The 4 Principles that Drive Elite Traders Performances

Even tho it sounds gimmicky these 4 principles really do drive success for traders. At least, I can attest it for full-time FX traders – others, I can’t say, that’s not my edge.

  1. Performing from your sweet spot
  2. Acquiring and building a skill
  3. Being able to deliver whenever there’s opportunity
  4. Remaining on top

Those four topics are the pillars for trading success, you want to become a full time trader – focus on those four, in that order!

I’ve just listened to an amazing podcast on chat with traders – Aaron Ffifield had James King on and the conversation was amazing that I’ve decided to make a blog post about it.

You can find the link to the podcast here:

You can also find James A King website here:

Now that we’ve shared this information, let’s dive into it!

What drives elite trader performances?

Ambition? Hard work? Talent? Yeah… But…That’s not the entire story

Neither is the 10,000hour rule, which I guess is rather reassuring for quite a lot of you?

In the point James King shares he makes it clear that he sees excellence as a pyramid, that has four core levels:

Screw using PowerPoint pyramids, might as well use a real one!

Those four principles are key to your success as a trader. As always, the first one, performing from your Sweet Spot is the most important. Since it’s the base, without it, everything would break.


Performing from your Sweet Spot

So what’s a sweet spot? Is it in the kitchen next to the candy jar? Nop, sorry to disappoint! I’ve got bad news, worse than the joke I just made, I actually can’t tell you what your sweet spot is.

You’ll have to ask yourself some questions, but we’ll come to them afterwards, let’s first address why do we need to perform from our sweet spot – it’s easier to perform when the goal you pursue aligns with the quality that makes you unique.

I’m not chasing someone else goal – I’m unique so I’m chasing my own goal and it’ll be way freaking easier if it aligns with things I’m good at.

So what’s your sweet spot? It will depend on your strength, interest and values – and those are not necessarily related to trading at all, it could be things you used to excel at when you were a kid.

What comes naturally to you? Do you like spending time reading news and staying up to date with what’s happening in the world? Are you better at solving puzzles? Are you always up to date on everything?

Once you’ve figured out what comes naturally to you, it could define your trading style, if for instance you love reading news and understanding how countries are being governed, then maybe trading the macro/fundamental side of things could be something you’d be better at that trading technicals? If on the opposite you hate watching news (#WelcomeToTheClub) but you like trying to solve puzzles, build stuff and have a strong imagination it’s likely you’d see better results in your trading if you were a technical trader.

If you are interested in technical analysis and trying to find levels where price is likely going to reverse and can spend a lot of hours without having to be motivated by someone else it’s a good sing – because the truth is, you’ll have to put in the time. So if trading gold interest you more than trading currencies or even equities you should focus on that side of things.

To find your sweet spot and to know what you should focus on to become an elite trader ask yourself, where have you excelled at in your life? What have you been highly responsive to training? What personality do you have (btw I highly recommend doing the Meyer Briggs test, it can help you find your strengths as well as your weaknesses, which is rather important!) What are you always motivated to do? What type of asset class are you the most interest in?

All of this leads to the question what are your values, what’s the most important to you? Is it money? Is it fame? Is it time? autonomy? etc Based on your values you may discover that working at a prop desk or a hedge fund doing research may be a better place than trading your own capital.

Find your sweet spot – and execute from there.

And yes, we’ve spent all this time not even talking about trading or performance but just about figuring out what we want to focus on.


Skill Acquisition

Here’s the good news, you probably won’t need to spend 10,000 hours working your ass off before you master a skill, if you do, it’s probably not your sweet spot or you’re following a shitty methodology 🙂 Let’s dive into the 7 key factors when building a skill to excellence.

Start with the comprehensive foundation

You don’t have to do extraordinary things – you have to do ordinary things extraordinarily well –> think about our friend Bruce Lee 🙂

You want to master the basics, without a mastery of the basics to stand on you’ll go nowhere.

Apparently in Tennis 85% of points are made in the service / return and return service – yet most tennis players only spend around 15% of their time practicing those skills.

You want to find what are the big levers for success, don’t focus on tiny marginal gains, focus on the big levers. That’s where the value is at. In trading it’s probably around entry / stop sizing and exists. That’s where the money is made, it’s not about anything else.

Practice over theory

It’s what you can do not what you know that matters – knowing how to kick a ball the most precisely as possible but not being able to do so in practice is useless. You’re better off not knowing the theory behind it but be able to hit every target that’s set.

Turn your learning into practice, don’t spend too much time on theory you have to think, do and produce –> once you’ve practiced enough you can articulate what happens then that’s fine, but practice over theory.

It’s all on you

I don’t really care if you end up super mega successful, your neighbor doesn’t either, it’s only on you, it’s your future. Don’t expect to be given the answers (well, that’s kinda what I’m doing here on a daily basis) you have to figure it out for yourself.

People can explain to you a strategy, but it’s on you to understand it and develop it. Advanced skills need to be discovered they can’t be taught.

Take responsibility over your future.

We need challenge to change

If we remain in our comfort zone we won’t evolve sadly, heck I wish sitting in my hamac would enable me to improve my 5k time, sadly I need to push myself to be able to build more muscles.

We need to spend as much time as possible in a challenging zone to be improving, you need to be absolutely focused on what’s happening – if you’re thinking about what you’ll be eating at dinner tonight when practicing you might as well stop straight away!

Get uncomfortable, learn to enjoy being challenged, but if you’re at a point where you’re starting to panic, you can take a break 🙂

If it doesn’t happen when you’re competing, it doesn’t matter.

There’s no point in practicing things that will have absolutely zero impact on your trading results – so many kids dream of becoming a football star, they go home and start practicing tricks with the ball, the problem is, being able to do fancy tricks with a football probably won’t win you a championship – being able to shoot straight, run faster, control the ball, tackle is what matters. Well, I think, I’m not a big football fan.

Create uncertainty

It’s nice to practice when you’re comfortable at home with zero stakes where you control all the factors, however you want to have uncertainty. You need to train in the conditions you’ll be executing – and then imagine even more extreme conditions – for instance for traders you may want to focus on extremely hard to trade markets, periods with drawdown, making decisions with a time limit, it’s all well having a backtest tool that you can pause to make a decision, but in live market conditions you’ve don’t have all the time you want.

Learning is the mindful search for solutions

It’s not mindlessly repeating a solution, it’s a mindful search for a solution repeated over and over – for instance think about your phone, to be able to unlock it with your finger you have to scan your finger several times, in different angles / positions –> what it’s doing is that it’s learning through variability to be able to recognise it whichever angle you end up using.

If you only gave your phone 1 try to collect your fingerprint I’m willing to bet your phone wouldn’t open as quickly as it does now, it would reject you quite often as well just because you didn’t train it with different conditions.

Out of every successful trader I’ve met (and the ones James has met) it’s very rare for them to rely on 2 extraordinary things – instead, most successful traders have mastered the basics and just don’t do mistakes that cost them their career.

Anyway that’s enough for our second point – the skill acquisition to become an elite trader.


Delivering on demand

Being able to execute your strategy whenever the time calls for it even tho you’re under pressure is key.

I remember Josh Waitzkin in the art of learning was talking about the ability masters have to switch on and off – for him he could just listen to one song and be pumped up ready to fight.

Outliers are able to flick a switch to regulate their emotions and execute. You want to be able to enter a flow state and have access to all your knowledge and training.

You need to spend time building your skill of getting into the zone – it’s a skill like all the other ones.

Your thoughts + Your actions = Emotional State

If you realize your are in a suboptimal state, think what are you doing, thinking, how you’re sitting, breathing etc.

Your thoughts and actions will change your emotional state.

The sea won’t always be calm. You need to be able to get comfortable even in the worst weather.

If you feel overwhelmed try to break the feeling down – is it because you’re in too many trades? If so only take 1 trade at a time until you’re comfortable. Is it because you’re trading a new asset class? Trade with a smaller risk!

A nice short section, but it’s so key.

Josh Waitzkin recommends listening to a song every single time before practicing – for instance before every single workout for a month listen to the same song. After a few months of that habit it’ll probably pump you up as soon as you hear it.


Sustaining Success

Let’s start this section with dark reminder: More people die going back down Everest than going up.

It’s actually got a name in climbing, the “post summit peril”, you’re tempted to bask in the view, enjoy life, congratulate yourself and switch off your focus really enjoy the moment. When you go back down….

There’s two key biases we need to keep in mind

  1. Continuity bias – We believe the future is the same as what we’ve experienced, we down play the risk since we’ve made it so far, it’ll just remain the same.
  2. Illusion of personal control – We downplay the rate of luck / variance in our success, we forget we were lucky because we had a favorable backwind – it makes us complacent because we believe it’s 100% thanks to us, we forget the circumstances were in our favour.

Those two key biases probably won’t impact us immediately it’s a slow process that will definitely lead to your long term demise sadly.

Although we want to strive to become the best, you can never allow yourself to believe you’re there –> when you’re second you have the drive to keep moving forward, when you’re first it’s easy to loose all motivation.

To do so, develop a comprehensive understanding of what it’ll take to win and a comprehensive understanding of where you are –> that will enable you to find your weak spots and what are the important levers you want to focus on.

If you really understand what is holding you back, the solution will probably fall into your lap 🙂

If you look at the best teams, for instance the All Blacks when we think of rugby, they don’t focus on being the best in the world in their sport, they look outside of their “industry” they are competing to get the best win rate in every sport. They’ve set bigger targets.

Standing on your own success won’t be enough. You need to keep evolving

What you need to keep in mind is that you’re basically evolving in a ever continuing circle of improvement – even tho you’re at the top of the current cycle, you’re not at the top of the mountain, you’re only in a transitional moment towards the next cycle.

That’s it for today!

I hope you enjoyed this one!


Oh and, James A King released a book I’ve just ordered on Amazon so I can’t speak about it, but the podcast was fantastic, you can find it here

Once again;

You can find the link to the podcast here:

You can also find James A King website here:

Dealing with my biggest drawdown (trading)

Fuck it, I guess I should admit to it…

My last 8 trades in a row were either a break-even or a loss

Can you imagine that?

8…

It hurts to just mention it, my ego took a serious beating…

But wait, instead of running away from losses let’s dive into them

Let’s put some music on (I like Worakls) on and talk about them, since I can’t out run them

This made me (re)backtest my strategy for 2020

I had recently adjusted it based of new knowledge and new testing.

The refinement I just mentioned took place without me backtesting the new trading plan, instead I truly believed they were worthwhile tweaks and additions so I just blindly added them to my plan.

It made my trading more mechanical, fuck yeah, that’s what I’m about!

So I just went through all the backtesting and applied those refinements, this lead to this:


In 2020:

42 positions up from 33

A strike rate (including BE) of 42.86% and only 28.55% of winning instead of 66.65% (including BE) and 54.44% of winning

An average return of 0.33% it used to be 1.31%

A total return of 14% instead of 43%

Eh fuck. Why did I adjust my plan

What the FUCK happened?????

That’s a good question..

II tweaked my trading strategy based on what I thought, on a logical basis would work better than what I used to do. And since it was only slight refinements I didn’t dive deep enough in my backtesting to make sure it was good changes.

So that made me deal with a 28% strike rate (of winning trades) instead of 55% which was the result of my previous plan

I tried to improve my plan, but instead I made it a hell of a lot worse.

It hurts, I thought everything I had done was good, smart and the right choice, well, it may have been in past years, but in 2020 it wasn’t the case…

Anyway, that’s the story about how that losing strike happened.

Even with a 28% winning rate the probability of having 8 trades in a row that aren’t winners is of 7.22%

Which is actually quite high knowing how many trades we shall take over our life time.

Let’s do an exercise to know the probability of having trades going “bad”

It’ll be fun I swear! The most important part is to know the probability of your winning trades (only winning trades, don’t include your break-even in this strike rate for this exercise)

So what is the probability you’ve got?

P= __%

So for me, according to my older plan, that P is equal to 55%

Now let’s do a tiny winy bit of maths (I recommend using http://www.wolframalpha.com if you don’t love maths and don’t have a calculator next to you :D, that’s how I passed my maths exams at uni!)

To get the probability of having X losses OR breakeven in a row we’re going to do:

(1-P)^X

Eheh, never thought I’d be talking maths on my own blog, what happened to me…

So for me that is (1-0.55)^X

Let’s have a look at the probability of having 5 losses OR breakeven in a row

(1-0.55)^5=1.85%

Okay that’s already WAY MORE REASONABLE!!! So in that case, with my previous strike rate, the probability of having 5 losses in a row is only of 1.85%

Over a lifetime of trading you’ll definitely take more than 100 trades, well at least I will that’s for sure so the probability of having 5 losses in a row within the next 5 years is actually pretty high…

Okay so that’s good to know I guess? I mean I understand the maths behind the probability of having a drawdown, I didn’t fail Math 202 at uni Max… I know you did!! Is there anything else you can talk about?

ABSOLUTELY!!! Well maybe 🙂

Use a deck of cards to represent probabilities

Oooohhhhh, finally a useful idea Max you were kinda wasting my time up to now..

adityachinchure on IG took this photo

(I really should say, thank you so much for reading this far, it means the world to me <3)

Okay so now unto the exercise I started talking about..

So with my 55% winning rate how can I represent that?

Well I’ll be lazy and say that it represents half the deck of cards because it makes life easier

So every single black card within the deck is a winning trade that represents 50% of the cards

I also had 11% chance of my trade being breakeven

In that case I’ll take 6 cards and turn them to breakeven trades

The RED 1, 2, 3, will represent breakeven trades to represent around 10%

The RED 4, 5, 6, 7, 8, 9, 10, J, Q, K will represent losing trades (20) out of the 56 card deck to represent 35%

So I delt myself 5 cards (avoid dealing more than 5 cards since with cards the cards that are already present influence the probability of what’s coming afterwards when it’s not the case in trading)

Pretty cards eh

So here’s the result:

8R = L

2B = W

2R= BE

10R= L

3B= W

That’s perfectly normal distribution for me, I have no issue with it I wouldn’t be surprised if it happened in real live trading to me. Just another day at the office.

This morning before having the courage to write this blog post I did the same exercise, I had 7 red cards in a row (I delt myself 3 hands of 5) the probability of having a R card that is always (more or less) the same.

But that surprise this morning made me realize, even with a 55% winning rate, the possibility of having 7 losses or BE in a row was there and I saw it in the cards.

That kinda sucks I’ll admit, but there’s nothing we can do about it

So I’m going to be dealing myself cards every single day from now on to represent the probability of having a negative streak of trades.

That being said, I’m also going to revert back to my previous trading plan and ignore all the changes I had applied to it because well… Yep it ain’t working.

Thank you for reading this post, I hope it was helpful!!

You don’t really trade the market

Everyone thinks that we trade the market we’re invested in, would that be FX, commodities, stocks etc etc

But is that the case? I mean a market is a market, it’s nothing at all.

It’s not as if you go to a counter and ask for two dozens oysters and some nice smelly cheese, that’s something we can eat and enjoy.

No, we only trade our beliefs.

Currencies are only worth X because of the belief/trust we have that they are worth that much, because someone told us it was the case.

Trading is only a matter of showing our belief that a currency is going to become more valuable / trustworthy for others

Don’t focus on trying to understand how a market moves, it’s only the sum of all the beliefs of the participants.

Instead, try to understand how you come to believe something, and how others change their minds.

If you’re able to understand a change in the mind of the other traders/investors before it takes place you’ll be well off.

You don’t really trade the market. You trade your beliefs about the market. 

~ Van Tharp

Reading habits

The highlight of being self employed and having a large amount of “free” time is the ability to read.

I love reading.

A lot of very successful people recommending reading too, so I’m sticking to it, and would highly recommend you to do so!

But if you don’t currently have a reading habit… Here are a few recommendations I would give myself

Don’t force yourself to read “smart” books

Read to enjoy yourself, don’t force it, you’ll get to a point where picking up a book becomes a habit and you’ll want to learn something new!

Start reading for the fun of it – don’t start reading complicated investment / psychology books if that’s not your cup to tea.

You’ll get to a point where that’s what you want to do,

don’t force it!

However, if you like reading here are a few of my favorite books as a trader

Meditations by Marcus Aurelius

Mental Game of Poker (1&2) by Jared Tendler

The way to Love by Anthony de Mello

Seeking Wisdom from Munger to Darwin by Peter Bevelin

Inside the House of Money / The Alpha Masters / Market Wizards (great collection about hedge fund managers)

There’s no need to read thousands of books

Instead find books that open your mind and read them, make sure you assimilate, take notes, go back, re-read them etc

Don’t rush the process

Don’t read to show off and be the smart ass that tells everyone he speeds read a book a day but doesn’t apply shit

You don’t even need to read books, there’s loads of great blogs

A few blogs I like to follow:

Macro-ops

Collaborative Fund

Paul Graham is a legend

Farnam Street

Does twitter count? There’s a few amazing accounts there!

P.S. Currently reading: The Invisible Hands top hedge fund traders… Steven Drobny

The four pillars for trading success

The four pillars for trading success

We all wish trading came naturally to us; after all that would’ve meant saving countless hours, (a lot of) money, friendships that were broken after having a shitty day in the market

Oh and these reflect my personal views and experiences, I am sure you could argue for something different

What are those four pillars?

(Wish their was like a way to drop a curtain or something)

  1. Persistence
  2. Risk Management
  3. Psychology
  4. Trading Edge
Image

Let’s break these four pillars into a section each:

Persistence

Trading is difficult. Like any other skill it will take time to master, the only way to through the deep water is to preserver, if you haven’t given up you haven’t failed.

As long as you get back up after being pushed back down there is still hope.

That being said, having fallen off (many) horses it does take persistence to get back up on the horse, the same goes with trading, there will be losses, there will be mistakes, but there is a need to continually get back up and get ready for another try.

There is also an undeniable need to spend countless hours in front of charts in order to develop and test an edge and persist until we feel comfortable with our own strategy

Trading is all about survival, protecting the assets we have, making them grow, without getting killed. Keep that in mind.

Image result for persistence quote paramahansa yoga

This point is rather straight forward so there’s no real value spending too much time dealing with it, we are left with

  1. Risk Management
  2. Psychology
  3. Trading Edge

Risk Management

Risk management is probably the first subject new trades should look into, we can break it down into two topics: protecting the initial capital and an understanding of probabilities.

Protecting the initial capital

One of the best ways to screw up your psychology and give up is by taking huge losses that will destroy the size of the trading account

In order to protect the initial capital, it is key for traders to understand how to size their positions and (ideally) maintain a constant risk profile.

Why is it so important to avoid large losses?

If a single trade isn’t properly sized, it is possible for a trading account to be blown – by that I do mean, it is possible with one trade to lose all the money (and potentially more) you have in the trading account…

Let’s dive into “smaller losses”:

Image

A 10% loss requires you to make 11% back in order to get back to the starting point, which when we think about it, isn’t that bad, it could be worse… However, if you take a 50% loss then you will need to double your account in order to bring it back up to the starting size…

Yep…. Here’s the example:

10,000+10,000*(-0.5) = 5,000

5,000*X=10,000

X= 2

(Mainly wanted to show the benefits of getting a university degree, I can do maths now 😊)

The key lesson here is:

 MAKE SURE YOU DON’T SCREW UP THE POSITION SIZE

The likelihood of you preserving and not screwing up your mental game after such a loss is extremely low so… If you want to have a career in trading, make sure you size your positions correctly.

Image result for it's not about being right or wrong soros

Understanding probabilities

Now this one may seem a bit more obvious, but over many discussions I’ve realized it may not be the case

There will be winning trades, but there will also be losing trades, this is a given, anyone that promises you a 100% strike rate is either into high frequency trading (and works at a huge fund) or is trying to get your money, and the likelihood of the second far outweighs the first…

Now it’s let’s dig into why I think it is key to understand your trading edge and your numbers (more on that afterwards)

If you are a trader you may have a 45% strike rate (it is possible to be profitable with a lower strike rate, as it is possible to be a consistently bankrupt trader with a higher strike rate)

As you can see on the following image, you have a 72% likelihood of taking 6 losses in a row over 50 trades taken, yep a 72% likelihood, that’s freaking surprising eh

The likelihood of taking 7 losses in a row is at a “more acceptable” probability of 49% (which is still super high!?)

Image

Knowing the probability of taking 7 losses in a row is close to 50%, no better than flipping a coin, how much should you risk?

If you risk 5% per trade, you shall be down 30.2% (assuming you adjust your $ risk after each trade) that means you’ll have to make back 43% to get to the level you were before this losing strike… A rather big number if you ask me – however if you only risk 1% then you’re only down 6.8%

Let’s say you’re trading a 100,000$ account, I would highly prefer being down 6,800$ instead of 30,200$… Can you imagine the impact on your psychology? I would be devasted with a 30.2% loss

Image

Don’t forget, trading is a survival game, and you can only survive if you protect your initial capital and risk the right amount… Don’t show off… Now onto

Psychology

Probably the less fun part of trading for most of us (I’ll admit, I actually love it!) but you’ve probably heard it from many people psychology is key for traders, it may even represent 80% of the work you need to do to become a profitable trader

Now what are common traps we can fall into

  1. Sticking to our bias
  2. Trying to prove we know better
  3. I can’t lose so risking more
  4. I just need to get even
  5. I’m just one trade away from being profitable this month

I always used to get told off for doing more than five bullet points but there’s so many other examples!

So how can we have a profitable psychology?

  1. Focus on the process – they do not care about being right or wrong
  2. Understanding the numbers linked to your trading strategy
  3. Having strong opinions weekly held and being willing to flip sides
Image result for psychology trading quote

The most important part of trading is understanding that the market doesn’t care about you, and you shouldn’t really care about it. Instead focus on the process, be willing to jump ship and understand nothing is guaranteed in the market.

Instead, focus on yourself, spend time off the charts, recharge, meditate, empty your mind, and execute your trading plan

The worst enemy you have is yourself – and sadly you’ll never really get to beat him to the ground, even the famous Greek philosophers sometimes had urges (some were also doing the exact opposite from what they preached…)

Image result for conquer yourself zeno of citium

Truly believe I can’t make a better point than Yvan:

Confidence is not “I will profit on this trade.” Confidence is “I will be fine if I don’t profit from this trade.”

Yvan Byeajee, The essence of trading psychology in one skill

Try calming your mind, ideally empty your mind from all greed hesitation and passion, instead remain neutral and in control. The best way to do that is to meditate, and if you refuse to do that, go for a thirty minutes walk without your phone, just paying attentions to your thoughts, it should help you drop all those negative charges.

Tihbo puts it beautifully

Now I could spend an entire day ranting about the importance of psychology but I believe this is a journey you alone can take since it is deep inside you and no matter how many quotes I put in front of you the decision to let go and become present is yours.

Having a trading edge

Yep, this is the last point… Not necessarily because I believe it’s the less important, but you can make money with so many different markets and in so many different ways, you can skin the cat yourself.

However, it is extremely important to have identified your trading edge and be able to prove it exist in the historical market without having to adjust it, that’s one of the main problems quants are faced with, they adjust their strategy so it provides great returns in the past but does not work when the market conditions change

So what do you have to do?

Back test your strategy over several years and several pairs, forecast possible moves, use your trading plan with a reduced risk for the first few months in order to make sure the edge is there

Understand that even a profitable strategy will have losses

Here’s an example of my go-to set-ups after having backtested it over a few pairs for 2019

I have come to realize, that two of my favorite set-ups are not very profitable for me (the 3rd rejection and the hover) therefore I will have to adapt, another key point is understanding that my strike rate (without including BE) is of 34% however as you can see the returns are profitable, because my average win is a lot bigger than average loss.

Keep on working, keep on testing your strategy and never become over confident, because that will be your end.

The end 😊

Before I ask you to like this post and share, I would like to thank both Tiho Brkan and Yvan Byeajee I most of the data I used came from their tweets!

What do you think are the key pillars for success in the FX market?

Hope you enjoyed this article!


Onwards,

-Max

Building a Trading Plan

Having your own trading plan, is (probably) the most important part to become a successful trader, would that be stocks, FX, commodities or whatever you want to trade.


Why is a trading plan so important?

It gives you the opportunity to write down exactly what you can do and how you should do it.

It’s like a cooking book, the only way to really improve a receipe is to know what ingredients to use, the amounts and how long you should cook it for.

I’m awful at cooking (Really bad, my old roommates refused to eat anything I cooked)

I know how to make salads tho, that’s the only thing I’m decent at!

Why do you think I spend so much time in cheap countries where I can eat out three times a day?? (Maybe it’s because I don’t need to cook)

Anyway, back to the subject at hand…

Becoming a good cook is relatively easy, you just follow instructions, it’s the “chef” that makes up the dish and writes down how to do it properly.

You can work in a great restaurant and make a lot of money if you’re a really good cook, especially if you work well with a famous chef.

Trading, is rather similar to working in a restaurant (not talking about the insane hours, but sometimes…)

The only way to become a chef (a really really good trader) is to become a cook (someone that can implement a trading plan), it will take time, but the more practice you get as a cook the easier it will be for you to become a chef.


Ask for help building your first trading plan

You become a good cook by learning from others how to cook, would it be your parents, siblings, a cooking book, youtube videos, an online course, a bootcamp etc etc

It’s the same with trading.

Learn from someone else

Find yourself a mentor, whoever that is (not me) and ask them if they can explain to you their trading style and share trades they took.

Once you know how they look at the market, the trades they took you can break it down.

Bring a bottle of coke to a lab and they can reverse engineer it.

You could know the exact ingredients Coca Cola use for their famous drink.

Do the same with a trading plan.

Create your first trading plan based on someone else, even better, if you can copy it. My mentor shared his to all his students, that’s what I used at first.

I knew:

  • The entry types
  • What he wants to see in order to take a position
  • How he manages trades
  • How he records them
  • His risk profile

That’s all I needed, I more or less copy pasted it at first.


Once you have a trading plan, backtest it

Now it’s time for you to work, you can’t let someone else do all the work for you…

You know what set-ups your mentor looks for so go and backtest.

Try them out, figure out their results and ask yourself

  • Do they have a good strike rate?
  • What is their average return?
  • Do I like trading them?

Based on those questions and the answers you have for them you can quite easily make your mind up, should you keep those set-ups in your trading plan? It’s up to you.

Those are my results with a backtesting exercise I did earlier this year.

I was able to figure out which trade set-ups I prefer and how I wanted to manage them.

It also gave me a lot more confidence in my trading, I saw what was possible, and it became way easier for me to execute on my trading plan.

Once you’ve backtested your plan you can then decide what to edit, what to change, what to ignore, what you want to focus on etc…


Make it your own.

Make sure it becomes your own, don’t copy the exact same trades if they don’t fit you, adjust the trading plan to your own personality – and backtest it once again – it’s all about refinement,

To go back to the cooking comparison, a chef will try out so many variations of the same dish just to make sure he has the perfect mix of flavors, smells and texture.

It’s the same with trading, just keep trying it out.

Tweak it until it becomes your own, your precious, your trading plan.

Now, you can easily argue that you don’t need to write it down, it’s in your mind, or you can easily draw it.

But…

The best way to learn is to teach someone else.

But you don’t need to teach someone else, you just need to be able to explain it on a word document.

Take screenshots of your favorite set-ups

Write down what you want to see before being able to take a position

Explain how you are going to manage your position once in the trade

What are your rules in term of taking a second trade once you got tagged out of a position, are you allowed to re-enter? Once? Twice? Three times?… Create rules and put it in your trading plan.

If you want a video about creating a trading plan, check-out this interview on Chat with Traders, I’ll admit, I have only watched it once, but Chat with Traders is hands down one of the best podcasts out there for anyone interested in trading.

Now I feel like I’m probably rambling… but…

GET YOURSELF A TRADING PLAN.

Honestly, I truly believe it’s the best way to improve your results if you’re in the FX market.

Copy someone else trading plan, (or spend countless hours trying to build one)

Backtest it (it’s worth doing the work!)

Refine it

Make it more personal, something that fits your personality

Backtest it again, keep updating it

Write down your rules

Stick to it.


The only way you can improve your trading is to have a process, otherwise you may just be lucky or unlucky but you wouldn’t know because your trading is not consistent.

Being consistent with your process, will turn you into a consistently profitable trader.

Anyway, I hope you enjoyed this article, if you did it would mean the world to me if you could share it! Or let me know in the comments what you would do!

Friday 20th of May

Good morning folks! I hope everyone is well

Quite a few pairs are on my watch today, so let’s have a look! I hope you guys didn’t mind me not mentioning any yesterday, but figured 3 trades recap ought to do the job!

Let’s dive straight into it?

FX Watchlist

AUD/CHF

Aussie Swiss is on my watchlist for a potential trade today or Monday. Once we have a clear break of the trendline we’ll also create a new area of supply so it’ll be an interesting pair to keep my eyes on

CAD/CHF

Canadian swiss has recently broken an ascending trendline giving us a rather clear area of supply – we are getting a lot closer to an area of demand tho, that fits perfectly with the trendline. I expect it to be rather good!

GBP/AUD

Pound Aussie has spent the majority of the month going sideways, however, due to the share amount of time it’s spent going sideways I believe it has validated the creation of a new area of supply due to the trendline break

USD/CHF

Dollar Swiss is also on my mind, while I’m not expecting a set-up to happen any time soon I just wanted to share the chart since it is a rather clear set-up to me

USD/JPY

Dollar Yen has been on my watchlist for a decent amount of time now, it’s just a question of when will we reach an area of interest?

Gold

XAU/USD is also on my watchlist for a potential short term play based on pivots, EMA, a previous high retest, and a fib retracement.

Take care folks!

That’s it from me for today! Have a nice weekend!

Thursday 19th of May

Good morning folks!

I come to you with an updated trading plan, going to be adding a filter to the trade entries I executed yesterday – however, all three trades remain valid

Trade Update -0.4R

AUD/CAD -1R

Sadly this trade seemed to be blocked underneath the 200EMA and a trendline that kept it below – still fits my rules, so I’m fine with it

NZD/CHF -1 R

Kiwi Swiss hurts a bit more knowing that it ran to a decent profit before reversing, still fits my rules so glad I executed this trade

USD/CHF +1.6R

Dollar Swiss was a clear set-up even tho I was worried about the trendline, I’m happy to see it go executed correctly and reach TP

I don’t really have anything on watch for today, more so just keeping my eyes open for the next few days so I’ll leave it at this.

Wednesday 18th of May

Good morning folks! I hope everyone is well!

Trade Update

NZD/CHF

Kiwi Swiss offered the opportunity for us to go long yesterday with an entry order on the pivot, which is exactly what I did.

It’s a new type of set-up for me, however, in my backtest, it appears to be worth adding to my arsenal, so that’s what we’re going to do.

On top of having recently rejected a zone, we had a clear retest of the 50EMA and 200EMA on an hourly basis, a retest of the pivot, and a pullback into the 0.382-06.18 fib area. All of this taken together was enough for me to be interested in this trade!

AUD/CAD

As I was writing up NZD/CHF I got an alert indicating I was triggered into Aussie Canadian for a long as well

Aussie Canadian is offering more of a corrective pattern on the Kiwi Swiss, which may be good, or may be bad, however, it remains a clear set-up in my eyes.

While I haven’t looked into the impact of the pivot being in the 0.382-0.618fib area this one is slightly above it, it’s on my to do list, however, I still feel comfortable executing this trade due to the HTF backing

USD/CHF

Dollar Swiss was triggered a few seconds after AUD/CAD, so exactly when I was writing up AUD/CAD – I wonder what will happen while I write this trade up! I no longer have any orders in the market so hopefully it’ll be a TP notification 🙂

This set-up is probably the one that makes me hesitate the most since it happens on a trendline, we haven’t yet really broken clean of it, ideally we would’ve seen a clear break lower before an entry, however, it was valid, so I executed it. In a similar fashion to AUD/CAD the pivot level wasn’t within the 0.382 and 0.618 FIB level, so going to be testing those factors out over the next few days!


FX Watchlist

GBP/JPY

Pound Yen recently broke out of a descending trendline, I’m hoping to see one day of price action that doesn’t touch the area of interest before looking to add this pair on my VIP list 🙂

USD/CAD

Dollar Canadian is also currently breaking an ascending trendline – so I’m hoping for one more day of price action away from the zone before seeing it as valid

USD/JPY

Dollar Yen remains on my watchlist has it’s been there for the entire week, I’m just patiently waiting to see how it behaves if it reaches the area of supply

Take care folks! That’s it for today!

Oh and both NZD/CHF and USD/CHF were executed on my personal account, however, they weren’t executed on my “5ers” account due to their margin requirements on swiss pairs sadly.

Tuesday 17th of May

Good morning!

I hope everyone is well!

Let’s dive straight into the watchlist?

FX Watchlist

USD/JPY

Remains on my watch

NZD/CHF

Kiwi Swiss is on my watch for a potential entry today and the creation of a new zone.

We are currently breaking out of a descending trendline a retest would be interesting to me. Let’s see what happens!

Those two are the only pairs I am looking at for a potential play today.

So on that note, I’ll disappear 🙂

Monday 16th of May

Good morning folks! I hope you’re all well and had an enjoyable weekend

I’ll admit I didn’t look at a single chart this Sunday, I really felt the need for a break, and I feel great today, I may add that part to my weekly routine now.

Think I overdid the backtesting recently :S

Trade Update

EUR/CAD -1R

Euro Canadian offered a great set-up this Friday, however, sadly it resulted in a loss. I had previously removed EUR/CAD from my the pairs I trade to increase my average return, but over the last two years it’s been a positive experience trading it so I feel comfortable adding it back to my “roster”

Daily Watchlist

USD/JPY

Dollar Yen recently broke out of a descending trendline it’s been “stuck” inside for quite a while, so I’m keeping my eyes on it in case we get a retest of that area of supply. It’ll be interesting to see what happens so I’m keeping my eyes on this one & an alert. It’s probably the prettiest set-up for the week.

For those that are using Oanda as a data provider, you may say, “But Max, we don’t have data going back before 2003, how do you know if there’s a weekly stack” –> I’ll answer, change data source to FXCM you’ll get more data, sure here’s no stack, but I’ve noticed that recently it remained +EV to execute trades even tho they don’t have a stack

This was the only pair I’m watching for a trade today, sorry for the lack of excitement, but it is what it is, I’m going to be quite drastically reducing the number of areas that are of interest to me due to my recent backtest results.

But as I always say, I’m not here to provide you with amusing content, I’m here to track my evolution as a trader 🙂

Friday 13th of May

Good morning folks!

I am pleased to announce I’ve finished my recent backtest session where I collected 545 trades since 2020.

I did this in order to maintain my skill with the market and see if anything changed and required an adaptation on my part.

Turns out, a few things are possible, a few new entry methods were also identified which is nice, since it enables me to sharpen my toolbox.

That being said, I do want to review one of those entry methods, so it remains on the sidelines for now until I’m able to review every single trade and add a few additional filters on it to (hopefully) increase the strike rate and average return.

In terms of my usual “script” entries, I have found a method to bring down the total amount of trades from 156 to 72 – while increasing my returns by 5%.
That personally makes me happy, it means a lot less exposure to the market and less fees to pay.

That also does mean that I’ll be taking less trades, which is something that will give me FOMO a couple of times, but I’ll keep tracking the data to see if any changes are required.

The backtest has also shown me that I would be better off changing my scale in method on the 4hour, I’m actually planning on removing it…

Another important point I’ve come to realize is that I do not always need a weekly stack for a trade to be valid – this will increase the number of trades I’ll be allowed to execute.

I’m willing to share more information on the changes and the actual numbers and strategies I’ll be employing, however, that would be a coaching call, and I will probably charge you for it, EXCEPT if you provide me with a lot of value as well.

Leave a comment here or shoot me an email at maximilian.sydney@gmail.com if you want to talk about having a potential call


Trade Update

AUD/NZD + 1.8R

As mentioned yesterday, I wasn’t taken out by the wick we see on tradingview (at my biggest surprise and joy), so I remained in the position.

Having finished collecting my backtest I came to realize that on top of the daily not being 100% valid, how it originated and the price action we were seeing on similar pairs:

  • AUD/CHF (clear double bottom on daily + trendline retest)
  • AUD/CAD (clear daily double bottom and forming an entry that would’ve been previously valid)
  • AUD/USD (looking in need for a pullback and forming a script entry)

On top of the fact we were rejecting the recent low/previous high and an old high, I took the decision to close the trade early.

Had the trade fitted my criteria to enter 100% after this backtest, I would’ve kept hold on to it until I was either taken out for a win or for BE.

However, this wasn’t a fully valid trade, so I preferred to take the win, and remove all risk.


FX Watchlist

While I personally do not have a single pair on watch for a potential trade today, here are a few I’m looking at

AUD/CHF

I’m patiently waiting to see if we get a clear break below this trend line to validate the area of supply.

GBP/AUD

In quite a similar fashion to AUD/CHF I’m waiting to see if we have a clear close above the trend line / previous area of supply

USD/CHF

Dollar Swiss is in a “to the moon” mode, let’s see what happens, I’m waiting for either a clear break lower, or a potential break of this area of supply to create a new area of demand

USD/JPY

Dollar Yen is just a question of one additional daily close below the trendline to confirm the creation of the area of supply. So you’ll see it mentioned a couple of times next week I imagine 🙂


That’s it from me for this week.

Time to test a few new filters for my new entries, and then I’m hoping to get at least one day with close to 0 screen time 🙂

Take care!

Thursday 12th of May

Good morning folks! I hope you’re well 🙂

Trade Update

AUD/NZD 0R

I mentioned this week that I closed the original position on AUD/NZD since my recent testing showed a negative EV on this set-up and the fact that the daily wasn’t 100% valid.

The 1h 20 was however, +EV to hold which is what I did, however, on TRADINGVIEW I ended up getting out of this position for BE

It reached my trigger to move my stop loss to BE, so I did exactly that, which is fine, and then pulled back to my entry point.

No issue with it!

That being said, the truth isn’t as easy, the data provided by OANDA on Tradingview is different than the data I have in my personal account with IC markets AND with my prop accounts on the5ers

Here’s a screenshot of the data on my 5ers account (similar to IC market)

So I’m saying it was a BE trade, however, it’s currently running in some small profits, I had it sized at 0.5R anyway due to the error, but hopefully, we’ll see price reach it’s original TP.

Rather confusing I’ll admit it 🙂

Let’s dive straight into the watchlist


FX Watchlist

AUD/CAD

Aussie Canadian is on my watchlist for a potential short – we’ve reached a clear area of reversal. That being said, once again, in my recent testing I’ve noticed these trades have a lower expected value which is rather interesting, I haven’t yet finished collecting all the trades I want to do really 100% trust it.

That being said that difference is on 130 trades to 60 trades using the filter, so I do believe it, but waiting for me to write up a synthesis on this test before adjusting my trading too dramatically.

EUR/GBP

Euro Pound is interesting, we’re approaching an area of great interest -same analysis tho.

USD/CHF

Dollar Swiss is reaching an area that dates back to 2019 – let’s patiently wait to see what happens, I definitely dislike this current price action

Gold

Gold is on my watchlist, however, I dislike double bottoms so let’s see what happens 🙂

On that note, take care folks!

Wednesday 11th of May

Good morning folks!

I hope you’re well 🙂

Let’s dive straight into my watchlist?

FX Watchlist

AUD/CAD

Aussie Canadian remains on my watchlist, I’m waiting to see a clear break into the lower zone. This current zone isn’t as interesting to me.

EUR/JPY

I mean it’s been two weeks, you know what I’m looking for

USD/CHF

Dollar Swiss has been fascinating, this run is rather impressive, so let’s see if we have a reversal around this area. It’ll be interesting!

GOLD

Rather a clear counter zone, it has a monthly stack, slightly lower tho

Keeping it short for today since there’s not much that’s new on watch for today 🙂

Tuesday 10th of May

Good morning folks!

Sorry this one is coming out a tad later than usual – I’m feeling a tad tired so decided to stay in bed for a while instead of getting to the screens (that is after having checked the candle closes at 7am)

Anyway, let’s dive straight into it

Trade Update

AUD/NZD + 0.5R

You may remember the AUD/NZD I executed on Friday – the one that wasn’t valid per my trading plan since the daily wasn’t followed by an engulfing candle (it only required 2.8pips difference for it to be valid) so I executed it anyway since it looked like something I’d have taken in my backtest.

However, as mentioned it already wasn’t really valid, but in my current backtest I’ve noticed that those zones actually rarely work out, they actually have a -EV value

So I closed my initial 4hour position.

I usually wouldn’t adapt based on a test I’m doing with only a 100 or so data samples addressing this issue, however, the fact that it wasn’t 100% part of my trading plan from the get go makes me a little shy.

The 1hour scale in however remains live, I had the possibility to move my stop to BE and let the price run, so that’s what I did.

Strangely enough, those entries actually are +EV even on this set-up, so I decided to hold on to it.


FX Watchlist

AUD/CAD

While I am not really interested in this zone, for me this zone has already been “played”, I remain interested in the fresh zone slightly below it

EUR/JPY

This pair is definitely making me laugh, last week I’d probably have said it was the best looking pair for the week, now I’m losing my excitement for it, I personally dislike when we see so much sideways price action before an area of interest, it feels like it will uncoil in a rather explosive manner

GBP/USD

You may have been surprised to see I am not in GBP/USD for a long, but sadly the stop sizing was way too large for me to be interested in executing a trade here, so I remain out of this position. I won’t be looking to trade this area now. Only including it on this watchlist to keep you folks updated

NZD/JPY

In a similar fashion, Kiwi Yen provided an entry this morning, however, the stop sizing was also way to big for me to be interested in executing a trade here, so I remain out of the position. Patience is key. And also is knowing which rules are important 🙂

USD/CHF

Dollar Swiss remains on my watchlist, we are definitely approaching the area of supply and saw some clear deceleration in the recent price action, which makes me a lot more comfortable executing a trade here

That being said, I dislike old zones, which is something I’m testing atm, and they do appear to have a lower EV than others.

GOLD

Gold is worth mentioning today, we’re currently forming a double bottom patttern, however, recently we’ve seen those fail a lot more times than succeed, so it’s likely that price will head lower towards our area of demand.

Let’s be patient 🙂

That’s it for today’s watch!

Don’t hesitate to leave a comment if you have any questions or want to go over your trading plan / backtest!

Monday 9th of May

Good morning folks! I hope you’re well and had an enjoyable weekend!

I’m still doing some rather heavy backtesting at the moment, and I came through with an interesting filter – here’s a few numbers without the filter

And with the new filter

Which I think is rather fascinating

Obviously, I’m collecting more data, I want to ensure it’s not just fluke

Anyway, time for the watchlist, what you’re really here for


FX Watchlist

EUR/JPY

Euro Yen is an interesting set-up as mentioned for the entire previous week, I’m waiting to see the price head higher, reach the area of supply and then drop.

Will be interesting to see what happens for sure

GBP/USD

Pound Dollar is interesting as well. We’ve seen some price action inside the zone, it’ll be interesting to see how things develop. I’m not sure I 100% love it due to the current price structure but…

USD/CHF

Dollar Swiis is also approaching an area of interest, we’ve seen so much bullish pressure I wouldn’t be surprised to see some reaction from that area

Take care folks!