How to Trade Any Prop Firm on Trading View in 5 Steps

How to Trade Any Prop Firm on Trading View in 5 Steps 0

Have you ever traded a prop challenge before?

If so, then you’re probably familiar with the limited selection of trading platforms that are offered by the firms with which you’ll need to trade.

Most prop firms offer the meta trader MT4 and MT5 as their sole offering for trading with the firm.

While this platform is the most ubiquitous in the market and there are many additional tools that can be installed unto Metatrader, much of its UI and UX design are a bit…outdated.

This isn’t much of a problem except when it comes to needing to use unique indicators, additional options on an order form, or to be able to take fast trades while scalping. 

There are a limited number of indicators already available on Metatrader – others need to be installed and require a multi-step process to do so. It can be difficult to calculate and manually enter orders by price (rather than pips) when trading as that’s the only input available for an order form. Trying to rely on a 3rd party position size calculator and typing in orders manually can be tedious and disadvantageous when trying to scalp.

In many ways, Trading View, which is one of the most useful trading platforms available, is the superior tool when analyzing charts and taking trades. Their order form allows you to automatically set your position sizes based upon the percent you’d like to risk and to set stop loss and take profit targets in pips on the same form. It takes a fraction of the time to set a trade on Trading View than it does Metatrader. This can make a big difference in profit or loss when scalping.

Trading View offers the easiest trading experience – and when applying a strategy and maintaining optimal psychology is already a difficult task, we don’t want to have to run into issues or delays with our platform and order entry as well.

Thus, it would be a boon to your prop trading career to be able to trade with Trading View and not have to worry about using the prop firm’s (suboptimal) platforms.

And it’s possible to do so!

Here I will show you, step-by-step, how you can trade with any prop firm on trading view.

Objective: Use a trade copier to trade prop firm accounts off of a demo account we can access on Trading View

We’ll achieve this in five steps:

  1. Setup a demo account with Oanda
  2. Sign up with a trade copier (TradersConnect)
  3. Use a prop firm login info to link that account to the Oanda demo
  4. Sign onto Trading View
  5. Test to make sure the connection is successful

For the purpose of this example, I will be demonstrating how I am connecting my Funded Trading Plus $50k challenge account to my Oanda demo account in order to take all of my trades off of Trading View.

<<If you’d like to take your own Funded Trading Plus Challenge, use coupon code “DFX10” at checkout for 10% off of your fee>>

Step 1: Sign up with Oanda for a demo account

First, we’re going to use one of the brokerage firms that can access Trading View as a platform. The best one that allows us to use a free demo account for our purposes is Oanda.

Google “Oanda” and pull up their homepage. It should look something like below (assuming you’re doing this in 2024):

oanda

You’re going to click a button to sign up for a free demo account. You’ll likely need to supply an email address, and identification information, and create a username + password, but you will not need to provide banking information or pay for anything.

Once you’re signed up, log into your demo account on the Oanda homepage and access the account dashboard by clicking the “Oanda Web Platform” button:

oanda dashboard

Then, select your “My Account:” button on the top of the screen to access the account dashboard.

You will not be able to connect your accounts to the v20 main account number. It must be a MT4 account. If one is not there, you will need to create it/add it to the account.

In order to move onto the next step, you’re going to need the demo mt4 account login information provided here. Click on the dots to access the account information. This should provide you with the MT4 login number and allow you to update the password for this MT4 account. 

Note your:

  • v20 MT4 Demo Account Login
  • Password
  • MT4 Server

We’ll need this to connect our accounts on the trade copier and to log into Trading View

Step 2: Sign up with TradersConnect to access a trade copier

Next, you’re going to need to purchase access to a trade copier. There are few major trade copiers on the market, but I suggest using TradersConnect, as they have a smooth service and a very easy-to-use design. 

Unfortunately, it’s not possible to demo copiers so you will need to sign up for a monthly subscription or yearly subscription in order to access a copier.

With Traders Connect you can pay for the number of accounts you wish to connect. You’ll need a spot for each account, including the Oanda demo account.

TradersConnect is often a cheaper option from other trade copies if you only want to link one or two accounts to the Oanda demo account.

Follow the directions for signing up with TradersConnect or your chosen trade copier. Once this is set up, you can add your accounts: the Oanda demo account and your prop firm account(s).

Step 3: Connect the accounts

Next, you’re going to connect the accounts. Notice that these are two separate steps – you need to first add your accounts to TradersConnect and then connect them as “Master-Slave” accounts. (Personally, I really wish they would use other terms, given the horrific connotations of this type of relationship in history, but the trading industry generally doesn’t seem to care about such things. For example, consider the term “scalping”…)

Under the accounts section, add your accounts one at a time and enter information concerning the account login ID, password, server, and brokerage.

Once all of your accounts are added, next, you’ll go to the “Trade Copier” section and select the button to add a new master copier.

You’ll need to connect each account one by one by using the “Add slave” button on the master account. Provide the details needed to set up how you want the trades to copy over to the slave account. I personally like to use the option to copy lot sizes, and will usually ensure that if I am trading with 0.5% of my account on the master, then I also want the slave to execute 0.5% of its account as well.

For example, my Oanda demo is set to about $200,000 (I have other $200k prop firm accounts that I want matched). Since I want to risk 0.5% on both the $200,000 and the $50k Funded Trading Plus account, I set the lot multiplier to 0.25. That means the lot size on the $50k account should be ¼ of the Oanda account, since $50k is ¼ of $200k. Thus, my risk percentage on each account should be the same.

You can also change the size of the Oanda demo account to match your other account by “withdrawing” or “depositing” simulated funds to your MT4 Oanda account on the Oanda site.

Once you’ve set your master and slave accounts, it’s time to log onto Trading View.

Step 4:  Sign into TradingView

For this step, you’re going to use Trading View’s Trading Panel to log into your Oanda Demo account.

If you don’t already have a TradingView account, sign up for one. You should be able to use the Oanda account with a free Trading View account, but there are so many added benefits to having a subscription that I recommend checking out their services.

You’ll need to access a Trading View chart and click to show the Trading Panel near the bottom of the layout.

Select the Oanda login option and make sure you select the “Demo” login panel on the right. Sign in with your MT4 login and password that you used to set up your TradersConnect master account. 

You may need to give permission through your Oanda account in order to sign in.

Once you’re logged on, you should see your Oanda account balance and all other information concerning your demo account. As long as you followed all of the above steps successfully, the account should be ready to trade.

Step 5: Test to see that the copier is working

Lastly, you’ll want to make sure that the account is properly connected to your prop firm account and that the position size conversion amount is correct.

First note that you can ONLY TRADE WITH OANDA CHARTS. When you access a chart or create your watchlist, make sure they are the pairs or securities offered by Oanda. 

I recommend creating a watchlist of Oanda pairs you like to trade so that you can quickly access them.

Select a pair you want to use for testing. EUR/USD is a good choice, given its low spread.

Select the TRADE button and you should see an order form pop up on the chart. Pick a small enough lot size that your prop firm will accept – since I was trading ¼ the size of my Oanda account, I needed to be sure to test with at least a 0.04 lot in order for Funded Trading Plus to accept the trade.

Once you place the order, you should see an open position on your Trading View dashboard. Next, go to your TradersConnect dashboard. Sometimes it may take a minute, but shortly after you enter the trade, you should see an open order on both your Oanda demo and prop firm account.

Success! You can now trade your prop challenge off of TradingView!

However, if you run into problems with connection, try troubleshooting with one of these ideas:

  • Check whether your login information for all of the accounts are correct – make sure you’re using an Oanda MT4 demo account (not the primary v20)
  • Check your master-slave multiplier
  • Check whether you’ve risked enough for the order to be valid for the prop firm account
  • Consider reaching out to TradersConnect support if it’s a network issue on their end
  • Check/change your Oanda MT4 password
  • Attempt to log off/remove accounts off of TradersConnect or TradingView and attempt to log in again

Overall, I hope you can see how useful this is for your trading, especially when trading with multiple prop firm accounts while using Trading View for analysis.

As always, best of strength and luck with your trading!

Top 3 Forex Trading Strategies and Courses for 2024

Top 3 Forex Trading Strategies and Courses for 2024 0

Hey there trader, I invite you to do a little reflective exercise with me right now. 

I want you to answer the following question off the top of your head. 

Ready?

 Ask yourself: After I add up all trade outcomes, was I profitable over the last year? 

This is a basic yes or no response. 

You shouldn’t have to guess, this is a number that should be apparent from your trading log or your account balance. 

If you answered “no” to this question, then what I’m about to share with you should be your guide to how you approach 2024. 

And if you answered “yes” to this question, then ask yourself whether you are proud with the amount or if you think you could have performed better. In that case, this guide is going to help you as well. 

We’re going to cover what the top 5 strategies are for the fast approaching 2024 and how you can combine these with a solid risk management plan to get you on the path to your best trading year ever. 

risk managrement forex

But First..Let’s Talk Risk Management

So before I give you a list of top trading strategies, we need to have a little talk about risk management. 

I’m starting with this topic because without a proper risk management plan, none of the following strategies are going to work for you.

 I recommend checking out the article I posted on what the true holy grail strategy is, which is your risk management strategy, where I discuss some ways profitable traders setup their risk management approach. This should give you some ideas. 

But for now, just know that your risk management plan should include:

  • Rules for how much you risk per trade
  • Whether you increase or decrease your risk per trade depending on your performance
  • What your rules are for trade management, such as moving your stop loss to break even once your trade hits 1R in profit
  • What your conditions are for withdrawing or adding to your account 

So too, you should have a list of conditions upon which you will refrain from trading – such as during news events, during holidays, and when you’re not well-rested or you feel ill. 

You will likely tweak your risk management plan to make sense for your trading strategy, so you can develop this plan in tandem with developing your strategy. 

It’s also important to remember that a fundamental aspect of profitable trading is self-management. This includes your trading psychology, your rules you keep for yourself so as to avoid overtrading or trading under conditions you know you are subject to impulsive behavior.

This could look like having a practical, hard rule to stop day trading after two losses. But this also implies that you are developing yourself as a trader who is responsible, calm, able to handle losses and losing streaks, and can behave like a professional in front of the charts.

Please don’t underestimate the importance of risk management and self-management in trading.

Top 3 Forex Strategies For 2024

Okay, now that we covered a crucial element of profitable trading design, let’s go over the list of the top high-performing strategies for trading Forex in 2024. 

#3 Indicators + Price Action

Number three on this list is a trading approach that often receives a lot of flack but in the right context, it’s actually quite durable and that’s trading with a mixed modality of indicators and price action. 

Indicators on their own are often unreliable as their signals and data lag behind current market price action. In my experience, strategies solely dependent on indicators tend to work well for specific market setups or for a certain month or two, but often fall apart once markets change. 

However, when combined with price action analysis, fundamental analysis, or a way to scan which pairs or assets are better suited to the strategy on a certain day, indicators still hold significance in today’s forex trading. 

andrew mitchem indicator trading

Some professional, seasoned traders who use and teach indicator-based strategies include:

Andrew Mitchem of The Forex trading Coach,
Karen Foo, and
Ezekiel Chew of the Asia Forex Mentor.

In the DisciplinedFX Scalping Course, I teach an indicator-based strategy that is used on the best-trending pairs for a given day. 

#2 Pure Price Action Trading

The second most effective trading strategy is to use price action alone to spot high-probability setups. 

This is the art of reading candlestick patterns in the context of price levels. 

You can use a variety of patterns to understand whether trends are continuing, reversing, or entering a range. Signals to enter or exit a trade can come from price action on lower time frames. 

For example, perhaps you specialize in head and shoulders setups as well as breakouts of flag patterns. Or maybe you mark support and resistance areas and look for engulfing candles or pin bars off of these areas.

This approach requires monitoring your charts as each new candle offers new information, but depending on which time frame you use, it may not take much time for analysis.

rayner teo forex trading strategy

Some reputable price action traders include:

Rayner Teo,
Steven Hart of The Trading Channel, and
Nial Fuller.

#1 Smart Money Concepts 

Lastly, the number one trading strategy for 2024 is ultimately smart money concepts or ICT trading. 

This is likely YouTube’s favorite trading approach, as many traders have visibly shown their profit from smart money concepts trading. 

Trading smart money concepts follows the underlying market structure and order flow of the market player’s with the deepest pockets, that is, the banks and financial institutions who more or less control the market. By understanding where these players are putting in their positions, retail traders can ride their backs and make significant return on high-probability trades. 

ict trader strategy best forex 2024

The Inner Circle Trader, who claims to be the father of Smart Money Concepts trading hosts all of his teaching content for free on his channel. But be warned, ICT’s approach to smart money concepts is highly advanced and takes a lot of time to learn and master. 

Nonetheless, one of FTMO’s reigning leaderboard traders, Paladin, is an ICT student and can attest to its validity. 

Other notable smart money concepts traders include:

Abdullah Rasheed of ProfitX,
Anton Calmes of MentFX, and
Matt Donlevey of Photon Trading

The intermediate level of the DFX Scalping Course teaches an easy-to-learn, rules-based smart money concepts strategy that simplifies many of the concepts taught by these other traders.

Time to Get Started

If you don’t know where to start your trading career or if you’re in need of a strategy that will help ensure your success (after also developing a solid risk management and self-management plan) then selecting one of these approaches and learning from one of these resources can get you started!

While I believe the strategy (or set of strategies) you’ll use as a consistently profitable, high performing trader will likely be unique and a collection of the most useful things you’ve learned on your journey, it’s highly beneficial to begin your success by using a time-tested and results-guaranteed strategy already designed by someone who has experience.

And once you’ve found your approach that suits your trading and you’ve shown yourself that you can trade it profitably, I recommend checking out one of these trustworthy prop trading opportunities!

May 2024 be the year that you reach all of your trading goals! 

How to Draw Market Structure with a Rules-Based Approach

How to Draw Market Structure with a Rules-Based Approach 0

It’s no secret that one of the most high-return and successful styles of trading taught for contemporary markets is the application of smart money concepts. 

This is the art of analyzing where institutions with deep pockets and massive order sizes place their trades. Then take those trades alongside them rather than against them. 

If you find yourself wanting to learn how to trade smart money concepts or if you’re already well on the path to profiting through this effective approach, then it’s likely you’ve learned a thing or two about market structure. 

Accurately drawing market structure is the most important step to successfully applying smart money concepts and it’s also one of the hardest to master. 

This article will help you understand what market structure is, how to draw it, some of the common mistakes you should avoid when drawing market structure, and a step-by-step approach to easily draw market structure in an objective (rather than subjective) way. I’m going to teach you the mechanical process I use to draw market structure for my own trading and help you clearly understand how to do so for yourself. Let’s begin!

What Is Market Structure?

To recap, market structure is the underlying trend and direction of price movement. 

When looking at price over time as it’s drawn visually, an uptrend is considered a series of higher highs and higher lows. 

profit market struc ture smart money concepts

A downtrend, conversely, is a series of lower lows and lower highs. 

market structure downtrend dfx

When a market is in a trend, it’s assumed price will continue to go the same way until a previous retracement is broken. 

continuation of trend break of structure smart money concepts

So with the example of an uptrend, if price were to come back and break through the previous higher low, then this trend is considered broken and price will likely begin a downtrend or oscillate in a ranging market from that point. 

When market  structure is accurately drawn, it’s possible to make profit by entering on pullbacks and exiting with the next wave in direction of the trend, like so.

trading smart money concepts market structure

<<<By the way, want to use the best company for receiving payouts for successful smart money concepts trading? Check out FT+! Use “DFX10” for 10% Off Your Challenge!>>>

Common Mistakes When Drawing Market Structure

This model of market direction is easy to understand and makes complete sense when describing price action by drawing these clean arrows. It may also appear logical when drawing market structure on past data in hindsight. But when we look to live charts, it can be much more complicated to determine where market structure is continuing or breaking. 

Many traders subjectively draw market structure as they see fit. Often, traders will draw a pullback or breakout with nearly every change of candle color. 

trading market structure smart money concepts

Here’s a common example of how a trader might subjectively draw market structure on a live chart. If we fast-forward a bit, we can see how this trend looks like it’s broken. 

how to draw market structure smart money concepts

If you’re trading smart money concepts, then this may seem like a good area to start shorting against the trend, by placing a trade like so.

how to draw market structure smart money concepts

However, if we fast forward a second time, we can see that the market is actually still in an uptrend! 

how to draw market structure smart money concepts

How to Draw Market Structure

So how can we possibly know when a pullback is over or where to accurately draw the pullback wave?

The key is to focus on pullbacks that have enough evidence or “weight” to be considered a valid pullback and to focus on continuation of structure (AKA “break outs”) that have enough price power behind them to be deemed valid.

With a handful of rules that follow these underlying principles, the above example would have a more accurate market structure that looks like this:

how to draw market structure smart money concepts

See how much cleaner this market structure looks? 

And you would have profited with a trade that focused on entering with the trend, like so:

profit market struc ture smart money concepts

The way I learned how to draw market structure with greater precision involves simple rules for designating valid pullback waves and valid breakout movements.

For the purpose of this article, I’m going to focus on teaching you how to draw market structure, so if you’d like to learn more about how to trade off of market structure levels for high-probability profit, then I invite you to join and learn how to do so in the Disciplined FX Scalping Course.

Draw Market Structure According to a Rules-Based Model

Here’s how to draw market structure in a nutshell:

  1. Draw valid pullbacks

  2. Draw valid breakouts

Let’s go over the rules for each one. I’m going to teach you by using an uptrend as our example, but you can apply the same rules to a downtrend, just inverted. 

To draw a valid pullback, we want to focus on areas that will most likely have a lot of big orders where institutions are accumulating entries into the market.

Remember, when big money comes into the market, it leaves a footprint. When orders cost millions of dollars, they’re not taken with one singular order (otherwise the market would move too much from the displacement!). 

Instead, big money needs to enter gradually, over a series of many smaller orders. This also will show some push and pull even done on a smaller scale.

Thus, one little pullback candle isn’t likely a sign of big money entering the market. So too, a tight ranging area might not be the right place.

We want to see the markets pullback from the recent high with a bit of conviction.

One way we can make a rule for this is to consider pullbacks that are at least two candles closed opposite the trend, the second further from the first.

This is an example of a valid pullback. 

Draw Market Structure According to a Rules-Based Model

These are not valid pullbacks.

how to draw market structure smart money concepts

We also want to make sure that the second pullback candle closes outside of a range. So if the first candle makes a pinbar, then the candle that follows need to be sure to close outside of that candles low. The low of the second candle isn’t the signal, it must be the close. So these series of lows don’t count.

From our example chart, here is a valid pullback. The boxed area is an invalid pullback because there isn’t another candle that closes below the first pullback candle.

how to draw market structure smart money concepts

Now for the rules of a valid breakout. 

With a breakout, we want to be sure that the market intends on moving higher and isn’t just making a fake breakout to trick traders into buying. 

Therefore, we want to see at least two candles close outside of the previous high. 

Here’s an example:

Draw Market Structure According to a Rules-Based Model

It doesn’t count if the second candle opens above the previous high but closes back below that previous high price. Also, the highs of candles that don’t close above the breakout area now create a range from which we want to see a break out of. Even if we see one candle validly break out of the previous high, the next valid breakout candle must close beyond these candle highs.

how to draw market structure smart money concepts

Here’s a valid breakout from our example trade. In the box is an example of a fake breakout.

how to draw market structure valid breakout

So using these two sets of rules for valid pullbacks and valid breakouts, you can now see how we can avoid a lot of noise on the charts and focus on the strongest areas of underlying market structure. 

This model helps us drastically simplify chart analysis and allows us to focus on areas where price will most likely react.

It’s important to note that this model is not perfect.

It just gives us a “probabilistic” edge. Sometimes the market is more volatile than other times. Higher time frames may respect these rules better than lower ones.

These rules, however, allow us to focus on best-case areas and to simplify a typically subjective and haphazardous analytical process.

Try it out for yourself! Backtest on your own charts and see if this rules-based approach to drawing market structure helps you better understand the underlying trends on the charts.

As always, I wish you nothing but the best of strength and luck in your trading!

Asking This One Question Will Save Your Trading

Asking This One Question Will Save Your Trading 0

Trading is a practice. 

Kind of like how playing baseball is a practice. A pro MLB player trains, develops skills, and puts far more hours into preparing for the game than playing the actual game itself. 

Trading is no different – how we prepare before the actual session can lead to success or failure at the time of performance and this will impact our profitability over the long run. 

Now, when a pro baseball player arrives before a game, do you think he just arrives to the stadium before game time, walks up to the plate, and takes a hit?

No!

Before a game, any athlete will warm up and mentally prepare for showtime. 

And as traders we should be doing the same. 

When it comes to trading, warming up and getting mentally prepared are things we should be doing before we place our first trade. 

Warming up can look like analyzing the chart, going over the week’s journal entries, back-testing a trade that happened in an earlier session, or reviewing past trades. 

But the majority of our time before a trade should be spent becoming mentally prepared. And in this article, there’s a specific question you should be asking yourself if you want to finally profit over the long run. 

This question that I want you to ask yourself each day is easy to answer- it requires a simple yes or no response, and yet it’s absolutely vital.

However, this question comes with a rule.

If you can’t honestly, from the most sincere analysis of your own mind, give the answer yes to this question…you shouldn’t trade that day. 

And in a minute I’ll explain why. 

The question you need to ask yourself any time you sit down to trade is:

“Can I accept taking a loss today?”

If you cannot sincerely and without anxiety accept that you can take a loss on a given day, then you are not in an appropriate psychological state to trade. 

One of the most difficult aspects of trading is that this activity involves facing constant loss.

And for most human beings, who have been taught all their lives to avoid failure, or to see loss as being “not good”, this can be a very difficult concept to accept.

The irony of trading is that:

  1. No trader will EVER win 100% of the trades they take over the course of their trading career – even professionals rack up some losses over weeks and months of trading
  2. It’s absolutely possible to win only 30% of your trades and still make a ton of money

Trading can be similar to sports in this way, too. The best of baseball hitters have a 0.300 batting average, which means that they only hit 3 out of 10 baseballs pitched. You don’t need to be a perfect batter to win the World Series, you just need enough of an edge.

Trading is the same – not all of your trades will win, you just need to get enough return on the ones that do so that they’ll outweigh the losses.

You’ll hear this fact stated over and over again – and yet..

..it’s still the most difficult pill to swallow of all trading psychology lessons.

The underlying concept here is that you don’t need to know exactly what the market is doing all the time. The best of financial analysis will misjudge outcomes at times, and that’s because the market is MASSIVE, capricious, and subject to many different orders, news events, and data influencing the decisions of market players. It’s not humanly possible to predict all market moves.

Instead, as responsible and disciplined traders, our goal is to use strategies and analysis that offer a high probability of winning frequently, returning large reward for the risk, or some combination of those two factors.

Once you’ve determined your strategy and you start consistently showing up to trade, your next responsibility is to take your setups when they come and to accept your losses when they hit their stop order. Hanging on to a losing trade by moving the stop loss further is a recipe for disaster.

So I suggest that when you sit down to trade, you always prep your mind for the market by asking yourself “Can I take a loss today?” As long as you can preemptively imagine yourself losing, and be okay with that outcome, then you are already in a much calmer and more prepared state than 90% of traders out there.

Write this question down somewhere you can see it when you trade and get in the practice of asking it every session.

Strategies, analysis, and learning technical tools will get you in the game but your psychological work will keep you playing for great rewards over the long run. Learning to accept losses is one of the best things you can do for your trading.

I Failed My Funded Trading Plus Challenge – Lessons Learned

I Failed My Funded Trading Plus Challenge – Lessons Learned 1648

I Failed My FTP Challenge – Here’s What I Learned

As of last night’s Asia trading session, I failed my Funded Trading Plus challenge. 

How do I feel?

Actually, after almost two months of battling a drawdown, I feel pretty relieved. 

My challenge was a mess, to put it bluntly. During that time I developed worsening symptoms of my chronic illness and could no longer wake up to trade the NY session (I’m located in Southern California. The NY/London crossover officially starts at 4am here). 

So instead, I tried to trade an end-of-NY-session crossover strategy that I had used in the past but hadn’t fully backtested for post-Covid volatility. That was a dud and further drained my account. 

I also made a switch to trading during the Asia session. I tried using the trend-following strategies I teach in the Scalping course during this time and the results didn’t quite match the preferred London or NY sessions. 

Do you see the pattern in this? 

funded trading plus failed

I made far too many changes during a challenge. Shifting too quickly left me feeling a bit chaotic and I failed myself in my own discipline as I made a few trades that broke my rules amidst feelings of anxiety.

The ideal is to run your challenge with a strategy and system already in place with your discipline well intact. You should have evidence that this process is profitable before starting your challenge.

My experience with this Funded Trading Plus challenge ran against that simple formula.

So when I say I’m relieved, I imply that I feel like I received the outcome that my trading choices deserved. I’m at peace with this result. In the truest sense of the word, this was my karma for behaving like a trader going through retrograde. The way I traded over the last few months was not reflective of the practices of a responsible trader. 

Given my life circumstances, I did the best with what I had and it wasn’t enough to merit a win. 

So now that this first challenge is over, I can take time and space to reflect on the process and decide what to do next.

I intend on taking another Funded Trading Plus challenge, but not necessarily right away. FTP gives you 30 days to “reset” your account. At this time, it seems you get about 20% off of the initial fee for a retry. 

Even if I am not ready to trade right away, because there is no time limit to the challenge, I can sign-up again and wait to start the new challenge. I want to be sure I have evidence that I can be profitable with a new approach before attempting to take it live.

For this entire year, I’ve been thinking about taking my trading to another level. For most of my time as a Forex trader, I’ve depended on mechanical strategies and short time frames to execute scalping trades. 

While this approach helped me to develop a routine, make money, learn to follow my rules, and be procedural about trading, I’m no longer able to maintain the daily routine of a mechanical scalper. With 3+ years in the market, I feel like this next step is appropriate should I prevail as a successful trader over the long-run.

The Next Step: Learn to Trade Like a Professional

As I do more research on the kinds of trading practices kept by professional traders who have decades of experience behind them, I’ve found that about 90% of these individuals:

  • Utilize discretionary trading styles on higher time frames, such as the 1H to Daily charts. 
  • Utilize both fundamental analysis and technical analysis that accounts for the way big money hunts order flows and responds to news
  • Apply a variety of technical analysis tools to understand where to position themselves for high-probability returns: candlestick patterns, trend lines, supply and demand zones, Fibonacci retracements, etc.
  • Mostly use indicators to understand the overall market structure, not necessarily to trigger entries or exits
  • Use multi-timeframe analysis and top-down approach to understanding directional cycles
  • Apply conservative risk management standards (For example, most will risk less than 1% per trade)
  • Are buoyant and can apply analysis to any market setup

At this watershed moment, with a failed long-term prop firm challenge in my peripheral view and a vision for more consistent profitability in the future, I think it’s time to take the next step and dive deep into professional-level trading skills. 

The Beginner’s Mind

Becoming a “Beginner” again is far different 3 years into trading rather than starting out completely fresh as a new trader. There are many things that I intuitively understand from experience, such as dealing with losses, drawdowns, winning streaks, emotions while trading, etc. I’m also comfortable with trading platforms, submitting orders, reading charts, and have a general understanding of nearly every technical tool and trading approach out there.

When you’re first learning to trade, when every concept you come across is new, information overload is common. You don’t know how to prioritize information. It’s easy to decide not to learn something that feels uncomfortable.

The beauty of “starting over” when you already have experience is that you have more situational awareness and knowledge to help conceptualize difficult topics. You’re not exactly starting over, you’re merely adding more information to mental categories that are shallow in depth. 

For example, I may not know how to apply fundamental analysis to my trades just yet, but I am familiar with many economic events that drive markets, such as interest rate decisions, non-farm payroll, retail sales, etc. If I was just starting out and attempting to learn fundamental analysis, these would all be new words and concepts to learn. Instead, at this stage, I am familiar with the terms and their basic meaning – now I want to learn how they all fit together and go deeper on what their numbers entail for market sentiment. 

It’s kind of like when you’re learning a new language and you more easily remember vocabulary that sounds similar to words in your own native tongue. It’s far easier to associate already-known concepts than have to drill an entirely new concept into your head. 

So this is all to say that learning how to trade like a professional is a process. It’s not one that you can Bootcamp in six months. There’s far too much information to acquire and too many processes to practice. Dealing with your psychology is also something you can only master with experience and time. 

It’s not embarrassing for me to say that I’ve failed this challenge because I’m still relatively young in my career as a trader. I share this with you so that you can reflect on your own time in the markets and give yourself some slack if you’re not where you thought you would be by this time. Trading is not easy. If it was, more people would routinely profit. I also hope that some of you will be influenced to join me on this learning adventure, as long as you’re ready to scale your knowledge. 

My Trading To-Do List for the Next Few Months (and Even Years)

  1. Daily read books and take courses offered by professional-level traders who have a solid trading record. Some possibilities include:
    1. Anna Coulling (“Three-Dimensional Approach to Forex”)
    2. Kathy Lien (“Day Trading and Swing Trading the Currency Market”)
    3. Brent Donnelly (“The Art of Currency Trading”)
    4. Karen Foo (“Fundamentals of Currency Trading”)
    5. Research other traders who have a solid track record, are professional not only in their trading style but the way they hold themselves and conduct their Forex education business. Academic background in finance is preferred but not necessary.
  2. Find a trading approach that compliments my lifestyle
    1. Trade 1H – Daily charts for entries so I can limit my trading session to about an hour a day, in the afternoon when NY closes and I am certain to be awake
    2. Mixes fundamental analysis with technical analysis – I actually enjoy reading the news. Having a sense of why the markets are moving helps build confidence in a trade idea
  3. Find a trading mentor who I trust
    1. Ideally, this is someone who can regularly review my trading decisions and pinpoint flaws and strengths in my thinking process
    2. Is someone who has a lifestyle and approach that mirrors my own ideals (Calm, genuinely kind, values financial freedom over materialism, enjoys the art of teaching and mentoring – isn’t in it just for the money)
  4. Be more scrupulous in tracking not only my trades but also what I am doing to develop my education as a Forex trader.
    1. Sometimes it’s easy to “do more” without really learning from the experience. I want to make sure what I am learning is directly connected to trading improvement and actually has an impact on my trading over the long-run
    2. Sometimes it’s easy to not do enough or to avoid the difficult work. I want to be sure to go slow with topics that I don’t immediately understand and give myself enough time and patience to work on the tough stuff. I anticipate this being an issue with learning fundamental analysis
    3. My tracking tools can include: Trading journal (trade stats, overarching trading idea, emotions and thoughts that arise while trading, etc.); Weekly reflection of best/worst trades, what I researched and learned that week; Forex education journal (Jot down a few lines in a log each day as to what I studied, what insights I had, and how I spent my time learning)

This is merely the blueprint of what my game plan will entail as I begin again and learn new Forex strategies that may push beyond what I was comfortable doing in the past. I hope to document this process and share it with you all. I don’t doubt that some of what I come across will also benefit you in your own trading. 

Sometimes it’s the big failures that act as kindle for the fire that will light you up and motivate you to reach a new level. Whether it’s blowing up your account, failing a challenge, experiencing a major life change, or facing a long drawdown. Sometimes big problems help us open up to solutions that we might have rejected in the past, out of fear or laziness, or even the belief that we’re not capable of learning.

In the aftermath of a serious problem, one option is to stay caught up in emotions. Another is to use it as a springboard to learn deeply from the experience and make new choices. Don’t forget, you can always get value out of your failures by reflecting upon what happened, taking responsibility for your role in the outcome, and using that knowledge for your improvement. 

How to Create a Trading Plan: The Definitive Guide

How to Create a Trading Plan: The Definitive Guide 2

Here’s a fun fact:

Do you know what people do when they’re blindfolded and told to walk 20ft in front of them?

This is an experiment done across many different landscapes and timezones, yet the results are always the same.

If you were to blindfold a group of people in an open space and then tell them to walk across to the other side of the field, they’ll start walking in circles.

It turns out, that humans need some kind of horizontal plane of reference, be it the horizon or buildings, to help guide a path forward.

Otherwise, the brain can’t fixate on a direct path.

You need to be able to see where you’re going.

So when you’re seeking to build skills as a trader to achieve consistent profit, having a destination in sight helps you get there.

Maybe you’re familiar with the symptoms of not trading with a plan:

  • you circle back to the same failed strategies or psychology time and again,
  • you do extra work finding new strategies or ways to become a better trader,
  • you change your mind about what you want or how you want to trade,
  • and overall, just second-guess yourself as a trader.

As the saying goes, if you fail to plan, you plan to fail.

Walking in circles isn’t just a metaphor, there are so many ways in which our brains use logic from the physical world to influence our inner world and the ways we think. So in order to guide your path to profitability, you’re going to need to develop a trading plan.

Whether you write a plan for each of your strategies you perform or a plan for each phase of a prop trading challenge, the beginning of every trading pursuit or goal you aim for needs to have a trading plan.

Yes, I’m implying a written document, not just an idea in your head.

While a goal may name the destination, your trading plan is supposed to show you some of the milestones along the way by listing what you should and shouldn’t do during each session, as well as what you plan on doing if you face unexpected challenges or lucrative opportunities.

In the world of trading where there’s so much movement and so many different assets changing direction all at once, you need to narrow in and define for yourself what you’re going to focus on.

You can’t trade everything you see in the market and make up a plan on the spot.

You need to create rules for yourself.

In this way, you are responsible for defining what you do and don’t trade and how you go about doing so. In this tutorial we’re going to go over what you need to include in your ideal trading plan. I’m going to show you a trading plan I’m making for the Funded trading Plus challenge, and we’ll go over different things you can include to adapt it for different trading goals.

The Components of Your Trading Plan:

  1. Goal
  2. Your Motivation/Why
  3. Strategy
  4. Risk Management
  5. Contingencies
  6. Log (Optional)
  7. Other Components

What to Include in Your Trading Plan:

1. Title

This may or may not seem obvious, but be sure to give your plan a title that makes sense for the role this plan will play in your greater trading career.

You will likely have a few different trading plans over time, so it helps to name them in a way that keeps things organized.

For example, if you are making a plan for a prop firm challenge, like the FTMO challenge, you can title it “FTMO $100K Challenge 2022”. Or if you name your plans for different strategy systems, you can title it according to the name of your strategy.

How to create a trading plan2. Goal

Next, your trading plan should immediately tell you what the purpose of the plan is, that is, what your goal is for trading this system.

Be descriptive, here.

Some examples:

  • Return on average 2-5% per month for 2022
  • Have 3 consistently profitable months in a row
  • Follow 100% of my trading strategy checklist rules for 21 days straight
  • Grow my account by 20% this year
  • Build my account to $50k within 5 months
  • Pass the FTMO challenge within 30 days by returning 10% of $100k

Notice how some of these goals have clear time-based or performance-based outcomes? Such targets are easier to track – you’ll know whether or not you’ve profited +2% in your account this month by looking at your brokerage statement. You want to be able to clearly say whether you’ve achieved your goal or not.

The reason for putting down clear numbers in your goals is not to constrict you, but to help you decide how you’ll design your trading strategy and risk management plan, especially the latter.

You can adjust these numbers as you go, but by having a target you can track how well other components of your trading plan help you meet your goals or not.

3. Your Motivation/Why

ALERT!

This is possibly the secret key to ensuring that you will actually follow through with your trading plan.

Anyone can write a plan and make it look like a good idea.

This isn’t only true for trading, but other big behavior-changing goals, as well. Think about fitness.

Here’s a simple fitness and nutrition plan:

  • Lift 3x/week
  • Jog 3x/week
  • Yoga on rest day
  • Go on an evening walk every day
  • Stick to a whole food plant-based diet, no sugar or processed foods

Seems simple, yes?

But performing this every week is the hard part.

The plan is effective. You will definitely morph your body into a healthier version of yourself by following these simple rules, but you will only achieve that outcome if you put the plan into practice regularly without fail.

Fitness coaches will often say that you need a really good “why” to help you sustain motivation while you’re still changing your habits and gaining momentum. Sometimes wanting to look good isn’t enough when you’re 5 seconds away from eating a chicken waffle slathered in high-fructose corn syrup after a long and tiring day of work as you pass an old favorite restaurant.

Better health and fitness reasons that will make you second guess short-term pleasure in order to achieve long-term freedom:

  • I want to be able to be there for my kids when they’re in college and stop feeling so winded every time I play with them
  • I want to see my abs for the first time in my life so that I can prove to myself that I have control over my body and my energy levels
  • I want to end this illness and see if I can use a safer and more effective approach in place of expensive drugs so I can live a vibrant life again

The pain of the greater loss needs to outweigh the pain or inconvenience in the moment.

Your trading plan is similar and your mindset as you execute the plan is likely going to have a greater effect on your results than the system rules.

I am diving deep on this topic for this guide because I want to emphasize how important it is to have a CLEARLY DEFINED MOTIVATION for pursuing profit from trading.

Your reason for choosing this highly risky, long path to becoming financially free as a trader needs to be so moving that it can make you second-guess acting out a trading mistake as you’re thinking about doing it.

Wanting to earn something like $5k per month won’t cut it.

Money, itself, usually isn’t the reason people want it.

Instead, it’s the options that money gives to life that make it so useful.

What can trading success help you feel or experience in your life?

Is it to be the first person in your family who isn’t indentured to debt? To afford a life-changing opportunity, like a professional degree? Is it to quit your job that makes you feel like you’re wasting away your life?

Make your motivation crystal clear. Make it emotional because it will be the emotion-evoking moments in your trading that will make or break your success – you need to be able to speak to your emotions in the language of emotion.

“Yes, I know I really don’t want to take a loss on this trade today, but I can’t let myself chance a bigger loss – I need to trade skillfully, otherwise I’m never going to get out of debt. Following my trading rules is key and right now they’re telling me to take this loss.”

I want you to begin thinking like that for every single move you make in your trading.

Your reason to trudge the path will help you prevail and learn from your mistakes. Give this one time and thought.

4. Overview of Your System: Your Trading Strategy

Usually, most traders focus all of their attention on this section.

That’s fair, you need a strategy that’s profitable for your trading goals, whether that means greater profit in the short-term or long-term.

However, I recommend keeping this as simple as possible. Your risk management and psychology will have the greatest effect on your ability to profit, overall, and other parts of this plan help you mitigate when those areas face problems.

For your strategy, be sure to include the main rules and principles that your strategy utilizes.

Your rules should define, clearly, what you do or do not trade.

For many traders, this could mean listing a specific set of candlestick patterns you trade, the main mechanics of an indicator setup for entry, etc.

Your trading principle should tell you what high probability situation you seek to use with your strategy.

Some common ones include:

  • Trend trading major/minor pairs
  • Trading a NY reversal
  • Trading London breakouts
  • Scalping News
  • Trading smart money liquidity setups

Again, like your trading goal, you should be able to simply and clearly understand the basis of why your strategy should work and how its rules were chosen to take advantage of the situation.

I think this is important to include, because you may find over time that your strategy rules don’t actually fit its principles. When you discover this, you can decide how you can change your rules or change your principle in order to ensure you’re only trading high probability setups.

Be sure to also include important technicalities regarding your strategy, such as:

  • The sessions you trade and the time you trade
  • What pairs or instrument classes you trade
  • The mechanics of your entry and exit plans
  • Your expected R:R and even expected win rate

 

5. System Cont.: Your Risk Management Plan

While most traders spend a ton of time fine-tuning and working through a trading strategy, seasoned pros know that the most important aspect of your trading plan is actually your risk management plan, which includes the ways in which you handle emotionally-charged trading situations.

So if you’re feeling like you’re running around in circles way too often, it’s probably because you’re spending too much time focusing on your strategy.

Stop that.

Instead, put your time and energy into learning about risk management, discipline building, and developing the ability to understand your own emotions and make systems to address them as they come up.

For your risk management plan, you’re going to want to include these key trade-related measurements and tactics:

  • How much of your account you’ll risk per trade
  • The maximum number of trades you’ll take each day
  • The maximum amount you can lose per day
  • The maximum drawdown you’ll let yourself experience with your account/prop challenge

To make your risk management strategy effective, these outcomes you’ve listed from above need to come with consequences. You need a plan for how you’ll address each situation and set yourself up to learn as much as you can from losses. You’ll also want to include in your risk management plan:

  • What happens when you exceed your risk per trade
  • What happens when you hit your max. # of trades per day
  • What happens when you hit your max. loss per day
  • What happens when you hit your drawdown

You’ll also want to add:

  • What happens when you break your trading rules

Your strategy and gameplan for what you do when you’re in a loss or breaking rules needs to cover two things:

  1. You need to create space between yourself and the trading desk
  2. You need to replace bad behavior with good behavior

Some ways to do this include:

  • No longer trading for the session, day, week, month, etc. – that is, take a break from trading because either the market doesn’t currently work with your strategy or you can no longer trade your strategy without breaking rules
  • Take time to review what happened – going over your trading journals, your account equity over a period of time, etc.
  • Learn from experienced traders how to manage drawdowns or improve trading behaviors/psychology – do some research
  • Make a plan to implement any tactics or behaviors for better trading performance that you learn from your research
  • Put the plan into action – schedule your tactics/habits, get someone to help hold you accountable, etc.

Make sure you write out a plan that works for you.

Think of this as a flow chart:

  • If X, then Y
  • If I break my rules during my trading session, then I stop trading for the entire day. If I break my rules more than two sessions in a row, then I stop trading for the entire week.

By having a “Worst Case Scenario” plan, you don’t have to rely on yourself to make a decision about your trading in the moment. You won’t likely be in the best mindset during a drawdown or some serious rule-breaking, so it’s better to make these plans while you’re feeling confident and in control.

6.  Contingency Plan

A trading contingency plan focuses on what you’ll need to do when things not necessarily related to trading go wrong, yet will still have an effect on your ability to trade with a sound mind.

In the contingency plan I created, I include a list of reasons for not trading, or at least reducing the frequency you trade or risk you take. These are contingent upon 3 key areas:

  1. Psychology – this would include any emotional states that affect your ability to make sound technical analysis or risk decisions. I would include here depression, grief, anger, stress, etc. Your worst trading mistakes arise from similar states of mind (anger can lead to revenge trading, depression can cause taking greater risks or avoiding setups because it doesn’t feel like trading matters anymore – it’s better to stay out during these transient times)
  2. Life – I included this category to cover any life events that can take away from your availability to trade – this can be weddings, funerals, change of jobs, moving to a new city, etc. It’s up to you to decide how emotional/physically you’ll be available and you can decide whether you want to reduce your risk, reduce your frequency of trading, or just stay out of the markets altogether until you’re situated again
  3. Personal – This last section is more of a grabbag for anything that doesn’t fit the others and may be individual to your personal life – for example, I’m currently pursuing a PhD in Business and will either stop trading or show up only for red news event days when I’m in finals for my courses.

Technical Troubleshooting

You also need to include contingency plans for what you’ll do when your tech breaks, the internet goes out, or any other trading resource is unavailable to use.

I promise you, if you’re in this for the long haul, you’re going to run into your internet going out or your computer/laptop/mouse/platform glitching or breaking on you while you trade.

The best plan is to always have a backup or figure out a place you can go to in order to set yourself up to trade for the rest of the session.

7. Optional: Log

Lastly, I included a log, but I don’t recommend using this unless you’re trading for a prop trading challenge or some other relatively short-term goal. An excel spreadsheet or software trading journal is a better tool for tracking your trades over the long run.

When you’re evaluating your trades during a challenge, it’s helpful to have your rules and strategy all in one place. By keeping a log of your trading outcomes on the same sheet as your plan, you’ll have an easier time deciding on how your plan is performing and whether you need to make any important changes.

8. Other Optional Components

The above categories and parameters will cover the majority of what you’ll need to plan when you’re setting yourself up for success while trading. However, there are a few other components you could  include if they are relevant to your situation. Feel free to also add others that you believe will help you.

The goal in creating this plan is to put everything you need to know to do while you trade, written down in one place.

Some additional things to include:

  • How you’ll break down your risk plan across multiple accounts
  • Equity chart as you track weekly or monthly balances over time
  • List of brokerages and which strategies you trade on each one
  • Worst/Good/Best targets for your performance goals
  • A “Retry” plan for when you should consider aiming for a retry for a prop trading challenge instead of completing the goal

I hope this article helps you organize your thinking and planning as you put together a working system for your success in the markets.

Your plan will likely shift, change, and evolve over time.

Instead of seeking to create the perfect plan, get yourself comfortable and familiar with the art of planning and gathering feedback from reviewing your plans regularly. This habit will accelerate your path to profit.

As always, I wish you nothing but the best of strength and luck with your trading!

Should You Trade Forex Like a Robot?

Should You Trade Forex Like a Robot? 84

Perhaps during this century more than ever before, society is willing to bravely discuss emotions and mental health.

I believe this is a milestone for humankind and a boon to evolving as a global society that seeks to achieve peace and continue to make technological and social progress.

I also believe that taking care of your mental health is crucial to your success as a day trader. Whether this means learning stress reduction techniques or meeting with a physician to discuss options for medication, you can make your trading sessions (and not to mention, all other areas of your life) far more comfortable and easier to manage when you prioritize your mental health care instead of avoiding it.

However, when it comes time to read the charts or set your trading order, emotions have a way of doing more harm than good.

Unless you’re seeking to become the next Paul Tudor Jones, trying to trade based on a “gut-feeling” for what the market is going to do next will more likely drain your account than develop your trading skills.

For us retail traders, who have limited access to the kinds of information that power the biggest funds in the market, we will likely depend on the technical analysis of price-action or indicator strategies in order to organize our approach and make some profit.the seven habits of successful day traders andrew bloom

If you follow the habits of successful day traders, you likely have a strategy and plan that tells you what you do during different market scenarios or at different stages of profit or loss in your account. You also have a checklist and routine that governs your trading session.

With these pre-planned rules and guidelines, combined with a strategy that is backtested or forward tested for profitability, you should have everything you need to be able to conduct a responsible trading session.

During that time in front of the charts, your emotions are not invited to join you. It is in your best interest to trade like a robot.

Why should you trade like a robot?

Consider these attributes of successful traders:

  • Winners think statistically – they know that no single loss or single win makes any difference in the long term. It is the series of wins and losses over weeks and months (or years, for swing traders) that determine the strength of a strategy
  • Winners know that a profitable strategy can still come with strings of losses (even up to 10 in a row)
  • Winners are patient and take only the high probability setups (consider trend-trading if you don’t know where to start)
  • Winners are willing to do nothing if the appropriate setups and rules aren’t aligned
  • Winners don’t try to predict the future
  • Winners reflect their understanding of risk and the inevitability of losses by limiting their risk on each trade to 2% or less (the larger the account, the smaller the number)
  • Winners develop confidence from backtesting (gaining statistical knowledge about the strategy) and by following rules
  • Winners focus on consistency

Emotion is not necessary to make any of the decisions involved in a well-thought-out trading plan. A trader builds skills to help manage randomness, your mind’s least favorite bedfellow.

forex trade like a robot

In this way, the point of learning about and developing your psychology while trading involves being able to override your human natural instinct to want to protect your money during your attempt to make more money.

However, it’s no easy task to subdue your emotions while you have money on the line. It will take many encounters with your emotions and having the courage to override them time and again in order to get to a status of discipline. Don’t worry, the pain of your failures will help this, too.

Here are some additional things you can do in order to minimize your emotions’ influence on your trading:

  • Make sure you are risking an amount that you are comfortable losing at least 5x in a row (if you want to be more realistic, make it the amount you’re comfortable losing 10x in a row)
  • Have hobbies and interests that give you a sense of self-worth which have nothing to do with trading
  • Have over streams of income so that your basic needs are not dependent on your profits
  • Before you trade each session, visualize yourself losing all of your setups and feeling okay with that because you’re proud of following your rules
  • Visualize yourself winning and only being proud about following your rules – not the fact that you made money
  • Consider losses as the normal operating costs of doing business in the trading industry (Every business has costs – for example, DFX has subscription fees for various software licenses) and as long as your “sales”, your winning trades, outweigh your losses, you’re in profit
  • Focus on %, # of pips, or R multiples, not dollars when tracking your progress

 

Psychology is the greatest factor in your trading success, followed by risk management, and lastly, your trading system. Continue to take time to learn about and be positively influenced by successful traders who talk about this key skill.

3 Ways To Get More Profit From Your Trades

3 Ways To Get More Profit From Your Trades 83

I’ve been doing a bit of research lately on the different ways professional retail traders select profit targets.

One of the most frequently touted adages for staying profitable in trading is: “Let profits run!”

There will come a point in your trading when you will no longer want to just be profitable, but also get the most out of your trades. Looking for more trades or trying to be available for more sessions aren’t always feasible. One can lead to over-trading and the other is both mentally draining and time-consuming. Instead, another way to build up one’s returns is to seek to increase your risk-to-reward ratio.

However, like many easy-to-repeat phrases of advice in the trading world (among others like “buy the rumor, sell the fact” or “buy low, sell high”), it’s hard to apply this wisdom without considering the context of your strategy.

If you’re a scalper or you trade during the Asia session, “Let profits run!” can sometimes be poor advice. Or expectations for “Let profits run” could mean capturing 100 pips over a week versus 10 pips for a Tokyo scalp.

In order to make the most of your take-profit targets, you’ll need to think deeply about your trading style, your trading goals, and then find a take-profit approach that works best for you.

While there are many other ways to seek more pips out of the market, here are three unique methods that you can apply to your trading.

3 Ways to Get More Profit From Your Trades

1) Backtest Your Strategy To Determine Appropriate R:R

Who is this best for: Algorithmic traders, mechanical strategies, scalping strategies

While past performance does not guarantee future outcomes, often history repeats itself. Since market moves are motivated by human emotions, players in the markets tend to behave similarly over time.

Especially if your strategy has clear-cut rules, you can readily backtest its performance and measure how far price tends to move before going against your trade. I like to do this with the mechanical strategies I use to trade. To compile data for this analysis, I’ll track the most pips moved towards and against my trade in a spreadsheet, as seen below.

 

how to backtest forex

Push implies the farthest distance the trade would go in my favor and the pull represents the movement that would go against the trade before turning towards profit again. “1.5 x 1.5” ended up being “1.5 ATR as a stop-loss and 1.4 multiplied by the stop loss for take profit.

Such data can be revealing. You can apply different risk-to-reward variables to see which results in the highest return over a period of time. Perhaps, even contrary to the advice to “Let profits run,” you may find that it pays to have a tighter take-profit target, with a R:R like 1:1 to 1:1.5. I find this to be particularly true for algorithmic trades or trades that occur on shorter time frames (5m, 1m, etc.), when trades are taken with any given setup, without higher time-frame analysis.

The more data, the better. Test it against different R:R possibilities, such as 1:2, 1:2.2, 1:4, or even 1:1.4. However, as with any backtesting activity, the results need to be taken with a grain of salt. Slippages, slow entry orders, and other small tweaks or mistakes can affect these outcomes. Therefore, I like to aim for a little less of a target than what my results tell me.

2) Using Multiple Targets: Using Both a Fixed and a Dynamic Profit Target

Who is this best for: Trend traders, price action traders

Many traders will split their take-profit targets over multiple different exits. This is probably one of the most widely used methods to let profits run while taking some profit along the way. While you want to get as much as you can out of a trade, the farther price moves, the increase in likelihood it will eventually turn around. Even with the best of analysis, picking tops and bottoms of trends can be excruciatingly difficult. Instead, it’s better to use an exit strategy that is malleable to a variety of outcomes.

An example of using both a fixed and dynamic profit target can look like this:

Instead of one target, use two take-profit targets.

The first can be a hard risk-to-reward ratio, such as 1:2, where you are profiting twice as much as you risk. At this price point you can decide to exit half of your position.

The second take-profit target can be an indicator or price action pattern that signals a reversal. One example of this is to let price continue until it pulls back and crosses a 21-ema. Another example is to exit when you see a bearish/bullish pinbar going against you on a higher time frame, like the 4h if you took your trade on a 1H. You can research different ways to spot signs that a trend is about to end if you’re using this to get as much as you can out of a trend strategy.

multiple take profit targets forex

3) Apply a Trailing Stop

Who is this best for: Trend Traders, day traders, swing traders

There are traders out there who only use trailing stops for a take-profit target, they won’t put a defined target on the chart, but instead let the market’s momentum decide where the appropriate profit lies. This approach can help with minimizing losses and drawdowns but sometimes at the cost of a higher return. The benefit in using this approach is that it’s agile and sets a target that more closely matches what the market is willing to give.

There are a few ways you can use trailing stops.

One way is to set it as an automatic stop-loss that follows the movement in ticks. If price goes down after a pre-defined level (such as with every 10 pips moved), the stop loss follows as well. This works better with wider stops, as often used in swing trading, and less volatile markets, as too close of a stop can take out a trade early.

Another way is to move your stop below the low/high of every 3 bars – this works best with trend trading.

Again, you can research trailing stops more deeply, as there are many methods out there.

Conclusion

No one exit strategy will work for all trading plans, time frames, or trading sessions. Backtesting, demo trading, and small positions can all be used to test the efficacy of a profit target as it relates to your strategy. Be sure to put the time and work in to experiment with your trading, as you’ll learn and build your skills by performing these exercises!

Wishing you the best of strength and luck in the markets!

 

7 Things Every Trader Should Do

7 Things Every Trader Should Do 87

Before I dive into the details of this post, I just want to say a very big heartfelt shout out to all Ukrainians around the world – I am so sorry and in so much pain as I see all the suffering, war, and destruction that’s happening in Ukraine right now. This is an unethical move on Putin’s part and I genuinely hope that this war ends soon and that Ukraine can recover and repair the damage.

These are difficult times right now – all around the world, inflation is pretty bad.

Here, in California, gas is just about six dollars a gallon.

Like any market, global economies go through ebbs and flows as they play out boom and bust cycles. Hopefully, we are still in an uptrend overall and in time the world will repair and grow again.

Amidst this volatility, you may be learning how to trade right now – and wanting so badly to get into profitability, or at least make sense of the market.

Or perhaps you’re three years in and you’re in a fumble and you don’t really know what to do as markets are changing. Just when you think you may be gravitating towards clarity, suddenly volatility is all over the place and you’re just kind of stuck in information anxiety.

To help abate some of that anxiety, and clear away the confusion, I want to help you regroup and be able to center in on 7 things you can focus on doing in order to become a profitable trader.

Now, I didn’t just pull these out of thin air. I actually derived these 7 ideas from Alexander Elder’s “The New Trading For a Living”. This is one of the first books I ever read on trading and I continuously go over and over again as I try to remind myself what do I need to be focusing on as I continue to grow as a trader.

<<This is also one of a number of books I personally recommend and have listed in a free guide that I’ve compiled just for you>>

You’re going to find that there aren’t only just trading books on that list but some other personal development and money management books as well. At the end of this article, I’ll touch on why I’ve included those other books.

So let’s dive in and go over 7 things every trader should be doing as they not only learn about markets but also grow into different levels of expertise.

In my notes, I call this list the “Seven Words of Fatherly Advice” from the trading father himself.

7 Things Every Trader Should Be Doing

1) Decide That You’re in This For the Long-Haul

Elder’s first suggestion is to decide that you’re in this for the long haul – for you, trading isn’t some dabbling activity. It’s not like when you go out and you just want to try quizzo for the first time and you know you can have fun with a one-off…no! You’re in this like you’re going to become the next star on Jeopardy.

You want to get into trading with a level of commitment where you know and anticipate that you will still be trading 20 years from now.

The kinds of things you’ll commit to doing in order to gain knowledge and endure the ups and downs that come with the experience will look different when you assume you’ll be in this for a long time versus just browsing with no true commitment.

2) Learn as Much as You Can

The second suggestion is to learn as much as you can, especially in the early stages. It’s really important to get a nice range of information from different sources – you don’t want to just follow one trader. Instead, you’ll probably look up a number of traders on youtube or you’ll probably read a couple of different books.

At the get-go, you want to be expansive and get a little taste of everything you can find in order to collect and later reflect on what to do with this information.

You’ll learn about day trading and scalping and swing trading…and then maybe after watching different videos or trying out different trading styles on your own, you’ll eventually decide on becoming a scalper or a swing trader. But at first, it’s a good idea to learn as much as you can.

The caveat that Elder gives (and that I think is the utmost of importance, too) is that it’s important to keep a healthy level of skepticism.

You can’t necessarily believe in everything you read or see, especially on youtube or other forms of social media.

It’s going to be up to you to filter this information through your own analysis and decide what might be useful what might be unfounded.

Following a bruce lee quote: Take what is useful, discard the rest, and basically come up with something of your own understanding.

3) Don’t Rush the Process

Elder’s third word of advice is to not rush this process. Don’t be greedy – don’t assume you’ll make money during the first couple of months.

You want to take this process slowly, especially if you’re in your first year, don’t start making any plans about quitting your day job.

Assume a slow learning process. Some people will compare day trading to getting a master’s degree – it can take a couple of years. You could try to get all your credits sooner but you tend to frustrate and overwhelm yourself in the process and maybe not do as well in certain courses as if you were to take the process slowly and maybe spend three years on a master’s degree instead of trying to do an accelerated one year.

So using that as an analogy for going into your first year of trading, don’t assume you’ll even make anything at the end of the year.

There’s common project management advice that says however much time you think it will take for you to complete a project, add in at least 30 percent more of a time buffer.

-Because things come up, mistakes happen, and you might not have all the information you need at the get-go.

You’re not a bad trader if you don’t make money your first year and you’re not even a bad trader if you don’t make money your second year.

It can take a lot of time to learn the skills you’re going to need to espouse in order to do well in the markets.7 things every trader should do

4) Be Able to Use Several Analytical Methods to Confirm Trades

Fourth, we’re getting more into the nuts and bolts, here. You’re going to want to have a way of analyzing the market. This is the aspect that most people pay attention to, as this involves having a strategy and being able to conduct technical or fundamental analysis.

Elder goes on to add that you need to be able to use several analytical methods to confirm trades. He also recommends that you should test everything on historical data and be able to move with markets and know how to approach a bear market versus a bull market. Overall, anticipate that you’re going to need a variety of approaches for different market conditions and it may take some time to learn this, as well.

5) Develop a Money Management Plan

Fifth- and this is huge- Elder recommends that you develop a money management plan. He explains that there should be three main goals with profiting in the markets and they’re ordered in level of importance:

A. Have a long-term plan

B. Aim for steady growth

C. Have high returns

That’s the order you should approach this. For your first couple of years of trading, you are probably just going to focus on making sure you can stay consistently profitable over the year even if you’re not returning a lot.

As you grow as a trader, then you can start looking to hit regular targets for steady growth. This could be profiting every month or every quarter, depending on your style of trading.

Your third goal is to eventually hit a high-profit level.  You’ll see this more in experienced traders, maybe going to the fifth sixth year and beyond, where you have a foundation, you’re solid in your discipline, and now you’re looking to increase the amount of profit you make each month. Of course, Elder goes into this more deeply in his book and I do recommend that you check it out to learn more about money management.

6) Remember That the Trader is Always the Weakest Link in a Trading System

I almost want to write it down as a note and put it on my computer to remind myself. He says that it’s important to remember that the trader is always the weakest link in a trading system – not the strategy, not the risk management plan, but the trader. Obviously, the trader is the person who decides the risk management strategy and which strategy to use or whether to enter in impulsive trades or not, because the trader is in command.

Given this information, it is crucial to understand your own weaknesses as you trade and this is something that I don’t think anyone’s going to be able to tell you.

You’re going to have to observe it within yourself.

Elder adds that you need to have a way to examine yourself and be able to cut and end those impulsive trades.

That’s gonna have a lot to do with psychology – you can learn a little bit about this by talking to other traders or learning from the mistakes of other traders, but the most important tool you’ll ever have to understand your psychology and gain control over yourself as a trader is to conduct a trading journal.

Keep track of what you’re thinking and doing as you perform in each trading session and review those entries regularly.

7) Winners Think Differently From Losers

It may be hard to conceptualize now, but how you think in this moment in your current trading sessions will look vastly different from how your mindset will work and the way your thought process will unravel as you’re trading in the future.

Elder specifically writes that you are going to need to change and develop your personality.

This is huge!

This is implying that what it takes to grow as a trader is going to involve work that expands beyond what you think about when you think about trading.

You’re going to have to develop your personal self – you’re going to have to grow into emotional maturity in order to reach that high-level success you’re aiming for.

This is why in the resource guide I list a number of personal development books that have made a huge impact on my life and my own trading, which may make a big impact on yours, as well.

7 things every trader should doOther actions, like going to therapy or maybe getting on medication if you’re struggling with a mental health illness, are also crucial tools you can use to develop yourself as a trader.

Remember that who you are now and who you will be when you are a profitable professional trader are two different human beings and there will need to be growth and some steps taken to get to that place.

It’s not going to happen overnight, so it is very much in your interest to get into the field of personal development if you want to grow as a trader. I often recommend books for this research because there’s no better way to start thinking like someone else than to hear their thoughts and their words inside your own head.

—

So these are just seven of the most foundational steps you can take to continue on your journey as a trader. There are others out there, but I think this is a very concise list if you’re ever feeling lost and you just want to regroup. I think you could use these seven reminders almost as a checklist to ensure you’re doing the things you need to do in order to profit as a trader.

I hope everyone stays strong and be prepared to deal with a continuation of this volatility in the coming weeks.  I wish you nothing but the best of strength and luck in the markets – take care!

Mechanical or Discretionary Strategies – Which is Better?

Mechanical or Discretionary Strategies – Which is Better? 102

Lately, I’ve been spending some time learning about the Wyckoff method and “Smart Money” concepts, both of which are discretionary approaches – I firmly believe that it’s always important to grow as a trader and do what you can to become more comfortable and aware of how the markets work, and while these two approaches are by no means easy to understand in-depth, they are incredibly efficient for producing phenomenal returns.

I think of myself as an intermediate trader – not quite a professional, but definitely not a noob. I started out with learning a grabbag of trading approaches – breakout candle structures, triangles, Fibonacci retracements, and ultimately landed on mechanical strategies using indicators as the way to defy the gravity of trading mistakes and finally get into profitability.

Discretionary tradingMechanical strategies can be fairly easy to learn, as long as the conditions for signal, entry, exit, and trade management are clearly described in rules. They’re also easy to program if you want to get into algorithmic trading and have a bot submit trades on your behalf. But every mechanical strategy has periods of drawdowns as they don’t necessarily adapt to new changes to typical market behavior.

Now that I’ve passed a couple of challenges with the mechanical strategy I teach in the Disciplined FX Scalping Course, I’m thinking about ways I can improve from here and not only increase my typical return but also stay vigilant of inevitable changes in market types.

Does this mean discretionary strategies are “better” than mechanical ones? I believe the answer to this question depends on your trading style, your level of experience with trading, and what kind of returns you hope to get out of the market in exchange for the amount of study, preparation, and effort that you put in.

If you’re relatively new to trading, I believe mechanical strategies are the best way to be able to focus on building emotional discipline with trading first. It’s difficult enough to determine appropriate entries and exits in market structure, but it’s nearly impossible to achieve any kind of consistency and profit if you have no reign over fear, greed, and impatience from upending your trading plan. While you might not see 1:20 risk-to-reward ratios with a day trading mechanical strategy, you can still get into profit and keep it. If this is an experience you’ve never been able to maintain for months at a time before, then that alone is achievement enough.

For me, getting back into discretionary trading methods feels like the logical next step. Now that I know myself better as a trader who is capable of following rules and not making common early mistakes such as holding onto losses, revenge trading, or putting more than 2% of my account at risk for a trade, I’m better prepared to handle the learning curve that comes with developing an intuitive and experienced eye for reading market behavior.

<<WANT TO SEE AN EXAMPLE OF A DISCRETIONARY STRATEGY? CHECK OUT THIS FREE CONCEPT I CREATED>>

I think the important takeaway from this question isn’t a final decision over whether one strategy approach is better than the other, but to instead regard the behaviors of each as unique. They each have their benefits and drawbacks, with their own skills that need to be mastered, regardless of your time in the markets.

Mechanical trading might be for you if: You’re new to trading; you are struggling with trading discipline; you want to turn your strategies into robots; you don’t have a lot of time to study market structure or trade; you’re having a hard time grasping discretionary concepts, or you are okay with less return in exchange for less effort committed to learning how to trade; you want to be able to trade while you are also working

Discretionary trading might be for you if: You’re looking to improve your trading skills while gaining a better understanding of how markets work; you want to improve your typical return of profit; you are confident in your trading discipline; you have more time to evaluate different time frames and setups; you have time and are available to watch the charts and wait for prime entries; you want to stay on top of changes in market behavior and profit from doing so

Mechanical Trading Skills to learn: How to implement trading tools like indicators, fibbonaci tools, or candlestick patterns; Discipline in following rules

Discretionary Trading Skills to learn: How to read market structure; How to profit on different market setups; dynamic entry and exit positions; How to use technical analysis tools to aid in understanding market structure and behavior; Discipline in following a trading plan

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