Fear of Losing – the Traders Biggest Hurdle

Fear of losing

It’s easy to trade the markets for a living… or at least that is what most sales pages confess to being able to teach you.

And yes it is, mostly… but that is only once you have learnt the right route to take to get you there.

However, after years of learning to trade… the biggest tip I can give to any new trader is this ‘learn to lose gracefully.

I’m a notoriously bad loser. I’m ultra-competitive… be it a board game or team sport, losing is not an option… I like to win!

So learning to lose was something of a hurdle to overcome when I started out.

Also you have to remember the style of trading that Vince Stanzione has taught me added to my predicament. Vince trades long term as you know. So holding a trade open for months at a time to then close for a loss was hugely frustrating.

But over the space of a year or so, after all the worrying and stress, I was in profit.

Fear of Losing

Now, the point is this, even though I had been biting my nails on many occasions during my initiation, guess what? It didn’t change my results.

The amount of times I questioned Vince’s selections and advice was/is probably legendry. But once I stood back and took in the view, I realised that this game is all about doing and forgetting. Not doing and praying to the trading gods for luck.

On average, what I began to see was a pattern of trades that looked something like this.

I had open, at any one time, a dozen trades or so.

Roughly 4-6 of these trades resulted in a loss, 2-4 may do nothing and trade in a range… 4 absolutely flew.

The losses were always smaller than the wins. The sideways positions were closed for small losses or minuscule gains and funds reinvested. The winners were rolled over again and again.

Once again, there is no amount of worrying that could have impacted these results.

I relied on someone’s expertise [Vince’s trade selections] and I had to roll with that.

In hindsight I didn’t have to be concerned at all… but at the time the fear of losing was very real. I was literally scared of it.

 

Take it Easy

If you learn from my advice and remember that trading is just a game that over time will return a positive [wins] over [negative] losses [if obviously you are using a reliable strategy], you’ll then be able to sleep at night.

No amount of worry will change the direction of a position.

So just follow the signals that you are using and walk away.

You can use the alert service on IG to notify you of your indicator alerts. So if you get a message you can take the necessary action on the position.

Do you think that Vince Stanzione, George Soros or Warren Buffet lay awake at night, sweating and worrying about their open positions? It’s quite a comical thought, but I really doubt that they do.

Your Fear of losing is imaginary.

Your actual fear of losing is self-inflicted. You are worrying about something that hasn’t yet happened.

When your position is open, whether it is in profit or not, you have not won or lost at that moment in time.

If you close your position for a loss, then it is a loss. There is no longer any fear of losing in itself. Are you frightened of the loss once it arrives? Do you call your friend, wife or mother and say “I’m really scared, there is a loss on my trading account… it’s really frightening me”. ??? Of course you don’t. They’d have no idea of what you were talking about and are more likely to come rushing round to see if you still have all your marbles in place.

So, when you are afraid of losing you are only beating yourself up. Because once you have lost [if you lose] there is no more fear. You may be upset about the loss, but you will not be in fear of it.

Try this Trading Test

Select any 6 shares, currencies, indices at random.  You can use the charts beneath that I have chosen if you prefer.

Add this exponential moving average [EMA] to the charts 10/50

Set the time frame of the candles to 1 Day

Now, paper trade and work out your profits over the last year.

I have randomly chosen the shares that are listed in position 1, 6, 12, 18, 24, 30 from the Dow Jones

So I have…

  • 3m Co
  • Chevron
  • Goldman Sachs
  • McDonalds
  • Travelers Companies INC
  • Walt Disney

 

Here are their charts from the last year with moving averages added. 

Fear of losing

NYSE-CVX

 

 

NYSE-GS

NYSE-MCD

NYSE-TRV

NYSE-DIS

Now work out overall how many points profit you’d have made overall just trading the crossover signals. Buying and selling.

Be brutal… Really give the charts a conservative hammering.

Could you have made a profit over the last year, just buying and selling on the crossovers?

It’s plain to see. Of course you could have.

Not only could have you made a profit, the actual amount of profit is in the £1000s even trading at .50p a point.

There were thousands upon thousands of points profits to be made.

In hindsight then… was there any fear of losing when looking at the above charts and results? So why be in fear of losing when actually trading?

 

Why Fear Stops Traders Making Money

It boils down to a few key areas although not limited to these that I am identifying here. However, one way or another they all point back to fear.

  • To bigger size stakes for bank size. So when a trade goes against you the loss seems magnified and you panic and close the trade early.
  • Using stop losses and setting stop losses to close to market You are using a stop loss because you are afraid of losing.  Stop losses are a pain in the rear. If you really want to use them make sure that they are set at the correct distance. 25 day highs and lows are a good place to start.
  • The money is in the waiting, some people just can’t wait it out. Impatience normally comes from the fear of losing the profits that you have already made. So you close the position too early.
  • No faith in the strategy you are using. When you start trading and encounter losing streaks it is [of course] the strategy or system that you are using that are at fault. So, in fear losing your bank and wasting your money, you stop using the system and buy into something else.

Everyone is Unique

Ultimately everyone sees things from their own angle when looking at a chart and deciding on a trade.

If you are struggling to make trading pay, identify your fears, as this will probably help you to rectify at least some off your negative trading.

Also learning to trade with someone that actually walks the walk can pay back hugely. Someone that understands what trading is and what you need to do to get things right… having a good mentor in these situations is invaluable.

Take a look at Vince Stanziones course, it’s how I started out and I can’t recommend it enough for newbies.

If spread betting is a bit too adventurous at the moment, you can learn how to make money trading binary options with my course here.

In Conclusion

Trading can be easy, but it is the fear of losing that is the biggest hurdle to overcome for almost all traders. Manage your fears and the rest will fall into place.

Beginners guide to Moving Averages

Moving averages

Quick guide for Using Moving Averages

 

Moving averages [MA’s] are among the most important financial and stock trading indicators a trader can have in their arsenal. Moving averages can help identify trends and reversals and this alone can be enough to help you profit from the markets.  What’s more is that they, [Moving averages] can also offer clarification to support and resistance levels.

 

The fact that much of my trading success has revolved around using moving averages at some stage, is enough to tell you that they work and that they are very simple to use.

But… stating the fact does not give them the true credit that they deserve.

 

Moving Averages 

Most traders know the importance of trends, and the moving average are the key indicator that can be used to identify trends.

MA’s are what are classed as lagging indicators. This means that they are formed from historic data, meaning that they can help you speculate where the price is likely to go not where the price is going to go.

Moving Averages work by smoothing out the past data to create lines that make the price of a chart easier to identify with.

Investors can hold a trading position when they can see that the price is above or below their moving average/s.

 

Different Kinds of Moving Averages

The two most common types of moving averages include the SMA and EMA. SMA stands for the simple moving average, while the EMA stands for the exponential moving average. There are differences and similarities between the two.

 

Simple Moving Average SMA

The Simple Moving Average or SMA, is calculated by adding the closing price of the security for a number of time periods and then dividing this total by the number of time periods. This is [unsurprisingly] the most basic of the moving averages.

 

Exponential Moving Average EMA

The Exponential moving average [EMA] is very similar to that off the simple moving average. However, the difference is in their sensitivity to market movement. The EMA will track and hug the price of the security, far closer than that of the SMA.

 

The EMA is more suited for shorter term trading [10 minute- 1 hour charts] and you will often see Day Traders using them in their set ups.

The SMA is slower to react to market price, therefore it can keep you in the trade longer with less false price movements, but can also get you into a trade later too. The SMA is preferred by medium to longer term trend traders that use end of day charts.

 

Weighted Moving Average WMA

The weighted moving average is calculated in the same way as the simple moving average is calculated. However, there are differences in the value. The values/price can be linearly weighted. This ensures that recent prices of the given security impact more on the average.

Some traders prefer the WMA moving average as it is that bit faster again at identifying price movements than the EMA. It can be more useful in a faster moving market where you are using 1 or 5 minute candles for example.

 

VIDYA Moving Average

The most recent addition to the moving average family is the VIDYA, which stands for Variable Index Dynamic Average. This moving average is commonly credited to Tushar Chande.

The VIDYA moving average is unique in the sense that it adjusts itself when there are changes in market volatility. When there is higher volatility the VIDYA reacts by becoming more sensitive. In periods of lower volatility, you’ll see the VIDYA less sensitive to market conditions.

The VIDYA is a combined indicator of the exponential moving average and the Chande momentum oscillator.

The VIDYA moving average is an indicator that I see a huge potential for traders, especially new traders. It [the VIDYA] takes a lot of false movements out off your trading when using the appropriate timeframes.

This means that you will come accustomed to riding the trading waves [price movement] without so much conflicting emotion.

When Vince Stanzione first started using the VIDYA I really wasn’t a fan. Now… I’m going to be basing far more emphasis on trading with it.

Why the shift in opinion? Because it’s awesome, and I’ve been back testing recently and it makes trading even easier.

You won’t find the VIDYA on many chart packages at the moment though. Sharescope have it pre installed however.

Most of the other chart packages are still playing catch up on installing the VIDYA as it is quite a complicated bit of programming to do [apparently].

 

In Conclusion

 

Moving averages smooth out price to make it easier to identify trends

Simple moving averages are the slowest moving averages to react to price movements and are therefore better for trading medium to longer term trends.

Exponential Moving Averages are useful for trading shorter time frames as the EMA will track the price closer than that of the SMA .

Weighted moving averages are better for fast day trading strategies and fast moving markets.

The VIDYA moving average is a combination of the EMA and an Oscillator. This moving average will keep you in trades longer with less chance of stops being hit and false signals

Remember, the faster the time frame of the charts and moving averages that you use, the more you will need to be prepared to deal with false trading signals.

11 Ways Trading from Home Can Improve Your Life

trading from home

Looking for a good work from home opportunity has many pitfalls… but in all honesty, the most common and certainly what were considered the easiest means of working from home are just not so easy anymore.

 

eBay, Amazon, Google AdSense have long been the staple for many that wish to leave the rat race.

But that’s changing.

 

It’s Way More Difficult Today

 

The problem nowadays is that these forms of income are becoming increasingly complicated options to start from home single handedly.

 

Amazon for example, are seemingly bringing in so much red tape to clear before you get started selling on their platform, that I can only imagine they are scaring off more new businesses than gaining.

 

If you are not a tech type of person, and can’t create original content, write adverts, run social media marketing campaigns, import goods from China, handle the shipping in the UK, do your accounts, deal with customers, take product photos, create a listing, learn how to get your products ranked and selling… then Amazon probably wont be for you.

 

eBay, even though somewhat easier to get started on, still has many areas of complexity to digest and tackle before you start making any kind of regular profits.

 

Google

 

Only a few years ago, Google AdSense was considered a mainstream income… but that too has become way harder to make income from.

 

Consumers are battered online with advertising from every possible angle… so much so that we have become immune to the adverts. This means that the adverts that you use to get commissions are less effective.

 

Blogging, which is mine and many entrepreneur’s best advice on how to start a new business online has also become harder to profit from. With 2.7 Million blog posts published every day in 2017… how does a new blogger stand out?  It’s difficult. Not undoable… just harder than it used to be.

 

Why Trading from Home Could be a Good Bet

Trading for a living

 

When you consider the amount of logistics that need to be addressed before you are even making a sale online, you can see why trading is becoming a far easier option for the modern entrepreneur.

 

After comparing the pro’s and cons that trading for a living can offer, compared to what other online businesses offer, then I can only see the trend [no pun intended] of new traders continuing to rise.

 

Here are some of the biggest benefits that trading can offer you if you are thinking about or looking for a way to generate an income online.

 

It’s easy to start

You don’t need any special equipment to get started. Once you have chosen a broker or spread betting company you are good to go. All the reputable services provide you with the necessary charts that you’ll need.

 

You Don’t Need Much Capital

Contrary to popular belief, you really don’t need mountains of money to start trading. In fact, you can risk far less start up funds deciding if trading is going to be your thing than you can buying stock from China to resell.

 

A few hundred quid is enough to test the waters out. If you decide that it is not for you, you can just close your account after you have withdrawn your funds.

 

You Only Need to Rely on Yourself

Unlike the other opportunities I mentioned earlier, with trading you are in control of your own destiny.

 

I have heard many unfortunate stories of entrepreneurs that have had there selling privileges removed by Amazon and eBay for what can only be considered unfair reasons… basically putting the person out of business quicker than you could say crash!

 

This never happened to me, but I’ve had my fair share of grievances with these selling channels and it regularly reminded me that you could be out on your ear for the slightest and leanest of issues.

 

When you think about it, it’s the same as being made redundant without pay or any clear explanation on any random morning that you arrive for work.

 

Spread betting or trading binary options carry no such hazard.

 

It Really can be Done from Home

You wont need to go to the post office, petrol station, market, cash and carry, library or any other shop or establishment to trade the markets successfully. Trading from home can genuinely be done on a laptop, in your pyjamas at the kitchen table if you wish.

 

Weekends are Always Free

With the financial markets and banks being closed from Friday evening until Monday morning, you have all weekend to do as you please. No overtime to do, ever!

 

No Staff 

Obviously, if you do decide to give trading from home a go, you are never going to need any staff.

 

This removes the entrapment of asking friends or family for favours.

 

Freedom

make money trading

Learning to trade the markets can really free up your time.

 

Vince Stanzione says that you need no more than 15 minutes a day to make money trading… you know what… he’s totally right.

 

Of course though, you’ll need a little more time if you’re day trading.

 

Creates other opportunity’s

The fact that you will have more free time available to you once you do become a successful trader can open the doors to all sorts of other opportunities.

 

Time to learn new skills and take up hobbies, indulge in subjects that have always interested you, travel, self-improvement, fitness, cooking classes, improving your social life… whatever takes your fancy becomes a realistic possibility.

 

Discovering the Law of Attraction

It isn’t luck that falls into the laps of successful and happy people; it is more a case of belief creates the world that they live in.

 

If you start with good foundations and a solid trading strategy, you’ll gain belief in what you are doing and trying to achieve when trading from home; then, the more life will unfold for you. This means getting more of what you want… in our case, trading success.

 

The angry trader that curses his stupidity and berates his own monitor or iPhone on every loss is mentally attracting more of the same into his life… trading failure.

 

Start as you mean to go on… Learn well, trade easily.

 

Satisfaction

 

Winning at anything is obviously more satisfying than losing [for most of us anyway] but winning at trading seems to carry a greater feeling of satisfaction than other successes.

 

The sheer emotional and psychological fact that you are winning trades and money on a regular basis, that is then compounding from month on month is truly exciting.

 

The result is true self-satisfaction.

 

Wealth

As most of us are striving towards creating more money, then last but certainly not least, the most obvious attraction of trading from home is the financial wealth that it can generate and offer.

 

The bookshelves and internet are littered with stories and successes of rags to riches investors. It can most certainly be done.

 

Although I must point out, as I have developed as an individual over the years, I believe that happiness is a far deeper and more soulful state than just being financially rich.

 

However, I do totally understand where this ideal of financial salvation comes from… after all, I used to think the same.

 

There is a certain level of financial gain that will undoubtedly lead many to a happier existence. But it is not infinite; more money does not equal more happiness.

 

Vince Stanzione has declared on numerous occasions that the first couple of million that he made, did most certainly make his life sweeter… after that, he said that nothing else really changed.

 

In Conclusion

 

I hope I haven’t gone to spiritual on you and that whatever you want to get from trading for a living you find.

 

It is worth remembering though that although trading from home can offer many benefits and can enhance your life in many ways… it’s too shallow to assume that money will make your life complete. It might help, and help a lot… but it’s not everything.

DAX Trading System

trade the dax 30

The German 30 or DAX if you prefer, is one of the most heavily traded markets. This is certainly true for day traders as it can be one of the easiest markets to predict spread betting price movement on from a day to day basis.

 

It also moves more than most currency markets from a daily point perspective. This adds to it as ideal market to spread bet.

 

There are many strategies and systems floating around online that can show you various ways on how you can make money from trading the German 30 DAX… I hope though, that none are going to be as simple and quick as this one.

 

Although this strategy is for financial spread betting [so you will need an account with one of the financial spread betting firms]. You could easily convert it to a binary trading system… I’ll show you how later.

 

Ok, with that said, lets get down to business and look at how we can trade the DAX.

 

DAX Trading System

 

I’m currently working on a day trading system for the DAX. It is looking very promising and I am now testing with real funds.

 

However, it has been whilst testing this new system that I spotted this little niche and I thought that I must share it with you now.

 

There are no technical indicators other than support and resistance lines to use.

 

All you need are some live charts.

 

NOTE: If it [this strategy] or something similar has already been published somewhere, then hey ho… I’m not claiming any rights to it.

 

The Rules of the DAX Trading System

 

Firstly, you need to open up your charting package and select the German 30 index.

 

Once selected you need to set the candles on the chart to 10 minutes.

 

I’m using the IG charts in these examples. They are good charts and are free even if you’re not trading on IG platform.

 

Now that I have selected the correct candles, I now need to look at the range of price movement from 7am – 9am

 

It is the price breakout from this range that we are going to be trading.

 

Whilst developing my new DAX trading strategy, I noticed that the first 2 hours of the DAX from 7.00am gave some major swings back and forth. Although you could try and trade this volatility alone, I thought it safer to trade the price breakouts from this range.

 

What is important to remember here is that we are not trying to get in on the start of any major movement and get out just as it finishes. Although a nice ideal it’s unlikely to happen with any regular occurrence.

 

Look at this chart image of the DAX German 30

 

DAX trading System

 

Dax Trading Zones

This image is of the first 2 hours of price movement. You can see that from 7 am until 9 am that the price has consistently swung back and forth from 12418 to 12382. I have highlighted this with the blue support and resistance lines.

 

This price zone gives us a 36-point range. That is actually quite a small range for the DAX and we can realistically expect a price breakout at some stage over the course of the day.

 

NOTE: Sometimes when trading this system, you can easily [and regularly do] get a price range of 100 + points. When the range is this large it’s better to leave this strategy and trade moving average crossovers.

 

So, from here we are looking for the price [our 10 minute candles] to close over or under one of our blue support or resistance lines. To simplify this we can set a price notification.

 

So the next thing you need to do is set the price alerts. Doing this saves having to be at your pc all day or checking your phone every 10 minutes.

 

Here how you create the alerts.

 

  • On the right hand side of the ig screen you’ll see the alert tab. Click that and then click the price level tab.

 

  • Enter the price levels of where you have drawn your support and resistance lines.

 

  • Click the set alert button.

 

German 30 trading system

 

Now when the price reaches one of these levels you can check to see if the candle will then close over or below the level, and if so we can then consider opening a trade on the following candle.

 

Opening a trade

 

To open a trade, we need to be clear and sure that the price has truly broken out of its trading range. It is important the price hasn’t just tested the levels and is going to reverse.

 

To do this and be confident that the price is breaking out from range, we are looking for a big bull or bear candle to break the S&R lines.

 

As you can see from our chart… the price continues to move sideways until we get a good bull candle that clearly breaks the resistance line.

 

Once you are ready to enter the trade, you just hit the buy or sell buttons in the top right hand corner of the IG screen.

 

Trade the DAX

 

With our breakout candle you can see that there is a small wick that formed at the top of the candle. Ideally you should enter the trade once the next candle has broken this level.

 

This can help ensure that the price will continue to move in our direction with minimal drawdown.

dax trading

 

Using Binary.com to Trade

 

If you don’t fancy trading on IG by spread betting this DAX trading system, then you can still trade it on binary.com

 

To do so just trade the German 30 will be higher or lower in 2 hours’ time.

This 2 hour time frame seems to suit this strategy really well.

You can’t start the trade now on binary.com so you will need to set the time of the trade to start a minimum of 5 minutes into the future.

 

Using Resistance Levels Versus Moving Averages

 

Resistance levels are one of the key indicators for day traders, but as you know, moving averages are probably the most used indicator in any form of financial trading.

 

Moving averages are awesome… but if you look at our chart with one of the most popular short term moving averages set ups added, you can see the issues with this type of indicator in sideways markets.

 

Using moving averages that are this small has cut us to smithereens. In and out of the markets all day and paying the spread each time as well as having our banks battered.

 

As you can see we have had a 7 crossover signals [blue dotted vertical lines] in the morning session alone. Most of which didn’t materialise into anything noticeable.

DAX System

 

 

A better moving average for the DAX Trading System.

 

However, if you use a longer moving average you can manage to stay out of most the noise and still get a clear entry point that can help clarify a breakout.

 

I have been looking at how effective the 10/50 EMA is on the DAX and currencies for a few months now and I can say that I have been impressed with the results.

 

The combination keeps you out of much of the sideways movement and noise but give a good buy or sell signal to boot.

 

DAX day trading system

 

Only 1 false signal out of 2 using the 10/50 EMA crossover and the 2nd signal [crossover] signified the start of the breakout.

 

Using a good reliable moving average can help anticipate the price movement as well as keeping you out of choppy unpredictable movements.

 

So the 10/50 EMA can be very useful, but you really do not need it for signalling an entry point when trading this strategy.

You can use it however [or another moving average] to exit the trade as I’ll explain shortly.

 

Closing the position.

 

How long will the trend last? I have absolutely no idea… but I do know that once you are in on it then long may it continue. But that doesn’t help you get out of the trade.

 

The best way to exit a trade using this strategy is following the moving average crossovers. So basically you are in the trade until the moving averages crossover. This is the easiest solution.

 

You can easily use a 10/50 Exponential moving average as an exit signal. This will keep you in the trend longer but can cost you more as the trend finishes.

 

If you want to keep your profits a little tighter then a 5/10 Exponential Moving average may work better for you.

 

You can also close the trade if the price moves back under/over S&R levels or if you are using trailing stops [I don’t use them very often] when and if your stop is hit.

 

You can also just manually close your trade when the market closes at 16.30pm.

 

Using stop losses

Stop losses can be great… but also a great pain in the rear.

 

I occasionally use them and have done when testing day trading strategies.

 

The question always is and always has been, where do you put a stop loss? Stating how much you want to risk on any trade is not a great idea even though popular. If you say you are happy to risk 2% of your bank on any 1 trade then why let the stop get hit in the first place? If the price seems to be bolting in the opposite direction, why let the stop get triggered?

 

In my opinion every trade is different… even if you are trading the same market. So therefore stop losses and where you are placing them are too.

 

This means that they need to be adapted as such. Plus, if you’re day trading, you need to be around to trade anyway. So you can hit the stop [close position] button as and when.

Longer term Trading

Long term trend trading is a far slower moving game. Price rarely go boom or bust in a day. So stop losses are not needed as much.

 

Long term trading is easier if your stop loss is whatever you are risking on that trade. Let me explain briefly.

 

So [an example of this] I may buy SOSO stock at £2 a point but I may be willing to risk £500 on that trade… however, instead of using a stop that keeps getting triggered every minor retracement and costing me £100 each time it does, I have a set risk in my mind. And I use moving averages to exit positions so I rarely if ever lose my amount risked.

 

The times I have seen my trade get stopped out, only to then see the price continue in the right direction was so irritating. And maybe even more annoying is paying extra spread for the privilege to see it happen.

 

Personally, with this strategy I’d be using moving averages to signal my moves, all I need to do is admit I’m wrong if need be and go the other way if I choose.

 

Anyway I digress, if you want to use a stop with this strategy then you are probably best putting it just beneath or above the breakout S&R lines… since you are expecting the price to move from there anyhow it is obviously far better to cut your losses sooner rather than later.

 

How Profitable Can Trading the DAX Breakouts be?

 

These breakouts on this DAX trading system can be very profitable. In fact, I’d say that even if this was your only trading system that you ever used then you’d be realistically able to grab 300 + points each month as a complete beginner.

 

Let’s look at what happened to our trade.

 

Dax strategy

 

Our breakout resulted in just over 50 points profit if we closed our trade as the market closes at 16.30.

 

Considering that this trade never had any losing periods or drawdown since opening the trade, it is a nice stress free result.

 

The awesome thing with this type of trading is that your downside is limited but the upside is unrestricted.

 

Another Example

german 30 day trading system

If you look at this next example of a breakout you can see that many more points can be made.

 

This trade resulted in 75 points profit if we had traded out when the 5/10 moving averages crossed over just before market close.

 

Often the breakouts can last a day and longer, and if the breakouts occur earlier in the day the you can ride the trend for longer if it is profitable.

 

In this next example you can see that the entry crossover candle was quite small but not once did the price move back over the morning support level.

 

This trade gave a very generous and easy 106 points profit if you had closed out at 16.30 or just over 110 points profit if you had waited and traded out at at the crossover.

 

how to trade the dax

 

Leaving Trades Overnight

 

If you are thinking about leaving a trade over night because you have been in a good winning move and you think that it is likely to continue, this is a one of the times it can actually be a good idea to add a stop loss.

 

You could add a 20 point trailing stop so that you can stay in the move should it continue over night, but you also get the safety and peace of mind that if it goes against you that you can lock in most of your profits from earlier in the day.

 

In conclusion

 

  • Open 10 Minute chart of the German 30
  • Draw support and resistance lines of highs and lows from 7am – 9am
  • Wait for a strong 10-minute bull or bear candle to close past the S&R levels.
  • Open trade on the start of the next candle if price movement continues.
  • Exit trade when moving averages have crossed over or at close of day.
  • Let profits run.
  • If using a stop, place it just beneath or above the S&R levels.

 

This really is a great stand alone DAX trading system that can be used on a regular daily basis if the morning support and resistance levels are broken.

 

You might not get to trade every day, but when you do, the minor risk compared to the rewards will easily see you in profit over the months.

 

Stay in Line – Don’t chop and change

Stay in line

At his recent seminar, Vince Stanzione played an smart video clip that highlighted the importance of not chopping and changing from one strategy to the next. [I’ve seen the videos now]

 

He said that many new traders want to make £100 a day and that they look at trading like it is going to pay like a regular job.

 

This ideal is not realistic in many cases.

 

He went on to say that some days he could lose £200,000 and another day make £400,000 and that he uses different systems/strategies throughout the year.

 

And it is over the years that all the profits come together.

 

He doesn’t look at trading profits as wages.

 

His results are from across the board… and that some part of his portfolio might be in profit whilst another strategy is running at a loss.

 

Although I don’t think that new traders should take on too much at once, trading a few winning strategies over time is a good way to increase your exposure to the markets without having all your eggs in one basket.

Stay in Line

That said… firstly you need to find a winning strategy and stay with it.

 

So once you find a system that you are interested in trading and after you have traded with real funds and got use to the concept of winning and losing, then and only then should you consider adding another string to your bow with another trading idea.

 

Here is the video from the seminar that Vince used to explain what most people do when looking for a winning opportunity.

 

They can’t handle the losses, slow pace, or whatever else, so they move about from one system to another looking for the golden goose… ultimately to get nowhere fast nor anywhere better.

 

If you know a system or strategy works, then you should stay with it.

 

The biggest part of any trading system that you use is going to be self control; fully accepting the ups, downs and the sideways… every system you find will require the same… so better to just stay in line as the video suggests.

General Update – Binary Alert Service

General update

General Update and Binary Service Results

I didn’t get the chance to do a proper update of results for my Binary Alert Service in May. So I thought I’d do a general update instead.

Overall it was a poorer run of binary trade results and as of the 1st of June when I initially was going to write the update I was up by around £51 on the previous month.

 

Just over a week later I was marginally down.

 

This is when you need to grasp trading psychology and understand that the aim is to look long term and the results will be positive.

 

My starting bank is still up over 110% since I started the service.

 

Although I can’t deny that I wasn’t upset about a few bad results… [mainly because I have subscribers that I want to make profits for]. I I have been trading the markets long enough to know that this is not science. We will have ups and downs.

 

If you can’t stomach losses, then trading is unlikely to be for you.

 

Anyhow, I’ll cut and paste all the images and do a complete update next month.

 

Trading Support and Clients

 

A huge portion of my mornings have been taken up by support for some of my customers.

 

Whilst the majority of my customers do not need any support at all… or maybe I get an email from some of them once a week, others are in a league of their own.

 

Sometimes this has a bit of an impact on me. Not because I don’t like giving support… but occasionally after a mornings support session, I haven’t wanted to do much else. I’m drained for the day.

 

I remember Vince Stanzione saying that 20% of your customers will need 80% of your support… well I’m closer to 1% of my customers need 99% of my support.

 

It’s seems to be a case of some people are just incredibly hard work. Nice people? undoubtedly… just a little demanding.

 

Out of all my subscribers and customers though, I have only ever had to bar one person. He just had to go. Another came close… but I think that overall I have a great crowd of customers and subscribers that I feel blessed to have the opportunity to be trading with.

 

What have I got planned from here on for 2017?

 

Well, I want to concentrate of writing longer blog posts about how to trade. I’ll focus on areas that I use personally, have used and also areas I consider to be not so useful to traders and why I think that.

 

Also I want to write about my life as a trader, and what being a self employed blogger can realistically bring to one’s life.

 

I’ll also mention some stocks and positions on occasion if possible.

 

Spread Betting Guide

 

I’m also looking at a day trading opportunity that will be for spread betting The German 30 DAX.

 

I’m not sure of how to offer this at the moment though… free or added to the member’s area. However, it will certainly not be ready until late Autumn at the earliest.

 

Learning to Trade

 

As I have said previously in posts, the summer is a great time to practice and learn how to trade. It is a generally quiet time for traders. If you start studying now, you can then be ready for the markets springing to life in the Autumn. Even if you take a few books on holiday with you, it’s a start.

Price Action Trading Strategy

One of the simplest ways that you can trade the markets is by using a strategy known as trading the price action.

 

This basically means that you are deciding on what direction you anticipate the price of the market moving without using any technical indicators at all.

 

My version of this trading strategy uses a single moving average and the price. That’s it.

 

You can remove the use of the moving average if you have set profit target levels.

 

Price Action Trading Strategy

 

Lets take a look at this Mastercard chart.

 

You can see that on here we have a multitude of indicators and drawings that are serving the same purpose… that is to help give us an idea of where the price might be heading.

Trading Price Action Strategy

 

The chart above may seem complicated to many of us… but some traders will genuinely use a set up similar to this.

 

If I were to use a chart with that many indicators on I don’t think I’d be any closer to an accurate decision after analysis.

 

So let’s have another look at the chart with all the indicators removed.

Price action system

 

That’s better… a nice calm chart.

 

Now we have to decide on where we think the price will go next?

 

From my perception, I think that the price will continue to rise, although I also think that there may be some price correction soon, before the upward trend continues.

 

So that being said, where do I enter the trade? I don’t want to just enter the trade with a random guess. So I need to analyse the entry point visually.

 

I can do this by reading and analysing the candle patterns, waiting for a price correction to finish and by drawing imaginary trend, support and resistance lines.

 

A Closer Look at Trading Price Action

 

So let’s take a closer look at my mental price action trading strategy.

 

You can see from this chart that I can mentally draw a picture of what is happening. Obviously I’m drawing on the chart to highlight my thinking.

Price action

 

 

This is a nice steady and well behaved chart. You can clearly see that support and resistance levels have formed and prices have broken out. It is at these price breakouts that I can enter the trades.

 

So as you see, we can make profitable trades using a simple price action trading strategy without the need for using any on screen indicators. You can do this quite easily with a bit of practice.

 

Now if we take an even closer look, we can use candle formations to give us even better entry points and conformation of where the price may be heading.

 

Price Action Trading Strategy Using Candle Formation

 

There are many candle formations that can signify a change in direction of the price on a chart.

 

I have actually read a lot about Japanese candle stick patterns.

 

Initially and with what I learnt from reading online, I could see the logic, but there was no real deep information that I could use to gain a better understanding.

 

I deciding on buying a book, or shall I say tome from Amazon… at £60 I did find it a little overrated after I had read the reviews, but maybe I missed something???  Anyhow, it is still a good book and I gained much useful and fascinating information about candle patterns, even if not trading strategies.

 

The Best Candle Stick Patterns

 

What I did take from the book was the reasoning behind the formation of certain patterns and why some formations are considered more accurate than others.

 

One can then use this information to gain better entry and exit points.

 

My 3 Favourite Candle Patterns for price action trading.

 

So when using a price action trading strategy here are the 3 most effective patterns [in my opinion] that can accommodate the theory.

 

The Hammer and Hanging Man

 

Looking at our chart of Mastercard we can see that we have had a price correction from the 16th May until the 18th May using our 4-hour chart. At 16.00 on 18th a hammer candle forms and from there the price continues its upward trend.

 

The reason that the hammer has formed at this level is because the bears have managed to push the price down further but then the bulls have resisted and fought back pushing the price back up.

 

This is why hammers often signal support levels and reversals. In saying that, the bears are still around… and further price action needs to be confirmed before entering the market.

 

NOTE: The longer the time frame of your candles on your chart the more accurate you can consider these candle pattern signals.

 

After the hammer has formed, a small doji candle forms and then we have a big gap and a nice bull candle that can confirm the upward price may continue. You can then enter on the next candle.

Price action candles

 

Engulfing Pattern

 

The engulfing pattern signifies that the bears have lost momentum and that the bulls have taken control. It also signifies downward price movement capitulation and that the price is likely to retreat.

 

A bullish engulfing pattern should be formed with a small down bear candle and a large up bull candle that has very little shadow.

Engulfing pattern

 

This is one of the most commonly used candle stick patterns to identify price reversal. It is also one of the easiest to identify and understand.

 

The best place to see a bullish engulfing pattern is at the bottom of a sustained downward trend with a minimum of four consecutive down bear candles that are not increasing in size.

 

Price Action Bullish engulfing

 

A Bearish engulfing pattern is the opposite of a bullish engulfing pattern.

 

A bearish engulfing pattern signifies that a sustained bull period may be about to reverse.

 

The engulfing bear candle must completely consume the previous bull candle.

Bearish engulfing

The Morning Star Pattern

The final pattern that I commonly use or shall I say look for, is the morning star pattern.

 

This is another reversal pattern that consists of a 3 candle set up.

 

The morning star was called such as Japanese rice traders call Mercury [the planet] the morning star and this good omen was considered a sign of brighter things to come. Hence why this pattern is named and formed after a bear market. The down trend has finished and better times are ahead.

 

The 3 candles that form the pattern are one bear candle, one doji [the star] and one bull candle.

 

Morning star pattern

 

Reading the formation is as easy as spotting it. The longer the bear and bull candles the more thrust behind the reversal.

 

The bigger the gap from the candles either side of the star, the greater the chance of reversal as this indicates market indecision.

 

The higher up the close of the 3rd candle is [the bull candle] the greater significance this has to the price reversal.

 

The morning star formation is the least common of the candles I mention but many will argue that it is the most accurate in terms of signalling a valid reversal in price.

 

Other Candle Formations

 

You can read more about candle formations and patterns here. You may find other formations more suited to your style of trading.

 

The book I bought that I mentioned earlier, explains the history of these candles and formations and explains in detail how they were developed when the Japanese initially used them when trading rice hundreds of years ago.

 

I found all of this fascinating and what’s even more bizarre is that traders in the western world didn’t even know about them [candles] until the 80’s.

 

Price action Trading Strategy and moving averages.

 

When using a price action trading strategy, adding a single moving average to your chart can really add some weight to making more of an informed decision as to where the price may move to.

 

If you look at our Mastercard chart again you see that I have added a single EMA, Exponential Moving Average.

Price action EMA

You can conform your earlier findings with the EMA and then enter the market confidently. Before I show you how, let’s take stock quickly…. no pun intended.

 

So to recap… Identify trend, determine support and resistance levels, look for candle formations that may signal a change in market sentiment and then add a 6 period EMA to verify your findings.

 

Bare Bones Price Action Trading Strategy

 

If all the above sounds like too much effort, then the easiest way possible to trade price action is just by trading above or below your EMA.

 

So in our Mastercard example, we can go long as the candles cross up and over the EMA and go short when they cross over and under.

You will get more false signals trading like this, but your win gains will out number your losses.

Price action trading strategy

 

 

In Conclusion

 

A simple trade the price action strategy can give great returns, without the headache of 20 different indicators on a single chart all opposing each other. It’s a simple as you want to make it in all honesty.

Beginner traders can practice this easy enough without spending any money on charting packages or systems.

You can use the free charts on google or yahoo finance

How to Choose a Stock to Trade

I’m often asked how to choose a stock to trade? What do I look at that ultimately sways my decision to go long or short?

 

So I’m going to give you a run down today at what I look at and how you can start to do the same.

 

Choose a Stock to Trade – Mastercard Inc

 

This is actually a stock that I’m interested in trading soon.

Choose a stock to trade

 

Firstly, I will look at the monthly and weekly charts. This gives me an idea of where the price is going.

 

Looking at the above monthly chart, I can see that there seems to be a nice steady trend in place.

 

There is a similar picture on the weekly chart.

How to choose a stock to trade

 

Finally, I will load the daily chart as this what I will be using for my final analysis and entry points.

 

When looking at the daily chart, I’ll now start to use my other indicators to make an informed decision on where to enter a trade.

 

I’ll start by checking to see if my moving averages have crossed over? Are the candles forming above the moving averages? Is the trend still in place?

 

You can see that this is the case on our daily chart.

Choose a stock

 

I use different moving averages depending on how long I am looking to trade a particular market.

 

Shorter term I’ll use moving averages around 20 days [the longest period] Medium term 50 days and longer term 200 day moving averages.

 

Now as the trend has already been identified, we are looking for a good entry point.

 

This can be a tricky decision as you can quite easily over think the situation and delay the entry, or you’ll find that you do enter but wish you hadn’t because the price shoots of in the opposite direction.

 

The main thing to remember is that you are not trying to enter at the absolute low or high… it’s a nice idea but in reality it rarely happens.

 

As long as you enter and follow your rules, and you are not trying to buck the trend, then you should be ok.

 

It’s ok to open a trade and the price moves in the opposite direction. Prices move up and down… that’s the name of the game.

 

If the price moves completely against you… remember that these things can and do happen. It doesn’t mean that you can’t trade and the markets don’t like you. It isn’t some game the markets are playing with just you in particular…

 

Just go again when the time looks right. Overall when trend trading you’ll come out on top over time.

 

Trade Entry Points

 

Good entry points are at the moving average crossover as already mentioned and also at price breakouts when price moves above or below support or resistance levels.

 

Using our Mastercard chart, we can set our entry points where the price goes beyond a previous high.

stock trade

Volume and Candle Patterns

 

Volume and candle patterns can be incredibly useful entry indicators when you combine them with your charts.

 

I can’t possibly tell you how to trade using either in a single blog post… I just couldn’t do it with any detail that the methods deserve. However, you can get some free info here. This guy is a bit of a legend when it comes to candle chart patterns.

 

I also have a copy of this book… although personally I found it a bit over rated compared to the reviews, it is still probably the best book on the subject.

 

Learning about volume and candle chart patterns, combined with moving averages is many a pro trader’s main arsenal when it comes to entry points.

 

As you know, there are hundreds of other indicators that you can use. MACD is another I use to confirm trends and entry. Stochastic oscillator can be very useful too, as this can identify price direction change [swings].

 

For me though, I’m mainly moving averages and trend following. It has been the core of all my trading. It keeps thing simple and easy to see.

 

Gaining a Greater Edge – Company Insights

 

Analysing a company and delving deep into its current news can sometimes give you a clue to where the price may be heading.

 

Profit announcements, mergers, product launches, new land acquisition, new directors and so on… can all play a part in knowing which way a price might move.

 

For me personally, I am of the opinion that what we need to know has already been factored into the current price.

 

That said, Vince Stanzione is an absolute master at identifying emerging trends. I have no idea how he does it, nor do I have any idea how many points he has made me on this information alone??? It is many thousands though.

 

In Conclusion

 

Keep it simple.

 

My main tools are moving averages.

 

I have not changed the foundations of my trading since I have started… that’s because long term moving averages have remained profitable.

 

Deciding on a good entry point is all you need to do once you have seen a trending stock. Again, keep that simple too.

 

If spread betting is a little to nervy for you, start by trading binary options and then move on to spread trading from there.

 

Trading from Your Mobile – 3 Reasons it can Suck

I have just returned from a well-deserved break. Only 4 nights, but OMG that sun felt good.

The Journey was smooth, transfers even smoother and the chance to rest amazing.

As you know, this year has been different for me and also far different for my partner, as we have worked hard on creating my trading systems.

Now that the system has launched, there is support that needs to be offered on a regular basis. This is obviously a fact of trying to teach anyone anything… you need to help when it’s needed.

Fortunately, smartphones and mobile internet make running a business on the go totally possible.

Although running a business, offering email support and genuinely keeping tabs on everything is one thing… but can you really trade effectively from your mobile phone?

Well, being as I did exactly that whilst away I have to say yes. My subscribers want to make money and trade… and I was able to do all the required analysis on my iPhone, relatively easily and profitably.

As I’m used to trading and using my own system, this no doubt aids the overall process. However, if you’re a newbie, then I truly believe that learning to trade on a smart phone can have more negative outcomes than positive.

Here’s why.

3 Reasons Trading from Your Mobile can Suck.

One of the big downfalls from trading on your mobile is that you just can’t see the bigger picture.

Trying to analyse a chart on what is essentially a 6 inch monitor is ridiculously hard to do. Yes… you can see the chart alright, but it is very difficult to gain any true feeling about the price from such a small view.

If you know a chart like the back of your hand and are used to looking at it day in day out on a larger laptop screen or PC monitor then it is easier to get your head around.

But for anyone just starting out, laying their trading foundations by learning charting from a smartphone is going to be a struggle at some stage and most certainly cause errors.

You might be able to check your longer term trades easily enough on a smart phone [I do] but deciding on opening new, shorter term or in all honest any new trade could well be flawed.

I just don’t see how you can get a true insight in the overall picture of the chart on a miniature screen.

I may be wrong on this…. but analysing a chart on a smart phone is a big NO for me.

Trading from your Mobile

Where is the price going?

 

Resolution and view is another big concern I have with smart phone trading.

Turning your phone one way and then another [landscape, portrait] changes the view of the chart totally.

So getting used to the look of your chart can change instantly.

The most irritating thing about this is that you have to do it at some stage in order to see the overall picture that the chart is presenting you with. Plus you have to do this in order to read some data quickly if need be.

Charts on Smart Phones

To me, a chart looks so more urgent in portrait mode. This means that you then need to look at landscape mode to reconfirm the same thing that you have seen in portrait mode… this is a mega issue.

I find that portrait mode makes things look like you need to take action NOW rather than telling you what you really need to be doing… which most of the time is nothing.

These charts are of the USD/JPY. They are both exactly the same. But the portrait few seems to offer a trading opportunity. The chart looks so urgent and liquid to me.

 

Mobile trading Trading on smart phones

 

 

Smartphone Habits

How many times or how many hours a day do you really waste playing around with your phone? Finding something to do other than what you should really be doing?

Over trading… the scourge of all traders…. This is hard to master for anyone.

But nowadays you have a smart phone…are traders more tempted to keep checking their positions? You bet they are. Talk about dangling the carrot.

As the saying goes, and one I have mentioned many times before, ‘the money is in the waiting’

But for those idle hands, the temptation to keep checking your open trade is a disaster waiting to happen.

The constant trading opportunities that present themselves when trading from your mobile are practically endless. Even though there really aren’t any that you need to consider, you’ll find them.

Plus watching your trading go in and out of the money can be an emotional rollercoaster for many.

Betting Companies Love Smart Phone Traders

Any sports bookmaker or spread betting firm must be doing back flips since the invention of the smart phone. Although there has been a sustained effort to get companies in the UK to tidy up their operations, is that enough to stop a gambler gambling? I doubt it.

For the FCA to really save people from losing their money they need to ban any form of punting on smart phones… and that ain’t going to happen folks.

In conclusion

Overall, trading from a smart phone can be a useful tool, but only for the few that have cast iron discipline and are probably not day traders.

If all you’re doing is logging to your trading account and placing a trade, then the smart phone is awesome. Just make sure you can walk away and forget about it once you have done so.

Most should steer well clear, trading on your mobile isn’t that easy. Learning to trade on a PC or laptop is far better.

Trading using support and resistance lines

As I have already mentioned, there are a numerous, even hundreds of ways to trade the markets, I thought it an idea to highlight that there are few simpler and as effective as trading support and resistance breakouts.

Again the one thing you need for this strategy is discipline, and that comes in the form of waiting for the breakouts.

Apart from that this trading using support and resistance lines is ultra-easy to do and mega effective.

Trading using support and resistance lines

Looking at this chart of the USD/JPY you can see that the price opened up on again Sunday evening from its Friday evening close.

Trading using support and resistance lines

The price then moved down quite strongly over Monday 24th after opening… giving us our first resistance level at 11062.3.

From there, the price met support on Tuesday at 10958.7 giving us our first support level.

As the price headed back up to our first resistance level, the candle at 12 noon breaks through this resistance level and as you can see moves higher.

The candle immediately after the breakout candle can give us a good entry point using our 4 hour charts.

You can then place a trade on binary for a set number of hours or if spread betting, open the trade and place a stop loss at the previous resistance line point 11062.3. that has now become our support line.

The price then retracts and moves sideways before resuming its upward climb to the next resistance level at 11229.8.

From this new resistance level we are either expecting a nice strong breakout or a good rebound/swing back down.

Why? Because if we look back at our chart we can get a far clearer idea of where we think the price may go.

Trading using support and resistance lines

As you can now see, the picture is clear.

The price has already rebounded from the same resistance level on 31/03/17 and continued to move down until 17th April where support was met.

Then the price has moved steadily back towards the resistance level that was formed on March 31st.

This simple trade has made around 800 points overall in a month… 400 down and 400 back up if you were spread betting [depending where you entered].

Where do you think the price will go from here? If I was trading this currency pair I’d wait for a breakout candle above the current resistance level around the 11230 mark. I could then place a binary trade for a set number of hours, or I could even use days. If it rebounded we could still trade the swing back down.

Spread Bet or Binary?

I have rarely ever spread bet currencies. I am far more content spread betting stocks or indices… That stems from trading with Vince Stanzione I think.

I do like trading the currency markets on binary though.

Anyway, have a look at some charts and practice drawing in some support and resistance levels. From there try trading the breakouts. You can use a demo account on IG or binary.com to monitor your results.

Drawing support and resistance lines

Don’t over complicate drawing support and resistance lines. All you need to do is ask yourself this… has there been a significant change in the direction of price where I’m about to draw my support and resistance lines?

If yes, then draw your line. It is that simple.

You can also draw support and resistance lines diagonally. This can also help to identify trend directions and create trend channels that can be used for swing trading as well as clarifying entry and exit points.

drawing support and resistance lines