The Forex mastery academy @Zw
Trading Plan
In other words: Don’t follow someone else’s trading advice blindly!
Just because someone may be doing well with their method, it doesn’t mean it will work for you.
We’re all in different situations in life, and we all have different market views, thought processes, risk tolerance levels, and market experience.
Have your own personalized trading plan and update it as you learn from the market.
With rock solid discipline, your trading could look like this.
Developing a Trading Plan and sticking to it are the two main ingredients of trading discipline.
A trading plan defines what is supposed to be done, why, when, and how. It covers your trader personality, personal expectations, risk management rules, and trading system(s).
When followed, a trading plan will help limit trading mistakes and minimize your losses.
After all, “If you fail to plan, then you’ve already planned to fail.”
A trading plan removes any bad decision making in the heat of the moment.
✅The Difference Between a Trading Plan and a Trading System
Before we continue, we have to quickly distinguish the difference between a trading plan and a trading system.
A trading system describes how you will enter and exit trades.
A trading system is PART of your trading plan but is just one of several important parts, i.e., analysis, executions, risk management, etc.
Since market conditions are always changing, a good trader will usually have two or more trading systems in his or her trading plan.
Trading systems will be covered more in-depth later on in the lesson, but we thought that it was important to point out the difference between the two upfront to avoid any confusion.
✅A trading plan will make trading simpler than it would be if you traded without one.
Think of when you use a GPS device.
You enter where you want to go. It then figures out where you currently are and then shows you how to get to where you want to go.
You’re able to constantly check on your GPS to see if you’re still on the right track.
When you make a wrong turn, it knows to make adjustments, and it points you back in the right direction.
A trading plan is your trading GPS. It will show you where you currently are as a trader and help you get to your destination: consistent profitability.
✅Traveling without a GPS wouldn’t be smart idea. You wouldn’t know how to get to your destination and it’s highly likely that you’ll drive around lost like a chicken with its head chopped off.
You’re probably thinking that one could use an ancient object called “maps” instead, but we have no clue what that is. Please don’t make such absurd suggestions again.
Trading without a trading plan would be the same thing as driving without a GPS–a bad idea.
You’re trying to get to this Promised Land called “Consistent Profits,” but since you have no way of knowing whether you’re headed in the right direction, you’ll most likely end up blowing out your account.
✅With a trading plan, you’re able to know if you’re headed in the right direction.
You’ll have a framework to measure your trading performance. And just like a GPS, you’re able to monitor this continually.
This allows you to trade with less emotion and stress.
✅Most importantly, if you suck at trading (and you certainly will in the beginning), you will know it is down to one of only two reasons: either there’s a problem in your trading plan or you are not sticking to your trading plan.
If you’re trading without a plan, it’s impossible to know what you’re doing right from wrong.
“If you fail to plan, then you’ve already planned to fail.”
Obviously, a trading plan doesn’t guarantee success, but a good plan that is followed will help you stay in the forex game longer than traders who don’t have a trading plan.
👉SURVIVAL is better than failure and it should be your first goal as a newbie trader.
Remember, 90% of new traders don’t make it. You want to be part of that special “10%” that does make it.
You’re probably thinking, “Ba humbug! Trading plan, schmading plan. I can be part of that 10% without a stinkin’ trading plan!”
It may be tempting to trade by the seat of your pants, but if you don’t develop clearly defined trading plans and be disciplined enough to follow them consistently, you’ll have much difficulty making consistent money as a trader.
🔥🔥Don’t take any chances. Have a trading plan.🔥🔥
Trading Discipline the Key to Consistent Profitability
Making an occasional winning trade, even when you throw your trading plan out the window, may provide a short-term pleasure, but entering trades haphazardly can adversely influence your ability to maintain discipline in the long term.
Trading is a marathon, not a sprint!hen you stop following your trading plan, you become rewarded for lacking discipline and you may start believing that abandoning a trading plan is no big deal.
An unjustified reward may increase your tendency to abandon trading plans in the future.
You may be prone to think “I was rewarded once, maybe I will be rewarded again. I’ll take a chance.”
But the positive outcomes of undisciplined trading are usually short-lived, and a lack of discipline ultimately produces long-term trading losses.
It’s important to distinguish justified wins from unjustified wins.
A justified win is when you create a very detailed trading plan and FOLLOW the plan.
✅A win that results from following a trading plan is justified and reinforces discipline.
An unjustified win occurs when you make a plan but don’t follow it or if you have no plan at all. You might be rewarded, but the outcome occurred by chance.
You might as well flip a coin or hang a printed copy of your charts on the wall and throw darts at it to help you make trading decisions.
The win is unjustified and can reinforce undisciplined trading.
Maintaining discipline is vital for consistent and profitable trading.
Trading is a matter of getting the law of averages to work in your favor.
You trade proven forex trading strategies, over and over, so that across a series of trades, the strategies work enough to produce an overall profit.
✅The winning player is the person who first develops the skill to make the shot consistently so that at every possible opportunity, the ball is likely to go through the basket.
They’ve developed the skill to learn how to shoot the ball the same way every single time. Consistency is crucial!
It’s the same for trading. One must trade consistently, following a specific trading plan on each and every single trade.
If you trade one approach this time, and a different approach at another time, your performance will more than likely be haphazard.
You have to allow the law of averages to work in your favor so that across a series of trades, you will make an overall profit.
If you follow the plan sometimes and abandon it at other times, you throw off the probabilities, and you will most likely end up losing overall.
✅With trading discipline comes profitability.
Don’t let unjustified wins interfere with your ability to maintain discipline.
Follow your own trading plan, and cement in the mindset that if you follow your plan, you will end up more profitable in the long run.
Find A Trading Style That Suits Your Personality
The foundation of your trading plan starts with your self-reflection because you will be the only one using it.Who you are as a trader will define what kind of method suits you.
Trading strategies, systems, and methods that aren’t compatible with your profile and personality will drastically lower your chances of success.While most traders want to immediately jump into creating or finding trading systems and strategies, they won’t know which ones match their personality and unique situation if they don’t spend some time on self-reflection first.
Before you think about clicking the Buy or Sell button on your trading platform, there are some questions you should ask yourself so that you can better form your trading plan.
While you’re at it, you should write down these answers.
What is Your Motivation to Be a Forex Trader?
👉Is it to become filthy rich? Is it for the thrill?
👉Is it because you want to do something challenging and exciting?
👉Is it because the girl you like trades currencies and you want to impress her?
✅It is important to know what your true motivation is, or whether you should even be trading at all.
Forex traders who aren’t serious or committed to the craft will be quickly eliminated by the market.
For example, seeking thrills and seeking consistent profits don’t go together.
You might enjoy the thrill of putting on a humungous “I’m betting the farm” position, but believe us, you won’t be smiling once your trade blows up in your face.
If thrills are what you seek, go to a casino, jump out of a plane or try driving an F1 racing car.
✅What have you determined to be your goal(s) for trading?
Set trading goals that will help you develop as a trader.
Be specific! - By making your goals specific and measurable, not only will you know what you really want, but you’ll be able to monitor your progress and see whether you are improving or not.
If they are not specific, you’re just wasting your time.
Your Risk Capital
Forex trading should only be done with risk capital.Risk capital is money that, if lost completely, would not have an overly harmful impact on you financially.
Risk capital is money that you can lose.
This is the kind of money that if you lost, you wouldn’t lose your home, car, spouse, limbs, electricity, etc.
Don’t risk what you can’t afford to lose!
If you’re playing with money that you need to pay the bills, it will have a huge negative impact on your ability to make objective trading decisions.
Imagine how stressed you’ll be while your trade is open knowing you might not be able to put on the food on the table if you get stopped out.
✅How Much Time Can You Dedicate To Forex Trading?
You need to seriously consider how much trading will affect your current lifestyle.
How much time each day/week/month (whichever is most appropriate) can you dedicate to the various requirements of forex trading and managing a trading system?
Your time availability should determine your trading style.
The shorter the timeframe you are trading, the more time you need in front of the charts.
If you’re a day trader, since you’re entering and exiting trades throughout the day, you need to be glued to the screen the whole time.
The longer the timeframe you trade, the less you have to watch the market. You can simply check your trade from time to time.
Because if you were a scalper, you’d probably missed a lot of entries and exits, and end up instead scalping your own head due to your many losses or missed winning opportunities.
You also need to dedicate time to developing AND tweaking your trading system.
Trading your system will require you to stare at charts looking for possible entries.
✅Once you’re in a trade, you then need to manage it.
After you exit, you need time to review your trade and look for ways to improve.
And then you need time to write everything you felt and did in your trading journal.
How much time you’ll need to accomplish all of this will depend on your trading system.
Naturally, your forex trading system needs to factor in how much time you can dedicate.
This is all assuming you only have ONE trading system.
You should repeat this process for every trading system you wish to trade.
Whatever “operating hours” you decide, just make sure you’re able to commit to it consistently.
✅Which Kind Of Returns Do You Expect To Make From Forex Trading?
I want to make some money! - anybody who’s interested in forex trading certainly has ambitions of raking in some dough.
rading involves risk, and we expect to be compensated for those risks.
There’s no doubt that every currency trader expects to make a profit.
The questions that you should ask yourself though are this:
What kind of returns do I expect to make? And how much risk am I willing to take to get these returns?
Your answer to these questions will play a huge role in determining what kind of trading style you will implement, what currency pairs and times you will trade, and most importantly, the risks involved in achieving your goals.
Let’s look at an example to help explain this better.
✅Traders will also have to take into consideration drawdowns.
A drawdown is normally calculated as the distance from the highest value of your account to the next lowest point. (We’ll explain this a little bit more in a later lesson. For now, pay attention in class!)
Each forex trader must decide how big of a drawdown he or she can accept in order to hit their profit target goals.
On the one hand, there are forex traders who are risk-averse and would rather have small drawdowns. The tradeoff is that this will also limit potential profits.
On the other hand, there are forex traders who are comfortable with large drawdowns, just as long as their system also yields huge returns.
✅You will also have to take into consideration how much time you can dedicate to trading.
If you can’t dedicate a significant amount of time working on your trading system, reading up on the financial markets and learning new trading techniques, recording/reviewing your trade journal, then we can guarantee you that you will have a difficult time hitting your goals.
If you can’t make this time commitment, you may have to readjust your expectations as to how much you can make your account grow.
In the end, just know that success depends on YOU.
Do you have the discipline to GRIND it out consistently to tweak your skills and gain the experience needed to navigate the markets?
If you don’t, then expect inconsistent returns, if any at all, over the long term.
✅What Is Your Daily Pre-Trading Routine?
Your forex trading routine should help you accomplish the following tasks:
👉Reviewing any open positions and making any necessary adjustments
👉Reviewing yesterday’s trades
👉Getting yourself “up to speed” on the market
👉Identifying any upcoming news that could cause volatility
👉Being ready to trade when the next trading session opens
✅Now you will want to review the overall market news. This can be done online through sites such as Bloomberg or through television (CNBC, Bloomberg TV, BBC).
Determine what the overall market sentiment is for the day, review yesterday’s trades and how the previous trading session finished, and maybe identify key market areas like support and resistance.
Now it’s time to start trading your system!
Your pre-market routine will be critical to your success as a trader.
You want to start your forex trading session feeling calm, relaxed, and prepared for whatever the market throws at you.
Keep up-to-date with both the fundamentals and technicals affecting the forex market.
👉A forex trader in the dark is a forex trader in the red.
Forex Trading Software, Hardware, And Other Tools
Write down the hardware, software, data feeds, furniture, and internet access that will comprise your currency “trading desk.”
Don’t forget backups! Make sure you have a backup plan for everything just in case your main tools fail while you’re in a trade.
👉What if your computer crashes and doesn’t boot back up?
👉What if your internet connection goes down?
👉What if your electricity goes out?
👉What if your keyboard stops working?
❗️21 Questions You Should Answer In Your Trading Plan❗️
👉What are your specific reasons for wanting to become a trader?
👉What do you hope to gain from trading?
👉What are your biggest strengths?
👉What are your biggest weaknesses?
👉How do you plan to address your weaknesses and leverage your strengths?
👉 What are the things that are going to separate you from the large majority of traders who fail? (Answering with “hard 👉work” isn’t enough. Lots of hard-working traders still fail.)
👉Will the things you mentioned above actually give you an edge in the markets so your trading outcomes generate a positive expectancy?
👉What market or markets do you plan to trade and why?
👉How much time can you devote to actively following the FX market? And the overall financial market?
👉What is your trading style? Do you plan to scalp, day trade, swing trade, or position trade?
👉Does the trading style(s) you’ve chosen reflect the reality of the amount of time that you can devote to trading?
👉At what times throughout the day (or week) are you going to spend actually trading, researching trades, and then learning about the market?
👉What trading system(s) will you be using (your criteria for entering and exiting trades)?
👉What is your risk management strategy?
👉How will you know if your trading system or strategy stops working?
👉After you’ve identified that your trading system or strategy has stopped working, what will you do to address it?
👉What trading software and equipment you will use to trade and how much is it?
👉Who will you use to access the markets? What broker(s) will you use?
👉How much money do you plan to start to trade with? Is this money you can afford to lose without negatively affecting your current standard of living?
👉Do you plan to add money to your account and if so where is that money going to come from?
If you are profitable, do you plan to reinvest profits or withdraw some or all of them?
☝️Growth and success need direction and a sense of purpose. Which must first be identified and clearly stated. They won’t appear on their own.
A clear roadmap forces accountability and responsibility, which sometimes may lead to a change in the plan (like when your trading system or strategy stops working). Which is fine, but you won’t know that change is even needed unless you’ve established in clear terms, what is considered “working” and “not working”.
Risks can be turned into opportunities, but first, you need to have identified what the risks are. If not, when they arrive as a crisis, you’ll be on your back foot, most likely panic, and make poor (and unprofitable) decisions.
As you can see, there are many things to consider before hitting that buy or sell button in your trading platform.
✅Answering each question will not guarantee trading success, but NOT answering such questions will almost certainly guarantee failure.
The choice is yours.
Results are usually proportional to the quality of the planning.
Don’t set yourself set up for failure. Set yourself up for success.
Stick With Your Trading Plan
Trader incompatibility.
A trading plan should be a personalized plan for you, a plan that fits your own goals, risk tolerances, and individual lifestyle.
You must develop each component on an individual basis, never losing sight of the fact that it must be custom-tailored to YOU and YOUR needs.
Not your girlfriend’s. Not your boyfriend’s.
Not even Ronald, your weirdo best friend whose head is shaped like a hamburger who likes to wear pink polka dot pants and is an aspiring rapper.
Your trading plan must be made based on reality, not on hope.
If you’re simply trying to copy somebody else’s trading plan or yours is based on false assumptions, then you will not be compatible with it and will have trouble following it.
SOLUTION: Be honest with yourself. Then revise your trading plan.
✅Trading plans are intended to be long-term.
Many forex traders give up on their trading plan, or often more specifically, the trading system in the trading plan.
They are unable to endure a string of losses. Rather than sticking it out through the inevitable rough times, they give up.
👉Be patient!
Trading according to a plan requires sticking to it through thick and thin. That takes discipline. Rock solid discipline.
Forex traders lacking discipline do not stick to their trading plans. You need to be disciplined. Rock solid.
👉Stay disciplined!
Self-destructive behavior: Some forex traders have deeply ingrained psychological issues that will sabotage them.
This can be resolved with hard work on one’s self, but the trader must be self-aware of such issues first. You can’t figure out a solution if you don’t know the root problem.
When you stop following your trading plan, you become rewarded for a lack of discipline and you may start believing that abandoning a trading plan is no big deal.
👉Distinguish justified wins from unjustified wins.
A justified win is when you create a very detailed trading plan and FOLLOW the plan. A win that results from following a trading plan is justified and reinforces discipline.
Trade Victory - An unjustified win occurs when you drift from or completely ditch the plan. You might be rewarded, but the outcome occurred by chance.
You might as well flip a coin or hang a printed copy of your charts on the wall and throw darts at it to help you make trading decisions. The win is unjustified and can reinforce undisciplined trading.
✅Consistency is key!
Maintaining discipline is vital for consistent and profitable forex trading.
Trading is a matter of getting the law of averages to work in your favor.
The winning trader is one who first develops the skill to make the shot consistently so that at every possible opportunity, the ball is likely to go through the basket.
One must trade consistently following a specific trading plan on each and every single trade.
If you trade one approach this time, and a different approach at another time, your performance will likely be all over the place, too.
What’s more, you’ll have a more difficult time pinpointing which strategy works and which don’t.
With discipline comes profitability. Don’t let unjustified wins interfere with your ability to maintain discipline.
Follow your trading plan, and cement in the mindset that if you follow your plan, you will end up more profitable in the long run.
✅Always remember that the trading plan is a work in progress.
The market environment is not static. It’s dynamic and constantly changing. As things change, your trading plan must change, too.Assess your trading plan and processes periodically, especially when you have changes in your financial or life situation.
Also, as your research leads to changes in your trading system or methods, be sure to reflect those adjustments in your forex trading plan.
Adapt and survive.
Remember, the main purpose of the trading plan is to keep you on task and to operate in an effective and efficient manner to make good trading decisions.
It is, however, only as good as you make it, and it is completely useless if it is not
The market environment is not static. It’s dynamic and constantly changing. As things change, your trading plan must change, too.Assess your trading plan and processes periodically, especially when you have changes in your financial or life situation.
Also, as your research leads to changes in your trading system or methods, be sure to reflect those adjustments in your forex trading plan.
Adapt and survive.
Remember, the main purpose of the trading plan is to keep you on task and to operate in an effective and efficient manner to make good trading decisions.
It is, however, only as good as you make it, and it is completely useless if it is not
Different Types Of Trading Styles
Each trader is unique.There are over 8 billion people in the world (including space aliens disguised as humans and automobiles) and not one person is exactly the same as another.
Even identical twins will have different fingerprints.
Trading is the same way. Our unique personalities will lead us to trade differently from one another.
Some may be aggressive, “type A” personality traders while others may be more relaxed, “type B” personality traders.
Some may like taking small wins all the time, while others don’t mind losing a bit in order to make those huge gains when they do win.
As traders, there are a wide variety of approaches available to try to interpret price movements and try to profit from them.
Some traders may use a particular approach almost exclusively.
The point is that no two traders are alike
Scalping
Scalping is like those high action thriller movies that keep you on the edge of your seat. It’s fast-paced, exciting, and mind-rattling all at once.
Scalp trading, also known as scalping, is a popular trading strategy characterized by relatively short time periods between the opening and closing of a trade.
These types of trades are usually only held onto for a few seconds to a few minutes at the most!
Forex ScalperThe main objective for forex scalpers is to grab very small amounts of pips as many times as they can throughout the busiest times of the day.
Its name is derived from the way its goals are achieved. A trader is literally trying to “scalp” lots of small profits from a huge number of trades throughout the day.
☝️What makes scalping so attractive to traders?
Smaller moves happen more frequently than larger ones, even in relatively calm markets. This means that there are many small movements from which a scalper can benefit.
Scalpers can place up to a few hundred trades in a single day, seeking small profits.
All positions are closed at the end of the trading day.
Because scalpers basically have to be glued to the charts, it is best suited for those who can spend several hours of undivided attention to their trading.
It requires intense focus and quick thinking to be successful. Not everyone can handle such fast and demanding trading.
☝️It is not for those looking to make big wins all the time, but rather for those who like raking in small profits over the long run to make an overall profit.
Scalping the Forex Market
The strategy behind scalping is that lots of small wins can easily morph into large gains.
These small wins are achieved by trying to profit from quick changes of the bid-ask spread.
Scalping focuses on larger position sizes for smaller profits in the shortest period of holding time: from a few seconds to minutes.
The assumption is that price will complete the first stage of a movement in a short span of time so you aim to take advantage of market volatility.
The main goal of scalping is to open a position at the ask or bid price and then quickly close the position a few points higher or lower for a profit.
A scalper wants to quickly “cross the spread“.
For example, if you go long EUR/USD, with a bid-ask spread of 2 pips, your position instantly starts with an unrealized loss of 2 pips.
Remember, when you buy, you buy at the ask price. But in order to exit, you need to sell, which is the bid price.
A scalper wants that 2-pip loss to turn into a gain as fast possible. In order to do this, the bid price needs to rise enough so it’s higher than the ask price that the trade initially entered at.
✅You might be a forex scalper if:
👉You like fast trading and excitement
👉You don’t mind being focused on your charts for several hours at a time
👉You are an impatient person who doesn’t like to wait for long trades
👉You can think fast and change bias, or direction, quickly
👉You have fast fingers (put those esports skills to work!)
👉You are a surgeon!
✅You might NOT be a forex scalper if:
👉You easily get stressed in fast-moving environments
👉You can’t commit several hours of undivided attention to your charts
👉You’d rather make fewer trades with higher profit gains
👉You like taking your time to analyze the overall picture of the market
👉Trade only the most liquid pairs
Pairs such as the EUR/USD, GBP/USD, USD/CHF, and USD/JPY offer the tightest spreads because they tend to have the highest trading volume.
👉You want your spreads to be as tight as possible since you will be entering the market frequently.
👉Trade only during the busiest times of the day
👉The most liquid times of the day are during the session overlaps. This is from 2:00 am to 4:00 am and from 8:00 am to 12:00 noon Eastern Time (EST).
👉Make sure to account for the spread
Because you enter the market frequently, spreads will be a big factor in your overall profit.
As each trade carries transaction costs, scalping can result in more costs than profits.
👉That’s like working for an hour in a job that pays $5/hr and then going out and buying a $6 Starbucks Caramel Ribbon Crunch Frappuccino.
👉Be sure your targets are at least double your spread so that you can account for the times the market moves against you.
✅Scalping is very intense and if you can put all your energy in one pair, you’ll have a better chance at being successful.
Trying to scalp multiple pairs simultaneously as a noob will almost suicidal.
If you start to get accustomed to the pace of things, then you can start by adding on another pair and see how it works for you.
Make sure you follow good money management
This goes for any type of trading, but since you are making so many trades within a day it is especially important that you are sticking to risk management practices.
Major news reports can throw you off
Because of slippage and high volatility, trading around highly anticipated news reports can be very dangerous.
Scalping is like those high action thriller movies that keep you on the edge of your seat. It’s fast-paced, exciting, and mind-rattling all at once.
Scalp trading, also known as scalping, is a popular trading strategy characterized by relatively short time periods between the opening and closing of a trade.
These types of trades are usually only held onto for a few seconds to a few minutes at the most!
Forex ScalperThe main objective for forex scalpers is to grab very small amounts of pips as many times as they can throughout the busiest times of the day.
Its name is derived from the way its goals are achieved. A trader is literally trying to “scalp” lots of small profits from a huge number of trades throughout the day.
☝️What makes scalping so attractive to traders?
Smaller moves happen more frequently than larger ones, even in relatively calm markets. This means that there are many small movements from which a scalper can benefit.
Scalpers can place up to a few hundred trades in a single day, seeking small profits.
All positions are closed at the end of the trading day.
Because scalpers basically have to be glued to the charts, it is best suited for those who can spend several hours of undivided attention to their trading.
It requires intense focus and quick thinking to be successful. Not everyone can handle such fast and demanding trading.
☝️It is not for those looking to make big wins all the time, but rather for those who like raking in small profits over the long run to make an overall profit.
Scalping the Forex Market
The strategy behind scalping is that lots of small wins can easily morph into large gains.
These small wins are achieved by trying to profit from quick changes of the bid-ask spread.
Scalping focuses on larger position sizes for smaller profits in the shortest period of holding time: from a few seconds to minutes.
The assumption is that price will complete the first stage of a movement in a short span of time so you aim to take advantage of market volatility.
The main goal of scalping is to open a position at the ask or bid price and then quickly close the position a few points higher or lower for a profit.
A scalper wants to quickly “cross the spread“.
For example, if you go long EUR/USD, with a bid-ask spread of 2 pips, your position instantly starts with an unrealized loss of 2 pips.
Remember, when you buy, you buy at the ask price. But in order to exit, you need to sell, which is the bid price.
A scalper wants that 2-pip loss to turn into a gain as fast possible. In order to do this, the bid price needs to rise enough so it’s higher than the ask price that the trade initially entered at.
✅You might be a forex scalper if:
👉You like fast trading and excitement
👉You don’t mind being focused on your charts for several hours at a time
👉You are an impatient person who doesn’t like to wait for long trades
👉You can think fast and change bias, or direction, quickly
👉You have fast fingers (put those esports skills to work!)
👉You are a surgeon!
✅You might NOT be a forex scalper if:
👉You easily get stressed in fast-moving environments
👉You can’t commit several hours of undivided attention to your charts
👉You’d rather make fewer trades with higher profit gains
👉You like taking your time to analyze the overall picture of the market
👉Trade only the most liquid pairs
Pairs such as the EUR/USD, GBP/USD, USD/CHF, and USD/JPY offer the tightest spreads because they tend to have the highest trading volume.
👉You want your spreads to be as tight as possible since you will be entering the market frequently.
👉Trade only during the busiest times of the day
👉The most liquid times of the day are during the session overlaps. This is from 2:00 am to 4:00 am and from 8:00 am to 12:00 noon Eastern Time (EST).
👉Make sure to account for the spread
Because you enter the market frequently, spreads will be a big factor in your overall profit.
As each trade carries transaction costs, scalping can result in more costs than profits.
👉That’s like working for an hour in a job that pays $5/hr and then going out and buying a $6 Starbucks Caramel Ribbon Crunch Frappuccino.
👉Be sure your targets are at least double your spread so that you can account for the times the market moves against you.
✅Scalping is very intense and if you can put all your energy in one pair, you’ll have a better chance at being successful.
Trying to scalp multiple pairs simultaneously as a noob will almost suicidal.
If you start to get accustomed to the pace of things, then you can start by adding on another pair and see how it works for you.
Make sure you follow good money management
This goes for any type of trading, but since you are making so many trades within a day it is especially important that you are sticking to risk management practices.
Major news reports can throw you off
Because of slippage and high volatility, trading around highly anticipated news reports can be very dangerous.
Day Trading
Day trading is a popular trading strategy where you buy and sell a financial instrument over a time frame of a single day’s trading with the intention of profiting from small price movements.
Day trading is another short term trading style, but unlike scalping, you are typically only taking one trade a day and closing it out when the day is over.
These traders like picking a side at the beginning of the day, acting on their bias, and then finishing the day with either a profit or a loss.
They DON’T like holding their trades overnight.
Day trading is suited for forex traders that have enough time throughout the day to analyze, execute and monitor a trade.
If you think scalping is too fast but swing trading is a bit slow for your taste, then day trading might be for you.
✅You might be a forex day trader if:
👉You like beginning and ending a trade within one day.
👉You have time to analyze the markets at the beginning of the day and can monitor it throughout the day.
👉You like to know whether or not you win or lose at the end of the day.
✅You might NOT be a forex day trader if:
👉You like longer or shorter term trading.
👉You don’t have time to analyze the markets and monitor it throughout the day.
👉You have a day job.
✅Some things to consider if you decide to day trade:
Stay informed on the latest fundamentals events to help you choose a direction
You will want to keep yourself up-to-date on the latest economic news so that you can make your trading decisions at the beginning of the day.
Do you have time to monitor your trade?
If you have a full-time job, consider how you will manage your time between your work and trading. Basically….don’t get fired from your job because you are always looking at your charts!
Types of Day Trading
Day traders looking to maximize intraday profits often use one or multiple of the following day trading strategies.
✅Trend Trading
Trend trading is when you look at a longer time frame chart and determine an overall trend.
Once the overall trend is established, you move to a smaller time frame chart and look for trading opportunities in the direction of that trend.
Using indicators on the shorter time frame chart will give you an idea of when to time your entries.
First, determine what the overall trend is by looking at a longer time frame.
✅Countertrend Trading
Countertrend day trading is similar to trend trading except that once you determine your overall trend, you look for trades in the opposite direction.
Traders who use this strategy need to be quick to spot the end of a trend in order to open a position at the optimal entry point.
This strategy is fighting the trend and can work against traders at times.
Remember that going opposite of the trend is very risky, but if timed correctly, it can have huge rewards!
Countertrend trading favors those who know recent price action really well and so know when to bet against it.The idea here is to find the end of a trend and get in early when the trend reverses. This is a little riskier but can have huge payoffs.
☝️Range trading, sometimes referred to as channel trading, is a day trading strategy that starts with an understanding of the recent price action.
A trader will inspect chart patterns to identify typical highs and lows during the day while keeping a close eye on the difference between these points.
For example, if the price has been rising off a support level or falling off a resistance level, then a trader might choose to buy or sell based on their perception of the market’s direction.
This is known as “trading in a range“, where each time price hits a high, it falls back to the low. And vice versa.
A day trader who is using this strategy who is looking to go long will buy around the low price and sell at the high price.
A day trader who is using this strategy who is looking to go short will sell around the high price and buy at the low price.
✅Most range traders will use stop losses and limit orders to keep their trading in line with what they perceive to be happening in the market.
A stop loss order is the point at which a position is automatically closed out if the price of the security drops below the trader’s entry point.
A limit order is the automatic closing of a position at the point where the trader perceives a profitable run could end.
Range trading requires enough volatility to keep the price moving for the duration of the day, but not so much volatility that the price breaks out of the range and starts a new trend.
But if the price does break out, there’s a strategy for that as well…
✅Breakout trading is when you look at the range a pair has made during certain hours of the day and then placing trades on either side, hoping to catch a breakout in either direction.
This is particularly effective when a pair has been a tight range because it is usually an indication that the pair is about to make a big move.
Your goal here is to set yourself up so that when the move takes place you are ready to catch the wave!
In breakout trading, you determine a range where support and resistance have been holding strongly.
Once you do, you can set entry points above and below your breakout levels.
As a rule of thumb, you want to target the same amount of pips that makes up your determined range.
☝️News trading is one of the most traditional, predominantly short term-focused trading strategies used by day traders.
Someone who is news trading pays less attention to charts and technical analysis. They wait for information to be released that they believe will drive prices in one direction or the other.
This information could be a report releasing economic data, such as unemployment, interest rates or inflation, or simply breaking news or random presidential tweets.
To do well with news trading, day traders tend to have a solid understanding of the markets in which they’re trading.
They develop the insights to determine how the news will be received by the market in question in terms of the extent to which its price will be affected.
They will be alert to various different news sources at the same time and know when to enter the market.
The drawback of news trading is that events that cause substantial movements in prices are usually rare.
More often than not, the expectations of such events are factored into the price in the run up to the announcement.
Swing trading refers to the medium-term trading style that is used by forex traders who try to profit from price swings.
It is trading style requires patience to hold your trades for several days at a time. Swing trading stands between two other popular trading styles: day trading and position trading.
Swing traders identify a possible trend and then hold the trade(s) for a period of time, from a minimum of two days to several weeks.
It is ideal for those who can’t monitor their charts throughout the day but can dedicate a couple of hours analyzing the market every night.Swing trading is best suited for those who have full-time jobs or school but have enough free time to stay up-to-date with what is going on in the global economy.
Swing trading strategies employ fundamental or technical analysis in order to determine whether or not a particular currency pair might go up or down in price in the near future.
☝️Swing trading attempts to identify “swings” within a medium-term trend and enter only when there seems to be a high probability of winning.Because trades last much longer than one day, larger stop losses are required to weather volatility, and a forex trader must adapt that to their money management plan.
You will most likely see trades go against you during the holding time since there can be many fluctuations in the price during the shorter time frames.
It is important that you are able to remain calm during these times and trust in your analysis.
Since trades usually have larger targets, spreads won’t have as much of an impact on your overall profits.
As a result, trading pairs with larger spreads and lower liquidity is acceptable.
✅Types of Swing Trading
How do you swing trade?
There are several different trading strategies often used by swing traders.
Here are the four most popular: reversal, retracement (or pullback), breakouts, and breakdowns.
👉Reversal Trading
Reversal trading relies on a change in price momentum. A reversal is a change in the trend direction of an asset’s price. For example, when an upward trend loses momentum and the price starts to move downwards. A reversal can be positive or negative (or bullish or bearish).
👉Retracement Trading
Retracement (or pullback) trading involves looking for price to temporarily reverse within a larger trend. Price temporarily retraces to an earlier price point and then continues to move in the same direction later.
👉Reversals are sometimes hard to predict and to tell apart from short-term pullbacks. While a reversal denotes a change in trend, a pullback is a shorter-term “mini reversal” within an existing trend.
Think of a retracement (or pullback) as a “minor countertrend within the major trend”.
If it’s a retracement, price moving in the against the primary trend should be temporary and relatively brief.
Reversals always start as potential pullbacks. The challenge is to know whether it is only a pullback or an actual trend reversal
☝️Breakout Trading
Breakout trading is an approach where you take a position on the early side of an UPTREND, and looking for price to“breakout”. You enter into a position as soon as price breaks a key level of RESISTANCE.
👉Breakdown Strategy
A breakdown strategy is the opposite of a breakout strategy. You take a position on the early side of a DOWNTREND, and looking for price to“breakdown” (also known as a downside breakout). You enter into a position as soon as price breaks a key level of SUPPORT.
✅You might want to be a swing trader if:
👉You don’t mind holding your trades for several days.
👉You are willing to take fewer trades but more careful to make sure your trades are very good setups.
👉You don’t mind having large stop losses.
👉You are patient.
👉You are able to remain calm when trades move against you.
✅You might NOT want to be a swing trader if:
👉You like fast-paced, action-packed trading.
👉You are impatient and like to know whether you are right or wrong immediately.
👉You get sweaty and anxious when trades go against you.
👉You can’t spend a couple of hours every day to analyze the markets.
👉You can’t give up your World of Warcraft raiding sessions.
❗️If you have a full-time job but enjoy trading on the side, then swing trading might be more your style!
It is important to remember that every trading style has its pros and cons, and it is up to you the trader, which one you will choose.
Position Trading
Position trading is the longest term trading and can have trades that last for several months to several years!Position traders ignore short-term price movements in favor of pinpointing and profiting from longer-term trends.
It is this type of trading that most closely resembles “investing”. The crucial difference is in markets outside forex, “investing” usually means you hold positions that are long.
This kind of forex trading is reserved for super PATIENT traders and requires a good understanding of the fundamentals.
Because position trading is held for so long, fundamental themes will be the predominant focus when analyzing the markets.
Fundamentals dictate the long term trends of currency pairs and it is important that you understand how economic data affects your countries and its future outlook.
Because of the lengthy holding time of your trades, your stop losses will be very large.
☝️This means that your losses can end up being huge, but it also means your profits can be Huge.
You must make sure you are well-capitalized or you will most likely get margin called.
For an idea of how much money you should have in your trading account, check out our money management lesson.
Position trading also requires thick skin because it is almost guaranteed that your trades will go against you at one point or another.
These won’t just be little retracements either.
You may experience huge swings and you must be ready and have absolute trust in your analysis in order to remain calm during these times.
✅Types of Position Trading
While fundamental analysis plays a much larger role for position traders, that doesn’t mean that technical analysis isn’t used.
Position traders tend to use both fundamental and technical analysis to evaluate potential trends.
Here are some trading strategies utilizing technical analysis that position traders use:
Trend Trading using Moving Averages (MA)
The 50-day moving average (MA) and 200-day moving average (MA) indicator is a significant technical indicator for position traders.
The reason for this is due to the fact these moving averages illustrate significant long-term trends.
When the 50-day MA intersects with 200-day MA, this signals the potential of a new long-term trend.
When the 50-day MA crosses below the 200-day MA, it is known as the “Death Cross“.
When the 50-day MA crosses above the 200-day MA, it is known as the “Golden Cross“.
These longer-term MAs are popular chart indicators for position traders.
👉Support and Resistance (S&R) Trading
Support and resistance levels can signal where the price is headed, letting position traders know whether to open or close a position.
A support level is a price level that, historically, does not fall below. These “historical” support levels can hold for years.
A resistance level is a price level that, historically, tends not to be able to break. These “historical” resistance levels can also hold for years.
If position traders expect a long term resistance hold, they can close out their positions before unrealized profits stars melting away.
They may also enter long positions at historical support levels if they expect a long term trend to hold and continue upward at this point.
☝️This strategy requires that traders to analyze chart patterns. When analyzing the chart, position traders consider three factors when trying to identify support and resistance levels.
The historic price is the most reliable source when identifying support and resistance. During periods of significant up or down in a market, recurring support and resistance levels are easy to spot.
Previous support and resistance levels can indicate future levels. It is not unusual for a resistance level to become a future support level once it has been broken.
Technical indicators like moving averages and Fibonacci retracement provide dynamic support and resistance levels that move as the price moves.
👉Breakout Trading
Trading breakouts can be useful for position traders as they can signal the start of a new trend.
Breakout traders using this technique are attempting to open a position in the early stages of a trend.
A breakout is where the price moves outside defined support or resistance levels (preferably confirmed with increased volume).
The idea behind trading breakouts is to open a long position after the price breaks above resistance or open a short position when the price breaks below support.
To successfully trade breakouts, you will need to be confident in identifying periods of support and resistance.
👉Pullback Trading
A pullback is a short dip or slight reversal in the prevailing trend.
This strategy is used when there is a brief market dip in a longer-term trend.
Pullback traders aim to capitalize on these pauses in the market.
The idea behind the pullback strategy is this:
For long trades, to buy low and sell high before a market briefly dips, and then to buy again at the new low.
For short trades, to sell high and buy low before a market briefly rallies, and then to sell again at the new high.
✅If executed successfully, a trader can not only profit from a long-term trend but avoid possible market losses by:
Selling high and buying the dips (for long trades).
Buying low and selling the rips (for short trades).
To help identify potential pullbacks, you can use retracement indicators, like the Fibonacci retracement.
✅You might be a position trader if:
👉You are an independent thinker. You have to be able to ignore popular opinion and make your own educated guesses as to where the market is going.
👉You have a great understanding of fundamentals and have good foresight into how they affect your currency pair in the long run.
👉You have thick skin and can weather any retracements you face.
👉You have enough capital to withstand several hundred pips if the market goes against you
👉You don’t mind waiting for your grand reward. Long term forex trading can net you several hundred to several thousands of pips. If you get excited being up 50 pips and already want to exit your trade, consider moving to a shorter-term trading style.
👉You are extremely patient and calm.
✅You might NOT be a position trader if:
👉You easily get swayed by popular opinions on the markets.
👉You don’t have a good understanding of how fundamentals affect the markets in the long run.
👉You aren’t patient. Even if you are somewhat patient, this still might not be the trading style for you. You have to be the ultimate zen master when it comes to being this kind of patient!
👉You don’t have enough starting capital.
👉You don’t like it when the market goes against you.
👉You like seeing your results fast. You may not mind waiting a few days, but several months or even years is just too long for you to wait.
Create A Mechanical Trading System
Mechanical trading systems are systems that generate trade signals for a trader to take.They are called mechanical because a trader will take the trade regardless of what is happening in the markets.
In theory, this should eliminate all biases and emotions in your trading, because you are supposed to follow the rules of your system NO MATTER WHAT.
If you do a simple search in Google for “forex trading systems” you’ll find many many many people out there who claim to have the “Holy Grail” system that you can purchase for “only” a few thousand dollars.
When developing your mechanical trading system, you want to achieve two very important goals:
👉Your system should be able to identify trends as early as possible.
👉Your system should be able to avoid you from getting whipsawed.
☝️The hard part about those goals is that they contradict each other.
If you have a system who’s primary goals is to catch trends early, then you will probably get faked out many times.
On the other hand, if you have a mechanical trading system that focuses on avoiding whipsaws, then you will be late on many trades and will also probably miss out on a lot of trades.
Your task, when developing your mechanical trading system, is to find a compromise between the two goals.
Find a way to identify trends early, but also find ways that will help you distinguish the fake signals from the real ones.
Trading System
Designing your own forex trading system.
While it doesn’t take long to come up with a system, it does take some time to extensively test it.
So be patient; in the long run, a good forex trading system can potentially make you a lot of money.
✅Step 1: Time Frame
The first thing you need to decide when creating your system is what kind of forex trader you are.
Are you a day trader or a swing trader?
Do you like looking at charts every day, every week, every month, or even every year? How long do you want to hold on to your positions?
This will help determine which time frame you will use to trade. Even though you will still look at multiple time frames, this will be the main time frame you will use when looking for a trade signal.
✅Step 2: Find indicators that help identify a new trend.
Since one of our goals is to identify trends as early as possible, we should use indicators that can accomplish this.
Moving averages are one of the most popular indicators that traders use to help them identify a trend.
Specifically, they will use two moving averages (one slow and one fast) and wait until the fast one crosses over or under the slow one.
This is the basis for what’s known as a “moving average crossover” system.
✅Step 3: Find indicators that help CONFIRM the trend.
Our second goal for our system is to have the ability to avoid whipsaws, meaning that we don’t want to be caught in a “false” trend.
The way we do this is by making sure that when we see a signal for a new trend, we can confirm it by using other indicators.
There are many good technical indicators for confirming trends like MACD, Stochastic, and RSI.
✅Step 4: Define Your Risk
When developing your forex trading system, it is very important that you define how much you are willing to lose on each trade.
Not many people like to talk about losing, but in actuality, a good trader thinks about what he or she could potentially lose BEFORE thinking about how much he or she can win.
The amount you are willing to lose will be different than everyone else.
You have to decide how much room is enough to give your trade some breathing space, but at the same time, not risk too much on one trade.
✅Step 5: Define Entries & Exits
Once you define how much you are willing to lose on a trade, your next step is to find out where you will enter and exit a trade in order to get the most profit.
👉Entries
Some people like to enter as soon as all of their indicators match up and give a good signal, even if the candle hasn’t closed. Others like to wait until the close of the candle.
Others like to wait until the close of the candle.
👉Exits
For exits, you have a few different options.
One way is to trail your stop, meaning that if the price moves in your favor by ‘X’ amount, you move your stop by ‘X’ amount.
Another way to exit is to have a set target, and exit when the price hits that target. How you calculate your target is up to you. For example, some traders choose support and resistance levels as their targets.
✅Step 6: Write down your system rules and FOLLOW IT!
Write Down Trading System RulesThis is the most important step in creating your trading system. You MUST write your trading system rules down and ALWAYS follow it.
Discipline is one of the most important characteristics a trader must-have, so you must always remember to stick to your system!
No system will ever work for you if you don’t stick to the rules, so remember to be disciplined.
Trading System in 3 Steps
This system is moving average crossover system, which uses moving averages to determine whether to go long or short.
Additional technical indicators are also used for confirmation before entering a trade.
You’ll learn to use these various technical indicators to establish specific “crystal clear” entry and exit levels.
The trading system can be built in 3 simple steps:
👉Define your time frame
👉Determine your entry trigger(s)
👉Determine your exit trigger(s)
✅Trading Setup
👉Trade on daily chart (swing trading)
👉5 SMA applied to the close
👉10 SMA applied to the close
👉Stochastic (14,3,3)
👉RSI (9)
☝️Entry Rules
✅Enter LONG if:
👉The 5 SMA crosses above the 10 SMA and both Stochastic lines are heading up (do not enter if the Stochastic lines are already in the overbought territory)
👉RSI is greater than 50
✅Enter SHORT if:
👉The 5 SMA crosses below the 10 SMA and both Stochastic lines are heading down AND (do not enter if the Stochastic lines are already in oversold territory)
👉RSI is less than 50
✅Exit Rules
👉Exit when the 5 SMA crosses the 10 SMA in the opposite direction of your trade OR if RSI crosses back to 50
👉Exit when trade hits stop loss of 100 pips
✅If the daily chart is too slow for you, you can try experimenting with different time frames.
Keep in mind though that the faster the time frame, the higher likelihood for “false positive” trades. These are trades that meet the rules for entry but where you end up getting stopped out.
Remember: A trading system is only effective if it is followed!
You need to have the discipline to stick to the rules!
So Easy It’s Ridiculous” Trading System
This system is moving average crossover system, which uses moving averages to determine whether to go long or short.
Additional technical indicators are also used for confirmation before entering a trade.
You’ll learn to use these various technical indicators to establish specific “crystal clear” entry and exit levels.
The trading system can be built in 3 simple steps:
👉Define your time frame
👉Determine your entry trigger(s)
👉Determine your exit trigger(s)
✅Trading Setup
👉Trade on daily chart (swing trading)
👉5 SMA applied to the close
👉10 SMA applied to the close
👉Stochastic (14,3,3)
👉RSI (9)
☝️Entry Rules
✅Enter LONG if:
👉The 5 SMA crosses above the 10 SMA and both Stochastic lines are heading up (do not enter if the Stochastic lines are already in the overbought territory)
👉RSI is greater than 50
✅Enter SHORT if:
👉The 5 SMA crosses below the 10 SMA and both Stochastic lines are heading down AND (do not enter if the Stochastic lines are already in oversold territory)
👉RSI is less than 50
✅Exit Rules
👉Exit when the 5 SMA crosses the 10 SMA in the opposite direction of your trade OR if RSI crosses back to 50
👉Exit when trade hits stop loss of 100 pips
✅If the daily chart is too slow for you, you can try experimenting with different time frames.
Keep in mind though that the faster the time frame, the higher likelihood for “false positive” trades. These are trades that meet the rules for entry but where you end up getting stopped out.
Remember: A trading system is only effective if it is followed!
You need to have the discipline to stick to the rules!
So Easy It’s Ridiculous” Trading System
👉First, we’ve decided that this is a swing trading system and that we will trade on a daily chart.
👉Next, we use simple moving averages to help us identify a new trend as early as possible.
👉The Stochastic help us determine if it’s still ok for us to enter a trade after a moving average crossover, and it also helps us avoid oversold and overbought areas.
👉The RSI is an extra confirmation tool that helps us determine the strength of our trend.
After figuring out our trade setup, we then determined our risk for each trade.
👉For this system, we are willing to risk 100 pips on each trade.
☝️Usually, the higher the time frame, the more pips you should be willing to risk because your gains will typically be larger than if you were to trade on a smaller time frame.
👉Next, we clearly define our entry and exit rules.
✅We know you’re probably thinking that this system is too simple to be profitable. Well, the truth is that it is simple. You shouldn’t be scared of something that’s simple.
In fact, there is an acronym that you will often see in the trading world called KISS.
It stands for Keep It Simple Stupid!
It basically means that forex trading systems don’t have to be complicated.
You don’t have to have a zillion indicators on your chart. In fact, keeping it simple will give you less of a headache.
The most important thing is discipline. We can’t stress it enough. Well, yes we can.
👉YOU MUST ALWAYS STICK TO YOUR TRADING SYSTEM RULES!
Trading journal
A disciplined trader is a profitable trader and keeping a trading journal is the first step to building your discipline.This might sound simple or easy but we assure you that to actually get started can be very difficult.
In fact, many forex traders give up after a while and rely on the logs that the forex broker provides.
The logs or transaction history from your forex broker gives information that is, at best, marginally useful as it doesn’t tell you much of WHY you entered and exited the trade.
That information provides NO help to your next trade.
A trading journal isn’t just about writing in the prices of your entry and exit and the time you executed the trade.
The trading journal is also about refining your methods and mastering your own psychology.
To be even more specific, it is about your individual emotional psychology before, during, and after the trade.
✅But your gut feeling tells you that the trade is NOT going to work…
So you remind yourself, “I don’t think this trade is going to work. BUT I have to follow my trading plan so I’ll take it.”
During the middle of your trade, the price comes 3 pips away from your stop loss and you’re thinking, “OMG. This trade isn’t looking so good. I knew it! Why didn’t I listen to myself? I’m such an idiot! I’m about to lose here! I’ll just exit now.”
You then decide to close your trade.
A few moments later the price shoots to your original profit target. Had you stayed in the trade you would have made a decent profit.
This is why you should write a trading journal. This is a classic case that probably happens to too many traders.
We fail to stay in the trade, we fail to trade the plan, and most importantly, we fail to distance our emotions from our trading!
If you keep trading like that and you don’t keep a trading journal, the balance on your trading account will become a big fat ZERO before you realize what you’re doing wrong.
✅Besides helping you in your journey to baller status, there are other personal benefits to journaling…
👉Defining yourself and your situation in life
👉Keeping progress of your goals you’ve set in your Trading Plan
👉Clarifying your weaknesses and strengths in your ability to perform and handle the pressure
👉Providing a way to self-coach and improve on your own
👉Forex Trading Journal Acts As A Coach
☝️Keeping a journal may seem boring and time-consuming, but a forex trader can often learn more from reviewing their own trades, than from reading a book or even attending a seminar.
Over time, your journal will grow with you and, if you keep detailed records on everything about your forex trading (from psychological issues, the market environment, system tweaks, etc), it will help you recognize important lessons
☝️Things You Must Have In Your Trading Journal
You record everything you feel and do before the trade, during the trade, and after the trade has been completed.
Trading is a performance skill, regardless of your trading style or method.
Your outcome is determined by how well you analyze the market environment, your ability to create a plan or trading method, how well you execute that plan, and luck.
There are many variables that lead to success, so you have to write down everything to determine your weak and strong points.
For traders, that means recording:
👉Who you are and your motivations for forex trading. To find the right trading method for you, you have to know who you are, your lifestyle considerations, and why you do the things you do.
👉Market views and philosophy. This is how you understand and frame the markets, and how you make the decisions to act and manage the risk to your account.
👉Observations of the market. Each day is different in the market, but that doesn’t mean there are certain “tendencies” or “behaviors” that you can take advantage of. With careful and consistent observation, you can find these “tendencies” and create or adjust your strategies to them. Also, if the environment changes, you’ll be on top of the situation and change with it!
👉Trading mistakes and missed opportunities. Mistakes and missed opportunities are just as detrimental to your success as the market going against your trade. Closing trades too early, not taking legit setups, entering the wrong entry levels or positions sizes, etc. should be recorded in your journal so that you avoid the same mistakes in the future.
👉Performance statistics. Many aspects of your forex trading performance can be quantified into hard data. This gives you a realistic, no BS picture of how you’re doing. Like Shakira’s hips, the numbers don’t lie. And sometimes a shot of reality can give you the kick in the butt you need to kick up your game!
✅The Bare Minimum: 5 Things You Must Keep In Your Trading Journal
All right, here are our 5 “must-have” elements of a forex trading journal:
👉Potential trading area
👉Entry trigger
👉Position size
👉Trade management rules
👉Trade retrospective
Trading Performance Statistics
Here are some of the statistics to keep, at a minimum, to track your system vitals.👉Net Profit
Your net profit is your total gain minus losses and expenses. These expenses include the cost of equipment, commissions, and other costs. Basically, this is how much your account is up or down at any given time minus to costs to trade.
👉Win %
Win percentage is the total number of wins divided by the total number of trades. What percent of the time do you win trades?
👉Loss %
Loss percentage is the total number of losses divided by the total number of trades. What percent of the time do you lose trades?
👉Largest Winning Trade
Your largest winning trade will be removed from your “average win” calculation.
This is not necessary to do, but if you do have an abnormally large win in relation to your other wins, then taking it out will provide a more accurate look and expectations to your stats.
👉Largest Losing Trade
Your largest losing trade will be removed from your “average loss” calculat
👉Average Winning Trade
The average gain per winning trade is computed by dividing the total gain from all your winning trades divided by the number of winning trades.
👉Average Losing Trade
The average loss per losing trade is your total loss from all your losing trades divided by the total number of losing trades.
👉Payoff Ratio per Trade
The payoff ratio per trade is your average winning trade minus your average losing trade.
👉Average Holding Time per Trade
The average holding time per trade is calculated by dividing your total holding time for all your trades by the number of trades.
👉P/L of Long Trades vs P/L of Short Trades
This stat helps determine what types of trades or trading environments you perform well in.
👉Largest # of Consecutive Losses
This stat helps in determining your max drawdown, or the worse possible scenario you have experienced so far.
👉Average # of Consecutive Losses
This stat helps in determining your average drawdown and controlling your potential max risk.
👉Maximum Drawdown
The maximum drawdown is the worst period of “peak to valley’” performance of your trading system.
👉Trading Expectancy
In simple terms, expectancy is the average amount you can expect to win (or lose) per trade.
👉This can be computed by multiplying the loss percentage by the average loss and subtracting it from the win percentage times the average win. This stat helps you determine the correct position size and how profitable your trading method is.
👉Tracking Feelings and Mistakes
Your mental state can’t exactly be tracked as a “statistic” but you should record it nonetheless.
👉Keeping track of how you feel will help you avoid trading during those frustrating times–like when you wake up right after a news event (that you forgot about), and it pushes the markets fast, so you try to chase it.
✅Knowing this, you can adjust her trading so that she can avoid going against the trend and this will hopefully lead to better trading performance.
the goal of collecting and calculating these stats should be to find ways to maximize your expectancy (pips or dollars gained per trade), set the correct position size per trade, and determine the trading conditions best suited for YOU!
✅How do you analyze all the data in the journal??
It’s pretty simple:
👉Find what works and keep doing it
👉Find out what doesn’t work and stop doing it.
And finding what works and doesn’t work is all about keen observation and asking the right questions.
👉Refine your analysis of your trading results by breaking them down into smaller categories, such as day of the week or specific currency pairs.
Stay tuned @ Forex mastery academy@Zw
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