intra-day trading – 2nd Skies Trading

Tag Archive for: intra-day trading

A Trading Mindset: Books To Give You A Mental Edge

Professional trading and training can be like a marathon that never seems to end. Simply trading each and every of the +225 trading days a year isn’t actually healthy for the learning process and skill development.

There are times when we have to spend more time reviewing and less time trading. There are also times when we need to do more study and training than trading.

Traders often tend to be a passionate bunch and love to digest good reading material.

As someone who consistently reads 1-2+ books per week, I’ve built up a decent library, particularly around trading and the trading mindset.

In today’s article, I’m going to share half a dozen forex trading books, centered around the trading mindset and building a successful traders mindset. I’ll give a brief description of each one, plus a link to the book on Amazon so you can order whichever you feel most drawn to.

It should be noted, most trading lists like these will typically share some of the staples, such as Market Wizards or Trading in the Zone. Since these have been done and done time and time again, I’ll be sharing some alternative forex trading psychology books which share a unique perspective on trading, mindset, success and training.

Enjoy.

#1 The Playbook by Mike Bellafiore
I’ve talked personally with Mike before. He’s one of the good guys in the industry doing some unique work for traders, training traders and the industry. He runs SMB which is part prop desk, part training program. With decades of experience in trading and running a trading desk, Mike has a unique perspective on trading, training traders and what it takes to become successful.

If I was ever to work/trade for a team, I’d probably work with them.

This is probably the longest forex trading book review of them all since I have personal experience with Mike, but his unique approach to trading also applies to the mindset. In The Playbook, he shares a lot about working with his trading team, getting them through the same obstacles we all experience.

He shares his insights into working with traders who aren’t cutting it vs. the ones who show potential, guiding them towards success.

He puts a tremendous focus and effort on mindset. Two quotes that stick out from the book are;
1) “You do not become a great trader by being shown cookie cutter technical setups and then soon become successful. That is a myth from what I call Trader Disneyland. It would be wonderful if Trader Disneyland existed, but it is marketed and spun that it does, yet it doesn’t.” (That means you Nial Fuller & Jonathan Fox)

and

2) “Many novice pedestrian traders focus on the next position. Consistently successful traders focus on the process and care little about the outcome of the next trade. The distinction is enormous.”

There are many gems in this book, including the actual ‘Playbook‘ idea he shares, but definitely a top read in my library for a traders mindset.

#2 The Way of the Fight by Georges St. Pierre
The Way of the Fight? What does this have to do with trading?

Yah good question. Georges St. Pierre is a Mixed Martial Artist. He is a former 2x World Welterweight Champion in the UFC and holds several records that still stand to this day.

Not only being one of the good guys of the world of mixed martial arts, Georges is a trailblazer in terms of training, preparation, mindset, and integrating many styles seamlessly.

In his book The Way of The Fight, he shares his experiences, challenges, training methods, and how he personally and mentally approaches mixed martial arts at the highest level.

Two gems that stand out from this book are;

1) “Almost anybody can be greatly successful. However most are not willing to go through the process and just want the result. It’s having to go through the process that stops people, not their limited potential.”

and

2) “If your enthusiasm is continually diminished by defeat, you will not have enough mental fuel to survive the learning curve.”

Definitely worth a read. Inspiring, challenging and clarifying.

#3 The Hour Between Dog & Wolf
Former trader turned Neuroscientist, John Coates spent almost a year studying an entire trading floor of institutional traders. With his training as a Neuroscientist, he shares some amazing information about how the brain and body works through the typical days of trading for professional traders at the highest level throughout an entire year.

In The Hour Between Dog & Wolf, you’ll learn more about your brain and body than any book I’ve seen out to date.

Ever had that ‘gut feeling’? You’ll learn about that. Want to know what stress hormones do to the brain, body and performance? You’ll find out in here.

A must read for traders wanting to learn about their brain, body and how trading affects them both.

#4 Cultures of Expertise in the Global Currency Markets by Leon Wansleben
This is a advanced forex trading book I covered in an article before (click here to read the full article and review), but had to mention it again.

Leon Wansleben is a sociologist by trade who also gets to spend time watching an entire FX trading desk. You’ll learn about how the traders work with the analysts, how they trade on all time frames, including intra-day lower time frames (Sorry Nial Fuller & Johnathan Fox for being flat out wrong again), what the bulk of their trading day is like, and more.

He covers how the top traders manage risk with exceptional skill while building emotional courage and stamina to survive the learning curve. He also goes in depth how they are trading price action and order flow, often in combination with fundamental analysis.

Another must read for getting a unique perspective on the trading mindset.

#5 Earn the Right to Win
After losing a coaching job, Tom Coughlin was found sitting at the NFL combine, which is where the potential new college grads will show off their skills and physical traits, hoping to get noticed by coaches and scouts for standing out.

While taking detailed notes on every player there, Tom was greeted by a friend in the industry who said this to him:

“Tom, what are you doing here? You don’t have a coaching job.”

Tom’s response says it all, “Not now I don’t.”

Tom has won two Super Bowls with the NY Giants. He is the oldest coach to ever win one, and has done an impressive job, often times taking the teams with the lowest winning records into the playoffs, and coming out champions.

When you finish this book, you’ll see the value of preparation, how managing one’s time and maintaining discipline leads to success. A great book from a great guy in the NFL.

#6 How to Be Like Mike by Pat Williams
Anyone who has been a follower of this blog and forex training site would already know I’m a big Michael Jordan fan. In this book Pat Williams goes through the many phases of Michael Jordan’s career, from his early failures in High School, to coming back stronger, to his winning the NCAA championship at UNC, to his early struggles at the bulls, and onto his 6 NBA titles.

You’ll learn more about MJ, and all the amazing little things he did in this book than any documentary I’ve seen yet. Sharing perspectives from players and coaches around him or against him, along with other greats in sports, you’ll see why MJ is and continues to be an inspiration, sharing a unique mindset on success.

Three quotes of the hundreds I’d like to share are below:

1) “Success isn’t something you chase. It is something you have to put forth the effort for constantly; then maybe it’ll come when you least expect it. Most people don’t understand that.”

2) “I was sitting on the bench and MJ came dribbling past us at full speed. Then he shifted into another gear and went to the hoop. I’ll never forget that fire in his eyes, that look of determination. It scared me to see that look. I’ve never seen it before. I’ve never seen it since.”

3) “You can’t turn it on and off like a faucet. I couldn’t dog it during practice and then, when I needed that extra push late in the game, expect it to be there. But that’s how a lot of people approach things. And that’s why a lot of people fail. They sound like they’re committed to being the best they can be. But when it comes right down to it, they’re looking for reasons instead of answers.”

A treasure trove of a book, and something I continually go back to.

In Closing
Whether these advanced forex trading books were from traders directly, or from high performers in other fields, you’ll notice several patterns in their thinking and mindset.

Most focus on training, preparation and process more than result. Most struggling traders have this equation reversed.

Most have a highly evolved training routine, and work at their chosen skill every single day. There are no lazy traders or examples of success from being lazy (sorry again Nial).

And most consistently, they realize having skills is one thing, but having a stronger mindset is far more powerful.

Food for thought, but I hope this gives you some enjoyable reads.

Forex Strategies

What If Your Trading Plan Cost You Money?

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?

trading plan 2ndskiesforex

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?

confusion about trading
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?

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

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.

practicing forex trading 2ndskiesforex

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.

professional traders 2ndskiesforex
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.

Forex Strategies, Price Action Trading

Why New York Close Charts are Not Important

In my prior article on the New York Daily Close Charts, I exposed the forex myth demonstrating how the New York Close Charts are not superior to the UK GMT 00.00 charts.

For my price action course members, I just updated our stats on the inside bar strategy, and compared the NY 5pm Close vs. the UK GMT 00.00 Close. For the second time, the results showed no superiority in performance.

Keep in mind, this is just a price action strategy I built, with no server time in mind. We tested it using identical parameters, and here are the results below;

FXCM UK GMT 00.00 Close
-9 Pairs Total Made the Cut
-13 Possible Trade Combinations (via pair/time frame)
-All 4 time frames had profitable setups (Daily, 4hr, 1hr, 30m)
-60% Hit Rate

NY Daily 5pm EST Close
-9 Pairs Made the Cut
-13 Possible Trade Combinations
-All 4 time frames had profitable setups
-61.5% Hit Rate

Now, if the NY Daily Close Charts are so superior, how come they only account for a 1.5% edge in hit rate, yet in the other system they had a 4% lower hit rate?

Does this sound like massive superiority to you? I didn’t think so.

Although you hear it all the time they are superior, who is backing it up with actual statistics? Nobody……save here.

What was also interesting is many of the pairs others are purporting to be profitable using the inside bar strategy are not – not by a long shot.

What the data simply translates into is that neither one is significantly more profitable than the other. However, it is important to know which pair and time frame is, as many did not match up across the different server times for continued profitability.

Now I did promise to discuss an alternative platform besides MT4 for those that want to stick with the NY Daily Close. First, before I share the platform, I should state why I do not like MT4 for trading;

1) Execution on Market Orders is Slow – so slow that FXCM spent a ton of money and time just to remove the 3rd party bridge and no auto account syncs so that it would execute faster
2) Bulky – not user friendly or flexible unless you can program an EA
3) Have to do more clicks for simple trading operations (i.e. closing multiple positions at once, etc.)

There are many other reasons, but if you do any sort of intra-day trading (1hr charts and below), or market orders, you will find other platforms to be far faster with their execution. Even the MT4 demo platforms can have slower execution then a live order on another platform.

What MT4 is Good For
The only use I have for MT4 is to run my algos which inform me of setups (that I execute on other platforms). For programming EAs, it can definitely be cheaper and simpler, but beyond this, for trading purposes, MT4 is slower and bulkier.

A More Intuitive Platform
For those that want a more user friendly and intuitive platform, I suggest the FXCM TS2 (Trading Station 2) platform. The execution for market orders or any sort of intra-day trading will be far superior and faster than almost any MT4 platform. But even more important, you will have to do less clicks to execute orders.

Case in point, open up a new order tab in MT4 to execute a pending order. Here is the window below;

Now notice, just to execute a pending order, you have to 1) click on the ‘New Order’ button, 2) select ‘pending order’ from the drop down menu, 3) then choose from 4 types of orders.

Let’s contrast that with the FXCM TS2 process with the window below;

To execute a pending order you simply 1) hit the ‘entry’ order button, and 2) select the ‘buy’ or ‘sell’ button.

Notice the difference?

We are talking 2 steps instead of 3, which when you are trading intra-day, could mean a big difference in execution and getting your price. But also notice which one is more confusing. With MT4, you have 4 order types to choose from, while with FXCM’s TS2, it’s a much simpler ‘buy’ or ‘sell’, regardless of whether its a buy stop or buy limit order – the platform and technology does the work for you.

But for those trading any significant size, or any intra-day price action strategies, execution is critical, and seconds can mean getting your price or missing it.

Trade History On the Charts
One other feature I really enjoy about the TS2 platform is it shows the trades (or trade history) you made in the last 24hrs on the chart, particularly your entry and exit levels. I find this particularly useful for when I’m doing intra-day trades, sometimes I cannot take screenshots of my trade as I’m in several trades at once. When I close the trade, the TS2 charts (Marketscope), will actually show me the entry and exit level on the charts. A good example is below;

The benefit of this feature allows to me to take screenshots of trades I missed, then store them for analysis at the end of the trading week so I can isolate patterns behind my winners and losers. But with MT4, these are not available. Once the trade is closed, the entry and exit levels on the chart are gone, which makes for more work.

Although this is a small feature, it’s all these little features that add up to a big result. When it comes to a trading platform, user friendliness is critical, and the more work you have to do to execute a trade, the more time and profits can be wasted.

I hope this article now has conveyed to you 1) the New York Daily Forex Close Charts being superior is a myth, and 2) there is a far superior alternative platform for trading then MT4 which also uses the NY 5pm Close should you wish.

For those wanting to learn which pairs and price action systems are profitable in your server time, then make sure to check out my Price Action Course where you will learn which pairs, time frames, and systems are profitable across specific server times.