Forex Strategies – Page 9 – 2nd Skies Trading

An Unconventional Approach to Your Trading Mindset

Today I’m going to share an unconventional approach to creating a successful forex trading mindset I employ every day before I hit the buy/sell button. A small confession though – it actually took me a while to realize it was a major ingredient in my success.

The funny thing is, I never read it in any trading book, video or blog. Perhaps it should be – perhaps it needs to be talked about more often, because doing this one thing has changed my mindset in trading and life.

So what is this one unconventional approach I’ve used that’s help to build a successful trading mindset?

How To Trade Price Action Trends In Forex – What You’ve Been Missing

Today’s forex strategy article is not going to be your typical ‘how to do trend trading‘ article, where you see the perfect pullback setups, hear about ‘trading from value‘ , or ‘1, 2, 3 reversal patterns‘, or about ‘naturally occurring swing points‘. These “How to Trade Trends” articles paint a one sided picture on how trends work, but really fails to give you the underlying models and mechanics to trade trends profitably.

I’m guessing many of you have tried utilizing trend trading strategies, but either;

a) got stopped out trading the breakout, or
b) waited for a pullback that never came as the pair falls 100’s of pips flying to your target & no profits
c) maybe you got into the trend, only to find it to all of a sudden reverse on you

Has this happened to you before?

I’m guessing it has, so I’m going to share with you what you’ve been missing regarding trend trading, how to understand it, and when to know what strategies to trade and what to avoid.

The Most Critical Point to Know When Trading Trends: Learn to Identify the Type of Trend You Are In

Before you can decide what forex trend trading strategy to use, you have to understand the type of trend you are in. If you don’t understand the trend and price action underlying it, you’ll be looking to ‘trade from value‘ in a pullback when a breakout strategy is what you need to get in and profit.

On the flip side of this, you may be looking to trade a breakout, only to find yourself getting stopped out when you should have been looking for a pullback setup.

How do you avoid this?

Identify the price action and order flow underlying the trend correctly. A simple way to do this is to look at the number of counter trend players in the market, or “level of imbalance“. For example, a trend that is highly “imbalanced“, is either heavily bullish or bearish, and this will reflect in the price action. I like to look at it as either strong participation from the counter-trend players, or very little at all. Two charts below will give you a good idea what the two look like.

A Highly Imbalanced Trend With Few Counter-Trend Players Gold 4hr Chart

Looking at the chart above, we can see from the consolidation breakdout at the top left, the selling was quite impulsive and highly imbalanced in favor of the bears. 10 out of 11 candles closed bearish, or 40 out of 44hrs. This kind of price action trend shows very little presence of the bulls – so little they can only muster a single 4hr bull candle.

Looking for pullbacks in this type of trend trading will leave you missing the majority of the trend, while watching thousands of pips go by and no profits in your account.

Thus, in these types of trends, you want to be trading breakout strategies which will be highly effective since the momentum and order flow is behind you. Strong trends like these tend to support your breakout trade, and push the price action heavily in your favor.

Now take a look at a different example below, using the AUDUSD on the 4hr chart. You will notice in this chart, there is a much greater presence of counter-trend players, thus a less “imbalanced” trend. Although the bulls have control of this trend, there are a fair amount of sellers present as they are able to a) take control of an almost even mix of candles and b) push back much further on the price action.

AUDUSD 4hr Chart with Stronger Counter-Trend Players

During trends like these, breakout strategies will likely fail, and you’ll find yourself getting stopped out, only to find the trend resume shortly after.

Has this happened to any of you before?

It has to me, and I’m guessing you as well.

Along those lines, this would be an ideal order flow and price action trend structure to take a with trend pullback. This is same as trading from a ‘swing point’ or ‘value area’. Here is where this strategy flourishes, usually offering a clear pullback to either

a) role reversal level,
b) dynamic support/resistance 20ema, or
c) a price action signal.

Does this make sense why your trend trades have not worked out before?

Can you see why you missed out on so many trends that kept on running like Forest without you?

Now you know why.

In Summary

Understanding ‘value areas’, ‘1, 2, 3 patterns’, or ‘naturally occurring swing points’ is not going to give you the tools needed to understand how to trade trends in forex, or any market for that matter.

All of those are are “reactive” models – and essentially fail to give you the most important tool – that of understanding why type of trend you are in, and what is the order flow behind it. When you can understand what type of trend you are in, then you can correctly apply the strategy, price action setup, or proper tool trade that trend. Otherwise, you may be using a hammer when you need a saw, and thus either stopped out, or missing most of the trend.

It should be noted, that although trends are ‘relatively’ the same between markets, they are not the same between bullish and bearish moves. Bearish trends as a whole (across all markets) are generally much more impulsive and imbalanced then bullish trends.

Why?

This is mostly due to the emotions behind bull and bear trends

Generally bullish markets are much more euphoric and take more time to form or bottom, while bearish trends are typically characterized by fear, and are much more rapid and forceful. Take a look at any major sell-off on the daily/weekly chart on any pair or instrument, and you will see this clearly in the price action.

There is more to this, such as the order flow behind bear/bull trends, but the volatility, impulsiveness and level of imbalance is usually far greater in bear trends than in bull trends. A great example of this is in the weekly chart below on Gold.

While your at it, look at any weekly chart on the Dow, and major Index, or currency pair, and you will see bull and bear trends are completely different from an order flow perspective.

Another thing to point out is trading pullback setups, or from ‘value areas‘ (also trading from key levels) really only offers you one tool to trade trends, which by itself is very limited. Thus, beware of people painting a rosy picture when it comes to trends, as often times the clear pullbacks to role reversals aren’t there. Yet while you are waiting for one, you are missing out on a highly profitable trend right in front of you.

Thus, learn how to trade and read the order flow behind the price action, so you can understand what type of trend you are in, and what kind of participation is happening from both sides. When you have this information, then decide if you need to use missiles or guns. When you do, you’ll find yourself missing less of the moves, having more winners, and profiting heavily from these great trending plays.

Forex Strategies, Trading Mindset & Risk Management

Forex Price Action Trades +1640 Pips

Hello Traders,

Often times I share my own personal trades that I use from my price action course strategies, but today I wanted to share some from a student who has banked over 1640+ pips in just the last two days, using our strategies. This student (we’ll call him Stan) had joined our course only a few weeks ago, and has already paid for it several times over. How Stan came to me is quite interesting and worth noting.

He took another course from someone else on price action just this last January and had the following to say;
“I started a course from him in January, and I do not want to waste any more time on his course. I like your forex videos, but moreso wanted to learn from your unique perspective on trading and life, so I’m going to join your course.”
He joined on March 10th of this year.
For the next two weeks, he did nothing but study and ask questions, really digging himself into the material and constantly getting feedback. He without a doubt has the passion and drive, and is using these to fuel his growth without a doubt.
After a few weeks of study, questions, practice and feedback, he emailed me on April 4th with the following;
“I have been watching the videos on the price action course, and today I nailed 3/3 trades which I’m still in at the moment. I just want to thank you for being such a good teacher and gifted instructor. Thank you for passing on the knowledge.”
Making a good chunk of money to have the time and freedom to do what you want is one thing – but having an impact on another person’s life is a completely different thing. This is what I strive for, as making money is not difficult, but being able to impact a person’s life like this student – is as rewarding as it gets.
Stan made these trades the day before NFP, and was up over +1060 pips heading into the big announcement.
After a few back and forth discussions on how he should handle the positions, Stan stayed in them through NFP, and has profited even more – currently up +1640 pips on just those three positions.
Here are the trades below from the screenshots he sent me on Thursday:
CHFJPY 1hr Chart

USDJPY 1hr Chart

GBPJPY 1hr Chart

As you can see, Stan got pretty darn good entries on the positions considering the JPY volatility – but has also held his nerve as they developed, which has allowed him to make several multiples of R (reward) per trade, with some over 10:1 reward to risk plays.
As of Friday just after the NFP report came out, Stan sent me another screenshot of him holding the positions, and even adding onto it using one of our price action setups.

As you can see buy the date and time on his broker platform, Stan was still in the position heading into NFP and added more. If you include the new position he added, he’s up another 221 pips, so a total of +1861 pips in the last two days, and each trade is no less than a 7:1 reward to risk play, with one being over 10:1.
Keep in mind, Stan only joined the course a few weeks ago, and has learned tools and methods to take advantage of these huge moves in the market. The irony of it is, he was not the top performing trader in the course this week, who banked over +6300 pips this week from trading Gold and Silver!
Perhaps you have not been profiting lately in the markets, and having trouble catching these great price action setups and large moves. But seeing the above, I hope you realize how you can profit from trading the market, with the right education, study and practice.
Making money in the markets is a real thing, and its not just something that I do, but my students do as well, and continue to do. My belief has always been – if they can do it, then there is no reason why you cannot as well.
My job is to give you the strategies, training and mindset to be successful, but you must meet me on the path. I can only do so much, and my job is really to do 50% of the work for you (although it ends up being like 75%). But for those that meet me along the way, and do their part, the rewards are there, just like they were for Stan in his excellent trading above.
Hopefully, you will be next.
Kind Regards,
Chris Capre

Forex Strategies, Trading Mindset & Risk Management

Forex Trading, Ted Williams, & The Little Details Pt. 2

Last week I talked about the importance of looking at the details and refining one’s trading game in Forex Trading, Ted Williams, & The Little Details Pt. 1 article. All highly skilled professionals realize paying attention to the details pays dividends, and often leads to the difference between being good and great. Today is the continuation of that article, where I will be sharing how making a small trading adjustment in my trading could lead to a six-figure change in profits per year.
But before I get into one small adjustment I need to make in my personal trading, I want to discuss a few amazing examples of how Ted Williams really paid attention to the details, and how these small things separated him from the rest.

Attention to Details
Ted was known to be obsessive about his hitting skills and had made several adjustments which allowed him to understand hitting better than most of his time. Here are some of the details below;
-He traditionally used a much lighter bat than most of the heavy hitters (sluggers) back in the day. To test how sensitive he was to the lightness of the bats, he was once presented with 4 bats, 3 weighing 34 ounces, and one weighing 33.5 ounces. Most people on the planet now could not tell the difference between 34 and 33.5 ounces, a .5 oz difference, or to put this in context, a 1.4% difference in the weight of the bat (.5oz / 34 = .014, or 1.4%).
Yet Ted was able to consistently tell the difference and identify the lighter bat each time.
-Ted used to warn his teammates to avoid leaving their bats on the ground. Since the bats were made of wood, this would cause them to absorb the moisture in the dirt or grass, and thus become heavier, which would slow their swing down. How would he have known this unless he was sensitive to all the details?
-After he retired, in a Sports Illustrated article, he was able to demonstrate how swinging at a pitch, just one baseball width outside the strike zone heavily affected his batting average, and he divided the strike zone into 77 baseballs, with each baseball being = to a particular batting average for each pitch in that location.
When reading the above examples of how Ted paid attention to the details, you can see why he was such a great hitter and baseball player. All of those small little details, while they may seem insignificant on their own, led to a huge difference between him and everyone else.

Paying Attention to Details in Trading
This is exactly the same for trading. Did you know using the risk of ruin tables, if you were 35% accurate, risking 2% per trade, and always taking profits at 2x your risk, you would have an 8.37% chance of blowing up your account?
But reduce your risk to 1% per trade, and the chance of you blowing up your account is only .7%, which is improving your chances of being profitable 119x?
That is quite a huge difference, all with one small detail.
SIDE NOTE: This is also the reason why we always measure risk in % terms, not in dollars terms. Professionals don’t measure risk in terms of dollars, they do it in terms of %’s, because this is where they can use the risk of ruin and math to guide them about trading performance as dollars are relative to you.

The One Details Which = A Six Figure Difference
I was reviewing my trading journal one day in March this year, and noticed a behavior continually repeating itself. I had been making sure to mark in my journal since 2012, every time I entered at market, but also noting if I was entering a bit early in relationship to the system entry. I marked it with the code EM (‘entered at market’) / HOP (‘hit original price’).
Several weeks ago, I noticed this happening several times in the same week, so I started to go back through my entire trading journal over the last 12 mos to see how many times this happened. The answer….
78% of all trades entered at market, would have executed at the original price the system gave the entry at. This occurred a total of 242x in the last 12 months.
3.6 Pips
I decided to compile a few more stats to really get into the details and see what kind of effect this was having on my trading.
The average entry was 3.6 pips less than my system entry price.
Now 3.6 pips may not seem like a lot, but it has a significant effect on your trading. To give an example, lets say you have the following trade setup with my system giving me the stop and take profit (limit) levels using the following data below;
Long EURUSD at 1.3003 (entered 3 pips early at market)
Target = 1.3103 (100 pips)
Stop = 1.2953 (50 pips)
Total reward to risk ratio is 2:1
But lets adjust this by just 3 pips, meaning I entered at 1.3000, still had the stop at the same level (1.2953) and target (1.3003) assuming they were my targets based on the original price action system numbers.
This translates into the stop being 47 pips, and the target being 103 pips, or a 6 pip difference. This also increases the reward to risk ratio from 2:1, to 2.2:1, or a 10% difference just in the R:R ratios.
This 3 pip earlier entry, was in reality a 6 pip difference, but for me, the number was 3.6 pips, so a total of 7.2 pips of difference in performance. Assuming a 50% win ratio, 7.2 pips x 242 EM/HOP (entered at market/hit original price) would result in a 1742.4 pips difference. Based on the average lot size, this would = ~200K USD. Even if we halve this performance, it would still be ~100K USD, which is a huge difference in performance, per year!

The Difference Between…
After getting over the initial shock of how much of a difference this small detail meant in my performance, I have come to a greater understanding of how important the small details are in trading and performance (in anything). Often times, these small details can be the difference between losing and winning, between breaking even and making money, between being just good or great.
Thus, make sure to apply a fine comb to your trading account performance and journal, to mine the little details which could be separating you from losing and winning, or making a little money to a lot. You cannot underestimate the power and difference a few small pips, or one small bad habit can have on your trading.
All highly skilled professionals pay attention to these small details, as they can truly create a world of difference in performance. Jimmy Hendrix realized this when adjusting his guitars. Ted Williams also realized this when it came to baseball and batting.
The question then remains, will you take the time to find the little details which could be holding you back? How much is it worth to you, to take a few hours away from the screen time, the beach, or the bars drinking, so you can increase your performance by a huge amount? The benefits could last you a lifetime, and it’s possible this could be one of the best reward-to-risk plays you ever embark on.

Forex Strategies, Trading Mindset & Risk Management

Forex Trading, Ted Williams, & the Little Details Pt. 1

With liquidity dying down heading into the Easter holiday coming this Sunday, instead of writing my evening price action market commentary article, I wanted to write a little two part series today and tomorrow about some of the overlooked aspects of trading – the little details.
Wasn’t Ted Williams a baseball player?
Yes he was – and a great one at that.
This lesson actually centers around a great story about Ted, although not during his trading career, but well after it had ended.

Several years ago, the Ted Williams museum was collecting several items from Ted’s great career to be stored in the museum for all to appreciate. For those that don’t know much about Ted, he is considered to be one of the greatest hitters of all time, and in 1941, he hit a .406 average – which makes him the last person in over 70 years to finish a season above .400.
Williams was known to pay attention to the details of everything he did when it came to baseball, especially hitting. His famous bat during the 1941 season was suspected to have been bought initially by a collector for over $20,000. When the museum had bought the bat, they had asked Ted to come to the museum and verify if it was his bat.
He saw the bat, closed his eyes, and put his hands firmly around the handle just as he held the bat to hit a baseball.
After a short pause, he said the following;
“Yep, this is one of my bats for sure.”
One of the members at the museum had asked him how he had known it was his bat.
He responded;
“Back in the years 1940 and 1941, I had cut a groove in the handle of my bats to rest my right index finger in. I can still feel the groove in this bat here.”
You will find amongst some of the greatest concert pianists, guitarists, athletes, and anyone highly skilled in their craft, they pay attention to the details and the smallest aspects of their game. Often times, these small details and steps will lead to a large result, often times separating success from failure, breaking even to profitability, and from just good to great.
Ted Williams realized that if he could rest his index finger more naturally into the bat, it would influence his swing. That is attention to detail.
Jimmy Hendrix would adjust and oversee every guitar he ever used. Anytime he got a new guitar, he would bend the ‘tremolo‘ (whammy bar) by hand for hours at a time.
Why?
By bending it and getting it closer to the body, he could tap the strings while raising and lowering the pitch, sometimes down three steps instead of one.
That is attention to detail, and just one in the dozens he did when adjusting his guitar.

All highly skilled professionals look towards the details as a way to refine their game. And this is something you have to do in your forex trading. You have have to constantly refine your trading to greater and greater levels of precision, detail and performance. Maybe you have to adjust your equity threshold, or maybe you have to adjust your engulfing bar entry, as the vanilla one is quite inefficient.
As Michael Jordan once said;
” Take small steps. Don’t let anything trip you up in reaching your goal. All of those small steps are like little pieces of a puzzle. Eventually they come together to form a picture of greatness. But doing things step by step – I cannot see any other way of accomplishing anything.”

So take some time to think of all the little details where you could refine your trading. We all have them, regardless of our level, profitability, or account size. I’m willing to bet that if you look at the numbers, and run the data on your performance, perhaps even adjusting your risk of ruin, if you just changed one little detail, you would be completely amazed at how it would affect your performance.
This can make the difference between being profitable and losing money, between barely breaking even and consistently profiting, or the difference between being good or great. Ask yourself where you are on that spectrum, and where you’d like to be. Then get to work.
Keep in mind, I’ve never met a single profitable trader who cut shortcuts, who tried the easy way out, who wanted something for free, or was willing to steal to get there. Food for thought…but without having the mindset of abundance, how can you expect to be a professional trader who works with bigger and bigger amounts of money?
Tomorrow before the weekend, I’ll write the second part of this article, where I share one piece of data I’ve recently discovered in my personal trading, that would be the difference between my current performance, and a six-figure car…per year…without compounding.
See you then…

Forex Strategies, Price Action Trading

Trading Support and Resistance Key Levels

Today’s article will focus on forex trading support and resistance key levels as this seems to challenge many developing traders. Learning how to trade support and resistance key levels is critical, because in essence, this is where;

a) you will be placing your stops and targets, and

b) this is where the institutional traders are getting in

In reality, forex support and resistance trading levels are like ‘doors’ or ‘walls’, either they will be open or closed – either they will break or they will hold shut. Your success in support and resistance trading will be in determining when they will hold, and when they will break.

Thus, it becomes essential to learn how to read key levels so you can have a well defended stop, a highly efficient entry, and also have proper timing. In this resistance and support trading strategy article, I will cover two powerful tips for finding these key support and resistance levels.

#1: Minimum of Two Touches
Before you can consider a level to be used as support or resistance, you will want a minimum of two touches.

Why?

Imagine you are in a strong downtrend, and the pair rejects off a particular price heavily – perhaps via a long tailed pin bar. You have to consider, with trend traders are just going to see this as a test. The bears know there are buyers off the price where the bottom of the pin bar formed, but they are not going to give up control of the trend just from a simple pin bar.

They are going to retest this level to see if the buyers there are strong enough. If they break it, then the trend and profits will continue. If not, then they will take profit, but it’s unlikely a reversal will start immediately. A good example of this is in the chart below.

GBPUSD Daily Chart

Looking at the chart above, we can see the pair is in a strong downtrend. In the middle of the chart at A, it forms a counter-trend pin bar. Now although the pin bar body is at the prior support area, the tail is way below, and its the bottom of the tail where the buyers entered in, not at the support area.

Thus, the bulls at the support area were likely stopped out when price dipped 100 pips below, & the rejection from the pin bar occurred at a place with no two touches. So this would not be a pin bar to buy as you can see failed whether or not you used a 50% retrace entry (which can be quite inefficient).

You will also see the same later on with the pin bar at B, which also had a low at no known support area or formed a second touch. This also would have been a loser.

Now notice the pin bar at C which is with trend. You will notice the pin bar formed a second touch off the level two candles back. This would have been a good price action setup to get in because the second rejection would have confirmed the level. And you will notice, it turned out to be a winner.

So the main takeaway from here is look for the two touches, because with a one touch, the with trend traders will re-attack that level. And it should be noted there is a far more efficient entry than the 50% retrace entry which I will discuss in next week’s article, but keep in mind, after long tailed pin bars, you don’t have to worry about missing the entry.

Why?

Because if it is going to reverse, the greater probability is that a re-balancing, or ‘re-distribution‘ of the order flow will begin. This mostly likely will creating a range, or a corrective pullback. This is also why when you have an impulsive price action move, followed by a corrective price action move, it is more often followed by another impulsive price action move.

This is also the reason why an impulsive price action move is rarely followed by a counter-trend impulsive price action move. From an order flow perspective, this is because if the sellers are heavily in control, the buyers will have to overwhelm the sellers, and this requires a lot more money and orders then the current bears in control. This is the reason why V-bottoms are more rare than common.

#2: Trading With Trend Increases the Probabilities
You might have noticed with the chart above, that trading with trend was more powerful than trading counter-trend. As a whole, counter-trend trades are a lesser probability trade, so they take more skill, experience, and precision. This is simply because you are trading against the majority of the order flow, so the odds are already stacked against you. For those still having trouble getting consistency, I’d recommend trading with trend as much as possible.

Now if you are in a range, then there is no dominant trend, so trading reversal type plays are suggested, particularly at the tops and bottoms of the range. But when a strong trend is in play like the one above, you will find greater profit potential and accuracy trading with trend instead of counter trend.

This also holds true for trading support and resistance levels.

Why?

In a strong trend, the larger players are just looking for key levels as areas they can get in with trend. This is traditionally known as a breakout pullback setup, and generally does not need two touches off the level to confirm its effectiveness.

Why?

Because likely, in a trend, there will be a support or resistance level that is already being challenged, which would confirm there are buyers or sellers at the level trying to defend it, while the other side is attacking it. Once it breaks, the with trend traders often look for a pullback towards this level to get back in with trend. A great example of this is in the chart below.

AUDJPY With Trend Setups 4hr Chart

Using the chart above, starting with the bottom left, price climbs consistently, gapping up, but then forming a resistance area at A. After a brief pullback, we can see price breaks through forming a new SH (swing high). The market then pulls back to the level at A, and at A’, forms an aggressive engulfing bar which starts the next up leg for over 400+ pips before forming a pullback.

The pullback at B which forms the next resistance high, dips just below the 20ema and forms a with trend pin bar. This marks the new impulsive leg up towards 95.00. Then price pulls back towards the level at B, and at B’, double bottoms (two touches) and starts another leg up and a nice with trend entry.

After a marginal break higher, price pulls back and forms another with trend pin bar below the 20ema, which starts another up leg towards a resistance at C. Sellers enter at C, and after a short pullback, break above it, with a brief consolidation at C’, offering a great breakout pullback setup to get in with trend.

Keep in mind, in all of these with trend pullbacks, the market pulled back towards the levle that it hat the strongest rejection from at A, B and C. The strong rejections at those levels are counter-trend players, trying to stop the trend. But when the bears tried to get past the last major resistance, now turned support (forming a role reversal level), the bulls used this as an opportunity to get long.

Yet in almost every case where the market formed a resistance, when the market attacked that level again, the sellers failed to hold the level. This is because they were going against the major order flow, which highlights how much easier it is to find key support and resistance levels that work when you are trading with trend, and not counter trend. So hopefully this highlights the difference.

In Summary
Finding key levels, and major support and resistance trading levels is not some Da Vinci code type endeavor. Two key things which really help this are using the two touch rule, along with trading more with trend than counter trend. Of course, there are other key clues to understanding support and resistance, but if you can employ these two techniques, they will greatly enhance your ability to find key levels, and make highly effective trades around them.

Forex Strategies, Price Action Trading

Avoiding Losses in Trading

I had an interesting conversation with a developing trader about avoiding losses in forex trading. After discussing the subject with them for a few mins, I realized there seems to be a great misunderstanding about trading and losses. This is not surprising as there is a lot of sophomore information out there about these A+ setups, that good setups only occur on higher time frames, that you should only take these high quality signals. But this misses an essential point of trading and something that all professional traders understand.

The A+ Setups Myth
Beginning traders try to ‘avoid losses’ by waiting for these ‘A+ setups, trading like a sniper stuff‘. This is a big reason why they fail to make money. To trade successfully, you have to trade and think in probabilities. You cannot ‘avoid’ losses in forex trading. This fear, this rationalization & desire to avoid the inevitable, actually takes you away from a system that has an edge and understanding what is a high quality signal.

A great example of this is how a beginning trader wants to ‘avoid’ a loss by waiting for some perfect setup, as if trading is a fashion contest. They fear losing and thus rationalize not trading this setup which may have a lesser probability hit rate. But here is where so many beginning traders go wrong and what you want to avoid.

Understand What An Edge Is
If a system has a 33% win rate, this may seem low, but if it always hits a 4x target, (e.g. you risk 50 pips to get 200), then this system has an ‘edge’ and makes money over time. By waiting for these ‘A+ setups‘ and trying to ‘trade like a sniper‘, you avoid the trade because it is not A+ or high probability.

What this actually does is separate you from a system that is profitable over time, that has a mathematical edge, and makes money. Yet if you ‘avoid’ this trade because you want to ‘avoid losses’, then you are passing up a profitable equity curve which could provide consistent profits over time. It is critical to understand your edge, and trade it when it presents an opportunity.

But here is another crucial point about this topic.

You cannot ‘avoid’ losses at all in trading. Losses are part of the forex trading game. They are something you will have to get comfortable with, and not identify with, or value yourself based on the latest win or loss. Trading is really about getting comfortable with yourself, and getting comfortable with losses. They are going to happen just like the sun will rise and set.

Avoid the Misconception, Not Losses
Trying to ‘avoid’ that which is unavoidable will create a limiting belief in your head that only interferes with your trading. Understand that in reality, losses get you closer to your next win as you let the edge play out.

Don’t pass up an edge/system which makes money, simply to avoid the fear and psychological discomfort of the loss (which is really up to you how you experience them). Don’t fall for this ‘A+ setup, trade like a sniper motto‘, which is really a misunderstanding of trading professionally, and a sophomore understanding of it at best. So time to start thinking about trading on a new level, and avoiding the misconceptions about trading, not the losses.

If anything, you should avoid the mistake of thinking you can avoid losses, by only waiting for these magical A+ setups.

There is really nothing to avoid in trading, which is more about getting comfortable with uncertainty, and understanding losses are part of the game. When you start to do this, you will find yourself taking trades less personally, and executing with greater discipline, lesser emotions, and a clearer perspective on the what it is to trade professionally.

Forex Strategies, Price Action Trading

Price Action, Breakouts & Order Flow

Today I am writing a potent article about pre-qualifying forex breakouts, particularly understanding them from a price action & order flow perspective. When you pre-qualify a breakout, you put yourself in a position to identify it as a high or low probability breakout. To do this however, you have to understand what makes a successful forex breakout trade both from a price action and order flow perspective.

In my prior article 3 Keys for Identifying Breakouts, I talk about 3 such parameters for pre-qualifying forex breakouts. They are;

1) Well Defined Support/Resistance Level

2) Pre-Breakout Squeeze/Pressure/Tension

3) 20ema Carry

When you can identify these prior to a potential breakout, you highly increase the probabilities of trading a successful breakout. But let’s dig into this a little deeper as to why from a price action and order flow perspective.

Order Flow Behind Breakouts
From an order flow perspective, breakouts generally start with an initial balance between buyers and sellers. This usually results in a range of sorts, with two clearly defined support and resistance levels. When you get several touches on these levels, this clearly communicates where both sides of the players are parked (and likely their stops as well). The more touches on these barriers, the more players are brought in.

Those who are bullish will get in on the bounces off support, while bearish players on rejections off resistance.

However as time goes on, tension starts to build between the two camps as someone will eventually want to take control. In almost all cases, the side with the largest number of orders and money behind their camp, will win this tug of war.

This usually manifests in a higher low (HL) or lower high (LH) being formed inside the range, and more aggressive pushes towards the other line in the sand, while less or no touches on the other side, almost as if the sellers or buyers could not reach the other support or resistance level. It usually looks something like the chart below.

EURJPY 5M Chart

Looking at the chart above, you’ll see a clearly defined support and resistance level with a minimum of two touches on each side. This tips us off to where the bears and bulls are parked on the chart with stops just above/below the levels.

Now you will notice each rejection at A & B minimally went up to 125.05 before coming back down and touching the same support level at 124.80.

C pushes price back up to 125.05, but this time the rejection fails to reach 124.80, and can only make it to 124.85. From an order flow perspective, the buyers are starting to get more aggressive and confident their level will hold, so they are buying up higher (at a more expensive price).

The next pullback at E is also higher, so we are seeing a continual change of hands by the bulls buying higher from support (and their defenses at 124.80).

Now notice every push up from B, C, D, and E only makes it to a maximum price of 125.05. But with F, it goes to 125.10. There were probably some intraday bears shorting at 125.05 (now stopped out), while the rest were still short at 125.15.

Now that price is pushing up towards the resistance without ever touching the support, this communicates the bulls are taking control of the price action with more orders and money, and will likely continue to squeeze the bears out.

This price action squeeze takes out smart sellers early as they recognize they are about to get stopped out if they stay in. The slower players stay in until they are at breakeven, while the slowest and most stubborn bears stay in till they are stopped out.

EURJPY 5M Breakout Chart

Using the chart above, we see the final stage of the breakout which is the 20ema carry in Box A. This “20ema carry” is a common price action formation prior to a good breakout, as it shows;

a) the mathematical representation of price gaining

and

b) gives bulls who haven’t entered a chance to get in prior to the breakout

This is followed by a strong breakout bar at B. This large bar should be curious, for why would bulls buy up so strongly heading into a resistance level if they were worried about sellers parked there. Usually, institutional traders can smell an upcoming breakout like this, so will push really hard to take out any stops as they go after the barrier.

A “strong breakout bar” is usually a really good sign the breakout will continue as it means stops were tripped above the resistance level, and price jumped aggressively in one bar. More ideal is if it has a good “clearing distance“, for if it does, then it increases the chances all the stops were tripped by going further away from the resistance level where most of the stops were near.

Tripping The Stops
It is this latter part – the stops getting tripped, which helps fuel the breakout even further, because those bears who were short now have to buy back, and this buying back to exit out helps further fuel the upside breakout. This is why if you ever watch the prices on your actual platform during a breakout like this, it generally reads (using 4 decimal places);

1.2999
1.3000
1.3001
1.3002
1.3003 (stops tripped)
1.3006!

You can always tell where the stops were parked and tripped, because price then jumps a few pips in a shot. The reason for this is – there were no sellers between 1.3003 and 1.3006, meaning the brokers could not print a price there since there were not enough orders there to hold that price. The stops being tripped at 1.3003 were sellers who now had to buy back, and when they did, they helped to push the next market price up 3 pips in a single tick or print.

When you see this, it usually means the breakout will likely continue – as long as you have done your pre-qualifying ahead of time.

One Final Note
Like all things, we have to pre-qualify a forex breakout using several price action characteristics ahead of time. The ones listed above are just a few of the ones we use in my Course, and there are several others which will clue you off and enhance the probability of the breakout being successful or not.

When you can pre-qualify them correctly, you will find breakouts quite easy to trade and accuracy levels around 60-70% as this is what my more profitable students are doing consistently just trading breakouts.

But, you have to pre-qualify them, like any price action setup. We never just trade them in isolation, as we are not pattern traders. We are price action traders, and we always trade setups & price action in context.

Any good system can perform badly without the proper context. Pin bars can be a highly effective system, if traded in context. But without understanding the type of trend, or volatility levels, you will likely lose money trading pin bars in isolation, even if you trade them at key chart levels.

Thus, we are never just trading patterns on a chart. We are always trading them in context, and this is exactly the same for breakouts, so always pre-qualify them ahead of time.

Look for the three characteristics above, try to trade them with trend more often then counter-trend, and you’ll find they can offer highly profitable trades, with some of the better reward to risk ratios out there, such as 3, 4, 5, or many reaching 7 or 9:1 reward to risk ratios.

Forex Strategies, Trading Mindset & Risk Management

The Beggar and The Trader

There is a story about a beggar several hundred years ago from a small village. He was orphaned at a young age, and with no education and family, he had to fend for himself. He was reasonably intelligent and able, despite his challenging start. Living in a small village his whole life, since the village was abundant, he was able to beg for food and receive what he needed to survive.

He tried several times to find menial work to give him some basic subsistence, but was unable to find any.

Difficult Times
Later, some hard times fell upon the village, and many people were struggling. The beggar went around the village asking for food, but many were unable to offer him any. He went without food for some time, barely maintaining his energy living off what little he could find.
Eventually, after struggling for many months, unable to find any work, he decided to leave the village and go to another looking for food. Working his way up the mountain, unfortunately he was unable to find any food or work in the nearby villages after his repeated efforts.
Now days later, it was getting dark, he started to lose hope and realized the end may be near. He eventually found a cave which was empty to rest in, and spend his last moments. He was sad because he really felt he could do something in this world, but was unable to make things work.
Dark and barely able to see, he started to lie down on this rock, and noticed it was really warm. He thought to himself, ‘Oh wow, this rock is really warm. I am glad I was able to at least feel warmth while I rest here‘.
Shortly after closing his eyes and falling asleep – he died…
In the Very Same Cave
The next day, a group of explorers were looking for something on the mountain, and passed by the very same cave as the beggar just passed away in. As they entered the cave, they noticed a motionless person lying on a rock, and realized he had passed.
Out of respect, they decided to bury him, but when they moved his body, they noticed something that sparkled really bright. Under the man’s head where he was resting when he passed, was gold.

Akin to Beginning Traders
This story is very similar to many beginning traders who come to trade the forex market. They see the potential of what forex trading can offer, but stability, consistency and success seem just out of reach.
They often try a system for a short period of time, but then abandon it if it doesn’t make them a million dollars after a few months, let alone with the first few trades.
What many fail to realize, is that the actual gold they were looking for (a consistently profitable system), was right underneath them the entire time. They likely have been resting on something highly valuable, but because of doubt, limiting beliefs, and unrealistic expectations, are unable to see what is in front of them. When encountering obstacles, instead of working through them, they abandon their system, and look for the next best thing.
The Main Difference
I think the main difference between profitable and unsuccessful traders, is in how they approach the market. Consistently profitable traders do not analyze or value their abilities based on their last win or loss. They are trading and thinking in probabilities.
What the consistently profitable traders are willing to do, was to work through their obstacles and challenges. They understood what they have available to them, and work at it until they are successful. They realize the pot of gold has been right underneath them the entire time, and all they had to do was dig – long, hard, and with the unfailing belief they will get to the gold underneath them.

I know of no profession, sport or skill based endeavor you can enter, that within a few months, you are operating at a professional level. Yet many beginning traders quickly abandon something if it doesn’t create a 45+ degree equity curve and hit over 80% accuracy in the first month or two.
What has fascinated me, is how I could teach traders the exact same price action or ichimoku systems, yet get wildly different results, with some being highly profitable and consistent – while others not. Usually those who stick with it regardless of the results eventually find their ground, and start to trade consistently and successfully.
Imagine a World…
I cannot imagine a world where Benjamin Franklin gave up after his first few rejections and failures, or Einstein not pursuing science after failing to get accepted at the Swiss Polytechnic school, or Michael Jordan never playing basketball after failing to make the Varsity team in High School.

The good thing is, whatever is separating you from being consistently profitable at this moment, is completely learnable. The mind has neuroplasticity to it, & without a doubt you can learn to trade successfully.
So keep digging for your pot of gold. Work with a trading mentor, continue to improve your systems edge, money management, and building your successful traders mindset. You might just be surprised what you’ll find if you keep digging.

Forex Strategies, Trading Mindset & Risk Management

You Will Have To Do This Trading

The Rosy Picture
I know the idea of being a professional trader will seem like a rosy picture, but the fact of the matter is you are going to face some tough times as a trader. You will have to do many things to be a successful and professional trader (or successful/professional anything for that matter), but the most crucial things you do will be the little things in the big moments of time.

Bottom line is – you will have to deal with making mistakes that cost you money, and a lot of it. You will have to deal with some really tough losses, whether they be 4, 5 or 6 figures. Yes, you can make 5, 6 or 7 figures, but that will be totally dependent upon you remaining completely focused, confident and disciplined while you are going through the good times, as well as the really tough ones.

In Trading…
You will have flat periods, draw-downs, losses (perhaps several in a row), but regardless of what you face mentally, emotionally, or physically, you will have to keep proper money management.
You will likely have to take a trade shortly after getting hit by the market only minutes before. You will have to deal with getting stopped out by a pip or two, only to see the market move 100+ pips towards your target. You will have to be patient and sit on your ass, even though you want to get in.
And you will have to do all of this while the market is moving in real time, while there are large profits to be made, while your emotions are working completely against you, while you are experiencing fear, or worry, or impatience, or frustration, or absolute un-clarity.

You will have to make tough decisions in real time that may not be so evident as they unfold before you in a live trading environment. It is very easy and completely common to miss the best setups happening in real time, that follow your rules, or your price action system, because in real time all of the toughest things about trading are present.
The Mountain
I know it may seem like you are pushing up against something larger than yourself, like you are moving a large boulder up a mountain, but you are actually pushing up against yourself – not the market. There is a powerful, self-reflective & insightful quote from Sir Edmund Hillary (1st to ever reach the summit of Mt. Everest) which goes;

“It is not the mountain that we are conquering, but ourselves”

This is exactly what trading is, as you are not conquering the market – but yourself.

Safe Distance & The Monday Morning Quarterback
Hindsight is a free zone, a safe distance to evaluate things as there is no emotion involved, with no live triggers to activate your unconscious or limiting beliefs. When you look at a trade after the fact, there is always clarity, and it looks like the setup was literally put on a golf tee just waiting for you tee off.

However, the reality in trading is, the clarity so available in hindsight is often barely present when trading in real time.
You wouldn’t believe how many ‘authorities‘ or ‘masters of all things price action‘ (ironic considering no peer calls them that), talk about all these great setups after the fact.
They boast how it was ‘widely discussed in their members forum’ only to find out it never was & they never traded it themselves. This is despite the fact it was an ‘obvious’ pin bar setup, or engulfing bar setup, or some other ‘obvious‘ thing they didn’t trade, but lauded after the fact.
Anyone can be a Monday morning quarterback, but can they be a trader in real time is the question. This is why lately I have been almost weekly posting my actual setups here, here, here, here, here, and here of how I traded them in real time.
This is with all the success and mistakes made while managing that live trade, with my actual entry and exit from the brokers chart, based on all the thoughts, emotions and decisions that are involved in them.
Actual Trades
If they’ve only shown you one trade in the last year, or a few in the last few months, without actually even showing you the entry and exit from their broker chart – then run away as they are hiding from the fact they do not trade. They should also be showing you successful trades from their students which you can find here, here, here, here, and a ton more here.

But make no mistake, there are many things you will have to do while trading, particularly managing, and managing two things which require practice and precision to do well. They are;
1) Managing Risk
2) Managing Your Emotions
Hopefully you already have a set of rule based systems that you follow to get in and out of a trade, so there is little management in that part. It is the two listed above that require most of your mental/emotional/psychological management and capital.
In Summary
To repeat, you will have to endure tough times as a trader, with some tough losses, flat periods, draw-downs, making expensive mistakes. And you will have to do this while not investing all of yourself and success / failure in the last trade. You always have to be trading and thinking in probabilities.
Losses are inevitable, but how you deal with them is not. If you can learn to remain focused, confident and disciplined – regardless of what just happened in the last few minutes, hours or days, then you can find yourself back towards a winning trade. But more importantly, you can experience first hand a valuable lesson, which can pick you up after you fall, carry you towards winning trades, and feed your trading career for a lifetime.

An Unconventional Approach to Your Trading Mindset

How To Trade Price Action Trends In Forex – What You’ve Been Missing

Forex Price Action Trades +1640 Pips

Forex Trading, Ted Williams, & The Little Details Pt. 2

Forex Trading, Ted Williams, & the Little Details Pt. 1

Trading Support and Resistance Key Levels

Avoiding Losses in Trading

Price Action, Breakouts & Order Flow

The Beggar and The Trader

You Will Have To Do This Trading

“It is not the mountain that we are conquering, but ourselves”

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