Learn the major differences between trading stocks vs trading forex, and which one is better to trade.
Tag Archive for: trading forex
What’s Inside?
- Can I trade set and forget with a full time job?
- What are some set and forget trading strategies you can use?
- What skills do you need to trade set and forget in the forex market?
In my last article, I showed how you can do forex day trading.
This week I’ll be covering how you can do set and forget trading in forex, stocks, commodities, and global indices.
The basic definition I’m working with when I’m talking about ‘set and forget trading‘ is whereby you open a position with a pre-defined stop loss, take profit and entry location, and once the trade is activated, you let it go with no trade management.
This means you let the trade run until it hits your take profit, or your stop loss. Hence the name ‘set and forget‘.
This can be done on any time frame, meaning you can do set and forget trading on the weekly time frame, the daily or 4hr charts, or even the intraday charts such as the 1hr and below.
Yes, you can even day trade using set and forget, meaning you take a trade for the day and close it when it hits your SL, TP or the daily session is done.
The key point is once your trade is active, you do not manage the trade.
Now let’s get into some of the key points and topics you’ll need to know around set and forget trading.
Can You Trade Set And Forget With A Full Time Job?
Short answer? Yes, and something you should (most likely) use if you have a full time job and only 1-2 hours per day to trade the forex markets (or any markets for that matter).
The opposite to set and forget trading is to actively manage your trades. I wouldn’t recommend this if you lack any of the following:
- Really solid price action skills to be able to read the price action context in real time, and thus be able to manage your trade to get the optimal profit out of it.
- Have a baseline profitable track record showing you can manage your trades
- Have the time to consistently watch your positions
- Have pre-defined conditions/rules/patterns to help you exit your positions early
Hence, if you lack any of the following above, then you should be trading set and forget.
Additionally, if you’re just starting out in the markets, I’d also recommend trading set and forget to build a baseline showing you can find trades, entries, and have well placed stop losses and take profit levels.
Now that we’ve established who should be trading set and forget, let’s get into my suggested rules, tips and strategies.
Trading Set and Forget Tip: Have A Pre-Trade Routine
Trading takes a very particular mindset and mental activity to do it profitably. Very rarely will your work mindset perfectly lead you into the right trading mindset.
Because of this, I recommend having a pre-trade routine, whereby before you even start trading, that you sit down at your computer and clear your mind, making sure you’re relaxed, clear and focused before you make any trading decisions.
All you need is about 5-10 minutes of mental preparation to get yourself into a clear state for trading.
NOTE: If you want a simple 5-10 minute practice to get ready for trading, read my article on meditation for trading.
Once you are mentally settled and ready to trade, then you’ll want to load up your trading platform and begin your pre-trade analysis.
For your pre-trade analysis, you’ll also want a routine that is structured and fixed. What I mean by this is:
- You trade ideally at the same times per day
- You only look at a fixed set of instruments every day that are a part of your trading plan
- You start with a top down analysis, meaning you start with the higher time frames, and work your way down (if you’re doing multiple time frame analysis)
- You begin by analyzing either the price action context first, or the Ichimoku context if you’re an Ichimoku trader
Once you have the above completed, it’s time to select which trades meet your criteria, and then enter your entry location/price, your stop loss and take profit levels.
NOTE: You should always trade with a minimum of 1:1 risk to reward ratio (or better). If you want to learn more about why you need this minimum risk to reward ratio, click here.
As to choosing your risk to reward ratio, I don’t recommend it always be a fixed number, but it should always satisfy the minimum 1:1.
Targets should always be set based upon the price action context (or Ichimoku context). If you have a particular trading strategy that suggests a specific target, then fine, fire away. But you should always be targeting a take profit location you can hit with a profitable trading edge over time.
I don’t recommend any fixed targets until you have a sufficient baseline and data to clearly back up what your most optimal target is because you could be getting out too early just based on a fixed target.
If you are new to trading, then I’d suggest somewhere between 1.25R and 2R. ‘R‘ simply refers to your risk, so if you’re risking 100 pips, 1.25R would be 1.25 x 100 pips, so 125 pips.
As to position sizing, I’d recommend no more than 1% per trade, and if you’re a beginner, then better to be extra cautious and use .5% risk per trade as you’ll likely make more mistakes in the beginning, and thus will need an extra buffer to compensate.
NOTE: We always recommend risking a fixed % of your equity per trade. To learn more about why we recommend this, click here.
Trading Set & Forget Tip: What Instruments to Trade
The most important rules of thumb for choosing what instruments to trade are the following 3 points:
- Don’t trade more instruments that you can easily manage/follow/analyze
- Whatever instruments you choose, stick with them for a minimum of 3 months to build a proper baseline
- Ideally stay within the same asset class till you have stability and profitability with that asset class
If you’re looking to trade the forex market set and forget, I’d recommend a minimum of 4-5 forex pairs, with 2-3 of them being major pairs, ideally one minor pair and one exotic pair.
Also make sure to trade only forex pairs which are most correlated with your region and time of day.
So USD and European currencies if you are in the UK/Europe/North America.
For Asia/Australia/New Zealand, I’d suggest at least 2 currencies from your region (JPY, AUD, NZD, CNY, SGD, KRW) and minimally one USD pair.
If you’re looking to trade stocks set and forget, I’d recommend one or two indices from your region, and at least 2-4 consistently volatile stocks from your region. You can also look for an ETF or two as well.
If you’re looking to trade commodities set and forget, I’d recommend at least one energy/natural resource product, such as WTI/Nat Gas, one to two precious metals, such as gold/silver, one to two industrial metals, such as copper or aluminium, and one to two agricultural products (corn, wheat, sugar, etc).
Now that you have your pre-trade routine, position sizing and instruments all set, the next thing you’ll need to setup will be the time frames you trade with.
Trading Set And Forget Tip: Time Frames To Work With
For day trading set and forget (meaning you open/close your trade within one day or one trading session), I’d recommend using the 4hr or 1hr time frames for your higher time frame context, then trading on either the 15 min chart, 5 min chart or 3 min chart.
For swing trading set and forget (meaning you hold your positions for days to weeks, perhaps a couple months), I’d recommend using the daily time frame for establishing your higher time frame context, then either making your trading decisions on the daily chart, 4hr chart or 1hr chart.
As to which time frame to make your trading decisions on, a general rule of thumb is to:
a) choose the time frame which looks the cleanest for your trade setup, and
b) which is most relative to your target size and holding time.
In terms of which time frame is best based upon your target and holding time, first you need to establish what your target is.
A simple rule of thumb is to setup an ATR indicator (set to 5) on the daily chart to see what the average daily range is for your instrument.
If your target is outside the current ATR, then you’ll likely need multiple days to hit your target and should be working with a higher time frame. If your target is within your daily ATR, then you’ll want to be using a lower time frame chart.
Set And Forget Trading Strategies
Whether you’re looking to set and forget trade forex, stocks, commodities or global indices, one consistently strong setup and trading strategy is the breakout pullback setup.
This is a straightforward strategy where you’re looking to trade with trend, and are waiting for the market to break above/below a key support or resistance level (break resistance for bull trend, and break support for a bear trend).
Once the market breaks its key level, you’ll then wait for a pullback to the prior support or resistance level to trade in the direction of the trend.
I have a video on how I traded the breakout pullback setup for +110 points on the UK FTSE with my own money which you can watch here.
I also have another video on the breakout pullback setup for +100 pips on the NZDUSD within a matter of hours. You can watch that video here.
The breakout pullback setup is such a classic and useful strategy that when you trade it with the right price action context can be a very profitable setup so it’s definitely one you’ll want to practice and master.
In Summary
By now you should also be well aware of how to trade set and forget, starting with your pre-trade routine, what instruments to trade and how many, what % of your equity you should risk per trade, what time frames to trade, and what strategies to trade set and forget.
If you’d like to learn more advanced methods to trade set and forget, along with see more examples of me trading live with my own money, then make sure to check out my Trading Masterclass course, where you’ll get access to our members trade setup forum, market commentary 4x per week and ongoing training.
With that being said, please make sure to leave your feedback on what you learned about set and forget trading from this article.
I’ll look forward to hearing from you, and wish you nothing but success in the markets while seeing real progress towards your trading goals.
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.
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.
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.
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).
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).
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.
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.
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.
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.
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.