Tag Archives: strategy
Learn How To Trade Forex Like A Professional Trader
I don’t often share trading statements on my blog, but i have decided to share this one, as it shows not only that i have the skills and market knowledge to be able to teach you how to trade like a professional trader, but it also shows some interesting statistics regarding profit and loss.
To be a successful trader.
To be a successful trader you have to have market knowledge. Knowledge is by far the biggest asset to a successful trader. Many traders say that psychology or discipline are the most important things you have to master. They say that if you are not a disciplined trader, or you do not have the correct mindset then you will not succeed.
Both of these attributes are needed to become successful, but having the correct market knowledge and understanding the forces that drive price, is the most important thing you need to learn. You can have the greatest discipline in the world, but without market knowledge you will not be successful.
The importance of profit and loss.
Profit to loss ratios can sometimes be overshadowed by win to loss ratios, but profit and loss is a key factor to long term profitability. Lots of traders are turned on by a high win to loss ratio, but winning 99% of your trades is no good if the one loser blows out your account.
The statement below shows where you need to be regarding your profit to loss ratios.
When i am hitting it out of the park i can have a win to loss ratio of above 95%. Yes that’s pretty impressive i know, but its the profit to loss ratio that really counts. As you can see from the trading statement, the win to loss ratio is 73.98%. Now while that is not particularly high, the profit to loss ratio is very good, with a gross profit of £34,763.81, against a gross loss of £3996.01. Which is a profit to loss ratio of almost 9 to 1.
How do you achieve a high profit to loss ratio?
Cut your losers quickly and let your winners run. I am sure you have heard that statement before, but its probably one of the hardest things to do in trading. No one wants to take a loss, that’s completely natural, but letting your losers run too long will kill your profit to loss ratio.
To achieve a consistently high profit to loss ratio you first have to have a great strategy. When you have developed your trading strategy you have to trade it as mechanically as possible. If the reason for entering a trade has changed, then get out of the trade as quickly as possible.
For example. You enter a trade at a specific price point as you expect the market to go in your favor. As soon as the market does not do what you expect it to do, and the reasons for entering that trade are no longer valid, then exit the trade. There is no point sitting in a losing trade hoping it will come back.
Sitting in losing trades hoping they will come back just grinds you down. It also stops you from looking at other trading opportunities, as you are glued to the chart, watching every move your losing trade is making. Just take the hit and move on. If you have a good strategy then you will soon get back that small loss.
You can see on the statement that the largest profit on a single trade was £427.60, against the largest loss on a single trade of £74.89. So even though the win to loss ratio is not that high, the profit to loss ratio is. So a consistently high profit to loss ratio will always trump a high win to loss ratio. If you can have both then that’s even better.
Learn how to trade like a professional trader.
If you want to be successful in this business you have to trade like a professional. All professional traders have sound market knowledge, and good profit to loss ratios. Forex trading is a cut throat business. This is not a Sunday afternoon kickabout in the park, its a ruthless business where only the best traders will survive.
You have to be on top of your game if you want to mix it with these sharks. If you are not the best you can be, they will eat you for breakfast. Trading at a professional level is something that i believe is almost impossible to learn on your own. Getting educated and mentored by a professional Forex trader is a must as far as i am concerned if you want to trade full time and make it your job.
Yes i would say that, as i offer education and mentoring. But listen, i am a trader first and an education provider second, and that is an important thing to remember. I am not a Forex training school, that offers the same old rubbish you can get on the internet for free. What i teach, you cannot get on the internet, or anywhere, free or paid.
My Forex training course is not cheap, but when you have the market knowledge to enable you to turn £10,000 into over £40,000 in less than 6 months, then i am sure you can see the value in what i am offering. If you cant see that, then i am sorry but i can’t help you.
For more information on my Forex training course please click here.
Thanks for visiting my blog and have a great day. 🙂
Do You Have An Unconscious Trading Bias?
Do you have a trading bias? Or are you a trader that is comfortable on both sides of the market?
What is a trading bias?
A trading bias can be an opinion about the market, or a certain currency pair, but it could also be an unconscious behavioural pattern that is affecting your profitability in the market.
Many traders do not realize they have an unconscious trading bias, but recognizing that you have one, and understanding how it can impact your trading performance, is something that you may need to do in order to make yourself a better trader.
Trader psychology does play an important role in trading, fear and greed are the most common problems that traders have to deal with on a daily basis, but if you have been trading for a while, as I have, there are some interesting characteristics that you may be applying to your trading behaviour, without actually realizing it.
When I first started trading.
I have been trading for almost 25 years. I first started trading equities in the early 90’s. When I started out on my trading career all those years ago, I did not have all the sophisticated charting software that we have today. I remember having to plot my charts on graph paper that I purchased from WH Smiths.
I first started out as a retail investor rather than a trader, plotting my charts by hand with end of the day prices taken from the Financial Times. My strategy was to buy and hold, buying value on dips, and following the long term trend. I had never heard of shorting, and with the limited resources available to me, I only really had the option to buy stock. So my brain was conditioned to only look for buying opportunities.
This early learned behaviour pattern has unconsciously been carried with me all my trading career. Even now when I am trading, I always feel more comfortable when buying rather than selling. These early trading experiences have shaped my trading psychology to this day, and there will be others in the same mindset.
Did you start your trading career buying equities?
If you started out in equities as I did, there is a good chance you will be more comfortable with long positions, rather than short positions, as I am. This bias does not stop me from taking short trades, but it just feels a little more normal when I am long.
If you keep a trading diary as most traders do, it would be a good idea to look back at the trades you have taken, and compare your long trades against your short trades. Are you taking more longs than shorts, or vice versa? Also look at the profitability of your longs verses your shorts.
An unconscious trading bias can also affect the length of time you stay in trades, so check that too. Are you mostly staying in long trades or short trades?
Knowledge is the biggest asset to trading profitability in my opinion, but it will help your trading if you can understand your trading behaviour, and recognize any trading bias that you may have, that could be affecting your profitability in the market.
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Thanks for stopping by, and have a great day. 🙂
A Profitable Forex Trading Strategy.
Searching for success.
There are 100s of Forex trading strategies that are used by traders, but not all of them have the potential to be profitable. Traders spend a lot of time searching for a profitable trading strategy, but the majority of them never find a strategy that they have enough confidence in, to enable them to trade with big money.
Many traders think that the reason they are not making money consistently, is because of a lack of discipline. They believe that their losses are down to their own inability to follow a profitable trading strategy, when in fact the real reason they cannot make money is because their strategy is weak.
I agree that discipline plays a major part in the success of every trader, and it is something that is very hard to truly master, but you also have to have a proven trading strategy to work with, or you have no chance of success. When you trade with a great strategy, and you have mastered discipline then you will become a very successful trader.
Finding a profitable trading strategy.
The problem faced by many traders is finding a strategy that has the potential to make profit consistently in the Forex market. This was a major problem for me when i first started out, as i did not know what worked and what did not work.
Would i be wasting my time and effort trying to learn something that would never be able to make money consistently. I know that this is a problem that many traders face. You can waste years learning and back testing strategies, only to find out that they do not work, and its very frustrating.
I am fortunate that i am a quick learner, so it took me a lot less time to wade through all the crap and get to the really good strategies that can make you lots of money.
Are you a frustrated trader?
When you first start on your Forex journey you inevitably come across many Forex training websites that will claim to be able teach you how to trade. So many traders will invest a few 100 bucks in something and start to learn what is being offered.
After a number of months or even years of learning, the majority of traders are left frustrated because of their lack of profitability.
I know of many such websites and training providers that claim to be this that and the other, but in reality they do not understand the business at the level required to be able to offer training, and although they are not charging a fortune for their services, its the time that you lose that’s the real killer.
The lost years learning to trade.
It is very important that you find the right trading strategies to learn, as it takes years to be a truly great trader. Yes you can be profitable in a few months with the right training, but to be consistent week after week month after month will take a lot more time.
Time is an extremely valuable commodity that some people do not fully respect. Yes you may have lost a few 100 bucks learning something that doesn’t work, but how long has it taken you to find out, and how many more strategies will you learn, that do not work either.
You can get back the money you have spent on these crap websites when you finally learn how to trade, but you will never get back the time that they have taken from you. I have been there, i have wasted my time on their shit too, and although the money is insignificant, the time that they have taken from you is very significant, and lost forever.
The strategies i teach.
I trade and teach many strategies, but everything i teach makes money. I do not teach strategies that are not profitable. I value time above everything else, we are not on this planet for very long and your time and mine is very precious, and i would never take time from anyone and teach them crap that does not work.
My Forex training course is not cheap, but its worth every penny i charge and more. The knowledge that i have about the Forex business has been built up over years and years of chart study, time that i will never get back, but its been time invested wisely by learning some really great stuff that i can now pass on to my students.
Knowledge + Time = Success.
This simple formula is all you need to be a great Forex trader, but the most important part of the formula is knowledge.
Time on its own will not bring you success. Time will bring knowledge, and the more time you invest, the more knowledge you will have, and the closer to success you will be, but learning to trade this way is the wrong way in my opinion.
The quickest way to learn, is to find someone with the knowledge you need, and invest the time with them, and success will come much quicker. If you have ever learned anything in your life you will most likely have learned it from someone else. Learning to read, learning to drive, learning your job, so why would learning to trade Forex be any different?
Volume Spread Analysis (VSA)
This article was kindly provided by Leonardo Barata of analyticalvsa.com who is an active VSA trader. VSA is a trading method that is favored by many traders. I do not trade VSA myself but you may find it interesting. If you like this article please share it. This article is for entertainment value only, and is not a recommendation to trade VSA.
What is volume spread analysis?
Volume Spread Analysis is a methodology originated in early 1900s, by Richard D. Wyckoff (1873-1934), a successful Wall Street trader and later known as the man who made a fortune in the 1929 market crash. Other very successful traders such as Richard Ney would use this methodology as well, only under a different name. This methodology, which is also called the Wyckoff method, was put in more modern terms by Tom Williams, a former syndicate trader based in London, in the 1960s. For the deep insights on the markets that it provides, and the fact that it can be applied to virtually any liquid market, VSA made a name for itself in trading communities.
Understanding VSA.
To understand what VSA is about, we must first understand who are the people who are making money in the markets, and how are they doing it. Like in any other business, there are specialists: some traders specialize in energy futures, others may specialize in the Japanese Yen pairs, others day-trading forex or stocks, and so on. And who are them? These are institutional traders, pit traders, syndicate traders and market-makers, which make a living speculating on the markets. If only we could know what those specialists are doing, then we could trade almost anything without having to do all the fundamental analysis and without looking at all the factors that influence the prices. Well, it turns out we can, and this was exactly Wyckoff’s breakthrough!
The role of volume.
The quantity that represents the activity in the market and is widely available (though not widely used impressively) is the volume. And one thing about the traders who consistently make money in the markets over the years, is that they’ve been able to accumulate a lot of it, and will make large trades to earn a significant amount of money for them. So the volume is the starting point of our analysis, and will show if there is a significant activity (or lack of) in the market, which will be very important to determine what the professionals (smart money) are doing.
Spread’s importance.
But Volume Spread Analysis as the name implies, not only uses volume but also the spread (bar’s high – low). The bar’s spread gives clues as to what type of activity is happening: for example, a low-spread up bar with high volume, indicates there was a lot of selling by the professionals and buying by the public: they prevented the price from going upper by dumping their positions in the market, which the public was happy to absorb. Another example: if there was an widespread down bar with high volume, and the next bars are up, it means there was actually buying on that down bar. Why would the prices go up if that was true selling? The smart money uses the public euphoria to dump or to open their positions, as not to turn the prices against themselves.
Charts examples:
The end of the 2008 stocks bear market: Right before the bear market ended, there was accumulation (professional buying) evident in Dow Jones Industrial Average and other indexes. Signals of distribution were also evident before the bear market started in 2008.
The gold top: right before the bear market in gold, and after all the buying euphoria by the public, gold finally collapsed after signs of heavy distribution.
Learn more and get VSA indicators on our volume spread analysis website.
About the author: Leonardo Barata is a forex and stocks VSA trader and developer.