My Plan for Swing Trading Funded Trading Plus’ $50k Challenge

My Plan for Swing Trading Funded Trading Plus’ $50k Challenge 1

As 2024 rolls along, the number of resilient prop firms seems to continue to dwindle as more regulatory fears are changing the online prop trading industry as we know it.

One of the most professional and respectable firms I’ve ever traded with is Funded Trading Plus (FT+) and I am seeking to test a simple and objective higher time frame strategy to see if it’s able to withstand the trading conditions of the Experienced Trader challenge.

Full disclosure: I am an affiliate with FT+ and have voluntarily chosen to be so after I thoroughly vetted the firm for its trustworthiness and reliability. I cannot emphasize enough just how much I believe this is one of the very few professional firms that I have ever traded with.

If you’d like to receive 10% off of your FT+ challenge, use “DFX10” at checkout.

In this article, I want to share with you:

  • Why I chose this particular firm to test this swing strategy
  • The conditions of the Experienced Trader challenge
  • Some of the fundamental aspects of the swing strategy I will be using
  • My risk management plan for this experiment
  • Some final notes on trading psychology while trading a challenge

Why Funded Trading Plus?

As I mentioned earlier, I believe Funded Trading Plus is one of the most reliable and sophisticated firms available. They are based in the UK, and the founders have a handful of years of experience trading and running a business in the Forex industry. 

They were the first prop firm to offer a “no-time-limit” challenge and have always done so since they were established. Their motto is that they wanted to “create a challenge that, as Forex traders themselves, would want to trade.” Their trading rules are realistic, they offer news and weekend trading, and there are no hidden rules around lot sizes or the use of stop losses.

So too, they are transparent about utilizing demo accounts as part of the simulated trading experience – this is particularly important for the current challenges that are arising in the prop trading industry. Many government regulatory bodies are looking to crack down on the availability of online live prop firm accounts and the trading of Forex CFDs to retail traders. It’s no secret that many prop firms use simulated accounts as part of their challenge experience – however, when firms like MyForexFunds failed to disclose this information, they were sued and shut down.By offering a simulated challenge, FT+ is protecting them (and us traders) from losing accounts over regulatory changes. 

What is the Experienced Trader Challenge?

The Experienced Trader Challenge is Funded Trading Plus’ 1-phase challenge. This means that traders only have to hit one simulated profit target of 10% in order to qualify for a funded account.

It’s important to note that the max relative simulated loss is 6%, their daily max loss is 4%. If you want a quick explanation of what is meant by relative drawdown, click here. EA’s, weekend trading, and news trading are all allowed.

After receiving funding, FT+ also has a generous scaling program with an increase in funding granted at 10% profit.

My Higher Time Frame Swing Trading Strategy

Timeframe: D chart

Assets: Majors & a couple of popular minors

Time of day for order placement: 5pm EST (New York Close)

Order types: Market and limit order (retracement)

Time spent trading each day: 15 minutes

Main entry criteria: engulfing candle at key levels

daily chart forex strategy

While I won’t be sharing all of the indicators and rules involved in my strategy, I’ll list for you some of the main features that give this strategy an edge and why I’ve chosen to apply this style of trading.

For over two years, I’ve been working on formulating a strategy that could be easily utilized by people who have a full-time job and very little time to trade. I find that the daily chart offers great opportunities for getting a good vantage point of what the market is up to.

Trades taken on the daily chart also allow for large enough stop losses so that the trader doesn’t have to waste a lot of money on commissions or be at risk of getting taken out due to market noise seen on lower time frames.

Price action trading is a fairly popular style as it helps paint a picture of how market players respond to certain price levels. Engulfing candles, on the daily time frame in particular, tend to show how both the high and low of the previous day were tested and the direction of the close engulfing candle won out in favor (Bullish when closing near the high and bearish when closing near the low). The daily open, high, low, and close holds a lot of weight in the eyes of bankers. 

The market rarely moves in a straightforward line. Instead, price tends to pulse and retreat in waves. When engulfing patterns occur at certain levels, such as just past a whole number, among other areas, this gives emphasis that price reached a certain limit and is ready to retrace back to a previous price.

Taking a market order and then leaving a limit order at some part of the retracement of the engulfing daily candle gives two possible opportunities to get in on the trade with the market having a slightly lower risk-to-reward than the retracement order.

By checking the daily charts once a day, Monday through Thursday, there are often opportunities to get in on a trade with my particular setup at least twice a week. Often these trades return between 1.4 and 3 R with a profitable outcome.

My Risk Management Plan for Funded Trading Plus

For this particular challenge combined with this particular strategy, I am looking to risk no more than 0.5% of the initial account balance per trade idea (0.25% for the market order, 0.25% for the retracement order – sometimes only one order of the two is hit).

I intend to use this precise risk amount for the entirety of the challenge, except when the account falls into drawdown.

When the balance falls below 2% of the initial balance, so in this case, to $49,0000, I will cut my risk in half to 0.25% of the initial balance (0.125% for market order, 0.125% for retracement order).

When the strategy can recover half of the drawdown (so when the balance is back to $49,500 or higher), I will return to 0.5% risked per trade idea.

However, should a losing streak continue to unfold, I will reduce my risk by half again. Thus, when price reaches $48,000, I will risk 0.125% of the initial account balance per trade idea. I will return to 0.25% risked per trade when the balance is $48,500. 

While this can make for an extended challenge, such a risk management approach helps me stay level-headed during a time when the trader feels the most fearful. Reducing risk can significantly reduce the pressure placed on oneself during a drawdown.

I have yet to meet a trader who wins 100% of the time. More often than not, even the best strategies can undergo a losing streak for a few weeks, a month, or longer. Thus, this risk management approach prepares for the losing streak in advance.

Due to the nature of the trailing drawdown, I will not increase my risk beyond 0.5% per trade should the account reach higher in profit.

A Final Note on Psychology

There is something about prop challenges that can make a trader more emotional than just trading one’s own funds. 

Perhaps it’s the mix of more restrictions plus the hopes of a greater account size than anything that could personally be saved for in cash.

It’s important to remember that it’s okay to lose a prop challenge, oftentimes that’s part of the process of learning how to manage this style of trading. Thus, be sure to buy a challenge that doesn’t break your break – risk only the funds you are comfortable losing. For many, that could be the cost of a $50k challenge.

I want to also note that I have addressed psychology through choosing a higher time frame to trade and using a very algorithmic approach to limiting losses in drawdowns through my risk management strategy. 

When trading the daily time frame, I am merely setting an order. During the New York close, the market is barely moving. There is nothing to chase. I merely follow my rules and if all the box marks are checked, then I take a trade. If not, then I patiently wait for another day to offer a setup. 

It is all very rudimentary and securely…boring.

Higher Time Frame or Swing Trading can be quite methodical and relieving especially after many long mornings of scalping. It’s also nice that I have the option to continue to scalp (with other accounts) while letting this account do its thing in its own time.

More importantly, I’m going into this challenge with no expectations for how long it will take. I’m not in a rush, and it’s likely that it could take multiple months to reach 10% in profit. I’m okay with that. 

I think between taking less than 15 minutes to trade each day and risking very small amounts of funds helps make this a calm experience. With a calm mindset, I trust that I will continue to show up, follow the rules, and let the process take care of itself.

Conclusion

Overall, this is my plan for taking this FT+ $50k challenge while using a swing style strategy. I recommend checking out the complimentary video for more information and to subscribe to the DisciplinedFX channel or the newsletter to receive updates as this experiment unfolds. Again, if you’d like to take a Funded Trading Plus challenge with me, be sure to use “DFX10” at checkout to get 10% off of your challenge. 

As always, I wish you all nothing but the best of strength and luck!

 

  

The True Holy Grail Strategy

The True Holy Grail Strategy 1

Since you first had the realization that it’s possible to make consistent money from trading markets, it’s likely that you subsequently formed an idea that “there must be a strategy out there that always, or at least almost always, makes a profit with every set up”. 

Forget your psychology, how much money you have to trade, or your level of experience: if you could follow a strategy with the right analysis and rules, you’d always make money, right?

This notion of depending on just one kind of strategy to repeatedly make money each week or month is often called a “holy grail strategy” – a mythical, catch-all approach that will practically print dollars right out of your computer. 

If you’ve been around trading education blogs or channels for some time, then it’s likely that you know what professional traders think of holy grail strategies: they don’t exist. 

The belief that depending on one profitable strategy for the entirety of one’s trading career is often what leads traders to hop around (or rather, shop around for) different strategies and approaches. This can lead to a vicious cycle of losing more money than what was earned as the trader jumps ship at the first sight of a losing streak.

I’m here to tell you that there IS a holy grail strategy.

But it’s not the kind that you’re anticipating.

First of all, instead of looking for a simple, “run-like-clock-work” strategy, I suggest that you learn an approach to trading that teaches how to analyze case-by-case scenarios and take trades depending on specific market conditions. Smart Money Concepts, the Wycoff Method, ICT, and the structured smart money approach I teach in the DFX Scalping Course are all examples of learning a trading approach rather than a strategy.

But once you understand your approach and build your trading system around it, even the most successful of systems will run into periods of drawdown and strings of losses. 

Therefore, the REAL holy grail strategy is involved with how you MANAGE YOUR MONEY and MANAGE YOURSELF. 

This idea isn’t my own, I first heard the suggestion from an Inner Circle Trader video about risk management and it really lit a lightbulb in my head. 

Risk Management

Yes, it is important to trade a strategy that actually has an edge and can make more money than it loses. 

But what’s also important is how you behave when the strategy inevitably faces a losing streak.

Risk management is an art form and depends entirely on one’s appetite for risk and overall trading goals. Michael Huddleston, the man behind ICT, gives the suggestions to adjust your risk with every loss by cutting it in half with every subsequent losing trade. 

So if you risk 2% on a trade, cut your risk in half to 1% for the next trade. If the following trade after that also loses, then its subsequent trade should have a risk of no more than 0.5% and keep it there until you make back at least half of the total amount of drawdown. 

I want you to understand the power of this model. If you took four losses in a row at the original 2% risked per trade, then you’d be down 8%. However, with Huddleston’s suggested risk model, you could lose 12 times in a row before hitting the same 8% drawdown as the first. Remember that we’re playing a probability game, not a prediction game. With a solid strategy, hitting 12 losses in a row should be a rare, albeit possible occurrence. You’re much more likely to hit 4 losses in a row (Which, under Huddleston’s model, means losing 4% when risking 1% per trade). Either way, by dynamically adjusting your risk amount according to your profits and losses, you protect your capital.

inner circle trader risk management

Another possible approach for managing risk is something that one of Huddleston’s famous YouTuber students, Paladin, suggests (and is a model I’ve used for myself in the past). Basically, you adjust your amount risked per trade according to whether you’re in profit or in a drawdown. Paladin tells his students to trade 0.5% per trade until you make 2% profit on your account. Then you can double your risk to 1% per trade as long as you hold over 2% in profit in your account.

The benefit in reducing risk during losing streaks is that sometimes a strategy conflicts with current market conditions for a period of time – be it days, weeks, or even months. By tightening your risk while you’re in a drawdown, you’re keeping your losses small in the event of a major losing streak. 

Sure, you may miss out on the upside – while your risk is low you may experience a winning streak and fail to make as much as if you had stuck to a consistent risk amount. But seeing how most people have a problem with losing money in the markets (rather than having a problem with making too much money) it’s better to accept less of a profit in order to mitigate inevitable losing streaks.

These are just a couple of examples of how you can manage your risk and money while trading. There are other aspects of money management, like deciding when to withdraw profit or when to increase funds, which merit further research outside of this article.

Self-Management

The other aspect of the true Holy Grail Strategy is having rules for how you manage yourself while you trade. Oftentimes, sticking to strategy rules and money management rules can give you enough confidence and trust in yourself to behave appropriately. Nonetheless, certain emotions can arise while trading and these can cause impulsive reactions.

One common emotional reaction is to revenge trade after facing multiple losses in a single day or week. This could entail taking setups that aren’t there, doubling the amount risked in order to “make back” what was lost. It helps to journal your trading sessions and to get to know how you behave during these scenarios so that you can develop a set of rules for yourself.

For example, part of a personal risk plan could include rules for only taking 2 trades a day, or similarly, allowing for only 2 losses a day before you stop trading. Psychologically speaking, you’re more likely to let emotions get to you with the more decisions you have to make over time, so even if your strategy could profit more from taking all setups, it may be prudent to trade less so as to avoid impulsive decisions. These are just a few examples of self-management rules.

Conclusion

The big takeaway: the only holy grail strategies you’ll find in trading have to do with the unique set of money- and self-management rules you create for yourself to protect your capital and trade at your best. When it comes to deploying a trading strategy, it’s better to focus on learning a trading approach that teaches dynamic analysis rather than a singular strategy. You want to trade “If-then” scenarios that adjust to market conditions. 

Finally, don’t forget that trading is a marathon, not a sprint – the set of rules you’ll need to manage your money and your psychology will likely shift over time as your experience, skills, and personality change. Be sure to spend as much time researching and thinking about risk management as you do analysis and strategy. 

Making the Switch: From the 15m to Daily Time Frames

Making the Switch: From the 15m to Daily Time Frames 28

Last month, I failed my Funded Trading Plus challenge. This was due to making too many changes during the challenge (such as no longer being able to get up at 5am to trade the NY session and attempting to scalp trending strategies off of Asia instead) and also fumbling over my own discipline (pulling winning trades too early and taking trades that didn’t fully match my rules). 

It was time to take a step back and evaluate what was going on.

Since I first started learning how to trade stocks and onwards with learning to trade Forex, I’ve always sought out scalping strategies. I liked the focus that came with partitioning a set amount of time each day to watch the markets and know that my account was cleared and safe at the beginning and end of the session. It was tough to learn to scalp from the outset, as many professional traders will tell you, yet in time, I was able to make a profit. 

That is, until the last few months. 

I’m a big believer that your psychology and discipline are the most important edge in your trading success. And while most traders seek out a holy grail strategy and will spend endless hours researching ways to optimize their trading rules and analysis (to be fair, there’s merit in having a strategy that works), ultimately it will be your ability to make calm, responsible decisions that will determine your success or failure in the markets. 

So once you have a halfway decent strategy, the leg work that will improve your trading isn’t necessarily watching more YouTube videos on technical analysis. Instead, spending time strengthening your relationship with your emotions, taking care of your mind and body, and ensuring that your trading regiment is sustainable with your lifestyle will play a greater role in helping you rise in the ranks from beginner to intermediate-level trader.

Over the last few months, I fell out of sync with my trading regiment. 

Suffering from insomnia for many years, I was running into issues with waking up late in the middle of the night, or not being able to fall asleep until the next day. I started missing my 5:00am NY trading sessions or would wake up foggy and exhausted just to make mindless mistakes, like trading in the wrong direction or miscalculating position sizes. These may seem like silly mistakes, but their costs are severe when they add up over a consistent basis.

Even worse, when one doesn’t sleep well, it’s far more difficult to stay disciplined. Consider how often you’ve made naughty food choices when you didn’t sleep well the night before. The same thing can happen when facing your trading rules. 

I was forcing my lifestyle to my trading routine. 

To do so, I was muddling with my health and my ability to get enough hours of sleep at night.

This impacted other areas of my life as well, as I had to take naps in the afternoon and miss work sessions or class in order to get enough rest.

I forced my lifestyle to accommodate my trading under the assumption that I only knew how to scalp the markets and that New York was the only session that would fit my approach.

This is a big mistake.

You should never have to bend over backward to make trading work for you. 

Remember, this is more of a psychological game than a tactical one. 

Your trading style needs to fit your lifestyle, not the other way around.

Doing otherwise can lead to built-up stress, and other areas of your life going unnurtured, which come back full circle to compromise your ability to make calm, rational choices with your trading account.

Like a pro athlete taking every chance possible to ensure optimal recovery, your trading routine, and your lifestyle need to synergistically work together. If one becomes suboptimal, the other will soon follow. 

So this is all to say that after losing my Funded Trading Plus challenge, I realized it was time to make a change. My trading approach did not work with my life.

Thus, taking a hard look at my geographical location, my health symptoms, my inconsistency with following scalping rules under stress and lack of sleep, I decided that it was time to shift my trading style.

It was time for me to move to higher time frames and find a time of day to trade that wouldn’t impact my sleep.

What I’m Leaving Behind: Scalping

Even though it’s commonly encouraged for beginners to avoid scalping and start with longer-term time frames, I believe there were a few benefits to taking the contrary route. 

  • Lower time frames don’t require an understanding of fundamental analysis – learning how markets move and the kinds of data that impacts them is a heady task. Being able to focus on technical analysis helps prevent information overload when first starting out
  • Scalping requires you to create a trading routine – You need to show up every day to evaluate setups. This helps you create a trading routine that comes with quick feedback. If you are organized about scalping, you should be getting into the habit of writing up a trading journal nearly every day. This immediate data and practice is useful and will help you grow more quickly as you reflect on the role your emotions play in your trading.
  • You can get plenty of practice in a short amount of time. Each session is an opportunity to work on your discipline.
  • You can focus on the movement of the charts during the session. You’ll get more exposure in a shorter amount of time compared to waiting another day to evaluate the next candle. 

While the chances of failure during your first and probably second years of scalping are nearly 100% (Sorry, I just want to be honest with you!), the experience you gain is priceless. 

I believe you learn far more from your trading mistakes than you do your successes. Sure, you will need to invest in trading income as partitioned between different trading courses, mentors, or other learning resources, but another form of tuition is paid through your losses as you gain experience. 

This type of trading tuition is mandatory, there is no avoiding it.

Even if you demo trade (which is highly encouraged!), you will still need to learn how to manage your decisions and emotions when your own money is on the line. Demo trading helps minimize the costs, but it cannot teach you the lesson that comes with feeling the pain of irresponsible losses.

So instead of trying to avoid the storm, sometimes I think it’s appropriate to head right into it and prepare yourself to focus on learning from the experience. Just be sure to do enough prep to avoid killing your account over it.

In this way, I have no regrets about learning how to scalp the markets first. It eventually helped me pass time-sensitive prop firm challenges and make money. The strategies I developed from learning to scalp have made money for my students, as well (many of which are lucky enough to live somewhere that allows them to do so at a preferable time!)

I believe scalping can be a worthwhile, although tricky endeavor. Nonetheless, at this time such a style is no longer appropriate for my lifestyle and trading goals. 

What I’m Moving Towards: Day/Swing Trading the Daily Charts

During the last couple of weeks, I’ve started researching different ways to trade the Daily chart. I’ve bought a couple of courses that focus on using the higher time frames to minimize the time spent in front of the charts while focusing on high probability setups. 

I decided that a 4H or daily chart would be my best option because the NY markets close at 2:00pm PST, in my location. I use charts that follow the NY close on the daily chart, which lets me use the most recently closed candle in my analysis.

This is an optimal time for me to trade because no matter how late I get to bed or how late I sleep in, I’m almost always awake at 2:00pm. 

Another benefit of moving to a daily chart is that there is no rush to take a trade. I have enough time to evaluate the technicals, look at the fundamentals, and pinpoint whether I want to set a limit order or act on the recently closed candle. This dramatically lowers the stress that comes with risking money on a trade. 

I also suffer from pretty severe brain fog, with my thoughts stopping and starting like an Autopia car at Disneyland. When using the daily charts, I can type out my trading ideas and better organize my thoughts about my strategy before taking the trade.

But most importantly, this approach drastically reduces my time in front of the charts. I was in the routine of spending upwards of 3.5 to 4 hours a day with scalping. 

I think it’s pretty common for traders at the 3+ year level to seek to spend less time trading. Trading can be exhausting when done too often and it can feel boring when done right. Taking on longer-term charts usually means less time in front of the screens. This means you can have more time to focus on more important areas in your life and reduce the pressure to act quickly.

Now that I’m focusing on daily candles, I can analyze and set (and forget) multiple trades in under an hour. This is huge – so much time is freed up to better take care of myself and meet the demands of all my other responsibilities. 

My initial impression?

I wish I made the shift sooner! This feels so much more appropriate for my health and living situation than waking up before the sun and grinding out quick trades. 

For a long time I believed the only way to pass a challenge would be through scalping or watching the charts all day. I thought it would be a waste of my experience (and a hit to my profitability) to attempt to learn a whole new approach. 

So too, I was afraid of using discretionary analysis. I didn’t trust myself to learn how to use multiple analysis tools to decide on an optimal setup. I feared that many tools, like trendlines and candlestick patterns can lean subjective. There are so many options that I didn’t know what to choose. I thought I had to be available for every movement. I thought the daily charts only held opportunities for long-term swing trades – some that wouldn’t complete in time for, say, a prop firm challenge or monthly account withdrawal.

Long-time trading professional and educator, Dr. Van Thorpe, always says, “You don’t trade the markets. You trade YOUR BELIEFS about the markets.”

My own beliefs about what I was capable of and what was possible held me back from trying an approach that is utilized by professional traders and investment firms.

And my first week of putting money on the line with a daily chart strategy resulted in a 1.3% profit! Not bad after nearly five weeks of continuous losses!

daily chart strategy

If only I could have let go of my fears and trusted the process, accepted that my condition and my lifestyle may not be appropriate for scalping, I may have been able to better prepare myself BEFORE taking my Funded Trading Plus challenge.

However, there’s always another trade – as long as I continue to succeed in my demo trading and small account trading with the Daily charts, I can attempt this challenge again in the coming months. 

I share this all with you to remind you that you have options. If you are continuing to face drawdowns each month, perhaps it’s time to evaluate your situation and determine whether you’re trading with a style that fits snuggly in your life and accommodates your trading experience. Whether that means going up or down a couple of time frames, or moving away or towards discretionary strategies, sometimes making a big shift is the answer. 

No one is going to be able to tell you what works best for you. You’ll have to learn what approaches are profitable and select those that match your personality and availability. Luckily, there are multiple roads to Rome – many strategies and styles of trading will get you to your profit goals. Keep your mind open and always stay reflective!

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!

Trader Trade-Offs

Trader Trade-Offs 63

Let me set the scene:

You’re sitting at your trading desk, about an hour into the session. You are using a strategy, like the ones taught in the Disciplined FX Scalping Course, which requires a specific market order entry. 

The good news is that you don’t have to guess where to enter. The bad news is that you need to be ready to enter at any given moment during the session.

Just as price is nearing a potential entry-level, you feel a gurgling sensation in your gut.

Uh-oh.

You know what’s coming.

It’s time to go to the bathroom.

But it’s also almost time to take your trade…

Now, the obvious question that’s coming next is… are you going to miss your trade or risk pooping in your chair in order to show up for your strategy?

That’s one way to approach this.

But I think there’s another way to frame this question, which speaks to the crux of this dilemma –

Would you be okay with pooping your pants in order to take a trade?

What I’m trying to get at is this – What trade-offs are you willing to make in order to not just trade, but ultimately make money from trading?

On an immediate level, you may already be swapping a good night’s sleep in order to be present for certain market sessions. You may be forfeiting Taco Tuesdays with friends so you can prep your next trading session.

But then there are trade-offs that come with greater risks.

Market Wizard, Linda Bradford, told Jack Swagger about being on call with her broker while in labor at the hospital. 

You may be reading this right now with the notion in your mind that, yes, you are completely okay with soiling your pants in order to possibly land a winning trade.

And that’s okay, I’m not here to judge what’s within or beyond your comfort zone of trade-offs.trading style

Instead, I want to direct you to consider the ways in which you are willing to make adjustments in your life in order to succeed at trading. I also want you to consider what you want to ask of trading to adjust to you.

This means that you don’t just keep bending yourself to try to capture as many trading edges as possible, but instead lay out what your ideal trading session is first. And then go find ways to best trade for profit during that time.

For example, I’m getting fed up with waking up at 5:00 am PST in order to trade the New York session. I have medical issues that destroy my ability to sleep well. I don’t have the option to sleep-in, should my body need it, if I want to be sure to follow my strategy correctly. So ntrading sessionow, I’m looking at ways to scalp either the end of the New York session or the Asian session.

Is scalping difficult? Yes, it comes with a long learning curve (mostly due to the emotional nature of scalping, not necessarily the ability to craft a winning strategy). Does the Asian session have less volume than the others? Absolutely. 

But if I continue to force-fit myself to meet the best practices of most traders, I run the risk of disempowering my discipline if I’m not “awake” or if I’m feeling emotional from not sleeping well.

If you want an outcome badly enough, you will find a way to make it work.

My ultimate point in writing this piece is to draw attention to the various trade-offs that come with developing your trading skills, choosing a trading style, and selecting a time to trade. They’re not obvious. There may be empirically “more profitable” or “less profitable” styles and strategies with trading, but they must be understood in the context of your own life, your current trading skill level, your psychology, and your appetite for risk.

No one else but you should make the final decision regarding what you want to do with your trading system. People (hopefully experienced traders and not some social media trend) can make suggestions from their own experiences, but what will ultimately guide you towards profitability and profitability for years to come is going to be unique to you. 

This is why the mechanical strategies I teach in my course all suggest different ways you can backtest and adjust the strategy to your own suiting – whether that means trading during a different market session, a different currency pair, or even a different time frame. I believe that the strategies that you will be trading with as a routinely profitable trader will possibly echo the mechanics of other’s strategies, but ultimately have a personal touch of your own, even if just to adjust an indicator setting. 

So if you’re A-okay with pooping your chair while you scalp the market, then that’s something important to know about yourself as you trade. If you need the guidance of reputable courses and mentors to help you along, or you’re committed to only consuming free content, both have ways in which they are perfectly reasonable and wise. Don’t let anyone else tell you otherwise. As you learn and grow as a trader, remember that you are in the driver’s seat of your own journey. Find the equilibrium of trade-offs that makes the most sense for you.

Learn to Be Okay with Your Losses

Learn to Be Okay with Your Losses 18

Did you click on this post because you just experienced a string of losses?

Don’t worry, I got you!

Today we’re going to talk about a really important topic on how to shift your paradigm of what loss in trading means so that you can become comfortable with losses and go on to become a profitable trader. now I want to begin this with a little demonstration

So let’s say I’m holding a d20 dice. (Because, yes, I do play dungeons and dragons)

I’m gonna take this dice and I’m gonna put it in one of my hands – I want you to guess which hand it’s in.

All right. Ready?

Which hand am I holding the d20?

Did you guess right?

Did you guess left?

If you said left, you’re correct!

Okay so if you lost that guess, how did it feel?

I’m guessing it didn’t matter – you might not have even guessed! You probably didn’t really care whether you would win or lose. There was no real incentive.

So we take bets on life all the time that have maybe have dual outcomes – a yes or a no answer.

Sometimes, it’s easy to make those guesses. Sometimes, it’s not. When there’s something at risk that’s valuable to you, that’s when it becomes more difficult to take a loss on a bad guess or a bad bet.

The Truth About Risk

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See, when we’re trading in markets we’re always approaching this with some kind of risk. If you’re putting money on the line, even if there’s a chance to return more money, there’s also a chance to lose.

It doesn’t matter if you have a high win rate strategy. It doesn’t matter if you have all the market knowledge that you could possibly need – except for telling the future. Because you’re always going to be risking, you’re not going to be placing bets with certainty. There is no certainty in markets.

So in order to show up for the wins, we have to be there for the losses. What professional traders and smart traders do is risk only what we’re comfortable losing. If you want to get technical, this turns into a certain percent risked per trade so that we’re always trading an amount that reflects the value of the account (such as 0.3%-2%per trade). If it goes higher, you risk a little more because it’s a percentage, and if you start losing money, you risk a little less because again it’s going to be relative to your account size.

When you show up to trade markets you have to be comfortable with taking losses and it can take time to internalize this. It usually takes losing money – a lot of money – to finally accept that when you finesse with your strategy, like when you move a pre-planned stop loss, it’s a chaotic experience.

You’ll get to a point when you want things to be solid, standardized, and steady. Sometimes it takes a year or two to be rattled about in the markets enough to want to settle down, stick with a strategy, stick with a risk strategy, and see it through the long run.

I want to make a couple of recommendations to help you start looking at losses in a way that doesn’t scare you anymore.

1) See loss as part of the natural transaction of the markets

The first tip I want to give you is something I write about in my book the seven habits of successful day traders.

I want you to think about the various ways in life that there are transactions – for example, right now you’re probably breathing. (I hope!)

With every out-breath, there’s an in-breath. With every in-breath, there’s an out-breath.

You can’t just take oxygen – you also have to give back some carbon dioxide. There’s an exchange albeit a more equitable one. There’s a balance between the two.

Think about other transactions in your life, such as with relationships – you sometimes have to put in a lot of work into the relationship, even when you’re not getting much out of it. (For example, perhaps with parenting)

When one person is putting in all the work then usually there’s an imbalance and the relationship can get ruined.

Now, with trading, we do want to win over the long run, we do want to be more profitable more often than we lose. We achieve this by having a higher return on what we risk, or having a high win rate – these are variables that you can adjust and play with to find something comfy that works for you.

2) Risk only what you’re comfortable losing

The second thing I’ll mention is that it’s important to risk only what you’re comfortable losing.

Money is very much a psychological concept.

It’s something that we all agree upon in society to use to measure value – it’s ideally a fair trade of value.

If I just bartered with you and I only had eggs and you had apples which I want but you don’t want eggs, then I’m not going to be able to get apples.

So money stands in to offer an exchange in a way where we can then use that note to go get the goods and things we need somewhere else. But it’s something we all agree upon in order for it to work.

if I had a little island and you brought your dollars to me and I said we exchanged only seashells here, I don’t want your dollars, then it’s just paper. It’s useless.

So when you think about money as something that’s psychological, you also have to think about the ways your emotions are tied to different ranges of money.

something like “too much money” is different from person to person. Same for losing money.

Take paying for dinner – for example – for some people, paying for a $30 dinner is not a problem. For others, that’s way too much, that could be a day’s worth of wages.

So remember that you’re going to have your own comfort level of what amount feels appropriate for you to risk,

Maybe it means starting out with a very small account as you learn your way through the markets, where it’s okay for you to lose 20 bucks on a trade. Maybe that’s where you need to start and over time your conception of money will change, especially if you’re in the markets (you’re going to learn a lot about how money works, how it moves, and how prices change). Later on, you may be able to get comfortable risking like $4k on a trade because you have a $400k account – that doesn’t feel like a lot of money anymore compared to what you have in store.

Remember that money is psychological by working on your psychology. Read personal development books!

Using personal development as part of your trading strategy is really important because a lot of trading comes down to managing what you’re thinking, what your beliefs are, what your fears are, and what your expectations are.

3) Learn From Those Who Came Before You

That leads me to the last suggestion – find out what professional traders lose each year. Even if they win on the year, find out how much they’re actually losing in order to get that exchange.

Keep learning about the role of loss. Look up other YouTubers, hear about their experiences – what kinds of losses they have on a day or a week.

Once you can accept loss as a contingent aspect of trading, you can become comfortable with it.

You can take your stop losses and stick around long enough to also return gains.

I wish you all the best of strength and luck in the markets! Take Care!

I Passed the FTMO Challenge – Again!

I Passed the FTMO Challenge – Again! 263

I’m excited to share with you all today that it happened again!

I passed a second FTMO challenge – this time with a 100k account, using only the Discipline FX Scalping Strategy as taught in the Disciplined FX Scalping Strategy Course.

I was able to pass a challenge with 10 trades over 7 days using a mechanical strategy. This strategy had an 80% win rate and returns 1.4 times your risk for each winning trade.

This challenge was a free retry after deciding to wait on last month’s challenge as my strategy took an unexpected dip and with the holidays approaching, I didn’t want to chance it turning around.

So let’s go over some stats of this experience:

  • There were 10 trades one of which was a mistake trade that got a little profit on another was just to capture a trading day – so really there were eight trades.
  • The average profit was about $1672 and the average loss was $1588
  • I took a couple of trades with E/J but basically, almost every single trade was with the A/U

Now, these were all scalping trades. I don’t think there was a single trade that returned more than maybe 16 pips – and while that may seem like nothing, and it may seem like that it must be on a 1m chart or 5m chart, this was actually on a 15m chart and these trades could sometimes last as few as 10 minutes or as long as a couple of hours.

That’s actually why I like Forex – it’s a slower-paced market compared to waking up and scalping stocks

FTMO verification passed

Let’s talk about risk

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As with my last challenge that I passed, I used a variation in risk as the account increased.

So I started out with a 1.4 percent risk per trade. Once I hit that three percent gain mark, I bumped it up to two percent, and then for one trade, I took a 2.5 percent risk for that trade. since that got me up close to the profit target, I then decided to dial it back down to 1.4 risk in case there would be losses so that I can stay up in this profit range.

And then for my last trade, I took 1.1 percent risk on that trade where if I hadn’t won that trade I could go back to risking maybe something up to 2% where I wouldn’t feel uncomfortable in taking that risk because I had already risked those percentages before.

So it kept me in a comfy zone where, knowing my stats about this trade, I know it’s has a higher win rate than a higher return so I was willing to take a bet that within three trades I’d be able to hit the profit target so by risking less as I got closer I would just keep re-measuring how much money do I need to hit target and risk according to that 1.4 ratio return.

Prop Trading Psychology

This is a huge part of what will lead you able to stick with a risk management strategy or your trading strategy and I will say every time I take a challenge, while my discipline’s rock-solid, I have my moments. It is so easy to want to move take profit targets or take out a trade early to be sure to capture a win. That’s the one inconsistency that I run into when prop trading, although it didn’t happen this time.

I think going in with a strategy that has a high win rate helped to appease some of the anxiety around trading for a challenge that has a time limit.

Now if I was trading something like five percenters or a new firm which I’m going to tell you all about, called funded traders plus, these two have very realistic time limits on taking the challenge, I’d have stuck to a certain risk percent, like 0.5 or 0.75%. These longer-term challenge models are less stressful.

Let’s Talk About Risk Management Models

So I have 3 that I want to share with you. I’ve used them all before for different accounts, strategies, and challenges.

Steady

it’s basically as it sounds – you’re using the same percent risk per trade on every trade. if you’re trading something more short-term, like FTMO, you might have to bump this up a bit to make sure you hit that profit target – it could be taking 1% per trade or 1.5% per trade, or 2% per trade.

It helps to know the stats of your strategy. This is why I like mechanical strategies because I can pull so much data from them than discretionary ones. Because with discretionary trading, you never know if you’re not going to take the trade when it comes down to game time.

So at least with mechanical strategies, I can run many different stats on them (What days of the week perform better than others, what % likelihood a trade will turn around and profit after starting out in deficit, etc.)- I think some of you guys know I’m a Ph.D. student (so researching variables is my bread and butter)!

So if you know your drawdown, as well as an average return for the month, you can adjust your risk per trade to fit your strategy, while also being mindful of the 5% daily drawdown, 10%  total drawdown, and the 10% target that you need to hit so that could end up being 1-2% risk per trade.

Scaled

The second approach is a scaled model – this is what I use for this challenge where you might want to designate something like a low, medium, and high risk.

I started out with what I consider medium: 1.4% per trade.

Once I hit that 3% target getting into this profitable zone, I bumped it up to two percent and I was willing, if the balance went down, to go back to 1.4% risk per trade.

And if it went under, such as going into a significant drawdown, like down 5%, I would consider going down to 1% risk per trade or less.

Such was not the case – Instead, the count continued to grow. Once I got into that middle zone of over 5% return, I was willing to take a 2.5% risk on that next trade – it ended up being a win and that bumped me up close to the profit target.

That’s when I moved down to a low risk, so that was back to 1.4% and then after that trade, I just kept measuring how much money I needed to hit the profit target. Then I would risk accordingly. (Target – current balance –> divide by 1.4, and that’s what I’d risk on the next trade [this was usually under 1.4%])

<< WANT TO TRY IT FOR YOURSELF? Feel free to use my FTMO affiliate link >>

Market Dependent Model

The last model I’ll name here is what I’m going to call the market-dependent model of risking according to what you see.

So this would be better for someone who is using a discretionary strategy or knows enough about their mechanical strategy to say how it performs in different types of markets.

If it’s a more volatile market you may want to risk more or less depending on what you see and how your strategy performs in that kind of market.

I think this last approach is what professional traders usually use, (but then again they aren’t necessarily trading for a challenge)

 

So any of these three models can work – there’s no one good choice.

you have to know what works for your strategy – this is why I highly recommend backtesting to really get to know what your strategy is. Define the parameters of your strategy instead of saying you’ll just trade triangles. Get to know stats by backtesting.

To sum this up, the next step for me is verification. That has a 5% target instead of 10%. I’ll probably risk the same way I’m risking now with the scaled model – but maybe dial it back a bit. I could also take the full 60 days and just take a steady, small percent risk per trade.

If I pass that too, then going into a funded account I am planning on risking tiny and I’m expecting tiny targets.

I will be happy to stop trading for the month once I hit a 3% return.

but that will be for a later post. For now, I’m happy to celebrate this win and share it with you!

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