Tag Archive for: price action

Weekly Price Action Setups & Trade Ideas | Feb 11 – Feb 15

Chris Capre’s current open price action and ichimoku trades: EURUSD, GBPUSD, USDMXN, USDJPY, BIR, TLS

NOTE: I’ve never met a struggling trader that hasn’t skipped steps. Don’t make that mistake. Read my article The 4 Stages of Becoming A Millionaire Trader to avoid this.

NZDUSD – Rejected At Resistance, Now Testing Support (Daily chart)

Price Action Context

For now, despite 2 solid attempts, bulls have not been able to successfully clear 0.69 which is the top of a multi-year S/R zone. Instead, bears again stepped in, heavily rejecting the bullish attack and price is now back testing the LT support a second time after the false break in early January.

forex-nzdusd-key-support-level-2ndskiesforex

Trending Analysis

If this LT support holds, a move back up towards 0.69 is likely whilst a break below would open up for a possible bearish continuation towards 0.65.

Key Support & Resistance Zones

R: 0.6920 – 0.6970
S: 0.6680 – 0.6730

Stay tuned to the members daily trade ideas for updates.

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EURGBP – LT Range Still In Play But Expanding (Daily chart)

Price Action Context

Despite the heavy bearish assault on the LT support, bulls stepped in at the lows from April last year and were able to defend the support zone for now. With LT volatility increasing, it seems the range is expanding both to the up- and downside which made us adjust our S/R zones slightly.

forex-eurgbp-trade-setups-2ndskiesforex

Trending Analysis

Non-directional LT price action since October 2017. Neutral bias while trading within this range and traders can look for potential trading opportunities at the extremes (top/bottom) of this range until it breaks.

Key Support & Resistance Zones

R: 0.9000 – 0.9100
S: 0.8620 – 0.8700

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Hang Seng 50 – Pullback To LT Key S/R Zone (Weekly chart)

Price Action Context

LT exhaustion into 33 350 followed by impulsive selling and corrective price action. The corrective structure got broken to the downside in the end of June last year, followed by continued selling towards 25 000. After putting in a rough double bottom, buyers came back and have now pushed price all the way back up to the LT S/R zone, a zone that coincides with a KSP from Q2 2015.

hang-seng-50-trade-ideas-2ndskiesforex

Trending Analysis

LT bias bearish and sellers can look for potential trading opportunities around the LT S/R zone.

Key Support & Resistance Zones

R: 28 200 – 29 350
S: 24 400 – 25 400

Weekly Price Action Setups & Trade Ideas | Jan 6 – Jan 11

Chris Capre’s current open price action and ichimoku trades: EURUSD, GBPUSD, USDMXN, USDJPY, BIR, TLS

NOTE: Wondering what stage you are at in trading, and how to progress to the next level? Read my latest article The 4 Stages of Becoming A Millionaire Trader.

USDJPY – LT Support Holding For Now (Daily chart)

Price Action Context

Bears did stay in control after breaking below the MT support we mentioned on the 23rd of October, and during the last week, price continued to sell off heavily. But despite the flash crash towards the end of the week, the LT support we’ve talked about in earlier member market commentaries as well seems to be holding for now, with price closing back above the zone ending the week.

Trending Analysis

LT bias remains neutral while inside the LT range and LT traders can look for potential trading opportunities around the top/bottom of the LCS.

Key Support & Resistance Zones [LT]

R: 114.30 – 115.50
S: 107.30 – 108.30

Stay tuned to the members daily trade ideas for updates.

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OMX30 – Broken Through LT Key Support (Weekly chart)

Price Action Context

The continuation after the bullish reaction to the LT key support level never manifested, and instead bears stepped on the gas, pushing price through the key support and additionally -100 points lower in the process, giving bulls a hard time.

omx-technical-analysis-2ndskiesforex

Trending Analysis

LT bias changed to bearish after the break of the LT support and if bears can stay in control, a move down towards the bottom of the bigger multi-year range is likely IMO. Weak pullbacks towards the broken support which now should act as resistance can offer potential shorting opportunities.

Watch the price action on the daily, 4hr and 1hr charts for potential trade setups.

Key Support & Resistance Zones

R: 20 200 – 21 000
S: 14 800 – 15 900

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XAGEUR – Broken Back Above LT S/R Zone (Daily chart)

Price Action Context

After bouncing from the multi-year support we’ve talked about in earlier market commentaries, bulls have now pushed the precious metal back above the LT resistance which now should act as support again.

IMO this changes the price action context MT to bullish.

gold-eur-2ndskiesforex-trade-setups

Trending Analysis

LT bias changed to bullish and bulls can look for potential trading opportunities on weak corrective pullbacks into the key support zone.

Key Support & Resistance Zones

R: 14.70 – 15.10
S: 13.10 – 13.50

The 5 Components You Need For Your Forex Trading Plan

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

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

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

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

#1 Your Why

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

For most traders, the why is simple:

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

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

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

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

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

#2 Daily Preparation

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

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

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

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

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

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

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

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

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

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

#3 Core Trading Mechanics

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

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

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

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

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

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

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

#4 Risk Profile

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

risk profile 2ndskiesforex

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

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

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

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

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

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

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

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

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

risk of ruin table 2ndskiesforex

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

#5 Analytics & Review

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

A simple way to relate to this is:

“You cannot change what you cannot measure.”

(Pro football players reviewing film below)

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

I recommend the following:

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

What should you be reviewing?

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

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

In Closing

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

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

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

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

trading analytics 2ndskiesforex profitable traders

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

Now Your Turn

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

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

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

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

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Forex Trading: Where To Place Your Stop Loss And Maximize Your Profit

Have you ever wondered if you are placing your stop losses too tight to make a profit? Are you unsure how far to place your stop loss based upon the price action? In this forex stop loss placement video, I share with you a clip from a private member webinar, whereby I talk about stop loss placement, how to make sure its not too tight, and how to get better stop loss placement over time as your price action skills progress.

If you want to learn how to get the tightest possible stop losses for your trades while maximizing your profit, check out my Advanced Price Action Course.

Read more

3 Things That Will Make You More Money Trading

What’s Inside?

-Tell me about your instruments
-When not to trade breakouts
-Let’s look at where you take profit

In the world of forex trading, if you’re not making money now (over a decent period of time), most likely you have to make some changes. To make money with forex, you will probably have to change the way you think, the way you trade, and the way you perform.

In today’s article, I’m going to share with you 3 things that will make you more money trading. If you want to improve your trading performance and make money on forex, consider making these 3 changes to your trading now.

#1: What Kind of Instruments Do You Play?

As of today, I’ve seen over 10000+ myfxbook accounts. Now I have an important question for you.

Out of all the students who’ve given me a myfxbook account for their first time, how many of them were trading only instruments they profited with?

Any guesses?

If you said ‘zero‘, you were correct.

Think about that for a moment…the first time you use myfxbook and start tracking your trading stats, the chances you’ll profit on every instrument you trade is likely zero!

In other words, you’re trading forex pairs and instruments you are not profiting from, and most likely won’t.

Below is a screenshot of a live myfxbook account for one of my students ‘Ahmed‘ (who’s well in profit).

instrument performance myfxbook

Notice anything? He’s lost every trade on the AUDJPY.

Now as long as you have a decent amount of trades for an instrument, if that instrument you’re trading has all losses, you should remove it from your trading plan and not trade it again for at least one year.

By taking off the instruments you have the most losses with (from my experience), can add between +3-10% of profit towards your bottom line per year.

That can be the difference between losing money and making money trading. It can also be the difference between making decent money, making great money with forex.

Hence look at your trading instruments by clicking on the ‘symbol‘ tab under your myfxbook trades and isolate the ones you lost the most money on.

Make sure to a) record the number of trades per pair, b) total accuracy %, and c) total profit/loss {in %} for each forex pair. Those 3 metrics alone will likely tell you which pairs and instruments you need to stop trading.

Oh and Ahmed whose trading stats you’ve been looking at?

He made a +300% profit in the last 6 mos (see below).

ahmed 300 percent 2ndskiesforex

NOTE: Do you want to learn how to make money trading price action? Find out more by seeing our price action course.

#2: When Not To Trade Breakouts

I have many different trading strategies, but I definitely trade breakouts. And I’ve shown I make money in forex trading.

I have a unique approach towards trading breakouts which you can learn about here.

But there is a key time to trade breakouts, and places on your chart you should not trade breakouts. Today I’m going to talk about two places you should not trade breakouts from.

1. Don’t trade breakouts in the middle of a corrective structure (range)

If you think about the order flow behind a corrective structure (see image below), you can see there is a balance between the buyers and sellers.

corrective structures support and resistance levels 2ndskiesforex

There is a ‘balance‘ because both sides relatively agree on where the price (or value) of a forex pair (or instrument) should be.

The bulls say the floor of the corrective structure is where they see the most value, and bears see this at the top. That is why the range persists, because both sides are participating at clear levels and zones.

This means their no directional winner in the order flow (bulls/bears). And this is what we mean when we say a corrective structure is ‘balanced‘.

In the middle of any range or corrective structure, there is the least profitability available for trading a  particular direction (i.e. trading breakouts) because there is an approximate 50% chance the market will go up or down in the middle of any range.

So avoid the middle of the corrective structure and range for trading breakouts.

2. Don’t trade breakouts just before a major support or resistance level

Looking at the chart below, you see the top line is a major resistance level, and just below it is a breakout formation.

breakout failures

These often form to create the illusion the market will keep going higher through the major resistance level. It can also form by bulls encountering the first layer of a resistance zone which is why the market kept pausing just below the level.

Whichever the reason (or both), I do not recommend trading breakouts just below/above a key level.

Better to wait till the price action is just below/above the actual support or resistance level. If you have less experience with this, we recommend taking a breakout pullback setup (see below).

breakout setups

#3: Let’s look at where you take profit

There are many components to your trades you’ll need to study, analyze and refine. One of those is where you take profit, or your TP.

Now I’d like you to do a little experiment with your own trading account (demo or live):

I’d like you to look at every trade you made money on. Now look at the data in myfxbook, and see how many of those that a) closed at your TP, b) closed manually before your TP.

Record how many trades you made of each (close manually/hit TP), and see which one made more money.

If it’s ‘a‘, then you likely have a solid grasp of finding good targets you can hit consistently. So no need to close them early.

This is what is called set and forget trading.

If it’s ‘b‘, that means you have a good grasp of when your profitable trades are going to turn around, and should continue manually closing your trades.

One last final metric is to look only at the ones you closed manually before they hit their TP, and see if they would have hit your TP anyways before hitting your stop loss (SL).

If that is true, then you’re missing a lot of profit (losing money) by not holding them to their full take profit and should stop manually closing your trades.

losing money trading

In Summary

We covered 3 main points in this article. They were:

1) Analyze your performance for each forex pair and trading instrument

2) When not to trade breakouts

3) Examine your take profit targets

Now that you know why you need these 3 things to make money trading, it’s time to do the work and find leaks in your game, while increasing how much money you make per trade.

Do you want to learn several more ways to increase your profits and how much money you make per trade?

Then check out my Price Action Course where you get life-time membership, access to the members trade setup forum, market commentary and a free skype session with me, so quite a lot.

To learn more about making money with forex, click here.

Now make sure to tell me what you thought about this article and if these 3 things will help you make money trading.

The Comfort Zone, Trading Psychology & Successful Forex Trading

In today’s article I’m going to talk about an important subject in forex trading psychology called ‘the comfort zone‘.
Before we get into this important trading and mindset lesson, I’d like to talk about a close relative of mine named ‘Vesh‘.
Vesh recently had his 2nd hemorrhagic stroke in 5 years.
Most people who have two hemorrhagic strokes aren’t very functional. Vesh is definitely an exception.
He was a database programmer for decades, and ironically, after the stroke, can still do database programming.
brain image after stroke
However there are many things he cannot do as a result of his two strokes.
Such as numbers…he’s not that good with numbers any more, and often gets them confused. If he’s talking about something from 100 years ago, he might say ‘Back over 20,000 years ago in England, the British…“
To compensate for his brain being damaged, he eats the same thing every day. It’s what he’s most ‘comfortable’ with and makes it easier for him. Man is it easy grocery shopping for him every two weeks 🙂
How does this relate to the comfort zone and trading successfully?
How your brain and body is wired right now is what you feel most ‘comfortable‘ doing. My friend Ross runs 5 days a week, 2 miles a day, so he feels quite ‘comfortable‘ running 2 miles a day 5x per week.
flight runner
However if one day, I came up to him and said, “Today you’re going to run 20 miles, and you’ll do this 3x this week,” Ross is not going to feel very ‘comfortable‘. In fact, he’s going to feel profoundly uncomfortable attempting such a feat.
Just like Ross, whatever is outside of your brain, body and psychology to do comfortably right now is called being ‘outside’ your ‘comfort zone‘.
This is where an article by Noah Kagan comes in. Noah is a highly successful entrepreneur who recently wrote an article called ‘How to Step Outside Your Comfort Zone in 2018′.
It’s a well written article with some simple steps to accomplish this, which I definitely recommend reading.
However he makes one major error in how he defines growth in relationship to your comfort zone.
He says, “growth happens outside of your comfort zone.“
While technically true, it’s also ‘false‘ at the same time. Wait, how can something be both true and false at the same time? Let me explain.
Growth in your brain, mindset and body will happen when you go outside your normal programming, or what you’re currently wired to do easily now.
comfort zone 2ndskiesforex
The same goes for you and your trading, and this is why it’s important to go ‘outside‘ your comfort zone, so Noah is correct in saying ‘growth happens outside your comfort zone‘.
However, Noah fails to make an important distinction here regarding your comfort zone.
There is a range you can go beyond this where there is ‘growth’. This range or ‘zone’ has also been discussed by those who talk about ‘being in the zone’ or ‘peak performance’ (image below).
peak performance zone 2ndskiesforex
However, if you go too far outside this zone or range, you won’t grow at all. In fact, you will almost certainly fail.
Hence there is a range you can go outside of your comfort zone and still have growth. This is what I call the ‘challenge zone‘ or ‘learning zone‘.
Asking Ross to do 2.5 miles per day is ‘challenging’ himself.
But asking Ross to run 20 miles today, and he won’t grow. He’ll struggle, experience pain, and most likely will fail.
The same goes for you and your trading (especially if you’re struggling).
Where you are right now in your trading process, there are definitely some strategies, methods or tasks you are just not ready for right now.
For example, if you don’t know how to read the basic pillars of price action context in the forex market, you’re definitely not ready to trade a price action strategy. If you don’t even have a trading plan that you can easily execute day in day out, you’re not ready to trade $10 million dollars.
Hence while Noah was correct in stating that ‘growth happens outside your comfort zone‘, so does failure by going too far outside your comfort zone. Venturing too far outside your comfort zone is what I call the ‘panic zone‘ or ‘failure zone‘ (see below).
comfort zone learning zone and failure zone 2ndskiesforex
You have to make this important distinction (and know the difference) if you want to succeed in trading forex.
I think this is where most struggling traders in their trading process fail. I see many traders taking on methods, skills or strategies they simply aren’t ready for yet.
While I think it’s a good idea to ‘challenge‘ yourself and go outside your comfort zone, going too far will almost always lead to failure.
It’s important to learn what are the various steps, skills and mindset you’ll need to learn along the way so you don’t go too far outside your comfort zone, and set yourself up for inevitable failure.
Thinking you can start making money trading price action without having a trading plan, without proper risk management, or without forex training isn’t a path to success. It’s setting yourself up for certain failure.
This is one of the most common mistakes I see struggling traders and students make.
I get it…you seriously want to succeed in trading forex, you want to work from home, and make more money than you could in any ‘job‘. And you see that I make money trading and am a professional trader.
chris capre verified trading performance 2ndskiesforex
I get it…who doesn’t want to do that? That’s why you’re here, to learn how to trade the forex markets.
But there is a difference between the challenge zone (growing), and failing consistently (failure zone).
If you are constantly losing money trading, and consistently making the same mistakes, most likely you’re going too far beyond your current skill set.
You’re likely in the ‘failure zone‘, which 99+% of the time will lead to you losing money trade after trade, month after month, feeling like you’re not going anywhere.
losing money trading
If you have this feeling, that is actually a good thing, because it’s your self-image and unconscious mind telling you “Hey, you’re too far outside your comfort zone.“
If that is your regular experience, then it’s time to get a forex mentor, one with a proven track record of successful forex trading.
Chris-Capres-Verified-Forex-Trading-Results-2017
Hence if you want to stop making the same mistakes day in-day out, month and after month, losing money consistently, then check out my trading course or my mindset course, both of which give you insights into the psychology of successful traders as well as a step by step process on how to trade successfully.
Did I describe your process and trading experience? Does any of this sound like you? If so, I want to hear your comments and feedback below.

Successful Forex Trading: Why You Don’t Have What It Takes

successful forex trading why you dont have what it takes 2ndskiesforex

“It’s got me thinking, maybe I don’t have what it takes to be successful at forex trading.”

Half question + half truth, I hear this a lot from traders struggling to make any consistency or profits.

Ever asked this question? I have in my early years (many times). The answer though will shock you.

What I’m going to say is not ‘politically‘ correct in the forex trading world. I’m guessing most ‘gurus’ will not tell you this either.

The truth is, right now, in all probability, you don’t have what it takes.

And I don’t mean in the sense of the Henry Ford quote “If you think you can or cannot do it, you’re right.” That is not what I’m talking about.

What I’m saying is direct and crystal clear – most likely, you do not have what it takes to make money trading.

Wait, what? You’re a trading mentor, why are you saying this?

Because the answer – that you don’t have what it takes to make money trading, is true. Now if that seems depressing, daunting or scary, then you need to know this other key point.

The flip side to this coin, is you actually have what it takes to make money trading.

Confused? Keep reading as I’ll clarify in this article. In fact, I’ll take both sides of this coin, and show you why I’m right on both accounts.

First we’ll jump into the original sentiment – that you don’t have what it takes.

Then we’ll dive into why you have what it takes, and how you can re-wire your brain to making money trading.

What you’ll end up with is:

a) an understanding of why you think ‘maybe I don’t have what it takes to make money trading‘

and

b) how you can transform this sentiment while leveraging your firepower

Let’s begin.

successful forex trading what it takes to succeed 2ndskiesforex

Why You Don’t Have What It Takes

I’m going to start off with a number: 200,000. That is how many years ago some of our earliest ancestors (Homo Sapiens) emerged.

190,000 years later we shifted from hunter-gatherers to form small bands of farming collectives.

During the last 9,900 years, a ratio about our everyday existence held steady. It is a ratio that is still affecting you today while you trade.

What is the ratio you need to know about?

That 1 in 8 people died from protecting their families, loved ones, and fellow neighbors.

In the last 100 years, that ratio fell from 1 in 8 to 1 in 100. However, you, myself, and pretty much everyone today is still acting as if it was 10,000 years ago.

Our brains and nervous systems today still ‘react‘ as if 1 in 8 of us will die today.

Why is that?

Evolution. For 99% of our existence, our brains ‘evolved’ to protect us from threats. The goal was simple – survive to continue our existence.

This is an understandable goal. However it is probably the most dominant reason why you struggle with trading today.

Why?

Teflon & Velcro

What does teflon and velcro have to do with your trading today? I’ll get to that in a moment.

Just understand, for 9,900+ years, there was a rule our brains operated by. It was Eat Lunch, Don’t Be Lunch.

trading rule 2ndskiesforex eat lunch dont be lunch

This rule got so hard-wired into our brains, it now dominates the neural real estate you think, act, love, work and trade with today.

Every buy and sell decision you make is influenced by this rule and wiring in our brain. In fact you are probably aware of this right now.

Ever heard of the fight or flight response? It’s a survival reaction we have to either fight or flee when facing extreme danger.

Problem is, this doesn’t help us make money in forex trading. In fact, it makes it damn near impossible!

It is also responsible for a bias you have, which is at the root of this question ‘Do I have what it takes to make money trading?‘

What is this bias you have?

The Negativity Bias

Because of the rule (eat lunch, don’t be lunch) that dominated our mental activity over thousands of years, we developed a bias.

Every human brain has this bias wired in today. You were born with it, and likely will die with it.

In fact, this bias is so strong, if we mapped out all the neural connections for detecting threats, attacks, fears, doubts, & critiques, the ratio would be over-whelming.

You’d be outnumbered by a long shot, and not the kind of odds you’d bet against.

As it stands today, your brain will react with lightning speed to a threat (<.1 secs). How long would it take you to ‘respond’ to a positive stimuli?

About 5-7 seconds. Why?

Because threats could have killed us, jokes (maybe bad ones) will not.

Thus a negativity bias was born and dominates your trading today.

negativity bias in trading 2ndskiesforex

Take a look at that definition above and read it again. Let it soak in.

Now, if you are giving more weight to your negative experiences than positive ones in trading, how do you think that will shape your brain, neural wiring and mindset?

Before you fully ponder and answer this question, let’s get back to how this and our evolution affects our trading mindset.

Lamentably, there is nothing in our evolutionary history which was built towards trading successfully.

This is why when the price action moves against your trade, you are ultra-sensitive to it. It is also why every pip the market moves for you elicits a much smaller reaction.

Velcro & Teflon: Why Your Brain Isn’t Wired for Success in Trading

Back to the analogy of velcro and teflon, positive experiences slide off your brain (like teflon) while negative ones stick (like velcro).

velcro and teflon neuroplasticity 2ndskiesforex

The best example of this is – what days can you recall the quickest and easiest with the most details? Days you won a ton of money? Or days you lost big?

I’m guessing for every 1000 that answer this question, 9900+ will say the ‘big losing’ days. This is your negativity bias at work. This is thousands of years of evolution at play. 

You are fighting an uphill battle from the beginning.

uphill trading battle negativity bias 2ndskiesforex

It is also the reason why it’s true that you don’t have what it takes to make money trading.

The way your brain is likely wired right now, you don’t.  Most of our evolution as humans is against us trading successfully. 

There is no bias for you – only against you.

Hence when you think (maybe I don’t have what it takes to make money trading), technically, you’re right. Most likely it is your unconscious mind communicating something to you.

GOOD NEWS!

You also have what it takes to make money trading.

Wait, what? You just gave me 1000 words why I don’t have what it takes to make money trading. 

How can I not have what it takes, and have what it takes?

There is more irony in this statement than you know. But first, I’ll share with you why you have what it takes.

EDN & SDN

The great thing about your brain & genes, is also behind the reason why you have what it takes to make money trading.

The initials above (EDN & SDN) hint at this.

In one word – neuroplasticity. There are two key forms of neuroplasticity which are your weapons to re-wire your brain. They are:

1) EDN = Experience Dependent Neuroplasticity

2) SDN = Self-Directed Neuroplasticity

neuroplasticity in trading 2ndskiesforex

EDN is a shortened way to say your brain learns, adapts and changes from experience.

It means you can wire in new habits and correct mental errors to your trading performance right now.

A great way to remember EDN is through the following statement:

Neurons that fire together – wire together

Another translation or implication of this is: the most dominant neural networks will 95% of the time determine how you trade each day.

Regarding SDN (self-directed neuroplasticity), the best way to remember it is:

Consistent passing mental states create lasting neural traits.

Hence, if while you are trading, you are constantly:

-angry
-frustrated
-doubtful
-fearful
-or stressed while trading

You’ll only make these neural networks stronger. This only increases the chance you’ll make bad trading decisions.

And it certainly won’t help you protect your mental capital.

negativity bias and the feedback loop 2ndskiesforex

Wait, I thought you said this will help us make money trading?

It can and will. If you want to go beyond the negativity bias for trading, you have to employ different neural networks.

It also means you have to change the mental activity while you are trading.

The good thing is, this is not a long step for you. In just 20 minutes a day, you can re-wire this bias for success. I’ll tell you how at the end of this article.

Both/And

Remember how I told you it seemed strange to say you have what it takes, and also do not have what it takes to make money trading?

Both of these are true. The answer is not binary, or either/or.

Your brain has an evolutionary bias that means it’s next to impossible to make money trading.

But your brain also has built in mechanisms (neuroplasticity) which also make it completely possible to make money trading.

One interesting thing about the negativity bias is what it does to your brain and thinking. When this bias is dominant, you tend to see things in binary. You see things as either/or.

negativity bias in trading either or thinking 2ndskiesforex

How Does This Affect My Forex Trading?

It means…

-you’ll see every loss as ‘bad’, not as a learning opportunity

-when your stop loss is hit, you wonder if you did something ‘wrong’, not as it being a part of trading

-breaking even is viewed as something is wrong, not how close you are to breaking through

Hence when heavily influenced by this negativity bias, it means you’ll either think you have what it takes, or don’t. If you tend to think in either/or most of the time, or make these statements a lot, this bias is strong in you.

It is also probably why you are not trading and thinking in probabilities (only black and white).

An upgrade to this is seeing things as both/and.

This translates to:

-finding the ‘positive’ in things which seem ‘negative’

-understanding that a losing streak is part of the game

-looking for solutions instead of focusing on the problems

If you are wondering which side of this coin you are on, listen carefully to what you say to yourself while trading over the next few days.

Are you saying more of the ‘either/or’? Or are you finding ‘grey’ areas between contrasting points? The best place to look is in your thoughts/mental activity while trading, and you’ll have your answer.

NOTE: A great way to rewire this either/or negativity bias is via meditation.

Meditation helps you create a whole-brain state which heavily reduces the chance you’ll fall into the either/or state or negativity bias.

Click on this link to learn a meditation practice for trading.

In Conclusion

As you can see now, successful forex trading is challenging not because there is something wrong with you, but a simple fact of evolution. We currently aren’t wired to trade successfully.

It is also true you have inherent mechanisms in your brain to make money trading. 

You can:

-learn the skills needed
-can pull the trigger when your price action setup is there
-can stick to your plan & fill out your journal
-can make money trading

Evolution isn’t in our favor, but it’s time we shed this negativity bias which 90+% of the time no longer serves us and stand out from the crowd.

positivity bias standing out from the crowd 2ndskiesforex

To do this, you’ll need to build a new bias. You’ll need to re-wire your brain for success in trading and life.

If you want to know how, then check out my Advanced Traders Mindset Course which focuses specifically on this.

Now Your Turn

Have you asked yourself this question? Ever wondered if you can make money trading?

What ‘aha’ moments did you have from this article as I want to know so make sure to comment below.

Until then – may good health and successful trading be with you.

Trading Psychology: Are You Over-trading & How Do We Define It?

trading psychology 2ndskiesforex

I got a forex trader psychology question from a new student of mine who’s been struggling for years. He’s experienced a common problem you yourself have likely faced.

Here is what he emailed me below:

“I know this varies greatly based on internal and external factors, but about how many trades do you take on a daily basis on average?”

The real question he was asking is under the surface. But it’s a common issue many traders face, which we’ll get into shortly.

Before I do, here is their response below to my follow up prodding and questions:

“One of my weaknesses that I battle with (although getting better) is over-trading and feeling the need to be in the market.

To combat it, I stick to the H4 and Daily time frames. But again I get impatient sometimes…“

Over-trading

This is something many traders struggle with. The reason why you over-trade has two major underlying reasons.

Befor we dive into those, I’d like to point out some key things they said.

They are:

1) “Feeling the need to be in the market”

2) “I get impatient sometimes”

Note those two statements down for now as they are critical for this article.

But before we get into the reasons why you over-trade, we need a working definition of ‘over-trading’.

My definition of over-trading is as follows.

Assuming you are working with a trading plan, ‘over-trading’ is either:

 

a) taking any trade/s outside of your trading plan, or

b) taking any trades which cause you to exceed your maximum risk limits

 

If you hit any of the two qualifications above, you are (in my book) over-trading.

Notice I mentioned nothing about a) the number of trades and b) the time frames. This last variable is highly relevant.

As I mentioned in my last article, there is a common trading psychology narrative around price action. This is because the majority of those ‘gurus’ teaching price action all copied what they learned.

They are derivatives themselves, or derivatives of derivatives.

One key piece of mis-information from this entire camp is ‘higher time frames are better than lower time frames’. They also state ‘lower time frames are just noise and higher time frames give better signals’.

Despite the fact professional bank traders trade intra-day, they still proselytize this meme.

smb-training
(does he look like he’s being impatient and over-trading? source: smb-training)

GUESS WHAT? You can over-trade on any time frame. The time frame is not the root cause of over-trading. A lack of discipline is.

If you have not wired your brain to mentally execute your trading plan, the time frame will make no difference.

Just like if you have the habit of over-eating, you will do so whether you are at a restaurant or your own kitchen. The habit is within you and doesn’t just disappear when you change environments.

Neural networks are clusters of neurons in your brain. They take time to change. If you are dominantly wired right now to eat too much, you will regardless of where you are. The same goes for over-trading.

neural networks trading 2ndskiesforex

Notice what my new student mentioned earlier, “I stick to H4 and Daily time frames. But again I get impatient sometimes.“

For him, the time frames are completely irrelevant. His impatience takes over regardless.

I do not find it ironic that all those who copied their ideas about price action, also repeat the same notions about over-trading.

If there is no real engagement with their minds and the markets, one will never come to the idea that over-trading is not time frame dependent. That is why this meme is repeated.

If you want to dissolve the underlying root of over-trading (discipline & mental execution), you have to re-wire your brain.

Before we get into how you can do that, I’d like to address a few points about my definition of over-trading.

Having A Daily Risk Limit

For my members, I recommend having three to four risk thresholds as part of their trading plan. They are:

1) A max risk per trade
2) A max risk per day
3) A max risk per week
4) A max risk per month

A max risk per trade should be based upon your risk of ruin.

risk of ruin formula 2ndskiesforex

NOTE: You cannot calculate your risk of ruin if you are risking a fixed dollar amount per trade.

I’ve written extensively why risking a fixed percent per trade is far superior to a fixed dollar amount.

If you have a risk of ruin that is zero, mathematically you a) cannot blow up your account, and b) will make money.

A max risk per day should be a daily risk limit to avoid losing too much on any given day. The max risk per week and month are also based upon the same concepts.

If any one of the above is ‘optional‘ in my book, it is the max risk per week. Keep in mind, none of the above defines how many trades you should (or should not) take in a day to avoid over-trading.

If a basketball player is on a hot streak, you keep feeding him the ball as those streaks are critical to winning. Professional poker players know this as well – when hot, keep putting your chips down.

poker play hot streak 2ndskiesforex

The same goes for trading. Not pulling the trigger when you have a setup (with all conditions in place) simply limits your upside.

Why would you ever do that? If the price action context is prime for you to make a ton of money that day, you should be attacking the markets.

On the other side of the coin, I’ve had days where I started out with 6, 7, maybe even 9 losses in a row. But I’m not phased by this.

As long as I haven’t hit my risk limit per day, I’ll keep attacking the markets, sometimes buying and selling in the same day.

Ironically, on many of those days, one or two big winners either brought me back to break even, or helped me end up in profit for the day.

Had I succumbed to some notion about ‘over-trading = x trades‘, every one of those days would have ended in a loss. On top of that, each one would have ended with a much greater negative impression in my mind.

Yet how much confidence do you think I get from losing 9+ trades in a row, and still making money to end the day?

Just like a quarterback doesn’t stop throwing the ball because he’s had a couple interceptions and bad passes, the same goes for trading.

Your goal should be to win each and every day while maintaining your trading plan, risk limits and mental execution.

With all the above said, two things have to be addressed regarding over-trading.

Discipline & Wiring Your Brain

discipline in trading 2ndskiesforex

IMO, you should not be trading the markets without a trading plan.

Make sure to read my article ‘what if your trading plan is costing you money?‘ Inside this plan should be specified the 4 risk limits from above. On top of this, so should your strategies and instruments you trade.

“Your trading plan needs to define your actions & mental execution every time you sit down to trade.”

However, these plans are meaningless if you haven’t built the discipline to execute them.

In some sense, I get the reason why some ‘gurus’ say ‘avoid the lower time frames as you will over-trade there‘.

Part of the proselytizing here is because it fits their story about higher time frames. Saying lower time frames are the boogeyman for your trading is a way to continually market & perpetuate their narrative.

But in reality, telling you to avoid the lower time frames is based upon fear.

That you will be powerless if you enter the seductive Scarlett Johannson-like bedroom of the lower time frames.

That you will become a helpless meth-like trading junkie should you go there.

One of them even uses this image to portray what happens when trading the lower time frames (see below).

over trading myth

FYI, I trade the 5 min charts (sometimes the 1 min charts) when trading price action intraday, and I’ve never looked like that. My mind is as calm as a hindu cow whether I’m trading the 5m or daily charts.

The time frame is irrelevant because I’ve wired discipline into my brain. Many of my students also trade the intra-day time frames, and none of them look like this (SHOCKING!).

I met a prop-firm day trader at the Singapore Trading Seminar I did this July. Guess what?

He didn’t look like that at all! He was one of the nicest, most relaxed and intelligent guys I’ve met.

It is true, day trading does increase CL (cognitive load), but it doesn’t turn you into a crazy person.

Photos from the Singapore Trading Seminar
singapore trading seminar 2ndskiesforex

Me showing a live trade and explaining the price action behind it
chris capre singapore trading seminar

I’m guessing the proof is in the pudding. Many of you are already trading the higher time frames, and still have issues with over-trading. The underlying root cause is discipline in trading, and that comes down to how your brain is currently wired.

If you haven’t wired it into your brain yet, you won’t be able to execute discipline while trading. It’s as simple as that, regardless of the time frame.

If you fear something will happen, you create psychological tension around this fear. This only INCREASES your negativity bias, which further perpetuates this behavior.

In Conclusion

We have to adopt a different working definition of ‘over-trading’. We have to get beyond the time frames cause over-trading notion.

I define over-trading as a) taking any one trade outside your trading plan and b) taking any trade which causes you to go over your risk limits.

When we look at over-trading in this context, the time frame you trade, nor number of trades matter.

Your goal should be to execute your trading plan as is (and nothing more). And that needs to include your risk limits while pulling the trigger when you need to.

Do you want to increase your price action skills to trade on any time frame? Check out my Trading Masterclass Course which teaches you the same trading psychology strategies I use every day, regardless of the instrument or time frame.

Need to become disciplined in trading? Visit my Advanced Traders Mindset Course to learn specific forex trader psychology techniques on building discipline.

Now Your Turn

Have you noticed you over-trade even on the higher time frames?

Does this new definition of over-trading help change your perspective?

Make sure to share your thoughts on signs of overtrading below.

Until then – may good trading and a successful mindset be with you.

5 Reasons Why Hedge Funds Aren’t Trading Confirmation Price Action Signals

albert einstein not following the crowd
This article is going to be a tad ‘controversial‘ to many developing traders out there. It is not meant to be negative in tone or start arguments.
It is to get you to question what you’ve been told about price action. It is to open up a dialogue, about another way of approaching PA beyond the typical narrative.
The general price action story spun out there goes something like this;
To make any buying/selling decisions and pulling the trigger, it ultimately comes down to one final piece of the puzzle.
This final piece comes in the form of a ‘confirmation price action signal‘. And said ‘signals’ only arise in the form of a 1 or 2 bar combination.
They come in many names, such as pin bars, inside bars, fakey/false break setups, or engulfing bars.
pin bar fakey price action signal failed
And the follow up to this magical fakey pin bar signal…
pin bar fakey price action signal failed 2ndskiesforex
Regardless of the name, the idea is the same. You should not enter the market till you see one of these famed 1-2 bar price action patterns.
Thus far, everyone spinning this narrative are derivatives. What do I mean by this?
Those who preach confirmation price action signals, copied all they knew (with minor adjustments) from someone else.
Many of them were students of one individual (Nial Fuller). A little investigation will reveal Nial Fuller’s price action strategies are also derivatives.
He was a member of J16 and copied all he knew from there, again with only minor adjustments.
If you look at most of the price action mentors, you’ll see the overwhelming similarity & repetition. Now you know why the narrative around PA sounds the same.
Essentially, they are either a derivative (copy) or a derivative of a derivative (copy of a copy). What you’ll also notice is none (or almost none) of them have institutional experience.
What’s really being sold here is a ‘green light buy/red light sell‘ methodology. It’s targeting easy prey who don’t want to do the work, who want understanding price action to be easy, who want to be lazy traders (in their own words).
Yes, with just three simple setups that are easy to find, you too can make profitable buying and selling decisions! Or so you are told…
The reality is far different from this (especially in institutions and hedge funds). By the end of this article, I’m guessing you’ll start to see why.
Below are my 5 reasons why hedge funds don’t trade confirmation price action signals.
 

Reason #1: Paying 5-6 figures To Train Their Traders?

smb training
photo: smbtraining.com (does it look like he’s sitting there just waiting for daily pin bars to form???)
The skill and time required to identify pin bars, inside bars, fakey’s and engulfing bars is minimal (a few months max). Shoot, you can even build an algo to do this for a few hundred dollars.
Bank traders on average will make 2000-4000 trades before they can trade the bank’s money. Hedge funds will also spend large amounts of money and time either training or finding talented traders.
If trading is as simple as finding these three patterns to enter the market, why spend so much to find/train traders what a $300 algo could do?
There is a reason for this.
Because reading and trading PA goes beyond confirmation price action signals. Because buying and selling decisions aren’t as simple as these 1 and 2 bar patterns.
If they were, there would never be the need for such expensive and exhaustive training programs. Would you ever spend that much training someone to trade daily pin bars?
My guess is no.
 

Reason #2 Macro + Technical

prop tradinng firms
 
If a fund is not trading algorithmically, most likely they are incorporating a combo of macro (read fundamental) + technical analysis.
I talked about this in my article Book Review: Cultures of Expertise in the Forex Trading Markets. The author (Leon Wansleben) is a sociologist who followed forex traders at a top-10 German bank desk for over a year.
Never once are the words ‘pin bar’, ‘engulfing bar’, ‘inside bar’ or ‘fakey’ mentioned in the book.
What you do find is traders working a combination of macro/fundamentals + technical analysis into how they trade.
They also discount the ‘lower time frames are noise‘ meme pretty quickly. Why?
Because most bank traders have to be reading the intra-day price action (due to flow trades, which accounts for about 70% of their trades).
By the end of the book, you realize entering the market goes way beyond pin bars, engulfing bars and inside bars. You realize they aren’t even trading those to make their buying and selling decisions.
 

Reason #3 Confirmation Decreases Accuracy and Profitability

 
“I was in (insert derivative name here) price action course and quickly realized how weak it is compared to yours. 
I’ve made over 20% in the last few months using your methods. I’m glad you poked giant holes in his price action strategies. 
Otherwise I’d still be waiting for pin bars and inside bars, missing hundreds of pips.“
After posting my video How A Typical Pin Bar Entry Is A Retail One, many struggling traders started to see price action differently.
They realized how many times they were sitting on the sidelines doing nothing when others were making money. They also realized how waiting for ‘confirmation signals’ decreased their accuracy and profitability.
To learn why this is the case, watch my video below.
pin bar entry is a retail entry
 
 

Reason #4 Waiting for Confirmation Price Action Signals is Passive Trading

 
Hedge funds and bank traders are (if anything) passive when it comes to entering the markets.
Institutional traders would not (and could not) be making trading decisions once a daily pin bar has formed.
If they were doing this so consistently, they’d be picked off by HFT’s or predatorial funds who could see their entries a mile away.
This is on top of the fact they’d all be competing for the same liquidity and relative price, which would only mean a worse entry and lesser profits on the same trading idea.
A little investigation into how predictable these entries are will change your perspective on trading.
 

#5 The Pepsi Challenge

pepsi challenge
Ok, let’s say you are a devout believer the real way to trade price action is via confirmation price action signals.
Let’s say the above 4 reasons didn’t convince you. We can simplify this through a pretty simple test – The Pepsi Challenge.
Your challenge, should you choose to accept:
Walk into a dozen or two hedge fund offices, bank trading desks and prop trading firms. Then ask them these two simple questions:
 
1) If you don’t see a daily pin bar, engulfing bar, or inside bar, are you staying out of the market?
2) If you do see a daily pin bar, engulfing bar, or inside bar, are you loading up on your position even more than usual?
 
I’m willing to bet the answers to the above questions will be a resounding NO.
More likely, you’ll get several laughs, along with someone perhaps escorting you out of the office.
 

To Date

waiting 2ndskiesforex
As it stands right now, nobody has taken me up on this litmus test (let alone proven otherwise). I’m still waiting as I posted this challenge many months ago.
I am confident(while open to being wrong) that after you take this test, you’ll look at price action differently.
Once you let go of the current narrative, you’ll be forced to examine how order flow and the balance/imbalance between buyers and sellers is reflected in the price action. You’ll begin to see how liquidity impacts the PA and volatility.
And you’ll start to trade contextually, meaning through the price action context.
That is when your real training in PA begins, when you let go of the freshman narrative. You’ll also realize trading those 1-2 bar patterns does not build your trading skills.
If trading pin bars really built PA trading skills, then bank traders would be going through thousands of reps on those alone.
It takes no skill to find those signals and spend your time looking for them. And doing so discounts all the other candles in the process.
 

About All Those Other Candles…

 
All those other candles is what forms a structure. This ‘structure’ is (by and large) a representation of the order flow.
The order flow gets reflected in the PA, and this PA forms the price action context.
This is where your study should be.
 

In Conclusion

 
Looking for 1-2 bar patterns doesn’t make you a price action trader. It makes you candlestick trader, and that is a different approach to the markets.
When you investigate it, hedge funds aren’t trading via confirmation price action signals. And when you stop waiting for confirmation, you’ll find yourself getting better trade locations and higher + R per trade.
Looking at the market contextually will change your mindset. You’ll start trading and thinking in probabilities.
You’ll also discover how waiting for confirmation is a retail traders mindset.
With all that being said, do you agree or disagree with these forex confirmation price action trading misconceptions? Can you see how hedge funds aren’t trading price action signals this way?
Even if you don’t agree, please do comment and share below (in a non-negative tone por favor).
Regardless, I’m hoping you’ll really open up to other ways at trading price action.
Until then – may good health, trading profits and success be with you.

, ,

(Video) Live Price Action Trade Setup +7R | +216 Pips Profit

Here is a live price action trade setup I made on the EURJPY, using only a 30 pip stop and a +216 pip target. The trade profited +7R, with the final trade result and screenshot below.

eurjpy 2hr chart live price action trade oct 31 2014 v1

Enjoy this EUR JPY forex trade video and want to make trades like this? Join my Price Action Course where you can get access to my daily trade setups commentary, live trade setups forum, private member webinars, and more.