings us to the second approach, and the one I prefer. This method involves waiting for a daily close below the neckline before considering an entry.

By doing this, you mitigate the risk of having the market snap back on your position and stop you out for a loss.

Because of this, we’re only going to focus on the second approach. But even when waiting for the market to close below the neckline there are two entry methods to consider.

Let’s discuss each in detail.

Entry Method #1
The first way to enter a head and shoulders break is to sell as soon as the candle closes below support (neckline).

For example, because we’re analyzing the GBPJPY on the daily time frame, we’d wait for a daily close below the neckline. That would be our signal to go short (sell).

Here’s how that would look:

Enter on close below neckline
Notice how we’re entering short as soon as the pair closes below neckline support.

Entry Method #2
While the method above has its uses, I usually prefer to wait for a retest of the neckline as new resistance.

This brings us to the second entry method.

Enter on retest as new resistance
Notice how with the second entry method we’re waiting for a retest of the neckline as new resistance.

This accomplishes two things:

It helps validate the recent break
It offers a more favorable risk to reward ratio
This combination is why I almost always opt for the second method. There is, of course, a greater chance of missing an entry by waiting, but the potential reward for doing so is equally great.

Stop Loss Placement and Risk Control
Despite being straightforward, the stop loss placement when trading the head and shoulders is a controversial topic. Some traders prefer a stop above the right shoulder whereas others choose a more aggressive placement.

Like everything you do in the Forex market, it comes down to what works best for you.

With that said, I tend to believe that a stop loss above the right shoulder is excessive. It unnecessarily and adversely affects your risk to reward ratio.

Here’s why…

A head and shoulders is confirmed with a close below the neckline, right? So a close back above that same level would negate the pattern.

Now, assuming my stop is above the right shoulder, am I going to wait for the market to take me out if it closes back above the neckline?

Of course not.

So really there are three ways to exit the trade should things turn sour. Let’s start with the first and, in my opinion, less appealing way and then we’ll finish up with my two favorites.

Stop Loss Placement #1
The first area you can place your stop loss is above the right shoulder.


Stop loss placement1
Notice how this option provides an ample amount of space between your entry and stop loss.

However, this isn’t necessarily a good thing. I’d even argue that it does more harm than good. You see, a stop loss that high means you’ve also cut your potential profit in half or worse.

In the case of the GBPJPY pattern the measured objective, which we’ll get to next, is 1,800 pips below the breakout point. If you chose this first option to set your risk, it means you’d have a 500 pip stop. If we divide that into the objective, we get 3.6R.

That’s pretty good but let’s see what we could have had using the section option.

Stop Loss Placement #2
This is my preferred stop loss placement. It allows for a much better risk to reward ratio while still affording me the ability to “hide” my stop.

Here’s how it looks on the GBPJPY chart:

Stop loss placement2
Note that I’m placing the stop above the last swing high. This is still about 200 pips from my entry, so it’s hidden, but it isn’t so far away that it adversely impacts my potential reward.

You can always go tighter if you’d like as it all depends on what fits your trading style. Just remember that the closer your stop loss is to your entry the greater the chance of being taken out of the trade prematurely.

Remember the 3.6R profit with the first stop loss placement above?

By setting your stop above the last swing high instead, you’ve cut your stop loss distance from 500 pips down to 200 pips. With an 1,800 pip objective, that’s an incredibly profitable 9R.

To put it in hypothetical terms, that’s a 7.2% profit versus an 18% profit, assuming you risked 2% of your account balance on the trade.

Exit on Close above the neckline (Safety Net)
I call this my safety net. Because any daily close back above the neckline suggests invalidation. And I don’t know about you, but I’d rather take a 50 pip loss than a 100 pip loss.

Referring to the GBPJPY example above, if the market had closed back above the neckline after it closed below it, we would want to exit the trade. Such a close would signal that the pattern is no longer valid and that sellers are no longer in control.

In fact, this notion can be applied to just about any pattern you trade. It can help reduce the size of a loss in the event the market turns against you.

Profit Targets and Measured Objectives
Knowing when to take profit can mean the difference between a winning trade and a losing one. It’s arguably the most challenging aspect of trading.

When it comes to the head and shoulders pattern, there are two ways to approach it. And for some, a blend of the two may be the way to go.

Approach #1
The first and more conservative approach is to book profit at the first key support level. These are the areas you’ve defined that could cause the market to bounce. As such, it may be a good idea to take profit on a retest of one of these areas.

Because every situation is different, these support levels will vary. But the one thing that must always be true is a favorable risk to reward ratio. So always be sure to do the math before taking the trade.

Approach #2
The second and more aggressive approach is to use a measured objective.

Although using a measured objective is more aggressive as your target is further away from your entry, it’s also more universal.

Why is that, you ask?

When you use this method, you’re taking a measurement of the height of the entire pattern. So regardless of the situation, you will always have a specific target area.

Here’s one taken from the EURCAD daily chart:

Measured objective
Note that I measure from the top of the head directly below to the neckline. I then take that same distance and measure lower from the breakout point.

Measuring from this point is a small but significant detail, especially for necklines that develop at an angle.

One last note about measured objectives. Although they can be extremely accurate, they are rarely perfect. So as an added layer of defense, it’s best to think of them as general areas rather than specific levels.

Also, try to find a key support level that intersects with or at least comes close to the measured objective. This will help you validate the target area and give you a greater degree of confidence during the trade.

A Few More Examples and Explanations
Who doesn’t like more examples? I know I do.

So to start wrapping things up, here are a couple more examples of the head and shoulders in action.

Be sure to take note how each structure forms in its own unique way yet is still highly effective at signaling a reversal.

First up is the EURCAD daily chart.

eurcad-head-and-shoulders
Notice how in this case the measured objective lined up with a key pivot area. While it’s not required, this can add a greater degree of confidence to any trade idea resulting from the reversal.

The second reversal pattern formed on the USDJPY weekly time frame after a multi-year uptrend.

usdjpy-reversal-pattern
A significant difference here from the first EURCAD reversal is that the USDJPY neckline is a horizontal level. This is perfectly acceptable but isn’t very common.

In most cases, the neckline support will form at a diagonal. The pitch of the level can vary, but one thing must always be true – the level should move from lower left to upper right. Note the angle on the first EURCAD chart above.

Putting It All Together
Now let’s put everything you just learned together. The video below will walk you through the same EURCAD head and shoulders from start to finish.

A Few Key Insights Before You Go...
So by this point, you’re familiar with the attributes of the pattern, where to find it and most importantly, how to enter and exit for profit.

But there are a few key insights I want to share with you before you go. Think of these as rules to follow when trading the head and shoulders pattern.

Let’s get started.

The pattern must form after an extended move higher
This rule is self-explanatory. It can only be a bearish reversal pattern if it forms after an extended move higher.

One way to double check is to make sure there are no immediate swing highs to the left of the formation.

Take a look at the charts above. Notice all the white space to the left. That’s what you want to see when trading any bearish reversal pattern.

Neither shoulder can be above the head
You can’t raise your shoulders above your head, right?

For your sake, I hope not.

The same applies to this technical pattern. The head should always stick out above both the left and right shoulders. And while there’s no exact rule for the distance, it should be evident from a quick glance.

Pro Tip: If you have to question the validity of a pattern, it probably isn’t worth the risk.

The neckline should be horizontal or ascending but never descending
If you find a head and shoulders where the neckline moves from the top left to the bottom right, you may want to stay on the sidelines.

For example, if you see this:

Weak head and shoulders
It’s a sign of a “weak” reversal pattern. And while you may still enjoy a favorable outcome, the odds aren’t in your favor.

Instead, this is what you want to see:

Healthy head and shoulders
Note how the neckline is moving from lower left to upper right. This suggests a “healthy” head and shoulders pattern and one you probably want to keep an eye on.

In my experience, the steeper the angle of the neckline, the more aggressive the breakout and reversal is likely to be. Look no further than the GBPJPY example above.

The shoulders should be on the same horizontal plan
This one is a bit tricky to explain, so an illustration seems more appropriate.

Head and shoulders overlap
Notice how both the left and right shoulder “overlap” to some degree. Each shares a portion of the same horizontal plane. They don’t need to overlap entirely, but they do need to share a portion of the highlighted area above.

If you find a price structure that doesn’t fit this description, it isn’t technically a head and shoulders.

Stick to the daily and weekly time frames
Last but certainly not least are the time frames that tend to perform the best. After several years of trading these reversals, I can say with certainty that they are most reliable on the daily and weekly time frames.

While you can trade them on say a 1-hour or 4-hour chart, you run the risk of finding a lot of false positives. That is a pattern that looks like a head and shoulders but doesn’t perform like one.

To avoid this be sure to stick to the daily time frame and higher. After all, that’s where you can usually find the most consistent trends.

Final Words
There are many different ways to trade reversals in the Forex market, but few are as consistently profitable as the head and shoulders.

It isn’t just about trading a technical formation. It’s about “reading” the price action to understand the fundamental shift between buyers and sellers.

While there are no guarantees in the Forex market, the head and shoulders strategy you just learned is as close as it gets. Follow the guidelines above, and you’ll be well on your way to achieving consistent profits.

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09 October 2018

 

Major Keys to Forex Trading Success

Credit: Brad Mitchell

Hey guys! I dropped quite a bit of knowledge in this group yesterday, and you guys seemed to love it. So, I decided to make another post! Without further ado, here are three HUGE pieces of advice I highly recommend you follow while trading:

✅ Do Not Add to a Losing Position

- While this is just common sense, ignorance of the principle, or carelessness in its employment has caused disasters to many traders in the course of history. Nobody knows where a currency pair will be heading during the next few hours, days, or even weeks. There are lots of educated guesses, but no knowledge of where the price will be a short while later.

- The only certain value about trading is now. Nothing much can be said about the future. Consequently, there can be no point in adding to a losing position, unless you love gambling. A position in the red can be allowed to survive on its own in accordance with the initial plan, but adding to it can never be an advisable practice.

✅ Don’t Let Emotions Come Into Play

- Greed, excitement, euphoria, panic or fear should have no place in traders’ calculations. Yet traders are human beings, so it is obvious that we have to find a way of living with these emotions, while at the same time controlling them and minimizing their effect on our lives. That is why traders are always advised to begin with small amounts.

- By reducing our risk, we can be calm enough to realize our long term goals, reducing the impact of emotions on our trading choices. A logical approach, and less emotional intensity are the best forex trading tips necessary to a successful career.

✅ Study Your Success & Failure

- An analytical approach to trading does not begin at the fundamental and technical analysis of price trends, or the formulation of trading strategies. It begins at the first step taken into the career, with the first dollar placed in an open position, and the first mistakes in calculation and trading methods.

- The successful trader will keep a diary, a journal of his trading activity where he carefully scrutinizes his mistakes and successes to find out what works and what does not. This is one of the most importance forex trading tips that you will get from a good mentor.

Thank you for all the love you gave on my previous post, I’ll be dropping some more value bombs soon! 💸🚀

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08 October 2018

 

Forex is NOT EASY. Don’t give up!

By Brad Mitchell

Forex is NOT EASY. Don’t give up!

Success takes a lot of time, dedication, and most importantly: Action. Without taking massive action you literally have ZERO chance of building a long-term source of income with anything. Period.

I started trading Forex in 2016 and it definitely wasn’t easy. I went through countless nights of studying the market, analyzing patterns, testing different techniques, and much more.

Every time I wanted to throw in the towel I always reminded myself why the heck I’m still doing this, and that’s solely for financial freedom. After all the trial and error, the ups and downs, I finally figured out what worked.

I know a lot of you are feeling frustrated and/or confused because there’s so much to learn, so here are some VALUABLE KEYS that helped me a TON:

✅ Be Consistent & Correct Before You Start Worrying About Money

- A lot of people start off with the mindset where they think to themselves; “If I catch this many pips I’ll make X amount of money!” Slow your role, you’re thinking about money WAY too soon if you haven’t even learned how to trade or analyze yet. Make sure you fully understand how the market moves before you start to think about how much profit you’re going to make off each move.

- At the end of the day, if you’re prematurely thinking about the money, you’re going to over leverage and end up putting too much volume on each trade which will eventually blow your account. Even though making money is the ultimate goal in Forex, learning how to accurately predict the market is the most important part in order to succeed.

✅ Trade Higher Timeframes

- It makes no sense as to why anybody, especially if you’re new, would trade small 5 minute timeframes. I recommend to learn and trade higher timeframes in order to see the bigger picture, rather than being zoomed into one specific period of time. This will ultimately result in better long-term trading success. Pretty self explanatory.

✅ Focus on 1-2 Pairs at a Time

- Each pair has it’s own story, they move differently and at different times. Many people waste their time focusing on multiple pairs at once such as gold, commodities, etc. Instead, you need to learn and master 1-2 pairs at a time before moving onto the next pair. How do you expect to master pairs if you’re trading so many at once and constantly switching between them? If you’re not consistent with just 1, how do you expect to be consistent with 5-10? My point exactly. Forex isn’t a game, it’s not something you can play around with and expect to learn overnight.

I hope this helped some of you guys out who are trading in the foreign exchange markets. If you have any questions feel free to drop a comment or reach out to me. I’d be more than happy to help!

If you guys like these types of posts, I can definitely drop some value in this group more often.

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