Stop Losing So Much Money While Day Trading Forex

Stop Losing So Much Money While Day Trading Forex 116

How to STOP LOSING SO MUCH MONEY While Day Trading Forex as a Beginner

Are you losing more money than you return every month? If so, there are three crucial questions you need to ask yourself before you put on another trade. 

Whether you’re in your first few months of trading FX or you’ve been trading for a while, you may find that even though you’ve managed to land a few decent trades, at the end of the week or the end of the month, you still wind up in a net loss.

stop losing money while day trading forexPerhaps when you first started to learn to trade, you looked around Youtube and the rest of the internet and saw different people talking about how they make a living off of trading. Whether it was the flashy cars or the nice desks and houses, or even screenshots of account sizes, something told you overall that this person has reached success and if they can do it, so can you. That’s okay, it’s an empowering feeling to be inspired by the success of others. But sometimes this can lead us to have unrealistic expectations.

If you’re like how I was when I first started trading, maybe you thought to yourself, “Oh, I’m smart enough to learn things on my own, I can figure this out, too, and in a couple of months I’ll weed out the beginner mistakes and make some good money out of this really cool skill.”

But then, a few months pass, and the mistakes aren’t really getting any less frequent. Actually, you may not even be aware of some of the mistakes you’re making and it feels like the same crummy situations are playing out week after week after week. But as you keep searching the internet or maybe you’ve moved to books and have tried new tactics or strategies from all of those, you’re still coming up short on actual follow-through.

I remember that place of total confusion with the markets and frustration with oneself. It doesn’t get any better unless you take action. To get you out of confusion and frustration we need to put you back into clarity and on the path to gaining control over your trading decisions. So today we’re going to talk about some approaches you can take to stop losing so much money while you’re learning how to trade Forex. In order to do so, we need to ask 3 crucial questions before trading again. So let’s dive in!

The first question is: Are you trading with a plan that can actually make money?

There’s actually two parts to this question.

First, let’s make sure that you’re actually trading with a plan.

If I came over and sat down next to you when you’re trading next, would I be able to find a document, whether physical or digital, that shows me your set of rules you use to trade? If the answer is no, you’re in luck, I have a free plan for a once-a-day trade that you can check out. If that doesn’t work for you, see if you can find another trustworthy source for a worthwhile plan.

When you trade without a plan, you’re left with a mix of faulty logic and mere emotion to make the decisions on what, when, and how you trade. There’s no consistency and trying to figure out what works and doesn’t work will be really hard to track. I highly recommend that new traders begin by learning to trade a mechanical strategy, that is, a strategy with strict rules on aspects of the trade like entries, exits, position size, and more. Then once you have experience and build discipline with this trading style, you can learn how to use a discretionary trading style, one that lets you call the shots based upon market patterns, since you’ll be able to trust yourself to follow your own rules.

The second part of this question (are you trading with a plan that can actually make money?), deals with whether the strategy you have is actually making money.

If we were to remove any losses or excess profit committed during mistakes, did the strategy actually profit over the last month or even the last quarter?

Not every strategy will be profitable every month.

If that’s the case, then the profitable months better outweigh the losing ones. If it’s not profitable over a month and it’s not profitable after a quarter, then it’s likely this trading strategy doesn’t fit the current market or it’s not a realistic strategy. If that’s the case, then it’s time to find something new. Again, you can check out this free strategy I came up with, or you can find another reliable source for a pre-made strategy that has backtested results to support its validity.

The second question to ask is: Are you trading too much at a time?

This includes both whether you’re trading too much money on a single trade and whether you’re taking too many trades on a given day.

First, we need to talk about how much money is appropriate to trade on any given trade. Usually, most successful traders will have a set percentage of their trading account size that they will use for each trade. This is often 0.5%-2% of their account sizes. The reasoning behind this is that any good strategy will likely hit a string of losses because the markets are always shifting.

You don’t want to blow half of your account on a single trade otherwise you’ll lose everything after two bad trades. I personally trade about 1.5% of my account for the scalping trades I take.

If you look at some of the interviews in any of Jack Schwager’s interviews with highly successful traders in the Market Wizards series, you’ll learn that many of them will change their position sizes and money risked based upon different market conditions.

If you’re just starting out, again, I recommend having very clear rules and this includes having a rule for what percentage of your account you will risk on every given trade. This will likely be between 0.5%-2% of your account.

Second, even when you get your risk size down pat and start to trade the same amount for each trade, you’ll also want to put a cap on how many times a day you’ll trade.

If you follow any of the strategies I’ve created for scalping Forex, you probably won’t get more than one to three signals on any given day, so this shouldn’t be a problem. However, if you’re in a faster-moving market, like with stocks, you’ll probably want to trade no more than 5 or 6 times a day. This is what I’ve heard around trading forums but it’s a number you should develop from your own experience.

Some people can stay disciplined for only three trades but may start to fall apart after the third and break some rules here or there, especially if the first few trades resulted in a loss. Contemporary research on willpower has shown us that when it comes to making tough decisions, our willpower is kind of like a bank account and we make withdrawals with every decision. The key is to stop trading before we get into discipline fatigue, and even for day traders, this can look like ending the trading day after only after three or four trades.

Finally, our third question to consider is: Are you committed to taking your stop losses?

This is probably the most important question in this lesson because failing to take stop losses is one of the most expensive bad habits a trader can commit.

I’m going to ask again and rephrase this question: Are you committed to taking your stop losses EVERY SINGLE TIME THEY ARE HIT?

Not every once in a while when you’re feeling good, not for nearly all your trades except that one trade where it looked like a head and shoulders was forming, no, I’m asking you if you are capable of taking your stop losses EVERY SINGLE TIME THEY ARE HIT?

If you can’t answer yes to this question, then we’ve found one of your most important areas of trading you need to focus on improving right now.

I want you to internalize that trading is a probability game. There is no guarantee with any kind of strategy or setup that a certain outcome will unfold. Our goal isn’t to never lose but to lose less often than we win or make more from our winners than the losses so that we come out in profit, or some combination of the two.

When we play the probability game of trading, we have to be comfortable with losing. It’s weird, it doesn’t feel good to lose, but it’s actually pretty consistent with achieving anything in life to persistent instead of trying to perfect.

For example, with business, I don’t know any business owners who have never had to deal with someone returning their product. Not everyone is going to fall in love with every item being sold.

The goal is to make the most of the winners and to minimize, but not avoid loss. We want to manage our losing trades to be small losses instead of big ones that can drain our accounts dry.

So what do you do when you’re not able to commit to your stop loss?

Let’s run through a few quick solutions before talking about some bigger commitment strategies for improvement.

First, ask yourself if you’re using stop-loss orders.

These are orders that can be added to your trades so that when your stop-loss target is hit, the brokerage will automatically close the trade for you.

Some people might be afraid that their stop loss targets will get hunted by bigger traders but most of you watching this will be trading with a small enough of an account where this won’t make much of a difference. Also, if you can’t take a stop loss then your bigger problem isn’t your stops getting hunted every now and then.

Next, if you’re comfortable with using stop-loss orders but find that you are constantly moving them to avoid closing a trade, then my word of advice for a quick fix is to fill out both a take-profit order and a stop-loss order after entering the trade. Then, close your chart screens so that you can’t watch. Make sure you can get a notification email or a banner on your phone to let you know when either of those orders get triggered so that you can go back to the charts and look for your next trade.

Remember, these are just quick fixes until you can get comfortable with losses, but they probably won’t make it easier to watch the charts if your trading strategy needs you to keep an eye on them.

Lastly, a third quick fix is to practice taking stop losses.

stop losing money while day trading forex

For this, you’ll trade a very tiny amount of money, such as risking no more than five dollars on a trade and jump into the trade with no strategy. Your entire focus is to pull that trade when it hits your five-dollar stop loss. In that practice session, you have only one job to do and that’s to click to close your trade or to watch your stop-loss order trigger. Nothing else.

Once that happens and you lose your five dollars, go, (pumps fist down) “YES!” Celebrate your ability to take a loss.

But If your practice trade keeps moving into profit, you’re welcome. If it keeps moving into profit, close the trade after it hits about ten bucks. You’re not doing this to make money but to condition yourself to accept losses.

Now, these hacks can get you started, but you’ll likely need to work on your stop-loss-taking ability over the long term. I talk more about how to take stop losses in my book, The Seven Habits of Successful Day Traders.

If you’ve been trading for a while and this is a problem you’ve been struggling with for a long time, I also offer coaching services for working together one-on-one to get to the root of your struggles with trading discipline.

I want to remind you that succeeding at Forex is completely possible so long as you persist and keep doing the work to change how you think and behave as a trader. Best of luck and strength, and I’ll see you in the markets!

 

Day Trading Psychology: Is This Foe Sabotaging You?

Day Trading Psychology: Is This Foe Sabotaging You? 4359

WORSE THAN FEAR/GREED:

Is There a Day Trading Psychology Foe More Cunning and Dangerous Than These?

There’s a foe that lives close to you.

 

It’s a pesky foe, one that seems to feed off the kinds of people who are attracted to the idea of day trading.

Day Trading Psychology FearIn fact, this foe is nipping at me as I write this.

 

When you first learn about trading psychology, you’ll often hear quite a bit about the dual trading antagonists of FEAR and GREED. 

 

FEAR – the emotion that arises when your trade immediately goes against you and you realize that you need to close a losing trade. It’s the emotion that arises when you get an entry signal but your past experiences with losing are telling you to stay out. It’s the nagging voice in your head that tells you to keep trading that day so that you can cover the week’s losses.

 

GREED – the emotion that waves its cheerleading pom-pom’s telling you to let a trade “GO GO GO!” and hold on past your take profit target. It’s the delusion that believes, “It’s going to the moon!” without defining how far away that moon is or where the boundary lies that signifies an “overshot.”

day trading psychology greedYou need to be able to understand these two feelings.

You need to be able to recognize them as they occur.

And you need to be able to say to them, “I can feel you Fear/Greed, but I’m choosing my rules anyways.”

 

But they are not your true foe. 

 

There’s a more cunning adversary that sends FEAR and GREED your way. Those two are just the messengers.

 

Who is the monster that seeks to sabotage your trading discipline?

 

Perfectionism

You see, you wouldn’t even feel fear or greed if you didn’t have a nagging belief that you ought to trade with 100% accuracy and success every time you put on an order.

 

Who whispers sweet nothings about some lofty standard that exists beyond reality? Perfectionism, that’s who!

[What to read more of my reflections and advice about day trading psychology, be sure to check out my book, The Seven Habits of Successful Day Traders: A Quick Guide to Profitable Day Trading Practices

This blog post is actually inspired by a book I recently read from an author whose writing style I highly admire.

 

Jon Acuff’s Finish: Give Yourself the Gift of Done, is a gripping and inspiring read about how to wrestle and win against the greatest threat to actually achieving our goals and getting things finished: Perfectionism.

 

(By the way, I am not an affiliate of Jon Acuff, I am sharing this recommendation because it’s something I find very valuable and want to pass on to my mentees and students)

 

In Finish, John personifies Perfectionism (as I have done here) as a persnickety and thwarting bedfellow to the best of our dreams and aspirations. He explains throughout the book how Perfectionism tells us a variety of lies in order to prevent us from moving forward and taking action.

 

Some of Perfectionism’s lies include:

 

Quit if it isn’t perfect.

 

Your goal should be bigger than average.

 

You need to wait to do X until you do Y.

 

Among an assortment of other lies that lead us to procrastination, being hard on ourselves, and ultimately failing to achieve what we originally set out to do.

 

As I was reading this book, I thought to myself, “Oh. This is spot-on. Not just for most goals, but also trading! This is exactly what happens when we make assumptions about continuous positive return.”

Perfectionism’s Role in Day Trading Psychology

Perfectionism leads us to believe that we ought to be able to make a regular profit within a few weeks of learning how to trade.

 

Perfectionism fools us into thinking that we should expect an 80-100% win rate.

 

Perfectionism amplifies our feelings of let-down and self-hatred when we make endless mistakes.

 

Instead, we need to get realistic.

 

Let go of perfectionism and choose to keep showing up. Forget about some clean, linear straight line of progress with your trading skills and your total account size. 

 

You might have profitable weeks followed by losing ones. If you’re just starting out, it can easily take two to three years to see your total net earnings in the green. 

 

Just when you think you’ve mastered taking your stop losses or sticking to your rule of three trades or less a day, one day your discipline goes haywire and you do some considerable damage to your account.

 

But before I leave you feeling deflated or hopeless in the face of what is a wild and unpredictable plight ahead, let’s go over a few ways we can make authentic progress with our day trading psychology without letting perfectionism drive the train.

How to Apply These Lessons to Your Day Trading Psychology Plan

Pointers for making realistic trading goals (as inspired by Acuff’s suggestions for stifling Perfectionism):

  1. Cut the goal in half – If you started out with a goal to make 20% off of your account each month, try cutting it down to 0%. Or if your goal is to grow your account to $50,000, trim it down to $25,000 first. In this way, you can take smaller baby steps to your larger long-term goal.
  2. Double the amount of time you are giving yourself to achieve your goal – if you are aiming to be profitable in the next six months, how about stretching that out to at least a whole year (or likely longer)? 
  3. Add on new routines and new trading tactics a little at a time – Through the discipline resources I offer I tend to make a lot of recommendations for different actions to take to improve trading discipline. Instead of trying to do everything at once, pick a few suggestions at a time and see if you can implement them well for a while before taking on new tactics and routines.
  4. Have fun on the journey– It may seem obvious that you would hopefully find some enjoyment out of trading if it’s the endeavor you’re choosing to use to make more money in your life, but once we get into “goal mode,” humans tend to get serious. Perfectionism would rather see you stressed out and doubling down on your intent to profit from day trading. But introducing fun into your routine and your experience can help you stay more serene and avoid anxiety- which is an emotion that tempts us into making mistakes. Instead, allow yourself to stay curious, intrigued by the markets, and make your trading practice and work sessions more enjoyable. Personally, I like to play music when I practice, backtest, and even when I trade live. Trading memes can help you laugh at the problems a lot of different traders make. Always be responsible and diligent, but don’t forget to laugh and enjoy yourself!
Top 5 Trading Routines Successful Day Traders Perform

Top 5 Trading Routines Successful Day Traders Perform 76

Let’s talk about the top five trading routines you can use to develop trading discipline and improve your trading skills!

You know, there’s something profoundly human about keeping routines. Think about some of the routines you keep. Whether it’s brushing your teeth two times a day, having a coffee while reading a self-help book in the morning, or going to the gym four times a week. Perhaps at first when the routine was new, it took more time than it does now and there might have been some

Day trader mentally preparing for scalping

 psychological push back against doing this thing on a regular basis. But over time, you got used to the motions, you memorized the steps of the routine, you were able to start performing the task without effort, and the energy required to start it is no longer demanding.

There are so many things we need to do to survive and stay healthy, so it kind of makes sense, biologically speaking, to be able to become accustomed to a routine in a way that requires less energy and focus to perform as you continuously do it over time. I’m here to tell you that trading well is no different from other routines that keep us well and healthy over time. There are certain things successful traders do consistently which losing traders don’t do frequently or fail to do at all. We’re going to go over the top 5 key trading routines you can keep as a day trader who is aiming for success

Let’s dive in!

Trading Routine #5: Recording the outcomes of your trades in a long-term trading log

Do you know, right now, how much you have returned or lost this particular month? Or how many trades you’ve taken so far? If not, it’s time to start recording your trades in a long-term log. A decent trading log should consist of 3 things:

1. Information from each of your individual trades

2. A breakdown of your return and loss from each week

3. Any deposits or withdrawals from your account.

The purpose of a trading log is to be able to track the return from each of your trades, as well as keep an account of your brokerage account balance. Most of the time, your brokerage can provide this information for you, but it’s a good practice to record this information for yourself so that you are sure to review it and reflect on your overall performance. I find I keep better records when I record my trades after each trading session, but you could also record them once a week, like on a Friday to tie up the trading week, by referencing the data from your brokerage firm.

Trading Routine # 4: Prepare for the week ahead

This routine is not as structured as the last routine, but that depends on what you need to do to prepare for your trading strategies. This could involve preparing on a 

Forex day trading routine preparing night

Sunday morning or evening by checking the economic calendar for the week and writing these times down. It can also involve setting an intention for the week ahead.

For example, if you got too greedy and held past your take profit the week before, you can write down an affirmation that you will be vigilant to avoid doing the same thing this week. I like to trade with the same position size all week, so I’ll usually write down and preset my order sizes based upon the amount of money I choose to risk for each trade. This is also a good time to draw any support or resistance levels from the daily and weekly charts if that’s a tool you like to use to trade.

Trading Routine #3: Mentally Prepare yourself before you trade

Think about high performers. A lot of athletes talk about having mental prep sessions before a game where they help themselves get into a zone. It can be a song that helps them pump up or a warm-up routine that tells their body it’s game time. Remember, your ability to stay level-headed and disciplined while you trade is crucial to your success. So perhaps instead of getting too wired before you trade, you’ll want to keep a start-up routine to help you get centered and focused. You can meditate before you trade or write out a declaration for yourself that you’ll say aloud, promising yourself that you will follow your trading rules today. This is also a good time to quickly reflect on the biggest trading mistakes you want to watch out for. 

So too, performing a visualization of yourself following through on your trading rules can also be beneficial. By the way, if you want a free checklist to help you follow through on some of these daily trading routines, you can download it here. Your headspace is the worst place to store your ideas and commitments. It’s better to have visual reminders of what we need to do to succeed and checklists are a handy tool used by professionals to ensure they follow through on their services. Okay, let’s move on!

The next two routines we’re really hard to rank. I couldn’t decide which one is more deserving of the #1 spot. But I think I made the right choice and I’ll tell you why soon. 

Trading Routine #2: Journal your trades

This is different from keeping a trading log.

A trading journal is where you can record not only the data of your trades but also any thoughts or emotions you had while you traded. Since intense emotional experiences are often the reason why many of us make mistakes while we trade, it’s helpful to write them down so we can discover what mental states or situations we need to improve.

For example, you could be waiting to take your stop loss, but as the price gets closer, you decide to move it out of the way to another price that is risking two to three times more than what you intended. During that moment you may be feeling intense anxiety. That’s one of the best times to write down what’s going on and why you’re feeling that way. Getting this out on paper may help you recognize that this is an emotional reaction and help you return to your rules.

That’s also why I like to add my trading rules to my trading journal so I can see them while I record what’s going on. If you want to see an example of this, I made a free trading journal for the once-a-day Disciplined FX scalping strategy I posted here on the Disciplined FX blog.

When keeping a trading journal, be sure to fill it out every time you trade, while you’re trading. Some people, myself included, like to take screenshots of the trade and store them in a distinct file on the computer. This is helpful for recognizing patterns in the market and in your trading behaviors. However, there’s one more thing you need to do with your trading journal and that helps us segue to the #1 routine on this list

Trading Routine#1: Review Your Trades

The top routine you can keep for your trading practice is to review your trades. Now, it’s a lot easier to review your trades when you have a trading journal and a log. But the reason why a review session is number one on this list instead of journaling your trades is that collecting information can only do so much for us. We have to analyze and act on the data we collect in order to make the best use of it. For this routine, I recommend sitting down either at the end of the trading week or right before your next one and go over every trade you performed that week. Look at each individual journal and notice what kinds of thoughts and feelings you experienced with each trading day. If you saved screenshots of your trades, go over these as well. Pick out which trade was your best trade (that is, the one in which you followed your rules to a T), and which one was your worst. Notice what mistakes you made and think about ways you can improve. This is also a good time to calculate your profit and loss for the week. I like to review my trades on a Sunday evening so that they are fresh in my mind for the week ahead. 

So, let me know in the comments below which trading routines you want to focus on including in your trading practice. Are there any routines that I missed that you think also belong on this list? Your insightful and respectful feedback is always appreciated!

If this is your first time thinking about keeping trading routines, I recommend beginning with the top two, which is keeping a trading journal and reviewing it once a week, because this practice will have the greatest effect on your trading discipline and confidence. By examining what’s going on when you trade, you can help dispel some of the confusion and anxiety that comes with learning how to trade. I hope this list has you thinking about the ways you can structure your trading for success. 

Best of strength and luck, and I’ll see you out there in the markets!

How to Meditate: Improve Your Day Trading Mindset

How to Meditate: Improve Your Day Trading Mindset 177

A Trading Mindset Practice For When You’re Away From the Charts (And How to Bring It With You Wherever You Go)

If I told you there was one daily practice that you could do away from a trading session that would have a greater impact on your trading mindset and ability to profit in the market than any other, even if it’s something you think you’re not interested in, would you be willing to give it a shot?

I want you to think about your most recent fumble with the markets. Bring to mind the last time you made a mistake or felt out of control while you were trading. Do you remember what you were thinking and feeling when that was happening? For a lot of traders, myself included, when we’re itching to appease a strong emotion, like hyper-contemplating moving our stop loss for fear of losing money when price plummets toward it, there’s usually a lot of heated thinking happening. Our trading discipline is nowhere to be found.

If you couldn’t feel or think at that moment, would you have been more likely to follow your rules or accept the loss? If you could magically flip a switch off in your brain and stay completely serene, in control of your trading mindset, no matter what’s happening in the market – don’t you think that would make you better at following your trading rules or help you stay confident during a losing streak?

In reality, there’s no switch to turn our emotions on and off. There’s no silver bullet that can make you stop feeling a mix of emotions while you’re trading. But the good news is that we don’t need a switch because you are 100% capable of trading with confidence and clarity despite all the different emotions you feel when you profit or lose in the markets. 

How do we do that?

We develop an observer’s mind. When you’re able to create some pause and space between your feelings, thoughts, and your decisions and actions, you gain more control over your trading behavior and your reactions to the market. One of the best ways to achieve this is through keeping a meditation practice.  

Before teaching you what meditation is anUsing meditation to improve beginner trading performance in forexd how to do it, especially with the main goal of using meditation to help your trading, I’m going to share a little bit about my past with you all.

Long before I ever owned a piece of stock or knew what Forex was, during my college years I was studying psychology in Los Angeles. During my second year of studies, I took a class about different mysticism and meditative traditions that stem from a variety of major religions. We learned about the concept of atman and dharma as illustrated in the Hindu suttrhas. We explored the prayer practices of the Jewish Chasidim of eastern Europe in the 17th century, and we also learned about the tenets of Buddhism that arose from the Buddha’s experiences with meditation.

This was by far one of my most favorite classes I had ever taken. I was so enthralled with the ways in which people found relief from the difficulties of life through contemplation and prayer. And it was also the point in my life that I became incredibly interested in Buddhism. Now, this wasn’t the first time I learned about Buddhism.

When I was 16, I had picked up a little book of the sayings of the Buddha as edited and compiled by Jack Kornfield, a psychologist who during the 1970s became deeply invested in learning about and teaching Buddhist practices as a means to healing trauma. As someone who wrestled with depression for decades, the Buddha’s emphasis on seeing things as they are instead of becoming attached to any thought or emotion offered me some relief and helped me prevent my thoughts from spiraling.

So, when I was taking this mysticism and meditation course during college, it was the springboard I needed to dive deeper into Buddhist philosophy and practice. I found a few meditation groups in the Los Angeles area, including the Northridge Zen Center, where I was able to learn how to sit Zazen, the form of meditation taught through Zen Buddhism, and I attended dharma talks that discussed some of the Buddha’s prominent teachings about becoming an observer instead of staying in a reactionary way of thinking.

This started my love affair with meditation. I’ve been on and off daily meditation streaks for over a decade now and I can’t emphasize enough just how much this one practice has changed my life. Meditation does not need to be a religious practice, it can be a discipline for feeling at peace and aware of what you think.

So what exactly is meditation?

Woman meditating about success, discipline, mindset, psychology

It’s a practice of sitting still for a handful of minutes, usually as little as 5 minutes or as long as 20, 45, or even 60 minutes. Personally, when I keep a daily practice, I find 15 to 20 minutes to be the sweet spot for getting a noticeable benefit from regular meditation. I’ll do this once a day before starting my work.

Next, let’s talk about how you meditate. As you’re sitting still during this slot of time, your focus should stay centered on your breath. The feeling of air moving in and out of your nostrils, or with the rise and fall of your chest and belly. Naturally, your mind will start to move, so to speak, while you are trying to focus on your breath. When that happens, you notice that you are thinking this thought, you let it go, and you return to focusing on the breath.

That is meditation – continuously returning to your breath over and over, as you let your thoughts move by, like clouds floating across the sky.

You are training yourself to not get caught up in everything your thoughts say.

By doing this every day, you learn to let go of the constantly stimulated stream of thoughts and over time you’ll find that it’s easier to quiet your mind when you sit to meditate.

There’s a saying, though, that the real practice of meditation occurs when you’re not on your cushion. See if you can bring this tactic with you to your trades.

How to Bring Meditation to Your Trading

Midway through a trade, maybe you’re starting to sweat as your taAndrew Bloom meditating as a disciplined trader in Forex markets for successke profit target is almost hit but then turned the other direction. Instead of sitting in anxiety, see if you can return to your breath. Then, the next step is to mentally return to your rules. Do you have a rule for this kind of situation? If not or if you’re supposed to hold through, that’s what you tell yourself. “Hold on.” The anxiety is still there, probably, but you’re better equipped to intercept the reaction and allow space for both the anxiety and your decision to follow your rules.

Should you keep a regular meditation practice, you’ll also find that when you don’t let your thoughts spiral or be continuously filled with more steam, they will often calm down and go away. Like a car that runs out of fuel, without the energy and heat of your emotions, self-sabotaging thoughts will die off.

Can you see how this practice can save your tail while you trade? It’s such a powerful tool!

If you’d like to start with a guided meditation specifically crafted for traders, check out another video I made for this purpose.

I recommend checking out other videos about how to keep a daily meditation practice and even see about using an app like Calm to help you stay accountable and go deeper into your practice. Best of strength and luck, and I’ll see you in the markets!

A Free, Once-a-Day Forex Scalping Strategy To Try Out

A Free, Once-a-Day Forex Scalping Strategy To Try Out 303

 

Have You Ever Tried Scalping in Forex Markets?

First off, if you’re new to the concept of forex scalping, I want to apologize for the horrid term. Whenever my non-trader friends ask me what I teach, I always get a concerned face because of this term. I’m going to take an educated guess and say that it’s likely that this was a term that came into play sometime around the same period when brokerages moved online and high-frequency trading became a common way to make a lot of money in the markets. So, 1980’s, maybe 1990’s? And we all know how culturally sensitive and gentle the social norms were during that time. (I’m being sarcastic, just to clarify) I’m also comfortable with being wrong about this theory, but either way, I’d love to see new slang come into the purview of the English trading lexicon. How about something like, “Swiping,” or “Tinder-Style Trading”? Not much better, huh?

 

Okay, let’s get serious! 

 

Today, you’re going to learn a new swiping/scalping strategy that can be used on the EUR/USD once a day. 

 

What are some of the benefits of using a strategy that only trades once a day?

  • You can keep your day trading session as short as possible
  • You avoid running the risk of breaking rules by spending less time in front of the charts, and therefore, will not be tempted to over trade or make impulsive trading mistakes
  • You can day trade while also keeping a full-time job or going to school or parenting young children or doing whatever activity that brings you joy and fulfillment in life and requires your time
  • It can be helpful for transitioning to day trading from investing or swing trading

 

WANT TO WATCH A STEP-BY-STEP TUTORIAL OF THIS STRATEGY? CHECK OUT THE VIDEO BELOW

WANT A PRINTABLE VERSION OF THESE DIRECTIONS AND A PDF OF A TRADING JOURNAL WITH THESE STRATEGY RULES? ENTER YOUR EMAIL AND WE’LL SEND YOU THIS KIT!


I remember when I was first learning how to trade. While it was exciting to learn about and participate in what I thought would be a “quick” way to make money, for months and months I felt so confused. I didn’t really know what to do or how to find or create a strategy I could trust. There are plenty of strategies available for free on the internet, but a lot of them felt really vague and rarely did anyone also post evidence that it worked in real time. Furthermore, a lot of strategies only work well during certain types of markets or during certain times of the day, and a lot of the strategies I came across were being marketed without clarification as to when to use them.

I just wanted someone to tell me exactly what to do! I wasn’t looking for THE ONE STRATEGY that would make me 50%+ return a month, I wanted something that I could sink my teeth into and trust to lead me to a little profit as I worked on weeding out the common beginner trading mistakes, like learning to always take my stop loss or take only five or less trades a day. 

 

Of course, it took some time to learn that if I wanted to find a strategy that I could trust the most, I would have to create one myself. But I didn’t have the experience, knowledge, or confidence to try that approach during my first year of day trading. 

 

Instead, I ended up paying for a strategy online. 

 

While it’s no longer the strategy I use today, using that paid-for strategy helped me to focus on one strategy and use most of my mental energy and time to train myself to stop committing expensive trading mistakes. Part of what made this strategy so useful was:

  • It came with video tutorials
  • The trader showed examples of how the trade worked
  • There was some guidance as to when and how to use it (instead of pretending like it was some catch-all for all markets, all currency pairs, or all times of day)
  • It was easy to backtest

 

I want to offer you something similar, but for free! 

 

I created this strategy with beginner day traders/scalpers in mind. I don’t think it’ll be the only strategy you’ll ever use, but it can be one that you trust enough so that you can focus more of your time and effort on developing good trading discipline. When you gain more experience, you can eventually develop your own trading strategy that works best for your personality, time zone, and personal schedule. Or, if you like it and feel comfortable, just keep using it!

 

So let’s dive into it!

Day trader diving into new easy beginner strategy from free course

First, What is Scalping? How is it Different from Day Trading?

Just a quick word before we get into the nitty-gritty of the strategy. 

Whether you’re new to scalping or you’re a seasoned trader on the hunt for a new scalping method, I want to clarify my own understanding of what scalping is. Because in the Forex markets, scalping can look a lot different from, say, scalping in stock markets or cryptocurrencies. 

Many people may assume scalping to be different from day trading because of the length of time a trade lasts. You probably know that a swing trader will take trades that last for a few days to a few weeks. And that a day trader takes trades that last from as little as a couple of minutes to a few hours, but always closes before the end of the trading day. Some may think that a scalping trade happens over a matter of seconds and mere minutes. 

And yes, sometimes it does!

You’ll see this most of the time with stocks, especially penny stocks.

But I don’t think of scalping as defined by the length of time it takes to trade.

Instead, I think of scalping as a way to define the number of ticks or pips that the trade covers. So if the EUR/USD moves 100 pips in a day, I would say a forex scalping trade is one that takes out less than 20 pips (20%) of that day’s range. Even if that one trade takes half an hour to close, I would still consider it a scalping trade.

You’re going to find with this forex scalping strategy that even though we are going to (usually) capture less than 20 pips on a trade, the entire trade may take more than an hour to complete. 

Summary: Scalping trades are those that seek to capture a small amount of pips/ticks/points. Sometimes this happens within a few seconds, sometimes this can take more than an hour to complete. It all depends on the market you trade.

 

The Disciplined FX Once-a-Day Scalping Strategy: THE OVERVIEW

 

Okay, so now that we know what a forex scalping trade looks like, we can talk about how this scalping strategy works and why it has a favorable probability of performing well for the EUR/USD when the NYC stock market opens.

 

THE PURPOSE OF THIS STRATEGY IS TO LET YOU, YOUNG NINJA,  PRACTICE WITH A WOODEN SWORD INSTEAD OF STEEL

This is not the only forex scalping strategy you’ll ever trade.

This is not a holy grail.

This is not a strategy meant to earn you ginormous amounts of profit in a mere number of days.

checking new strategy works for forex EUR/USD

This is a strategy that takes the stress and pain out of researching and hunting for a profitable strategy and instead ALLOWS YOU TO FOCUS ON DEVELOPING DISCIPLINE when you’re first learning how to trade with rules!

 

All clear? Good!

 

The thinking behind this forex scalping strategy is that when you observe trends on the 5-minute chart, rarely do they keep plowing in the same direction all day long. Once the London markets close for the day, often any trends from the cross-over of the London Close and the NYC Opening lose their steam and start to pull-back or enter a range. Not always, but often enough that we can make a profit of it. That’s when we want to pop in for a quick swipe of a few pips!

 

As someone who has spent almost the entirety of his 12 years of adult life in academia, I don’t want to try to convince you of anything without first showing you some evidence. It’s not ethical, or influential, to do otherwise. 

 

So, here’s a screenshot of a backtest I performed for this strategy at the end of May 2021:

ATR = Average True Range at time of trade entry

R = ratio of pips won or loss to the number of pips risked

Wait, What’s R?

In this instance, R stands for “Ratio” and represents your risk-reward ratio. If your stop loss is 5 pips and your take profit is 10 pips, then you would have a risk-reward ratio of 2. For what you are risking, you are returning twice as much when you win.

I like calculating R when backtesting because it allows me to get an idea of what kind of profit this strategy could return for different levels of risk.

When you combine R with the percentage of your account that you’re risking each trade, you can figure out how much you would make on this strategy (assuming you risk the same amount of money each trade).

For example, if you are trading with a $1,000 account, you may decide to risk 1% of your account for each trade. That means that you would risk $10 per trade.

If your risk-reward ratio (that is, R) is 2, then for every $10 you risk, you would return $20. 

Got it?

Therefore, when we add up all of the R’s from each individual trade during this backtest, we get the sum total of 5. If you had risked 1% of your $1,000 account on each trade, then you would have returned 5% of your account (which is $50).

If you risked 2%, you would have returned 10% of your account ($100)

If you risked 3% you would have returned 15% ($150)

 

But before you start thinking you can go risking 3-5% of your account on a single trade, Look at that third week of the backtest sample. Three losses in a row. If your first week trading resulted in a loss every day, you could have had a drawdown of 15-25% of your account! That’s not good! A rule of thumb is to risk no more than 2.5% of your account per trade.

 

Some Observations from this Backtest:

  1. There were 4 days of no-signal/no-trade
  2. 4 trades resulted in a break-even
  3. 3 out of 11 trades resulted in a loss
  4. 4 out of 11 trades resulted in a win
  5. The third week would have involved sitting through loss after loss
  6. If you don’t include the break-even trades, this strategy had a 57% (rounded) win-rate
  7. If you traded this strategy and went by “feeling”, seeing how you would have only won four times, it probably would have “felt” like you weren’t getting anywhere with this strategy
  8. BUT at the end of these three weeks, you would have been in PROFIT

* NOTE: Backtesting is different from live trading. Sometimes you don’t get the same entry as you would have in a backtest because of the size of the spread between the ASK and BUY. This backtest also fails to take into account slippages and commissions

 

Overall, returning 3-10% a month in Forex is really good!! Actually, given the fact that most people lose when they trade, any kind of profit should be celebrated! 

 

Be careful of what kinds of expectations you place on yourself as a trader and the kinds of returns you think you should be getting from the markets. If you’re new, start with learning how to return any kind of profit. Then, once you’ve developed some discipline, you can try out other strategies that seek to return a higher amount of profit, should you take that route at all.

 

How to Trade the Disciplined FX Once-a-Day Forex Scalping Strategy

Now for the juicy part you’ve been waiting for!

 

Here’s a breakdown of the DFX Once-a-Day Scalping Strategy:

 

THE INDICATORS 

  1. ADX – this is the Average Directional Index. It usually measures the strength of a trend. Often, anything above a 25 is considered a durable trend. Anything below it is considered a weak or non-existent trend. 
  • Settings for the ADX should be 14, WILDERS (this should be the standard setting)
  1. ATR – this stands for the Average True Range. It gives the average size (in pips, from bottom to top) of the chart’s candles over a certain period.
  • Settings for the ATR should be 14 for ADX Smoothing and 14 for DI length (this should be the standard setting)
  1. Exponential Moving Averages – A moving average is the average price of the last length of candles depending on the number/length you select. So if you have a 9 moving average, it would measure the average price of the last 9 candles. However, the exponential moving average is different from a simple moving average in that it gives greater weight to the most recent candles. 

When price moves away from the candles, there’s usually a trend in the direction the candles are moving. If the moving averages are all tied up, crisscrossing each other frequently, then the market is likely oscillating or ranging. 

  • You are going to use 2 different EMA’s
  • The settings for each of the EMA’s = 5, 200 

 

THE RULES FOR ENTRY

  1. This trade can only occur between 930am – 1230pm EST on the EUR/USD (I haven’t tried it with any other pair, but feel free to backtest it and try it in a similar “end-of-one-market-opening-of-another” scenario)
  2. First, note which side of the 200 EMA that the candles are trading 
  3. If the candles are trading ABOVE the 200 EMA, look for LONG/BUY trades ONLY
  4. If the candles are trading BELOW the 200 EMA, look for SHORT/SELL trades ONLY

ENTRY SIGNAL:

  1. You are going to wait for the candles to touch and close ABOVE the 5 EMA if you are LONG/BUY/ABOVE the 200 EMA. Enter a BUY trade (usually via market order) with the opening of the next candlestick
  2. You are going to wait for the candles to touch and close BELOW the 5 EMA if you are SHORT/SELL/BELOW the 200 EMA. Enter a SELL trade (usually via market order) with the opening of the next candlestick

 

STOP LOSS = 1 x ATR (exp: if the current ATR at the entry is 5 pips, then you will put a stop loss limit order 5 pips above/below the entry)

TAKE PROFIT = 3 x ATR (exp: if the current ATR is 7, you will put a take profit order 21 pips away from the entry)

 

MOVING THE STOP LOSS

  1. After the trade moves 1 ATR in a favorable direction (towards your take profit target) move the stop loss to break-even (the price you entered the trade)

 

And that’s it! You take this trade only once!

 

Theoretically, if you know how to set up a moving stop loss, once you’ve entered this trade, you can walk away from the screens and move on with your day. 

 

This trade is meant to help you get started with forex scalping/day trading without having to dive in head-first. 

 

YOUR NEXT STEPS

  1. Set up your charts for this trade.  If you want a walkthrough, be sure to check out the tutorial I made to compliment these instructions
  2. Backtest the trade – Go over at least 100 samples of this trade from the last couple of months to make sure it’s still profitable for this current market. Your results may differ from the backtest report listed above because markets are always changing
  3. Demo Trade or start with a small amount of live cash – before risking your entire account on this trade, try out a few trades with a demo account or by risking a small amount of cash, like $5-$10 per trade
  4. Journal your trades – focus on honing your discipline and following these rules to a T. Note down any extreme emotions you have or if you make any rule-breaking mistakes. Furthermore, stay attentive to any issues that affect the trade, like the spread your brokerage offers or issues with getting your entry filled in time with the opening of the next candle.

 

 

Final Thoughts

I’ll say again, as I’ve said earlier in this article – this is a training wheels strategy not meant to return a whole lot of money, but to get you started with forex scalping and focusing on your own trading discipline. By recognizing that it’s possible to rarely win in a month yet still profit, you are more likely to take your stop losses and follow your trading rules. 

That’s what we’re aiming for – that’s the real WIN in all of this – DISCIPLINE. Once you’ve cultivated discipline, you can trust yourself to try out riskier and more elaborate forex scalping strategies. 

 

If you approach this process in the reverse, that is, get a risky, profitable strategy first and work on discipline once you’re making money, you’re setting yourself up for much loss and failure. 

 

But that’s not going to be you. You’re going to be responsible about this and grow from the experience.

If you ever need more help from me, you know where I can be found.

 

I wish you the best of luck and strength, as always.

 

See you in the markets!

 

Luv,

Andrew

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