price action – Page 6 – 2nd Skies Trading

Tag Archive for: price action

The Beggar and The Trader

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

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

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

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

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

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

You Will Have To Do This Trading

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

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

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

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

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

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

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

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

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

Forex Strategies, Trading Mindset & Risk Management

End of The Trading Week – What Are You Doing?

Hello Traders,
It is now the end of my trading week and I wanted to ask a critical question:
When the trading week ends, whether it has been a winning or losing week, and you know you will not make any more trades, what do you do?
Most typically shut down the charts, close the platform down, exhale and then walk away.
If it has been a winning week, I’m guessing many of you go for a drink to celebrate your hard work. For a losing week…I’m guessing many of you go for a drink to forget about your mistakes and what you lost.
Instead, I suggest trying another path.
Reviewing the Tape
I noticed a long time ago the best players and athletes spend tens of hours per week reviewing tape. They are looking for what they did well, but also zoning in on their mistakes, so they know what to spend energy on correcting. Ironically, some of the best traders I know do the same.
If you are really passionate about this, and are excited to get back to the chair (win or lose) after the day, week or month – then you’ll come back and work on your mistakes while re-enforcing your successes.
Oftentimes, the difference between a successful and unsuccessful trader, is doing all the little things which add up to a big result. Taking time to review your trades and performance is one of those little things that has a far reaching reward.
There are many ways you can do this easily, using programs such as Jing, Screencast or Camtasia, which are all done by TechSmith (some are free).
How I do it is I have a folder, with sub folders for each month and week. After a trade is done, I take a screenshot (or video), color code the trade (green for a win and red for a loss), and put them in the trading folder for that week. Below is a screenshot from a live trade I video recorded, which I shared in the member traders forum.

When trading is done for the week, after getting a brief cup of tea, I come back and sit down for my analysis on what I did well and what I need to work on. Sure, at the end of the week, I’m a bit tired. But I love what I do, and dedicate a ton of energy to becoming a better trader each day, to increase my skill and craft.
What I often find is there are patterns in the price action, or Ichimoku, that repeat themselves in my winners and losers. These patterns get stored in your long term memory and central nervous system.
If you do this enough, when you are trading in real time, you will be better able (and prepared) to spot patterns, either consciously or unconsciously, which will lead to finding and making better trades.
You will spot patterns on whether it’s time to reverse and go short, or time to exit a current trade, or time to enter before a big move. All of this review builds pattern recognition skills which lead to automaticity – a critical tool for success and mastery of any skill.
Trading is a constant learning process – it never ends, and that means a constant effort and fine tuning of your skills. So the next time your week ends, consider taking a moment to review your week of trading, and build a little habit that goes a long way.
Kind Regards,
Chris Capre

Forex Strategies, Price Action Trading

2 Tips for Placing Highly Effective Stops

One of the more difficult aspects for traders is placing highly effective stops. Either most beginning traders place stops too tight or too far away. Place stops too close to your entry and they are likely to get hit. Too loose and they unbalance your risk/reward ratios.
In today’s article, I’m going to share 2 tips for placing highly effective stops and how these can help you increase your accuracy and profit potential.
1) The Reason You Entered the Market
You should always have a reason to enter the market. Ideally it based on a price action pattern that has repeated itself in the past, and will likely do so again. All patterns have variables that repeat themselves, and it is this ‘repeating‘ we want to happen again, thus allowing us to profit from a predictable event.
If the reason you bought a pair was because the dynamic support and 20ema was holding on the 4hr chart several times, then your reason to exit should be a violation of this.
I recently wrote in my market commentary how the S&P 500 bounced 4x off the 20ema. If the reason for buying was the anticipation price would bounce off the 20ema again, then my reason for exiting would be the opposite of this happening. Today this is exactly how it played out, bouncing for a 5th time, and offering a trader to profit from it greatly (see chart below).

Now if the price action breaks and closes below the 20ema (something it has not done in 11 days), then the pattern has broken down, and it is no longer a tradable event.
But in terms of placing a stop with this trade setup, we could have looked for the largest breach below the 20ema over the last 11 days, and placed our stop just below this upon entry. Had you done so, you could have easily grabbed a 3x reward play on the last 20ema touch.
2) Stops Are Best Placed Above/Below Support & Resistance Levels
Institutional traders place their orders around levels more than anything else. When many orders from a lot of players with a lot of money, occur at a particular price, it often creates a strong reaction at a level. And when price ‘reacts‘ to this level more than once, it often becomes a key support or resistance level.
Thus, stops are best placed above or below key support and resistance levels. It is here that the larger players are placing their orders, and thus likely to defend your entry and stop.
If you do, then in following the logic of rule #1, we should be getting out of the trade if the level is clearly breached.
Lets take both sides of a potential trade below and see how we could have placed our stops effectively buying or selling.
EURUSD 4HR Chart

Starting with the left side of the chart above, we have a strong impulsive price action bull run, that finds sellers just below 1.3400 , or point 1. This selling pulls back to A where it finds support around 1.3250, and then re-attacks the sellers just below 1.3400 again at point 2. Now if you were a seller, and had seen price hold just below 1.3400 2x, and sold at pt 2, the logical place would be to put it about 10 pips above the round number, while targeting the buyers around 1.3250.
Why 10 pips above 1.3400?
Because this is a round number, statistics show typical stops for selling orders placed at round numbers are often within the first 9 pips above (so 1.3400-1.3409). Of course, always make sure price action confirms this, but this is a general rule you can use.
Now if you want to be a buyer in this case – taking a with trend continuation play, then buying at B or C, with a stop 10-15 pips below 1.3250 would have also worked out, targeting the resistance at 1.3400.
Now trades will not always be this clean in terms of support and resistance levels, which leaves you two options;
1) Only trade when the price action is really clean
or
2) Learn to place really efficient stops
I understand the latter may be more difficult to do, but you can find more high probability setups by adding a key component.
Impulsive Moves
One way to increase your chance of having a profitable trade, and placing an efficient stop, is to trade with trend more than counter-trend. When trading with trend, the majority of the order flow is already on your side, so look to consistently trade with impulsive price action moves, not corrective ones. If you can do this, then you will build your confidence in placing efficient stops, because you are getting in with the larger players.
A great example of impulsive and corrective moves is in the chart below.

You will clearly see how much more profitable one would be selling the impulsive moves (white boxes), and not the corrective moves (green ones). When you can learn to spot and trade with these moves, you will find your stops tend to get hit less, and your full profit targets achieved.
One Final Note
It should always be noted, when a beginning trader looks at a trade, they see profit first, and risk second. A professional on the other hand, looks at controlling risk first, then profit second. So once you have a trade idea and potential entry, figure out your stop – which should be placed where the market should not go if you are correct.
From here, calculate your risk in pips, and then find a target which can be easily achieved with consistency. If the math works, then pull the trigger, and let the trade play out.
In Summary
Placing stops tends to be one of the more confusing things for beginning traders, as they are often placed too far or too close to your entry. By learning to place stops close to key support and resistance levels, you will find they are more well defended than it no-mans land.
Also, by placing stops based on what the market should not do if you are correct, then you will find your stops get hit a lot less.
Lastly, when trading with impulsive moves, you increase the probability your trade will be profitable since you are trading with the flow of the larger players.
To learn rule based systems for placing effective stops, limits, entries and exits – make sure to check out my Price Action Course.
Kind Regards,
Chris Capre

Forex Strategies, Trading Mindset & Risk Management

Trading Is Not A Fashion Contest

There seems to be some fascination with newer/beginning traders to find this perfect setup, this small set of circumstances that give price action the appearance of a great trade opportunity. You’ve probably heard about these patterns and setups before, often referred to as Pin Bars, Engulfing Bars, Inside Bars, etc.

Beginning traders become hypnotized, thinking these price action patterns are all you need learn to trade the market, as if trading were a fashion contest, and your goal is to find the best dressed setup.

The problem is, this is a really confined view as these patterns are more often the result of order flow – not the cause of it.

A Means, Not the Reason
These price action setups discussed above, are a means to get into the market, not the reason why you should be. And it’s often the case, they are the secondary reason why you should be entering the market.
The reason why you should be getting into the market, is because your understanding of the price action & order flow in the overall market, gives you an over-weighted picture as to a clear direction in the market.

This direction could be for 20 minutes, hours, or even days. The amount of time it will likely maintain that direction is not important. That the price action gives you an over-weighted picture of the direction IS!

And when this happens, there is a trade opportunity. If that opportunity offers you a good mathematical reward/risk play, then you should be trading it – not because of some picture perfect setup.

Trading is Not A Fashion Contest
How many times have you seen a picture perfect setup that completely failed? I’m willing to bet dozens of times, and if you trade long enough, hundreds or thousands of times.
Why is that?
Because trading is not a fashion contest where you are looking for the best dressed setup. Because price action setups can and will fail, which should communicate to you – not to become fascinated with finding the perfect price action setup.
What it should mean, is you want to develop your ability to read the overall picture of the market, understand the order flow behind it, learn to read the impulsive and corrective price action. Then, look for an over-weighted scenario. Once you find it, check the math to see if it’s favorable. If so, then take the trade.

Missing High Quality Signals
If you are always on the hunt for the perfect setup or trade, you will likely be completely missing high quality signals passing by right in front of you.
The greatest mistake of higher time frame traders is they often do not take great trades that are right in front of them, because they are waiting for the ‘perfect‘ setup – one that will hit them over the head.
The problem is in passing up these trades, they are also passing up high quality signals that offer a mathematical edge and profits.

Ironically, the greatest fallacy of intraday traders is they will often take trades that are not there, or not of high quality. Although it may seem like the former is better than the latter, both are the same!
The higher time frame trader makes a lot less profit because they pass up really high quality signals, looking for their perfect match.
Meanwhile, the intraday trader while often having more profits, generally has slightly more losses, because they are taking trades that are not there. Their upside is higher for executing their edge more, but the extra losses pull them back.
Thus, when you really see this clearly, these are two sides of the same coin! The trick is to find the balance and wisdom of the two, not to stay on one side of it. This is the knot of trading you have to untie.

A Fantasy World
Spending your time looking for the perfect setup is living in a fantasy world. It’s like looking for the perfect partner – how many people have you really met that have one? How many people have you met thought they found one, & were completely wrong? Food for thought – but trading is not a fashion contest, and it’s not about looking for the perfect setup.

Same Setup – Different Result
There are many times several of my price action traders spot the same exact setup, yet end up with completely different results.
How could that be?

Because they managed the trade differently. One took profits a little early (but still ended up profitable), while the other caught a huge portion of the move.
Although it may seem like this one trade may not mean much – it means a lot if its repeated.
When trader A encounters a series of losses (and you will, regardless of your strategy), their downside will be more severe and they will take more time to recover. However when trader B encounters the same downside period, their recovering will be faster, because they padded on more alpha to their trading account. For them, it only takes a few large wins to erase a lot of losses.
Keep in mind, they both spotted the ‘perfect price action setup‘, yet they both had different levels of profits.
What was the difference? In how they managed the trade.
This should be communicating to you, what is far more important than finding the ‘perfect’ price action setup, is learning how to manage the trade. And this really comes down to three things;
1) Understanding Risk Management
2) Learning to Read Price Action In Real Time
3) Managing Your Emotions/Mental State

Perhaps you can find the perfect setup, but fail to do the three above, & your perfect setup is powerless to deliver consistent profits. Bells should be going off in your head now about what you should be spending your time studying. It’s not how to spot a pin bar, or engulfing bar, or some other magical bar. It’s about setups, price action and context.
These pin bars, engulfing bars, or any bars are easy to find, and take little mental effort. The learning process for this should be short.
But the learning process for the three things I listed above prior, should be never-ending.
I understand why many of you have made this mistake. There are these so called ‘authorities‘ and ‘masters‘ (notice self-labeled as no peer will call them that), who claim you only need 3 of these ‘setups’ to understand the market. That these great setups only occur on higher time frames, that intraday price action trading is to be loathed, that accuracy and profitability has a linear relationship with time frames.
Ah yes, and don’t forget the three golden setups – how convenient! As if a market with over a million participants, composed of retail & institutional traders, hedge funds, banks/brokers, pension funds, HFTs, intraday traders, swing traders, long term position traders, etc. are all subdued by these overlords of price action patterns.
High quality signals occur on every time frame, and there are profitable traders across the world trading on almost every time frame. Intraday price action trading is not to be loathed – that is just a personal feeling of some, while a ATM machine for others.
Who is right? Neither – thus don’t hate intraday trading because it doesn’t work for you. The greatest mistake a trader can do, is to think their world and thoughts about reality – ARE REALITY! As if your wisdom and insight is so brilliant, so total, so complete, that it has a monopoly on the truth about trading.
Does that sound reasonable to you? Or does it seem more likely there are many ways to trade successfully, and the best way is what’s comfortable for you.
Just remember, what may be comfortable for you, may not be for another, and neither one individually is reality by itself.

Heed the wisdom of Obi-Wan Kenobi who once said, ‘Only a Sith sees in absolutes‘. Don’t be the Sith in trading, or follow a Sith.
Find wisdom in things, then find what is most comfortable for you, while constantly challenging yourself to take things to the next level. Rarely ever where you start this journey (both in trading and in life) is where you end up. Thus remember, trading is not a fashion contest, but it is about managing risk, your mental state, and learning how to read and trade price action in real time.

Forex Strategies, Price Action Trading

2 Price Action Tips For Beginning Traders

Today’s price action tip article is designed to give any beginning, or non-profitable trader, 2 critical tips to help accelerate your learning curve and avoid the pitfalls almost everyone falls into. If you can learn to follow these two beginner forex trading tips, then you will find yourself making more winning trades, along with less mistakes that tend to get you in trouble.

Trading is already hard enough, regardless of your level, so integrating these two tips will help you to make more winning trades.

Tip #1: Trade Only When The Price Action & Direction Is Clear
Although this may seem confusing for the beginner, as price action rarely seems clear, there is actually a simple model to determine whether the price action and direction is clear.

The model I use daily to determine the direction/clarity of the market is looking for impulsive price action moves. To briefly sum it up, impulsive price action is when the institutional players (those that move the market) are either heavily buying or heavily selling the market. You can spot these moves by three simple characteristics;

1) The bars are quite large

2) They are mostly one color

3) They have closes towards the highs or lows (in the direction of the move)

When you see these three things, you almost always have an impulsive move. And when you have an impulsive move, those that move the market are predominantly pushing it in one direction, which is the direction you want to trade with. When you can find the correct direction, and trade it, you give yourself the greatest probability of making money.

An example of some impulsive moves are below, and you will see when looking at the chart, you will definitely want to be trading in that direction.

Silver 4hr Chart

Looking at the chart above, you will see two colors of boxes; White and Green. If you look at all the white boxes above, you will all notice they have the three characteristics of impulsive moves described above.

Compare them to the green boxes – these have the opposite of the 3 characteristics of impulsive moves. These are called corrective moves, and for beginning traders, they should be avoided as a whole. When in doubt, if you do not have a clear market or impulsive moves, avoid trading.

Often times for beginning traders, finding the right direction is difficult, and it seems like you tend to find the opposite side of the move. By learning to only trade with impulsive moves and the price action is clear, you are saying to yourself, ‘I’m only going to fish when the easy fish are around’.

Tip #2: When Trend Trading – Best to Buy or Sell When the Prior Bar Closes in Your Direction
This is a general rule I suggest to use until you get really good at trading trends. The reason for this is simple;

a) If you are looking to buy in an uptrend, you have a greater chance of being correct when the last bar to close, closed bullish.
b) If you are looking to sell in a downtrend, you have the greater chance of being correct when the last bar to close, closed bearish

If you think about it – when looking to buy in an uptrend and the last bar closed bullish, it is a confirmation for the last candle (and time), the bulls were in control. This bullish close is more likely to inspire bulls the trend is still alive.

Contrast this to buying when the bears demonstrated control on the last bar. This means they dominated the order flow for that bar, and may be pushing against your orders. This increases the chance the bulls will take profit after seeing a bear bar as opposed to a bull bar (continuation).

However, if the bulls demonstrated control on the last bar, then they are likely still present pushing the market in your favor, so this gives you a greater probability to have follow through on your trade when you enter the market.

Two examples are below.

GBPJPY 4hr Chart

In this chart, we clearly have an uptrend, which offers a couple of with trend pullbacks. In these pullbacks, you will see two PBL’s (Pullback Lows), which led to a breakout of the prior SH (Swing High) for the trend. You will notice in both of them, the low for the pullback was a bull candle, and the follow up price action was a strong series of bull candles to follow.

Another example is in the chart below on the EURJPY 4hr Chart

In this chart, we have 3 major with trend pullbacks, and in two out of three of them, the PBL’s had a bull bar at the bottom, also demonstrating this principle. As a general rule, bulls will feel more confident buying a pullback (or breakout) in a trend, when the last bar closed bullish. This is a stronger communication the bulls have been able to take control of the price action and order flow for the last bar.

In Summary
Trading is already challenging enough, and finding the right direction is one of the most crucial aspects to making good trades. In the beginning, you already have enough to think about, so try to keep it simple, and trade when the direction is clear. Look for impulsive price action moves as much as possible, and when you find them, trade in that direction.

However, when the price action is not clear, try to stay out until a clear signal and market emerges.

When trend trading, you have a much better chance in the beginning, if you buy/sell when the last bar closes in your direction. This closing in your direction is a clearer communication from the market, the bulls/bears are more likely in control, and in your favor.

I hope these two beginner forex trading tips help you.

To learn more price action techniques and systems, make sure to check out my price action course where I have a large community of traders, posting live trade setups daily, and I teach them how to read and trade price action.

Forex Strategies, Trading Mindset & Risk Management

Developing A Successful Forex Trading Mindset Pt. 2

In my previous article Developing A Successful Forex Mindset Pt. 1, I discussed how your trading mindset is essentially a product of three things;

1) Your Neuro-Physiological Wiring

2) Your Mindset of Level of Mindfulness

3) Your Psychological Conditioning

I focused specifically on how your Neuro-Physiological Wiring, specifically how your mind and brain are integrated and help in your development as a forex trader.

I also talked about the three main fundamental functions of your brain (regulation, learning, selection) and how these mental functions are critical for building a successful forex trader mindset.

Today I’ll focus on number two from above – how your level of mindfulness helps to build your trading mindset – gearing it towards success or failure.

Your Level Of Mindfulness
As a general definition of mindfulness in trading, your mindfulness equates to the degree of awareness and attention to both your inner and outer worlds. Although this is particularly critical during the trading process (including just before and after), it is also connected to your mental activity and thoughts separate from trading.

Why?

This is because there is no compartmentalized section of your brain just for forex trading. We didn’t evolve to be forex traders sitting in front of a computer for our survival, so we are using skills and neurons from all portions of your brain. Because the brain is an interconnected whole, our experiences in life around wealth, mindset of abundance, family, memory, fear, greed, confidence, and more, all effect our trading mindset, and thus – how we make trading decisions in the moment.

Particularly true for trading (but also in life), your brain learns primarily from what you attend to in the moment. In an ode to Star Wars fans, Qui-Gon Jinn once stated, ‘your focus determines your reality‘. Thus, since your mind essentially learns from what you focus on in the moment, your level of mindfulness is the gateway to taking in helpful information (and avoiding non-useful info). How you perceive information (internally and externally) via your level of mindfulness, is what facilitates your learning process and thus trading mindset.

30-80x a Second
I’m going to be sharing a few ways you can build your level of mindfulness to sharpen your mental faculties, but wanted to briefly mention the potency of mindfulness practice.

In a study in 2004 by Lutz et al., he examined various Tibetan meditators as they went deep into their meditation and he found something highly impressive. Lutz noticed these meditators produced an uncommonly level of powerful and pervasive brainwaves, whereby unusually large regions of neural connections were pulsing in a ballet like synchrony. These large regions of neural connections pulsed at 30-80x a second allowing them to unify large territories of the mind.

Part of Einstein’s incredible mental faculties were his ability to involve large regions of his brains to work together via the cerebral cortex. His level of activity and connection (or higher) has also been found in those meditators who have build up their level of mindfulness via a sitting meditation practice. So a genius level IQ or mental abilities, along with highly perceptive qualities are not reserved for people born with these gifts.

Like all things in the mind, they can be learned and developed, particularly through mindfulness practices.

Mindfulness & Wisdom in Trading
As a whole, trading wisdom and mindfulness is not your ability to spot price action patterns in the charts, or understand proper risk management. Trading wisdom and mindfulness comes from a few steps;

1) Understanding what hurts and helps your trading process

2) Based on this understanding and experience, letting go of those habits which hurt your trading process

3) And strengthening those that help move your trading forward

As a whole, mindfulness and wisdom in trading are supported by the three basic functions I mentioned in the last article (regulation, learning and selection). Your brain learns through forming new circuits, strengthening new ones and weakening others. It selects through experience what is valuable and what is not.

Mindfulness in turn leads to new (and accelerated) learning, since your attention shapes what neural circuits are built. Regulation is done through a combination of excitatory and inhibitory activity. Thus, by learning to improve these three processes, you will improve your neural functions, and thus improve your trading mindset.

Two Methods For Building Mindfulness
Although there are dozens of methods to help you build mindfulness which will flood into your trading, I will talk about the two that I have practiced for over 12 years now; Yoga & Meditation

Over a few thousand years old, Yoga has hundreds and hundreds of scientifically proven benefits, such as reducing fat, increasing muscle tone, improving digestion, enhancing your sex life, glandular function, and relaxing your central nervous system (or CNS).

Your CNS regulates an enormous amount of activity from motor to mental activity to breathing. Are you mouth breathing rapidly? If so, you are likely to be more excited, emotional and less relaxed/focused during trading. Yoga is a great practice to help build both a relaxed CNS, but also to build awareness, both physical and mental.

To really do yoga well, you have to maintain awareness of your entire body, and control your internal energy. Any inability to do this will manifest in your yoga practice. Don’t believe me, try and do a balancing pose (like tree pose) and see how long you can hold it? I’m willing to bet almost any experienced yoga instructor can hold it for much longer than you. How so? Through a greater ability to relax their body, mind while maintaining awareness.

Thus, Yoga is a fantastic option for building mindfulness as that is the root of all yoga practice.

Meditation is another alternative, particularly silent sitting, sometimes known as vipassana, shi-ne, zazen or many other names. More than likely there is a center around you that offers a silent sitting practice, but those who engage this practice fully not only notice mindfulness benefits, but greater clarity, happiness and without a doubt – better neural functioning.

The general goal of any silent sitting practice is to build your mindfulness and awareness in the moment.

Many people wonder how I became a successful trader being self-taught. I am unlikely smarter than many of those I teach. Nor did I take a single economics or business class in college. But one edge I had for sure, was my yoga and meditation practice over the last 12 years.

This helped accelerate my learning curve as I figured out much quicker what to focus on, what price action setups were high probability, how to build my trading skills and trading mindset to be successful. If there was one key edge between me and others, it would be this, and the benefits continue ad infinitum – probably the best investment and ROI I could have ever come across in my life.

Regardless, these are a few options for building a successful trading mindset and your mindfulness in trading.

In Closing
Your mindset, brain and mental activity is what forms your trading mindset, and thus – determines your level of success. Mindfulness in trading equates to the degree of awareness and attention to both your inner and outer worlds. This would mean your emotions, your level of relaxation or excitation, your ability to focus in the moment and detect the order flow in the market, along with how your mental activity is helping or hurting your trading decisions.

Mindfulness increases your learning process by focusing on what is beneficial and profitable for your trading process, while avoiding what sets you backward.

Two practices you can engage in to build your mindfulness are yoga and meditation, which will sharpen your focus and mental activity so you get more out of your brain and mind when trading.

This is part two of the three part series on Developing A Successful Trading Mindset, so stay tuned for the last edition soon. But I hope this gives you some ideas of looking beyond the strategy to what may be keeping profits and success in trading just out of reach.

Kind Regards,
Chris Capre

Forex Strategies, Trading Mindset & Risk Management

Setting Trading Goals for 2013

Now that 2012 is wrapping up for traders, I’m guessing many of you (like myself) are dying to get into the new year of trading. During this time, it is a fantastic opportunity to reflect upon what successes you had last year, but also what you need to work on.
A common practice and tradition for people before the new year is to set goals or what some refer to as ‘resolutions‘. Did you know that over 80% of all New Years resolutions around losing weight or getting into shape fail? Similarly for traders, virtually the same amount of profitable accounts last year (avg. 28%) is virtually identical to the year before (avg. 26%).
Yet I’m willing to bet most of you made trading resolutions last year that were all designed to help you become successful. Being that around the same amount are, it’s safe to say these ‘resolutions’ failed, so why do you think that is?
The key is around setting proper goals, for if they are done incorrectly, you will move forward without a real plan of action, just attacking the charts hunting for profits and intraday price action setups, but no real progress towards your trading.
This article is designed to share with you an easy 5 step strategy for setting proper trading goals in 2013. This is so you can make the significant changes to your trading you feel is possible.

Step 1 – Make Your Goals Specific
If a goal is not specific, there is no way to focus on it, or take specific actions to achieve it. Your efforts become dis-coordinated towards achieving your goal, and your energy never drives home any specific change. Stating to yourself;
“I will stick with my trading method“ is too general and not specific enough.
Sure, your method may be to trade price action, or the ichimoku cloud, but that is too vague. Does this mean one system or many? Does this address risk parameters? No. Does it address the specific rules of your system? No.
You have to be specific with your goals, otherwise your efforts will be scattered and ineffective.
Although the most common goals will be numbers oriented, try to avoid these typical ones below;
I want to make a 100% gain on my account
I want to make 10% profit a month
I want to make 500 pips per month
Why?
Because you cannot know what the market will bring. You may have a goal of 20 pips per day, but what if the market is offering you 100 pips on your price action setup? Why would you not take what is offered?
Consequently, the market may have low liquidity and be in a super small 15 pip range, perhaps waiting for a big announcement. So why try and force more out of the market then what it is offering?
Focusing on performance means you may sacrifice technique to get there, and this leads to bad habits in trading which will cause greater losses down the line.
Instead, set some clear ‘process‘ oriented goals which focus on technique instead of result. If you do the technique correct, and trade following your rule based system, then you trade the system as is, and build positive habits towards trading successfully. I always suggest – focus on doing the technique correctly, and the money will come.
Some examples are;

-I will execute proper risk management targeting minimally 2x my risk on every trade
-I will stay in a winning position until my system gives me an exit signal
-I will spend 30 minutes each day preparing for my trading day, and 30 minutes reviewing my trading day
Not only are these ‘process‘ oriented goals which build positive behaviors to improve your trading, but they are specific. Instead of saying, ‘I will use ‘better‘ risk management techniques‘, they state specifically what they are. ‘Better‘ is ambiguous and hard to define, so how do you know if you achieved the goal?
Specific goals (both small and big) are critical because you direct your efforts in a specific direction where the goal is clear. Each smaller goal is simply a step on the path to a larger goal and gets you that much closer.

Step 2 – Goals Need to Be Measurable
Along the lines of goals being specific, they also need to be measurable. For example, maybe for the last year, across all your trades, you achieved a 1.5:1 reward-risk ratio for all your winners. Well, with the goal of having a 2x reward-risk ratio, this is something you can measure.
You can also challenge yourself by adding a time value beyond ‘for the year 2013‘. An example would be;

By March 1st, I will targeting nothing smaller than 2x my risk

or
By March 1st, over half of my trades winners will be 2x my risk, and the other half no less than 1.5x my risk
You may accomplish these goals earlier, but by having a goal be ‘measurable‘, it becomes a measurable indicator directly related to your goal, which will provide you with clear results and a feedback loop which communicates how you are doing, and what specifically you need to work on. You can even get specific by making smaller measurable goals which are just one step on the way up towards your bigger goals.

Step 3 – Make Your Goal Attainable
Ask yourself, ‘is your goal attainable?‘ Saying you want to achieve 70% accuracy with all your trades may be difficult if you’ve never had a year (or even month) above 50%.
The questions you have to ask yourself ‘Am I prepared, capable and have all the tools needed to achieve my goals?‘
Maybe you do not even have a rule based price action system with an edge to begin with. So how can you say you want to achieve 70% accuracy when you a) do not even have a system and b) have not tested your system on demo or live to see how it performs?
Perhaps one of your goals is to write in your trading journal every day. Well, ask yourself – do you even have a trading journal?
First figure out what you need to achieve your goals, then determine whether you have everything you need or not. A goal must be attainable, but only if you have the right tools in place.

Step 4 – Make Your Goal Realistic
It is easy to make a goal, just like it is easy to make a new years resolution. But setting a realistic goal is a completely different thing. Just like a goal needs to be attainable, having a realistic goal keeps you honest about where you are and what is workable to you without putting undue stress on yourself.

For example, using the goal, ‘I will spend 30 minutes every day preparing for my trading day‘, what if you work 9 to 5, and your trading day starts at 5:30? Maybe it takes you 15 minutes just to get home, so spending 30 minutes preparing for your trading day may not be realistic if you need to be trading at 5:30 when your price action setups form.
This is the failure of many exercise or weight goals. Saying you want to lose 50lbs in 3 months is one thing, but maybe it would be unhealthy for you to lose that much weight so quickly.
The same is for trading – make your goal realistic. If you are going to make your goal a performance number, like 1000 pips per month, yet you’ve never made over 200 pips, you may be setting yourself up for failure and disappointment which will have a negative psychological impact on your trading.
Thus, find a goal that is achievable, but will force you to work and stretch your current abilities.

Step 5 – Make Your Goal Timely
Obviously you will start working on these new goals beginning the new year, but what is your deadline or finish line? Would you ever join a race if you had no idea how far you had to run? Of course not. Thus, not having a finish line for achieving your goals can cause your motivation to wane, or discipline to slip by taking breaks from working on your goals consistently.
Remember, the finish line is not just an ending you are moving towards passing. It is a guide on how to manage and use your time and effort. Most traders fail to manage their time effectively, both in front of the screen (trading, analyzing the market for setups), and away from their screen (reviewing trade journal, analyzing performance/stats).
It is common to think ‘next week, or next month I will use proper risk management, or write in my trade journal‘. How many times have you said this to yourself, and how many times have you not hit your goals on time?
The difference between successful people and those who are not, is successful people know how to manage their time well, set small goals that lead to the larger goal, and constantly make progress towards them. By knocking down the smaller goals, it makes the larger goal seem much more possible.

Each step you take should have a finish line for achieving your goals, so you know how to effectively manage your time and build towards your new heights.

In Summary
Creating resolutions and goals at first seem simple and straightforward, especially if they are just done in your head. But you’ve committed to becoming a successful trader.
You’ve spent money, time, and made many sacrifices to complete the journey. Why waste that time and effort to fall short and not get the financial freedom you want? Why spend so many hours and dollars to not get a return on your investment which is the the best kind of all – independence for both money and time?
Thus, make sure you know what you need to achieve your goals, that they are specific, measurable, attainable, realistic and timely.
I always suggest starting off asking, ‘What Do I Need To Trade Successfully‘. This is a critical step towards achieving any goal. But once you’ve asked these questions, then you know what you need to do and where to go. Now you just need a map and to set your goals for getting there.
Maybe you want to achieve your goals in a few months, a year, or maybe a few years. Regardless, you need a map, and clear goals/steps to get there, so make sure to make your plans and goals workable by following the five steps above. Doing so is the fastest way to reaching your goals and crossing the finish line.

Thus in 2013 accept the challenge to become a successful trader by working with a trading mentor, study a rule based system, do the work, and enjoy the rewards as they are more than worth it.
I’d like to end with a quote that was inspiring for me in my early years of trading from Hannah Moore:
“Obstacles are those frightful things when you take your eyes off your goals”
Kind Regards,
Chris Capre
Make sure to out my latest trading articles:
My Top Trading Mistakes for 2012
Developing a Successful Forex Trading Mindset Pt. 1
The Ideal Trader

Forex Strategies, Price Action Trading

My Top Trading Mistakes for 2012

The learning process never ends for a trader. The market is always evolving and you have to adapt. Algorithmic trading was about 3% of the FX market in 04′. Now 28% of it is just HFT’s alone! Think that has changed the intraday price action? Absolutely!
Thus, you must always be learning, evolving and challenging yourself. There are always refinements and greater depths to what you are doing, whether you are trading price action, ichimoku or other rule based systems.
Regardless of your skill level in trading, you are going to make mistakes. I make mistakes, but I learn from them with alacrity. I quickly analyze what I did wrong, visualize what I would do differently, clear my mindset and get back to business. The difference between a professional & beginning trader is usually two-fold;
1) they make less of the typical mistakes beginners do
and
2) they rebound much faster, control the damage quicker and get back to business
Analyze your last year of trading in your journal. I’m willing to bet if you eliminated just one or two mistakes you continually repeat, your current losing year would have been a profitable one. If you ended the year break-even, then it likely would have been highly profitable.
Eliminating mistakes is one of the fastest ways to profitability. The sooner you discover, eliminate and transform them, the faster your equity curve will climb.
Thus, in the spirit of this, I will share my top trading mistakes for 2012 in the hopes you can learn from them.
1) Trading and Investing are Two Different Things
I am a trader first and foremost, but I also am invested long term in physical gold.
To ‘invest’ in physical gold, you constantly have to understand what is happening in the physical AND paper market. It helps to study central bank buying of gold, physical supply, how it is used as a safe haven against bad governments, etc.
However, I also trade gold using intraday price action strategies, and sometimes my methods/opinions on one get mixed with another. Long term I am a bull on gold, and have been since 2004/05 back at the $400 levels.
Many times in the last 3 months, I was long paper gold. Yet intraday price action would be screaming for me to get short. My broker allows hedging – so why wasn’t I shorting physical? Because my long term investing bias was interfering with my short term trading methods.
One of my top trading mistakes for 2012 was forgetting that I am a trader first and foremost, and to not let my bullish bias or investing strategies interfere with an obvious price action setup.
A good example is I bought paper gold at $1633, which I blogged about as a high probability breakout. At one point I was up 51x my risk, meaning for the 300 pips I was risking, I was up about 15200 pips.
By the time I walked away from the trade, I was only up 6500 pips. I didn’t follow exit rules because of my long term investment bias.
Remember, a trader and investor are two different things, and you must understand the difference.
2) Trading Against Impulsive Price Action
One of the base models I use for trading is understanding impulsive and corrective price action.
To sum it up briefly, impulsive price action moves are when the institutional market is heavily buying or selling and driving the price action directionally. With training and practice, you can learn to read the order flow behind price action, particularly by identifying these impulsive price action moves.
A few times this year I traded completely against these moves. Case in point – meet exhibit A, ironically on……wait for it……Gold!
Gold 4hr Charts

Looking at the chart above, you will notice on the bottom left points A and B which showed strong price action rejections. Buyers stepped in at this level, driving prices almost $50 higher in about 6 days.
At C you will notice the pin bar at C which was the second sign the bullish move was ending. Any idea what the first was?
Regardless, after the pin bar, price action failed to make a HH (higher high) and started with selling off impulsively at D, then more sellers came in at E, and by F, once it broke the role reversal level, price got monkey-hammered dropping $30 in 4 hours.
I had a buy order at the support level at G, so made some profit on the bounce, but missed the fact the market was still showing impulsive price action selling.
So at H what did I do? I bought some again, hoping for a similar move. The result is below, but you get the idea.
Gold 4hr Chart Exhibit B

At the support level where my first long worked out, I went long again at H and the same level. Shortly after I was stopped out.
Instead of realizing I was trading against the trend and impulsive price action, I was looking for a reversal. I consequently missed the obvious breakout pullback setup at the same level I was looking to get long, which then became a role reversal level. This is what happens when you trade against the trend and your system.
Not only do you miss several good with trend setups, but after you get stopped out, you usually miss the follow up trade from your price action system to take advantage of the move.
3) Let Your Trade Run Until Your System Tells You To Exit
Barring any extreme or black swan event, I usually just let my trade run until my rule based system tells me to exit.
However on a recent buy on the GBPJPY, after getting a great entry and banking about +300 pips, I exited the trade, even though my system was still telling me to hold long and hadn’t given an exit signal.
Looking at the chart below, you can see on the top left at B a critical resistance level which started the massive 300 pip sell off.

Price started to show signs of exhaustion, and started a reversal. My ichimoku strategy picked up a buy order just above 126.60. Shortly after, price climbed rapidly gunning it for the same resistance level at 129.50. After the weekend gap rejected, I took profit banking about +300 pips.
Not so bad you say…until you look at the chart below.

Not only did my system hold on for another + 300 pips, but it gave me a re-buy signal around 132 and is still currently long today. I missed that one as well from being ‘upset’ about exiting early. Needless to say this would have over tripled my profits. Even though my system never gave me an exit, I got out of the position.
Not letting runners run is one of the most costly mistakes a trader can make. Yes, it is important to understand what is a high quality signal, but I’m guessing if you let just 10 of your trades run until the system gave you an exit, you would have made almost double your profits on those 10 trades. For me, it was actually 2.4x more. Food for thought.
In Closing
Part of trading is making mistakes, but a key component of your success is learning from your mistakes and making less of them over time. Regardless of your skill level or how long you have been trading, you will make mistakes. Anyone who only posts their successes and doesn’t admit to their failures is hiding behind a wall of fear and a false reality.
I make mistakes and I’ve been doing this for 12 years. But I learn from them continually and make less of them as time goes on. This translates into more profits, smaller drawdowns, less emotions, and a smoother equity curve.
Eliminating mistakes is the fastest path to making more profits. But the first step is becoming aware of them. This is where the trading journal comes in handy. If you’ve made 300 trades last year, are you really going to remember every mistake you ever made? Unlikely, this is why you have a journal, to help you become aware of your mistakes.
The second step is to actively work on eliminating and transforming them. If you repeat a mistake over and over again, then the cause is likely psychologically, and something that can be re-wired through ERT training and developing a successful trader mindset.
But the bottom line is you can transform your mistakes into strengths, and most definitely into greater profits. In almost all cases, making less mistakes can be the difference between a winning and losing day, month or year. And in almost all cases – will lead to significantly greater profits.
Kind Regards,
Chris Capre

Forex Strategies, Trading Mindset & Risk Management

The Ideal Trader

Over the last two weeks, I wrote on the subjects of ‘Quality vs Quantity – Which is Better For Trading?’ and ‘What is A High Quality Signal‘.

The main theme has been around dispelling some freshman arguments and confusions others have written espousing the quality is better than quantity argument, and what really constitutes a high quality signal.

One question that should have arisen out of this is ‘what is the ideal trading method and frequency‘ based on what I have now explained.

That is what I will focus on today – the ideal trading frequency (or what I think is the ideal trader). In other words, what kinds of trading strategies and frequency would offer you to make the most profits.

I will first talk about time and how that plays a crucial role in trading (and life). Then I will unpack a few trading strategies to give you the maximum punch for your efforts.

Time Is A Currency

I was recently traveling internationally walking down the streets, and I noticed a huge line leading up to this machine. I asked my local friend what all those people were waiting for. They told me if they punch their tickets, they get $.30 off their subway fare.

I then went up to someone in line and asked them how long they wait on average. “About 15 minutes”. I could tell immediately this person misunderstood how valuable time was.

They waited there 5x per week on average of 15 minutes (1.25 hours) all to save $1.50. If they really valued time, they would work an extra 1.25 hours to make more money than the $1.50 they were saving waiting in line.

This extra effort in overtime pay certainly outweighs the $1.50 gained.

Or they could use this extra time to figure out new ways to do what they do, likely leading to a promotion and thus higher pay.

There are plenty of more effective ways to use their time. But the reality is, when you do not have money, you think money is more valuable than time. When you have money, you think time is money and is really more valuable.

Why?

Because you can replace lost money, you can always make more money (an almost unlimited amount), and you can multiply money exponentially.

But…you cannot replace, make or multiple time. Once time is spent, it is gone forever and cannot be replaced, re-done or re-used.
Thus in reality, time is a currency, and often mis-spent.

Using your time well in a highly efficient and intelligent manner will almost always lead to having more time and more money. Find someone really successful and active, and I’ll find you someone who understands time is a currency.

So How Does This Relate To Trading?

The only way one can possibly ‘multiply’ time is to be able to do two things at once.

When it comes to trading, the only way to do this is to trade set and forget strategies on the 4hr and daily time frames. These are strategies where you do not need much time to manage them.

Real set and forget strategies are rule based systems, meaning there are rules for entries, exits, stops, limits, taking profits – everything.

You do not have to make discretionary decisions to use them. All you have to do execute the rules using minimal time and effort to trade them.

While the trade is playing itself out, you are off doing something else (reading a book, learning a new language, training in a brain gym, etc). This allows you to get maximum effect for the least amount of time used.

But I thought you said trading in quantity can be more profitable?

I did, and it is a fact, that if you can take your systems edge, and execute it a few more times a month with similar accuracy, you will make more profit then executing it less.

In fact, in my prior article dispelling the quality is better than quantity argument, I showed that the system with over 15% higher accuracy trading less, was still making far less profits and pips than the system trading more frequently and less accurately.

So quantity does matter.

Thus, trading set and forget strategies is useful because it allows you to do other things while making money. Being able to make money while sleeping is incredibly potent for building financial abundance.

But…and I mean but…trading only a handful of times per month does two negative things to your trading;

Limited Feedback Loop = Slower Learning Curve
Not Multiplying Your Edge = Making Less Money

Let me unpack these two briefly.

Limited Feedback Loop = Slower Learning Curve
It is a Neuroscientific & Cognitive fact that if you are under-stimulated, or become bored with your trading process, that it will interfere with your learning process. Being bored means you are not challenging yourself enough, nor getting enough feedback from the markets.

Every time you make a trade, it gives you feedback on your abilities, on how you find entries and exits, how you control risk, read price action signals, and make trading decisions.

You don’t become a good golfer or quarterback by sitting on the sidelines most of the time.

You become better at trading, by trading and making trading decisions – win or lose. Each trade is a feedback loop from the markets which offers you information that can bring you closer towards your goal, re-enforcing good habits while negating bad ones.

But if you don’t trade often or enough, you are missing out from seeing how much you really understand. There is a reason bank traders often have to make 4,000 trades before the bank lets them trade money. Without being challenged enough in relationship to your skill level, being bored or under-stimulated will not induce development, and it will actually hurt the learning process.

Thus, if you are only trading around 4-5x a month, you are hurting your learning process and curve, as you are missing plenty of high quality signals every day.

Not Multiplying Your Edge = Making Less Money

Although I’ve already demonstrated this in my prior article on quality vs quantity, the bottom line is your system should have an edge and expectancy.

If you are trading at 60% accuracy, making on average 2:1 reward to risk per trade, ask yourself who makes more money;

Trader A using that system 5x a month?

Trader B using that system 10x a month?

The answer is obvious – it’s a mathematical fact that if you can multiply the amount of times your edge plays out, you will make more money.

So in summary, trading more often while keeping your edge, will not only challenge you and stimulate you more, but will also help you make more money and profits.

What About Set and Forget Strategies?

The downside with set and forget strategies on the 4hr and daily time frames, is they do not come as often as intraday trading setups will.

Ask yourself how many signals offering 100 pip targets and 50 pips stops come in relationship to 60 pip targets and 30 pip stops?

Obviously more of the latter. And since daily signals only come once per day per pair, mathematically there are less of them than signals on the 4hr, 1hr or smaller time frames.

Although you may think only high quality signals come on the 4hr and daily time frames, you simply have not been trained to see them, as there are plenty of them coming daily on lower time frames.

A quality signal has nothing to do with time frame, but having three things;

Is a pattern that repeats itself with consistency and accuracy
Is a signal that offers low risk and high reward potential
Is a pattern that offers itself a clear entry and exit pattern

That is all a signal needs to be high quality, and this is not time frame dependent. If someone tells you otherwise, they do not understand trading and you should run away from them.

Although set and forget strategies can allow you to use your time efficiently, they do not allow you to multiply your account at the same pace as trading intraday will offer you more signals, and plenty of high quality ones. The one downside in trading intraday is you usually have to be there and manage the trade.

With training, this is not stressful, and becomes quite enjoyable. It also offers you a greater opportunity to learn, as you are observing more candles and price action formations, thus seeing more patterns and gaining more chart time. The latter two will without a doubt increase your learning curve, but only spending a few hours per week will take you a long time to log your 10,000 hours or really master reading price action patterns.

Thus, trading intraday signals and setups allows you to generate more opportunities for profit.

Which Is Better Then, and What Is The Ideal Trader?

In reality, the best combination is to trade both set and forget strategies, along with trading intraday setups. This is the ideal way to generate the most profits in the least amount of time.

You really get the best of both worlds as you can make money sleeping, also finding great intraday price action setups each day, and I have students doing exactly that, week in-week out.

Now I do not recommend sitting at your computer for 8hrs per day just trading intraday, then spending another 1-2 hours per day finding your set and forget setups.

The brain really can only achieve maximum concentration for short periods of time, often less than a few hours. Luckily, the best intraday trading setups are during peak times of volatility, so you only need to be around for a few segments of the trading day to capture some serious pips and profits.

I recently did a live intraday price action trade banking +1415 pips of profit in about 4 hours with over a 4.75x reward to risk play. How many days will it take you to make +1415 pips of profit, or 4.75x your risk trading daily price action setups? Food for thought, but i’m pretty sure you won’t do that in a day, or even a week for that matter.

In Summary

The bottom line is, the ideal trader can trade a few hours of the day highly concentrated, finding a few high quality intraday price action setups, while also making some set and forget plays. This allows them to multiply their profits and edge from the intraday trading, in concert with making money while sleeping.

This really is the ideal trader and offers you the most opportunities – not just for making profits, but for accelerating your learning process as you are constantly in the feedback loop from the markets, and learning at a faster pace.

Now there are other critical factors for helping the learning process, along with finding what is ideal for you, and what is the ideal trader mentality. These things I will discuss in the next article which will be coming soon so stay tuned.

Until then, no matter what religion you are, or wherever you are in the world, I wish you all the best of holidays, and that good health, abundance and a ocean of good things come to you, and those you care about.

Kind Regards,
Chris Capre

Tag Archive for: price action

The Beggar and The Trader

You Will Have To Do This Trading

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

End of The Trading Week – What Are You Doing?

2 Tips for Placing Highly Effective Stops

Trading Is Not A Fashion Contest

2 Price Action Tips For Beginning Traders

Developing A Successful Forex Trading Mindset Pt. 2

Setting Trading Goals for 2013

My Top Trading Mistakes for 2012

The Ideal Trader

Time Is A Currency

So How Does This Relate To Trading?

Not Multiplying Your Edge = Making Less Money

What About Set and Forget Strategies?

Which Is Better Then, and What Is The Ideal Trader?

In Summary

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Trading Courses

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