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

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