Forex Strategies – Page 11 – 2nd Skies Trading

Developing a Successful Forex Trading Mindset Pt. 1

Today’s lesson is just to give you some brief tips on how to develop a successful forex trading mindset. Without a profitable and successful trading mindset, you will be swimming upstream against your emotions/fears, thoughts and unconscious habits which undermine your success. Perhaps you have noticed this already in your trading, almost as if you are being kept at arms length from trading profitably.

Your trading mindset is really a product of three things;
1) your neuro-physiological wiring

2) your mindset or level of mindfulness

3) your psychological conditioning

Too many traders always seem to feel it is the system which is holding them back from being profitable. Yet I teach the same price action strategies to hundreds of people, and while many are profitable, others using the same systems are not.

What is the difference between the two? Their Trading Mindset.

So I will briefly share some key points about the mind, the brain, and how you can help develop a successful trading mindset. For today’s part 1 of the article, I will focus on the first point, and will cover the other two in the following articles.

Neuro-physiological Wiring (i.e. How Your Brain is Wired)
When your brain changes, so does your mind and vice versa. They are integrated and help in your development as a forex trader. Neurons that fire together wire together, and mental activity helps to create new neural structures (positive or negative ones). Simple unrelated thoughts (about past, present or future) can having significant effects on your trading mindset.

It should be noted there is no compartmentalized portion of your brain just for forex trading. Everything in your past conditioning and wiring can and will have an effect on your trading success.

The good thing about this is – your mind is neuroplastic and can be re-wired into a whole brain state. Any subtle changes in brain chemistry, heart rate, etc. can and will alter your concentration, memory and emotions (all critical for trading successfully).

Fantastic ways to alter your neural programming and to build a whole brain state for better performance + a successful trading mindset are a) ERT training, b) a brain gym or using binaural beats c) right diet and lifestyle.

As a whole, your brain has three fundamental functions:

1) Regulation (physiological processes necessary for survival, perception, etc. through exciting or inhibiting neurons)

2) Learning (forming new synapses, pathways and circuits by strengthening or weakening current ones)

3) Selection (working with perception and experience moving towards what is valuable or not)

These three fundamental functions are critical for all mental activity – especially in forex trading.

Regulation
If you have not taught your brain and central nervous system to relax, to breathe slowly and more deeply, your trading will likely be more emotional, panicked and stressed. You will miss details and make irrational decisions (not trading your strategy, trading with fear, risking too much). But you can train your brain to regulate the physiological and mental activity through exercise, yoga and breathing practices.

Learning
The best ways to accelerate the learning process is to a) work with a trading mentor, b) practice, study and train to use rule based systems, and c) to train in the markets which provide a feedback loop for you.

Selection
In concert with the learning process, your experience in the markets will help provide a rich context and feedback to help you move towards what is beneficial and valuable for your trading. This is done by discovering what works and consistently making profits, while moving away from what does not.

Your brain has survival strategies (physical/psychological) hard wired into its cells, and these can help or hurt your trading. It should be noted, when a survival strategy runs into a high energy (or uncomfortable) situation, the brain will create alarm signals that can and will influence mental activity.

Some of these strategies are;

1) to look for stability/solidity in a constantly changing world
2) to divide what is connected creating a subject/object relationship
3) to avoid pain/threats and seek pleasure

Can you see how these strategies may effect/hurt your trading? Any of the three stand out?

Food for thought, but perhaps you can explore how they have influenced your trading. This is the first step to building awareness around what makes you tick as a trader, and what you need to work on mentally. Overcoming and transforming these obstacles can (and likely will) mean the difference between making money and losing money.

Regardless, each of these three fundamental functions and strategies will play a critical role in building a successful trading mindset. Additionally, how your brain is physically wired will either support (or hamper) your learning process.

The good thing is, you can completely train and re-program yourself to be hard wired for successful forex trading. The only thing missing is working with a proper mentor, a training program, and the right effort.

I hope this helps gives you insights into the mind and why developing a successful trader mindset is important.

I’ll explore more in part two of this article series, so stay tuned, and happy holidays to all!

Kind Regards,
Chris Capre

The Ideal Trader

Over the last two weeks, I wrote on the subjects of ‘Quality vs Quantity – Which is Better For Trading?’ and ‘What is A High Quality Signal‘.

The main theme has been around dispelling some freshman arguments and confusions others have written espousing the quality is better than quantity argument, and what really constitutes a high quality signal.

One question that should have arisen out of this is ‘what is the ideal trading method and frequency‘ based on what I have now explained.

That is what I will focus on today – the ideal trading frequency (or what I think is the ideal trader). In other words, what kinds of trading strategies and frequency would offer you to make the most profits.

I will first talk about time and how that plays a crucial role in trading (and life). Then I will unpack a few trading strategies to give you the maximum punch for your efforts.

Time Is A Currency

I was recently traveling internationally walking down the streets, and I noticed a huge line leading up to this machine. I asked my local friend what all those people were waiting for. They told me if they punch their tickets, they get $.30 off their subway fare.

I then went up to someone in line and asked them how long they wait on average. “About 15 minutes”. I could tell immediately this person misunderstood how valuable time was.

They waited there 5x per week on average of 15 minutes (1.25 hours) all to save $1.50. If they really valued time, they would work an extra 1.25 hours to make more money than the $1.50 they were saving waiting in line.

This extra effort in overtime pay certainly outweighs the $1.50 gained.

Or they could use this extra time to figure out new ways to do what they do, likely leading to a promotion and thus higher pay.

There are plenty of more effective ways to use their time. But the reality is, when you do not have money, you think money is more valuable than time. When you have money, you think time is money and is really more valuable.

Why?

Because you can replace lost money, you can always make more money (an almost unlimited amount), and you can multiply money exponentially.

But…you cannot replace, make or multiple time. Once time is spent, it is gone forever and cannot be replaced, re-done or re-used.
Thus in reality, time is a currency, and often mis-spent.

Using your time well in a highly efficient and intelligent manner will almost always lead to having more time and more money. Find someone really successful and active, and I’ll find you someone who understands time is a currency.

So How Does This Relate To Trading?

The only way one can possibly ‘multiply’ time is to be able to do two things at once.

When it comes to trading, the only way to do this is to trade set and forget strategies on the 4hr and daily time frames. These are strategies where you do not need much time to manage them.

Real set and forget strategies are rule based systems, meaning there are rules for entries, exits, stops, limits, taking profits – everything.

You do not have to make discretionary decisions to use them. All you have to do execute the rules using minimal time and effort to trade them.

While the trade is playing itself out, you are off doing something else (reading a book, learning a new language, training in a brain gym, etc). This allows you to get maximum effect for the least amount of time used.

But I thought you said trading in quantity can be more profitable?

I did, and it is a fact, that if you can take your systems edge, and execute it a few more times a month with similar accuracy, you will make more profit then executing it less.

In fact, in my prior article dispelling the quality is better than quantity argument, I showed that the system with over 15% higher accuracy trading less, was still making far less profits and pips than the system trading more frequently and less accurately.

So quantity does matter.

Thus, trading set and forget strategies is useful because it allows you to do other things while making money. Being able to make money while sleeping is incredibly potent for building financial abundance.

But…and I mean but…trading only a handful of times per month does two negative things to your trading;

Limited Feedback Loop = Slower Learning Curve
Not Multiplying Your Edge = Making Less Money

Let me unpack these two briefly.

Limited Feedback Loop = Slower Learning Curve
It is a Neuroscientific & Cognitive fact that if you are under-stimulated, or become bored with your trading process, that it will interfere with your learning process. Being bored means you are not challenging yourself enough, nor getting enough feedback from the markets.

Every time you make a trade, it gives you feedback on your abilities, on how you find entries and exits, how you control risk, read price action signals, and make trading decisions.

You don’t become a good golfer or quarterback by sitting on the sidelines most of the time.

You become better at trading, by trading and making trading decisions – win or lose. Each trade is a feedback loop from the markets which offers you information that can bring you closer towards your goal, re-enforcing good habits while negating bad ones.

But if you don’t trade often or enough, you are missing out from seeing how much you really understand. There is a reason bank traders often have to make 4,000 trades before the bank lets them trade money. Without being challenged enough in relationship to your skill level, being bored or under-stimulated will not induce development, and it will actually hurt the learning process.

Thus, if you are only trading around 4-5x a month, you are hurting your learning process and curve, as you are missing plenty of high quality signals every day.

Not Multiplying Your Edge = Making Less Money

Although I’ve already demonstrated this in my prior article on quality vs quantity, the bottom line is your system should have an edge and expectancy.

If you are trading at 60% accuracy, making on average 2:1 reward to risk per trade, ask yourself who makes more money;

Trader A using that system 5x a month?

Trader B using that system 10x a month?

The answer is obvious – it’s a mathematical fact that if you can multiply the amount of times your edge plays out, you will make more money.

So in summary, trading more often while keeping your edge, will not only challenge you and stimulate you more, but will also help you make more money and profits.

What About Set and Forget Strategies?

The downside with set and forget strategies on the 4hr and daily time frames, is they do not come as often as intraday trading setups will.

Ask yourself how many signals offering 100 pip targets and 50 pips stops come in relationship to 60 pip targets and 30 pip stops?

Obviously more of the latter. And since daily signals only come once per day per pair, mathematically there are less of them than signals on the 4hr, 1hr or smaller time frames.

Although you may think only high quality signals come on the 4hr and daily time frames, you simply have not been trained to see them, as there are plenty of them coming daily on lower time frames.

A quality signal has nothing to do with time frame, but having three things;

Is a pattern that repeats itself with consistency and accuracy
Is a signal that offers low risk and high reward potential
Is a pattern that offers itself a clear entry and exit pattern

That is all a signal needs to be high quality, and this is not time frame dependent. If someone tells you otherwise, they do not understand trading and you should run away from them.

Although set and forget strategies can allow you to use your time efficiently, they do not allow you to multiply your account at the same pace as trading intraday will offer you more signals, and plenty of high quality ones. The one downside in trading intraday is you usually have to be there and manage the trade.

With training, this is not stressful, and becomes quite enjoyable. It also offers you a greater opportunity to learn, as you are observing more candles and price action formations, thus seeing more patterns and gaining more chart time. The latter two will without a doubt increase your learning curve, but only spending a few hours per week will take you a long time to log your 10,000 hours or really master reading price action patterns.

Thus, trading intraday signals and setups allows you to generate more opportunities for profit.

Which Is Better Then, and What Is The Ideal Trader?

In reality, the best combination is to trade both set and forget strategies, along with trading intraday setups. This is the ideal way to generate the most profits in the least amount of time.

You really get the best of both worlds as you can make money sleeping, also finding great intraday price action setups each day, and I have students doing exactly that, week in-week out.

Now I do not recommend sitting at your computer for 8hrs per day just trading intraday, then spending another 1-2 hours per day finding your set and forget setups.

The brain really can only achieve maximum concentration for short periods of time, often less than a few hours. Luckily, the best intraday trading setups are during peak times of volatility, so you only need to be around for a few segments of the trading day to capture some serious pips and profits.

I recently did a live intraday price action trade banking +1415 pips of profit in about 4 hours with over a 4.75x reward to risk play. How many days will it take you to make +1415 pips of profit, or 4.75x your risk trading daily price action setups? Food for thought, but i’m pretty sure you won’t do that in a day, or even a week for that matter.

In Summary

The bottom line is, the ideal trader can trade a few hours of the day highly concentrated, finding a few high quality intraday price action setups, while also making some set and forget plays. This allows them to multiply their profits and edge from the intraday trading, in concert with making money while sleeping.

This really is the ideal trader and offers you the most opportunities – not just for making profits, but for accelerating your learning process as you are constantly in the feedback loop from the markets, and learning at a faster pace.

Now there are other critical factors for helping the learning process, along with finding what is ideal for you, and what is the ideal trader mentality. These things I will discuss in the next article which will be coming soon so stay tuned.

Until then, no matter what religion you are, or wherever you are in the world, I wish you all the best of holidays, and that good health, abundance and a ocean of good things come to you, and those you care about.

Kind Regards,
Chris Capre

Forex Strategies, Price Action Trading

What Is A High Quality Signal?

I recently wrote a controversial article dispelling some of the misconceptions about the ‘Quality vs Quantity‘ argument, the ‘Less is More‘ being better for your trading. It has already garnered a lot of questions and responses on the web, which was its purpose.

But there are still some lingering and freshman ideas floating around there. Thus, I wanted to write a brief article to end the week highlighting some of the key takeaways, and what not to be fooled by.

High Quality Signals Only Come From Higher Time Frames
The idea that high quality trades, setups and signals only come from higher time frames really comes from an inability to see and read price action.

Ask yourself – what constitutes a high quality forex signal?
Some of the main components (regardless of time frame) should be;
1) a pattern that repeats itself with consistency and accuracy
2) a signal that offers low risk and high reward potential
3) a pattern that offers a clear entry and exit pattern
Let’s break down each one here so you fully understand them;

1) A pattern that repeats itself with consistency and accuracy

If you haven’t noticed, the markets are changing with daily ranges contracting massively and currently at 5 year lows. HFT algos now comprise 28% of the daily volume, but 3 years ago were 10%. So this would change how the price action unfolds considerably as they are using different techniques, technology, and patterns than traditional human traders would (or could).
Even though the patterns are changing, they are patterns that repeat themselves nonetheless, and for someone who is a real student of price action, you will be able to see these patterns on all time frames.
As long as the price action pattern is relatively consistent with both the formation and outcome, this is a key ingredient for a high quality signal, and thus a tradable event.

2) A signal that offers low risk and high reward potential

The size of my stop in relationship to my target is what constitutes a high quality signal. The greater this is above 2x reward v. risk, the better the quality of the signal. I still have to figure accuracy into the equation, as profit is really a measurement of risk, reward and accuracy.
Regardless, a 200 pip winner with a 100 pip stop offers the exact same profit potential as an 60 pip winner with a 30 pip stop. Assuming you risk the same on each trade in terms of % equity, they offer the exact same profit potential.
Now one thing should be pointed out;
Risking 100 pips, how many times would I be able to grab a 9x, or 11x reward play, meaning I could grab 900 or 1100 pips from that trade? I’m assuming not many at all, and something you’ve likely never done just risking 100 pips.
But what about risking say 10 pips and gaining 90? Since 900 pip straight moves are not common on a daily chart (maybe 5-6x a year), but 90 pip moves occur everyday, the latter once again offers more profit potential.
Just the other day, one of my price action course students did just that, snagging 128 pips on the day, grabbing a 9x reward play, an 11x reward play, and a 2+x reward play.
So you trading the daily charts only risking say 100 pips, would have needed to bank a 900 pip runner, an 1100 pip runner, and a 250 pip runner, just to equal what my student did in < 24hrs!

Ask yourself Mr. (or Mrs.) Daily Chart Trader Only, how many times will you be able to do that in one single day, let alone a year?
If you are on avg. banking 2x reward plays, and trading 3x per week, you would need an entire month of perfect trading just to equal his half day of trading. Add 3-4 losses in there, and you are talking 1.5-2 months to achieve what my student did in 24hrs.
Which would you rather do? Work for an entire month to make what you could in a day? Wait for months on end to find something you could achieve almost daily?
Food for thought, but high quality signals happen everyday. If you are not seeing it, you just haven’t learned how to yet, but with proper training in price action or ichimoku, you could.

3) A pattern that offers itself a clear entry and exit pattern
For any signal to be high quality, as discussed earlier, it has to be 1) repeatable and solidly accurate, 2) offer low risk/high reward potential, and 3) offer a clear entry and exit pattern.
For those that have read my article on understanding impulsive and corrective price action, you will remember my key model is to find impulsive moves and trade in that direction, as the next legs are likely to be a corrective move, followed by another impulsive move in the same direction.
Now using the same chart from my student below, look at the 4th trade which is the last one on the day (chart below).

Notice how he was using my model of following the impulsive and corrective price action, looking to short with trend on a corrective pullback and trade with the institutional money.
His first attempt failed for a small 4pip loss, but his second attempt caught a really opportune moment to get in, and immediately after his entry, the sellers came in with force, bottoming out with a pin bar setup that he recognized as a likely bottom, along with a few other clues from my price action course.
He ended up banking +25 pips on a 12 pip stop for a 2x+ reward to risk play, all in 15 mins.
Notice how he controlled the risk exceptionally well with precision and confidence, almost like a sniper would taking out his targets. For those with eyes, he had a clear entry and exit pattern, which is needed to have a high quality signal.
This was a high quality A+ setup that was obvious and was begging to be shorted. You will also notice he had a good strike rate, hitting 3 out of 4 trades for 75% accuracy, all while trading < 1hr charts.
To do this he had to be patient and disciplined. You don’t have to wait for days to find these trades, as they come daily. You just need to learn how to spot these high quality intraday price action setups.
He was looking for easy opportunities, acted with complete confidence, swiftness, precision and without hesitation.

He also avoided any risky situations, and used highly effective risk management, never risking too much per trade or more than necessary. He never interfered with his trades as you can see on trade 2, he had to be patient for the trade to mature. When it did, he took profit, but he never exited early.
And if you look at the 2nd and 4th trades, he was looking for the easy prey – the most obvious setups out there.

In Summary
As I stated in my prior article on quality vs. quantity – which is better for trading?, the ‘less is more‘ doesn’t apply mathematically and always hold up, as I’ve already demonstrated. Unless your accuracy is significantly higher, your ‘less is more‘ theory is actually a lot less profit mathematically.
Food for thought.
Now it should be stated I am not saying you should trade intraday only, or abandon the 4hr and daily charts. For those of you with full time jobs, families, and busy lives (many of you), I recommend trading the daily and 4hr strategies as these will be most suited to your situation and availability.
I always advocate finding what is most natural to you, your mindset and situation. This will always be the most profitable strategy you could engage in. For some that will be on the higher time frames and the ‘less is more‘ approach which has some advantages.
But for others, it will not be, as you have the skill set, mental aptitude, and availability to trade intraday. The key is to finding what would work best for you, and then learning that to the best of your abilities.
Just don’t fall prey to the ‘one size fits all‘ or ‘less is more‘ approach, because it may actually be ‘less’ for you.
To argue high quality forex trading setups only manifest on higher time frames is a sophomore understanding of trading price action, or trading as a whole. They manifest on all time frames, you just have to learn how to see them. That does not mean you should trade them all – just find a method of trading that fits you best.
Make sure though, you don’t fall for any one sided arguments saying quality is better than quantity, or vice versa, as the answer lies somewhere in between, and in reality – a balance of both!
Kind Regards,
Chris Capre

Forex Strategies, Price Action Trading

Quality vs Quantity – Which is Better for Trading?

There seems to be a ton of confusion on both sides regarding the Quality vs Quantity Argument when it comes to trading. Being such an important subject for a trader, I have been wanting to write about this for some time so it’s time to put some of the myths, mis-information and confusion to bed here.

One of the big forex trading arguments going around has to do with ‘Quality vs Quantity‘, and it is often masked in the typical;

-Trading Higher Time Frames = More Accuracy

-Trading Smaller Time Frames Carry More Risk

-Anything Below The 1HR Charts is Just Noise

-Quality Trades Make More Money Than Quantity

In regards to the above statements, only one of them is true, but it is incomplete by itself and does not paint the whole picture.

Today’s article is here to dive into this subject, explore both sides of it, and talk about which of the two competing theories is correct.

Quality Is Better Than Quantity When It Comes To Trading
I know two groups of billion dollar business entities that would completely disagree with this argument. They would be Casino’s and HFT shops (High Frequency Trading).

Casinos often times (in the various games you can play there), only have a slight edge, often times 1-4%, meaning they are 51-56% likely to win at every play, with a 49-44% chance to lose. This small edge might not seem like a lot, but played out over 1000’s of times a day, and it all adds up.

HFT algos also take a similar approach. They are not trying to make huge winners and let trades run for days. They are in anywhere from hours to minutes, perhaps seconds, or even nan0-seconds. They make small trades for ultra small profit, but they do this hundreds of times a day, and make money year in year out.

These two things alone debunk the whole quality is better than quantity argument, as they are highly successful at what they do. In 2011 alone, HFT firms made over $1.2B (yes, billion) in profits. Not bad for having such an inferior trading style!

HFT methods simply use the mathematics and repetition of the edge to make profit. It’s an edge – maybe not the easiest for a human trader, but an edge nonetheless, and it makes money.

The bottom line is, if you have an edge, the more times you can apply it with the same level of accuracy, the more the edge will play out in your favor. And that leads to more profits.

A Comparison Approach
To really see the numbers and a comparison approach, let’s take System A with 60% accuracy, trading 5x a month, risking 100 pips and targeting 200 pips. Below is how the math works out;

5 trades over 12 months = 60 trades per year
60 trades x 60% accuracy = 36 winners and 24 losers
36 winners at 200 pips gained = 7200 pips gained
24 losers at 100 pips lost = 2400 pips lost
Total Profit = +4800 pips

Now, lets take System B, which is the same as System A, but bring down the accuracy just 5%, assuming you will be less accurate trading the same system on a lower time frame. Let’s have you trading 20x a month (~5x per week), risking 50 pips and targeting 100 pips (same ratio of risk to reward). Here is how the math plays out below;

20 trades a month = 240 trades per year
240 trades at 55% accuracy = 132 winners and 108 losers
132 winners at 100 pips gained per trade = 13200 pips gained
108 losers at 50 pips lost per trade = 5400 pips lost
Total Profit = +7800 pips

Assuming you risked the same equity % per trade using System B – trading quantity over quality made more pips and profit. Even if I make System A 15 % more accurate than System B, here is how the math plays out;

60 trades at 70% accuracy = 42 winners and 18 losers
42 winners at 200 pips gained per trade = 8400 pips gained
18 losers at 100 pips lost per trade = 1800 pips lost
Total Profit = +6600 pips

As you can see, even being 15% more accurate, System A still under-performs System B. Only until you get to 77% accuracy will System A outperform System B.

So this whole argument that Quality over Quantity is mathematically false.

One of the key questions you should be asking yourself then is;

Can I be 77% accurate trading my system on the higher time frames?

If not, you may want to reconsider how to maximize your edge, which is all you are really doing in trading. But the fact is that trading on higher time frames will take longer to make money as you will have less signals in the market.

Key Points
A few of the typical or vanilla counter-arguments to the quantity makes more than quality statements are;

1) Trading higher time frames is less stressful and is More Accurate

2) Anything below 1hr charts is just noise

3) Trading lower time frames causes you to over-trade and over-analyze

Of the above statements, only one is true to some degree (#1) , but again it is incomplete by itself and needs to be fully understood. Let me break down each one so you can fully understand the differences.

Trading Higher Time Frames is Less Stressful and More Accurate:
Of all the statements, this is really the only one with some truth, and it has to do with the second part (being more accurate).

I have quantitatively tested various 1, 2 and 3 bar price action signals (over 24 in total), such as pin bars, inside bars, engulfing bars, 2-bar reversals, outside bars, and more across every time frame from the 1m to weekly. Statistically, if you are just trading these patterns by themselves, they tend to be more accurate on time frames such as daily and 4hr strategies (along with the 1hr), then they do on say the 5m.

The reason for this is, a daily candle includes 24hrs of price action, therefore 24hrs of market sentiment and order flow, which is three sessions total. This can have a lot of info as to how players are positioning themselves both intraday and daily.

Thus, with a greater amount of market sentiment over a longer period of time, you can trade some of these patterns with greater accuracy.

However, as we have seen above, greater accuracy does not always = more profits. One thing should be noted though accuracy is not the same trading the often promoted NY Daily Close.

I have one system that on the NY Daily Close, on one pair, trades highly accurate, but another pair quite poorly. If you have an idea as to why, write in a comment below, but the statistics and profitability are night and day, so NY Daily Close is not ideal for all systems, pairs and time frames, and in many cases, under-performs massively.

Thus to sum it up, trading the higher time frame ‘can’ lead to more accuracy.

However, the notion of trading the higher time frame is less stressful is not true, and really a matter of having a successful trading mindset. Some people are more naturally wired to have a set and forget style of trading. Others are better at managing small details, so trading a higher time frame would actually work against their natural mindset.

There is no one-size fits all, thus the key is to find what is most natural to you.

I would like to state generally, if I was starting with a new student, I would start them on a higher time frame as accuracy in the beginning is critical to the learning process. This is exactly how it is in my archery training – in the beginning you start with a target close by, say 3-6 meters, and only after time do you move to targets farther away.

But the idea of lower time frames being more stressful is a matter of mindset, training and practice. Stress is based on how one perceives information and reacts to stimuli. To some people, being bored is more stressful, and there are tons of studies that boredom can hugely interfere with the trading and learning process. For an F1 driver, being stuck in traffic may feel like torture, but doing 150MPH may be joyful. Food for thought.

Anything below 1hr charts is just noise:

First off, this argument often comes from daily chart traders saying price action below the 1hr is just noise. Ironically, this same argument comes from 1hr chart traders who say the 1m time frame is just noise. Who is right, and is it just a matter of perspective?

The truth of the matter is, although there is a greater possibility to witness ‘noise‘ (price action that is the result of non-directional interest and order flow), on lower time frames, support and resistance levels work just the same. They simply require a little tweaking. But the bottom line is, order flow creates price action, and price action is simply information.

Using a recent example of a live intraday price action trade I did on Gold, take a look at the two charts below;

Exhibit A (4hr Time Frame Gold/USD)

Looking at the chart above, we can see three strong reactions to the $1685 level on Gold, all communicating strong buying interest at this level.

Now look at the chart below which is the third rejection on the 5m time frame.

Exhibit B (5m Time Frame Gold/USD)

Looking at the chart above, we can see the same strong reaction and buying interest off this level in the first wick. But we can also see there are two high quality price action signals off this level, with a pin bar false break, along with an inside bar + pin bar combo.

I actually got long on this trade, and made over +1415 pips of profit just using pure price action on the 5m chart.

Does the price action at the bottom of this chart look like ‘noise‘ to you?

I don’t think so, and it shouldn’t.

Learning to filter out useful information and helpful information is just a matter of training and time. But the idea anything below the 1hr chart is just ‘noise‘ is ridiculous and really a freshman understanding of price action.

Trading Lower Time Frames Causes You To Over-Trade and is Greater Risk:

Although there is some truth to this, it really is misleading. If you analyze each bar, sure, you will be over-analyzing the charts, but this applies to any time frame. In a choppy range, you are not watching every bar for clues, especially the bars in the middle of the range.

However, if you are marking your key levels on a higher time frame, and simply looking for signals at those levels, then the chances of you over-analyzing are slim. It is really a question of trading and preparation- not a fact that you will over-analyze.

The mind has neuro-plasticity to it and can learn almost any skill. You can learn to filter out unimportant bars and price action on the chart – all it takes is a little practice. Once you do, you wait for your key levels and signals, and get in without any extra analysis or stress.

The whole idea of doing less is better for you (or being lazy), I have already demonstrated, doesn’t make you more profitable. Try this same logic to exercising, playing piano or hitting a golf ball, and tell me how that works out!

As to trading the lower time frames or intraday trading equaling greater risk, is a confusion. Risk has nothing to do with the time frame. Risk has to do with three things;

1) Position Sizing
2) Size of Stop Loss in Relation to Target
3) Accuracy

I can have a 3 pip stop (via position sizing) = more risk than a 500 pip stop. I can also make more money with a 50 pip target and 20 pip stop (2.5:1 reward-risk ratio) than a 500 pip target and 250 pip stop (2:1 reward to risk ratio), with the same equity % at risk per trade. So this notion that risk is > on lower time frames is mis-informed.

Does This Mean Quantity Is Better Than Quality?
This is the real question, and it comes down to edge, personality and availability. If you are not available to trade more throughout the day, and have a full time job with only a few hours to view the charts, then I’d suggest trading the higher time frames. However, if your personality is more suited to being more active, then trading 4-5x a month could be harmful to your learning process. So remember trading rule # 1 – know thyself when it comes to trading, and find a system, time frame and style that best suits you.

And we always have to consider our edge. If we trade the daily time frame at 60% accuracy, and the 4hr or 1hr time frames more often with slightly less accurately, do the math and see how it works out. If it’s more profitable trading more often with slightly less accuracy, then do it, as long as it doesn’t throw off your life or health.

But the bottom line is, the whole argument quality is better than quantity doesn’t always hold up, and you need to do the research and the numbers to determine which has a greater edge. And without a doubt, it is a fact if you can take your same edge, and apply it more often than you are now, you will make more money and be more profitable.

Thus, in regards to the question as to which is forex trading method is better, the answer is neither one is better, but both!

Quality matters, but can under-perform. Quantity repeats the process faster of making profit, but has to be considered in the larger scheme and what is most natural for you. However neither forex trading method is better, and the best edge lies somewhere in between the two.

So don’t be fooled by any freshman arguments stating one is better than the other – because they are simply not true, highly inaccurate and misleading.

Hopefully this quality vs quantity forex trading article will put a lot of the mis-information to rest, and give you a new perspective on this critical subject. In a follow up article, I will talk about how I approach this subject in my personal trading, and what I think is the ‘Ideal Trader‘ in relationship to these two.

Kind Regards,
Chris Capre

Forex Strategies, Trading Mindset & Risk Management

Trading With Amnesia

Last year the Colts were the first team in NFL history to go 0-13 following 9 straight playoff appearances. They had the single biggest lost of 2011, the worst AFC record in 3 years and finished with a 2-14 record which was the worst in the league that year. Because of this, they got the first overall pick in the 2012 draft. They chose Andrew Luck who is the subject of today’s lesson.

Being the first overall pick in the draft is a special honor, and burden due to the high expectations. Once he was selected first, former first round draft picks were interviewed and asked to give advice to Luck on his first season. Prior to yesterday’s game, Luck was also interviewed about the Colts amazing turnaround, being 7-4 and in 2nd place in the AFC South division. They talked about his reactions to the advice given by former first round drafts.
The one that really stood out for him was one of the quarterbacks suggesting he develop amnesia. What he meant was, you are going to make mistakes, and although you want to learn from them, you want to forget about them so that you can focus completely on the next pass, the next play and the task at hand.
By developing amnesia, you are willing to risk again, regardless of the last loss. You are willing to forgive yourself for over-leveraging, for not following your system, for pulling the trigger too late. Developing amnesia in some sense can be a great skill because each trade is its own, where there is no past mistakes haunting you. No fear of repeating the last major loss, no thoughts about losing more money.
If you are constantly brewing over the last mistake, trading in fear, it will take you out of the present moment. It will reduce your intelligence, awareness and cognitive skills needed to trade successfully. But if you have forgotten about the last mistake which cost you a lot of money, you can treat the newest trade as a fresh start, as another chance to do it right.

Quarterbacks need this skill because they can throw the ball 20, 30 or 40 times in a single game. Imagine what it takes to make a major mistake on live television, being watched by millions of people, and then having the throw the ball again.
In last Sunday’s game, Luck did not have a perfect game by any means. In fact for 90% of the game, his team was behind and he had made some major mistakes. He threw for three interceptions in the game, some of which were rookie errors. He threw a total of 54x and only completed 24 of his passes for 44% accuracy, which is incredibly low for such a talented quarterback.
In the last four minutes of the game, his team was down by 12 points and they had the ball, but had to go 85 yards. He had already thrown three interceptions, and time was running out. Yet, in 1 minute and 23 seconds, he completed 5 of the next 8 passes and scored a touchdown.
Luck got the ball again with 1 minute and 7 seconds left in the game and had to go 75 yards. With less than 4 seconds to play, he threw for a touchdown pass and won the game.
These last two amazing drives would have been challenging for the best ever to play the game. Yet a rookie quarterback did the amazing, and won the game.
None of this would have ever been possible if he hadn’t forgotten about those three interceptions. If he kept dwelling on them, he would have not been focused enough to make the crucial plays, to be totally aware and pass where he needed to, run when he needed to, decide when he needed to. He would have been stuck in the past which is a dead place you can never go back to ever. And that is where his intelligence would have been, stuck in a dead zone and imprisoned by his mind.

This often happens to traders, especially developing ones who haven’t built up a consistent track record. Ask yourself if you have ever been paralyzed to make a trade. Perhaps over-analyzing because you fear another loss. Perhaps not pulling the trigger because you are afraid to lose more money. Ask yourself what limits you from trading profitably? Are you afraid to make a mistake and what that means about you. Worried you might make a bad choice, or risk too much, or be completely wrong.
Has this ever happened to you? Does this sound familiar?
I’ve been there, and almost every successful trader has at one point or another.
In what may seem like a paradox, you need a good memory, and amnesia at the same time. Pattern recognition becomes easier with a good memory, especially if you’ve seen the patterns hundreds of times before. You know what follows, and you know what to do, so you just do it and execute your forex trading strategy.
But at the same time, you also need to trade with amnesia, you need to forget your mistakes, stop punishing yourself, stop getting back your losses in trading, stop being critical of yourself, stop being afraid, and treat the current trade like a fresh start, like its completely new and disconnected from your past mistakes.
This is skill that can be learned, and a strong memory can be developed as well. The mind is neuroplastic and has the ability to rebuild neural connections, the ability to build a mindset of success, for trading and life. Brain gyms are a great way to build up your memory and pattern recognition, while ERT training (Emotional Repolarization Technique) is exceptional for re-building neural connections, re-programming bad habits into good ones, fears into strengths, confusion into understanding and awareness.
Yes, you do need to remember your mistakes and learn from them. Reviewing your journal weekly is helpful for this, so you are aware what you need to work on and what are your strengths. But dwelling on your weaknesses and mistakes is not helpful, and will likely harm you psychologically from trading successfully.
In conclusion, there are three things needed to trade successfully;
1) A Strategy With An Edge
2) Proper Risk Management
3) Successful Trading Psychology
Andrew Luck did not have a fantastic first game of the year and made tons of mistakes. In many cases he did some embarrassing things when the whole world was watching. But he was never paralyzed by a bad pass, an interception or a critical mistake. He understood he’s going to make hundreds of passes, and one pass cannot define him or his career. He remembers his mistakes, and yet has amnesia about them so he can be totally present in the moment.

You will make hundreds of trades in a year, perhaps even a few months. No one trade will define you, and never will, whether its a big winner or a horrible loser that cost you a lot of money. How you move on and treat the current trade will determine how you perform. Do you hesitate to pull the trigger in fear you’ll make another mistake, or do you treat it as just another pass attempt and an opportunity to move forward. If you struggle with this, there are ways to get past this, but there will always be another chance to make a good trade and move closer to the endzone of success.
I hope you enjoyed this article and look forward to hearing your comments.
Kind Regards,
Chris Capre

Forex Strategies, Ichimoku Cloud Trading

Ichimoku Price Theory | An Introduction

This is the third installment introducing details to subjects which are not really discussed or talked about when it comes to Ichimoku Trading, that of using Ichimoku Time Theory and Ichimoku Wave Theory. Remember, according to Goichi Hosada (the creator of the Ichimoku Cloud), the Ichimoku trading system is based upon three pillars, and they are;
1) Ichimoku Time Theory
2) Ichimoku Wave Theory
3) Ichimoku Price Theory
This Ichimoku trading system article will be focused on introducing the key principles to Ichimoku Price Theory. For those wanting a review of the other two, you can find those articles by clicking on the links above.
It should be noted to really understand and apply Ichimoku Price Theory, you will need an understanding of the prior two, particularly a good grasp of the Time Theory which is used quite extensively with the Price Theory.
The goal of this article will be to introduce the most basic components of the Price Theory, which may be considered the most complicated of the three. I will discuss the main price calculations, how to formulate them, give examples of each one and some helpful tips when applying the Price Theory to Ichimoku trading.
Introduction To Ichimoku Price Theory
First, it should be noted we do not want to see these price targets as absolutes. They are really guides to give us highly probable approximations as to where the market is likely headed during a particular wave or move. These methods take practice to learn how to use, so take your time with them, but never look at this as an absolute target.
In reality, there are 4 basic price measurement methods according to the theory, however the 4th is generally regarded as a low probability event and takes a considerable amount of skill to spot and use. So for our purposes, we will only use the basic three which are the most common and critical to learn.
The three main price measurements are known as;
1) The V Calculation = B + (B – C)
2) The N Calculation = C + (B – A)
3) The E Calculation = B + (B – A)
The formulas for them are listed above, but I will show you a diagram to better understand them which is below.

Although I listed the NT Calculation, for now just spend time understanding and practicing the first three price measurements.
The V Calculation
Looking at this general structure, we have a bullish move from A – B – C. You will notice the depth of the retracement of C in relationship to the A – B move, which is about a 61.8% retracement. If we were using Ichimoku Wave Theory, this would correlate to an N Wave.
The way to use this as a price measurement method is when price breaks the horizontal line at B for that is only when the V Calculation and pattern would be active. Of course we can make the calculation ahead of time, and that is the point of the price measurement methods (or ichimoku price theory in general). But the calculation actually does not become ‘active’ till the line at B is broken.
Once this does, we can expect an upside price target of D to be achieved (within a handful of pips) based on the V Calculation. An example is below.
V Calculation Using the NZDUSD 4hr Chart

So using this chart and running through the math of the V Calculation, we take .8202 + (.8202 – .8110 = 92), or .8202 + 92 pips = .8294. As you can see, this matches up nicely with a current swing high and natural target for an upside continuation in the Kiwi (should it continue). This is a basic example of how you can use the V Calculation to gauge a potential target for the pair. An ichimoku trader using this calculation along with the swing high would only bolster their confidence in the upside target being hit.
Keep in mind this is a live chart and I have no idea how this will play out, but wanted to show it as an example.
Lets run through examples of the N and E calculations so you can see how they operate.
N Calculation = C + (B – A) Using the Dow Jones Index 4hr Chart

Now using this chart above and the numbers for the N Calculation, C (12698) + (12794 – 12463 = 331), or 12698 + 331 = 13029. So we would have a general target of 13029. Now if you remember, these numbers are not meant to be absolutes, only highly probably approximations of upside or downside targets. Considering the major role reversal level was at 13003, we can consider this to be a good target for D using the N calculation.
E Calculation = B + (B – A) Using GBPJPY 4hr Chart

Using this chart above on the GBPJPY and the E Calculation, B (12897) + (12897 – 12566 = 331), so 12897 + 331 = 132.28. In this case, the market actually only got one pip higher than the D price measurement or target, showing a fine example of how the E calculation and price measurement theory can work.
Some Additional Notes
As I said before, ichimoku price theory should be combined with ichimoku time theory as they work in tandem. But the scope of this is for another article and far too large for an introduction to ichimoku price theory.
Another note in terms of deciding which price measurement to use is based on the price action of the actual moves you want to measure. You will notice all of the calculations have certain levels of impulsivity and correctiveness to the A, B and C moves. On a basic level, what you are doing is gauging the level of the retracement from B – C, along with the correctiveness of the pullback from B-C to determine which calculation you will use. Thus in essence, you need the A, B and C components to really apply any calculation at all. But how you read these moves and waves will determine which calculation you use.
A critical note as well, is when measuring bull or bear runs. The calculations you see in the first diagram are for bullish runs. For bearish runs, you will substitute the + for a – between the first variable and the set. Thus, using the V Calculation, instead of it being V = B + (B-C), it would be V = B – (B – C).
In Summary
This was an introduction into Ichimoku Price Theory which is by far the most complex and intricate of the three pillars of The Ichimoku trading system. The three basic calculations are critical and the foundation of the entire price theory, thus the most important formulas for you to learn. Eventually you will combine price theory with time theory, but for now, just practice the basics here. These price measurements are not to be considered absolute values, and Ichimoku was always meant to be used in combination with price action. In fact, many aspects of ichimoku and the formulas are interpretations and patterns often found within price action, so the two are really intertwined.
For a more in depth study and training on Ichimoku Price, Time, Wave Theory, and Ichimoku Trading, make sure to visit my Advanced Ichimoku Course where we explore these methods in great depth, along with giving rule based systems to trade ichimoku both intraday and a trending/momentum basis.

Forex Strategies, Trading Mindset & Risk Management

Trading and Fear

Inspired by watching The Dark Knight Rises on my recent flight, I wanted to write an article about trading and fear. Of all the emotions that affect a trader negatively, fear would be at the top of the list.

Ask yourself;

-Have you ever not pulled the trigger when your system gave you a signal?
-Have you ever been paralyzed by a series of losses (or one big loss) that prevented you from taking a trade?
-Have you ever made a poor decision because you were thinking of your last losses?
-Has the fear of losing money ever affected you from doing what you know would help your trading?

If any of these have happened to you, do not worry, you are not alone, and are likely in a large group of traders – a majority if anything.

Fear is a highly powerful emotion that has paralyzed many at one moment or another. It has confused you, separated you from your intelligence, your wisdom, your ability to make a good decision. This is true not just in trading, but also in life.

Of almost every mental, emotional or psychological issue I’ve encountered with traders, fear has always been at the root of the issue.

Fear of losing money, of hitting your equity threshold and trading too large, fear of failure, fear of being wrong, fear of making a mistake, fear of about anything you can imagine, with fear as the common denominator.

There are really three stages to fear for a person, especially in forex trading, which I will briefly go over, and talk about how to remedy your fears.

Stage 1 – Paralysis and Confusion

Being such a powerful emotion, at a base level, fear tends to cloud our judgment when experiencing fear on any level. If we are not aware of it, or do not know how to deal with it, it will paralyze us, such as paralysis analysis. It will actually reduce our mental and cognitive resources, forcing us to use a more primitive portion of our brain called the Limbic System (our most ancient brain). You may have heard this as fight or flight, but really when fear takes a hold of us, we are separated from our natural intelligence in the moment we most surely need it. We become the deer on headlights, frozen when we should act. And this leads to confusion.

By having no awareness of fear, or being run over by it, we take the path of confusion, and this leads to bad trading decisions.

Perhaps not pulling the trigger, even though our system has a signal. Perhaps leveraging too little for being afraid of losing money. Whatever the reason, fear at the basic level is of no use to us, and if anything at all – is highly damaging to our life, and our trading performance.

The only way to pass stage 1 of relating to fear, is to first become aware of it, then realize how it affects you. Once you do this, you have the ability to use fear, which is just a highly potent energy.

If you have trouble becoming aware of fear, there are several options, such as doing yoga, practicing meditation before trading, listening to binaural beats, or using a neurofeedback device to monitor your neural activity. Any will work in their own way, but they will help you become aware of it to get past stage 1. Without it, you will forever be a servant to your fears. But after this, you can use fear to your advantage which is the next stage.

Stage 2 – Using Fear To Your Advantage

Imagine being aware that you have the fear of failure. It could, like in stage 1 paralyze you from making an important decision.

But…it can also be used to enhance your performance. It can be used to your advantage to become a better trader.

In The Dark Knight Rises, Batman wasn’t afraid of dying, and this lack of fear of death separated him from an energy – an energy to do something beyond normal. He eventually used this fear for his gain.

How Can Fear Be Used For Trading?

Imagine being afraid to fail, which in stage 1 means you are paralyzed. But if you have the awareness of it, recognize your fears, you can use this energy (which is all fear and emotion are), to perform better. You can use this to work harder, to do the things that build your skills, to practice your technique and system more, to put more hours behind the chart, to fear failure more than inaction.

Fear can be used to push you to the next level, and it is often fear which is at the root of someone who is highly driven. They fear the outcome of failure, so they work harder to make sure it never happens. In stage 2, fear is used as an energy to enhance your performance, to work harder than the next person, to not accepting mediocrity as you know how it sets you back. Instead of being paralyzed and confused by fear, you transform it into a vehicle for your success.

If done correctly, it can bring you a tremendous increase to your efforts which can lead to success. And although this may seem like a victory, it is a limited one – and certainly not the golden prize, which is the next stage. Generally successful traders have fear, but they use this to their advantage and have built a successful trading mentality.

Stage 3 – Transformation of Fear

You always hear about fear and greed in trading, but this comes from the belief they cannot be overcome. This is shortsided and misunderstands the mind. Fear can be transformed and something you are rid of. Imagine how you would be able to act in trading and life if you were without fear of death, without fear of loss, without fear of failure?

Imagine if you never had to deal with those energies, that all your intelligence and wisdom was directed to the problem at hand, to the moment? You would never even have to take the side-road of using it for your advantage. You could just act freely, uninhibited and without hesitation. There would be nothing to protect, no future scenario you worried about, and nothing to lose.

Fear does not have to be a part of your life and especially your trading.

Just imagine what you could do without fear? Imagine if your resources were used to advance your trading and life? Go over your trading journal and look at how many times you hesitated, with the trade ending up a highly profitable winner? I’m willing to bet if you turn those non-trades into profits, or losing trades into winners, you would have a completely different account than you do today.

The good thing is you do not have to become a buddhist monk or a shaolin warrior to overcome fear. With a little ERT training, and willingness on your part, fear can be transformed. Your neural pathways can be reprogrammed towards success, intelligence and wisdom, all without fear. It’s really just a question of will, effort and a desire to take things to the next level in trading and life.

On An Ending Note

Ask yourself where you are in your experience with fear and trading, and then ask yourself what you have done about it, and what you would do to turn the corner. Ask yourself what are you willing to do to become a successful trader. I have tons of students email me saying they will do anything. But when the moment comes time and time again, they choose the path of fear, they choose to not take the risk which is what this game is about (financial and psychological).

Our decisions and focus determine what we manifest in trading and life. The question of how it ends is always within you. In reality, trading is putting yourself in front of a mirror where you are given two choices;
-either become prey to your weaknesses, confusions and fears
-or rise to overcome them and empower yourself to live a different life

Regardless of which path you take, I hope this forex trader psychology article has provoked, challenged and inspired you to look at fear in a different way, and given you options to take your trading to the next level.

Forex Strategies, Trading Mindset & Risk Management

3 Ways Archery Helps My Trading

Last week was the first time I had gone back to my archery school in over a year. Approximately 2mins into the class, I realized how much I had missed formal archery classes, but also how archery helps my trading.

Now I am not suggesting you need to grab an Olympic bow and start taking archery classes to take your trading to the next level. But, it often helps to acquire a second skill or practice to assist your main endeavor – i.e. trading.
For example, Joe Namath was constantly reminded by his coaches he needed to work on his footwork. So he did what every quarterback does…he took up dancing! Footwork was critical to his position, and dancing helped him improve his footwork dramatically.
In almost all skill based endeavors, an additional practice can really improve one’s core skill. I’m going to share with you three ways Archery helps my trading.

1) Focus on the Complete Process
In archery, to hit the target consistently, you have to repeat a specific motion with the precision of a Swiss watch. But to do this, you have to be completely present and focused on the moment and process.
I had developed a habit of pulling my back shoulder towards my head. As my teacher corrected me on this, my concentration naturally became more focused on my pulling shoulder. But, in the process, I wasn’t rotating my front elbow properly.
I quickly realized too much concentration on one area meant less on another. Now just imagine if I was a tightrope walker and had this problem 😮

I find this to be the same with developing traders – they focus too much on strategy (particularly the system and entry) but not enough on controlling risk. Managing risk is a game of pure mathematics, and with most traders, they take profits too early, but get hit for their full stops.

Does this sound familiar?
This is a mathematical disaster waiting to happen, and unless you understand your risk of ruin tables, along with how your system performs over time, you may be 60% accurate or better, but mathematically doomed to lose money.
To be a successful trader, you have to focus on the complete process and every aspect of trading. This means just as much attention to proper risk management, building a successful trading psychology, AND a winning system. If any one is lacking, you will unlikely make money over time.

2) It’s All In the Mind
My last session before returning home was the advanced practice focused solely on shooting at longer distances. Normally, I train at 18m, but for this class it was at 30m.
Obviously, some adjustments had to be made, like changing the sight, getting used to holding the bow higher, etc.
After a few rounds, I was shooting close (but not quite) to what I normally would at 18m.
At the very end though, things got interesting.
We ended by shooting three rounds back at 18m, and it ‘felt‘ incredibly easier. Yes, precision becomes more critical at longer distances, but it also felt easier as a whole. Something changed in my mind, and I definitely felt more confident about shooting at 18m.
But what I noticed is with the top shooters in the school, they almost shot identical to what they did at 18m. Why were they able to shoot the same at 18m as they did at 30m?
The difference was in the mind. To them, their mind was just as focused on the task at 12m as it was at 30m, and they were also just as confident. That difference in the ‘thinking it was harder’ for me, definitely translated into my experience of it, particularly my confidence.

Just like archery, so much of trading is in what goes on between your two ears. Take a look at your last 20-30 losing trades in your journal, and see how many of them are related to mental errors, as opposed to you executing everything perfectly, but the trade just not working out?
Now do the math and see what you would have done if you had executed the strategy perfectly. Try the same for your last 20-30 wins, particularly the ones whereby you exited too early, and do the math again. Take a look at the results, and I’m willing to be with over 90% of you, your performance would have improved (if not been highly profitable) if you had used the strategy according to its rules.
Numbers are the best sirens for traders, so see the financial impact your mind has on your results. Now imagine that every month for the next 5 years and see what the difference would be. You are likely talking about two different trading careers.
So ask yourself how many errors do you make simply because of your mind & emotions, then see what you can do to make less errors. For traders more often than not – it’s in the mind.

3) Repetition is Key
Nobody will become a professional golfer swinging the club only 5-7x a month. The same goes for throwing a baseball, playing piano, and trading as well. There is no way you are going to really understand trading, patterns, price action, or the markets if you are only pulling the trigger less than 7x a month.
If you are currently doing this, you are not getting enough feedback from the market, and almost certainly not finding good setups, because there are plenty that happen per day.

Just like in archery, repetition is key to getting the process and technique down. This does not mean you will become a better archer shooting an arrow every 10 seconds as opposed to every 20. There has to be deliberate practice and you have to be able to concentrate on each trade, just like each arrow.
Thus, repeating the process more often will generally lead to better development, so make sure you are trading every day unless there is absolutely no signal with your system. But if that is the case, consider getting another system. Trading is like a feedback loop which communicates information on you, what you see in the markets, and how you are doing. Any lack of feedback usually means a missed opportunity to both profit and learning more about yourself and where you need to develop.

In Summary
Often times, when learning any skill based endeavor (like trading), finding another practice to engage in will often help augment your development as a trader. Many things come to mind, such as playing chess, learning an instrument, training in a brain gym, playing poker :-), and also archery. All of them have aspects which develop key skills highly useful for trading, and could provide the necessary tools to take your trading to the next level.
In terms of trading though, make sure to realize how a lot of it is in the mind (confidence, emotions, etc), to focus on the complete process (risk management, trading psychology, strategy), and how repetition helps develop your skills as a trader.

Forex Strategies, Trading Mindset & Risk Management

What Limits You From Trading Profitably?

The Question
I was recently talking with a student in one of my trading courses who is an eager beaver. They definitely have the desire to trade for a living, but I noticed something of a repeating pattern for them. They would constantly not trade the system as is, make modifications to it and adjust the risk parameters.

I have often wondered why a developing student who wants to learn how to trade, but hasn’t made it on their own, make all of these decisions which would hurt their trading.

I am certainly guilty of this in my early days, without a doubt. But like in Archery, I trusted my teacher, and decided to practice the technique he taught me. Originally, this was not the case, but he told me that when I can shoot consistently and the technique is 2nd nature, then I can bring in my own style. Until then, I followed his technique.

But the question has been with me for some time, as to why traders like myself (back in the day), or others would make decisions that obstruct them from the goal they so clearly want – to trade profitably and for a living.

The answer to this mercurial piece of the puzzle came together this past July.

A Weekend of Training
For about 6 weeks this last summer, I was on vacation in the US visiting family and friends. But for one weekend, I was in a training that helped me answer some long lasting questions about trading, for myself and my students as to why some do things which hurt the learning process.

The training was a QRA Level 1 intensive. QRA stands for Quantum Reflex Analysis and it was a weekend where I was pounded with information. QRA is based on Biophysics, particularly on the work by Fritz-Albert Popp, an award winning physicist with hundreds of publications.

QRA is mostly focused on the healing of physical illnesses, but also works on a psychological/emotional level.

Although I remember many things from the weekend, one moment stood out amongst the rest.

The trainer was talking about someone who had cancer that came to see the Doctor and head of the QRA program. They were wanting to get cured of their cancer, but the Doctor kept running into strange ‘blocks‘ in trying to help with the healing process. It dawned on him that the client actually had underlying psychological or limiting beliefs that were interfering with the healing process.

The Answer
Imagine – someone has cancer and they have tried everything to cure it, spending hundreds of thousands of dollars and going through tons of painful treatments and surgeries. They obviously want to live and want to be free from the disease. But the whole time, there was something interfering with the healing process – and it was them the entire time. It turns out they actually had a sub-conscious belief they did not deserve to live, and this program was running in the background the entire time.

Suddenly, the light went on and it all came clear to me – this is what happens to traders who use improper risk management even though they know the math is against them. This is what happens to traders who don’t trade the system, even though they know it makes money. This is what happens when;

-a trader jumps in too early, before they get a signal
-or chases a trend when they know they shouldn’t
-trades out of emotion, trying to get losses back when they have no signal
-overtrades
-adds to a losing trade
-gets over-confident and thinks they ‘got it’ after just a few months
-trades way beyond their position sizing
-takes profit before hitting their target
-doesn’t accept their risk and panics, exiting too early only to watch the trade run to their limit
-fails to pull the trigger when they do get a signal

You know the story, because it has happened to you, just as it has happened to me.

Have you ever wondered, why you make the decisions you do, even though you know they are not helpful to your trading?

Is it your fear that overcomes your clarity? Is it your impatience that overcomes your discipline? Why do you not prepare for your trading day when you know how challenging trading is?

Whatever it is, it is currently in you, in your psyche and wired into your brain, causing you to repeat many of the patterns that has held you back.

You have known this in some way (hopefully), but it is very possible (and likely) you have a program running in the background, which is interfering with you trading successfully and reaching your goals.

You Mean I Don’t Want to Be Successful?
It is actually possible (like the patient), some part of you does not want to trade successfully. It is actually possible, some part of you is afraid of being successful, of being wealthy, of being a disciplined trader, of reaching your goals. If any of these, or many other programs and unconscious beliefs are there, then they will always short circuit your process and efforts to trade profitably.

The good thing is – you can change all this. The brain has an ability to learn new things. It has neuro-plasticity, meaning it can be re-wired with amazing flexibility. You can learn new things at almost any age, you can increase your IQ, you can develop skills regardless of your background and training. Thus, regardless of what patterns and behaviors are inhibiting you, they can be re-written.

I have actually trained in both QRA and ERT (Emotional Repolarization Technique), doing dozens of sessions designed to re-wire my neural connections, to function in a more optimal state, in a whole-brain state, to remove any unconscious programs which would interfere with my trading, along with many other things.

If I could have started my entire trading career over, I would have started with this training from the very beginning. If I could recommend one thing to build a successful trading mentality, for those having psychological issues interfering with your trading, to combine with your learning process while working with a mentor, it would be this.

Two Questions
With all of that being said, I would like to end with two questions;

If you could watch yourself trade, like an observer, what advice would you give yourself?

and the other…

What would you do, study and train in order to trade successfully?

I hope you enjoyed this forex trader tip article, and that it has brought up some intriguing questions for you. Please feel free to share, along with your thoughts on the article.

Kind Regards,
Chris

Forex Strategies, Price Action Trading

Setups, Price Action & Context

If you think this article is going to be about learning a price action setup, you’re wrong, but it will be about something more powerful. For your future, for your learning process, and for your sanity, keep reading this article if you are not consistently profitable.

Of all my articles, the most popular and commented ones are always on some specific setup or system.

Why?

Because almost all of you have been hunting for the one system, that edge which will turn your trading around. That edge which will print money into your account day after day, week after week without much effort. You’ve probably amassed dozens of patterns and systems, yet still aren’t making money.

Sound familiar?

If so, don’t worry – that was me 12 years ago.

But I think it points to a problem for those hunting through forums, websites and videos looking for your pot of gold. All of your focus and energy has been on finding a ‘system‘ or ‘price action setup‘ that makes money.

Sure, everyone wants their own ATM machine – who doesn’t? But what is also going on is you want the market de-mystified. You want trading to be simple and easy, i.e. thinking three simple setups will solve all your trading problems and help you understand the market.

Regardless, this underlies two things which will trip you up in trading;

1) The fallacy three simple price action setups will consistently make you money if you have good money management.

2) Being uncomfortable with uncertainty.

Today’s article will be focused on the first point, and the next article will be focused on the latter.

Three Simple Setups? Really?
To begin, it is a complete fallacy that if you learn what a pin bar, inside bar and a fakeout system is + good money management = making money…that you understand and can trade price action.

How convenient that a market which has brought traders to its knees, crying, jumping out of windows after losing fortunes, that three simple setups and good money management (plus a little psychology) is all you need to be a profitable trader.

If that was the case, why isn’t everyone doing it?

Why are banks spending thousands of dollars, and months, if not years on end, training their traders, when there is such a conveniently packaged solution available?

My programmer was recently at a algo conference with some of the top hedge funds. He told me they are spending hundreds of thousands of dollars re-programming their algos every 12-24 months to keep a competitive edge.

Why would they do this if they could just learn what a pin bar was, inside bar and fakeout setup is? Wouldn’t that be easier?

Newbie traders want to hear the market can be simplified into three price action setups, that trading with the trend and good money management is all you need. It perpetuates a dream which is actually a false reality.

This is why I have always talked about learning to read the price action in real time, that you cannot rely upon systems alone. Yes, a pin bar can be a highly effective method for trading various price action situations. But it always has to be taken in ‘Context‘.

Two Scenarios
To demonstrate this point, lets take two scenarios;

1) A bullish pin bar forms after a long trending move. This trending move ended with an exhaustive candle which then proceeded to form a double bottom off a key support level. The pin bar closed bullish and formed on the 2nd bottom also creating a 3 pip breakout below the lows. Am I going to buy that pin bar if I get a corrective pullback towards the double bottom?

Absolutely!

I see that – I’m going to buy that. The pin bar was a very good setup and price action cue for me. But remember, pin bars can be both cause and the result of order flow.

However, we have the other pin bar scenario….

2) Price action has dropped 1000pips in the last two days. Then in the middle of the Tokyo session forms a tiny pin bar on the 4hr time frame that closes bearish. Am I going to buy that pin bar expecting the price to reverse? NO!

Why???

Context!

You have to understand, there is nothing wrong with the pin bar by itself. It can be a highly effective signal, or it can lead to losses.

What is the difference?

It’s not money management, or trading with the trend, or your psychology.

It’s the context with which it forms. But to understand these differences, you have to learn to read price action in real time, and what it has done in the past around those levels. That is the context you have to learn how to read.

Passive vs. Active Learning
To be sitting there passively, waiting for days on end for your three simple price action setups is trading in passive mode and flat out boring. And boredom will actually interfere with your learning process.

If you can only find one setup a week, you’re not looking hard enough because there are plenty.

There is no active learning, and active learning is what you need. In active learning, you are engaging your resources, your current level of knowledge and applying it. In passive learning, you are not engaging any of your knowledge and seeing how it works in real time, learning from the feedback loop called the markets.

If you are sitting on the sidelines for days on end, just waiting for your three simple setups, you’re wasting your time. You could be learning, trying, studying, and participating in the market which is what facilitates learning.

I didn’t just learn what an inside bar was and then trade it based on what it should do. I spent dozens of hours studying 1000’s of inside bars and pin bars, to see what was different between them all, and how did price action form after each unique one.

I have pages of notes about pin bars, how each one forms, its size in relation to the prior bar, where it forms in relation to the prior bar, in the trend, near the 20ema, in relation to the surrounding price action, support/resistance levels, etc, etc, etc.

I don’t just trade pin bars like a robot. I trade them in context, and that is what gives me an edge, to be able to read the price action in real time, and what the market has done around current levels.

A Student
One of my students wrote just yesterday on this subject:

“I am at that point where I know I want to be a full time trader. I absolutely believe that the strategies, models and methods we are taught in this course can lead to profitability, because I’m using them everyday and they lead to good profitable trades.

However, I have moved away from just seeing a pin bar or some other signal and just pulling the trigger, because I have moved toward understanding price action the way Chris talks about in his lessons, like he has done on breakouts, the aussie price action, the USDX, etc.

I believe that as traders we can trade these strategies and make some money, but we will not evolve as traders if we don’t begin to read and understand the price action that is occurring around these different setups.“

When I read this, I was nothing but smiles as the light went on. This student gets it, and gets what I have been teaching. He understands that pin bars, inside bars, and all the other methods have a purpose – but they are not the road and vehicle towards profitable trading.

Although they are highly informative about what the order flow is behind the price action, he understands they are both cause and result. This means he understands sometimes they are the cause of order flow, and other times, they are the ‘result’ of order flow. They are not simply just one or the other.

It also means he is spending his time learning to read the price action in real time, to understand what kinds of order flow would create such price action. He is not passively waiting for setups, and then pulling the trigger like an automaton. He understands that these setups have to be taken in context.

In Summary
Don’t waste your days on end in waiting mode for your simple three setups to occur. Understand three simple setups will not lead you to profitable trading, nor understanding price action. If it did, everyone would be doing it and that is all they would be teaching at banks and hedge funds.

Understand trading price action means learning to read price action in real time. It means being an active and deliberate learner.

Understand that price action setups are highly valuable tools – but they have to be taken in context. You have to learn to read what kind of order flow would create such price action, and how to trade this flow.

I hope this helps and that it changes the way you look at price action and your learning process.

Please make sure to leave your comment, like and share this post.

Kind Regards,
Chris

Developing a Successful Forex Trading Mindset Pt. 1

The Ideal Trader

Time Is A Currency

So How Does This Relate To Trading?

Not Multiplying Your Edge = Making Less Money

What About Set and Forget Strategies?

Which Is Better Then, and What Is The Ideal Trader?

In Summary

What Is A High Quality Signal?

Quality vs Quantity – Which is Better for Trading?

Trading With Amnesia

Ichimoku Price Theory | An Introduction

Trading and Fear

3 Ways Archery Helps My Trading

What Limits You From Trading Profitably?

Setups, Price Action & Context

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