Patience and Discipline in Trading

The value of patience and discipline in Forex trading cannot be overstated.  In order to be a successful trader, you must possess these two traits with unwavering consistency.  As I have gone through various phases of learning, failure, and success over the past 17 months, I have had moments and weeks where I have been extremely patient and disciplined.  However, maintaining that unwavering consistency has been one of the biggest challenges in my trading.

Lately, for a little over a month now, I have finally started to exhibit some reasonable level of self control.  I realize I have not yet absolutely mastered these essential survival skills.  Even during the past month, I experienced back to back days where I allowed myself to over-trade (the only two truly bad trading days I have experienced since mid-May).  As such,  I am constantly seeking new thoughts and inspirations for how and why to maintain steadfast patience and discipline.  I believe I am starting to turn the corner.  I find that I am no longer easy prey for the market.  I now lie in wait and take quick small bites out of the market.

So, what has been working?  What is helping me maintain my patience and discipline?  I go through a routine before each trading session.  The first thing I do is look at the lot ladder.  I must warn you, without the right mindset, this can be a double-edged sword.  The lot ladder allows you enter the number of pips you expect to average per day (along with some other variables) and then see how much money you will be making each week if you climb the lot ladder one rung at a time.  The reason this is so dangerous is that you can make the mistake of raising your daily pip goal so that you can make huge money so much faster.  This is completely counter-productive as it leads to over-trading, not covering profits, etc.

However, I have set my daily pip goal at the Fx365 Institute's long-time suggestion of just 7 pips a day.  Once you have been trading on the Smart Money Profile platform for some time, you know this is truly a modest goal.  Before any trading session, I look at where this highly obtainable goal can take me.  Here is a screen shot of what one part of my lot ladder looks like:

I take a few moments to really focus on the truth that averaging just 7 pips day turns a $1,000 account into a $20,000 a month income in a ridiculously short time frame.  I mean, this is incredibly powerful stuff.  It helps me cover smaller trades rather than trying to swing for the fences.  I still need to get better at not caring if the trade runs another 30, 50, 100+ pips.  It's tough knowing that I could have made my whole week on one trade, or hearing that someone else pulled a 40 when I had better entry and only pulled a 10 or 20.  However, I come back and look at the lot ladder again and realize I only need 2-4 of my modest winners a week.  I have to always remember, trading is a long-term race.  By taking those smaller positives, I avoid taking negatives that make it harder to reach my goal.  Then, at the end of the week when I have made my goal and am moving up the lot ladder again, I am one week closer to the financial freedom that $20,000 a month brings.  Isn't that the whole idea?

My other monumental struggle has been to avoid over-trading after taking a negative.  Now, although I am making significant progress towards trading at indifference, there are still times when I take a negative trade and literally feel the stress prickling through my body (what a horrible feeling).  When this happens, I absolutely must exhibit tremendous discipline and STOP TRADING until I have calmed down.  If I look at where I want to be by the end of 2015, I ABSOLUTELY CANNOT ALLOW MYSELF TO DAMAGE MY ACCOUNT.  

At those crucial moments, I lean on something Fx365i's Head Trader Wade Guth once told me.  He asked if I was planning to trade tomorrow.  I said yes.  He asked if I was planning to trade next week.  I said yes.  Next month, next year, etc?  Yes, yes, and yes.  So he asked me, "Why on earth would you get worked up about one trade or one negative day?"  I also reflect on Shane Guth recently telling me that the biggest thing he NEVER wants to do is let one bad day cause him to lose his buying power.  Live to fight another day!

Over this past month, I have also started telling my wife how my trading went each and every day.  She has believed in me and allowed me to stay on this journey despite several months without positive results.  Believe me, it is not easy to tell her when I am down for the day.  However, when I have taken a couple of wrong trades and walked away with relatively small losses, I can proudly tell her I kept my discipline and didn't throw money out the window like an idiot.  Knowing I will have to report to my wife on a daily basis helps me maintain steadfast discipline and patience in my trading.

One last thing I think about is basically a lesson from Rhonda Byrne's famous book, The Secret."  The Secret teaches that if we want something, we have to hold it in our mind's eye, believe we have already obtained it, and be fully grateful for having received it from the universe.  So yes, I am thankful for my huge trading account.  More importantly, I am thankful for being a highly successful trader with tremendous patience and discipline.  I know I did not get to this point by getting emotional and overreacting at every unexpected twist and turn in the market.  I am thankful for the self control and confidence that made me the trader I am today.

I realize the lot ladder may not help everyone.  Of course everybody is not married or willing to discuss their daily results with their significant other.  I also know that not everyone has the same view of The Secret as I do.  That is not the point.  What is important is that I have found ways (and will continue to seek and find new ways) to exhibit patience and discipline in my trading.  If you are struggling with patience and/or discipline in your trading, maybe you can use one of my tools.  Some of you will have to come up with something totally new that works for you.  The key is to find something that truly resonates with you - something powerful enough to give you the internal fortitude to do the right thing in the face of strong negative emotion.  Once you find ways to be patient and disciplined, you will be much more likely to survive in the unforgiving Forex jungle.

Two quick notes:
1) One other thing that has helped is writing this blog.  Thank you so much to everyone who reads it and especially to those of you who reach out to discuss your own trading experiences with me.  Thank you, thank you, thank you!
2) In regards to the 7 pips, you may be saying, "Well what about the commission?"  On my personal spreadsheet, I subtract 1.5 pips from each trade to come up with what I call "net pips."  This number will vary depending on the pair you trade and whether you are in a micro account.  I can help you figure out the exact number if you need help with this.

As always, please feel free to reach out to me at pipaddict73@gmail.com.  I LOVE hearing from fellow traders!

-Cyrus Sidhwa
Smart Money Profile Trader

Fighting #FOMO

#FOMO = Fear Of Missing Out.  Fomo is a serious killer for an SMP Trader.  

When you succumb to fomo, bad things happen.  The number one issue caused by fomo is massive over-trading.  Over-trading is deadly, so always remember: TRADES ARE GOING TO GO BY WITHOUT YOU AND IT'S OK!  THERE WILL BE MANY MANY MANY MANY MANY MORE TRADES.  When you overcome fomo, you can now wait for clear market conditions with a well defined directional bias.  Once direction has been established, wait for an opportunity like a good pullback, focus on getting great low-risk entry, and just let the directional bias take the trade in your direction.

By overcoming fomo, you end up taking far fewer trades because you are not jumping at every little whiffle and tick in the market.  When you become more selective about your trading, you only enter the trades you feel most strongly about.  Winning trades happen when a trader first gains a strong understanding of the current market conditions and then develops a strong belief about what is about to happen next. 

You do NOT want to tangle with
the dreaded Fomomonster

The #fomomonster can also cause a trader to start foolishly trying to call the turn.  The reason fomo starts causing you to call the turn is that you're afraid that this one little area of resistance might be the place that the market suddenly turns around.  You start thinking, "What if this is the new low?  It could be a huge trade.  I don't want to miss out on that...."   Calling the turn against a clear directional bias is one of the most frustrating and fruitless endeavors on earth (ask me how I know). If you want to steer clear of the monster, ONLY TRADE WHEN YOU HAVE STRONG EVIDENCE TO SUPPORT A MOVE IN FAVOR OF YOUR DIRECTIONAL BIAS.

If we focus on getting great entry, we can keep our negatives quite small.  If we avoid the fomo and only enter trades when we have a strong belief about the upcoming move, we will combine smaller and less frequent losses together with larger, more frequent wins.  Now that sounds like the winning recipe for trading success to me!

I love hearing back from fellow traders!  Please email me at pipaddict73@gmail.com.

-Cyrus

Risk Management Salvaged My Week

Quick Note: I have only posted my last couple of entries onto the Fx365i website's blog.  I will be adding those posts onto this blog soon.  I will be keeping both up to date.

Risk management really saved me from having a truly terrible week last week.  My win-loss record was only 3 wins vs 9 losses.  One of those wins was less than 3 pips.  Without solid risk management, I could have seen myself down a boatload of pips.  However, I managed to keep it together and was down a relatively modest 19 pips for the week.  Obviously I'm not proud of going 3 for 12 and being down for the week, but I sure am glad I kept my losses under control!

After trading for a year, I've heard some different theories on risk management.  Some people say you have to give a trade a fair amount of room.  Trying to decide just how much room is "fair" depends on where you "know you are wrong."  I believe this is a concept that takes screen time to fully understand.  In order to avoid taking large losses with this theory, it is critical to have sharp, well-placed entries.  If you chase a trade, it can be a long ride down to find out you were truly wrong.  We'll talk more about this in a minute.

Another theory I've heard is that as soon as a trade doesn't behave exactly as you expected it to, get out of the trade.  The problem is this isn't our business - it's the market makers' business.  If we knew exactly how trades were going to behave, we'd all be batting a thousand!  However, this concept certainly has a lot of merit.  As is so often the case, it's the subtle nuances that make all the difference.  For example, in an SMP trade, if you get a market maker dot, and you expect price to hold below that dot, if price gets above the dot, Dump The Trade!  The same idea holds true for Wealth Smart traders taking a trade up against trend break.  It's so tempting to just want to be right and let the it play out further... only to watch the trade go further against you.  To be successful, you must not only plan a trade, but you must then trade that plan.

I have also heard a theory that you should run a large stop, sometimes as large as 30 - 50 pips.  The thought behind this is that if you see that the trade is going against you, at some point it will take a breath coming back your way and allow you to get out without as big of a loss.  This is one theory that absolutely doesn't work for me on multiple levels.  First of all, if you run a huge stop, guess what?  PRICE CAN HIT IT!  Ask me how I know.  Nearly every time I have taken a large risk on a trade, I have hit my stop.   Additionally, when it does start breathing back in your favor, guess what?  You don't want to get out!  You feel like the trade is finally going your way and you decision to run such a large stop is paying off.  Until 10 seconds later when price snaps hard and stops you out.  To each their own, but that style of risk management is definitely not for me.

I truly believe you have to find your own style of trading and your own style of risk management.  I like to run a tight stop.  In fact, my stop is set at just 10 pips.  On most of my trades, I will almost immediately tighten my stop up even a couple more pips.  A huge part of the reason for this is that I am absolutely useless at clicking out of a trade when it is going against me.  Whether it is pride, ego, blind optimism, or just plain stupidity, I constantly find reasons to stay in the trade.  However, if I have moved my stop to  minus 6 or 8 pips, I no longer have to worry about it.

Now, I also believe setting my stop at a place where I know I was wrong about the trade.  In order to accomplish this, I truly have to focus on my entries.  For example, I frequently want to enter close to a market maker dot (if you are a Wealth Smart trader, think about trying to get in close to trend break).  Let's say we're trying to go long.  The further price moves above that dot, or above trend break, the larger the negative we would have to take before knowing we were wrong.  Why?  Because we would know we were wrong when price moved below the dot or snapped short through trend break.  If we entered the trade 10 pips above the dot or trend break, there is too much risk.  If we entered 2 or 3 pips above, we have managed our risk much more efficiently.

Well, I hope this is helpful to fellow traders.  Find your own style of risk management that makes sense to you.  As for me, I need to consistently stick with my risk management principles.  But to tell you the truth, I'm sick of talking about losing.  I need to be more patient and find better trades.  Hopefully over the upcoming weeks, we can discuss when to exit trades for profit!

I always love hearing from fellow traders.  Please reach out to me at pipaddict73@gmail.com.  

Happy Pip Hunting!

11.13.14 - SMP Trading Rules

I was shocked by the news yesterday when I heard that the banks manipulate the Forex market.

HAHAHAHAHAHAHA!  

Yes, that was an attempt at a little currency trading humor....  It actually was really funny watching non-traders who heard the news come up to me throughout the day and ask what I thought about this terrible manipulation of the banks.  When I tried to explain that the Smart Money Profile (SMP) software actually tracks the market maker's manipulations, and that our entire trading methodology is based around understanding their manipulations, I was met with many blank stares and looks of confusion.  I am eternally grateful to Wade and everyone involved in creating SMP.  It is an absolutely amazing tool.

By the way, before we get to the main topic of the day, I want to say that I was fortunate enough to have the opportunity to sit down and pick the brains of someone who I would venture to say is well on his way to becoming one of the best traders in the world.  The funny thing is, most of you already know him.  I'm talking about Ira Barnes.  Being the humble person that he is, Ira does not frequently toot his own horn, but you should know that for several weeks now, Ira has been averaging hundreds of pips per week.  Yes hundreds.  Week after week.  These pips are all pulled by using information found exclusively on Fx365i's incredible Wealth Smart trading platform.    In one of my next posts, I look forward to sharing with you some of the wisdom that Ira shared with me. 

Well, on to the main topic for the day...

Over the past couple of weeks, I have found myself in a bit of a spin cycle caused by some serious over-trading.  This is very disappointing to me because I have been at this long enough now to know much better.  Hell, one of my first blog entries was about how over-trading got me into an epic slump.  Fortunately I did not enter those horrific levels of deep abyss this time around and I am bound and determine to control myself.  All I want to do is create sustainable winning trading habits and profitably move up the lot ladder.  Nothing else matters.

As such, I have created a new set of trading rules for SMP.  There are no earth shattering concepts here... just good trading habits and common sense.  I have pasted them below exactly as I have written them out for myself.  The real challenge of course is not in just writing them, but in following and LIVING them every single day.  That said, I am extremely glad I wrote them down because it gives me a reference point and something to live by.  I imagine the rules will continue to evolve, so I would love to hear any feedback about them.  Is there anything you would change?  Do you have your own rules written out?  If you'd like to share them, or any other thoughts, please email me at pipaddict73@gmail.com.  Happy Trading - I'll see you soon!  Here are my SMP trading rules pasted directly from my Evernote:

These rules are not made to be broken.  They must be followed.  If you follow these rules, you will create an amazing financial life.

1. LET THE TRADES COME TO YOU
2. ONLY TAKE TRADES YOU UNDERSTAND
3. LET THE TRADES COME TO YOU
4. ONLY TAKE TRADES YOU UNDERSTAND
5. PRACTICE OUTSTANDING TIGHT RISK MANAGEMENT ON EVERY SINGLE TRADE
   • You will be wrong on a decent amount of trades
   • If you keep those negatives averaging 8 or less pips, you can win big with the SMP software because you will hit a good amount of 20 pip trades and also hit some much bigger trades
     • Tight risk management is an INCREDIBLY important element in long term sustainable profitability.
6. BE PATIENT
   • Wait for something you understand
   • Everything else is gambling.
     • You are not here to gamble, you are here to profitably interact with the market makers business model
   • Until you have new information, stick with your directional bias 
   • Do not get bored / sloppy and start trading both ways
7. DON'T OVER-TRADE
   
   • Only enter trades that you believe have at least a 15 pip potential.  Ideally, look for 20+ pip opportunities.
   • Wait for what you believe is the real entry.  If you happen to miss it, so be it.  There will be many many more trades.
   • Don't shoot all your bullets at one opportunity.  If you are wrong once, twice at the most, wait for more information.  If it happens to go and you miss it, it's OK... there will be many more great trading opportunities.
     • Not over-trading is another INCREDIBLY important element in long term sustainable profitability.
8. GET GREAT ENTRY
   • When you see a set-up you understand, be decisive and act quickly in order to get great entry.  
     • For example, if you are getting in because price is going through a dot, get in as soon as price goes through the dot, don't wait for 5 pips of confirmation.
     • This allows you to maximize profit potential and run very tight risk management
9. DO NOT TRY TO CALL THE TURN!
   • Only trade in the direction of your directional bias
10. EXIT TRADES WITH SOUND REASONING
    • If you are up in a trade and the trade stalls / reaches a decision point / reaches a point where it is likely to take a breath:
      • Move your stop so you have zero exposure.  This means setting your stop at +1.5 pips so you are able to pay your commission and still walk away with no loss.
      • Once you have moved your stop, decide if you think it is likely that price will move back to reach your stop.  If you think there is a decent likelihood, then take your profit before it starts to breathe against you
      • If you believe you are just dealing with a breath in what can potentially turn into a much bigger trade, and that price is unlikely to come back to your stop, stay in the trade.  If you are wrong, you take a zero.  If you are right, this is how you pull huge trades.
        • NOTE: Do NOT get out just because price action is making you uncomfortable or you will be minimizing your profits.  Do NOT watch the trade stall, decide you're going to stay in the trade, let it back up 10 pips, and then get out.  Either let the trade play out, or get out at the stall, but don't let the market makers manipulate you into giving up 10-20 pips and then get out just when the market is about to turn back your way.
        • IMPORTANT: If you get new information that tells you you are more likely to be wrong, then get out of the trade with as much profit as possible - there is no reason to let it go back to your stop if you have new information
    • If you did not get great entry in a trade and it is stalling at a decision point, you did not earn the right to stay in that trade.  Take the profit and get out.
      • The only exception to this is if your intuition strongly tells you that the trade will keep going your way.  Make sure your stop is in a place where you have very little to no exposure.
11. USE YOUR INTUITION
    • If it makes sense, but something tells you it's not right, don't take the trade.  Be patient.  There will be tons of great trading opportunities over the coming days, weeks, months, and years.  Let them come to you.  If you miss a trade, you miss it... so what?  There will be tons more trades.
12. LET THE TRADES COME TO YOU
13. ONLY TAKE TRADES YOU UNDERSTAND
14. LET THE TRADES COME TO YOU
15. ONLY TAKE TRADES YOU UNDERSTAND
16. LET THE TRADES COME TO YOU

10/16/2014: Great Day of Trading Despite a Mistake... The Debate That Raged Within

I am thrilled to be able to say I was up 56.4 pips today (Thursday)!  As someone who has struggled mightily with my trading, I now feel that I am starting to turn the corner and become a consistent, disciplined, and profitable trader.  It feels GREAT to have made my goal for the week.  

I took three trades today (Thursday morning New York session).  All were to the short side.  I took a +19.7, a +6.1, and a +30.6.  I could talk for ages about all three of these trades, but this post will focus on the first trade of the morning.

I had tried to trade the Aussie session from around 6:30 - 9:00 on Wednesday night and it was flat as a table (by GBP/AUD standards).  One of Wade's great pieces of advice about the Smart Money Profile (SMP) software is to pay close attention to where the market is at in the volume curve.  Usually the market is pretty wide awake during that Aussie session.  However, while I was watching, the volume on the hour stayed almost exclusively dark blue.... ice cold.  This really helped me stay out of the market.  Sure there were some pips to be had as the market rolled back and forth in a 30 pip range, but I stayed true to my trading plan, exercised some discipline and stayed out of the market.

This morning I got online at around 5:05 am pacific time.  The first thing out of my mouth was, "Ohhh Nooo!"  Why?  I saw the market had run up over 200 pips!  I was ticked off.  On Wednesday morning I had seen an excellent entry, but didn't pull the trigger on a trade that would have paid at least 50 pips.  On Wednesday evening, there was nothing to trade.  Now I come in on Thursday morning and the market has already made it's move?  What??

I realized had a decision to make.  Was I going to be an idiot and stay upset, or was I going to exhibit some emotional intelligence and get ready for the next move?  Thankfully I chose the latter.  I pulled out Wade's awesome Trading Questions and started evaluating the market.  Here's what I noticed (see screen shot below):

1. As the market continued to run up, price on the buy side went above 1.8400 to open up a bunch of retail trader longs.  The market makers then snapped it short by about 18 pips to stop out all the longs that opened up at the double zeros.  Then they took the sell side up to about 1.8408 to open up a bunch of longs again.  Then the market makers snapped the market short all the way down to 1.8357.  If the 18 pip stop taking didn't get you, the 51 pip smash definitely knocked you out.
2. At this point, my intuition told me that I should be looking for a retracement so I could get in short.  I was conflicted because the market had pushed up for several hours and I felt like I was trading against the overall trend.  However, I trusted my instinct and looked to see if we would get a retracement back close to the market maker activity dot from 5:45 at 1.8389.  I wasn't sure if price would go there, or go all the way back up to the blue liquidity line at 1.8402.
3. Price hit 1.83988 on the 6:20 candle and turned - basically right at the average price.  However, because I wasn't sure where price was going to turn, I was nervous to get in right away when price started to turn down off the average price dot.  

• I finally got in going short at 1.8380 - not great entry, but not terrible.  It was pins and needles for the first 7 minutes because price actually went back up.  It got as high as 1.8391.  However, because price had not really cleared the average price dot, I did not have any confirmation that I was wrong in the trade.  I am proud to say I did not allow the fact that I was uncomfortable with price get me out when the overall story had not yet changed.  After a few white knuckle minutes, price pushed down nicely for me and quickly reached 1.8350.  
• As so often happens around power numbers, price then backed off.  This is where the debate started raging in my head.  Once we hit the power number, things seemed to be happening at warp speed.  Although not terrible, I did not exhibit the best decision making here.  Here were my options as I saw them:

• Option A: Move my stop so that if price backs all the way up to 1.8380, I get out with a zero.  In actuality, this was my original trading plan and I had already moved my stop to 1.8380.  I had no risk of losing anything of significance and the potential upside to staying in the trade was huge.  My target when I got in the trade was the yellow liquidity line all the way down at 1.8280 - so I had a legitimate shot at a 100 pip trade!  Obviously the market is going to breathe during a 100+ pip run, so the fact that it took a breath at the power number was not a surprise.  If I'm ever going to learn to pull 50's, 75's, and even 100+ pip trades, I have to learn to stay in the trade and be willing to take the chance that the trade doesn't pay me at all.
• Option B:  Get out right when price started to hesitate after hitting 1.8350 and book 30 pips.  There certainly is nothing wrong with booking 30 pips!  My goal for the week was 35-50 pips and, after a slow week, I could have reached the low end of my goal with that one trade.
• Option C:  Options A and B were both pretty good.  Unfortunately, I went with option C:  Let the market breathe back and once the price action makes me uncomfortable, allow the market makers to bully me out of the trade.  Yes, this is the exact behavior I managed to avoid at the start of the trade.  
• Now, don't get me wrong, I was pretty happy with my 19.7 pips.  However, it turned out to be dumb because the market only breathed back about 1 more pip before it took off again (doff of the cap to the market makers for their skill at getting people out of trades).  
• Now you may say that hindsight is always 20/10 in the market and you'd be right.  The real reason it was dumb was because I gave up the upside AND gave back 10 pips for no reason.  If I'm not going to have the stomach to stay in the trade, then as soon as price starts stalling, especially around a power number or another sticky point like average price, then I should just get out of the trade.

So, other than sheer panic, why did I actually get out?  Here's what I was thinking in the moment.  I knew that when the market makers tapped 1.8350, there was a chance the market could breathe back significantly.  Knowing that the target for the trade was over 100 pips short from the start of the move, I felt there was a good chance the market might breathe back much more than 10 pips.   I thought it very possibly could breathe all the way back to 1.8375.  

Now, remember, my entry was 1.8380.  If price did retrace back to 1.8375, there was a great chance it could stop me out and I really didn't want to end up with a zero or 5 pips.  Thanks to both Shane and Wade's teachings, I am constantly asking myself, "At what price will I know that I was wrong about the trade?"  In this situation, I would not have confirmation about being wrong until price would have gone north of the original average price of 1.8389.  This means I would have been forced to have my stop up over 1.8390 in order to truly know that I was wrong about the move.  There was no way I was willing to see a +30 in the trade and take a negative 10-15 pips.  

So in my mind, it didn't make sense to risk letting the trade back up to 1.8375 because I wouldn't even know that I was wrong yet.  I also wasn't about to set my stop up over 1.8390 and take a big negative.  As I look back now, this tells me that the best option for that trade would have been to take the 30 pips.  Now, if I would have had truly pristine entry up around 1.8388, then I would have had the ability to let it breathe back to find out if I was wrong without taking more than a 5 pip negative. 

I hope and expect it will soon be a common situation where I am up a significant amount of pips and then have to decide whether to stay in a trade or get out.  Right now, it's tough to imagine being up 20-40 pips and being OK with giving it all back.  As such, I believe I may err on the side of caution and book those profits (hopefully without giving back 10+ like today).  While I definitely want to pull bigger trades, I am also highly fearful of losing those pips because it is not yet commonplace for me to be up 30+ pips in a trade.   As I gain more experience with SMP, I believe I will start encountering this situation more frequently.  As such, I hope over time it will become easier to stay in the trade because I will have the confidence that I will be up 30 again soon.  

Well, it sure is awesome to have made my goal, made 56 pips, AND learned a valuable lesson all in one morning session.  What a great day!  I'm planning to watch the market tomorrow, but I'm not pulling up my rate indicator.  Heck, if I'm tired enough, I might just sleep in like a wild man until 6am (welcome to the west coast student trader's lifestyle!).  On a serious note, I hope your trading is going well.  If you are struggling, please reach out to one of the instructors.  These guys know their stuff, but they can only help you if you are open and honest with them.   Also, please feel free to connect with me any time at pipaddict73@gmail.com.

All the best!

10/8/14: PM Session, Pulled the Trigger... but Made a Very Costly Error in Execution.... Another Lesson to Learn

There was extremely high news this afternoon at 5:30 pacific time when the Aussie unemployment figures came out for the month.  I wasn't sure if I'd find something to trade, but I sure did!

Take a look at the 5 Minute Chart.  The first thing to notice is that in the roughly 45 minutes preceding the news, the market makers created a long belief.  In fact, they took price just north of 1.8300 to open up what had to be a ton of long trades sitting at the double zeros.  Their next move was to challenge that belief.  Although it doesn't look like much on the chart, in the last 6-8 minutes before the news, they actually moved the market down by 17 pips.  So, very subtly, they opened up a ton of trades and also stopped out a ton of those traders out with a nice little liquidity swap.

Then at 5:30, it was time for the fireworks!  With absolutely no fake short, the market spiked up 71 pips within the first 2 or 3 minutes of the 5 Minute Candle (maybe even quicker).  This was very difficult to interpret.  Except for one thing.  Take a look at the Hour Chart and notice that the amazing SMP software had thrown up both a dot, and more importantly, a blue buy-liquidity line.  Incredibly, during this wild push up, SMP's brand new liquidity line was spot on.  In fact, price only crossed the line by 4 pips before price started pushing down.

I was still a little unsure about what was going on, but price fell pretty far short.  It came back up and was pretty whippy - all during that first 5 Minute Candle.  I remember looking at the clock and laughing because it was only 5:32 - let me tell you, the adrenaline was flowing!  After a little while, I realized that the since price wasn't pushing back past the blue line, we had already received a pretty strong clue that the market might push extremely hard to the short side.  I was hoping it would breathe back and give me a decent entry.

Luckily, price did breathe back up and I finally got in a short trade at 1.8339. The trade never went against me and I was soon up roughly 15, maybe 20 pips.  I had some phenomenal potential profit targets as indicated by the arrows I have drawn that are pointing at the yellow liquidity lines.  I knew that if the market makers manipulated the market that hard, it was a great opportunity for a HUGE run.  For risk management,  I had moved my stop so that the worst thing that would happen was I would break even.  So far... great job Cy!  But then, at the first sign of adversity, I fell apart.

The market breathed back.  I got out of the market with an 8.8 pip trade.  I have to tip my hat to the market makers because they are damn good at scaring woosy little traders like me. The amazing thing about this is that I literally got out at the exact very tip top of the breath.  How exact?  Within 0.1 pips.  Yes, if I would have had one tenth of a pip more guts, I would have pulled at least a 60 pip trade... in 15 minutes.  I honestly don't really fell like I pulled an 8.8, I feel like I left 50-110 pips on the table.  

The Trade Exit section of Wade's Trading Questions asks, "Do I have a sound reason to get out, or am I just feeling uncomfortable due to the current price action?"  It also asks, "Am I exiting this trade based upon emotion or based upon a sound reason looking at the current chart content?"  It is amply clear that I got out of the trade because I felt uncomfortable and WOOSED OUT!  

So once again, the SMP software showed us an amazing entry into a trade.  The lesson I must take from this is if I have excellent reason to believe there is a possibility to pull a monster trade and the worst thing that can happen is I'm going to take a zero... STAY IN THE TRADE!!!!!  I hope anyone reading this can learn the same lesson without making the same dumb mistake.  I must say I am glad to be reading the software reasonably well, but I clearly need to work on my execution.

As always, I'd love to hear your comments.  You can comment on the blog, or reach me at pipaddict73@gmail.com.

10/8/14: Arrgh, Missed My Entry On a 40 Pip Trade... Lesson Learned

Well, I sure blew it this morning  The one good thing about the morning session is that I read the market correctly.  The bad thing was I tried to be too exact with my entry.  I think anyone trading SMP can benefit from reading today's post in order to avoid making the same mistake.  In fact anyone trading the WealthSmart suite can apply the same concept to a pullback getting close to trend break.  Here's what happened...

We started watching the market on the Smart Money Profile (SMP) Webinar at 6:00 am (as represented by the purple line on both the Hour and the 5 Minute charts).  As you can see from the hour, we were clearly only looking for long trades.  When the market pushed short and then showed us the green dot followed by the yellow sell liquidity line (shown by the arrow on the 5 Minute), I was looking for the classic 1,2,3 market maker move of creating belief to the long side, challenge of that belief, and then the real move in the original direction.

In the screen capture below, you can see that all three of the phases happened very quickly (please forgive my rudimentary numbering).  This should have been a really easy trade for me to get into.  1: Price pushed up to create the long belief, 2: it snapped short exactly to the yellow liquidity line, and then 3: BOOM! It took off long.   

My problem was that I was looking for price to snap short about 5 pips below the yellow liquidity line before I was going to enter.  As you can see, price never went much more than a pip (if that) below the line.  Now, there is nothing wrong with waiting to see if price goes a little further through the liquidity line in order to get the best entry possible.  However, my real mistake was that as soon as it started to go my way, I should have recognized that my entry was right then and there.  Instead, I kept waiting to see it back up again and go 5 pips below the line.   

By the time I finally admitted to myself that I was wrong, I was waaaay late to the party. I foolishly jumped in super late.  At that point, I had no tolerance for any type of a breath back, so once I saw my stupid little +3, I decided to take my profit.

So, the good news is that I did read the market correctly.  The bad news is that despite seeing the market almost perfectly, I failed to see that it was going my way and didn't get out of my own way fast enough to pull the trigger.  As LaCurtis and Ira have preached many times, you don't want to get married to a trade if it's going against you.  In this case, I shouldn't have been married to a certain spot in a pull back just because I thought it was going there.  The trade showed that it had turned in my desired direction and I absolutely should have entered.  As Wade likes to say, it's not my business, it's the market makers' business - what a great reminder of this fact!   I strive to learn from these mistakes and continue to do better moving forward.

As always, comments are appreciated and I can also be reached at pipaddict73@gmail.com.  Have a great day out there!

A Challenging Weekend... Emotional Intelligence Crucial Now... Goal for the Week

I'm going to keep this post very quick and to the point.  I did some extremely dumb things this weekend.  I am sorely disappointed in my actions and especially angry that I let down the person closest to me in this world.  I'm not going to get into specifics, but let's just say I had a vicious hangover yesterday and found out out that I both said and did some extremely hurtful things (for the record, there was no physical violence - just mass levels of stupidity).  My actions represent the exact opposite types of behaviors from who I strive to be and how I want to act.  So... where do I go from here?

Well, I am telling myself that it's not how many times you get knocked down (or knock myself down as the case may be), but how many times you get up.  So, rather than get up and jump right into trading this morning, I took the time to watch a new training video that Wade created on liquidity lines.  I think this was very important because I needed to get back in sync with trading and positive behaviors.  Since my thoughts are still drifting back to my actions from the weekend, it's difficult to have the laser focus needed to properly analyze the market in order to have a chance of pulling positive trades.  Anyone who has been at the institute for any length of time knows the importance we place on exhibiting emotional intelligence in our trading (and our daily lives).  While I am far from proud of my actions on Saturday night, I am at least glad to say that I am trying to bounce back in a positive manner.  I'm not going anywhere and the Forex market is not going anywhere, so there's no point in rushing back into the market when my focus is not where it needs to be.

There is high Aussie news tonight at 8:30pm PST, so I'm going to try and be here to possibly trade it.  I must have my mind right and be ready to behave intelligently if I'm going to gain positive pips tonight (and every trading session).  My mantra: I must only trade if and when I see something I understand.  I must not over-trade.  It would not surprise me if I don't trade during tonight's session, but we'll see how it goes.

By the way, my pip goal for the week is to be up 35-50 pips.

Thanks for reading.  Here's to hoping I bounce back quickly and effectively... and never make the same moronic mistakes again.

10/2/14: No Trades, Protecting my Pips... Commitment to Excellence

Coming into today, I was basically at my goal for the week.  The goal for this week was to be up 25 to 35 pips.  After yesterday, I was up 33.6 pips.  My debate coming for today and tomorrow was whether to continue trading.  The more conservative members of the Fx365i senior leadership would argue against trading and the more aggressive members would say to trade when you see good opportunity.  I told myself I would only trade if I saw something I felt extremely strongly about.

I did see a couple of trade set ups I felt good about today, but I chose to be conservative and did not trade.  This is proving to be both good and bad.  The good news is that I am still at my goal for the week.  As you may know, this is the first time in a month I have not been down dozens of pips, so this is a great thing!  So, what is the bad side of it?

The bad side is that I'm wondering if I'm still spinning from the severe emotional beatings I took over the past month (self-inflicted as they may have been).  If I'm seeing good setups, why am I not taking the trades?  On Tuesday, I didn't take a trade that set up perfectly and I regretted it.  On Wednesday, I took a similar trade and it paid me 22.9 pips.  The two trade setups I saw today both went very strongly in the direction I expected.  I could potentially have pulled around 80 pips on them.  So how do I continue to grow as a trader at this moment?

In order to keep my mind right and keep improving, my take on all of this is:

1. I am really happy with how I am seeing the market and beginning to understand the amazing new Smart Money Profile (SMP) software.
2. There is nothing wrong with being extremely conservative once I have reached my goal for the week.  If I was up 50 for the week, maybe then I would feel like I was playing with house money and could afford to take a potential 10-12 pip loss and still be very happy with the week.  However, if I took that loss now, I would not meet my target for the week.
3. I have decided I am absolutely not going to trade tomorrow.  I know it is going to be maddening if I see an easy entry and it runs for a monster trade, but we all know the GBP/AUD runs all the time and there will be more trades next week and beyond.  I will be watching closely in order to stay in tune with the market, but I will not have my rate indicator up.

Speaking of continuing to improve, I made the time last night to read Chapter 4 of The Forex Mindset, aka "The Book."  The commitment to excellence (no, not a Raiders reference) is such a phenomenal concept.  The habits we create on a daily basis and the small decisions to do the right thing on the little tiny stuff in our lives make a huge difference.  The chapter starts with quote by Aristotle.  I don't have it in front of me, but the gist is that you don't do the right thing because you have virtue, but rather you have virtue because you consistently do the right thing.  Continually striving for excellence and continual improvement, in all facets of our lives is not only a noble goal, but will also make us indefinitely better traders.

To everyone who is planning to trade non-farm payroll tomorrow, be careful.  It's a great day to lose a boatload of pips - especially if you start getting emotional or are trading a higher lot size than you are ready for.  Ask me how I know.  Good luck tomorrow and I can't wait to start trading again next week.

10/1/14: Improvement from Yesterday's Missed Opportunity... Up 22.9 Pips

If you happened to catch yesterday's post, you know I was frustrated because I saw a trade that I completely understood... and didn't pull the trigger.  The trade would have paid me close to 50 pips.  Well, I'm happy to say that I didn't make that same mistake again today.  More about that in a minute. 

First, let me tell you, I was in a pissy little mood this morning.  One of the great things about the Fx365i Institute is just the camaraderie that exists at the school.  Also, one of our room rules is to always be uptone.  So between simply showing up to class and being around like-minded traders, I slowly dragged myself into an emotional state where I was able to start analyzing the market.

Unfortunately, by the time we started today's SMP webinar, the market was in a pretty tight accumulation.  It had already moved up 135, down 90, and then back up 45 (hello market maker 45's!).  The market kept futzing around and I really couldn't form a strong directional bias.  

Head trader Wade Guth suggested that we were overall likely to be in a short market.  I more or less agreed with this, but I still didn't see any type of set up that I understood.  Then, all of a sudden, BOOM, it happened.  Unlike yesterday, I acted with conviction and took advantage of another great setup that was shown by the SMP software.  Let's walk through what I saw on this trade.

Classic maniuplation.  Short belief created.  Hardcore news manipulation spike with quick rotation going back short.

If you look at the hour chart, you can see that we were really ranging pretty tightly back and forth.  However, on the 5 minute chart, look at the candle just to the left of the the candles where I drew the yellow circle.  Notice how that was roughly the fifth 5 minute candle in a row that was going short.  Also, notice how it went just a little bit lower than the previous low (as shown by the dotted horizontal line).  When price did not continue to push down, I was very suspicious of what was going on.  The market makers had enticed the masses to go short.

Then, as you can see by the next candle, price shot up.  This happened right at the very end of the candle.  Notice how the blue buy-liquidity line had formed on the SMP software (man this software is awesome!).  As soon as price started dropping on the orange candle, it became apparent to me that we had just witnessed absolutely classic manipulation.  I got in going short just a couple of pips after price crossed back down below the blue line.  I had low risk on this trade because if price would have suddenly backed up above the blue line, I would have dumped the trade.

I did experience a pretty good amount of slippage as I only got in at about 1.8597.  However, the trade continued to go strong my way.  There was debate in the room about whether or not I should stay in the trade when I was up about 15-18 pips in the trade.  I was tempted to get out, but figured I had a good chance of price continuing to push down.  I moved my stop down so that even if it suddenly reversed, I would have got out with a small positive.  If this would have been "the move," I could have potentially seen something close to a triple digit trade.

Fortunately, price pushed down and I saw about a +25 in the trade.  When it stalled again, I no longer had as much confidence that it was going to continue to push down.  I also realized I was basically at my goal for the week.  The market backed up just a touch and I got out with a +22.9.  I'm very happy with that result.

So my next debate is to decide whether or not I should trade the rest of the week.  The more conservative members of Fx365i's leadership group would tell me not to trade the rest of the week because I'm at my goal.  The more aggressive thinkers would say that I'm seeing the market well and to take advantage.  So what am I planning to do?  I believe I may trade again this week, but only if I see something I think I really understand and STRONGLY believe in.  European rate decision and Non-Farm payroll are coming up the next two days and I am damn well determined not to give the market makers my pips back.

Thanks for the support.  Let me know what you think of this trade and how your trading is going.  You can comment on the post or email me at pipaddict73@gmail.com.

9.30.14 - A Missed Opportunity

There was a great trade on the Smart Money Profile (SMP) software today.  I absolutely saw it and didn't take it. I'm not exactly sure why, but more than anything else, I basically didn't have the courage to click in the trade.  Here was the beautiful setup the software gave us:

Notice the yellow circle I have drawn on the 5 minute chart.  As the market was moving up slowly for the previous hour, I started feeling like the market makers were creating belief and were likely to snap the market back short.  At the time, I was looking for price to hit the blue buy-liquidity line at 1.8605.

However, SMP then added the green accumulation dot and gave us a new blue liquidity line where I drew the yellow circle.  I immediately saw this as a great entry to go short.  Why didn't I get in?  I go back to something QuickStart instructor LaCurtis says over and over, "You're afraid to take a negative."  This was a poor mistake on my part.  This was a very low risk entry.  Wade Guth, head trader at Fx365i even called out that this could be a spot to take the market short.  However, at that point, I felt like I had missed my entry and didn't want to chase the market short.

SMP showed us an amazing trade and gave us beautiful entry.  Several people in our class pulled 20-40 pips out of the trade.  I actually saw the trade very early and SHOULD have pulled a 40+ pip trade.  I'm excited that I saw the trade and read it correctly, but I'm very disappointed in my lack of courage to pull the trigger.  The trade gave me excellent risk management and an excellent profit target and the software showed us the entry.  You literally can't ask for anything else.

Could woulda shoulda doesn't cut it.  My thought to myself for today is when I see something I understand and there is opportunity for a good profit, I MUST take those trades.  It's idiotic to not take a trade like today's excellent setup.  The thing that's most important for me now is to not get stupid and try and make up for it by getting in on too many trades, or taking worse trades that don't have low risk.  The market will be here tomorrow and good trades will present themselves again.

How about you?  How was your trading today?

9/29/14: Up 10 Pips Today! ---> Busting the Slump

I'm happy to report I am actually UP 10+ Pips for the day on two trades!  Not only am I sick of the slump, but I'm getting pretty sick of talking and writing about it, so hopefully I won't have to for much longer.  However, it doesn't pay to be in denial (ask me how I know, Good Lord ask me how I know) and I promised that I would share what steps I'm taking to make the turn to become a proficient, disciplined and profitable trader.
  
It started two weeks ago today when we had our last student council meeting at Fx365i.  I was there a few minutes early along with a couple of other student council members.  I noticed the "Always" poster in the room.  The Always poster is pretty much the first thing that we are shown at Fx365i.  I had actually seen it hanging in the institute before I even signed up.  

As I was reading the poster about these basic tenets of how to become a solid trader, I realized I had not been following many of the guiding principles.  Remember, this is called the ALWAYS poster.  For me it was more like the once in while or not at all poster.  We were all quiet in the room when instructor (and major league pip-collector) Ira Barnes said, "Well someone say something."  So I piped up, "Man, I've got to do a way better job of this following this Always poster."  Ira, who is one of the most supportive / positive people I know, simply replied, "Yeah, Trading 101."  He probably had no idea, but his slightly gruff tone at that moment was exactly the kick in the ass I needed to realize what a bad student I have been.  The leadership meeting was about to begin, but that was the moment I realized I needed to make some serious changes.

Change #1: Starting This Trading Blog
I strongly believe in the power of writing about your thoughts, but I realized I had not been keeping great notes.  Even before I deleted my entire trading log out of sheer frustration, the only comments I was writing out were discussing the specifics of my trades.  I wasn't taking notes when the instructors would explain things in class, I wasn't keeping a trading journal, I wasn't taking notes when we would discuss chapters from The Forex Mindset... nothing.  Basically, all I was doing was looking for trades.  Well guess what, you can't go look for trades, you have to let trades come to you.  And, as the Always Poster says, you have to ALWAYS continue to educate yourself on how the market works.  Looking back, it's no surprise that my trading was terrible. So, to anyone who is reading this, I thank you from the bottom of my heart.  My hope is that you will be able to avoid making the same mistakes I make - while mirroring the behaviors that bring me success.

Change #2: Letting My Support System Help Me
During my struggles, I was not talking to anyone about how poorly my trading was going.  I tried my best to stay upbeat, but let me tell you, even though I might have left class most days with a friendly "See you tomorrow," when I would get in my car, more often than not I would let out a wicked scream of frustration and drop a few f-bombs for good measure.  If you don't think trading can become a highly emotional situation, you are sorely mistaken.  Ask me how I know.

Finally, after I started the blog, one of the consultants at the school talked to me about what I had written.  Rather than clamming up or saying "Don't worry about me, I'll be fine," I opened up and had an honest conversation about what was going on.  Maybe more importantly, I actually listened to what I was being told.  This person's support has been unwavering since day one.  In case you are reading this, you know who you are and I can't thank you enough.

In a previous post, I mentioned that I have been struggling at my "day job" also.  I took the same approach and sought out help again.  I pulled my manager aside and said I was disappointed with my performance.  I told him I didn't want him to think I was screwing off or not caring.  I explained how my trading struggles have been causing me major stress and despite my best efforts, I sometimes find myself staring blankly at my computer screens.  Once again, this person was incredibly supportive.  He gave me some suggestions and a little pep talk.  I feel much better about how I'm going to perform at work moving forwards as well.  I realize how blessed I am to have a boss like this and it inspires me to continue to do better because I don't want to disappoint him.

Change #3: Being More Determined
I really try not to be that pompous guy who everyone hates.  However, I think I went too far in trying to be Mr Nice Guy.  It sucks to have to say this, but I've been soft.  Softer than a jelly donut dammit.  

Simply put, I have told myself I need to compete harder in every facet of my life.  Compete harder to be a better trader, compete harder to lose the 15-18 pounds I want to lose, compete harder at work, compete harder with myself to be a better husband, compete harder with myself and be disciplined in every facet of my life.  

I have hardly played any competitive sports lately, but I'm going to try and find something to get back into (probably playing tennis) and I'm going to fight like hell to win.  The last time I played a set of tennis, I competed a little, and I did win, but I remember feeling like my opponent wanted it more than me.  I can't have that.  I'm determined to push myself harder.  WIN!

Now, it's an interesting thing to try and push yourself harder in trading because unlike other facets of your life, it doesn't just mean, Go, Go Go.  However, writing the blog, taking notes, reading more, paying more attention when I read, being a more active listener, and being extremely disciplined in letting trades come to me (and in risk management) are things I must do in order to realize my dreams of becoming a highly profitable trader.

I see now I have a chance to put the slump squarely in the my rear view mirror and start WINNING!  I'm looking forward to sharing my journey with everyone as I push forward.

I hope you enjoy reading, I'd love to hear your comments about your own trading.

Here is a screenshot of my two WINNING trades in the Smart Money Profile software:

-Cy

9/26/14: The Slump Takes a Breath; Work To Be Done

Well, the plan for this post was to talk about the steps I’m taking to break out of the slump, but today’s trading was incredibly interesting and provided some great lessons, so I thought I’d share about that instead.

First, the good: 

1.      I read the market beautifully today.  I thought it would move up to about 1.8575 and then crash hard.  That’s exactly what it did!  I’m very happy with that.

2.      After starting the day down over 35 pips on my first two trades, I actually took several winning trades today and was positive for the day a couple of times.

Now the bad:

1.      If you’re paying close attention, you probably realize that the good in #2 also represents something bad.  I took close to 15 trade today.  I sort of justify it because I tell myself I’m just learning on the new Smart Money Profile (SMP)software, but at the same time, I KNOW I MUST START SETTING EXCELLENT TRADING HABITS.  Taking 15 trades in a day is NOT a good trading habit.

2.      First of all, when the market didn’t move initially when the GDP # was released, I decided my forecast of a strong push up followed by a crash down was wrong.  I abandoned my forecast and went short.  Then, when it started to break long, I chased it and it took a fat breath back against me.  This is like writing a recurring theme on how NOT to trade.

3.      Then, when the market followed my forecast and pushed up to 1.8580 and started to turn, I got decent entry (not terrific by any means, but reasonably good) at 1.8570.  Now, with the SMP system, we are target trading.  Based on that, I should have been trading to the yellow liquidity line at 1.8526.  Obviously the market is extremely likely to take some breaths inside a move going from 1.8570 to 1.8526.  The chart below shows 5 minute candles.  So in about 15 minutes, I could have collected 45 pips if I would have just had the guts to stay in the trade.

Sadly, instead of just staying in the trade like I’m supposed to, I got scared off like a little baby when the market took a little breath and got out at 1.8562.  Now, given the state of my uber-slump, it is understandable why I took a profit.  I hadn’t taken a profitable trade in weeks, so it was great to see something.  However, this is NOT the style of trading we are looking for on this platform.  At the time, I took the profit, I thought “Good job, I finally took a positive.”  In reality, I had forecast the market perfectly, entered the trade nicely, but then emotionally fell apart when it was time to execute my trading plan.  Damn.

I made this mistake a number of times as I kept catching little bits and pieces of the short market.  The worst part of what I was doing was taking a positive trade and then not even waiting for a significant breath back before getting in again.  In other words, I was giving up my better entry points for worse ones after only capturing 5-8 pips – and then getting back in and paying a 3.3 pip commission.  This is ABSOLUTE STUPIDITY.  If I’m going to target trade, then I need to stay in the trade and execute my trading plan.  If I do decide to get out, I MUST wait for a breath back before trying to enter again.  This is really crucial.  Basic.  Simple.  Critical. But somehow I didn’t do it today.

Now, one thing I’m concerned about is not staying married to a trading plan when it’s going against me.  This will be something I have to learn to balance.  When do you immediately realize you were wrong and actually take the other side of the trade and when do you wait and re-evaluate.  I’ve seen Shane flip the switch when he realize he was wrong and go from taking a -7 in a short to suddenly taking a +25 or more in a long.  Maybe I’m just not ready to do that yet.  Maybe it’s better if I just wait if I realize things aren’t going according to plan.  I suppose it all depends on whether or not I really understand what I’m starting to see.

I’d love to hear your thoughts about all of this.  Thanks for reading.  See you next time!

9/25/14: The Slump Lives… How did we get here?

Well, I must admit, writing the blog post has made me feel better.  I’m determined to compete harder at work and I know I’m going to come out of this slump and become a highly profitable and disciplined trader.  Prior to today’s trading session, I spoke with one of the consultants at the institute today and that talk had me feeling positive also. 

So what about the slump?  Sadly, the slump is still going strong.  Two trades today, both big losers.  However, for the first time in I can’t even remember, I actually saw a decent sized positive in one of the trades with a +11.  I typically am happy to take 10’s when I see them, but because we are learning on the new Smart Money platform, I wanted to let it ride and see if it would hit the target, which was about 65 pips away (that would be a nice way to break out of a slump!).  Needless to say, the market turned the other way and I took a huge loss on the trade.  However, I am not upset by any  of this.  I’m learning a new system and learned valuable lessons about the value of good entry, taking profits when they are available, and managing risk with the new Smart Money system.  I’ve lotted way down, so despite being down over 45 pips today, the dollar loss was extremely minimal.

Today’s topic is more about what put me in this monster spin cycle.  I have identified a few pretty easy to see things that have put me in the spin cycle:

1.      Trading The Wrong Lot Size  Prior to the slump, I was trading reasonably well.  Not great, but winning on far more trades than I was losing.  I wasn’t positive on the pips, because I was taking some big negatives, but I told myself “OK, I get this now.  All I have to do is limit the losses to 10 pips and under and I’ll be well into the positive.”  So I abandoned my plan to slowly and steadily move up the lot ladder and skipped about 5 levels on the lot ladder.  BIG MISTAKE!  By the way, I have to say that Fx365i has warned against making this stupid move about a million times, but I was ready to start going up that lot ladder and I was going to hit it! 

So, how many positive trades did I do at the higher lot size before the slump started?  Ten? Five? Three?  Ha – TRY ZERO!!  I kid you not.  I went from winning 70% of the time to ice cold.  Traders Beware: it is a HUGE MISTAKE to lot up more quickly than you are ready for.  Please, I beg of you, trust me on this.  I spoke to another student today who did the same thing with the exact same results.  Actually this trader skipped about 10 levels on the lot ladder and lost money even faster than I did.  Save yourself hundreds of dollars by going slowly and steadily up the lot ladder.  As the school has said a thousand times, the Forex market isn’t going anywhere, so take your time… it’s in your best interests.

2.      Impatience and an Absolute Lack of Discipline  This is where it gets ugly.  I mean really ugly.  As anyone who has been at the institute knows, anything over 2 trades in a day probably means you are overtrading.  With very few exceptions, taking five trades in a day is pretty ridiculous and a recipe for a terrible day.  However, once I took a couple of quick losses at the higher lot size, what happened?  Read on for the horror….

SO, like I said, I had taken a few losses at the higher lot size.  I was frustrated, but still felt like my trading was going well and I just had a few trades go against me.  I was determined not to let that affect me.  Later that week, we had major news.  I was excited.  I have enough experience to where I know not to trade too early on high news.  I know it’s way too whippy and I have learned to stay out until the initial craziness is over.  I was ready for a HUGE day.  I couldn’t wait to write some monster numbers on the board for the class to see.

However, as LaCurtis has cautioned a gazillion times, there was a little voice on my shoulder said I better go get those pips back that I had lost earlier in the week.  So the news hits.  It starts whipping around like crazy and I stayed out for about all of about, oh… maybe 90 seconds.  Then someone inside my head (who I don’t recognize) said, “Screw it, I’m going for it.  I think I know what’s going to happen, maybe I’ll hit one out of the park.  Even if I don’t, it’s not biggie, I’ll wait for it to calm down and I’ll be able to recover.”  Well, of course, I got stopped out quickly on my first trade.  OK, so no biggie right?  Just wait for it to calm down and then take some smarter trades.

 

So what did I do? I said, “Well that was silly, I only ran a 12 pip stop on high news.  Let’s at least give ourselves a chance to get this one right.”  I moved my stop to 20 pips, waited for about 5 whole minutes this time, and blatantly and knowingly chased a trade.  You literally cannot be much more stupid.  Of course, the trade snapped hard against me and stopped me out within a matter of seconds.  Oh, about not being able to be much more stupid?  WRONG!  The horror is about to get serious.

Over the next few hours I took over 20 trades.  I’m literally ashamed to type it out even weeks later.  I won on a few and lost on more.  Most of the losses were bigger than the wins.  I left the school mad as hell at myself.  While driving to work, I continued to get into trade after trade.  Realize, these trades are being placed on my cell while driving in my car on the freeway.  Beyond the obvious terrible behavior of interacting with my phone that much on the freeway, do you really think I was clearly analyzing trade setups?  There are no indicators on the phone.  Oh, there’s also no stop loss on the phone, so I’m constantly watching the screen and clicking in and out of losing trade after losing trade.  Oh, by the way, I kept trading on my phone during my work day.  By the time the day was done, I had taken 30 trades.  30.  Freakin.  Trades. 

The good news was that there was more big news coming out the next day.  I of course gave myself a good talking to that night and told myself I was going to take it much easier and not make the same incredibly dumb mistakes.  I was right.  I ‘only’ took 20 trades that day. 

Since then, I calmed the trading way down.  No more double-digit trading days.  Well, there was one a couple of days later, but none in the last few weeks.  The most trades I’ve done in a day are 4 or 5.  Most days I’ve been doing anywhere from 0 – 2 trades.   However, the damage was already done.  My confidence was smashed to a pulp.  I had put myself so unbelievably out of sync with the market, I’m still trying to recover weeks later. 

I believe I’m going to pull out of it soon.  I’m practicing much better habits and have rededicated myself to learning my craft.  Fellow traders, especially those of you who trade with the institute: Don’t put yourself through this vicious cycle.  It’s painful and it’s expensive.  If you have taken more than a few losing trades, step away and pull a fellow trader aside.  If you’re an online trader, call your mentor, call LaCurtis, call someone who can help you step away from the screen and JUST STOP TRADING.  Believe me, if you don’t do it and you keep trading, you’re going to regret it and you will endure your own Horror.

3.      Although my astoundingly bad behavior from a few weeks ago was undoubtedly the crux of this mind-numbing slump, another contributing factor has also been the fact that I have been learning some brand new information.  In particular, the concept of average price and how it affects the market was recently unrolled to the student at Fx365i.  The concepts are great and our instructors have used the new concepts to pull a great many large positive trades.

However, just like lotting up too quickly and just like being far too impatient, I wanted to use this information too quickly.  As I was just starting to understand some of the basic concepts of average price and how the market reacts to these accumulation points, I tried to make them the backbone of my trading methodology.  Instead of using the information as clues to help with momentum trading on the Wealth Smart suite, I basically forgot all about all my principles on how to trade the Wealth Smart indicators.  This was yet another HUGE mistake.  My risk management and entry points went right out the window.  Not coincidentally, so did my positive trades. Fellow traders, when you learn something new, slowly incorporate it into your trading methodology, but remember that your basic principles must still be absolutely adhered to.  Fail to do so and you can forget about seeing positive trades.

4.      The last cause of this slump that I have identified is pride/ego and embarrassment.  I was too proud to go up to the board in class and write down my negative trades for everyone to see.  I let my ego stop me from walking up to my friend and lead instructor LaCurtis and say, “I need some help.  I’ve lost on 5 (7? 10? 12?) trades today.”  It took 3 weeks of losses before I finally blurted out in class, “I am the worst trader in the room.  I haven’t had a positive trade in weeks.”  I was so stupid, I even made sure my computer was on mute so no one would hear me clicking in and out of a trade every 5 minutes.

Fellow Fx365i traders, don’t do this to yourself.  The stress is puts on you is unbelievable.  The shame you feel is highly palpable and extremely powerful.  The toll on your trading account is significant.  You don’t have to let it get this bad.  If you are struggling, don’t be afraid to ask LaCurtis to analyze your trade.  Blurt something out in class.  If you’re not sure who to talk to and you feel like you’re starting to do something stupid, come and talk to me.  As you have read here, I have been there and done that.  As the famous saying around the institute goes… “Ask Me How I Know.”

Thanks to anyone who has read this.  I hope you found it helpful.  Hopefully you are saying to yourself, “Man, what an IDIOT!  I will NEVER EVER behave anything like that.”  Hopefully you are right and you never do these kinds of things.  However, please remember you can come to almost anyone at the institute from the instructors to the students if the need arises.

My next post will focus on some of the things I am doing to fight my way out of this hole I have dug myself into.  Thanks again for reading, see you next time!