You do not have to lose
Who has not been told to give up trading. It's a total waste of time says your best friend. You will only lose say your work colleagues. 'What about our kid's schooling?', shouts your better half. And on, and on, and on... It gets so frustrating doesn't it.
Well, the truth is that trading IS difficult and beginners are likely to lose money, maybe lots of money. So what to do? How do we get past the endless criticisms from others, and more importantly from the critic inside our own heads? Yes, we fight among our own Selves too!
To tackle this emotional draining problem, keep reading for Day Trading Insights that can help you profit from trading, or at least stop losing first. You do need to accept that trading is difficult, worth repeating! Work to change the way you think about yourself, and the way you work and trading. You can profit from the market, so let's get going. Read on.
There is no need to fuss over a platform. They are all very much the same and the key need is to find a suitable broker to trade with, and match your platform to that. If you are consumed by the need to automate trading, or have a gazillion indicators on your chart, then you would have to be more selective. But here, we are talking about making money with trading. Not wasting time fiddling with pretty looking charts that lose money. Keep it simple!
I have been a long time user of the NinjaTrader platform. Not perfect as not all data feeds are available. Buying into NinjaTrader now for the first time will limit your brokerage support, as NinjaTrader encourages their own brokerage business. May work fine for most, but check the markets you need to trade, and cost of data, to be sure NinjaTrader works for you. You can get a free version of NinjaTrader complete with free daily historical data. Excellent for getting to learn the basics of trading.
Another sound option is TradeStation with its fully integrated platform, but again, be sure to check you can access the markets you wish to trade.
To access the local Hong Kong Futures Exchange (HKFE) I have added Multicharts to my trading setup. My AMP Futures broker supplies Multicharts free, as well as a wide selection of other platforms, many free. I can vouch for the reliable, low-cost, high-quality CQG full tick data feed from AMP too. My second broker, Interactive Brokers, is reliable and supports Multicharts, but tick data is sampled and not suitable for more advanced trading such as order flow.
For Forex traders, the venerable and popular MetaTrader is available for free direct from MetaTrader or many brokers. But keep it simple, remember! No need for the gazillion extras with MetaTrader available for through many brokers - the basic platform is all you need.
Your trading objectives
You want to trade for a living. Good. But you also desperately want to make money quickly to replace your day job earnings. Not so good. Be careful of setting goals that trigger your inner emotional resources that can sabotage your future as a trader. Be realistic. Be sensible. And be committed. Trading is not a five minute learning exercise, and not a 10,000 hour task either.
Set your objectives to ensure you can remain comfortable while trading - whether winning or losing. Trade small to stay in the game, build your skills and confidence, and limit inevitable losses. Increase size as your skills improve and emotional resilience is under control well enough to trade consistently well.
You can learn to trade
Well, you are not going to disagree when I say trading is hard work, right? Nothing comes for free. No free lunch anywhere, including trading. So ignore the hype and disinformation from trading educators that tell you stupid stuff like you need to blow your account before becoming a real trader. Absolute bull. Such trading educators often have an 'Introducing Broker' agreement to feed gullible newbies into the system keeping brokers supplied with easy income. Brokers do best when their clients trade a lot, but that is not so healthy for most learning traders. So how to learn to trade?
First things first. Forget the Holy Grail, silver bullet, or other pass to riches. Get serious and analyze your chosen market every day. Learn price action patterns to look for, and fire up the simulator to get familiar with your platform, and take the trades. At the end of the day, print out the chart and mark up your trades by hand. Then analyze what you did well, and not so well.
You learn better doing this markup and study by hand! Keep on doing it, day after day, until you find yourself seeing the setups (good and bad) in real time. This only comes after many hours of sincere, serious study. No short cuts to build the skills needed.
Once you are consistently profitable on the simulator, you need to trade with real money. The simulator is only useful for learning the trading ropes. Then you must get real. No other way. Only by live trading do your inner psychological resources get triggered, and emotionally arouse you to take action. But that action will often be at odds with the action you need to take to become profitable. So trade small and fix your profit target and stop loss positions BEFORE you place a trade. Do not move your stop loss if market goes against you - unless price action shows your premise for taking trade is clearly wrong.
Physical stops in the market are crucial. By all means keep mental stops in your head, typically tighter than where a wide physical stop may be placed. But the physical stop protects you from Internet trouble, your platform going down, the broker having trouble, and whatever else is sent your way. Murphy's Law will ensure you do have trouble when you least expect it, so be prepared.
Trading is hard work, yes, but quite simple when compared to many professions. The really hard part is getting control over your mindset, a challenge quite unique for trading.
Your mindset rules
If there really was a Holy Grail for trading success I would suggest that your trading mindset might take that honor. Sadly, our upbringing usually does not include any education on how our individual mindset rules our life. We are never taught how our inner mental resources (psychological parts) are created to 'protect us' from life's challenges and trauma. Sadly, such protection can work against our best interests as a trader.
Sad, but here we are in the 21st century and the average person has no better idea on how his/her brain operates than most homo sapiens descendants before him! Our brain is a super-computer, probably the most powerful in the known universe. And yet most of us never learn about how this amazing super-computer brain 'runs our show'. So, most traders (ie people) are not brain-wise, and oblivious to the real dangers that are triggered when trading.
Trading is an effective activity for learning about our true Selves, the mindset drivers. Trading provokes your inner resources (psychological parts) to do things you do not really want. Like taking small profits instead of letting trades run. Like getting out for a small loss instead of allowing your stop to work, and for your trade to make money.
Your mindset hijacks you while trading without your consent or awareness, leaving you with despairing thoughts such as "Why did I do that? What was I thinking? That was a stupid thing to do?" Your mindset is automatic, and for most humans a black box with hidden 'apps' (those resources) running your life. So what can you do about it?
Your first step towards Self awareness is accepting the true nature of our brain-mind. Our personality is made up of separate, truly independent selves (inner resources), all helping us to survive. These selves have been built over time forming neural networks within our brain and body. They can be very strong and independent of each other. Just like real people! You need to accept this multiplicity of selves and communicate with them. Weird, yes, but a fact that you avoid or disbelieve at your peril.
I will expand more on the selves/resources topic in later trading psychology articles. Whether or not you wish to believe in multiplicity, your essential first step in getting to know your Self better is to learn to relax. Take deep breaths often while trading. Focus your attention on your breath and feel the relaxation effect. Repeat this while you focus on identifying a Best Trade setup. Repeat when taking and managing the trade. Never stop learning to relax.
Then consider mindfulness meditation, say just 15 minutes each day before trading. Meditation will take your insights deeper to think about thinking itself. Then you are on your way to becoming aware of your emotional reactions to trading, and how to manage them. By being aware of emotions as they surface, you gain control by interrupting them, preventing the hijacking of your brains higher functions. Magic can then happen.
Your Best Trade setups
Hone your trading skill set more effectively by learning to trade 4 reliable price action setups - the Best Trades. Forget fancy indicators, whether free or paid, and put your effort into learning price action. All those indicators are derivatives of price action, so why over complicate your work - focus on price action. A simple exponential moving average is all your chart needs to represent the average price where traders will take predictable actions.
The market goes through an endless cycle of trend --> trading range --> trend. Never ending. A trend that follows a trading range may continue the earlier trend, or reverse into an opposite trend. That's all there is to it. Is it that easy? Yes, and the 4 Best Trades are your effective methodology to capitalize on the market cycle.
The first of the 4 Best Trades is the Major Trend Reversal. This is what occurs when a trend transitions into an opposite trend, via a short period of trading range price action. Your Best Trade #2 is the pullback, where a trend pulls back in one or more legs, often to the moving average and/or a trend line. The trend then continues on. If the trading range extends in time, you switch to the third Best Trade: Trading Range reversals. And when it is time for the Trading Range to end, the fourth Best Trade setup to know is the breakout. That's it. All covered!
By putting in the effort to learn the Best Trade setups, your trading is simplified and effective. Relax and Focus your attention on the market, identify the setups, and take Action. The Results will follow. You can better plan your trades. Achieve profitability more easily, and in less time than trying to spot numerous setups. Save that for later when you have mastered the 4 Best Trades and you want to move on.
For trading success there is no substitute for repetitive hands-on trading. By repeating reliable setups over and over, you are building new neural pathways in your brain and body! New neural networks form, giving you new trading resources (parts) that can switch in and operate when needed.
Like changing habits, it takes a long time to burn in new networks, and perhaps even longer to establish new resources that do not compete with existing resources. Repetition of coping skills throughout your whole life is what has created the family of inner resources (parts).
Your brain's resources do not give up control easily, having run your show well (in their opinion!) for many years. Many automatic and unconscious resources have been around for over 100,000 years in our species development! So respect each and every part of you, and negotiate when needed to allow new trading resources (or enhanced existing resources) to step in when the trading time is right. We'll get more into this in later articles.
So learning the Best Trade setups along with simple trade management rules is not done in one swoop. Nothing is. The ongoing repetitive experience embeds new knowledge, learns from mistakes, and creates your trader persona. You become a different person! Cherish the challenge, persevere, and prepare for your new life!
I trust you are still here. Read and reread the above periodically and rehearse the practical steps to trade well. Never give up. Never surrender to your inner or outer adverseries. Prove to yourself and others that trading can be fun, and a profitable pursuit. Keep things simple (how many times has that been said?) and avoid the temptation to complicate your trading with the next great idea. Price action trading works so get it working for you. Then when you are a success, add more setups along with tools that improve your game and not confuse it.
Wishing you all great success. Focus on taking the 4 Best Trade setups (or even just 1 or 2 setups) and let your trading results prove you can do it. Yes, you really can trade for a living - if you seriously want to.
What's your favorite trading insight from this article? And what do you think is missing? Let me know by leaving a comment below!
REALLY GREAT FOR BEGINNERS AS WELL AS EXPERIENCED & SEASONED TRADERS.
Happy to hear you are getting value from information. I am working on a long overdue post on trade management that I hope will help too. Such a confusing topic for many traders with most sources making it over complicated.
Richard hi, this course is fantastic. I’m really enjoying it. I have an important question. Many times Al Brooks references the moving average for example Unit:10 MTR. Which time frame is the moving average using? Many thanks, Andy
Happy to hear you are enjoying course.
I had better review materials if the moving average is not clear. Al uses the 5 minute chart with 2 Exponential Moving Averages (EMA):
(1) The standard 20 period EMA, and
(2) A 60-minute EMA on the 5 minutes chart done by either
(a) a TradeStation platform indicator he wrote, or
(b) using a 220 period value on the 5 minute chart EMA indicator. The 220 is a slight readjustment of the theoretical 240 (20 x 12 = 240) to account for tight trading ranges in particular.
Sorry this was not addressed in forum as you noted. Will followup.
Hope that helps.
Thanks for the speedy reply. That helps massively. I had the wrong EMA on my 5 minute chart
Sorry but I didn’t understand. 60-minute EMA on the 5 minute chart would be done by using a 12 period, right ?
You need to multiply the 12 you have (from 60min/5min) by 20 to get period. So 240 is needed.
Al suggests 220 is more accurate to account for effect of overlapping bars on the 5-minute chart. So use 220 and you will be fine.
Hi Richard, The course is the best Keep It Simple Course I have ever seen.
My favorite Insight today is “Focus on the setups, take Action, and the Results will follow.”
Thanks for your kind comments and happy to hear you are getting good value from course.
I will be getting some new content up soon to help traders better understand price action terminology.
And must get back onto live trading videos asap!
Have read this about three times and will keep reading it at least every week. It is very helpful ,the part on relaxing and taking deep breaths has worked wonders.
Hi Albert, happy to hear the article has helped. Yes, those deep breaths are the starting point for real magic. While you take a deep breath you can give yourself a ‘butterfly hug’ too, tapping lightly on each upper arm. KK the caregiver demonstrates this hug in the live trading video. ; )
Awesome! I bought the course because of this post. It’s full of insights for a begginer like me. Thank you very much.
Hi Oscar, thanks for your feedback and very happy to hear the article helped you. I am trying to avoid writing the usual trading stuff that is all over the Net and does not help much.
Excellent article! Can you tell your story of becoming a stable profitable trader? Did you trade only best trades? Only one market? What were the other main factors for contributing to your transfer from losing to profitable trader?
Thanks for your kind comment. Yes, I will be following this article up with many topics introduced. That was the idea behind writing it this way.
I am travelling currently and will get onto next article early next month. For now, I only trade the US ES Emini market. The Best Trades form the core of my trades, along with wedges and measured moves.