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.
Tag Archive for: building a trading plan
You might have had a few profitable months trading live this year, but if you are like 92.5% of all traders out there, when the clock strikes 2015, your account will be negative.
In almost all endeavors, the dividing line between success and not making it is a fine one. Likewise, such a dividing line is drawn daily by what you do, and what you do not do.
Another way of putting this would be – those who will be profitable at the end of 2014 will generally do the things consistently others will not.
The great thing is, you can be one of those in the green at the end of this year. To get there though, you’ll likely have to make a few changes to what you are doing.
Here are some simple steps you can take to put yourself in the 7.5% who will be green at the end of the year. These are the 4 things you should be doing (minimally) if you are trading forex.
1. Being Mentally Prepared
Ever go to a professional sports event 1-3 hours before the game started? Besides empty seats and reporters giving up to date info, you’ll see one constant every time. The athletes themselves are preparing.

All professionals simply know you have to prepare before each game/event/match. Keep in mind, these professional athletes are already successful, yet they prepare regardless. In trading it is no different, although most of our preparation is mental.
Being mentally prepared, means knowing what you are going to do during your trading day, and how you are going to do it. It is tuning your mind to give yourself the greatest mental edge possible.
Ask yourself do you prepare mentally each day? Do you have a routine you go through before you hit the buy and sell buttons? What do you do to build a successful mindset?
Interesting Story: I had a student who started off his first month of live trading in the red. The next month, he upped his game gaining +11% for the month, mentally prepared for each day.
Ironically the following month, he stopped his mental preparation, and as suspected lost money.
After doing his private follow up session with me, we got him back on his mental preparation routine. Where is he at for the month of May? Up almost 7%.
2. Have A Trading Plan
One of the most important documents you will have as a trader will be your trading plan. This is what you will follow each day from the beginning to the end of your day. It is to guide your actions, along with helping you measure habits and patterns of behavior, to see what is working (or not).
There are generally two types of trading plans:
1) Day-to-Day Trading Plan (actions to do/follow daily)
2) Business Trading Plan
Most ‘authorities’ and ‘masters’ of price action promote only the first one, and they do so in a highly limited way.
Generally such freshman trading plans cover the typical vanilla things, such as;
1) Price Action Signals to Trade
2) What instruments you will trade
3) % Equity Risk Models
4) Stop Loss and Take Profit Rules
5) Rules for Entry & Exit
Look familiar? These plans are completely inadequate by themselves. They myopically focus only on the mechanics of an actual trade.
What about mental preparation? What about reviewing your trades? How you will treat trading as a business, and measure properly if your business trading plan isn’t working?

Just like the CEO has a business plan, or the NFL coach has a game plan, you should not be trading without a trading plan.
NOTE: For a really good article on How to Build a Proper Trading Plan, click on the link.
3. Have a Way to Measure and Review Trades
Most traders in the red come end of the year do not measure their trades. The irony is, usually a small adjustment to what you are currently doing will help you trade consistently profitable. One of the best places to find this information is in measuring and reviewing your trades.
Measuring your trades is initially done through a trading journal and performance worksheet. The former notes all the details about each trade, while the latter analyzes the performance of each pair, strategy and time frame.
Have you considered the fact you may do really well with a few pairs, yet consistently lose money with others? How would you know without measuring your trading performance?

Reviewing trades is probably one of the hidden secrets you’ve overlooked to boost your performance and skill set. Sometimes looking at charts of past winners and losers will help you spot patterns and price action context you missed before.
NOTE: For a good article on reviewing trades, visit the following link: Reviewing Trades – Two Crucial Tips
I actually have a folder full of screenshots for winning and losing trades. I also have a folder of screenshots whereby the charts show great examples of a price action pattern working out. By reviewing these charts at the end of the week, I am wiring into my brain to look for these patterns, thus being more likely to spot (& trade) them in real time.
For more information on end of the trading week review, click on the link here.
4. Continual Training
Most developing traders seem to think that once they are profitable, the training ends. Does a concert pianist ever stop training? Do high level martial artists ever stop training? Do Buddhist monks ever stop training?
No. So why would you think that training ends at some point?
Do you have two hours set aside to trade each day, but no trades available with your set and forget strategies? Don’t walk away and be a lazy trader – study, practice, or best of all – do live simulation trading.
Is it a holiday and the markets are closed? The answer is the same.
Anytime I am not trading for the day (for whatever reason), I Use Forex Tester 2 to Accelerate My Learning Curve. FT2 allows you to do live forward simulation trading on any pair or time frame, with at several years of data available.
Need help with your pin bar trading? Use forex tester 2. Having trouble trading support and resistance key levels? Jump on forex tester 2.
It’s like the golfer going to the driving range – but for trading.

This is a great way to build your skill set and get real practice time executing trades in with live forward simulation. You could literally do 50-100 trades in one hour with forex tester 2, which may take you an entire year to do on your own.
I could spend a day talking about the benefits of this as the list is long, but for those trading daily and 4hr price action strategies, you’ll need to increase your trade/rep count to build a sufficient skill set. FT2 is the best way to do this.
You Will Need This Though…
One might think that having a strategy with an edge is one thing you shouldn’t bother trading without.
I agree, but I think this should be a part of your trading plan. If it’s not, then your trading plan is incomplete.
In Summary
All high level professionals do a minimal amount to perform well in their chose field, and that minimum amount they do is often more than those who are not successful. Trading is no different.
If you decide to trade anyways without doing these 4 things above, expect sub-par performance. More importantly, don’t expect the best out of yourself.
With that being said, what things would you add to this list?
I recently got a daily forex trading plan from a new student and eager beaver who asked for some help with their plan. The moment I opened it, I realized it was incomplete and needed work. To be fair, they had gotten this template from another course, so cannot fault the student.
I generally suggest having two trading plans:
- The Day-to-Day Trading Plan which includes your daily procedures
- Your Business Trading Plan
What we’ll be focusing on here is related to #1 above. Below is the general outline of their current forex trade plan, which I’ll go over, show you what needs to be changed, and what is missing.
Their Current Trading Plan
- Introduction
- Price Action Signals to Trade
- Rating a Trade
- Time Frames
- Pairs/Instruments to Trade
- Risk-Reward Ratio
- # of Positions
- Position Sizing
- Stop Loss & Take Profit Rules
- Rules for Entry
- News Events
- Documentation
- Losing Trades
Do you see anything confusing, missing, or out of place here?

What I Would Change
#1: Introduction – I think this was a good start. However, two things in this introduction stood out;
a) the opening statement, ‘The goal of this plan is to avoid emotion-based trading‘
b) ‘the trading plan may be adjusted, and the rules edited‘
Lets start with A – If the goal of the trading plan is to ‘avoid emotion based trading‘, the current plan only helps for that day, but doesn’t get at the root cause of ‘emotion based trading‘.
Where should the real work be done for this? Prior to any trading, and in the ‘training’ phase! How? Proper training, building your sub-conscious skill set, and removing limiting beliefs.
For B – this is fine to allow the trading plan to be adjusted, but how often? The trading plan should be an evolving document as your level develops and grows as a trader. But put a time factor to this and stick with it.
I would have in the introduction why I am trading, what I am trying to achieve and what my daily goals are. More on this later.
#2: Price Action Signals to Trade – A military general doesn’t start their plan with tactics. They take all the information in to get a broad picture – i.e. the ‘context‘. In trading, this relates to understanding the price action context first. So this section needs to be later in the plan.
What would I put here? Pre-trading preparation, i.e. how will you prepare for each trading day (physically, mentally, market analysis, etc).
#3: Rating a Trade – We haven’t even gotten to our price action context first. This comes before rating a trade for quality. So this should be done here, starting with our top down analysis, how we find the correct context, then go from here.
NOTE: In this template from the other course, their highest point rating for a trade was ‘big size‘ for the signal bar.
Now let me get this straight – the size of the 1-2 bar pattern, is given the most importance? One bar out of the 30-50+ bars which comprise the validity of the signal?

Seems like a confusion to me on what price action is about. Yet ‘Trading with the Trend’ is 5th on their list? How does one bar by itself, have greater value than the entire trend and order flow to this point?
Lastly, the 13-pt rating list completely rules out intra-day trading. A trading plan should be flexible enough to incorporate both.
# 4 & 5: Time Frames – by now, we are too far ahead of ourselves with this plan. Once we know the context, only then can we know the tactics (price action strategies) to use. We cover this in more detail with our course members.
One other thing about this is the fallacy that the time frame is more important than the instrument you trade. Should be the other way around.
Pairs/Instruments to Trade – Although this is completely necessary, I think in one section you can have the pairs/time frames you are trading.
# 6, 7 & 8: Risk-Reward Ratio/# of Positions/Position Sizing – The first one is completely irrelevant by itself without understanding the Risk of Ruin.
You can use my risk of ruin calculator to find yours. For more information on the risk of ruin formula, click on the link above.
Number of Positions – kind of irrelevant. Although you may have a fixed % equity risk per trade, what if you start your day, and realize 4-5 high quality setups on deck?

My suggestion is to have a max risk per day, and per trade. If your max risk per day is say 5%, and you spot 5 trade setups, then you can risk 1% per trade. If only 2, then you can risk 2.5% per trade. As long as you keep the risk of ruin at zero, the number of positions should not be limited IMO.
Position Sizing – Can all be addressed under one section, which I’d label ‘Risk Management‘
# 9 & 10 & 13: SL & TP Rules/Rules for Entry – should be addressed in the strategy itself.
#11: News Events – I’d say make this part of the ‘pre-trading preparation‘, under the ‘market analysis‘ preparation.
#12: Documentation/Journal – I agree this needs to be part of your forex trade plan. But there is nothing in here about reviewing your trades, or end of the trading week analysis. Monthly, quarterly and yearly reviews would be recommended.
What About Training?
I generally recommend having a completely separate plan for training, very much like professional athletes have practice/training routines, which are separate from game-day preparation. Trading should be no different.
For those trading higher time frames like daily and 4hr strategies, I’d recommend using your non-trading time for practice/training. This is not just demo trading, reading books, or studying course material. We suggest going beyond this with live forward simulation trading, just like fighter pilots do simulators, or baseball players have batting practice.

Our favorite tool for this is Forex Tester 2, which allows you to go back in time, and then live forward trade it bar by bar as if they were appearing in real time.
You can get a $50 discount on Forex Tester 2 by clicking here.
In Summary
As you can see, the template they were working with was quite confusing, lacking key things, and out of order. Had I been working off that trading plan and not known better, I would be approaching the market incorrectly every day, missing a dearth of things.
It is important to understand a professional trader will see things on a more sophisticated level than your traditional 1-2 bar pattern trader. Professionals, by default, can recognize opportunities beginning traders will not, like a good poker player can make money on more hands than a weaker one. This also goes for one’s daily forex trading plan, so having a more evolved one will give you a greater edge.

Ask yourself, how sophisticated is your trading plan? Does it feel unorganized, confusing and incomplete like the first template? Does it even include pre-trading preparation? What would you recommend adding to this trading plan?
Please make sure to share your answers, along with whether you agree or not, and why you agree/disagree.
