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

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.

10/1/14: 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?