PATIENCE is not only a Virtue, but is also a key element to trading success.Often times, trading rules are easier recite than to follow.  Sometimes we think to ourselves if we just follow our system rules, we will be successful.  However,  it is often harder to follow the rules than anybody thinks. Why is this?  The answer almost always comes down to the tendency for us traders to let emotions get in the way of logic.  Sounds simple right?  Again, eliminating or just reducing emotions from our trading decisions can be a big struggle for many of us.   How many times have we been in a positive trade with everything looking great and we get inpatient and “take our gain” early, out of fear, just to watch the trade develop into a huge profit “without” us?

Controlling our emotions is a process of educating ourselves and experience.

One of the things to work on which is key to controlling our trading is to work on PATIENCE.

If you miss a trade, traders must be PATIENT enough to let it go and wait until a new trade set-up occurs.

Once a trade is entered, a trader needs to have enough PATIENCE to allow time for the trade to develop and give it time to create the profits you expected. The age old adage that “you never go broke taking a profit” is maybe the worst piece of advice ever given. Taking small profits is one the surest way to ultimate loss I can think of, for small profits are never allowed to develop into enormous profits. The real money in trading is made from the one, two or three large trades that develop each year. You must develop the ability to patiently stay with winning trades to allow them to develop into that sort of trade.

The PATIENCE to give time for a trade to work is one of most important elements; give it time to insulate itself from random noise; give it time for others to see the merit of what you saw earlier than they.

PATIENCE is one of the most difficult things for a trader to develop.  Confidence in your system is important and will allow you to be more PATIENT once a trade had been put on.

The only time for a trader to be IMPATIENCE is when you are in a failed, losing trade. The best thing a trader can do once a trade has failed and is in a losing position is to close that trade as fast as possible to minimize the loss.

As you gain experience with your trading system, your confidence will grow and PATIENCE will become easier implement as one of the most important elements to our trading psychology

Today I want to continue our look at daily charts in the forex markets this week. Let’s start with the USD/CHF…

 

USD/CHF

Trend:  The current trend on the USDCHF seems to be moving to the downside.  It also has been moving back up towards the down trend line.

Resistance and Support:  As the price has been moving together the support and resistance has been closing in on each other.  Look for a break out of these areas as the triangle pattern has been forming.

 

AUD/USD

Trend:  Overall trend is up but beginning to show sideways movements.

Support:  The price is currently sitting on the support area created by several swing lows.

EURUSD

Trend:  The overall trend is currently moving up.

Support:  The price is sitting near the area support.  Watch for a move back up off of the upward moving trend line.

In the end you will want to take some time on a weekly basis to identify these areas of strong trend and support or resistance.  Knowing these areas can lead one to know how to trade the strategy or method they are using.  Keep it simple but take the time to know these important areas on the chart.

Today, we’re going to look at a few major currency pairs to identify the areas of importance in relationship to the Trend and Support/Resistance.  When trading any trading strategy you will want to know these two areas of importance.  With this understanding we can proceed with our strategy, whatever that may be.  When looking at a daily chart you will first draw the line to identify the trend.  You will then want to draw the major areas of support and resistance.  You will want to remember that you are drawing these as areas, not exact points.  You just need to know about where you may encounter some resistance or support of movements.

USDCAD

The first chart we will look at is the USDCAD.  The first thing you should recognize is the fact that the trend is in a definite down trend.  Of course we don’t know how long this will last but we do know the bears have been pushing this down for some time.

Trend:  Down with price up against trend line.

Resistance:  Price has pulled back up to the area of resistance on the chart.  It is also sitting near the area of longer term support as shown with the horizontal line.

 

USDJPY

Trend:  Although the trend is making lower highs, the lows seem to be stabilizing and causing the price action to take s slightly more sideways look.

Resistance:  The price is currently sitting near the area of the down trend line which seems to be acting as a resistance area.  Watch for a break of this area or a bounce back down to the support area.

I’ll be back shortly with more charts and more analysis, but use these candlestick charts and these evaluations to see if you can improve your trades.

 

 

 

Today I want to spend some time discussing the topic of trading what you see.  This might seem like an obvious thing but too often traders will being to ignore what they see and take trades off of what they think or feel is going to happen.  Trading off of this is often time referred to as “hope” trading.  When we start trading off of hope we are letting the market dictate what is going to happen and when we let the market dictate what happens we are generally not going to be pleased with the results. This is also true with trading systems. If you’re using a trading system (you’re using a trading system right?) you need to make sure it works off of fundamental and or technical analysis. This is key and will give you the peace of mind that your system is trading based of what it “see” and not what whoever created it “thinks.”

This can also lead us into the problem of avoiding what is really happening as opposed to what is actually happening.  When we are trading off of hope we will take the smallest thing as evidence that we should be in a trade, even if a majority of the evidence point us to the fact that we should be out of the trade.  Sometimes we will even search out someone else that agrees with our opinion so we feel justified in our decision to stay in or get into a trade.  This should be obvious to most of us but it can be an easy problem to fall into unless we are aware that it can happen.

In order to avoid situations like this we need to focus in on trading the evidence that is shown on the charts and avoid our feelings as to what may happen.  When we think about it, if we are trading what we think is going to happen we are very unlikely to develop a consistent way to trade.  This consistency is what we need to have in order to develop long term success.  This long term success comes by having a trading method that can be duplicated over and over again and is based off of a set of trading conditions that can be seen on the charts.

So, in order to avoid “hope” trading we need to focus in on trading the evidence on the chart.  Trading what we see, not what we think.  We need to ask ourselves if our decision has been based on what the chart is showing.  This is where having our method outlined can be helpful in making these decisions.  A simple way to stick with the evidence is to create yourself a check list that you can go through each time you are considering taking a trade.  This will force you to look at each part of your setup and the trading conditions in order to trade just the evidence.  This check list should be comprehensive in looking at all the conditions you have set up for your trading method.  Once you have this you can simply follow the checklist which will help you trade the evidence, not what you think or feel.

Take some time this week to outline your trading method in to a set of rules that you can check off as you look at your trades.  Keeping your emotions out of your trading will help you develop that consistency you need for long term success.

How serious are you about your trading?  To really be successful as a trader I believe that you must treat it just like it is a business.  Like any business there needs to be specific guidelines that are followed, rules that are complied with and possibly more important than anything there must be a great amount of discipline.  When running a business there are certain things that most business owners will do each day to prepare themselves for success.  This could be reviewing a prospect or client list, mapping out the day to accomplish a specific set of tasks or making sure that each person in the organization knows exactly what is expected of them to have a great and successful day.

A trading business is not much different than any other business; we need to review the markets that we are trading in, we need to review currently open positions to determine if any adjustments are necessary and we need to look for new business or in this case new trade setups.  Some companies provide specific products or services to their clients or to the general public buying products at the wholesale level and selling them at the retail level traders are simply acquiring financial assets at what they believe is the wholesale level and liquidating them at a later time at what they would consider the retail level.

Regardless of whether you are running a full time trading business trading for a living or you are running a part time trading business looking to supplement other income or looking to increase your net worth, the concept is the same.  When you are at work you work and when you are off work you don’t.  This is partially where the discipline comes in.  Since most trading is done over the internet it is very easy to get distracted reading email and going to different websites searching for different items but we really do need to stay focused when we are operating our trading business or it may turn into just a hobby.

I have noticed that some traders treat their trading business as a form of entertainment almost more like something to pass the time away like a hobby.  This is fine of course if that’s the level of participation they want to have or the amount of effort they are willing to put forth but I also notice that these are the traders that will typically lose on a regular basis and get discouraged and eventually leave the trading business.  Experiencing losses while trading is just part of trading, it is the part that we do not like but it is still something that we all experience.   If we don’t pay attention to our business we may experience many losses which can get very discouraging so a trader that is not really engaged in their trading business will probably lead to a trader that is going to lose more than they will win.  Of course this will not usually last too long and the trader will quit trading and eventually move on to some other form of entertainment.

If you are really serious about trading and look at it as a revenue source of some type do your best to keep your emotions out of your trading and be very dogmatic in your approach.  Regardless of whether you win or lose on any given trade don’t take it personal.  If you win it doesn’t mean that you’re a great person any more than if you lose it means you’re a bad person.  Many traders get very emotional about the trades that they make almost acting like they are life and death decisions.  Each trade is just a trade, it is a business decision, some work out well and some do not but regardless of the outcome if we follow our rules and are disciplined regardless of the outcome we must simply move on to the next trade.

Traders without proper exit procedures in place are really just gambling. It’s true that some gamblers come out winners occasionally however; the casinos are evidence enough that most are losers. The decision to get involved in trading should not be based on a desire to gamble. If you want to gamble, you will have a lot more fun going to Las Vegas.  If you want to quit gambling, you need to use risk management

Risk management is an essential but often overlooked element to successful trading. After all, a trader that has generated substantial profits over his or her lifetime can lose it all in just one or two bad trades if proper risk management is not used. Risk management basics include a good exit plan for our trades, with proper use of initial stop losses and profit target levels.
Planning your Exits
Successful traders are successful because they plan out the exit by setting stop-loss and take-profit points. Stop-loss and take profit points represent two key ways in which traders can plan your exits.

On the other hand, unsuccessful traders often enter a trade without having a good idea of at what points they will sell at a profit or a loss. Like gamblers on a lucky or unlucky streak, emotions begin to take over and dictate their trades. Losses often provoke people to hold on and hope to make their money back, while profits often entice traders to imprudently hold on for even more gains.

Initial Stop-Loss and Take-Profit Points
An initial stop-loss point, is the price at which a trader will close a position and take a loss on the trade. Often times, this happens when a trade does not go the way you had hoped. The initial stop loss point is designed to prevent the “it will come back” mentality and will limit losses before they get overwhelming. For example, if long in a stock and it breaks below a key support level, it is often a good time to close the position.
On the other side of the table, a take-profit point is the price at which a trader will sell a stock and take a profit on the trade. Often times, this is when there is limited additional upside given the risks. For example, if a stock is approaching key resistance level after a large move upwards, traders may want to sell before a period of consolidation takes place.

How to Effectively Set Initial Stop-Loss Points
Moving averages represent an effective way to set these key support and resistance levels, as they are easy to calculate and widely tracked by the market. Key moving averages include the 20, 50, 100 and 200-day averages, and are best set by applying them to a stock’s chart and determining whether the stock price has reacted to them in the past as either a support or resistance level.

Another way to determine stop-loss or take-profit levels is on support or resistance levels that can be drawn by connecting previous highs or lows that occurred on significant, above-average volume. Just like moving averages, the key is determining levels at which the price reacts to these support and resistance levels.

Traders Challenge:
Never place a trade before you determine your  initial stop loss and take profit levels.  Know in advance where you are going to “cut your losses,” if the trade goes against you and where you are willing to take a profit.  This will help you keep the “gambler” mentality out of your trading.

 

Hi everybody,

If any of you traders out there have every followed any of my teaching, been part of my forex coaching sessions, or used any of my stock indicator systems, then you know one of my main philosophies is:

YOU DON’T NEED TO BE CHAINED TO YOUR COMPUTER TO TRADE SUCCESSFULLY.

If you’re a day trader, and enjoy the thrill of watching every tick of the market, then that’s fine. I personally do that myself sometimes, but I’m a “trading nerd.” But again, I only do that sometimes.

You see, I’ve been trading a long time… over three decades. And I remember a time when I was younger; I would come home from work, and go straight to my den and pour over charts till the wee hours of the morning. And these were the days before computers so I was plotting all these things with real charts and a magnifying glass.

It was brutal and took a toll on my quality of life. Now that life lesson was a driving force behind what I do today.  So each course I develop, each student I coach, each piece of software I invent… I always have in the back of my mind: How will this make each trader’s life easier?

It’s one of the biggest myths out there that we traders need to be staring at computer screens until our eyes glaze over. It’s not needed. In fact, it might even be detrimental. Watching the ever-fluctuating markets can do a lot to someone’s psyche. So you see the market twitch up and down and what does that do? It becomes a huge temptation to over trade. Or a temptation to stay out of trade, or get into a trade that ultimately differs from where your trading plan and or trading methods or system tell you to be. So you see, staring at charts can be dangerous.

At the end of the day, you need to find a trading system that utilizes methods and tactics that fit within your trading plan. If you only have an hour to trade everyday, or heck, you only have 10 minutes, then that’s how your trading system should operate.

Enjoy your life. Take time to go golfing, fishing, spend extra time with your family… trading is fun, but so is living your life. With the right system, you can have both.

Good Trading!

In today’s article we are going to discuss the importance of and the use of stop losses.  In the most simple terms a stop loss is used to limit and control the amount you may lose in a given trade.  In order to place a stop loss you will need to be able to evaluate the charts in order to know where to properly place the stop loss.

Once you have determined where to place you stop loss, you will then be able to determine your lot size.  This, in conjunction with the amount you are willing to risk in each trade will help you properly control your risk in each trade.  One of the most important thing you will ever do in your trading is to properly control your risk.  So, the question you should be asking yourself is how do you know where to properly place your stop losses.  This can be a point of confusion to many new traders, so let’s take a look at some simple things you can do to help you better identify where the stops should be placed.

The first thing you need to be able to do is properly evaluate the chart you are currently trading.  As you look at the charts you will first identity the trend that is happening.  You can simply look at a Simple Moving Average or the highs and the lows to determine the trend.  The stop loss should be place below this trend if it is moving up and above it if the trend is moving down.  If you are using a moving average, you can use it to help identify the stop placement.  Take a look at this chart below to see how this might work.

The other thing you will want to identify is where the area of support or resistance is located.  If the trend is moving up you will want your stop loss below the support and if it is in a downtrend you will want it above resistance.  You can draw your support or resistance lines on the chart first, then look at where you might place the stop loss.  Take a look at the chart below to see how this might work.

So take some time to practice placing stop losses in the appropriate places.  One of the problems that new traders run into is that they place their stops too close and the get stopped out before the price has a chance to move in the direction they planned.  Using the trend or support and resistance you can have a better idea of where to properly place your stop losses.  This will also help you in better determining you proper position size when placing your forex trades.

Each week we need to take some time to analyze the chart of the instruments that we are trading.  Today we are going to analyze the charts for Gold and identify where we see the trends and where we see support and resistance.  A detailed evaluation is good to do on a weekly basis so we know the longer term direction and momentum that is happening for Gold.  This should be done for each instrument traded.

With the weekly chart we do not need to look at specifics but rather we need to look at the overall general movements and trends that are occurring.  We also need to look for longer term support and longer term resistance.  In the chart above you can see the trend that move up, then how it has since began to move sideways in between the areas of support and resistance.  You will also want to notice that the price is currently sitting at a long term resistance area.  With the price in this area we can expect it to begin to move down off the resistance area or break through it and go higher.

On the daily chart we can see the recent breakout of the resistance area where the price was forming a triangle pattern.  You can also see that after the breakout the price trended up strongly to where it is currently sitting.  By knowing what the weekly chart is doing we can know that the price is now sitting near the long term resistance area.  This would make us consider what type of trade we would be looking for.  With these shorter term charts you will look at the specifics a bit more in looking for trades.

You can also take this same process down to the shorter term charts and identify their trend and support or resistance.  You will want to do this for the time frames you are currently trading.  Understanding the trends and support/resistance areas are critical in your overall evaluation of the charts.

So as a trader you will want to spend some time each week looking at the longer term chart so you know where you may run into the price having some difficulty moving.  As the price reaches these areas of support and resistance we need to know how we will proceed in our trading.  By applying this information to our trading rules we can improve our overall performance.

In the end, the charts of Gold would currently make us consider the fact that even though the trend is moving up on the daily charts we need to be concerned that it is now running into a long term resistance area.  Knowing this should make us cautious as to taking long positions, at least until the resistance area is broken.  We would also want to consider a short if the price begins to move back down to support.

It seems as though many traders are interested in obtaining or creating a trading robot that implements their trading strategies or methodologies for them automatically without them having to do much work at all.  This sounds like a great idea; I would love nothing more than to have a trading robot making trades for me during trading hours in the stock market or 24 hours per day 5 day each week in the Forex market filling my accounts with cash however I have not found one that will do this for me.

I have looked into this over the years thinking, as I’m sure many traders have, how convenient and lucrative this would be.  The problem that I have encountered with this concept is not with the robots themselves or even with the methodology behind the method that the robot is using to determine when to enter and when to exit the market.  What I have found to be the problem is the market itself.

Computers can be programmed to create trading robots that can be designed to look for the same thing over and over again repeatedly checking the price action of the markets and whatever indicators, if any, are used as it is moving live to determine if the setup conditions are present for a trade setup to occur.   This is sometimes referred to in the Forex market as Forex automated trading or

Forex autopilot.  A trader with minimal programming experience can create scans that will do the same thing except for actually placing the trade orders.   There are many charting software packages available as well as broker’s trading platforms that can handle this type of task when programmed correctly.  The problem and the reason that robots generally speaking do not work well is the market not the robot.

I do not believe that there is a robot that will work well consistently over time because if there was and people were getting rich using it there would be a constant barrage of news stories about it, every trader and trader wannabe would have to have it, the creator would be on countless talk shows and news programs.  Since I do not see this happening around products that are currently on the market I have to believe that it simply does not exist.

I believe that the reason that robots do not work especially over a long period of time is because the market actually changes making what the robots are looking for ineffective at least for given chunks of time.  Most trading methods will work well in a specific or a particular type of market but unless it is a very dynamic method, which most robots will not have, there will be a point in time when a method will no longer work due to changing market conditions.  The market itself changes making the results of the robots trades very poor.

Personal experience tells me that this is the case because there have been many times when I come up with a great trading strategy or a trader that I know has come up with a great trading strategy that has a high degree of accuracy and works very well until the motion of the market changes and all of a sudden without warning it becomes less accurate.  That’s not to say that it won’t work at all but it does not work with the same level of success it has in the past.  This is when many traders will abandon their current method and begin to bounce around looking for another trading method or strategy.  Most traders that are using a robot that is no longer winning abandons the robot the only question at that point is what do they replace the robot with?