Stop using bullish/bearish - how markets work - pt.1Stop using the words bullish and bearish in trading, these are emotion-based terms, add these terms to your vocabulary instead:
1. Accumulation
2. Distribution
3. Mark-up
4. Mark-down
Trading Psychology
Secret Key to Becoming a Disciplined TraderDiscipline is the hardest trait to become good at in trading. We need it in analyzing charts and news updates as well as being aware of risk management and psychology. It's difficult to keep track of all those all at once. It can overwhelm us to become impatient and not aware of our mental and emotional states. Which results in poor performance.
I was in that phase in my life for 4 years straight. No coach was on my side guiding me through the journey. I had to teach myself everything that makes a person become a successful trader. It was tough, especially mastering the mental and emotional side of the game. Not being aware of those two and how to improve them is what led to consistent failure.
But when I began studying and applying what profitable traders do to be successful, I became one of them. It was hard though. I had to change my internal monarchy by facing my demons and tearing down old limiting beliefs. I used various techniques to make that happen. The results were astonishing. I became more mindful and self-aware. I understood my emotional nature, which allowed me to be quick to spot and tone down bad emotions.
I did the following to achieve that results:
1. Journaling.
It is a process of recording the what, why, and how behind the trade as well as your thoughts and emotions before, during, and after the trade. Doing this will keep a record for you to reflect on in the future when you want to improve your performance. That feedback will raise your self-awareness which will protect you from sabotaging your trading performance.
2. Meditating.
It is a mental exercise that trains the brain to be mindful and self-aware of your emotional triggers and behaviors that disrupt your performance. Moreover, it will allow you to improve your focus levels for a trading session. So, every day, sit quietly on your chair with your back straight and your eyes closed, then focus on your breathing pattern for 10-15 minutes.
3. Breathing.
I know you can breathe, but I bet you that your breathing is incorrect. Most people breathe through their mouths, which is wrong because the air doesn't get to the brain. The air we breathe through our nose releases certain chemicals in the brain that makes it awake and calm. It also does other things in the body that helps control it when fight/flight emotions trigger. Breathing techniques allow us to gauge those triggers during the trading session. Thus, whenever you tap into a negative state, stop and sit back on your chair, then do the following 4-7-8 breathing exercise. Inhale on the count of 4. Hold your breath on the count of 7. Then exhale on the count of 8. Do this 3-5 times.
5 Elements of a Smart Trade Plan
Find out why you should have a trade plan—and the five elements that may help you put it to work successfully.
Element 1: Your time horizon
How long do you plan to hold a position? This will depend on your trading strategy. Generally, traders fit into one of three categories:
Single-session traders are very active and look to gain from small price variations over very short time periods (minutes or hours) throughout the trading day.
Swing traders target trades that can be completed in a few days to a few weeks.
Position traders seek larger gains and recognize that it often takes longer than a few weeks to achieve them.
Element 2: Your entry strategy
Look for entry signals—for instance, divergences from trend lines and support levels—to help you place your trades. The signals you employ and the orders you use to make good on them hinge on your trading style and preferences.
Element 3: Your exit plan
When it comes to an exit strategy, plan for two types of trades: those that go in your favor and those that don’t. You might be tempted to let favorable trades run, but don’t ignore opportunities to take some profits.
Element 4: Your position size
Trading is risky. A good trade plan establishes ground rules for how much you’re willing to risk on any single trade. Say, for example, you don’t want to risk losing more than 2%–3% of your account on a single trade. You could consider exercising portion control, or sizing positions, to fit your budget.
Element 5: Your trade performance
Look over your trading history to calculate your theoretical trade expectancy, meaning your average gain (or loss) per trade. You start by determining the percentage of your trades that have been profitable versus those that haven’t. This is known as your win/loss ratio.
Understanding what goes into a smart trade plan is the first step to prepare you for your next trade.
🌱Weekly quote: We know what we're doing wrong🌱🟢For many of us, our trading accounts are our cluttered homes. What we desperately need is to find our inner quiet; review our trades and trading statistics in detail and truly experience the horror of betraying our potential; and fully appreciate what we do well and embrace it with gratitude. Out of that energized awareness, we can replace the clutter with what is meaningful.
Our great enemy is routine. Many times, we know what we're doing wrong, but we keep making the same mistakes. Indeed, that is the way of life's curriculum. If we fail to learn from the first lesson, we get a second and a third and a fourth: one painful opportunity after another to commit to a different path. Is that failure, or is that something to be grateful for: a curriculum that is trying, trying, trying to teach us the lessons we need to learn to be successful?
🟢We've seen that gratitude is an essential component of psychological well-being. The grateful trader is not self-focused, absorbed in how much money they could/should make. The grateful trader is thankful for the opportunities coming their way. When we look heavenward with thanks for what we've accomplished, there is an essential humility to our perspective. It's not just about us. It's not just about profits and losses.
A great metric in evaluating your trading journal is to count the number of frustrated statements versus the number of grateful ones. A great metric in evaluating other traders is to count the number of self-aggrandizing statements with the number of humble, grateful ones.
🟢If losses are opportunities to learn and improve, we can sustain a grateful mindset even in times of adversity. A humble mindset is one looking to learn. A grateful mindset appreciates every opportunity to grow.
A life perspective that instills and strengthens humility grounds us in the awareness that there is always something more important than me. There is always something more significant than what is simply happening here and now. We cannot succeed in trading--or any life endeavor--if it becomes our end-all and be-all. Once trading and P/L are placed on a pedestal, they control us and our experience. And that is precisely what interferes with profitability!
It's great to correct your mistakes, but it's in your shining successes that you can find your path to fulfillment--and your future in markets. Hidden in your winning trades may be the key to your development as a trader.
🟢 So many developing traders look for one edge after another, one market after another, one trading style after another--all in a frantic search for success. The reality is that our best trading is hiding in plain sight, when we explore what we're trading and how we're trading it when we're most fulfilled and successful.
Brett Steenbarger, Trading Psychology
What is an ETF? (exchange traded fund)
An exchange traded fund (ETF) is an investment fund that invests in a basket of stocks, bonds, or other assets. ETFs are traded on a stock exchange, just like stocks. Investors are drawn to ETFs because of their low price, tax efficiency and ease of trading.
ETFs seek to provide the performance of a specified index, such as the S&P 500, and typically have low fees.
Like mutual funds, ETFs offer investors diversified exposure to a portfolio of securities, such as stocks, bonds, commodities and real estate.
Why are ETFs popular?
While investors often associate ETFs with large stock indexes, such as the S&P 500, ETFs provide access to virtually every asset class, sector, region, theme and investment style.
ETFs are popular because of their low fees, tax efficiency, liquidity and transparency. Since the first ETF was launched in 1993, the ETF industry has grown substantially, with more than $3 trillion now invested in ETFs.
What are the benefits of ETFs?
ETFs cost significantly less than comparable active mutual funds — and that savings can add up over time. Other benefits include:
Access and liquidity. Because ETFs are traded on stock exchanges, they are easily bought or sold.
Transparency. Just like mutual funds, ETFs report performance quarterly and fees daily.
Diversification. ETFs provide access to a wide range of investment options, covering a broad range of asset classes, sectors and geographies. They also make it easy to select specific themes or investment styles.
What are the risks associated
with ETFs?
Like mutual funds, ETFs carry investment risk depending on their asset class, strategy and region. Some ETFs are riskier than others.
In addition, if you invest in an ETF that holds securities in a currency other than your own, movements in the foreign exchange rate may affect your returns.
🟢TRADING HACKS: A MIX OF TRADING ADVICE, ROUTINE, GOOD HABITS🟢When you open your charts in the beginning of the day, don't rush into first trade you see.
Step back for a little while, and check in with your emotions. If you want to trade cause you didn't have a trade in a while, or you're bored, or you want to make your money back, or if you just want to make money and now you "know the market will go up (down)" - these all are signs of emotional imbalance. if you feel like this, it's better just to make a pause. Yes, it can be hard to do it by the way, but you need to make it through your will effort.
So, instead of putting a trade right away, go through your multitimeframe analysis, mark up the zones and set your alerts for zones you really like. more on this here
While you're waiting for alerts to go off, you can do a lot of useful things for your trading.
first of all, go through your checklist or trading plan, or a journal, and remind yourself how your best, high-quality setups look like.
Now go back to previous week or two, and just look in hindsight for your highquality patterns, whatever strategy you use. See how market developed and find entry points which will be in line with your rules. You can even make a step further and journal these hindsight trades in a separate journal (I call it mark ups, or "missed trades"). This simple action will train your pattern recognition skills and also develop a habit of working with a journal. In the future you'll come back to these trades for reference of how your best setups can look like.
Now, if the alert is still not activated, do some backtesting, 5-10 trade would be enough, but also journal these trades.
Doing this, you're already few steps ahead of your competitors become not many people are willing to put such kind of effort in their trading.
Well done, and now it's time to go and check how the market is developing. More on building the routing and good habits you can read in this series of posts
The Evolution of a Trader | 3 Milestones 📈
Hey traders,
In this educational article, we will discuss 3 stages of the evolution of a trader.
Stage 1 - Unprofitable trader 😞
The unprofitable trader has very typical characteristics:
-total absence of trading skills
Most of the time, people open a live account simply after completing some beginners course like on babypips website.
Being sure that the obtained knowledge are completely enough to start trading, they quickly face the tough reality.
-no trading plan
Having just basic knowledge, of course, they do not have a trading plan. Why the hell to have it if everything is so simple?!
All their actions on the market is just gambling. They open the positions randomly most of the time, simply relying on intuition.
-poor risk management
In 99% percent of the time, the unprofitable trader does not even think about risk management. The position sizing, stop placement and target selection are completely neglected.
Trading performance of the unprofitable traders is characterized by small wins and substantial losses and negatively trending equity.
Stage 2 - Boom and bust trader 😶
Usually, traders reach boom and bust stage after 1-2 years of unprofitable trading. At some moment, winning trades start to compensate losing trades, brining non-trending equity.
Such traders have very common traits:
-not polished trading plan
Being unprofitable for so long, traders start to realize the significance of a trading plan.
Sticking to the set of rules, they notice positive changes in their trading performance.
However, trading plan requires to be polished and modified. It takes many years for a trader to identify all its drawbacks before it starts bringing net profits.
-lack of confidence
When one starts following a trading system, confidence plays a substantial role.
The fact is that even the best trading strategy in the world occasionally produces negative results. In order to not give up and keep following such a system, one needs to build trust in that.
The confidence that after a series of losing trades, the strategy will manage to recover.
Such a trust can be built after many years of trading that strategy.
Stage 3 - Profitable trader ☺️
That is the final destination.
After many years of a struggling trading, one finally sees positively-trending equity. Winning trades start to outperform losing ones, leading to consistent account growth.
Profitable trader is characterized by iron discipline, confidence and consistency.
He knows what he is trading, when and why. His trading plan is polished, he fully controls his emotions.
He never stops learning and constantly develops his strategy.
Knowing the 3 stages of the evolution of a trader, one can easily identify at what stage he currently is. That will help to identify the things to be focused on to move to the next stage.
At what stages are you at the moment?
❤️If you have any questions, please, ask me in the comment section.
Please, support my work with like, thank you!❤️
STOP OVERTRADING Have you ever stopped to think that overtrading could be the reason why you are constantly giving back your profits? Try sticking to 1-2 trades to solve this problem!
HOW TO GET RICH?
1. Money mindset is everything
You need to have a positive money mindset when it comes to creating wealth. Everyone carries a money story and it’s your job to understand what yours is and if it’s holding you back. Reframing your story to a millionaire’s mindset is essential for success because rich people think differently. How to get rich can’t be a passing phase in your life; it takes work and commitment.
2. Millionaires still budget
Hard to believe, but it’s true. Even millionaires follow a budget. The biggest secret on how to get rich and stay rich is spending less than you bring in. There will always be wants that exceed budget limits, even for millionaires, because there is not an unlimited supply of money.
3. Money management is key
Good money management is so important to get rich and stay rich. Money management is a behavior and habit. You need to be mindful of where you are investing and spending your money. There is a specific strategy to growing your wealth and maintaining it and you must follow it like you do a workout regime.
4. Invest your money for growth
Investing in assets that will appreciate over time and provide you with a return on your investment such as dividend or interest payments is smart. The goal is to build your asset portfolio and make it so strong that you can live off the passive income in your retirement.
5. Build your business around your personal financial goals
As a business owner you have more control over the money you make versus being an employee with a set salary. If you want more money in your pockets, you can increase your revenue and your profit margins to ensure you are taking home more money. The more profits you have in your business the more you can pay yourself a dividend or bonus, depending on the legal structure of your business.
6. Create multiple income streams
Smart business owners create more than one income streamas it protects them from fluctuations in the market. That means if one source of revenue dries up due to market conditions, other sources of income can protect you from a loss.
7. CONCLUSION:
The bottom line is that knowing how to get rich is something that is learned. There are no guarantees that if you start a business that you will get rich because even the best business ideas fail due to poor execution. But if you educate yourself and get help in making your business a success, you will increase your chances of success.
✍️WEEKLY QUOTE: You don't need to know in order to make money✍️...Having an awareness or an understanding of some principle, insight, or concept doesn't necessarily equate to acceptance and belief. When something has been truly accepted, it isn't in conflict with any other component of our mental environment. When we believe in something, we operate out of that belief as a natural function of who we are, without struggle or extra effort. To whatever degree there is a conflict with any other component of our mental environment, to the same degree there is a lack of acceptance. It isn't difficult, therefore, to understand why so few people make it as traders. They simply don't do the mental work necessary to reconcile the many conflicts that exist between what they've already learned and believe, and how that learning contradicts and acts as a source of resistance to implementing the various principles of successful trading.
The answer is quite simple: The typical trader doesn't predefine his risk, cut his losses, or systematically take profits because the typical trader doesn't believe it's necessary. The only reason why he would believe it isn't necessary is that he believes he already knows what's going to happen next, based on what he perceives is happening in any given "now moment." If he already knows, then there's really no reason to adhere to these principles. Believing, assuming, or thinking that "he knows" will be the cause of virtually every trading error he has the potential to make (with the exception of those errors that are the result of not believing that he deserves the money).
If he believes that anything is possible, then there's nothing for his mind to avoid. Because anything includes everything, this belief will act as an expansive force on his perception of the market that will allow him to perceive information that might otherwise have been invisible to him.
It's the ability to believe in the unpredictability of the game at the micro level and simultaneously believe in the predictability of the game at the macro level that makes the casino and the professional gambler effective and successful at what they do
Their belief in the uniqueness of each hand prevents them from engaging in the pointless endeavor of trying to predict the outcome of each individual hand. They have learned and completely accepted the fact that they don't know what's going to happen next. More important, they don't need to know in order to make money consistently. Because they don't have to know what's going to happen next, they don't place any special significance, emotional or otherwise, on each individual hand, spin of the wheel, or roll of the dice. In other words, they're not encumbered by unrealistic expectations about what is going to happen, nor are their egos involved in a way that makes them have to be right. As a result, it's easier to stay focused on keeping the odds in their favor and executing flawlessly, which in turn makes them less susceptible to making costly mistakes.
From Trading in the Zone by M. Douglas
How To Set Trading Goals!Hey Traders,
Setting trading goals is always a fun discussion and something I actually really enjoy talking about. It is possibly one of the most simple tasks with getting started in investing or day trading, yet it is a task that so many get wrong. It's like starting a Sprint race, only you're starting the race facing the other direction. So, today we're going to dive into how to set goals, what they should look like and how we can start getting you running on that race, or even if you started the race, to give you that little speed boost so you can get back on track be sprinting for that finish line, which is where you want to be.
It is very common, especially with beginners in trading, that when asked what are their trading goals, they're going to leave you with some kind of percentage or dollar amount and what they're trying to achieve per week or per month. It's easy and it's their aspirations is why they are in the game. They want to make X amount of money and they've been able to divide it down to figure out what they need to make each day in order to reach that goal. Now, most people will sit back and judge that goal on whether or not they think it's achievable and then they'll say well done and give the trader a pat on the back. Only what that person is done by telling this trader that it is good feedback is re firmed that there facing the wrong way at the start of the race and telling him to still Sprint that direction.
We trade an unpredictable market. That means no matter who you are or where you are, unless you have some kind of insider information, you have no idea which way a stock, currency or any type of asset is going to move. We base our decisions off of probability. We play on whether or not we have an edge over the market and as long as we win enough we will make profit in the long term and that is how trading works. What that means is we are never sure on how much money we will make or whether or not we will make money. Which means it is unreliable to set money based goals because we have no idea what the market is going to deliver for us. We can have expectations over the long term, but short term. As long as we are trading true to our strategy, it is honestly up to the market whether or not we take home profit or whether we cop losses. Now we understand this because it's trading, right? We got into this market knowing that. So why do we attempt to set money related goals when we know it's just unrealistic and really hard to achieve such consistency when you're looking at short term goals?
Baffling right?
Now, for some of you may just woke up to this fact, "oh yeah, that is very unrealistic." For others, you may have already known this. Either way, what we're going to do is dive into where you should be setting your goals and what should they look like.
My favorite goal to set and to see other people set is consistency within myself. It's to track your own decisions, marking your own movements. When actually trading, if you can become consistent within yourself, you will see consistency in your results, because you'll be able to trade that strategy without having to worry about your own decisions or emotions affecting your decisions. So, what I always did is obviously have a trading plan, have this trading plan and have set guidelines in what you have to do. Post trading as well. When it comes to filling out worksheets, maybe Excel spreadsheets you're trading, log your data, fill it all out.
Get yourself a spare calendar, put it on your wall and every day that you do everything to your plan, win or loss on the charts, everything you were supposed to according your strategy, your plan, and filling out all of your Excel spreadsheets, give yourself star. Then every single trading day you get a little star on that calendar and your goals should be set around that. If you find you're being consistent within yourself and consistent in your decision making, then you will be able to determine whether or not your strategy is good or bad, and you'll be able to achieve consistent results long term. Do not base your goals on dollar figures base your goals off of performance. It is the only thing you can actually control.
Stop playing around with the idea of setting goals outside of the market or outside of your results. Yes, it is fun to set dollar amount goals. Yes, it is fun to Daydream, but you get stuck in that Daydream Cloud and there may be times where you have a perfectly good trading strategy. You're able to trade it perfectly as well, but you're not hitting your goals. And the reason that might be is because your strategy may not be able to hit those dollar value goals even on perfect days. It happens. So set goals on what you can control, not on what you want the market to deliver.
How did you go about setting your goals? How do you do it now? Let me know in the comments. I hope you enjoyed this little post and I'll see you next time.
-Jordon Mellor
Handling losses like a pro!Hey traders,
Ever wondered how some of the professional traders can lose tens of thousands of dollars and still not be phased? Well, today I am going to chat about how and why they have the ability to remain consistent and trust the process, and how you can do the same.
Enjoy!
🟩TRADING HACKS: You're doing ENOUGH 🟩 This video is about the importance of thinking in RR and %. The main point is when you think you haven't earned enough is $ amount - and so you want to trade more and more, which leads to poor trade quality - remind yourself that trading is highly scalable, and so it's ok to imagine you have a 20x more capital at the moment. So x20 your profit in the trade and ask yourself how I feel now, is this enough for the day? Remember, if you're consistent, you'll be able to scale the account relatively easy.
Successful traders think like chess playersEvery day I get many questions from traders and more than half of them are: "What will X asset do today, will it rise or fall" or "Do you think X asset will reach Y price?"
With very few exceptions, I say "I don't know". Surely my interlocutor will think that I don't want to tell him/her or that I'm an idiot.
In fact, the correct answer is another: "I don't care"
And now, dear reader, you will think not that I am an idiot, but a complete one.
But bear with me a little more and let me explain using a real trading example on EurUsd
Let's say we consider taking a trade on this pair so, we ask ourselves what do we know about it?
1. Fundamentally the USD is favored
2. The trend is down for more than a year.
So, we want to trade in the direction of the trend and sell this pair
Looking closely at the chart we see that EurUsd is contained in a downwards channel and recently found support in the 0.99 zone.
Last week, the pair corrected and reached a high at 1.0150 and reversed exactly from the channel's resistance, leaving a nice and strong bearish engulfing on our daily chart.
Going further with our judgment, where do we want to sell this pair?
Now, considering my approach, I see a good place to sell in the 1.0030-1.0050 zone.
So we set a sell limit order in that zone (Remember, professional traders use pending orders)
We also consider at this moment the point where our bearish outlook is negated. We get 1.0150 for our stop loss.
Now, using again my personal trade, let's say we set the selling order at 1.0030, with a stop loss at 1.0150 we have a potential loss of 120 pips.
We know that every pip move on EurUsd represents 1usd for 0.01 volume, so 12usd potential loss on 0.01 trade for our trade.
Now, let's consider volumes.
What potential loss are we "comfortable" with?
For the sake of example let's say 120 USD, so a 0.1 volume.
Now let’s see where we can take profit.
0.97 zone is the falling channel's support, so there.
Looking at such a trade we have 120 pips or 120 USD potential loss with 330 pips or 330 potential profit. This gives us a close to 1:3 risk-reward ratio, a very good one.
And now, maintaining the analogy from the title is the market’s “move” turn
And the market can do only 2 things at this point: fill our pending order or not.
Considering that I don't hold pending orders after NY's close, if the market doesn't reach my level by then, I will remove the order, and tomorrow I will start over again by analyzing the market.
The second is to trigger our limit order as is also the case for my trade, and we are in a running trade now.
Now, with a trade running is again the market's move.
So, what are the possible scenarios?
1. The market rises and hits our SL. Although an undesirable scenario, we knew from the start that it’s a possibility and like every trade, this also carries a risk. We considered it and assumed it from the start and didn't trade more than we could afford to lose in a trade.
So, we take it like a stoic and move on to the next trade and market analysis
2. The lovely scenario in which EurUsd breaks 0.99 support and falls to our target.
So, our reasoning was correct and we now have a trade that brought 330usd in our pocket, but more importantly we traded disciplined with a good R: R
3. The market falls below 0.99 but reverses. Now we can also consider some action
- Move SL in BE and let the trade run
- Close half to get some money off the table and move SL into BE
- Close all trade
In conclusion:
As you can see, you don't need to be Gary Kasparov to be a good trader, the market's "moves” being in fact just a few. All you need to do is to be aware of these moves and have a plan for each of them.
This way you will not end up wondering every minute "where will EurUsd go, it will rise, it will fall", you will not trade emotionally or recklessly.
As Benjamin Franklin once said: "Those who failed to plan, plan to fail", but it is not your case, because, as a good trader you always trade with a plan and know from the beginning all that the market can do.
Best regards!
Mihai Iacob
What Is Imbalance Of Price Action Orders?What Is an Imbalance of Orders?
An forex imbalance of orders exists when there are too many (either buy or sell) orders of a listed pair that cannot be fully matched by the opposite order on an exchange. This applies to either buy, sell, or limit orders. An imbalance of orders is also referred to as an "order imbalance."
Good news would increase the demand (buy orders) for a certain pair and would also make it attractive to hold onto. Likewise, unexpected negative news can bring a large sell-off (sell orders) and little demand for a pair that does not look promising. HIGH impact news can leave imbalances on charts- especially on 1hr or 4hr charts during a trading session. These are in my top five easy scalps or day trading trades to do during my trading. << Should be yours too!!!
Things to be aware of with Forex imbalances area:
1) Order imbalances exist when there is an excess of buy or sell orders for a specific Forex pair.
2) Most order imbalances are short-lived but can exist for hours and even the entire day.
3) Using limit orders rather than market orders can help mitigate some of the problems with buying or selling during order imbalances.
Some traders trade before or during high impact news hits certain pairs- SMART play is to wait for that one hour candle to close- and IF you see an either buy or sell imbalance in 1 hour candlestick (no price action either right or left of that candlestick and zero WICKS either)- wait for price action to reverse current trend to negate the imbalance (either buy or sell)- the opposite way. Those are easy trades- but always use risk management on all trades you do.
High impact news can leave these areas of imbalance on any timeframes (yes, gaps in price actions are considered imbalances in price too). Look for big huge candlesticks or gaps left on charts (big banks are buying or selling). A reversal point happens when filling of big orders changes the price behavior. I look and trade these price reversals when price action closely consulates around major quarter point levels ).000 or .500 levels. Then shows me one of the three following candlestick set ups (only ones I trade and need in trading): Harami (2 candles), Engulfing (2 candles) and/or Pinbar (3 candle) setups.
Look for: Large candlesticks, with no candlesticks left or right on candlestick and have zero WICKS/SHADOWS in that area either. (this is a clue/hint). RSI line (purple) when up thru BASE line (yellow) and above 50 on RSI- so only trade noted had liquidity, momentum & volume to rock price action up or visa versa.
WHAT IS DRAWDOWN | 3 Types Of Drawdown Explained 📚
Hey traders,
In my videos, I frequently use the term "drawdown".
Many of you asked me to explain the meaning of that term and share some examples.
The account drawdown is the highest observed loss from the highest
value of the deposit to the lowest value of the deposit at
a certain period of time.
Imagine you started to trade with 10,000$ account.
At the end of the year, your account size reached 15,000$.
However, at some point through the year the deposit value dropped to 6,000$. It was the absolute minimum for the one-year period.
At some point, your net loss was -4,000$ or 40% of your account balance.
The account drawdown is 40%.
❗️Knowing the account drawdown is very important for the risk assessment of the trading strategy. Usually, 50% and bigger drawdown signifies an extremely high risk.
There are 3 types of drawdown to know.
Current drawdown - a temporary drawdown associated
with the negative total value of opened trading position(s)
at present.
Once you start trading with 10,000$ deposit, you open several trading positions. Being opened, with the constant price movements, your potential gains fluctuates from positive to negative.
For examples, with 3 active trades: EURUSD (-500$ at present); GBPUSD (+200$ at present); GOLD (-100$ at present) your current account drawdown is -400$ or 4% of your deposit.
Fixed drawdown - the negative value of the closed trading
position(s) at present for a certain period of time.
While some of your trades remain active, some are already closed.
Imagine the same deposit - 10,000$.
On Monday you opened 6 trades, 2 still remain active and 4 are already closed. Your total loss from your closed trades is -500$. Your fixed Monday's drawdown is 5%.
Maximum Drawdown - the maximum observed loss from
the highest value of the deposit before a new maximum
is reached.
Starting to trade with 10,000$ you are already trading for 5 years.
Your account were growing rapidly and at some moment it reached 25,000$. Then the recession started. You faced a dramatic loss of 12,500$ before you started to recover.
That was the maximum observed loss for the period.
Your maximum account drawdown was 50%.
❗️Different types of drawdown give a lot of insights about a trading strategy. Its proper assessment will help to spot a high risk strategy and to find a conservative one.
Constantly monitor your account drawdown and always check the numbers.
What is your highest account drawdown?
❤️If you have any questions, please, ask me in the comment section.
Please, support my work with like, thank you!❤️
forex word find (21 related words) enjoy!!!words in word find:
bear
bull
buy
chart
entry
exit
forex
london
long
loss
ny
pair
pip
plan
price
sell
sydney
time
tokyo
trade
win
How to calculate which lot size to useAs mentioned several times before, we risk 1% of our total trading capital per transaction. In simple terms, we risk 1 egg out of the 100 that we have in the basket in an attempt to get more eggs.
However, even though the average price mark where we place our Stop Loss is 30-60 pips away from the entry price, SL levels set differ from one trade to another, and different currency pairs have various differences in pricing (major pairs have small differences for the most part, while minor and cross-pairs have big gaps in pricing).
This article will demonstrate 3 random scenarios and illustrate which lot sizing is needed to be used based on the Stop Loss set and the percentage of the total capital risked while taking into account the size of the trading account. All numbers are imaginary in order to diversify the visualisation of the portrayed examples and give a better understanding of the case.
Enjoy the idea and don't forget to drop your questions in the comment box below!
📖 STEP 5 to MASTER TRADING: Create a Checklist 📖
🟩 Checklist is the necessary and essential part of your trading plan 🟩
If you already have a trading plan - that’s really great. Now it’s time to take one step further and create a checklist. You will refer to it before each and every trade, and you’ll enter only if 100% of the checklist is present.
You can have different kinds of trading plan, it can have 5 or 50 pages - and it will describe your overall approach. Unfortunately, when it comes to executing your edge in the market, it’s very easy to bend your rules “just a little bit”, and all of a sudden you find yourself taking trade that is only a distant reminder of your actual trading setup.
Most traders will damage their account not because their strategy is bad but because they start to take random set up outside of their trading edge. Blowing the account usually doesn’t take more than several hours of emotional trading.
So that’s why it’s essential to have a short and clear checklist, usually up to 10 sentences usually that describes, point by point, what your trade entry looks like. You can even check every point before entering a trade (I do it). Of course, with time you’ll perfectly remember that checklist, but it’s also important to honestly follow it without checking every time, and the rule-following skill itself is a separate topic.
🟩 You're trading randomly if you don't have a checklist 🟩
Think about it. How many traders are constantly looking for “something else”, one more strategy. Instead of grinding deep into some specific concept, pattern or trading system, they will run to the next one with the first normal losses. They are running on the surfice for years instead of going deep to the core of trading - which, in my opinion, is the perfection of one strategy.
Sometimes they even find what they like and what starts to show some kind of results. But then some time passes, and after any kind of emotional stress (would it be euphoria after a winner or fear and anger after a loser), he can start to deviate from his rules. A beginner can be so emotional that he can enter random trades, one after another, in the course of a few hours, destroying a big part of his account.
There are a lot of other issues behind such inefficient behavior, however, a checklist is one of the first steps to handling it. Because if you don’t truly know what you’re looking for at the market, you’ll take the first trade you’ll find.
🟩 "Right or wrong" mentality is a fundamental flaw 🟩
You’re only right when you’re following your rules, and you’re only wrong when you take random setups. Again: even if you have a loser but you followed your setup - you're right, and even if you have crazy profit but it was a random trade - you're wrong, because this approach is not stable long-term.
Yes, traders do predict the price movements in a way, but only as a side effect of following their rules and executing their system. A trader will not be fixed on his predictions, and because he drew a box or a line, he will not expect the market to obey his colored drawings. A trader’s job is to take a setup based on his experience and testing, and he should let go of the expectations and his trade, managing on the way of course. This is a very deep question, in my opinion, and deserves a separate post later.
That’s why next time when you’ll see someone asking: “Should I buy or sell sir?”, you can surely tell the person is in the very beginning of his journey.
🟩 How to create a checklist? 🟩
Take a moment and describe in the short form how does your entry look like. What are your rules for Structure, Zones of interest, what is your entry confirmation, and what is your risk and management? I like to actually checkmark every point before each of my trades, so I’m sure I’m following my plan. Here’s an example of what my checklist looks like:
🎁Bonus for everyone still reading :) If you’re struggling with any discipline issues, ask yourself a question: “If I would receive a fully funded 100k account, for free, would I start to follow my rules and would I be more disciplined than I am now, and would I start “trading the right way” at last?” Try to be honest with yourself.
It may seem strange, but many novice traders think that something should happen before they will “really stick to their plan”. It could be “just one more good winner”, or “if only I had bigger capital”, or “when I finish this yet one more educational course’’ - and AFTER that I’ll do what I know I should be doing.
So, if your answer to that question is yes, then this is a clear indication you’re still in a very beginner mindset. Try to realize that ANY external change will not change the way you are. You need to change yourself FIRST, the way you behave in the markets and your mindset, and then everything external will follow.
Learn TOP 5 Tips For Trade Management 📖
Hey traders,
In this post, I will share with you my tips for trade management.
But first, let me elaborate on what is exactly a trade management.
Trade management is the set of rules and techniques applied for managing of an already active position.
Trade management is a very important element of any trading strategy that should never be neglected.
1. Never remove a stop loss
Being in a huge loss, many traders refuse to admit that they are wrong. Instead, watching how the price moves closer and closer to a stop loss, they remove stop loss hoping on a coming reversal.
The alternative situation may happen when the price is going sharply in the desired direction. Watching the increasing profits, traders remove a stop loss, being afraid to miss bigger profits.
Both situations may lead to substantial, higher than initially planned losses. Driven by many factors, the market can easily burn all gains and move against the desired direction much longer than traders stay solvent.
For these reasons, never remove a stop loss. It must be always set.
2. Never modify your stop loss if a position is in loss
Watching how the price moves closer and closer to a stop loss is painful. Instead of removing stop loss, some traders move it and give the market more space for reversal.
Even though such a technique is safer than the complete stop loss removal, it is still a very bad habit.
Each stop loss adjustment increases the potential loss, not giving any guarantees that the market will reverse.
It is highly recommendable to keep your stop loss fixed and let the price hit it and admit the loss.
3. Know in advance your profit protection strategy
Where do you take your profit?
Do you have a fixed tp level or do you apply trailing stop?
You should always know the answers.
Coiling around take profit level but not being able to reach it, the price makes many traders manually close the trade or move take profit closer to current price levels.
Another common situation happens when the market so quickly reaches the desired TP level so the traders remove TP hoping to make bigger than initially planned profit.
Such emotional interventions negatively affect a long-term trading performance. TP removal may even burn all profits.
Do not let your greed intervene, and always follow your rules.
4. Never add to a losing position
Watching how the price refuses to go in the intended direction and cutting a partial loss, many traders add to a losing trade in hopes that the market will reverse and all the losses will be recovered.
Again, such a fallacy usually leads to substantial losses.
Remember, you can add to a position only AFTER the market moved in the desired direction, not BEFORE.
5. Close the trades manually only following rules
Quite often, newbie traders manually close their trades because of some random factors:
they saw someone's opposite view, or they simply changed their mind.
Remember, that if you opened a trade following your trading plan, you should always have strict rules for a position manual close. Do not let random factors affect your trading.
Following these 5 simple tips, your trading will improve dramatically. Remember, that it is not enough to spot and accurate entry. Once you are in a trade, you should wisely manage that, following your plan.
❤️If you have any questions, please, ask me in the comment section.
Please, support my work with like, thank you!❤️
Eur/Cad Monthly Timeframe (Sad or Happy Smiley Face Indicator). From the past seven years (7 years) of monthly Euro/Canadian Dollar pair, the following happen:
5 years- monthly ended up Green (Blue Candle) Happy smiley face (buyers won)
and
2 years- monthly ended up Red (Red Candle) Sad smiley face (sellers won)
That is around a 70% buyers winning the month of August vs 30% sellers losing the month of August= for the last 7 years.
If you are playing the odds and or trading Forex with probabilities in mind, you would put more buying trades on for the rest of August because of the cycler nature of Forex. Always look at how low the RSI scale right now, which measures movement of pair (its down very low now).
I would continue buying when this pair is at the right price, during right session and at the right time of day, in my opinion the Eur/Cad pair will end up at 1.32000 by end of this month. That is around 150 pips to bullish side, from PA now. Always, use right risk management for your account size, 2% is mine.
GUIDE TO TRADING EUR/JPY (highest traded non USD pair in forex)Why is EUR/JPY important to traders?
One of the popular pairings across the worldwide foreign exchange market is EUR/JPY. It represents around 4% of all daily transactions. Investors and traders alike look to the euro/Japanese yen currency pair because high levels of volatility can provide plenty of trading opportunities. There are major factors that can influence their rates, and how and why people choose to trade EUR/JPY using CFDs (contracts for difference) on forex.
Fundamental Aspects of EUR/JPY pair:
Major factors throughout both Europe and Japan affect the euro yen exchange rate. As with most regions, factors that can have knock-on effects are usually fairly broad and similar in nature. Japan, however, has some interesting key points that differ from the norm, which we'll explain in more detail.
Like most modern currencies, the major factors which influence the movement of euro prices are mainly economic, political, and financial. Many of the ways in which the euro is affected will already be familiar to people who have a basic knowledge of how traders try to determine which way prices of currencies like the euro will move. Monthly reports which are released by the European Central Bank (ECB) form the backbone of many traders' decisions regarding the euro. Investors and traders are quick to scour these details as soon as they are released in an effort to find out more about what direction the euro could be heading. Economically, news releases surrounding employment can play a huge part in the oscillation of euro rates. These figures are freely available and provide a valuable insight into the health of Europe's economy and direction in which euro prices could go.
The economy of Japan has a few more factors in play that can affect the rate of their currency. General health of the economy will play a massive part, with the high rate of import and export trading in Japan helping to boost or weigh on prices, depending on the state of the industry. One of the influencing factors that you're less likely to find in other countries is, surprisingly, the rate of natural disasters which occur in the region. Due to the small size of the country, events like natural disasters can affect the currency’s value immensely. The government of Japan often utilizes economic initiatives in an effort to bolster the economy. As a result, many traders and investors pay extremely close attention to interest rates and government interventions from financial institutions such as the Bank of Japan (BOJ). Another regular factor that traders watch out for is the details within data reports such as the Tankan Report, the Tokyo Area CPI and the aforementioned interest rate decisions of the BOJ. These help to determine various financial paths that yen may follow.
How & When To Trade EUR/JPY: Best is when currency is most volatile. The EUR/JPY is generally busy between 07:30 and 15:30 (GMT). Convert To Your Time. Tokyo and London overlap two -three hours is great when there our two major sessions trading at one time. Yen is currency of Japan, and third most widely traded currency in world after US Dollar and the Euro. It is possible to make a significant profit within just a short time when trading EUR/JPY.
Trading needs to be treated like a business 🧑💼This is spoken about a lot but what does it mean?
In starting a business you would need funding and a business plan, right?
You would have realistic goals mapped out and be focused on your cashflow.
You wouldn't blow your 'cash' in recruiting too fast, or buying too much stock or spending too much on marketing.
Yet, in trading most don't have a plan. Or focus on protecting their cash.
They also don't think long term in line with their plan.
They over estimate their expectations short term and in doing so mess up what they could achieve long term.
You just wouldn't do this in business right?
No one would open or run a business you knew nothing about.
Most come in to trading thinking this will be easy! It's not and we all come in knowing nothing.
So again would you start any other business with no training or idea?
Most can keep the trading cash flow topped up as we all start out on this journey having another job to fund trading.
There is no such thing as a sure-fire way to make money online. However, if you seriously want to make money out of forex trading it needs treating like a business.
In a lot of ways, being a trader is like being an entrepreneur. It takes more than just knowledge and a killer idea.
It also takes hard work, discipline and mental preparation.
The reason it’s a good idea to treat forex trading like a business is because as a trader, your account is your own business.
Trading isn't about the quick money it's about being consistent.
That consistency comes from having a plan and sticking to it much like you would a business plan.
Treat losses as a cost of business and factor them into the plan.
The business plan for you the trader will be the strategy and risk management you opt to run.
Set realistic targets and goals this will ensure suitability, Much how good businesses set up there own goals and aims for coming year with out being to risky.
If you lack on the knowledge front in certain areas invest in education and training, No successful business neglects training and learning.
Invest in resources that will help your business grow. Yes TradingView is free but having a higher package and more data help me just as an example.
There is no other business in the world like trading where the over heads and start up cost are low, So if paid resources can kick you on to next level factor them in as a cost of business.
Keep treating trading as a hobby and it becomes an expensive one.
Start treating trading as a business with the ethos and cultures applied the same as those of successful businesses and that profit starts to come naturally.
Thanks for taking the time to read my idea.
Hope you all have a good weekend
Darren 👍
