Forex Strategies – Page 4 – 2nd Skies Trading

A Trading Quiz on Price Action Trading

In my Price Action Course, I am often sharing my personal live trades, using them as a learning experience for the private members.

My goal is to help them learn price action, so one of the methods I will employ to help them with this is create trading quizzes.

Today I want to share one of those forex trade quizzes on an actual live trade setup I took.

Before taking the trade, I was looking at 3 different charts, so I took screenshots of each chart I was considering trading.

I will often do this when reviewing my trades at the end of the week, or examining the price action to increase my pattern recognition skills.

If you want to learn price action and how to trade it, that learning process must come from many sources – not just trading or watching videos.

The Trading Quiz

Below are three charts, all of which I was considering trading last week. Each one presented opportunities, both trading with the trend, some counter-trend, while others both long and short.

For this price action forex quiz, examine each chart in detail. Look at the overall price action context and structure. Some are offering with trend setups, some are offering counter-trend setups, and some are offering both (or none at all).

Your job is to decide which ones to trade, where, and how.

Hence your answers are the three possibilities:

a) Trade With Trend
b) Trade Counter Trend
c) No Trade

For each trade, fill in your answer (using a, b or c for each chart), what you see in the price action, and why you will take this trade. You can choose A and B as appropriate answers.

This is a great opportunity to see how well you understand price action, how well you can spot with trend or counter-trend setups, & what opportunities you can find in the charts.

There will be no prices marked, nor will I tell you what instruments they are (so you cannot cheat :-). I did however mark some key support and resistance levels I am looking at to give you some small hints.
But by and large, this is just pure price action trading and analysis.

Here we go.

Price Action Chart #1

Price Action Chart #2

Price Action Chart #3

Your Quiz:

In the comments section below, fill out your answers. You can list the name of the trade (Price Action Chart #1, 2, or 3). Then provide your answer (a, b or c). And lastly, explain the reasons for your trade setups and why.

Then I will respond with a follow up article what live trade setups I took, sharing my exact entry / exit points, and what I was reading in the price action.

Now try to answer each one using your current trading skill set. The winner with the best answer (most detailed, complete and closest to mine) will get a $50 discount on any one of my forex trading education courses. I will announce the winner with the next article.

Good luck and I look forward to your answers.

Featured Article, Forex Strategies, Trading Mindset & Risk Management

The 4 Components of A Trading Process

I recently read a post by Brett Steenbarger called ‘The Four Pillars of Trading Process‘. In this article he outlines and details what is a trading process, isolating several components of any trading process. They are;

1) Preparing
2) Performing
3) Reviewing
4) Revamping

Before I get into the spice and flavor of these four points, I’d like to state this commentary on Mr. Steenbarger’s post is both praise and critique. I appreciate his work on trading psychology and would suggest checking out his blog.

In this post, I found useful components to his description of the trading process. However, there are a few ingredients I would amplify/expand on, meaning I felt they could have been cooked a little more.

Let’s get into the four components and how he describes them. I will go over one at a time, discussing what I found valuable, along with what I’d change/adjust/or add to.

I will also give suggestions how you could get a greater understanding of the trading process and how to leverage this to increase your trading skill set.

#1 Preparing

Mr. Steenbarger defines this as the following;

“Preparing – What you do to identify and exploit opportunity in markets, including observation, research, idea testing, trade structuring, portfolio construction, and trade planning.”

To me, this first one falls short, because it only covers what you do once you sit down in front of your trading station.

Preparation (in my book) begins with the mental game, and that has to start before you actually put your butt in your chair.

You’ll see this in professional athletes who are getting themselves mentally ready before they even get to the stadium.

Aaron Rogers (quarterback for the Green Bay Packers, 1x Super Bowl Champion & holder of several Quarterback records) actually spends time the night before thinking about the game and what he is going to do.

Trading has to be approached in a similar way, and the successful traders I communicate with regularly employ the same tack.

Hence, we have to include mental preparation in this part of the trading process.

Even though Brett (Mr. Steenbarger’s first name) does a good job outlining what you do when you are in front of your trading station, I think this definition of ‘preparation‘ needs to be amplified.

#2 Performing

Here Mr. S. defines this as follows;

“Performing – What you do to initiate and manage positions in the market, including sizing, risk management, entry and exit execution, and adjusting to the ongoing stream of news, data releases, and market movements.”

Here I think Brett covers (by and large) all the ‘mechanical’ actions you as a trader will execute and engage on a daily basis. I do feel there is room in here to discuss ‘mental management‘ which is a large component of ‘performing‘ during your trading day.

However, I will cover this in the near future.

#3 Reviewing

Mr. S. here writes;

“Reviewing – What you do to examine individual trades and overall trading to learn from successes and mistakes and to reexamine ideas about markets.”

Not much to say here – he pretty much nails it, other than reviewing one’s mental performance & trading journal.

Note: For a great article on how to review your trades, read Reviewing Trades: Two Crucial Tips)

#4 Revamping

Brett here states;

“Revamping – What you do to translate your reviews into concrete goals and actions that make you more prepared and aid your future performance.”

Here I also feel he gets it right, although I think we can bring this into #3 above and make them one whole component of the trading process.

Now he also states in this article how the main issue for traders is not letting their emotions affect their trading and discipline. He feels the big issue is how they neglect the last two elements and spend most of their time working on #’s 1 and 2. Does this ring a bell?

While I certainly agree traders are less likely to review their trades, performance, process, etc., I find most revamping their methods all too frequently without ever digging deep into any one process, system or skill set.

On top of this, I find without a doubt many traders let their emotions affect their trading and discipline. I hear about it all the time, and even see it in their trading journals.

My experience is both are a major issues. Any trader not controlling their thought processes or emotions is the least likely to succeed. Hence I see it as a both-and scenario, not an either-or.

In Summary

I think Mr. Steenbarger does a good job of breaking down specific components of the trading process, and giving them a more detailed look.

I personally feel there needs to be more emphasis on preparation & reviewing, along with managing one’s mindset and emotions in real time.

I do see other components besides these four, which I will cover in the near future, but overall, he does a good job of bringing a greater discussion on the subject.

Those traders without a well developed trading process beyond the vanilla a) take a trading course, b) learn a trading system, and c) start trading in the markets, will find themselves struggling to trade consistently, missing key components, and not building their skill set.

Unfortunately this is the path most traders take, and it simply won’t get you from here to consistent profits. Hence why this is an important article and discussion.

With that being said, what parts do you see as critical to the trading process? Do you agree with my sentiments here?

Please make sure to share your thoughts, comments and feedback, particularly why and what you see the same/or differently.

Working With Failed Trades & Your Trading Mindset

There is a statement non-profitable traders often use regarding some of their losses. Perhaps you have heard this before, or said this yourself (myself included years ago).

It is the commonly used term ‘Failed Trades‘, which is something of a misnomer. In reality, there are no ‘Failed Trades‘. In fact, there are only three types of outcomes from any single trade, and they are not the win/break-even/loss you are thinking of.
These three types of outcomes from any single trade are; winning, learning, and failing to learn from. The idea of a ‘failed trade‘ is the latter – that being one you failed to learn from.

However the very mention of the term ‘failed trades‘ brings up something crucial about our trading mindset. That is – we cannot define ourselves by our last few trades, whether they made money or not. Think about it like this;

What if you are 50% accurate, and generally scoop up 1.25R per winner? According to the risk of ruin, that level of accuracy, risking 1% per trade (and R won per trade) will mathematically make you money.
Another perspective around this would be to examine coin flips. How so?

You can flip a coin 10,000x and end up with 50% heads and tails. Yet…inside that 10,000 rounds of flipping, you may have 7 heads in a row. Now what if during those 7 heads you were betting tails each time? Would you call that a failure to bet wrong 7x? Probably not, yet its perfectly natural to have moments of random distribution like that, even in a coin flip.

Translation: you will have losing streaks which will be part of trading. You will also have ‘hot streaks‘ which are part of the same process. These winning and losing streaks come via any natural distribution curve. Individually, they’ll look like streaks, but in reality, this is an illusion, because they are statistically going to happen. Which is why we have to focus on something else.

A Students Trading Process: From 8%-38%
I recently had a student (we’ll call him Michael) who wanted to trade an anti-podean currency (Kiwi vs. the USD) as it worked for his availability. When he first started training with the pair on Forex Tester 2, doing live forward simulation training, his accuracy was a whopping 8%. Yep, you read that right, he was only accurate 8 out of 100 trades.

A month later, Michael was now 28% accurate. I just received an email from him showing me his myfxbook stats. Where is Michael at now? Currently clocking in at 38% percent. Maybe I should call him the crazy eights trader!

(NOTE: To get a $50 discount on Forex Tester 2, click here)
Now when you look at his trading over time, what you can see is the evolution of his trading via focusing on the process (not results). He is evolving over time and continually getting better. If you define yourself by your last two to three trades, you are focusing on a see-saw, which, technically could oscillate with a loss following every win forever!
By focusing on process, and your trend in terms of your overall trading process, you get a better handle on what you actually are – which is on a sliding scale. In other words – a moving target!

Michael kept his eye on the ball, and because of that, his process and performance is getting better. He’s constantly improving his execution, timing, and his read on the price action context. By getting better at reading the price action in real time, he’s noticing a steady uptick in his accuracy. His last two trades will never represent all the effort he’s gone through thus far, and more importantly – where he is going.

But He’s Losing Money…
Now you may think, ‘big deal, he’s still only 38% accurate, which is losing money.‘ Call it a guess, but I’m willing to bet at least 60+% of you thought 38% accuracy is poor in terms of trading, and that Michael was losing money. That would be true if his average R was +1 per trade. But he is generating over +2.5R per trade, which means Michael is making money consistently.

And now that he’s making money, is he just sitting there content with what he’s got? No – like a track runner constantly working to reduce his time, he is constantly refining his edge wherever he can find it. He is using the Aggregation of Marginal Gains, where every 1% edge adds up to a large result.

In Closing
We can now see there are no failed trades – there are only trades we fail to learn from. By focusing on process, and not the see-saw of the last 2 or 3 trade outcomes, we keep our eye on the target
We can now understand how hot and cold streaks are a common part of our trade distributions, so getting bent out of shape by a few losing trades means nothing. What is more important is having a successful trading mindset, which is focused on constantly improving and building our skill set.
When we do this, we will find ourselves making better decisions, worrying less about the outcome of each trade, and making more profitable trading decisions.

Featured Article, Forex Strategies, Trading Mindset & Risk Management

Excuses in Trading: What They Do & How to Overcome Them

Meet Claire and Chloe Gruenke. They are 13 year old twins. Both of them compete in track for their junior high school in Illinois.
A few months ago, both were in a track meet when Chloe felt something ‘pop’ in her leg and fell down. Trying to complete the race, Chloe tried to get up, but she couldn’t run, let alone walk.
At this time her sister Claire, realizing Chloe was physically unable to complete the race on her own, did something extraordinary.
Instead of calling for help, she put Chloe on her back and kept on running for the finish line. There was no chance either of them was going to come in any place but dead last. Yet Claire ran with her sister on her back.
Right before crossing the finish line, Claire gently let her sister down and told her to cross the line first. Chloe saw the bigger picture, and they crossed at the same time.
This is an amazing example of losing the race, but winning at life. It is also reflective of something which plagues developing traders – dealing with excuses when facing obstacles.
Excuses & Your Trading Mindset
When it comes to trading, what is the most damaging part of the excuses you make? Is it the fact you missed an opportunity pull the trigger on a winning trade? No. Is it that you didn’t fill out your training journal and learned from your trading mistakes? No.
The most damaging part about making excuses when it comes to forex trading, is how they affect your self-image. Every time you make an excuse, and then act upon said excuse, you communicate something which dis-empowers you.

Each excuse you give and act upon sends a message to your self-image of how weak it is, how unable you are to accomplish something, and ultimately where your level of ability is at.
This is incredibly damaging because our self-image is one of the greatest determinants for our performance and level of trading success. With each an every excuse we make, we not only stunt the growth of our self-image, but concurrently shrink it.
Excuses Affecting Performance
We all have the goal to become a successful profitable trader. When we parse out an excuse as the reason why we didn’t do something, we lower our self-confidence, particularly in our ability to follow through. When we don’t follow through (even though we recognize our ability & potential), we experience frustration which affects our performance negatively.
Products Of…
In most cases, excuses are a product of two things;
1) Lack of Proper Motivation
2) Unspecified Goals
If you aren’t properly motivated to trade profitably, or do not know the underlying reasons for your motivations, your unconscious mind & limiting beliefs will subvert your efforts to do the hard things when it comes time.
This lack of completing what you set out to do can often be a reflection of being unmotivated. It is only when your motivation becomes larger than the energy of your excuses, is the moment you start to see forward progress in your efforts and training to accelerate your learning curve.
Also, having unspecified trading goals leaves you with no clear endgame, and thus motivational underpinning to trade successfully.
Easy to Produce
It will always be easier to produce excuses any time we fail to do something or reach our goal. We will always have moments when we are tired, do not feel 100%, lack inspiration, had a bad day trading, don’t have the money, the time, the genes, the experience, and the list goes on…
All of the above can be manufactured in a second and take no effort at all.
Before 6am & -40 degrees F
I cannot say I truly like getting up just before 6am every day. Sometimes it feels great, and sometimes I’m tired as all hell. In those latter moments, it is hard to get up, and quite easy to stay in bed.

Luckily, I’ve had various ‘trainings‘ since I was young (soccer, martial arts, yoga, meditation, forex trading) which conditioned me to ‘just do it‘. Getting up when it was -40F at the age of 11 during a Chicago winter wasn’t fun by any means. But working towards a goal and accomplishing something for my day was 99% of the time far better then doing nothing.
It’s true – getting up that one day wasn’t going to make me a professional trader, martial artist, or soccer player. But each step was both building my skills, while increasing my self-image. Do this enough times and eventually you feel like you can overcome almost any obstacle.
Common Amongst Successful Traders & People
One thing you will notice amongst highly successful traders and people, is when they come up against an excuse, they look for ways to get past them and complete their task. Their long term vision is far more important than their short term discomfort.
They are solution focused, thus constantly turning their minds towards finding an answer. This solution based focus, while being focused on the process helps to improve brain performance and wire your brain for success.
Successful traders and people do not leave much space for excuses to enter. Even when they do surface, they are usually met with discipline, focus and a forward moving momentum excuses usually fold under.
Overcoming Is…
Remember, overcoming is the currency of success. Thus it is very important you are solution focused when facing your challenges, instead of allowing your challenges to transform into excuses.
In 95+% of all situations, you are in control of ‘you’. Hence the underlying reason you haven’t done what was needed, was because of something YOU chose to do (or not to do).
Once you realize how much you are in control, there are fundamentally no more excuses to give as you determine your reality more than any other agent.
Going back to Chloe & Claire, Claire was less worried about winning the race, and more focused on finding a solution.
She communicated to everyone on that track, there are always ways to finish the race. She wouldn’t let any excuse into the situation. She showed us all something great about humanity, of what we could be if we let go of excuses, and directed our minds towards solutions.
Unable to run, Chloe still finished the race, and Claire wouldn’t let it happen otherwise. She had the mentality of ‘No-Obstacle‘, which is one of the most powerful mentalities you can have in trading and life.
Every time you face an obstacle or excuse, but overcome it – you increase your self-confidence and self-image. This is one of the most effective ways to build a successful trading mindset.
In Closing
Excuses are some of the most damaging things to your mindset and trading success. They reduce your self-image, which must be strong to trade successfully.
By learning to see what excuses are, and discover how much we can actually control them, we give ourselves the potential to transform obstacles into growth, and excuses into determination.
In reality, although there are great mountains like Mt. Everest & K2, the greatest mountain we will ever climb is our own mind, and our own challenges.

For those who can and do scale such mountains, you will find yourself standing atop all those obstacles, limitations, and challenges, which can bring a confidence to last you a lifetime. It is in that moment that you will see the great expanse, and what’s available to you.

Lucy & Trading Forex Successfully – What You Can Learn From Lucy

This weekend my girlfriend and I watched the new movie Lucy with Scarlett Johansson. Entertaining, funny and somewhat provocative, the movie describes a woman who (through a strange turn of events) develops an ultra-powerful brain.

Being that I have studied Neuroscience at the University, while my partner has studied the brain from a health perspective, an interesting debate ensued after the movie during our summer saunter home. And out of the blue….the conversation shifted to trading (I wonder why :-0).
We’ve both trained traders, but from different fields, and we both realized there was a lesson inside the movie for those of you wanting to build a successful trading mindset. Below is our key takeaway from the movie, what we noticed about it, and how struggling traders can breakthrough to profitability.
Unsuccessful People Believe in Events, Successful People Focus on Process
In Lucy, Johansson has CPH4, a new and powerful drug, put into her stomach that is to be sold worldwide by a ruthless businessman. After being kicked in the stomach, the CPH4 releases into her bloodstream, overcoming her blood-brain barrier, causing her brain to expand in capacity and abilities. Within minutes (after a gravity defying series of convulsions), she starts to develop super human abilities (or are they ‘human’, just undeveloped in us???)
Philosophical and scientific debates aside, why do movies like this sell? Why do we constantly see movies about random ‘events‘ that turn people’s fortunes instantly – Limitless, Powder, Trading Places, Brewster’s Millions (yes, I’m old)?
The answer is, because they follow the general meme of most media, literature and culture – they focus on ‘events‘, not ‘process‘.
What do I mean by an ‘event‘? For this article, when I’m using the word ‘event’, I’m specifically referring to the end result moment in a long chain of events.
An event is the big paycheck, the striking it rich moment, the they’ve made it moment.

Media typically focus on events because it keeps the dream alive. Nevermind the largest wealth gap in history happening right now, or that home incomes dropping to multi-decade lows around the world.
Events get more reads, clicks and attention, giving people the idea that in a flash of lightning become rich, become a world-class athlete, some super special trader, or ultra-intelligent like Lucy.
But an untold sub-text lies underneath all these rosy ‘events’. There’s a harbinger behind each of them. That is, when you hear about an event, you don’t hear about the long process said-now-successful person went through to get that big paycheck.
A $57 Million Dollar Payday
Richard Sherman, the feisty outspoken cornerback for the Super Bowl Seattle Seahawks, recently landed a record breaking deal of $57 Million, becoming the highest paid cornerback in the NFL.
You’ll hear/read tons of stories, piling to the heights of Mt. Everest in the media about his big paycheck, the terms of the deal, how much it is, whether he is worth it, and how it breaks records.

What you won’t hear about is how Sherman was born in Compton (a really rough neighborhood in California), and how many people he knew were killed due to gang violence. Or how he was the Salutatorian in his High School class (second of all students academically) spending hours studying after a long day of practice, or an all-american track star, or a super late round draft pick in the NFL.
How many stories have been printed about his ‘process‘, all the hardships he went through to get this big paycheck, or how hard he worked over the last 8+ years? Compare that to the number of stories printed about his ‘event‘ and record breaking payday. I’m guessing the event articles outnumber the process articles by a margin of 10:1, maybe even 50:1.
Why? Because stories about ‘events‘ sell, and those about ‘process‘ don’t. Who wants to hear about how they have to work harder to become successful when you’re already working down to your bones? Who wants to hear they may have to put in 7 day work-weeks for 7+ years on end, when you barely make it through a five-day work-week with a family to take care of?
Few if any, but I’m not here to give you a false picture about trading. I’m here to help you become a successful and profitable trader.
14+ Hours Behind The Charts for 7 Years Straight
Outside of the members in my trading community, most don’t know I spent 14+ hours behind the charts for the first 7 years of trading, or worked 6-7 day work weeks at the broker when I was only paid for 5, or how I skipped out on many parties or weekend events on warm sunny days practicing on forex tester 2, and refining my price action skills. There was no ‘event’ behind my current success, just a relentless focus on process.
Breaking the Bank of England (An Event)
I’m guessing you’ve heard of George Soros’s big trade where he broke the Bank of England. But how many of you know the story behind it, about how he and Stanley Drunkenmiller did painstaking research for months on end, constantly getting rejected by investors to help finance his trade idea, or all the other work put into it?

Simply put, popular culture (especially in trading) has been trained to think ‘events’ just happen, and that ‘process’ is less important. You have to reverse this equation, and make process first.
Process Creates Events
By putting process first, you create the grounds for events to happen. Creating a garden doesn’t simply happen by buying a bunch of plants. You need to buy good soil, build a plant box for them, dig holes and plant them, give them nutrients, pull out weeds, and make sure they get the proper amount of sun regularly. Trading is absolutely no different.
First you had to study the basics of the market and the terminology behind it. Then you had get a free demo account and learn how to use the trading platform. After this you had to learn how to read charts and understand price action in real time. Then you had to find a trading system which made sense for you, then build a trading plan, then practice reading the patterns in the market, then train to accelerate your learning curve, learn optimal times to trade, build consistency in your trading execution, build confidence in your trading mindset, and then perhaps shift to live trading.
All of the above doesn’t happen without a focus on process in trading. Only seeing the event doesn’t help you get through the tough moments, help you keep the right perspective when draw-downs occur, or pick you up after a big loss.
Process keeps your head down until you have covered the distance. It helps you to continually move forward when you want to quit. So reverse this equation, re-direct your focus on the process, on what’s in front of you right now.
In time, you’ll find that big paycheck. It is there, and many of my students are now getting that big paycheck.
Like the one student of mine who just got $5 million in seed capital for his new trading fund, or Tony who started his own private fund after doing 110% return on capital over a year, or another Tony who made 100% return in just a few months risking only 1% per trade, which we talked about in our private members webinar, showing his real myfxbook account (image below).

I have many students trading forex successfully, but they all got there via process. There is no reason you cannot be next.
Always Preceded By This
Events do happen, but they are always preceded by process. So take the time to see where you are (and are not) focusing on process. Then build a plan of action re-directing your efforts to each of these skills, create timelines to complete them, and measure your progress until you get there.
Remember, the very underlying reason behind ‘the holy grail‘ is a pill, a one shot silver bullet, a solve-all-your-problems thing which takes you from losing money to super trader. Does such a pill or thing exist in Football, Basketball, playing piano or Martial Arts? No. So why would you think this exists for trading forex?
Why would you think all you need is a system to be printing money out of your laptop and trading account daily? Does having the best bow make you a professional archer? No, and neither does one system help you make money week in-week out trading. Process, and focusing on the little details does.
In Closing
The underlying cultural sub-text of the movie Lucy, is that events sell, but process doesn’t. Yet it is a focus on the process which gets you the big paycheck. Most of the world’s richest today got to where they were via process, not events. Many of them were homeless, or surviving on next to nothing at one point in their lives. Now they can buy a small island of Fiji.
You have a method and road map, now it’s time to dig into the trenches and do the work. The results are worth it, and so is what’s waiting for you.

Featured Article, Forex Strategies, Price Action Trading

The Aggregation of Marginal Gains in Forex Trading

The World Cup ended a few days ago with Germany hoisting the trophy. Some are speculating this Germany may be the best national team ever.
aggregation of marginal gains german wins world cup 2ndskiesforex
Such a statement will be argued across bar tables and countries for years to come. Regardless, below are a few amazing facts about Die Mannschaft winning the World Cup;
1) No European team in 6 prior attempts had won the WC in Latin America
2) Their goal differential (difference between goals scored vs. goals allowed) was tied for the best ever at +14, scoring 18 goals, allowing only 4 in 7 games.
3) They finished the WC with the highest ELO rating for a WC champion ever (source: Nate Silver)
There is more, but they won without having any major superstars like Messi, Ronaldo, or Neymar.
How did they do it?
The answer is a method known as The Aggregation of Marginal Gains. This is a strategy for improving performance in any sport, skill or performance based endeavor (i.e. trading). This method is the offspring of Dave Brailsford, the General Manager for Team Sky (Great Britain’s professional cycling team), who has helped British cycling become dominant since 2010.
The idea is simple – find and improve as many areas of your discipline as possible by 1%. If you add up those small gains, it will lead to a dramatic improvement in performance.
How did the Germans utilize this method to win the 2014 World Cup? They employed 40 sports scientists to look at every aspect of the game. Their mission was clear – find the smallest advantages wherever they existed. Putting this into context, while they had 40 sport scientists, Brasil had 2. Below are just some of the 1% marginal gains they produced.
1) Climate Trends – they analyzed various tropical climate trends in relationship to player performance and reduce the risk of injuries.
2) Alpine Training – before the WC, they had a 10 day preparation camp in an isolated village in the Italian Alps, 1,000 meters above sea level. Training at this altitude helps to increase the production of oxygen-carrying red blood cells – thus increasing stamina.
3) Base in Porto Seguro – 1 year before the WC started, they build a 60 room base helping them adjust to the tropical conditions more easily. The German climate is far from anything resembling ‘tropical’. Most teams booked hotels in the south of Brasil where it was much cooler, thus making it harder to adapt.
There is more, but you get the key point – they prepared in every way possible giving them the edge available.
If I’m correct, many teams and nations will be studying their methods to improve their respective programs.
An Edge in Trading
In trading, most tend to think of their ‘edge‘ housed only in their strategy. That would be a rookie mistake.
Your trading mindset is an edge, your risk management is an edge, your trade management is an edge, your training method is an edge, your preparation is an edge, your trading plan is an edge, your spreads are an edge, etc. There are certainly more, but create a 1% increase in any or all of these, and the aggregation adds up to a huge shift in performance. That difference could be the gap or cleft between you losing money like you are now, and making money consistently.
The Slightest of Edges
In trading, the difference between losing and being flat is often marginal. Sometimes just a few small shifts in your trading can bridge the gap. The same goes for moving from break-even to profitability. Just increasing your accuracy alone by a few % can mean the difference between having no edge, and making money consistently.
Just even using the fixed % model vs. the fixed dollar amount will improve performance as we’ve demonstrated before. Below is a great chart just showing one of the ways the fixed % model is superior in performance.

Another great example is housed in your risk management. Using the risk of ruin formula, imagine you are a trader who can consistently get a 1:1 reward to risk ratio with your price action strategy. If you are 50% accurate with this R:R ratio, you are losing money. Increase your accuracy to 55%, and now your system makes money (assuming you have a manageable spread).
NOTE: I have a FREE Risk of Ruin Calculator which you can use by clicking on the link.
Edge In the Spread
Coming back to the spread, if your current markup on the GBPUSD pair is 1.5 pips, and you can reduce that to just 1.4 pips, a .1 pip decrease in your spread may not look like much, but take a long view and see what happens.
I have been trading for 14+ years now. Let’s use a low number assuming I make 20 trades per month trading 11 months per year.
14 years x 11 months = 154 months of trading
At 20 trades per month, I would have executed 3080 trades
A .1 pip increase = a +308 pip gain
At 10 standard lots per trade, we are talking $100 per pip
At $100 per pip, we are talking a difference of $30,800 profit, all from a .1 pip improvement in my spread!
Can you see the power of how one small gain leads to a big increase in performance?
Now imagine making 5, 10 or 100 of such gains. By using the aggregation of marginal gains method, you can create small gains which lead to huge improvements in performance. Such gains can be the difference from losing money, to breaking even. or breaking even to making money month after month.
Below is a fantastic graphic how a 1% increase in performance over time will affect your outcome (source: Jeff Olsen).

Edges To Be Found in Trading
In trading, every edge counts, which is why you have to take time to really dig into your trading system and method. Such analysis can turn a barely profitable trader into a highly successful one. My top students have all dug deep into every aspect of their trading, and this is why many of them would outperform 95% of all traders on the planet.
Below is a list of some possible edges you can find in your trading:
1) Improving your entries – Are you using optimal entries, or sub-optimal?
2) Decreasing Stop Size – Take a trade setup with an 80 pip stop & 120 pip target (1.5 R:R). Now reduce the stop by 10 pips. Your R:R increases from +1.5R to +1.85R (23% increase), all from tightening your stop by 10 pips.
3) Trade Management – is a trailing stop kicking your out too early, or helping you lock in the maximum amount of gains?
4) Time Stops – are you holding your trade for days, maybe weeks on end for a simple 1R gain? Or could your capital, time and mind be used for trades with higher R and a quicker return?
5) The instrument you are trading – Perhaps you can make a little money with one pair, but testing the system on another pair shows a big increase in performance.
6) Reducing your spread – perhaps you can get equal performance in terms of accuracy and R:R ratios in a lower spread instrument.
7) Time of Day – Are you trading intra-day? Perhaps trading during more ideal times for your system could increase profitability.
8) Risk of Ruin – do you even know your risk of ruin, or the mathematical probability you will make (or lose) money? Knowing your RoR can mean the difference between losing and making money every month.
9) Your Trading Mindset – maybe your strategy makes money consistently, but you use it improperly, or don’t pull the trigger when you get a prime setup. Your trading mindset could either keep you focused on process, or constantly worrying about that big loss you just took. Ask yourself what edge do you have in your mindset, and how do you work to improve this.
10) Trading Strategy – does your trading strategy have an edge? Below is a strategy from our Price Action Course on just one pair and one time frame, including the performance data gaining +108% over 97 trades risking only 2% per trade.

In Closing
The aggregation of marginal gains is a powerful method that can be applied to trading, sport or any skill based endeavor. The training in the alps did not win Germany the World Cup. Nor did the base they built in Porto Seguro. Nor did the analysis on climate trends and player performance. But adding them all together, alongside with their futbol system, training, teamwork, and a focus on the details, it all added up to a winning advantage, setting records and making history.
Now that you’ve seen the power of making small gains in your trading and how it can affect performance, ask yourself what can you look at to give yourself a better edge? Where can you make small gains, and what details are you missing?
Along those lines, what other edges do you think could be useful to improve trader performance?
Please make sure to share your ideas, comments and suggestions, and what you have used to increase your performance.

Forex Strategies, Price Action Trading

Trading Forex in the Summer – A How To Guide

By now we have fully entered the summer trading months which are traditionally slower to begin with. When you combine the summer + the lack of ‘flow information‘ shared by bank traders under investigation, you have an environment of lesser volatility, smaller moves, and more false break setups.

With that being said, how can we maximize our time, while still remaining active and consistently profiting? Below is a mini how-to-guide for summer forex currency trading.

In this article, I will share 2 simple tips to help you trade pairs with stable volatility, larger moves, and also remain active during the slower summer months.

Summer Forex Currency Trading Tip #1: Switching Pairs & Instruments
Below is the weekly chart for the EURUSD, the most heavily traded pair on the planet. Do you see that red line under the price action part of the chart? That is the weekly ATR which measures the average trading range (in pips) per week.

The average range of the pair on a week to week basis has been declining for years with it currently being at an all time low. It is the same for most majors, including the USDJPY and GBPUSD. If you are expecting a few hundred pip move on any of the above pairs, you could be sitting on your hand for days which is not the best use of your time. So what can you do about this?

My suggestion is to switch pairs that are more volatile. For example, instead of trading the GBPUSD or the AUDUSD, why not switch to the GBPAUD? It is far more volatile due to the ‘weighting‘ of the pair. If you can learn to spot good moves on the AUDUSD, then it will usually correspond to a directionally opposite move in the GBPAUD.

Take a look at the two charts below to get a better idea of this concept. In the first chart, we are looking at the AUDUSD 1hr intra-day chart. You’ll see the pair selling off heavy in the middle of the chart after a breakout pullback setup around 9330.

The trade happened in the Tokyo session, and took about 1.5 days to drop 135 pips. Now take a look at the chart below of the GBPAUD at that same time and notice the pattern.

As you can see. the GBPAUD also make a breakout pullback setup off the role reversal level, yet it runs for +300 pips (a larger move by 2.2x). The size of each stop would have been relatively similar, which would have led to more profit on the second trade, and money in your account. Even an every day 40-50 pip directional move in the AUDUSD can lead to a +120 pip move in the GBPAUD.

Thus start looking at pairs which are naturally more volatile, and will be less affected by the lack of ‘flow information‘ shared by bank traders who are currently less active.

An additional suggestion would be to add other instruments, such as global indices and commodities. The Asian indices such as the Nikkei 225 and Hang Seng tend to have consistent volatility.

Along those lines, recently spent time with an HFT trader at IMC (Chicago). He mentioned how IMC is quite active in trading the Asian indices because of the higher volatility. Gold and WTI Crude Oil will also offer some greater volatility. Same with the German Dax and FTSE 100, so consider expanding your instruments giving you multiple options to trade.

Summer Forex Currency Trading Tip #2: Spend More Time Training
Since you are naturally less active during the summer months, why not use that time to build your trading skill set? Forget the idea of walking away when there is no trades to play golf, watch a movie, or read a book.

You want to be a professional trader who has the freedom of working from home, not having a boss who tells you what to do, what to wear and how much you get paid.

Do you get better at golf by sitting on the beach? Do you get better at playing guitar by reading novels? Do you get better at martial arts by playing video games? No, so why in the world do you think this applies to trading? It doesn’t, hence take advantage of the time available.

For those not familiar with it, Forex Tester 2 is a fantastic live simulation platform. You can take virtually any pair, and load up 13+ years of data on any time frame, then live forward trade it as if the price action was forming in real time.

I did a great video on forex training with Forex Tester 2 which shares several ideas how to accelerate your learning curve. This is especially relevant for those trading daily and 4hr strategies.

Ask yourself how long would it take you to log 500 trades if you only trade the higher time frames? Years perhaps? In less than a week, you can log the same amount of trades in FT2.

Think of it being the equivalent training of the golfer at the driving range, hitting ball after ball. Professional golfers on average will hit 500 balls a day. Do you think that helps their golf game and perfect their swing? Ponder that a moment for those of you only trading 3-5x a month, and how long it will take you to build your skill set.

I’ve had several students log thousands of trades after a few months using FT2. Go figure their trading is improving the most, and showing the greatest profits over the last few months.

NOTE: In the link I shared above to the video on FT2, there is a link where you can get a $50 discount on it.

Along the lines of using FT2 to improve your trading performance, I recently did a private member webinar, where we showed a myfxbook account from one of our students. He is trading over 70% accuracy, and up about +96% on his live trading account, with his average wins well out-sizing their average losses. He profit factor is currently +3.08 and is up +1780 pips for the last 4 months.

Below is a screenshot from their myfxbook page we discussed in the webinar.

They trained over and over again in FT2 and are a member of my price action course.

While others are being lazy traders, they are building their skill set. If anyone is going to really trade for a living, it will be the ones who put in the hours and properly train.

In Summary
These are just a few tips you can use to help stay consistently profitable trading forex in the summer, while using the time effectively to build your trading skill set.

There are many more tips which I share with my course members, along with more ways to utilize Forex Tester 2, building a successful trading mindset, how to train properly, along with adjusting to the ever evolving markets in real time.

Forex Strategies, Trading Mindset & Risk Management

Korean Archery And The Training Process

In the summer of 1988, a new trend was about to begin. During the Olympic games of this year, (ironically being hosted in Seoul, Korea), team archery was being introduced. Since this inclusion of team archery into the Olympics, the Korean women’s team have won all 6 titles, with the men’s team winning 4 out of 6.
Before the 2012 Olympics in London, of the the top UK shooters, Larry Godfrey said the following:
“Myself and Simon Terry are the only British archers to have ever shot over 1350 points in a round. But in Korea, there are at least 50 archers who could score over 1350 at the moment.”

Needless to say, Korean’s are some of the most dominant archers in the world, and one of their secrets to success lies in their training. And never mind the fact the archer featured above is virtually blind!
Moving on, there are many aspects of their training which deserve study, but we will focus on one component here.
In many Korean archery schools, you may actually practice the basic technique of shooting a bow, for 3 months before you actually fire a live round.
Let me repeat that – THREE MONTHS!
What this hyper-focus on technique does, is insure you have properly wired into your brain the foundation for correctly shooting the bow and arrow. It also forces you to focus more on process and technique, thus keeping the right perspective.
This is one of the most common elements successful traders have, as well as high performers in all fields (the focus on process/technique – not results).
Imagine what your trading skill set would be like now, if you spent the first three to six months focusing entirely on technique and process. How much better would your trading be for it?
Have you focused 90% of your energies on results, or technique? On process or profits? Would it be worth taking a little longer in your training process to build a rock solid foundation?
If you are focused on getting rich quick, then you’ll skip this process, and ironically, be least likely to achieve your goal. But if you want to learn how to trade professionally, you’ll take the time, train properly, and put in the effort.

Forex Strategies, Trading Mindset & Risk Management

How to Keep The Right Perspective When Trading

Without a doubt, the learning process to successful trading is not a short one. It is one that takes time, akin to virtually all other skill based endeavors. Be it sports, playing a musical instruments, or martial arts.

Although we want to become black belt traders, or virtuoso readers of price action in a jiffy, in 99% of the cases, your time line from here to success will likely not be as quick as you’d prefer.
Because of the extended time on our journey from A to B, it is common as bikes in Amsterdam for us to lose perspective, and go off the rails.
Putting Things In Perspective
Take a look at the graph below. What you are seeing is a snapshot of an equity curve from one of the strategies in my price action course.

Upon first glance, it looks incredibly unimpressive…that it loses money. And you would be correct in this assumption…for this period of time.
Now take a look at the second image below, which is the entire equity curve over several years.

What you are now seeing is something totally different.
When you look at its entirety, you are seeing is a price action strategy that made 108% return! This is across only one ONE PAIR, and only ONE TIME FRAME.
Some highlights of the performance are below:
+108.9% profit
Profit Factor of 2.3
Expected Payoff of 112.28
Maximal Drawdown of 14.27%
% Profitable Trades 68.04%
Greatest Win 36% Larger Than Greatest Loss
Max Consecutive Profit Almost 200% Greater than Max Consecutive Loss

Without a doubt, this is a strategy that makes money, consistently, preserves capital, with a balanced risk to reward ratio.

Below is the table from the performance test, showing you the same performance.

Most Un-Successful Traders Make This Mistake
For those who are not trading profitably, most likely when you are in a draw down, you don’t give the strategy enough time to work itself out. You see the equity curve falling, and think something has to be changed.

In reality, there could be nothing wrong with the strategy. Maybe this particular strategy won’t perform well in that market, yet this price action strategy makes money over time.

Now imagine if you changed strategies at the end of the first graph. You would have missed out on over 85% of the entire profit that strategy made. You would have lost several years of consistently profitable trading. That alone would have put you in top 5% of all traders. Food 4 thought.

Building A Healthy Perspective
Generally developing traders are more hyper-sensitive to every single trade, each win and loss. But look at this from a different perspective:

Imagine being a new archer having this same approach – that you gauge your confidence based on each shot.

That map would be all over the place, and drive a person batty as to how they are doing, because naturally one will be an inconsistent shooter in the beginning.

Instead, look to a great basketball player, and tell me if their confidence wanes from missing one free throw. They don’t make this mistake. They keep the right perspective and mindset by focusing on the process, not result. They keep the right perspective.

Constantly Changing
Changing strategies every month or so will take you in circles (like the dog that chases its tail).

Quarterbacks don’t change throwing motions every month, nor do musicians change instruments every time things go bad. Why would you think the path to successful trading would be any different?
So avoid changing your trading plan and strategy every month. Stick to the one you got for at least 90 days, once you’ve refined it. Commit to learning/trading it inside and out.
By doing this, you are (at the very least) building a skill set towards successful trading. Even if the strategy does not work out, you are developing one of the most important qualities in trading – discipline.
And with discipline comes confidence, which is something most un-successful traders lack. Remember, the draw down of the first chart was the prelude to a 108% return, (doubling your account in a few years).
Ask yourself if you have done this (changed strategies after a small losing period). Ask yourself if you’ve focused on result more than process. Then see how you can change this to keep the right perspective when trading.

Forex Strategies, Price Action Trading

Forex Trading Strategies – Trading the False Break Part 2

Key Talking Points:

False Breaks Offer Great With Trend Trade Setups
Trading the False Break with Pin Bars
Trading the False Break with Engulfing Bars

In my prior article on trading the false break strategy part 1, I shared the basic definition of a false break, covered what is the price action and order flow behind false breaks, and how we can trade them.

In this false break forex trade strategy article, I will discuss how you can trade them using pin bars and engulfing bars, along with entry, SL and TP techniques.

To Recap What A False Break Is
I generally define a false break as one of the two following scenarios:

A break above/below a prior candle that fails to close above/below that candle
A break above/below a key level, quickly reversing that level, and sparking a counter-trend move

Below is another example of a false break:

Looking at the chart above, we can see a clear downtrend, starting with A in the top left of the chart. The sell-off finds support at B, which eventually becomes a role reversal level at C.

Further along at E, we can see the textbook false break setup, just like we defined in the prior article. The pair breaks up above the key level CT (counter-trend), stalls, then sells off again breaking back below, and offering a great false break setup.

This sell off heads all the way down to F for a nicely profitable trade, and is a great example of a false break setup.

Now we will discuss how to trade the false break setup with a pin bar.

The Pin Bar + False Break Setup
Another type of false break setup is using the pin bar reversal pattern. In many ways, the pin bar by itself, can be a type of ‘false break’.

This is true if the body of the pin bar itself is housed within the prior bar. The breaking above/below the prior bar, and then closing back within that bar, is in and of itself, a type of false break.

What we are going to discuss is how we can use this to trade the false break strategy in combination with the pin bar.

A Pin Bar + False Break Example

In this chart above, we can see at A (top left), there is a bullish move to the dynamic resistance (20 EMA). The sell off from the dynamic resistance to B only takes 3 bars, which means it was over 2.5x faster then the buying pressure at A.

From an order flow perspective, the sellers are stronger, since it took them less time to cover the same distance.

After breaking below the support level at B, the pair bounces at D’ towards C, (very same support level at A), hence a role reversal level.

Now notice at C how the pair briefly broke above A. If the buyers were really in control, they would have kept pushing prices. But the pin bar formed a false break above the highs of the blue bar (or prior bar).

This breaking above then back below, suggested a likely false break and more selling. The pair sold off from C to D, re-affirming the pin bar + false break setup.

NOTE: Observe how the support level at D and D’ formed another role reversal setup just after? This is a great example of trading with the trend.

Entry, Stop & Limit
If the pin bar represents a real false break, then the with trend direction should continue. Assuming I have read the price action context correctly, I generally like to enter using one of two methods:

On a few pip break back below/above the key level
On a pullback setup to the key level

The first entry method (more aggressive), can protect you from missing the move, as sometimes the false break never offers a second chance to enter.

For those wanting more ‘confirmation’, then I’d recommend the second entry method.

Now assuming the pin bar is the high/low in the move, I’ll put my stop just above/below the pin bar. For my take profit, if there is a prior level which caused the bounce/sell-off leading into the pin bar, then I’ll target that. One can use that as the only target, or as a first TP holding for a deeper move.

Trading the Engulfing Bar + False Break Setup
In reality, the engulfing bar + false break setup is not much different from the pin bar false break. I am still wanting to trade them with trend as much as possible, looking for a false break followed by an engulfing bar.

An Engulfing Bar + False Break Example

Turning to the chart above, we can see the strong selling stops at A. This forms a price action squeeze, which leads to a breakout and further selling.

The pair pulls back to B (the support level at A), and forms a false break. This is immediately followed by an engulfing bar.

Now ask yourself, if the bulls were truly in control, why did the price action immediately reverse after taking out A? This should have been a clue to watch for a false break.

You’ll notice right after the engulfing bar was an inverted pin bar. This is a failed attempt to rally, suggesting the buyers tried to push higher, but failed. What results is heavy selling from the open of the next bar down to C, and eventually E, resulting in a nice profit.

NOTE: Take a look at the move from C – D. This is a corrective pullback following an impulsive move. The corrective pullback went into the dynamic resistance (2o EMA), and then sold off heavily after.

This would have represented a great pullback setup, and is a good example of how impulsive and corrective moves manifest.

Entry, SL & TP
The entry, stop loss and take profit techniques are the same as the pin bar + false break. The only variation, would be if the engulfing bar closes back below/above the key level.

If it does, I’ll look to take a pullback into the engulfing bar, which is far more optimal entry as a whole. For more information on why the pullback is a more optimal entry for the engulfing bar, click here.

To Recap
In today’s false break forex trade strategy article, I talked about how false breaks offer great with trend setups. I then went into two more examples of the false break strategy, showing how you can trade them with pin bars and engulfing bars.

I shared entry, SL and TP techniques, along with explaining the price action and order flow behind these great setups.

These are just a few of the false break techniques available. If you want to learn more about trading the false break, along with other forex trading strategies, you can read more about my Price Action Course & Daily Members Commentary here.