Why Your Biology And Psychophysiology Make Trading Hard (And Easy)

What You’ll Learn In This Trading Article

-What is psychophysiology?
-How does your biology + psychophysiology make trading hard
-How does your biology + psychophysiology make trading easy

Ever felt really nervous making a trade to the point where you passed on it, even though it was a perfectly good trading setup according to your plan? What about being so angry/upset/frustrated at a prior loss that you revenge trade on the next setup?

On the flip side, how about having a ‘gut feel‘ that your current trade is going to get stopped out, or perhaps a really good setup is forming and you have to jump in? If you’ve experienced these things (I have 1000’s of times), then welcome to how your biology and psychophysiology affects your trading.

In today’s trading article, I’m going to first define what psychophysiology is.

Then I’m going to talk about the ways your biology and psychophysiology make trading hard for you and how it affects your day to day performance.

After that, I’ll talk about how you actually have various biological or psychophysiological traits which can help you become a profitable trader, and how to use them to your advantage.

What Is Psychophysiology?

Psychophysiology is a branch of neuroscience (science of the brain and central nervous system) which shows you how your mental states and biological + physiological responses can affect your mood, higher cognitive skills, analytical abilities, perception, decision making and mental states.

the biology of why you are losing money forex trading

In simple words: the current state of your body + brain affect your mental abilities – abilities which are crucial to making profitable trades and trading decisions.

Think of it as the biology of why you are losing money in forex trading.

This is critical to understand because once you know the various biological/psychophysiological mechanisms, and how they affect your mental abilities, you can employ methods to counteract their negative effects so you don’t make really bad trading decisions.

How Your Biology + Psychophysiology Make Trading Hard

I’m going to start off with an easy one here as it relates to my situation right now. I was having a jolly good time with my friends last night and was up later than usual, which cut my sleep time by 2 hours.

Sleep is incredibly important to your brain and body as it a) allows your brain to detox, rest and cleanse itself, while b) allowing your body to rest/relax while your internal organs are cleaning, and resetting themselves for the next day’s work.

Did you know that in a study by Dr. Walker at the Sleep & Neuroimaging Lab @ UC Berkeley shown how subjects that had less than normal sleep (6hrs) remembered 81% of the words they were exposed to with a negative connotation to them (i.e. anger, fear, loss), while only 31% of the words with a positive connotation to them.

Translation: Getting less sleep than needed triggers a massive bias in your brain towards the negative.

Now with your mind primed to see the negative more than the positive, do you think this will affect your trading decisions and performance? I hope so.

Ever had that experience of a winning trading starting to against you and it immediately feels ‘threatening‘? That’s your biology + psychophysiology working against you and making trading hard. It’s why we are afraid to lose money trading.

FYI…sleep debt is cumulative…so less sleep over an extended period of time really affects your mental capacities and states.

Below are two charts/images showing how sleep debt affects your brain + performance over time.

Image 1: How Less Sleep Leads to Performance Lapses

performance-lapses-from-sleep-deprivation-2ndskiesforex

Image 2: Your Brain on More/Less Sleep

brain-after-sleep-deprivation-image-2-2ndskiesforex

Another example of how your biology + psychophysiology makes trading hard is a fear of a loss. This ‘fear‘ is so ingrained in us it dates back 1000’s of years to our ancestors where survival was a daily fight for food, shelter and safety and a life or death struggle.

The rule was ‘eat lunch, don’t be lunch‘.

Sadly, our ancestors ‘experience‘ was encoded in our DNA, particularly in the DNA of our brains and nervous systems. 10,000 years ago, 1 in every 8 people died from protecting their families. This made us more ‘fearful‘ of ‘threats‘ and created this a ‘negativity bias‘ along with activated our ‘fight, flight or freeze responses’.

negativity bias in trading 2ndskiesforex

NEWS FLASH: Even though it’s the 21st century, and our chances of dying before old age are 1 in 100, we still experience this fight/flight/freeze response to stimuli which are not threatening. Your fear of a loss is an example of it.

In fact, this negativity bias (fear of that which is negative to our life/survival) is so strong in us, we have %500 more neural real estate towards spotting the negative vs the positive!

Do you think that will affect your trading mindset if for every 6 stimuli you receive from the market, 5 of them will be perceived as ‘negative/threatening/harmful‘ vs ‘positive/beneficial’? What do you think that will do to how you perceive changes in the price action context which go against your trade?

psychophysiology of fear 2ndskiesforex

Ever had a day/week/month where you crushed it for most of that time period, and went on a winning streak, but then one loss killed all your profits? Now, of those many trades you took, with the majority of them being winners, which trade do you remember the most? The big loss, or the several wins in a row? My guess is the big loss is what you remember the most.

Another example how this negativity bias can kill your trading performance has to do with neural real estate (how regions of your brain are wired).

Did you know it can take you 5-7 seconds to notice anything positive in your environment vs <.1 seconds to perceive a negative/threatening stimuli? Do you think that will really affect your trading mindset, perceptions and decisions about what is happening with your current open trades? I hope so.

There are 100’s of examples I could get into here, however it should be pretty clear how our biology and psychophysiology make trading hard. Now it’s not all bad, and there is a silver lining in all this.

How Your Biology + Psychophysiology Make Trading Easy

Ironically, even though you have about 5x more neural cells dedicated to finding the negative vs the positive, you also have some aces up your neurological & biological sleeves.

Case in point, your brain has this amazing trait called ‘neuroplasticity‘ which basically means your brain can adapt its wiring based upon your experiences, environment, what you focus on, and what little thoughts you have going through your head.

Experience Dependent Neuroplasticity (EDN) is the ability to wire new habits into your brain through two main factors:

1) neurons that fire together, wire together
2) consistent passing mental states create lasting neural traits

Translation: you can correct your mental errors/decisions/processes which are affecting your trading mindset and performance by firing new neurons in your brain (e.g. changing the thoughts/emotions/mindset you experience day to day). This is a real thing that we’ve taught members of our traders mindset course to do.

Imagine getting over the mental mistakes/hurdles you experience day in-day out of your trading?

Imagine not being afraid to pull the trigger, or fearing a loss, or worrying about a winning trade that’s starting to pullback against you.

You can learn to change these experiences which are holding you back from making money trading.

Regardless, neuroplasticity is one example of how your biology + psychophysiology can make trading easier. You have another tool in your biological belt which can make trading easier. You’re already familiar with it – it’s called your ‘gut feel‘.

While this term ‘gut feel‘ may seem wishy-washy, it actually has its roots in science.

You Have A Second Brain?

Did you know you that your gut actually sends more signals to your brain than your brain does to your gut?

Did you know you have an entire nervous system which has 5x more neurons than in your own spinal cord?

Welcome to your enteric nervous system which is embedded in the lining of your gut, starting at the esophagus and going down to your ‘dairy-aire‘ 🙂

It’s often called your ‘second brain‘ because it a) can operate independently of your brain, and b) uses the same neurotransmitters as your brain, such as dopamine (i.e. reward experiences) and serotonin. In fact, more than 90% of your bodies seratonin is found in your gut. Seratonin is an essential neurotransmitter because it’s critical for feeling happy, affecting memory, learning, mood and sleep. Can you start to see how your ‘gut‘ can affect your trading performance?

And this is where the vagus nerve comes into play.

The Vagus Nerve

You have many cranial nerves in your brain (12 total), but the 10th one is of great importance to you. It’s called the Vagus Nerve and it’s connected from your brain (medulla oblongata) down to your stomach, innervating itself to most of your major organs along the way.

It is the longest nerve of the ANS (autonomic nervous system) in your entire body and can affect heart rate, lungs, sweating, muscle movements, digestion, etc. The vagus nerve conveys sensory information about the state of the body’s organs to your CNS (central nervous system).

Now the vagus nerve can become heavily agitated due to stress or emotional responses to trading. These can either be good signals, or bad ones. But our experiences of the vagus nerve + enteric nervous system comprise what is often referred to as ‘gut feel‘.

This is because your gut might actually be getting signals from your brain or body that something is really right, or something is really wrong with your current trades. Often times these signals go unnoticed on an unconscious level, but can also manifest because you’ve treated your gut poorly (bad diet/food intake/etc).

When tuned right, your ‘gut feel‘ can be a warning signal something is about to go awry, or a spotlight that you need to jump into this trade before it takes off.

Have you ever had any of the above experiences? If so, then you’re seeing how your biology + psychophysiology can really affect your trading performance.

In Closing

There are many ways your biology + psychophysiology can make trading hard (and easy). It is critical for you as a trader to learn how to spot these reactions/responses, and learn to change them, or use them to make better trading decisions and thus more profitable trades.

I feel the trading education industry + trading mentors are just waking up to this and how powerful your body + brain can/will affect your trading performance (for the good, or bad).

I also feel the trading education industry can/should make a concerted push to use these things to our advantage so you can become a better trader and make less trading mistakes.

We’ve covered this extensively in our traders mindset course, along with practices and methods to help you use these biological and neurological reactions/responses to your advantage.

Now Your Turn

Did you learn anything about how your body and brain can affect your trading mindset and decisions? Have you ever had these ‘gut feel’ experiences? What about a fear of a loss even though you’re in a winning trade?

Make sure to leave a comment about this important trading subject as I really want to hear your feedback on this.

The Problem With Trading Mentors & Trading Education Today

What You’ll Learn In Today’s Trading Article:

-Why most trading courses will fail to teach you how to make money trading
-Major problems in the trading mentor and education industry today
-How can we implement technology to help improve trading courses

Retail forex traders (along with stocks, futures, options, commodities and global index traders) have a problem, and it’s a problem the broker has as well. Most traders who open an account on January 1st of any year will not be profitable at the end of that year.

Think along the lines of 8-9 out of you traders will not be profitable at the end of the year.

9 out of 10 traders won't be profitable 2ndskiesforex

Now when I started trading forex back in 2000/01, there were about 6 websites online about forex trading. Now there are millions of forex trading sites with thousands of online trading courses.

We’ve had a massive proliferation of online trading courses, trading mentors and educators, yet the needle of retail traders making money has barely moved. Hence you have to ask the question; why are so many retail traders losing money?

The answer really only has 3 possibilities:

1) There is a problem with the trader (you)
2) There is a problem with the trading education out there
3) All of the above

The answer to the above question is #3.

Without a doubt, there is a problem with you (the trader). This is implicitly obvious in the fact you are constantly studying, training, and taking trading courses. You’re doing this because you realize you need to make changes to your thinking, trading mindset, and price action skills to make money trading. Hence you implicitly recognize (consciously or unconsciously) there is something you need to fix, thus making #1 true.

On the other hand, there is a problem with the trading mentors and education today. Think about this probabilistically:

How can there be an enormous explosion + proliferation of trading courses and educators out there, yet profitability over the last 10-15 years barely move?

Even if the root of the problem to profitability is just with the trader (you), then isn’t it the responsibility of the trading mentors + educators today to recognize this, and then change their trading education and courses to help mitigate this problem?

Hence, the answer to the above question (as to what needs to change to make more retail traders profitable), comes down to you + the online training available today.

For trading mentors, our job is to train you in 3 main areas to help you make money trading:

1) building a successful trading mindset
2) acquiring trading skills that can give you a trading edge over time (i.e. technical, fundamental, sentiment, or flow based)
3) learn to properly understand, quantify and manage risk

And while I have written over 1200+ free trading articles to date, have been trading since 2001 and training retail traders since 2007, I am not immune to some of the problems in the trading industry I’m going to talk about today.

Since 2013, I’ve been thinking heavily on how to solve these problems in the industry. By 2015, after doing 2 years of research on this, I felt like I found several solutions to make more traders become profitable and change the trading education industry. From 2015, I’ve been quietly in the background working with developers to build a solution.

chris capre trading office

Since that year, I’ve spent close to $200,000USD building this solution to help change the trading education industry. And just a few months ago, I’ve been working with another trader in the industry who has the same focus, vision and commitment to changing the trading education industry forever.

We’re pretty close to announcing it’s launch soon, but for this article, I’d like to highlight why most trading courses today will fail to turn you into a profitable trader. Then I’d like to talk about how technology is a vehicle which can (and will) provide real world solutions to changing the way you think, trade and perform.

Let’s get into this controversial and (IMO) critical discussion to have about trading mentors, educators and online trading courses.

Problems With Most Trading Courses Today

If you’ve taken an online trading course, or looked to take one, you’ve probably found thousands of courses out there. The majority of all trading courses fall into the following categories:

Online trading courses (pdf’s, videos, books, text, webinars, live courses, etc)
Online Trading Rooms/Chat Rooms
Live in person training (seminars/workshops)

The first two are the most prolific because a) they’re more accessible, and b) the most cost effective.

Live training in person is the least prolific because they’re a) not easily accessible being location dependent, and b) expensive for the amount of time you get doing live training.

london trading seminar 2ndskiesforex
(Image: London Trading Seminar 2015 – twas an amazing trading seminar)

Regardless of which category of training you work with above, they all have two things in common;

  1. They’re all primarily ‘informational’ (this means they spend the majority of time giving you information)
  2. Their feedback loops are almost always voluntary, not consistent, not automatic, not ongoing, and not continually updating.

Let’s address the first point to start with.

Why Informational Courses Fail to Help You Become Profitable

With informational courses, the general sentiments is ‘If we give you the information you need to make money trading, you should be able to then go make money trading…eventually‘. The problem is, you have to assimilate that information into trading skills, with you doing the majority of the work.

Why do ‘informational’ courses not build your trading skills? And why is the feedback model with most trading courses so poor?

Information Does Not = Successful Trading Skills

How many trading articles, books and videos have you digested over the last several years? My guess is somewhere in the 100’s, perhaps 1000’s? Now if 8/9 out of 10 of you are not making money, then why hasn’t all the books, articles, and trading videos you’ve studied turned you into a successful profitable trader?

Do you really think reading books about golf will make you a good golfer by itself?

Do you really think watching 100’s of martial arts videos on youtube could turn you into Bruce Lee?

Can you become a good archer simply by reading books on archery?

No, of course not. That’s because information (by itself) does not make you a profitable trader.

Trading is a ‘skill-based’ endeavor, meaning you have to wire specific trading skills into your brain to make money trading. Luckily, you have an amazing neurological feature called neuroplasticity, which means your neurological circuits can re-wire themselves (through training and repetition) to make money trading.

This is a real thing.

Now there are 7 characteristics (or rules) behind neuroplasticity. They are:

Intention
Mindfulness
Belief
Emotion
Focus
Repetition
Choices

Notice the word ‘information’ is not in the list above. So jamming as much information to your brain as possible (by itself) will not make you a good trader. Just think back to your college/university days, and try to think about how much of the actual information you digested you can still recall today?

Bottom line is information does not = making money trading.

Now there are 4 of the 7 rules above which are super powerful for impacting and increasing neuroplasticity in your brain, but the one that is most fundamental is #6 (repetition). Simply put, you cannot build new neural structures without repetition.

Hence, since trading is a skill based endeavor that requires ‘repetition’ of a specific action (i.e. proper trading preparation, analysis, execution, risk mgmt, etc.), to make money trading, you’ll have to wire those skills into your brain.

Reading books or watching videos over and over again simply won’t cut it. You’ll need to continually practice those critical skills till they become professional.

Why This Matters

If most trading courses today are ‘informational’, then isn’t there a problem with the trading education and courses today? Doesn’t this mean the majority of trading courses out there are not going to help you make money trading?

 

While you’re at it, when you think about your struggling performance you’re experiencing right now, recall how many trading courses you’ve taken and ask yourself; how many of these trading courses were ‘informational’ vs focused on ‘building skills’?

Most Trading Courses Have Poor Feedback Models

The second problem with most trading courses today is they have poor feedback models.

 

The best way to understand this is, reflect upon what gives you ‘feedback’ when learning to trade or taking an online trading course?

-the market (wins/losses/timing/trading location/accuracy/instruments/performance, etc)
-your emotions
-your self-talk
-your perceptions/attitudes about your trading performance
-your experiences
-environment
-the course content
-the skills your course teaches you to build

feedback model

Now there are several types of feedback you can get, but all peak performers in trading, sports, etc have the following characteristics:

The feedback model is quantified
The feedback model is automatic
The feedback model is ongoing
The feedback model is responsive
The feedback model is continually updating

For a feedback model to be quantified, there has to be fixed metrics you’re measuring through the course that are minimally sufficient to give you quantified data on what you’re specifically performing well with, and what you specifically need to change.

For a feedback model to be automatic, it has to be one where the feedback and data collected is automatic.

For a feedback model to be ongoing, it has to be feedback you’re consistently getting over time.

For a feedback model to be responsive, it has to be able to analyze what training/feedback/execution variables are improving your performance, and which are not.

For a feedback model to be continually updating, it has to be collecting your performance data and continually updating it based upon new data coming in and how the bulk of your performance is changing over time.

Now of the above 5 models for feedback, how many of them does your current course provide? My guess is 1, maybe 2 max. It needs to be said, while my 2ndSkiesForex trading courses offer quantified feedback (our Trading Analytics sessions), which is ongoing, responsive and continually updating, it’s not automatic (not yet at least ;-).

If you’re missing 2-3 feedback models above in your current online trading course, then you’re likely getting insufficient feedback and clarity on how to improve your trading performance. And that can mean the difference between making money trading, and losing money trading.

You’ll have to decide which side of that equation you want to be.

Final Thoughts

I believe the trading education industry needs to change. I think we have to improve our feedback models, along with stop producing ‘informational’ courses, and start building more skill-based trading courses.

This means not just teaching systems and how to enter/exit a trade, but how to build the most important base skills of trading. This has to be done in the same vein as professional basketball players continually work on their dribbling, passing, footwork, and shooting skills day in – day out.

I also believe the trading education industry is going to change, and it’s going to do so with the help of technology. I feel the technology is in place to produce the best training tools available, so you can become a peak performing trader who makes money trading.

beautiful car sunset

Now Your Turn

Do you feel the trading education industry needs to change? How do you think online trading courses can be improved? How do you see technology helping with this process.

Make sure to share your thoughts and leave a comment below as I’m very passionate about this topic and changing the trading education industry.

Trading In The Summer – Tips For Trading Forex, Stocks, Commodities and CFD’s

What You’ll Learn In This Article:

-Trading in the summer
-What are two unique factors affecting trading this summer
-What preferred strategies and instruments I’m watching this summer

As traders, our job is to constantly adapt to an ever changing environment of price action, liquidity and volatility. Trading markets in the summer often experience a decrease in volatility and liquidity whereby many professional traders go on vacation, spend time with their kids, thus affecting market liquidity and volatility.

summer trading forex 2ndskiesforex

In today’s trading article, I’m going to talk about how this summer is different for two reasons you need to understand, along with how you can profit during the summer months, adjust your trading strategies, and maximize your time + profitability behind the charts.

How Trading This Summer Is Different (Trading Insight #1)

This summer has an additional element contributing to the typical summer trading conditions.

It has the World Cup, which is only hosted every 4 years. Because of this, and being such an international event, there is extra impetus for traders to be less active and order flows to change drastically as 3-4 billion people globally are watching the games (myself included :-).

When there is a World Cup, the stats are very clear. In a research paper by Ehrmann & Jansen, during the 2014 World Cup, when a country played during normal trading hours, volumes dropped by as much as 48% in that country’s stock market. On top of it, prices tended to ‘decouple‘ from what’s happening in the global markets.

Below is a good image to show how volumes during the world cup drop (source: reuters).

market volatility during summer and world cup trading

Hence, when your team is playing, local stock market volumes will drop.

On top of it, when your country (or your opponent) scores a goal in your game, the number of trades goes down by 10% and will often take 30-60 mins after the game before trading volumes resume to their pre-game levels.

In this year, more than 2/3’s of the games will be during European or New York trading hours. So expect forex, stocks, futures and bond markets in both Europe and the US to be subdued (less in the US since their team didn’t make it).

And another interesting fact – your country getting knocked out of the World Cup can knock off almost 50 bps from your national index that day, while your country winning the World Cup translates into your country’s index outperforming the global benchmark by 3.5% on average, so some potential trading opportunities on both sides there.

How Trading This Summer Is Different (Trading Insight #2)

Unlike many previous summers, trading has taken on a different tone because of the events happening globally. A trade war between China & the US has spooked global markets (i.e. risk off), and the emerging market space (EM) has been quite volatile while the DM space (developed markets) has been much more muted.

You’ll notice in our members daily trade ideas, we’ve often been holding positions or doing our price action analysis moreso outside the majors simply due to DM volatility being low while EM volatility has been high.

Below you can see my active open positions with none of them being a major.

chris capre's current open trades

Hence I’ve been taking advantage of the increased volatility in the EM markets & crosses to capture these large moves and changes in the price action.

With that being said, how can you use this information to help adjust your trading strategies?

Summer Trading Tip #1

With decreased liquidity as a whole, markets tend to move less. Hence you have to expect trades to take more time to play out. 

Thus try to be a little more patient with your trading hold times as they may simply take more time to get to your target.

Summer Trading Tip #2

Along with tip #1, expect ranges to hold more, and trading breakouts to work out less during these periods.

range price action 2ndskiesforex

When ranges hold, and liquidity is less, I avoid trading breakouts because many will fail.

Instead, I often look for false breaks which become more common during lower liquidity times, so make sure you’re watching for potential false break setups.

NOTE: If you want to learn more about false break setups, watch my video of me doing a live false break trade for +350 pips of profit.

Summer Trading Tip #3

Try expanding some of your instruments to move beyond the forex majors, like looking at the exotics and EM currencies. Some of EM forex pairs I’m watching right now are: EURNOK, USDSEK, USDTRY, USDZAR, USDMXN, USDRUB, and USDPLN.

As for the DM forex pairs, I’m currently most interested in: CAD, AUD, JPY, CHF and NZD pairs (note: 3/5 are commodity currencies).

In terms of the global markets, I’m heavily watching Russian stocks, UST’s (US Treasuries), commodities (gold, Oil), and EM bonds.

If you’d like to learn more about what live trades I’m in at any time, make sure to check in with our members daily trade ideas for updates.

And if you’d like to learn about another summer trading tip, check out another article I did on trading forex in the summer.

Now Your Turn

Did you learn something about trading in the summer? Have new options for finding high quality trading opportunities?

And the toughest question of them all – who do you think is going to win the World Cup?

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Chris Capre’s 18 Trading Lessons From 18 years Of Trading

This year will mark my 18th year of trading the forex and financial markets. I’ve learned some incredibly valuable trading lessons I wish I had been taught when I first started out. These are lessons which have cost me probably north of $2-3 million dollars in losses, missed opportunities, and making mistakes which took years to figure out (and unwind).

If you’re a struggling trader who’s making the same mistakes over and over again, take heed of these lessons as they’ll save you years in your trading process, and likely well over 6 figures in unnecessary losses.

Hence if you want the fast track to becoming a successful forex trader, learn everything there is to know about these 18 trading lessons. Do this and you’ll find yourself making more money and having greater trading success than before.

Let’s jump in.

1) Invert the Equations Of What Most Are Doing

I have a general formula which I apply to trading and life. That formula is to invert the equation (or process) of what most people are doing.

The bottom line is most people are not successful at trading. In fact, with almost all things in life, most are not in the top 10% of anything they do (job, profession, sports, martial arts, etc).

If that is true (it is btw :-), then most of them are likely following similar patterns and equations for their job, profession, sport, etc, and its NOT WORKING!

trader formula for success 2ndskiesforex

What’s the most common pattern you see with struggling traders? Most are not following their trading plan. Most don’t have a proper risk management profile. Most are spending their time on the charts and strategy, not their skills.

Hence, whatever the majority of people are doing – you’ll have to invert that process & equation. Follow this formula and my guess is you’ll find out how well it works in trading, and life as well.

2) Good Trading Requires Good Trading Skills

Trading is a skill based endeavor. There is no way around it. If you want to make money trading, you’ll have to build the skills necessary to do that month in, month out.

Most traders spend between 75-90% of their time looking for ‘the’ strategy, focusing on the charts, focusing on the next trade and how their going to make money. And most are losing money!

 

Look, it’s quite simple. If you want to play like Mozart, do you start off with the focus of playing like Mozart, or do you focus first on learning the keys, building coordination your fingers, learn to read sheet music, learn how to play chords?

The answer is obvious. You focus on the latter. Those are the core skills of playing piano. Do that, and in no time, you’ll be playing Mozart. Trading is no different.

3) Sim, Then Demo, Then Live

I have a framework for how you should build your trading skills to make money trading. The process is simple.

First, you practice on a trading simulator, focusing on the core skills of price action context. Second, you practice synthesizing those skills on sim, and then start practicing on a free demo account, first finding potential trading opportunities, then trading them on demo. Third, after you’ve built some consistency there, it’s time to go live (starting with a small amount first, then building your acct as you progress).

The formula is simple: Sim, then Demo, then Live.

Do that and you’ll shorten your learning process.

4) Treat Demo Trading Just Like Live Trading

Ever thought to yourself “I can’t get excited about trading demo as there’s no money on the line“? Anytime a struggling trader tells me that, I know that they (right now) don’t have the mindset to make money trading.

Think demo trading is something not to be treated seriously? Think practice is over-rated?

Watch the following video of Michael Jordan on practice and how he related to it. See how intense he is about practice. See how seriously he’s taking it, then compare that to how you’re relating to practice.

As Michael said, “Every day in practice was like a competition to me. So when the game comes, there’s nothing I haven’t practiced before. It’s like a routine. I never feared about my skills because I put in the work. Work ethic eliminates fear.”

After watching this video, tell me if you can still justify treating demo as ‘not-important‘. My guess is after watching this video, you can’t.

5) In The Beginning, Use Bigger Stop Losses, Then Decrease Them Over Time

75% of my students who do a ‘Trading Analytics‘ session with me (where I use 20+ metrics to analyze their performance and help them reduce their leaks while increasing profits), have one thing in common. Their stops are too tight.

In the beginning, your goal should be accuracy and consistency. Tight stops in the beginning requires precision. Do you really think you have precision in your trading skills right now? If the answer is no, try widening your stops a bit and see if your accuracy increases. If it does, you’re on the right track, like my student below.

trading analytics 2ndskiesforex

However you cannot always have bigger stops as it will decrease your profitability over time. You’ll be leaving money on the table. So focus on consistency first, then precision later.

6) Preparation is Highly Underrated By Most Struggling Traders

How much do you prepare (mentally) for your trading day? 10 mins? 15 mins? I’m willing to bet 75% of the traders struggling out there spend 15 mins or less preparing for their trading day. Are you one of them?

What’s the most important tools for a Football player? His body and his mind. What’s the most important tool for you as a trader? Your mind (for the most part).

Hence you need that tool (your mind) to be sharp and prepared for your trading day. Treat preparing for your trading day like a professional athlete, then see if your performance (and mindset) increases.

trading preparation 2ndskiesforex

7) Whatever You Don’t Measure, You Won’t Improve On

How many metrics of your trading performance are you measuring right now consistently? My guess is 90+% of you struggling traders out there measure 3 things at most:

#1 – % accuracy for your trading
#2 – account balance at the end of the week/month/year
#3 – how much your account is negative from your original starting balance (or how much you need to get back to break even)

Does this sound accurate?

How many metrics do I measure about my trading performance? About 20, and I can measure them so quickly, it takes me < 15 mins to measure.

Bottom line is, whatever metrics regarding your trading performance you are not aware of, you cannot fix. You have to be aware of your trading mistakes before you can fix them.
But even then, if you don’t take the next step (measuring them), you won’t know what your baseline is, and how you can improve.

And if you don’t know what your baseline is, and what you need to improve on, how do you plan on getting better?

8) Consistency Comes From The Mind

“I’m close, but can’t seem to break through. All I’m really needing is a consistent trading strategy and trading plan.” Ever thought that to yourself?

Where do all your trading decisions come from? They come from your mind.

How many times have you written out a trading plan, and not followed it? How many times have you not followed your trading strategy? How many times have you not pulled the trigger when your trading setup comes?

Consistency in trading doesn’t come from the strategy or your trading plan. You won’t experience consistency in your trading till you have consistency in your mind.

Hence if you want to experience more ‘consistency‘ in your trading, you’ll have to wire consistency in your mind.

9) Information Does Not = A Good Trader

How many trading books have you read? How many trading videos have you watched? Probably a lot, yes? Yet you’re still struggling to make money trading. Why is that?

If watching videos, reading books (i.e. taking in information) made good traders, you’d likely be there by now. But you’re not. And that reason is simple.

Information does not = successful habits.

Trading is a skill based endeavor. I’ll take the trader who’s read only one trading book, and watched one trading video, but has practiced the core skills of price action context vs. the trader who’s read 100’s of books, watched 100’s of videos, but doesn’t practice their trading skills.

 

10) Successful Trading Requires A Successful Mindset

To make money trading, you’re going to have to build a successful mindset. This is a mindset which focuses on getting better every single day, regardless if they made money that day or not. This is a mindset which embraces the challenges trading provides.

There is a mindset you’ll need to make money trading. While that mindset is not fixed, there are certain habits and patterns of thinking you’ll need to make money trading. You’ll see these patterns in the best traders of our time.

Hence if you want to make money trading, you’ll need to build the mindset to get you there, and keep you there.

growth mindset vs fixed mindset 2ndskiesforex

11) Trading Can Be A Lonely Venture. Join A Trading Community!

Ever feel lonely in your trading quest? NEWS FLASH: You’re not the only one who feels this. Most traders do.

Anytime I visit traders and students in other cities, they all tell me how relieved they are to realize they’re not the only one having these experiences. There is no university degree in trading. Very few people will ever work at institutions with other traders. Plan on not being that person.

Once you realize this, and that you’re not alone, you also realize how beneficial it is to join a trading community.

I feel really proud on the trading community we have at 2ndSkiesForex as they’re all open, friendly, and really helpful towards others, especially the senior students. We’re all here for the same goal, and we realize how important it is to communicate and interact with others on this journey.

trading community 2ndskiesforex

Why should you try to tackle such a challenging profession as trading alone? Why not join an active trading community that supports your growth as a trader, where you can see others succeeding?

12) Focus on the How vs Focusing on the When

One of the most important mindset shifts you can make in trading is spending more time focusing on the ‘How‘ vs. the ‘When‘. I can always tell where a traders mindset is when they ask the question “how long will it take for me to make money trading?”

Would you ever walk into a martial arts studio and ask “how long before I can beat up a black belt?” Would you ever walk into a piano school and ask “how long before I can play Mozart really well?” No, of course not. Not only is there no fixed answer for this, you’re focused on the wrong variable.

The reason why this is such an important mindset shift, is it gets you actively focusing on and directing your energy to the ‘how‘ and ‘what‘ that will get you from point A to B.

The ‘when‘ won’t get you from point A to B. But the ‘how‘ will.

13) Risk Management is the Most Underestimated Skill in Trading

90% of all struggling students who start my trading course have one variable in common. They don’t take risk management seriously and have inconsistent risk on each trade.

Now ask yourself, “How good are you at predicting whether your next trade will win or not?”

Most likely, you’re not that good. If you were, you wouldn’t be taking so many losing trades that you ‘knew’ were going to lose now, would you?

There are 2 key points here:

1) you’re likely not that good at predicting your winners and losers (less winners)
2) trading is a game of probabilities and your trading distribution will be mostly random

Hence risk a fixed % per trade so each loss is always the same % of your account.

fixed-percent-equity-risk-model-superior-than-fixed-dollar-amount-graph-1-2ndskiesforex

14) There Is A Difference Between Planting Seeds & Watering Seeds

In April this year, my father passed away. I left within a day of hearing upon the news to spend time with my family and say my goodbyes to my dad.

The day I got back home, I realized how much we all were in the same vision, or spirit regarding our family. I realized this was a ‘window’ for us to make real changes, just like all big moments in one’s life are.

I talked with my family about how this moment was a window, and a great opportunity for us to plant new seeds for our family. But planting seeds is not enough if you want them to fully grow. You have to water them, provide sunlight, and give them proper soil. Do that, and the seeds (which are pure potential) will grow and manifest that potential.

So ask yourself, are you just planting seeds (watching videos, reading books, but not making any real changes)? Or are you actually watering those seeds, taking real actions, working hard every day to get better?

Which trader do you want to be?

15) If You’re Continually Making the Same Mistakes, Seek Training From A Forex Mentor

I could not imagine trying to learn more about becoming a Buddhist and do the meditation practices without a mentor or teacher. I actually did try (back in college) and for the most part, failed.

The same went for my trading. I knew at some point I needed training. I needed someone to provide feedback to me and help me see what I wasn’t seeing. This is something every professional athlete has (a coach or mentor). Why do you think trading would be any different?

If you’re continually making the same mistakes over and over again, you’ll need a mindset and path outside your current one. If your current path, skills and mindset was working, you wouldn’t be repeating the same mistakes over and over again now, would you?

Hence, if the above description sounds like you, get training from a forex mentor (or trading mentor), one that is a verified profitable trader.

chris capre forex mentor 2ndskiesforex

If they cannot (at a minimum) provide one year of verified profitable trading results, then most likely they aren’t a good trader, and most likely aren’t a good trading mentor.

16) To Make Money Long Term, You’ll Have to Get Comfortable With Uncertainty

How do most people make their money? Via a job, yes? A job which pays you a fixed salary on fixed dates. A job which requires you to work fixed hours, wear fixed clothes, and has a lot of fixed rules.

What’s the common denominator there? Everything (by and large) is ‘fixed’ or ‘solid’. You can rely upon that, which has its benefits.

Trading by default completely up-ends that process. The markets aren’t fixed, but ‘fluid‘, constantly changing. Bull trends one day become ranges, pullbacks, or bear trends the next day. You can make $25,000 one month, and lose $2K the next.

What’s the common denominator here? Most things are not ‘solid‘ or fixed in the markets. And that will totally mess with your brain, and sense of security.

Bottom line is, you’re going to have to get comfortable with ‘uncertainty’ when it comes to trading.

However by becoming a successful profitable trader, you can put the ball back in your court. And that + financial freedom will most likely eliminate about 75% of the every day stresses you experience in your life.

17) Always Wait For Your Price…95% of the time 🙂

If there is a trading lesson I’ve had to learn 100’s of times over, it’s this one. I cannot tell you how many times I got to the charts, noticed a trade setup just happened, and now its moving away from my entry, exactly as I had planned.

Of all the times I chased the trade and price, about 95% of the time, it came back to my price.

This is such an important lesson for 2 main reasons:

1) if the trade does come back to your price, and wins, won’t you be making more money that way? won’t you be losing money if you get in for a worse entry, and it goes against you?
2) what do you think being disciplined, and waiting for your price does to your self-image and trading mindset?

Which one of the above scenarios do you think wins? And more importantly, which one do you want to win with?

18) Your Brain Has The Tools To Make Money Trading, But You’ll Need to Re-wire It

I’m very serious about learning how the brain and mind works. Of the 50+ books I read every year, about 45+ are on the brain, mindset and meditation.

I’ve been studying neuroscience for over 20 yrs since my university days. I’ve spent the last 18 yrs meditating every day, completing a 1 yr meditation retreat and various practice progressions along the way.

There is one thing I’ve learned through all those years. That the brain, and how its wired, has the tools to help you make money trading. It also has the biases to cause you to lose a lot of money trading. Most likely you’ve already experienced this.

Now I’m guessing you’ve heard about cognitive biases? These are mental and neurological structures in your brain + mindset which cause you to make really bad decisions. A few examples:

1) The negativity bias
2) Confirmation bias
3) Fear of Missing Out
etc…

There are dozens of biases you have which will make it really difficult (if not impossible) to make money trading. Luckily, your brain also has a key feature (like hardware in your computer), that allows you to re-wire your brain to make money trading.

This feature is called Neuroplasticity. It’s how your brain can actually change its cellular and neurological structures to form new habits (i.e. habits that will help you make money trading).

What this means is, you have the ability to re-wire your brain to think and take actions like a successful trader.

The key is, you’ll have to re-wire your brain to do this, and that takes methods, applications and work.

You’ll need real practices, methods and training based upon neuroscience, cognitive psychology and a deep understanding of your brain + mind to make these changes.

Luckily this is a real thing, and my profitable students have proven this.

Hence if you want to start making money trading, you’ll have to re-wire your brain to do this consistently. And that only comes with training, practice and hard work.

Now Your Turn

What did you think of my 18 trading lessons? Did you find something valuable here and learn something new? I take my trading, and my mentoring very seriously, so please make sure to share and comment as I want to hear your feedback on this.

The 5 Components You Need For Your Forex Trading Plan

What you’ll learn in this forex trade plan article:

-How do you build a successful forex trading plan?
-How do you evaluate whether your trading plan is working?
-Why you need a forex mentor to help with your trading plan

One of the more common questions I get from traders is “how can I build a successful forex trading plan?” If you’ve had this question before, or feel your trading plan is not sufficient, confusing, or not working, then pay attention because this article will answer your questions directly.

From my experience, you will need (at a minimum) these 5 major components to be in any successful forex trading plan you make. Let’s go through them.

#1 Your Why

From my experience, you need a ‘why‘ as to why you’re doing this. It should be the ‘core‘ reason and inspiration behind why you’re trying to become a successful trader.

For most traders, the why is simple:

“To build financial independence while working from home, having more time to spend with your friends, family, while determining your value and income, and having no limit to the upside you can make.”

Would this pretty much encapture the main reasons why you want to become a successful trader?

Now there is certainly a deeper discussion we can have about your ‘why‘ and what you think it will give you, but for now, my guess is almost all of you fall into the above reasons why you’re wanting to become a professional trader.

The reason why I suggest getting really clear about your why is it will remind you (no pun intended) why you are doing this, but more specifically, why you should work hard to achieve your goals. This is helpful when things are going wrong as that is when you need a boost in motivation and connection to your why.

By having a personal and emotional connection to your why, you’re more likely to stay focused and keep going when things are challenging.

#2 Daily Preparation

Ever watch a professional sports game, particularly before the game starts? What do you notice if you turn on a football game a few hours before it starts? You’ll see the same thing across pretty much every sport on the planet.

All professional athletes start hours before the actual game/contest doing one thing: Preparation!

They are preparing their body and mindset to get ready for the game ahead. Take a look at this 30 second video of Odell Beckham Jr. (American Football Player) getting ready before his game.

What do you see him doing? Rehearsing the exact same things he’ll be doing in the game (running routes, making cuts, catching passes). Keep in mind, this is after he’s done his stretching and exercise routine to get his body warmed up for this.

Now I have one simple question for you: “Do you think trading should be any different when it comes to preparation?” 

The question is mostly rhetorical, however when I quiz most struggling traders about their pre-trading routine, its usually very minimal at best.

Now I know many of you have full time jobs and lead busy lives, and perhaps only have 1-2 hours per day to trade. If that is the case, then I’d suggest spending at least 15 minutes preparing mentally for your trading day. This should be finely crafted into a very specific routine you execute day in, day out.

What should you be doing during this preparation phase of trading? At a minimum:

1) getting your mind (and ideally body) in an optimal state for trading
2) mentally rehearsing everything you need to do during your trading day
3) after you’ve done the above, then starting your pre-trade routine

The above is what I would call a ‘sufficient‘ and ‘expedient‘ way to prepare for your trading day and get you in a mindset + state to make money trading.

#3 Core Trading Mechanics

Now that you’ve 1) connected with our ‘why‘, and 2) mentally prepared for your trading day, it’s time to sit down in the chair and start trading your edge. However, you need to clearly lay out what you are trading, and how. These are your core trading mechanics and a blueprint of what you’re trading.

In this part of the forex trade plan, you need to cover the following:

1) markets/instruments you are trading (should be fixed in the beginning until you’re at least stable or consistently profitable)
2) what strategies are you trading (these should be very clear what you are trading, along with the parameters/conditions for each strategy and setup, such as entry, SL and TP conditions)
3) what time frames you are analyzing the price action context and making your trading decisions from

In the beginning, I recommend trading no more than 5-10 instruments (less is usually better in the beginning) so you can learn their price action, volatility and order flow patterns by watching the same instruments day in, day out.

Gaining familiarity will allow you to find more trading opportunities in those instruments over time, and thus profit more.

You’ll also need to know exactly what trading strategies you are using day in, day out so you’re very clear about what setups you should be focusing on, and what you should let go of.

Forex Trading Tip: Once you know what strategies you are using, make sure you have screenshots of those setups (ideally you trading them successfully live) so you can imprint these patterns and charts into your brain. This way when that same pattern in the price action shows up, your brain will (sub-consciously) tell you “Hey, that’s a good trade, you need to jump on this.”

#4 Risk Profile

This part of your trading plan is all about risk, and risk is all about the numbers (mathematics). It’s a confluence of the risk required to make a maximum amount for each trade, your risk tolerance and risk capacity.

risk profile 2ndskiesforex

There are several things which will help determine your risk profile in your trading plan, such as:

1) % risk per trade
2) max risk per day
3) max risk per month

NOTE: If you want to learn why we recommend a % risk based model, click here.

Regardless, you’ll need to know exactly what you’re risking per trade and it should be consistent. This is because you could be varying your position size, but if you increase size on your losing trades, and decrease size on your winning trades, you’re leaking your edge (losing money where you shouldn’t be).

Since you don’t know whether your next trade will be a win or a loss, you need to be risking a fixed % per trade.

I also recommend having a max risk per day so you can shut things down if you’re off for that day. This will minimize your downside when not on your game.

In terms of your max risk per month, this is the same concept as above.

Trading Tip: If you want to avoid having major draw-downs you’re unlikely to recover from, we recommend having a max risk per month <10%. For every month you have a 10%+ drawdown, you decrease your chances exponentially you won’t recover your losses by year end.

Also in your risk profile, you should be aware of your risk of ruin, which tells you mathematically a) whether your account will blow up, or b) whether you’ll mathematically make money. So critical you understand your risk of ruin.

risk of ruin table 2ndskiesforex

If you want to learn more about the risk of ruin for trading, click here.

#5 Analytics & Review

Every successful trader reviews their trading for the day. Just like an athlete reviews film from their past games to see what they could improve upon, you have to have a process for reviewing your trades each day/week/month.

A simple way to relate to this is:

“You cannot change what you cannot measure.”

(Pro football players reviewing film below)

If you don’t measure and review your trading performance in detail, you’ll continue making the same mistakes over and over again. Have you had this experience? If so, most likely you’re not reviewing and analyzing your trades and trading performance properly.

I recommend the following:

1) spend at least 15mins each day reviewing your trades for the day
2) spend at least 1hr per week reviewing your performance and execution for the week
3) spend at least 1hr per month reviewing your overall stats

What should you be reviewing?

1) charts for each and every trade, showing the price action context before the trade, along with your trades entry, SL, TP, & the result
2) how well did you execute your trading plan (were you over-trading?)
3) what was your performance (stats) for the month and how does that compare to your baseline?

By having a time to analyze and review your performance, you’re teaching your brain to spot the habits and actions which led to making successful trades, which further reinforces good trading habits.

In Closing

These are the 5 major components you’ll need for any trading plan you create. There is a lot more that could be said on the subject, but this should give you a solid framework to build your own trading plan.

In the beginning, you’ll need to do some experimenting to tease out what feels more natural for you. I recommend doing this in 3 month chunks so you don’t change your plan too often, and give it enough time to play out.

Eventually, you’ll likely need some feedback on fine tuning your forex trading business plan. This is where a forex mentor really helps, because they can see things you’ll likely be missing, and can give you actionable insights on  how to increase your profits, accuracy and performance.

Below is one of my students first quarter performance for this year whom I’m constantly helping with their trading plan.

trading analytics 2ndskiesforex profitable traders

If you’d like to learn more about our Trading Masterclass course and how we can help you build a successful trading plan, click here.

Now Your Turn

Did you learn something from this trading plan article? Notice anything lacking in your current forex trading business plan? Feel like you have a more clear idea how to build a successful forex trading plan?

Make sure to leave a comment below, and share this article on social media.

Until then, I’ll look forward to hearing from you.

Additional Resources: What if your trading plan is costing you money?

A Forex Trading Mindset Lesson: Fixing Trading Mistakes & Better Trading

I wanted to write a brief trading mindset lesson for today as I’ve been ‘out of pocket‘ for days now. I recently caught a nasty flu virus that has taken the piss out of me.
Fever, sneezing 100x per day, congestion, phlegm, cold shakes, trouble breathing, you name it, I’ve had it for the last several days. Luckily my girlfriend has been awesome in taking care of me, so a big shout out to her (if she actually reads this :-o).
Speaking of which, my girlfriend actually inspired this short trading mindset lesson.
The other day, the fever really set in. To me, this is a bad situation and experience. Who thinks getting a fever is a good thing?
However my girlfriend said something which got me thinking about trading. She said, “Oh, the fever is a good thing. It means your immunity is really kicking in to fight off the virus.”

And that got my mind thinking about my process of making money trading, and those who struggle to make money trading (perhaps you are one of them?).
If you are struggling to make money trading, you’re probably experiencing ‘symptoms’.
These could be:

and more…

Have you experienced any of these trading mistakes or symptoms?

Most likely you have, and I did just like you do now.
There is a reason you experience these trading symptoms.
Your brain right now has a 99% chance it isn’t wired to make money trading. This has to do with our brains evovled and development over time.

Right now, you have many components and neural structures in your brain. Some of them are new, such as the pre-frontal cortex, which allows you to make analytical decisions (i.e. reading the price action context in the chart).
Some of these structures on the other hand are very old, like millions of years old. One of them is the amygdala, and it is one of the most frequent actors to cause you to trade poorly.

Why? Because for most of our human existence, we experienced life threatening situations as a daily occurrence.

Think about this fact:

1 in every 8 lads died from protecting our families and resources 10,000 years ago.
In the 20th century, that number is 1 in 100 (I’ve written another extensive article on this subject which you can find here).

Why does this matter to you as a forex trader?

Because of this experience, parts of our brain (such as the amygdala) are heavily wired as if we’re dying at a ratio of 1 in 8. This wiring causes us to experience things today, even though it’s not reflective of our current reality.
So you today right now in front of the charts are trading with old parts that aren’t accurate, nor wired to make money trading.
Your amygdala has several functions, such as:

  • Having a primary role in the process of memories
  • Decision making
  • Emotional responses (more negative than positive)
  • Along with affecting your reward systems

Now think about the above 4 things for a moment.
Let’s say you have an emotional response to trading, such as opening a trade, and the market instantly goes against you. What’s the first thing you’ll likely experience? Doubt, fear, worried about a loss, etc.?

Do you struggle with these emotions while trading?

That’s your old amygdala and wiring affecting your trading performance now.
In fact, your amygdala can get so easily triggered, that every pip the market moves against you is experienced way more intensely than every pip it goes for you.
Have you experienced this before? If so, you’re experiencing the ‘symptoms’ of your old neurological wiring.
Now circling back to being sick and having symptoms, when you experience FOMO, revenge trading, start over-trading, get worried about a profitable trade starting to go against you, etc…you’re experiencing the ‘symptoms’ of your brains wiring, which by and large, isn’t currently wired to make money trading.

When my girlfriend told me the fever is a good thing, my initial reaction was:
“What? Why the heck is feeling like I’m burning alive a good thing?”

But this was simply my immune system kicking in and trying to fight off the virus.
And that is very much how your trading symptoms are. You see, you and your brain want to make money trading. You want to experience less negative emotions, you want to avoid over-trading, you want to be able to trade without being worried of missing out.
You experiencing these things is your brains way of telling you ‘something is wrong, I think this is a bad situation’ but in actuality, it’s not.
You and your brain want to evolve, fix your trading mistakes, and make money trading.
But you can’t until you start to change how your brain is wired.

The good thing is, you can wire your brain to make money trading, but currently, you’re experiencing these ‘symptoms’, and you’ll need to make adjustments to get better.
If you want to learn how to make money trading and rewire your brain for trading success, then check out my advanced price action course where we teach you how to fix your trading mistakes and make money trading.
And if you’re really hard core about changing your brain and wiring it for success in trading (and life), then check out my advanced traders mindset course, where the entire focus is on changing the way you think, trade and perform so you no longer over-trade, you no longer experience FOMO, you no longer revenge trade, and no longer get derailed by your negative emotions in trading.
traders mindset course 2ndskiesforex
I hope you enjoyed this brief article on the trading mindset and how to fix your trading mistakes.
Also a big shout out to my apprentice ‘Sascha‘ who helped me finish this while being under the weather.
Make sure to comment, along with sharing it with others as sharing is caring so that others don’t have to make the same mistakes you and I have in trading.
Time to wire your brain to make money trading.

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How We Change Your Trading Mindset at 2ndSkiesForex

Want a successful trading mindset and see real change? Make sure to watch this video on how we use neuroscience, meditation and two decades of experience in the markets to help you become successful.
Read more

Trade Management & Analysis on A Losing Trade

Changing tack a bit here, I’m going to be covering a losing trade forex management analysis here to give you an idea about price action, trade management and what I learned from this trade.

In my weekly trade setups commentary, I covered the USDJPY which had just broken range resistance and the ‘big figure’ at 125, suggesting more bullish price action.

I trade more with trend vs. counter-trend and was definitely bullish on this pair, so looking to get long.

Below is a 1hr chart of the pair right before the breakout.

usdjpy 1hr chart price action 2ndskiesforex

You can clearly see the uptrend movement starting from the bottom left of the chart, which eventually led to a corrective phase (blue box), or a period of balancing in the order flow.

Corrective phases at the top of a bull move and trend generally signal continuation, so was anticipating a breakout.

And the pair did just that, also forming an intra-day corrective phase at the highs (1hr chart below).

usdjpy price action breakout after correction 2ndskiesforex

After this breakout, I was looking to buy on a pullback. I talked about my buy being in the support zone around 125.10 – 124.75 so this was my trade location.

I put a resting limit order at 124.81 with a 30 pip SL and target around 126.60 for a potential +6R. If my idea is correct, we should minimally get a bounce towards the recent breakout highs.

My reasoning was as follows:

1) Price Action Context = Bull Trend, Impulsive Breakout, Volatile Trend
2) Corrective Phase led to breakout = Strong Bull + Factor
3) Balancing area was clearly defined = Strong + Factor
4) Looking to buy on a pullback into top of balancing area/corrective structure

If all the above is correct and the bulls are in control, they should maintain the breakout and will want to defend any pullbacks, along with potentially adding to their position.

Breaking back into the corrective structure would be a sign of weakness on their part, so I do not want to be long if we break past the upper area of the zone.

Hence this would invalidate my idea, and thus determined my SL location.

As you know, the trade resulted in a loss (see chart below).

usdjpy losing trade jun 8 2ndskiesforex

However, I did not take the full loss as I exited early for about half my original SL.

Why?

I was managing the trade in real time. If I had used a pure set and forget style trading, this would have resulted in a full -1R.

Instead it was a -.5R.

Now this may seem like a small deal only saving .5R, but over 100+ losses, this could result in a +50R to my bottom line!

I don’t expect each trade I manage personally (or exit early) to be the right decision every time.

Ever heard the old adage from professional traders ‘let your winners run and cut your losses quickly‘?

Does that sound like they are using the ‘set-and-forget’ method to manage their trades? I don’t think so, and neither should you.

Regardless, in managing my trades actively, I do not expect each time for it to be the right decision.

What I do expect is that overall I will have a positive expectancy in managing my losses (and winners). I expect with my trades that letting them ride to the set and forget SL or TP will not be as profitable or provide a greater edge vs. managing my trades.

Before I get into that further, let’s get back to the trade, show you what I was thinking, and why I exited the trade early.

Below is the 15m chart the candle before my actual entry, along with my trade location (entry) and my SL.

usdjpy trade location 15 min chart 2ndskiesforex

Now look at the 5m chart below and you’ll notice some greater detail on how the price action was reacting to the support zone.

usdjpy 125 bids stepping in 2ndskiesforex

You can see there were 3 touches/bounces off 125 (blue arrows) showing where the bids were coming in.

However, you’ll also notice something else (see chart below).

price action angles off key level 2ndskiesforex

Each reaction off the level is getting weaker.

This suggests the bears are pushing back the bulls and forcing them out of the market. The faster players are realizing this and getting out before it breaks.

I’ve talked about the importance of price action angles and how the PA is reacting to a level based on the angle it makes.

This is indicative of the underlying order flow, denoting the strength (or weakness) of the bids/offers in the market and around the level.

My original instincts were to just get out before the trade activated. I wasn’t totally feeling on my game yesterday, so was definitely slow to respond.

Shortly after my trade opened, there was a small consolidation (middle right side of chart above) which was also showing weakness.

Once the breakdown happened from there, I was out. If I was following my instincts, I would have either a) never been in this trade or b) exited early.

An off day mentally and it showed in my trade management.

Learning From Each Trade
Regardless, I learned something from it, and my philosophy regarding trading is either I win and learn, I lose and learn, or a I fail to learn.

The first two are wins to me because I learn something each time which translates into a greater edge and profits over time.

The last one is the real failure (and loss) IMO as there is something to learn (either about price action or my mental execution and mindset).

But this brings me to another key point.

Why Set And Forget Is Not Ideal or A One Size Fits All
Set and forget is one style of ‘forex trade management‘ and there are many trade management options available, all on sliding scale between passive and active.

If I’m a set and forget trader, and targeting a typical +2R, yet I can see the market is mostly likely to run for a +6, +8 or +10R, why would I just ‘forget’ about that?

Why would I not maximize my edge at every turn? Does a professional poker player just say ‘I only want to make x amount on this hand and that’s it‘?

Of course not – they want to maximize their gains from every single hand.

This is why stating the set and forget method is the be all end all of forex trade management tactics is a freshman idea.

There are a few instances I recommend trading the set and forget style of trade management (limited circumstances).

But I do not recommend it as a resting point or long term method.

You’ll limit your upside on runners, take full losses when you shouldn’t, and decrease your feedback loop over time.

It is true that managing a trade in real time takes more skill, psychological confidence and mental strength vs. the set and forget approach.

But that doesn’t mean we should avoid such a skill, venture or challenge.

Why put limits on your upside growth and performance? No elite performer does this.

What I do recommend is starting off with a set and forget style forex trade management strategy.

But once you’ve built up your skills of reading price action context in real time, then it’s time to move onto trade management methods which allow you to take advantage of long running trends.

Want to Build Up Your Price Action Skills?

My Price Action Course is specifically designed to help you build up your price action skills so you can learn when to stay in a trade, let it run for a large profit, or exit for a small loss.

This course is skill-based, meaning we teach you the core price action skills from the ground up. These can be used on any instrument, time frame or environment, and is the core skills I am always trading my live money with.

Did you find this forex trade management strategy article useful?

What style of forex trade management do you use, and have you ever wished you could learn when to cut your losses early and let your winners run?

As always, I want to hear from you on this one.

Thank you for reading this important post, and please do forward this to anyone you think can benefit from it.

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The Blind Entry (How It Will Leave You Trading Blind)

This is part 2 of a 4 part series. View the next one here: How the Typical Pin Bar Entry Is A Retail Entry or if you missed the first one, checkout The Price Action Confirmation Myth & the Retail Mindset

blind entry 2ndskiesforex 1

Preface

I’d like to preface this post before I share the meat and potatoes stew.

People are going to have differing opinions on how to trade, particularly when it comes to price action, and that is to be both expected and accepted.

I think as colleagues, it is perfectly ok to offer a critique on a trading method.  It helps bring greater clarity and information to the trading world, especially for developing traders.

As long as the critique and constructive criticism is not personal, and not based on speculation, but simply comparing the differences in technique or approach, then it seems perfectly fine (IMO).

We see this in science, mathematics and medicine, so there is no reason why it cannot or should not be here.

I’ve recently posted a video on Why Confirmation is A Retail Traders Mindset, and not how professionals think.

This article is my critique and explanation of how and why the forex blind entry method communicates a retail traders mindset about price action.

Let’s begin.

The Critique On The Blind Entry

There is this retail version of price action, that trading a support or resistance level without a ‘confirmation signal’, is trading the market ‘blind‘.

It is called the ‘blind entry‘, because if you are trading without any confirmation signal, then you are trading the market blind.

I want you to think about that for a moment.

That a trend which has been moving for 1500 pips, selling off for 7, 8 or 9 weeks/months in a row…that if you are shorting without a price action confirmation signal (such as a pin bar, engulfing bar, or inside bar), that you are trading blind.

If that is how you approach price action, that trading without such a confirmation price action signal, is really trading blind, then you really don’t trust price action.

You don’t trust trading trends, you don’t trust price action context, you don’t trust an imbalanced order flow in the market, you don’t trust key support and resistance levels.

In reality, you really don’t trust your ability to trade at all now, do you?

Do you really think that a professional bank, prop or hedge fund trader has been sitting on the sidelines of the EURUSD downtrend these last several months, simply because they did not get a daily price action signal to ‘confirm’ the trend is valid?

Is that what you really think?

One has to ask the question, if attempting to join a well established trend, or entering the market without a ‘price action signal‘ (in the form of a 1-2 bar pattern) is trading ‘blind’, you really have to question that approach to the markets.

You have to question that understanding of price action as it is likely causing you to lose money.

In Closing

Are you one of those trading these price action confirmation signals?

Have you been sitting on your hands in trends that have moved thousands of pips, not trading them because you didn’t get ‘confirmation’?

If so, I want to hear your feedback and how this series of videos and articles is changing your perspective on trading price action confirmation signals.

Can you see the difference now in the two versions of price action being taught?

Which one do you think wins over time and why?

I want to know, so please comment and join the discussion below.

Did you like this article and find it useful?

Please make sure to like, share and tweet it below.

And do watch my next video in this series where I show the difference between the 50% retrace tweak entry vs. a professional traders entry.

 

This is part 2 of a 4 part series. View the next one here: How the Typical Pin Bar Entry Is A Retail Entry or if you missed the first one, checkout The Price Action Confirmation Myth & the Retail Mindset

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The Price Action Confirmation Myth & the Retail Mindset

This is part 1 of a 4 part forex price action strategy series. Read the next one here: The Blind Entry (How It Will Leave You Trading Blind)

I can always tell where people are in the trading process based on how they speak about confirmation. Why is that? Watch, and find out!

Here’s the transcription for the video:

“There’s a really big misunderstanding about confirmation.

When I hear people talk about confirmation and how they talk about confirmation, I can always tell where people are in the trading process based on how they speak about confirmation. Why is that?

Because there’s been this proliferated idea in the trading education world that to trade a setup or trend or something like that you need this thing called confirmation and the confirmation comes in the form of a pin bar, an engulfing bar, an inside bar or whatever.

So that’s the general idea that’s out there when it comes to trading price action.

The thing is, is that when I hear somebody talk about price action in this way, I know exactly what level of trader they are and what level of trader they’re not, because how somebody speaks about confirmation is very indicative of where they are in their trading process.

If a trader is looking for confirmation that a trade will work and they’re doing this because they’re saying “ok, we gotta wait for a price action confirmation signal from support or resistance“.

Well, where does this idea and need for confirmation come from? It comes from a beginner’s understanding of trading.

Why is that?

Because beginning traders are looking for certainty in the market. They’re looking for solidarity, they’re looking for something really really potent that says “I need confirmation”.

The reason why they need confirmation is because they don’t trust price action, they don’t trust their skillset.

They don’t trust trading as a whole. They don’t trust trading with trends, they don’t trust reversals. They don’t trust support and resistance, they don’t trust price action as a whole.

In the beginning, traders want solidarity, they want certainty. And because of that, they’re looking for confirmation in the form of a pin bar or something like that.

The pin bar ‘confirms’ that this trend is going to continue.

The thing about it i,s is that this is something that professional traders have let go of that a long time ago. And they have to let go of it to become a professional trader.

The reason why that is, is because that idea of certainty, of confirmation and the way that a beginning trader is looking for it, that wanting things to be really certain, that A++ setup.

Where that comes from is a beginning understanding of trading.

“Professional traders don’t look for certainty, because they’ve realized it’s an illusion.”

What professional traders are looking at, which is a different perspective, is trading and thinking probability.

So if you hear somebody talking about confirmation, “we wanna trade with the downtrend and we’re gonna wait for a pullback towards resistance and a pin bar off that resistance as confirmation that the trend is still in play and we can trade it“.

How many have heard that story before?

The reason why you’ve been told that is because the people who are teaching that aren’t trading professionally.

If they were you would know this, and all professional traders would know this because professionals aren’t looking for confirmation signals via a pin bar.

So if you hear somebody talking about that, you know where they are in terms of their level of trading.

They’re still a beginning trader themselves, and if you think about it, if somebody is talking about an A++ setup or they’re saying “hey, we’re waiting for a pin bar from resistance for confirmation“, besides the fact that I would suggest running from them as far as possible, because they’re still beginning traders.

You have to ask yourself “look, if you’re only willing to wait for a pin bar or an inside bar, or a false break, if you’re only willing to wait for those signals before you enter the market, well then you really don’t trust price action, do you?”

You don’t trust trends, you don’t trust price action context, impulsive vs. corrective, volatile vs. non-volatile trends, you don’t trust support and resistance, you don’t trust your own ability to trade.

You have to wait for all these other things to be in place and then this one final supposedly magical pattern and supposedly there’s only like 3 of them, which is amazing to me that this idea is actually out there, that there’s only 3 possible ways that the market is telling you a trend’s going to continue.

I don’t know about you but that seems kind of absurd to me. It seems a little insane to think that a market that is so complex, across so many players, across trends that continue.

Confirmation via a pinbar is an illusion, it’s a beginning way to look at trading.

So, your job as a professional trader… you know you’ve kinda crossed the Rubicon and made a big leap in your trading when you look at trading in terms of probabilities, not confirmation in the ordinary sense.

Confirmation, the way it’s normally talked about is a very dubious notion. It’s a very slippery idea that doesn’t really exist in the way you think it does.

If you’re constantly looking for those things you’re going to miss thousands and thousands of pips in a trend that is already well-esablished.

If you’re looking for confirmation, you won’t be able to make this trade and this trade and this trade and this trade. And that’s… what is that? +240-250 pips?

In a period of, what, 3 days? On one pair? You won’t be able to do that.”

This is part 1 of a 4 part series. Read the next one here: The Blind Entry (How It Will Leave You Trading Blind)

Have you been trading price action via ‘confirmation’? If so, I want to hear from you and what you see as the difference, so please make sure to comment below.

Was this article helpful? Please make sure to like, share and tweet it below to anyone you think can benefit from this.