Hey there folks! Andrew Bloom of Disciplined FX, here, where you can find resources to help build your trading mindset, trade mechanical strategies, and learn how to achieve profitability in forex markets! 

For those who don’t know my story, I started teaching myself how to day trade after developing a chronic illness that left me unable to reliably show up to work or to live independently. 

By developing the skill of day trading with technical analysis, I was able to finally acquire an income that didn’t require more than a handful of hours of concentrating on the charts each week. 

Furthermore, some of you may know just how expensive healthcare is, especially if doctors aren’t sure what’s wrong. 

By making use of the opportunities available through developing trading skills, I now have the resources to afford top-notch medical care and to be able to live on my own again. 

Whether we like it or not, we live in a world where having more money means having more options. 

So now I want to be able to help you all develop your trading skills so that you can finally afford a better life that lets you achieve goals and dreams that may break the status quo and perhaps relieve you of any financial burdens that keep you struggling to live your best life. 

With that said, I want to spend today talking about the style of trading I used to achieve not only profitability in current markets, but also to pass the FTMO prop trading challenge. 

Mechanical Trading

I am what some may call a “mechanical trader”. While there isn’t necessarily a firm definition for what this entails, I’m labeling my trading style as mechanical because every step of the strategies I use has very clear and strict rules about what I can and cannot do during a trade. 

Mechanical strategies are like machines that run a protocol of actions, such as with a pinball machine that uses levers to flick the ball back up towards the holes on the board, where you can trust that when you press the buttons on the side of the machine, those levels that they’re attached to will always flick the ball up without fail, so long as you time it right. 

The pinball might not land in a winning hole, but the mechanics of your actions do not change often and overall stay fairly consistent. 

A rules-based, mechanical strategy is similar to the pinball machine. 

In this way, your strategy becomes a habit that is easier to perform the more often you do it. As long as a mechanical strategy is profitable, the rules don’t change and likely don’t allow for much room to make your own interpretations. 

Mechanical strategies usually have a set of rules for when you can and can’t enter, for where you set your stop loss and take profit targets, and often these strategies will rely upon chart indicators, like moving averages or an RSI,  to help pinpoint these locations. 

When you hear about expert advisors and programmable trades, those are likely a form of mechanical strategy. 

If you want an example of a mechanical strategy, check out the free scalping strategy I created. While this strategy isn’t robust enough for a prop trading challenge, it is a nice addition to a set of other types of strategies and styles.

What I like best about mechanical strategies is that they take the pressure off of having to analyze and decide what the current market is doing. 

Instead, the focus of your role as the trader is to follow your rules with discipline. 

How do you know if you have a good trade? It’s easy, when you trade your rules, you are trading well, even if you lose from time to time. It’s when you make impulsive decisions intratrade that problems arise. 

Another reason why I love mechanical strategies is that they are far easier to backtest than strategies that require discretionary decision-making. 

With discretionary decision-making, you don’t always know what is forming until the aftermath. If you look at historical data through a backtest, it’s likely you’ll call the candle formations in favor of their final form, but in real-time, your fears and concerns may prevent you from reading the formation right. 

With a mechanical strategy, you have very clear yes or no answers from historical data as to whether the strategy worked on a given day. 

That way, you are able to get an idea as to how profitable the strategy is and get to gather other information such as how frequently you experience strings of losses and for how long they tend to last. 

Such information can be useful when deciding on risk management strategies.

How To Craft Your Own Mechanical Strategy

So, before I end this lesson, I want to show you how you can craft your own mechanical strategy over a few easy steps. 

It’s not the only way to create a strategy, but it’s a good overview of the things I personally consider when I need to craft a new strategy, such as the one I used to pass the FTMO challenge. 

**By the way, if you want to use the exact strategy I am running for my prop trading, check out the Disciplined FX Scalping Course** 

1) Determine Your Trading Requirements

Do you want to be trading an hourly chart?

Do you want to scalp and be in and out of a trade within an hour or two? 

Do you need a strategy that lets you trade at night since you work during the day? 

I’ve come to find that if you set the boundaries of your trading to what your schedule, skill, and comfort level are, you’re more likely to stick with a strategy, than for instance, if you forced yourself to watch the charts six hours a day, every day, with no clear direction as to what you’re looking for. 

So here are some things that I like to look for before establishing a mechanical strategy: 

• I want to trade lower time frames so I don’t have to keep trades open for a long time, thus I look to the 30m, 15m, or 5m charts. 
•  I live in Southern California and consider myself a morning person, so I’m most interested in trading during the cross-over of the London and NYC markets, around 630am PST. 
• Lastly, I don’t want to spend more than a handful of hours in front of the charts each week, since I need a lot of time to take care of my health and other responsibilities – such as studying for my doctorate level courses and creating informative content for my students. 

Thus, I like strategies that don’t require any complicated exiting maneuvers, such as trailing stops with position reduction, and I only want to take one trade a day, so that I can get in, let my attached stop loss and take profit orders do the work, and then get to work or go back to bed if my energy is low. 

2) Determine your Edge

This can look like only trading trends or trading around scheduled economic news. Research trading edges to find out more.

3) Pick your Pair(s) and Trading Time

Now, after creating your own parameters for your trading session, you’ll want to select a currency pair or pairs that fit these needs. 

I currently only trade the EUR/USD and find that focusing on one currency pair helps me get a really good feel for the typical behavior of that market, but you’re also welcome to trade multiple currency pairs as long as you backtest for each one.

One thing to consider when looking for a pair is that it’s best to trade a pair that has at least one underlying market open, not closed, during the time you trade. 

So if you’re in the Caribbean and you’re looking to trade in the evening you might want to look at trading a pair that has the AUD, NZD, or JPY, as those markets will just be getting started for the day. 

4) Select Your Indicators or Signals

Next, pick an indicator or two that supports the market-style you want to trade – for example, if you’re looking to trade trends, a moving average plus an indicator that helps track trends can be useful, such as the ADX or MACD. 

5) Formulate Your Mechanical Strategy

The next step is where you really need to get creative. 

You want to be able to create a set of rules around your chosen indicators and price that help tell you when it’s a good time to get into the market, in what direction you want to trade (buy/sell), and where to put your stop loss and target profit. 

This could mean entering when price returns to a moving average and then trading in the direction of the trend. 

I find it really useful to call on any previous strategies you’ve used before or seen in videos to help get an idea of what indicators to implement. 

Again, check out the free scalping strategy I created for an example of what this could look like. 

When it comes to stop loss and take profit targets, try to get a feel for the typical number of pips that move over the span of your time frame during your trading hours or create a formula for determining appropriate stop loss and take profit targets as adjusted for the current market behavior. 

One indicator I love to use for this is the ATR, or average true range. 

Making a stop loss that is equal to or a factor of the ATR can be useful, such as making a stop loss that is 1.5x the current ATR reading. 

Lastly, depending on your strategy, be sure to include any other rules, such as how long you let a trade run, like opting to close the trade after six hours, or rules for when you stay out of the markets altogether, such as when the price is ranging.

Using something like the ADX, which tracks trend strength, may be useful to include. 

If trying to craft your own strategy is still feeling overwhelming, I invite you to use the same strategy that I trade with to win and profit from prop trading challenges. 

That summarizes my approach to crafting mechanical day trading strategies. I hope you’ve been able to discover just how organized and useful a mechanical strategy can be, especially when you want to achieve clarity and minimize confusion while trading. 

I wish you all the best of strength and luck out there in the markets!

Today, we’re going to cover 3 reasons why day trading FX is easier than trying to day trade stocks. Forex is an especially good choice for new day traders who have less than $25,000 to start.

#1) You don’t need to search far to find something good to trade

What makes for a good trade?

Ultimately it comes down to two things:

Volatility and Volume.

With high volatility, this means the price can move enough for you to earn a decent return.

With high volume, there is more liquidity, which means that there is a greater likelihood of your orders getting filled because someone will be there to take the other end of your trade.

Usually, high volume correlates with high volatility 

So when a day trader goes to find stocks to trade after the market opens, they are going to have to choose among thousands of potential stocks to find that high volume and high volatility.

Now, any good day trader of the stock market will likely use a scanner to find these desirable stocks. However, even with this tool, she will still need to make a decision as to what deserves her focus.

Sometimes this means watching multiple stocks all at once.

* Note: A Key to keeping trading simple and easy is to limit the number of decisions you need to make during your trading session

With forex, on the other hand, there are only 8 major currency pairs to trade.

And when I say major, I literally mean Major – The most actively traded currencies that pair with the US dollar are called the Majors: These include pairs such as the EUR/USD and USD/JPY. 

**WANT TO SEE THE REST OF THE PAGE THAT THIS LIST COMES FROM? DOWNLOAD THE VISUAL GUIDE TO FOREX TRADING HERE**

Note: A currency pair with one currency traded against another is the unit we trade in FX, like how one stock in a company is a unit traded in the stock market. 

So on any given day when trading FX, it’s super easy to find where the action is.

Every day trillions of dollars are traded in FX markets – you don’t have to look far to find that high volume and high volatility.

In fact, if you’re like me, you pick and trade only one currency pair as your strategy. I personally trade only EUR/USD at a time of day when this pair is most active.

Nothing else

#2) FX market is open almost 24/7.

See, the US stock market, on the other hand, is limited to about three or four hours of ideal opportunity.

If you work or go to school during the hours that the stock market is open, you’re not going to be able to day trade.

With foreign exchange markets, you get to choose when you want to trade. Because it’s an international market, there is always a market open somewhere in the world.

For example, if you trade in California and you’re nocturnal, then you can look into trading something like the GBP/USD around midnight when the London exchange opens. 

Since good day trading revolves around good trading behaviors, it helps to be able to trade when you have time and can be in a space where you can sit and focus without any distractions. Forex markets provide that kind of accommodation

#3) The FX market can be a bit more stable than the kinds of stocks most beginners can afford to trade.

For example, a lot of beginners are attracted to trading penny stocks – I know I was when I first started out trading.

However, these stocks are super volatile and just as quickly as one may make you a huge profit, so too, it can turn around and drain your account dry.

That level of volatility is also really emotionally stimulating and it can be harder to stick to your rules under such pressure. Sure, there are bigger stocks to trade that are less volatile, but often beginner traders can’t always afford the price of entry (example: TSLA is currently priced at $679.70).

Forex, on the other hand, tends to make cleaner and easier moves that you can time.

On our path to consistent profits, we want to be sure to trade instruments that also exhibit a degree of consistency. 

This leads us to our bonus reason  

#4) WITH FX YOU CAN MAKE AS MANY TRADES AS YOU WANT WITH ANY ACCOUNT SIZE

For those who are familiar with stock market rules, there is something that regulators came up with called the Pattern Day Trading Rule – This PDT rule prevents anyone with less than $25k in their account from taking more than 3 day trades…a week!

That means you can enter and exit a trade on the same day only three times a week.

If you’re looking to become skilled in day trading, you’re probably going to have to wait a long time to build your account up enough to be able to achieve a consistent routine with day trading. 

Forex, though, is far less regulated. You can trade multiple times a day whether you have $25k in your account or just $500. However, it’s not a good idea to constantly be trading just because you can

(Note: Profitable day traders limit themselves to about 2-6 trades on any given day, so long as certain conditions are met. )

But, having that freedom to day trade gives you the opportunity to practice the right habits early and make more money than having to learn how to swing trade then learn to day trade, since the key habits and skills for each of these trading types do differ. (There’s a different kind of psychological tug when you have only a minute to make a trading decision versus a few hours or days for swing trading and investing.)

Okay folks, we are at the end of this lesson. Today, we covered three reasons why day trading forex is easier than trading stocks because you don’t need to search far to find a good trade, the fx markets are open nearly 24/7 allowing you to trade on your own time, and the currency pairs tend to be less scary volatile than the kinds of stocks most beginners can afford to trade. Lastly, we discussed how the PDT rule in the stock market prevents small account traders from day trading while Forex is available to day trade for all account sizes.

This year I finally was able to experience consistent profit with scalping Forex markets, and it’s my third year day trading in the markets in total.

If you’ve been trading for a hot second, then you probably already know just how difficult day trading can be.

Most traders have to focus on surviving the learning curve for the first one to two years of live trading.

Once you can read charts and find a strategy that matches your personality, I personally don’t think the issue with what takes so long to gain profitability has to do with not knowing enough about markets but instead has to do with developing enough trading discipline to be able to follow your strategy and rules. For me, there were a few things that happened that led to the tipping point from consistent losses to consistent profit. 

There were 3 things I did during that time that likely led to this big shift in my performance. Of the three, the last one I will share with you was probably the most beneficial of them all.

But before we get into the thick of things, I want to let you all know that last week I published my first book, The Seven Habits of Successful Day Traders, a quick guide to profitable day trading habits. If you want to learn how to structure your daily and weekly trading routines, how to always take your stop losses, and how to shift your trading mindset to stay comfortable and calm in front of the charts, CLICK HERE to get your copy through amazon.

So, ready to dive in?

Consistent Profit Change #1 Take Only One GOOD Trade Per Day

One of the first big actions I took that got this profitability ball rolling was to stop trading multiple times a day and just focus on taking one good trade a day. At that time, I was struggling with following my stop loss and take profit rules. I would frequently shift my stop-loss if the price got too close because I was afraid of losing on a trade that could turn around. 

I took the strategy that I was using, gave it a backtest to see if it would be profitable if I only took one signal instead of the three or four I would usually get, and sure enough, it still held.

Thus, for about a month, I focused on following all of my rules on just one trade a day.

During this time, I wasn’t worried about the money, I just wanted to finally know I could trust myself to follow my rules.

Remember the movie Forgetting Sarah Marshall? It’s like how the surf instructor tells Jason Segel’s character to do less and less as he’s learning to get up on a surfboard, to the point where all he can do is just lie on the board and lift his head. It’s a funny scene but doing less is still a useful antidote for handling chronic trading issues.

If scalping or day trading is feeling overwhelming, maybe dial it back a bit and see if you can take just one good trade a day or even per week before trying to ramp up the intensity again. Who knows, perhaps by trading less, you will be able to achieve consistent profit.

Consistent Profit Change #2 Get Enough Sleep/Trade at a Time That Works For You

The next important change that I made was to make sure I was trading at a time that let me get enough sleep. I currently wrestle with pretty severe insomnia, an issue I’ve had since I was a teenager. I live in California where the end of the London session closes really early in the morning. I wanted to be part of this crossover into the New York session but sometimes waking up at 530 in the morning would lead to a lot of mid-morning or afternoon naps to make up for lost sleep after the nights I experienced insomnia.

I decided to create a strategy that would let me trade right when the stock market opens, so I could at least get an extra hour of sleep. It doesn’t sound like a big change, but this was huge for me to be able to have enough brainpower and energy to follow my rules and stay awake through the session. 

If you’re waking up exhausted to trade or don’t sleep well at night in general, making sure you get enough rest and take care of your body can have such a big impact on your trading performance and help you achieve consistent profit.

Do you have a hard time sleeping at night? Can you tell if it affects your performance? Let us know in the comments below and add if you have any good tips for staying clear-headed and energized while trading. It’s seriously a game-changer.

Consistent Profit Change #3 Track How Much Your Mistakes Are Costing You

Lastly, there was one more big shift I made that was probably the most powerful trick I’ve ever used to stop making trading mistakes and finally get into profit and that was to track how much my trades were costing me.

Some of you may be familiar with this kind of habit like when keeping track of your expenses when you want to get out of debt, sticking to a budget, or saving for a big purchase. When you record every one of your expenses, you start to notice where your money is going and can make a conscientious effort to cut back on the areas you splurge most, such as buying takeout too often or over-funding your weed addiction.

Because the issue isn’t losing money. It’s not like you’re going outside and dropping money on the ground. It’s certain actions and choices you’re making that lead to loss over time.

This is true of trading too. We need to be able to track and find out which behaviors are costing us the most money so we can prioritize what to improve first on our path to consistent profit.

So to track how much my mistakes were costing me, every time I made a mistake, I would write on my excel sheet of my trades what mistake was made and how much it cost.

If my mistake was pulling a winning trade too soon, I would write how much money I missed out on between where I exited and where my planned take profit was.

If I took a trade that wasn’t part of my signal criteria, then I would record what I’d lose.

If I made money on any of these mistakes, I would just record the mistake cost as $0.

This helped me generate some data about my mistake making. After about a month of doing this, I started making money in the markets with the same strategy I was using while I was still consistently losing.

Final Thought?

Sometimes all it takes to turn your life around is a big epiphany combined with simple actions.

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

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

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

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

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

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

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

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

There’s actually two parts to this question.

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

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

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

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

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

Not every strategy will be profitable every month.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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