Forex for a trader
Forex never goes my direction

Forex never goes my direction5 Ways To Identify The Direction Of The Trend. Our Trading Courses & Mentorship. Join our team, learn our exact trading strategies , receive a new video with the best setups every week and benefit from our ongoing mentoring in our private community. 5 Ways To Identify The Direction Of The Trend. Trading with the trend is trading with the flow. When the prevailing trend is up, why would you want to look for short entries when buying might result in much smoother trades? Many amateur traders, even when facing a very obivous trend can’t stop trying to predict reversals and burn their fingers going counter-trend, whereas they could have made so much more money by simply joining the trend. But even if you are not a trend-following trader, you can combine the concept of trading with the trend and with momentum with your regular trading approach. Knowing where the price is going and which side of the market is stronger is an important trading skill. To be able to correctly read price action, trends and trend direction, we will now introduce the most effective ways to analyze a chart. In our Forex trading course , you will learn even more about this way of reading and trading price. Intro: The different market phases. Before we learn how to identify the trend, we should first be clear what we are looking for. It may sound too simplistic first, but stick with me for now and you will soon see the power of this analysis approach.

Markets can do one of three things: go up, go down, or move sideways. Of course, how fast (or how slow) and how long the individual periods last changes all the time, but price can only do one of those three things. The picture below shows you the three possible scenarios and how the market keep alternating between the phases. We will shortly see how all price patterns and chart formations are also made up of those moves. Reading trends the simple way: The Line Graph. Most traders only use bars and candles when it comes to observing charts, but they completely forget about a very effective and simple tool that allows them to look through all the clutter and noise: the line graph . The purpose of bars and candles is to provide detailed information about what is happening on your charts, but is this really necessary when it comes to identifying the overall trend? Probably not. A trader should zoom out from time to time (at least once a week) and also switch to the line graph to get a better and clearer picture of what is currently happening. And since our only goal here is to identify the trend direction and become aware of the overall situation, the line graph is a perfect starting point. The market rythm: Highs and lows. This is my personal favorite way of analyzing charts and although it sounds very simple, it is usually everything you need to understand any price chart. Conventional technical analysis says that during an uptrend you have higher highs , because buyers are in the majority and push price higher, and lows are also higher because buyers keep buying the dips earlier and earlier. It works the same during a downtrend: lows are lower when the seller surplus moves price lower and highs are lower because sellers sell earlier and buyers are not as interested. Chart example: Head and shoulders vs highs and lows.

Highs and lows define all market patterns and chart formations. Below we see a Head and Shoulders pattern and this pattern is, of course, also made up of highs and lows. This pattern beatifully shows how transitioning highs and lows describe the shifting power between buyers and sellers. We just need to follow the highs and lows to understand what the market is telling us. Try it out and you will be able to describe all market patterns anc conventional chart formations using highs and lows. Moving averages are undoubtedly among the most popular trading tools and they are great to identify the market direction as well. However, there are a few things to be aware of when it comes to analyzing trend direction with moving averages. The length of the moving average highly impacts when you get a signal when markets turn. A small (fast) moving average might give a lot of early and false signals because it reacts too soon to minor price movements. On the other hand, a fast moving average can get you out early when the trend is about to change. A slow moving average might provide signals too late.

Or, it can help you ride trends longer when it filters out the noise. In the screenshot below we used the 50 EMA which is a mid-term moving average. You can see that during an uptrend, price always stayed well above the moving average and once price has crossed the moving average, it entered a range. In a range, price does not pay too much attention to moving averages because they fall in the middle of the range, hence average . If you want to use moving averages as a filter, you can apply the 50 MA to the daily timeframe and then only look for trades in the direction of the daily MA on the lower timeframes. 4. Channels and trend lines. Channels and trend lines are another way of identifying the direction of a trend and they can also help you understand range markets much better. Whereas moving averages and the analysis of highs and lows can also be used during early trend stages, trendlines are better suited for later trend stages because you need at least 2 touch-points (better 3) to draw a trendline. I mainly use trendlines to identify changes of established trends; when you have a strong trend and suddenly the trendline breaks, it can signal the transition into a new trend. Trendlines during ranges are ideal when it comes to finding breakout scenarios when price enters the trending mode again. Also, trendlines can be combined with moving averages nicely because of the complimentary characteristics. If you want to learn more about trendlines, take a few minutes and watch our video here: learn how to draw trendlines . 5. How to use the ADX indicator.

The ADX is an indicator that you could use to determine the direction of the trend and for the strength as well. The ADX indicator comes with three lines: the ADX line that tells you the strength of the trend (we deleted this line in our example, since we only want to analyze the direction of the trend), the +DI line which shows the bullish strength ( green line ) and the - DI line which shows the bearish strength ( red line ). As you can see in the screenshot below, the ADX signals an uptrend when the green line is on top of the red line, and it signals a downtrend when the red line is higher than the green line. When price is ranging, the two DI lines are very close together and hover around the middle. The ADX can be combined with moving averages nicely and you can see that once the DI lines cross, price also crosses the moving average. In the video below we explain how to use the ADX in more detail with the other concepts. If you like this introduction to reading charts and you want to take your tradint to the next level, take a look at our advanced Forex and Futures trading course. You will learn our professional and profitable trading strategies and also get our best setups every week. What is the Number One Mistake Forex Traders Make? by David Rodriguez , Timothy Shea. Your Forecast Is Headed to Your Inbox. But don't just read our analysis - put it to the rest.

Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk. Your demo is preloaded with ?10,000 virtual funds , which you can use to trade over 10,000 live global markets. We'll email you login details shortly. You are subscribed to David Rodriguez. You can manage you subscriptions by following the link in the footer of each email you will receive. An error occurred submitting your form. Please try again later. Summary: Traders are right more than 50% of the time, but lose more money on losing trades than they win on winning trades. Traders should use stops and limits to enforce a riskreward ratio of 1:1 or higher. Big US Dollar moves against the Euro and other currencies have made forex trading more popular than ever, but the influx of new traders has been matched by an outflow of existing traders. Why do major currency moves bring increased trader losses?

To find out, the DailyFX research team has looked through amalgamated trading data on thousands of live accounts from a major FX broker. In this article, we look at the biggest mistake that forex traders make, and a way to trade appropriately. What Does the Average Forex Trader Do Wrong? Many forex traders have significant experience trading in other markets, and their technical and fundamental analysis is often quite good. In fact, in almost all of the most popular currency pairs that clients traded at this major FX broker, traders are correct more than 50% of the time : The above chart shows the results of a data set of over 12 million real trades conducted by clients from a major FX broker worldwide in 2009 and 2010. It shows the 15 most popular currency pairs that clients trade. The blue bar shows the percentage of trades that ended with a profit for the client. Red shows the percentage of trades that ended in loss. For example, in EURUSD, the most popular currency pair, clients a major FX broker in the sample were profitable on 59% of their trades, and lost on 41% of their trades. So if traders tend to be right more than half the time, what are they doing wrong? The above chart says it all. In blue, it shows the average number of pips traders earned on profitable trades. In red, it shows the average number of pips lost in losing trades.

We can now clearly see why traders lose money despite bring right more than half the time. They lose more money on their losing trades than they make on their winning trades . Let’s use EURUSD as an example. We know that EURUSD trades were profitable 59% of the time, but trader losses on EURUSD were an average of 127 pips while profits were only an average of 65 pips. While traders were correct more than half the time, they lost nearly twice as much on their losing trades as they won on winning trades losing money overall. The track record for the volatile GBPJPY pair was even worse. Traders were right an impressive 66% of the time in GBPJPY – that’s twice as many successful trades as unsuccessful ones. However, traders overall lost money in GBPJPY because they made an average of only 52 pips on winning trades, while losing more than twice that – an average 122 pips – on losing trades. Cut Your Losses Early, Let Your Profits Run. Countless trading books advise traders to do this. When your trade goes against you, close it out. Take the small loss and then try again later, if appropriate. It is better to take a small loss early than a big loss later. Conversely, when a trade is going well, do not be afraid to let it continue working. You may be able to gain more profits. This may sound simple – “do more of what is working and less of what is not” – but it runs contrary to human nature. We want to be right.

We naturally want to hold on to losses, hoping that “things will turn around” and that our trade “will be right”. Meanwhile, we want to take our profitable trades off the table early, because we become afraid of losing the profits that we’ve already made. This is how you lose money trading. When trading, it is more important to be profitable than to be right. So take your losses early, and let your profits run. How to Do It: Follow One Simple Rule. Avoiding the loss-making problem described above is pretty simple. When trading, always follow one simple rule: always seek a bigger reward than the loss you are risking. This is a valuable piece of advice that can be found in almost every trading book. Typically, this is called a “ riskreward ratio ”. If you risk losing the same number of pips as you hope to gain, then your riskreward ratio is 1-to-1 (sometimes written 1:1). If you target a profit of 80 pips with a risk of 40 pips, then you have a 1:2 riskreward ratio. If you follow this simple rule, you can be right on the direction of only half of your trades and still make money because you will earn more profits on your winning trades than losses on your losing trades. What ratio should you use? It depends on the type of trade you are making. You should always use a minimum 1:1 ratio . That way, if you are right only half the time, you will at least break even. Generally, with high probability trading strategies, such as range trading strategies, you will want to use a lower ratio, perhaps between 1:1 and 1:2. For lower probability trades, such as trend trading strategies, a higher riskreward ratio is recommended, such as 1:2, 1:3, or even 1:4. Remember, the higher the riskreward ratio you choose, the less often you need to correctly predict market direction in order to make money trading.

Stick to Your Plan: Use Stops and Limits. Once you have a trading plan that uses a proper riskreward ratio, the next challenge is to stick to the plan. Remember, it is natural for humans to want to hold on to losses and take profits early, but it makes for bad trading. We must overcome this natural tendency and remove our emotions from trading. The best way to do this is to set up your trade with Stop-Loss and Limit orders from the beginning . This will allow you to use the proper riskreward ratio (1:1 or higher) from the outset, and to stick to it. Once you set them, don’t touch them (One exception: you can move your stop in your favor to lock in profits as the market moves in your favor). Managing your risk in this way is a part of what many traders call “money management” . Many of the most successful forex traders are right about the market’s direction less than half the time. Since they practice good money management , they cut their losses quickly and let their profits run, so they are still profitable in their overall trading. Does This Rule Really Work?

Absolutely. There is a reason why so many traders advocate it. You can readily see the difference in the chart below. The 2 lines in the chart above show the hypothetical returns from a basic RSI trading strategy on USDCHF using a 60 minute chart. This system was developed to mimic the strategy followed by a very large number of live clients, who tend to be range traders. The blue line shows the “raw” returns, if we run the system without any stops or limits. The red line shows the results if we use stops and limits. The improved results are plain to see. Our “raw” system follows traders in another way – it has a high win percentage, but still loses more money on losing trades than it gains on winning ones. The “raw” system’s trades are profitable an impressive 65% of the time during the test period, but it lost an average $200 on losing trades, while only making an average $121 on winning trades. For our Stop and Limit settings in this model, we set the stop to a constant 115 pips, and the limit to 120 pips, giving us a riskreward ratio of slightly higher than 1:1. Since this is an RSI Range Trading Strategy, a lower riskreward ratio gave us better results, because it is a high-probability strategy. 56% of trades in the system were profitable. In comparing these two results, you can see that not only are the overall results better with the stops and limits, but positive results are more consistent. Drawdowns tend to be smaller, and the equity curve a bit smoother.

Also, in general, a riskreward of 1-to-1 or higher was more profitable than one that was lower . The next chart shows a simulation for setting a stop to 110 pips on every trade. The system had the best overall profit at around the 1-to-1 and 1-to-1.5 riskreward level. In the chart below, the left axis shows you the overall return generated over time by the system. The bottom axis shows the riskreward ratios. You can see the steep rise right at the 1:1 level. At higher riskrewards levels, the results are broadly similar to the 1:1 level. Again, we note that our model strategy in this case is a high probability range trading strategy, so a low riskreward ratio is likely to work well. With a trending strategy, we would expect better results at a higher riskreward, as trends can continue in your favor for far longer than a range-bound price move.

Game Plan: What Strategy Should I Use? Trade forex with stops and limits set to a riskreward ratio of 1:1 or higher. Whenever you place a trade, make sure that you use a stop-loss order. Always make sure that your profit target is at least as far away from your entry price as your stop-loss is. You can certainly set your price target higher, and probably should aim for 1:2 or more when trend trading . Then you can choose the market direction correctly only half the time and still make money in your account. The actual distance you place your stops and limits will depend on the conditions in the market at the time, such as volatility, currency pair, and where you see support and resistance. You can apply the same riskreward ratio to any trade. If you have a stop level 40 pips away from entry, you should have a profit target 40 pips or more away. If you have a stop level 500 pips away, your profit target should be at least 500 pips away. For our models in this article, we simulated a “typical trader” using one of the most common and simple intraday range trading strategies there is, following RSI on a 15 minute chart. Entry Rule: When the 14-period RSI crosses above 30, buy at market on the open of the next bar. When RSI crosses below 70, sell at market on the open of the next bar. Exit Rule: Strategy will exit a trade and flip direction when the opposite signal is triggered. When adding in the stops and limits, the strategy can close out a trade before a stop or limit is hit, if the RSI indicates that a position should be closed or flipped. When a Stop or Limit order is triggered, the position is closed and the system waits to open its next position according to the Entry Rule. The Traits of Successful Traders. This article is Part 1 of our Traits of Successful Traders series. Over the past several months, the DailyFX research team has been closely studying the trading trends of clients from a major FX broker, utilizing their trade data .

We have gone through an enormous number of statistics and anonymized trading records in order to answer one question: “What separates successful traders from unsuccessful traders?”. We have been using this unique resource to distill some of the “best practices” that successful traders follow, such as the best time of day, appropriate use of leverage, the best currency pairs, and more. DailyFX provides forex news and technical analysis on the trends that influence the global currency markets. Four Consistent Ways to Take Profits When Trading (Exit Strategies) Most day and swing traders spend more time planning and contemplating entries than exits. While proper entries are important, most seasoned traders agree that trading success relies on how a trader exits their trades. Below, learn four exit methods you can use to attain a profitable edge in your trading. If we don’t know how and when to take profits, even a fantastic entry may be squandered. Which of these exit methods to use is ultimately up to you, based on which ones result in the best performance for your account. I use three of these methods, depending on the trade and market conditions. Compare the different techniques in a demo account, or look at your past trades and see if one method would have produced much better results than the others. Obviously, you want to go with the one that works best for you. Using any of the methods means you will be implementing the same approach each time you exit a trade, which translates to more consistent performance because you won’t be second-guessing yourself and wondering if it is time to take profits or not. Pre-Determined Reward:Risk Exit.

One of the most successful ways, based on my trading experience, for determining exit points is to look at the reward:risk ratio of any trade. Applying a reward:risk ratio ensures well calibrated and pre-set exit points. If the trade doesn’t provide a favorable reward:risk, the trade is avoided, which helps eliminate low-quality trades from being taken. If the target (the “reward” portion of the trade) is reached on a trade, then the position is closed at the target price according to the strategy. If the stop loss is reached (the “risk” portion of the trade) then the manageable loss is accepted, and the trade is closed before the loss gets worse. There is no confusion on what to do: exit as planned, at the predetermined exit points, whether profitable or unprofitable. In my own trading, I like to have at least a 1.5:1 reward:risk for day trading, and a greater than 2:1 reward:risk when swing trading. This is the minimum recommended. It’s possible to find setups with ratios of 5:1, or even higher. That means that for every dollar you risk you stand to make five. I determine the reward:risk for each trade before I take it, based on the strength of the trend and how far the price is likely to move in my favor (for additional reading on how to analyze trends, see Trading Impulsive and Corrective Waves). If the using a basic 2:1 formula, then a stop loss placed 100 pips (if forex trading) from the entry point means the target (reward) must be at least 200 pips away from the entry point. With the reward:risk established, and orders set, the trader can sit back and let the trade run until one of these levels is reached and the trade is closed. The chart below provides an example of the reward:risk exit in action.

Source: My Forex Broker, FXOpen. The chart above represents a typical trend trade. The trend is up and I am buying during a pullback. I often wait for the price to consolidate (blue box) for several bars and then buy when the price moves above the high of the consolidation. In this case, the difference between the entry and my stop loss (placed just below the low of the consolidation) is 16 pips. We can see that even if the price only runs to the prior high, or even if it didn’t make it there, it is still possible to have a decent trade because we could have taken profits at 2:1, 3:1 or even 4:1 reward to risk ratios. All of which represent a good return on the risk we were taking. The reward:risk model is simple and effective, in theory. The challenge comes in making it all work together. For example, the target still needs to be a placed where it is likely to be reached. It doesn’t matter how good the reward:risk is if the price is unlikely to ever reach the profit target. A good target, with a favorable reward:risk, also requires a good entry technique.

The entry and stop loss determine the risk part of the equation, so the smaller that risk is–but not soo small that the stop loss gets triggered unnecessarily–the easier is to have a favorable reward:risk. Sound confusing? Assume you are swing trading and buy a stock at a $50, placing a stop loss at $49. You are risking $1, and even if you placed a target at $53 to $55, that is a pretty reasonable expectation. The price only needs to move 10% to reach $55 (or 2% to hit the stop loss), for a 5:1 reward to risk. Many $50 stocks can move 10% quite easily within a week or two. But, if you buy at $50, and place a stop loss at $45, your risk is $5. Now you need to place a target at $60 or $65 (a 30% move) just to get a 2:1 or 3:1 reward to risk. A much bigger move is required to reach the target. Assume you risk $200 on both these trades. With the first trade, you can much more easily make $600 to $1000 on a conservative upward move. With the latter trade, the price needs to make a big jump just to make $400 or $600 (see Proper Position Sizing for an explanation of how this works). Let’s look at my forex trade above again, but this time let’s assume I got a much worse entry and used the same stop loss location.

The risk is now 38 pips, so just to get a 2:1 reward:risk I need to put my target 76 pips above my entry. Oops. As we can see, that ended up being too ambitious. The price may eventually make its way up to my target, but I could be in this trade for a long time…and for a small profit. Also, the price rallied in my direction but then pulled back and is trading near the entry point once again. For comparison, on my better entry (chart prior), I could already be out of this trade, have collected my bigger profit, and be looking for other trades. We want to keep our stop loss (distance from entry) as small as possible, but still out of the way of minor fluctuations, as this will allow us the best chance of taking high reward :risk trades where the target is still likely to get hit . For examples of how this plays out in day trading, see How to Day Trade Forex in 2 Hours or Less, and for swing trading see the Stock Market Swing Trading Video Course. The name of the game is to find setups that produce high reward:risk ratios, yet only require relatively conservative price moves to produce those ratios. Multiple Targets and Risk Reduction Exit. Another way to exit a trade is to use multiple targets, and reduce the risk as the targets are reached.

Assume a trader opens a position by selling two lots of the EURUSD. They place a target at 75 pips for the first lot, and a target of 150 pips for the second lot. A stop loss is placed at 30 pips on this particular trade. These are sample figures with the actual numbers varying from trade to trade. If the price moves 75 pips in our favor, close out half the position at the first target. Then, move the stop loss on the second lot to break even. Even if the price drops to our the stop loss while still holding the second lot, no money is lost and we still have the 75 pips we made on the first lot. If the price continues to move in our favor, then we make 150 pips on the second lot. By staggering our targets we make more (if both targets are hit) than if we just used the 75 pip target for both lots; and by adjusting our stop loss to breakeven after the first target is reached, we reduce our risk and are assured a profit (from the first portion that hit our first target). This method can be expanded to three targets, or four. Exit 13 or 14 of the position, respectively, at each target. As each target is reached, move the stop loss to breakeven, then the first target, then the second, then the third.

With this method, we are taking profits as the price moves favorably, but we are also reducing our risk as this occurs because the stop loss moves to the prior target once a new target is filled. The multiple targets method is easily combined with the reward:risk method described above. In the reward:risk method we picked one target. That works very well if you have practiced and are skilled at picking targets that both maximize profit and are likely to get hit. This isn’t always easy though. Therefore, another option is to exit a portion of the trade at various reward:risk ratios. Assume you short sell the EURUSD at 1.1510, and place a stop loss at 1.1520. You’re risking 10 pips. Place targets in 10 pip increments below your entry. The first target is 1.1500, then 1.1490, then 1.1480. A third of the position is exited at each of these targets, representing reward to risk ratios of 1:1, 2:1, and 3:1, respectively.

This is a simple example, and you may opt to only place targets at 2:1 and 4:1, or 1:1, 3:1 and 6:1. There are no right or wrongs, rather it is about making the method work for us based on how we trade. With this approach, you may also wish to move your stop loss as targets are reached. When the first target is reached, move the stop loss to the entry. When the second target is hit, move the stop loss to the first target, and so on. To learn how to trade currencies (forex), including basics to get you started, strategies, and a plan to get you practicing and successful, check out my Forex Strategies Guide for Day and Swing Traders 2.0 eBook. A trailing stop loss is when we move our exit point to lock in profit (or reduce a potential loss) as the price moves favorably. For example, you buy a stock at $50 with a stop loss at $49. When the stock goes to $51, the stop loss moves up to $50. Once a stop loss has been moved up, don’t drop it back down again. If the price keeps rising to $52 the stop loss goes to $51. The price may keep rising, but will eventually pullback enough to hit the stop loss. This is a simple example, and you were already introduced to this concept in the section above. Trailing stop losses can be quite dynamic though, incorporating statistics or technical indicators. Average True Range (ATR) is a calculation that looks at how far an asset typically moves over the course of one period, on average. That period may be 1-minute, 10-minutes, 1 hour, 1 week….whatever timeframe you have on your chart. For example, if looking at a daily chart we may see that a forex pair typically moves 50 pips in a day. If we are in a swing trade, on any given day the price could rally or decline, but over time we expect the price to keep moving in the trending direction. Therefore, if we expect the price to go down, we may place a stop loss at 3xATR above our entry price.

This means that the price would basically have to rise the equivalent of three days worth of movement to hit our stop loss. That gives our trade lots of room to start moving in our anticipated direction. The stop loss stays where it is until the price starts dropping like we expect (if going short). This is when we start to implement a trailing stop loss, always keeping the stop loss 3xATR above the current price. Since we are in a short trade, we can only move our stop loss down, never back up. So if the price rises or ATR increases, our stop loss stays where it is. Keeping track of all this is a pain, but luckily there are indicators that do all the calculations for us. One of my favorite versions of the indicator is called ATR Stops , available on TradingView. com (free real-time charts…although I do pay a yearly subscription to get rid of the ads and have more functionality). The indicator only requires we input two settings: Period and Multiplier. The Period is how many price bars we want the average of for our ATR calculation.

A period between 5 and 14 is standard. I typically use 6 periods with this indicator. For my trading style I find it works the best, although for your trading style you may find another Period setting works a bit better. The chart below shows this in play. In this case, the settings are 6-Period and a Multiplier of 3.5. I determined the Multiplier setting by looking at the prior rally (rallies) for the asset I am interested in. I find the lowest ATR multiplier that would have kept me in the last rally (even though I wasn’t actually in it) until there was a significant pullback. That gives me a good idea of what settings I need to use for this stock when I do I find a trade setup. In the case below there were two potential entries: a pullback-consolidation breakout and a rounded bottom entry, both of which are covered in my Stock Market Swing Trading Video Course. Note: settings are a bit different for each stock, forex pair, or futures contract because every one has different volatility. But my Period setting is almost always 6 and my Multiplier setting is almost always somewhere between 2.7 and 3.7. While the settings window is open you can adjust your Multiplier by 0.1 at a time and see the effect.

How to Use the Trailing Stop Loss Indicator. The indicator is below the price, following it up, when the price is rising. When the price falls below the indicator, the line flips above the price following it down as the price falls. Since I like to buy during pullbacks in uptrends (or short during little rallies in downtrends), sometimes the indicator will still be above the price (showing red) when I buy. That is okay. This indicator is not meant to give entry signals , only exit signals. At the time of my trade I still place a stop loss…typically just below the most recent swing low. If the indicator is already below your entry point at the time of a purchase, you can use the indicator as your stop loss level. If you are long, start using the trailing stop loss once the indicator is below the price. If you are short, start using the trailing stop loss once the indicator is above the price. The indicator moves with each price bar, so you always know where your exit is before the price reaches it. One option is to exit as soon as the price touches the indicator . Alternatively, wait for a price bar to close below the indicator line, if in a long trade. Then move your stop loss to just below the low of that price bar. Since I like to trade trends, this gives the price a little more room to start moving in the trending direction again.

If you look closely at the chart above, you will see that the price touched the indicator line multiple times on the rally higher…any one of these “touches” could have closed my trade if I opted to use that approach. But no price bars closed below the indicator line and then kept dropping…so I am still in the trade and making more profit. Which approach you opt to use is up to you. There are pros and cons to both. Do not judge the indicator by how it acts when you are aren’t, or wouldn’t be, in trades. For example, I am mostly a trend trader, and I prefer to focus on strong trends when swing trading. Therefore, I only care about how the indicator performs after a valid trade setup in a strong trending stock. During times when an asset is not trending strongly the indicator will not perform well, as discussed below. That is okay, though, because I am typically not in trades at those choppy times.

And remember, if you are waiting for the price bar to close outside the indicator, just because the indicator flips to red to green (or vice versa) doesn’t necessarily mean you are stopped out. In the chart below the price reverses from an uptrend into a downtrend. Once the downtrend has started I am looking for an entry signal to go short. A signal occurs when the price drops below the small box I have drawn. At the time of the trade, the indicator is below the price. That is fine. I will still go short and place my original stop loss. Once the indicator flips back above the price and I will start using the indicator as a trailing stop loss. Once the price starts falling, it eventually closes above the indicator line again. We drop our stop loss to just above the high of this bar. On the next bar, the price keeps falling so we are not stopped out . Later on, the price closes above the indicator again. Our stop loss is moved again, in the same fashion. A few bars later the price hits the stop loss and gets us out of the trade, having captured a nice downside move. At the time this trade was taken, the trend is was not particularly strong.

I would call this a “normal” trend. Therefore, I actually I wouldn’t have used a trailing stop loss, rather I would have used the reward:risk method and looked to get in and out a couple of times during this downward move. But the example does illustrate how this particular trailing stop loss method works. Feel free to adjust it to your liking. Other Trailing Stop Loss Indicators. There are many ways to implement a trailing stop loss, and some indicators may help in this regard. Some examples of other indicators that could be used as trailing stop loss are Turtle Channels and Envelopes, Bollinger Bands or Keltner Channels, TTM Trend, or even a humble Moving Average. The trailing stop loss can also be based on price action. For example, you sell a currency pair at 1.2510 and place a stop loss at 1.2525. You are risking 15 pips and trading off of a 5-minute chart. You don’t place any profit targets, but once the price has moved more than 30 pips in your favor (2:1), you start dropping your stop loss to just above the most recent high of every new price bar. As long as each bar keeps dropping, your stop loss drops to lock in more profit. As soon as the price moves above the high of the last bar, you are stopped out and collect your profit.

This is just an example, but shows how you can create your own trailing stop loss method. Pros and Cons of Trailing Stop Losses. I only use trailing stop losses on trades where there is a strong trend. A strong uptrend is when each upward price wave moves well above the last swing high. A strong downtrend is when each downward price wave moves well below the prior swing low. For comparison, in normal uptrends, the price moves a little bit above a prior high before pulling back. In weak uptrends, the price is barely making new highs before pulling back. During strong trends, the price can move a lot further than we think. The trailing stop loss keeps us in the trade as long as the price is moving well. During choppier conditions, or when the price is in a normal trend, I don’t use a trailing stop loss because it will not work well . Instead, I use the reward:risk method. Before the trade is taken I determine which exit method I will be using, then I stick with it. So that is the tradeoff: trailing stop losses work well, but usually only in strong trends. The reward:risk method works well all the time, but during very strong trends it is highly likely you will be leaving money on the table. Trying to use a trailing stop loss in choppy conditions–or in weak, or even normal, trends–will likely lead to poor performance…

or at least worse performance than if using a properly implemented reward:risk method. A time-based exit is used in conjunction with other exit methods, and will supersede them in some cases. A time-based exit allows us to close a trade before our target or stop loss is reached, but only under certain conditions. Day traders don’t typically hold overnight positions, so it’s prudent to close all trades, regardless of profit or loss, by the end of the trading day…or whenever the trader decides to quit for the day. Another time-based exit is to close all positions a couple minutes before a major economic news release (like interest rate announcements). Most day traders and some swing traders do this, and then resume trading after the announcement. I personally opt to close all my day trades before news announcements. About two minutes before, I just hit the close button on my day trades regardless of profit or loss. Once the news is released, I go back to trading again. On shorter-term swing trades, I also typically close my positions before a major news (for forex) or earnings releases (for stocks). For longer-term trades (like my forex weekly charts method), I leave my trades open and am not concerned about closing them prior to earnings or news releases. Establish any time constraints you opt to work within, then stick to the rules that you set. Use time-based exits in conjunction with the other exit methods. Final Thoughts on Taking Profits When Trading. I primarily stick to reward:risk and trailing stop loss exits. For many of my trades, I use the reward:risk (one target) method because I know exactly what I am getting and am happy to risk a certain amount to potentially make more. I use a trailing stop loss only when an asset is in a strong trend.

During strong trends the price can run for much longer than I expect. Therefore, I extract more profit by letting it run as far as it wants, then getting out when it starts to pull back and triggers my trailing stop loss. For normal trends, that aren’t exceptionally strong, I find that a well-placed target extracts more profit than the trailing stop loss. That said, placing high-probability targets takes a lot of practice, whereas using a trailing stop loss does not. Find the method that works best for you then stick with it. Time-based exits make sure we don’t get stuck in a situation we don’t want to be in, such as holding a day trading stock after-hours when liquidity dries up, or holding a position through a major news event that could cause us to lose much more than expected. Longer-term traders don’t need to worry about this as much, but should still be planning their exits using one of the other methods. Finally, another exit method is to place multiple targets, taking profits as the price moves favorably. This strategy can be a bit easier to implement than picking one target, because we can just place targets at various reward:risk ratios instead of trying to pick one. For example, place a target at a 2:1 reward:risk, another at 3:1, 4:1, etc. The stop loss can also be moved to reduce risk as the targets are reached. If you are interested in learning a complete method of swing trading stocks, including how to find trades, how to manage risk, where to enter, and where to exit, then check out my Stock Market Swing Trading Video Course. More than 12 hours of video show you how to swing trade efficiently and profitably, in about 20 minutes per day. Forex never goes my direction. My friend Peter just blew his account.

After spending $15,000 on Forex courses, $10,000 on coaching, and losing $5,000 to a scam broker (InvesttechFX) – he was ready to call it quits. After all of that, he decided to give it one last try. He bought an Expert Advisor (EA, also known as a trading robot). After 6 months, boom… his trading account was gone – again . “I am just stupid! Bloody stupid.” he told me. However, Peter didn’t understand that it wasn’t his fault . He wasn’t “stupid”. He was being harsh on himself.

It wasn’t his fault for believing marketers and people with their “track records”, MyFXBook results, and hundreds of testimonials. It is hard to resist. Upon closer inspection though, it was obvious to me that this would never have worked. Do you really think Warren Buffet relies on MyFXBook or a MetaTrader 4 account to make his buying decisions? Do you think that anybody in the City of London or Wall Street make trading decisions based on that? I do have an unfair advantage though. I spent 23 years on Wall Street trading wealthy client accounts. The last 13 years have been spent trading for myself. During that time I have seen a number of miracles happen. One of my biggest wins early in my trading career was a trade in 1982. I started with a paltry $8,000 to my name and I used it to buy silver on the futures exchanges.

As it turns out my analysis was spot on, and I ended up running my $8,000 account to a little over $280,000 in only 30 days. Since that time I have modified my trading strategy – slightly . After 120,000 trades, 1,200 trading accounts, and 8 Wall Street Firms – I am going to give you an exact guide to walking away with 4 additional winning trades per month and avoid losing your shirt – like Peter did (I’ll tell you what happened to him in a minute). Before you read this article you must agree to the following statements: There’s no magic pill. The markets are full of sharks and they will eat you alive. You need to stick to simple and sensible rules. The Forex systems and robots churned out by internet marketer’s are laughable. – especially if you think that’s how they make money on Wall Street. And trust me, they DO make tons of money.

Forget about making 20% per month. That’s how poor people think. I’ll let you know exactly how much you can actually make later in this article. Now, if you agree with all of those statements then I salute you. If you disagree with any of them, then close this page right now. Still here? Good… You are part of a small group of people who can separate reality from outright dreams and lies. And for that reason you will understand the words in this article better than anyone. I don’t have time for ‘internet traders’, the ‘Forex forums’, or any other breeding ground for newbies who pretend they really know how the markets work – and neither should you. This article is going to be simple. I am going to show you how to get 4 – yes, just 4 – additional winning trades every month. Don’t be fooled by the goofy EA developers and internet marketers out there.

Having 4 profitable trades per month is more than enough to push you into the big boys club. You can make more, but my aim is to get you started with something consistent. Once you’ve got that mastered you can increase your output. Why you won’t make a dime from the information contained in this article. Most people reading this won’t make a single dollar. Not because the content sucks – I believe it is some of the best trading tips in the world. It is because people are lazy and don’t implement what they learn. It is because people lose their shit and take too much risk. And it is because you might not be able to handle my style. My past results really are no indication of you making any money whatsoever. You might simply not have what it takes. However, there are a small percentage of people who do. And by following the rules you might be one of them.

There are no guarantees. So read carefully and make sure you examine every word on this page as if your life depends on it. Because it might just change it forever – if you have what it takes. #1. The last opportunity for major profits in the Forex market. Have you ever been stopped out of the trade, just for it to change direction immediately? Do you ever feel like every decision you make is the wrong one? There is this big lie out there that hundreds of thousands of Forex traders believe. And you may have believed this too at one point. “The Forex market is the most liquid market in the world and therefore it cannot be manipulated “. That is plain wrong. Governments have been cracking down on big banks because of their manipulation of a whole host of markets. Check out this article on the BBC: Have a look at this chart they supplied: Have you ever been knocked out of a trade that just seemed totally random? Well, chances are somebody rigged it. And chances are… you didn’t confirm your trade with a “2-pattern overlay”. More on that in a little bit. You and I are small fish who are competing with much MUCH bigger sharks. Sharks who know the waters better than you do. I used to swim with them. Merrill Lynch was only one of 8 companies I worked for on Wall Street.

They did NOT take prisoners. There are entire teams who’s job it is to cheat the system. And those are some of the brightest minds in the world from the best universities in the world. You have to accept that you cannot beat them. That’s why, what I’m about to reveal, is the very last opportunity to profit in the Forex markets. Forget scraping a few pips off the charts. Forget taking daily pivot trades, or “snipers”, or FAPTurbos, or whatever else these idiots are selling these days. You have to stick to simple daily trades that unfold over a period of days, weeks, and sometimes months. By riding the wave on a boat, you’ll be safe from the sharks on Wall Street. #2. How to dominate a currency with profitable trades. That’s a lie. You can never ‘dominate’ a market. That kind of thinking will get your account murdered. However, you can put the odds severely in your favor by doing one thing.

You can use a simple “2-pattern overlay” before entering a trade. I’ve been using this since the 80s and it still works better than anything. One million dollar client at EF Hutton & Co (another Wall Street company) dubbed me the “2-pattern wizard”. Every time I used it he knew he was about to make enough cash to buy another house. All you do is look for a minimum of two chart patterns to “confirm the trade”. Now, that doesn’t mean you confirm an entry. You simply confirm that you potentially want to take a trade. Here’s an example from one of my trades: I saw a triple “core support bounce”, and then a simple overhead resistance. (If you don’t know how to spot price patterns then don’t worry… I’ll get to that). DON’T jump into the trade just yet – it isn’t that easy. You still have to know when to enter. I use a very specific ‘trigger’ that usually means the market is coiled like a spring, ready to burst in the right direction.

Keep reading and you’ll learn all about it. #3. Use this simple trigger. Most newbies would simply jump into the trade because they saw a “double bottom” or some other pattern. You and I know better. You have to wait for the market to form a coil. There are several different types of market “coils”, however the one I’m about to reveal is the easiest to spot and tends to give me better results. It is called an “inside day bar”. So, looking at the daily chart I would wait for this bar to form. Here’s a real live example from a trade I took a while ago: Two inside day bars were the beginning of a nice coil. Here’s another example: #4. Have a tight stop loss and await the coming burst in movement. Remember that silver trade I told you about in the 1980s?

It was my first big win. Even though I turned $8k into $280k the risk was minimal. I did that by scaling into a rocketing market. Despite what people say… NEVER do that. Not until you understand the true risks involved. It can take a heavy psychological impact on you. I once saw a guy at Commodities Corp (now a division of Goldman Sachs) throw his computer across the room because he leveraged his position by scaling in too much. Theres no need to do it. Simply stick with what I am about to reveal and you could walk away with a handful of winning trades each month. Keep the initial stop loss tight, and then keep it loose… The initial stop loss is very tight. I anchor it close to the previous bar. If you’ve established the correct price action and trigger bar, you should see it shoot off in the right direction. Only 1 out of 2 trades tends to linger around. If they turn, then it means the trade is a dud and your stop loss will kick you out quickly. However, when it goes… it goes.

Here’s an example of a good trade I took. I made a fat 5.2% in about one week. This example shows how it immediately jumped in my favor. That means I spotted a good coil. By the way… those are actual trades. My trading platform marks them with those little circled arrows. Here’s another example: EURGBP immediately jumped after a trigger coil for a 2.5% gain in just one day. I don’t usually exit trades in the same day, however, 2.5% is a lot of money in my world. You don’t often see 2.5% days. If everyday was like that my account would grow by a billion every month.

So when it happens… I take it. #5. Exiting the trade for a fat profit. This is how you get 4 additional winning trades. If you get the coil right. Your trade should shoot out of the block like Usain Bolt. This allows you to have a tight stop loss. It puts you in a great position to make huge gains with a tiny risk. If your stop loss was far away from your initial entry then your risk would be greater and you’ll have to reduce your position size. Therefore, I would recommend a hard and fast 3:1 risk reward ratio. If your stop loss is 35 pips away, your profit target will be 105 pips (three times the stop loss). Now, admittedly I use a way more complicated process for my exits. I could write an entire book on it. However, when I looked back at my last 300 trades, I noticed that if I used THIS exit strategy I would still have made a great return. It is simple and it takes psychology out of the equation. I learned this while working at Bridgewater Associates (they manage about $170 billion) from a funny looking Irishman.

Back in 20112012 I forgot this rule and I duly got slaughtered. There is a story inside of the book ‘Marketing Wizzards’. It talks about a great trader who locks himself in a room with no distractions. No windows. No TV. No Computer. He has his assistant bring him his chart-book without the instruments named. So he doesn’t know if he’s trading pork bellies or gold. He doesn’t care. All he cares about is the price and the fact that he has no distractions. It means he ‘never loses’. My rule gives me the same sort of piece of mind. Before I let you in on it you must know what I mean by ‘never’ lose.

When you lose a trade – you aren’t ‘losing’ . It is simply part of the process. It is the equivalent of a business expense. You will always lose trades. However, when you lose your mind and you don’t follow your own rules. That’s when you truly lose. So here are the exact rules you need to follow to NEVER lose, always stick to your rules, and always win in the long run. Do not share your trading results. I did once. And only once. It was a huge mistake.

All of the sudden I was answerable to thousands of people who happen to stumble across my profile. This doesn’t work when you are a trader. I lost focus. I kept fussing about whether a trade was a winner or a loser. I didn’t focus on whether it followed the rules or not. As long as you follow the rules… you are winning. When you don’t follow the rules – you are losing (even when you make a profit). Systems and routines are the only thing that make you profitable in the long run. It is the only thing that’ll protect you against the sharks. So whatever you do – don’t share you trading results. Not even with your husband or wife. It’ll put external pressures on you. Don’t even mention a winning trade or a losing trade. Simply tell them you’re winning because you followed the rules.

#7. How to make $1m from trading. Do you want to know the real secret? The one that most people ignore, because they don’t really take their trading seriously? Well, it is a system of recording and documenting your trades in detail. I call it a trade journal. Super original right? Every single time I am about to take a trade, I stop. I take a snapshot of the chart, I write out my analysis (the reason WHY), and then I enter the order. 90% of my orders are pending orders, which means they only enter when the market reaches a specific price. This is an example of three pages inside of my journal. By doing this with your trading you’ll be able to get a lot more focussed.

When you look at the markets you will feel excited. You will get a rush of adrenaline. Stop. Take a deep breath and start recording the trade before it happens. It gives you the breathing room you need to make rational decisions. It helps you to be a winner every time by following the rules. Seriously. Get my journal. It’ll show you how you should structure yours for maximum results. You’ll also get a better feel for the way I trade.

#8. Past trading results on MyFXBook will drain your trading account. This is the biggest difference between the Wall Street traders and normal folk. On Wall Street – we know that past results don’t mean anything. They really are no indication of future performance. Even if the results are third party verified. Think about it. How many times have you bought a system or a program based on their past results? And… how many times has it worked out? Now you have two choices. I should congratulate you. You’ve read the entire article. However, this is just the start. You now face two choices.

Choice #1. Forget what I told you and keep doing what everybody else is doing. It is easier to follow the herd after all. Some of the things I talked about aren’t easy. Some of them are plain boring. Yet this is what it takes. And I think you know that, which is why you’ll probably go for… Choice #2. This is the choice smart Forex traders go for. You grit your teeth and follow the rules. So that you can finally break away from the ‘internet herd’ and actually start taking pride in being a trader. Don’t fall into the same trap as Peter. Be the person that “actually makes money”. How nice would that feel for a change? I’ll help you out by giving you my 21 Power Strategies without asking you for a dime. Just let me know which email address I should send it.



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  • Forex never goes my direction