Category: Trading Related

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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:

Posted on

Wednesday 30th of September

Last day of the quarter, last day of the month, but I don’t think I’ll be taking any trades today, we’ll see what the price action does.

I finished the month 1.57% using 0.5% as my max risk per trade. Where I am annoyed is that while I correctly sized all my position to have 0,5% risk or less, I was sometimes forced to risk less than 0,5% due to lot sizes, I’m currently going through the fivers trial program, hence I’m being very careful (as always) with my risk, but the main issue is the small account.

return for september 2020

As you can see in this screenshot neither of these 3R winners were close to 1.5% or even 1.45% that is due to the lot sizing as well as commissions and roll over fees.

All in all, that would’ve resulted in a 3.14% month had I been using my 1% risk I use in my personal account.

But now onto the important stuff 🙂

Daily Watchlist

EUR/CAD

Euro Cad used to be my favourite pair to trade (when I lived in Canada and had most of my savings in Euros I was always trying to figure when would be the best moment to transfer money over)

I’m liking this pair, we are moving towards a fresh trend line break zone, which has a nice weekly stack on it as well.

I hasn’t really moved since March, so we’ll see if once we reach supply we are able to finally get out of the daily consolidation it’s been in for quite a while

Once again, I will need to see more things than just the price reaching the zone to take an entry.

https://www.tradingview.com/x/vVo33NzO/

eurcad

AUD/USD

Aussie Dollar remains on my watchlist since we actually did not touch the zone (if we adjust it to the weekly stack) hence I believe that the zone remains fresh to the upside.

Time will tell if there’s indeed a move into this demand zone, but if there is, there’s a nice weekly stack. Let’s see how it gets there.

If the price decided to go higher we’ll have to settle for creating a new counter zone if the supply area is broken since it is no longer fresh.

https://www.tradingview.com/x/STx7qTIm/

audusd

EUR/AUD

Let’s talk about the euro and aussie crossover since I’ve mentioned both currencies above 🙂

I mentioned yesterday that I wasn’t surprised the price was pulling back towards the 4h 50ema in a corrective pattern to gain enough strength – to catch bids – to reach our supply zone, it probably won’t reach it today, but it’s a possibility

Once again, that zone has a weekly stack so all is good on that side of things, now it’s just a question of waiting to see if the zone is reached, or not, and how it does so.

https://www.tradingview.com/x/pycIW6Dx/

euraud

EUR/NZD

I’ll be also eying up a potential short on ER/NZD, we are still quite far away from the zone, but it’s not too surprising to see this pair move more than 200 pips in a day, I was planning to only talk about it tomorrow but we’ll do it today too!

This set-up is quite nice, the pair is moving quite correctively towards this supply area, it fits with my overall EURO short bias (once the supply zone are reached), there’s a clear weekly stack.

I think this zone kinda jumps to the eyes, so we’ll see if other people notice it too.

https://www.tradingview.com/x/L1OROql5/

eurnzd

Book wise…

I finished rereading Meditations last night and I’m now reading the Lives of the Stoics, the new book by Ryan Holiday, which talks about the lives of the “heads” of the school – I’m only 20% in but I’m enjoying so far.

I truly believe that philosophers should show us how to live, by their own actions rather than just texts.

Wish philosophy on how to live was still taught to this day.

I finished rereading Meditations last night and I’m now reading the Lives of the Stoics, the new book by Ryan Holiday, which talks about the lives of the “heads” of the school – I’m only 20% in but I’m enjoying so far.

I truly believe that philosophers should show us how to live, by their own actions rather than just texts.

Wish philosophy on how to live was still taught to this day.

Tweet wise…. Here’s my favourite of the day

Zoom out guys! Zoom out 🙂

Posted on

Friday 25th of September

I’ll admit, writing these daily watchlist before coffee is quite hard, and yes, a FX trader doesn’t necessarily need to be drinking coffee! Big new eh.

My AUD/NZD scale in from 2 days ago, the one I explained yesterday, is now closed for -1R, it reached my stop loss.

Wasn’t the prettiest set-up but it fits my trading plan so I’m happy.

That being said, it did make me think about the validity of different set-ups, so I did some data analysis to see if there was a pattern of scale in I shouldn’t be taking.

On my drawing the black box is the 4h entry, the grey one the 1h scale in entry.

So in 1/2 the 50EMA is above the 4h entry, in 2/4 the 50EMA was below the 4h entry.

In 1 & 3 the 1h scale in was taken above the 4h entry, and 2/4 below it.

Was interesting, it reinforced my belief that the set-up 4 is definitely not worth it, out of the 14 trades taken that followed this plan, only 3 were profits. I usually want to take a scale in when the price is confirming my bias, not if there’s no additional confirmation since the original entry.

Hope you guys enjoyed this quick behind the scene work explanation!

Now onto the important stuff, my daily watchlist!

Daily Watchlist

AUD/USD

Still on watch from yesterday, we nearly reached the zone – we barely barely touched it, so it remains fresh in my eyes, however we didn’t reach the weekly stack, so there wasn’t any trade for us.

As you can see on this screenshot, the zone I’m interested in begins at 0.6995 when we adjust it to the weekly stack.

We’ll see if the price reaches this level, and if it does, if it gives us an entry signal.

https://www.tradingview.com/x/C15EPQ8S/

C15EPQ8S (1796×1280)

CHF/JPY

As we can see on the left, there was a strong supply area where the price currently is, it lead to 5 move lowers, a lot of support and resistance traders will want to be buying long.

I’ll be waiting for the zone I have drawn here (below 113.5) to be reached before looking for a potential long.

Once that area is reached, most of the support and resistance traders will be getting out of their positions which will give us liquidity to enter in the trades to the upside.

Let’s see what happens

Ud6b66DZ (2119×1280)

https://www.tradingview.com/x/Ud6b66DZ/

EUR/AUD

Euro Aussie is another pair I mentioned yesterday but didn’t go into depth about it since it still had a decent amount of distance before reaching the zone

This zone, a counter zone of a counter zone, is something I’m keen to see play out, I wouldn’t be surprised if we saw the price move lower today and then back up on Monday, we are currently at the upper limit of a wedge/correction pattern so people that trade patterns and market structure will be looking for shorts.

We want to be shorting this pair when they are forced to buy out from their positions, I believe this zone is valid, so we’ll see what happens

I will obviously wait for an entry pattern before taking a trade

https://www.tradingview.com/x/2Qx3JwBS/

2Qx3JwBS (2119×1280)

GBP/JPY

As mentioned more or less for the entire week, I’m still looking for a potential GBP/JPY long play, time will tell. I’m not going to spend too much time talking about it, feel free to check out my previous daily watchlist for more details

To be entirely honest, I’d be more than happy if the Pound would just explode to the upside 🙂

Here’s a screenshot of my GBP/JPY chart

https://www.tradingview.com/x/LbRyJGJv/

LbRyJGJv (2119×1280)

Book wise…

I’m going through my physical version of meditations at the moment to be able to take notes and refresh my memory.

At the same time I’m reading a fun book (One from the Jack Reacher series), waiting on the 29th for the Lives of the Stoics to be released 🙂 The three chapters I got to read from pre-ordering it were good so I’m looking forward to it!

Didn’t especially enjoy the beginning of the Malcom X biography so I stopped reading it, it was recommended by several people so I’ll give it another try next month!

Tweet wise…. Here’s my favourite of the day

Short and sweet, I hope I didn’t waste your time with this daily watch!

Feel free to contact me on Twitter too! Probably more responsive there than IG these days

Posted on

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

Posted on

Work as a digital nomad

Digital nomad & work

One of the most frequent questions I get is: “How do I get work done while traveling?”, so will try to answer this one.

I feel like I’ve already used this photo

I DON’T DO ANY WORK…

I spend my days at the beach taking photos duh.

Okay, that’s a lie (I hope you knew that!)

The truth is, it’s not because you’re a digital nomad that you won’t be doing a lot of work – the amount of work you need to do is the exact same as if you were living at home.

But it does depend on your work, as a FX trader, I spend around three hours a day doing work, but that’s a normal amount of work for any trader? (Do you spend more time on the charts?)

All I need is to forecast, review my past trades, do some backtesting and watch some content in order to maintain my skill at the same level.

That being said, there are days where I spend a lot more time, if I am motivated I can very easily get into a backtesting session and spend around eight hours on it, because I love it.

That being said, if you are not self employed and instead get paid on an hourly basis (which is what I do on the side), you will have to spend hours doing work in order to go paid and finish the task you were assigned, and you’d do the exact same workload as if you were home.

But here’s where the “good shit” comes in…

If you’re in a country where your living expenses are half what you used to spend it’s rather easy to reduce your workload (still recommend getting more hours done than the bare minimum) – so instead of working 8 hours you could work 6 hours rather easily?

Where to work?

That’s the interesting/challenging part, I do try to spend more money on airbnbs where I know I shall be able to get work done in the mornings.

One of the challenges of being a nomad is that you never really have an office, especially if you change location rather often and there’s no co-working space close by that offers a “hot desk” membership.

You need decent wifi in order to be able to do your backtesting and watch content, and that’s not a given sadly…

To be entirely fair, “developing” countries (Indonesia, Poland, Colombia, Lebanon,…) please don’t bully me for putting Poland there… the wifi is a hell of a lot better than in developed countries when it comes to working in coffee shops.

So the answer is:

I usually work at home during my “productive” hours – the first three hours – if there’s a desk, one of my requirements for airbnbs (highly recommend it),

I like outdoor standing (home made) desks

Then go out and do work at a coffee shop, however the work done in coffee shops is a lot less productive than at home, but I need the change of scenery – and it’s easier to keep doing work when you’re not the single one, otherwise the urge to go out and explore is super strong

Be a tourist for the afternoon, then get more work done in the evening at home or with a glass of wine!

That being said, if you are spending a month or more in one location, I highly recommend joining a co-working space, you’ll not only get to meet other self employed individuals and make friends but you’ll also get into a habit of working from there, which is great because you have a separation between home and work, something that’s not really possible when working from home.

Growth as a digital nomad

Now, as I just talked about, it’s rather easy to get work done as a digital nomad, you just have to say “fuck you” to your excuses and remember that you are only able to travel because of the work you do, hence, you need to prioritize the work over being a tourist.

That being said,

I don’t think living as a digital nomad is the best way to grow your business, instead, I would even argue it’s a bad idea

If you are aiming to scale your business, launch a new product, create a new offering, or even increase your returns as a forex trader or even learn an entire new trading style you’d be better off staying in one place

I’m not going to write too much about this, because I think Iman Gadhzi did a great job explaining it in this video, highly recommend it, shows the life about being a digital nomad, but after the six minute mark he talks about the downside of Variation and being a digital nomad.

You want to be repetive, you want to do the same shit, you want to have your routine, you don’t want to do new stuff every day, have a schedule, make sure you’re productive.

Anyway, hope you’re well and enjoyed this blog post!

Onwards,

Oh, and, if you’ve enjoyed this blog post, would mean the world to me if you left a like or a comment 😊

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The right questions

That’s a bloody heavy title… Definitely not going to be able to address it within one blog post, but…

I just listened to an enjoyable podcast with Warren Berger and Shane Parish on Fs.blog and they talk a fair amount about questions…

Here’s a quote from Warren Berger that explains why I believe asking the right questions is key

Now, yes, that can easily be understood for engineers, for entrepreneurs and scientists, but what about traders?

Questions for traders

What is the market?

It helps to think about the entire market, what is the stock market? why does the stock market (on average) go up? Why do currencies exist? Why are there several currencies? Why is the price of a certain currency worth more than another one? How can I forecast that?

Now this won’t improve your trading 10-fold I’ll give you that, but having a larger understanding makes the next steps a lot easier…

Plus, the more you learn the more intrigued you’ll be trust me, I’ve fallen into a dark rabbit hole more times than I wish to admit

Why FX?

You can easily ask yourself, why do I trade FX? Why do I trade this way? Why do I need a trading plan? (I hope by now you know why you need one!!!! Otherwise this blog has failed you I’m sorry! :S ) What are the positives and downsides of having a trading plan? What will I learn from my trading plan?

(A previous blog post about trading plans can be found here!)

Knowing the answers will give you the motivation to build one? You can ask yourself the same questions about anything btw, would that be why you want to trade full-time, why you need a routine, why you should eat healthy etc

How do I trade?

How do I build the right foundations to become a full-time trader? What is the process I should follow to achieve my goals? What set-ups am I allowed to trade? Why can I trade those set-ups and not others? Why is limiting the number of trades I take good?

Those questions will probably make you understand that sticking to your plan has way more benefits than downsides, you will understand that the only reason you trade those set-ups is because you are playing out an edge with a positive expected value and you definitely don’t want to start playing around because that will costly…

So many question marks…

What questions to ask?

Now I’m not going to list hundreds (I easily could) questions instead here are a few questions I like to ask myself

Why did I take this trade? Does this trade fit my trading plan? Did I forecast it?

Why will the price go in that direction? What is the structure telling me?

Should I stay out? Why shouldn’t I pull the trigger on this position

What would my mentor say if I took this trade?

Would my mentor take this trade? Does it fit with his previous “behavior?”

Why would this trade turn out to be a loss?

How will I feel after taking this loss?

Am I still happy taking this trade?

Hope those questions help you.

I truly believe that everyone has the answers to the right questions (yes even you!) you just need to ask yourself the right questions…

If you can’t answer a question, then dig into it? Ask yourself what do you need to know in order to answer it?

Ask yourself questions and the following questions

How do you make money trading while traveling?

I trade currencies

How do you I make money trading?

By betting that a currency is going to be worth more than another one

Why are currencies worth something?

Because it’s a store of value

How do we know what value that is?

Ugh… I’m not digging my own hole, I’d need an entire semester to debate this

How can you analyze that one currency is going to be worth more than another?

Well, there’s fundamentals, news, technical analysis, etc

I use technical analysis…

What is technical analysis?

It’s looking at the historical movement of price and forecasting that it will do something similar in the future

How do you forecast it?….

You get it by now right? I can stop this game?

Please.. Say yes…

Ask yourself the right questions and your trading and life will improve. Sometimes those answers will force you to look up something else to be able to answer it but in the end you’ll be better off

It’s easy to make something sound complicated, the truly hard part is to make something that’s really complicated sound simple

Eheh, didn’t use Einstein for this one!

Once you are able to explain your trading strategy, why you take certain trades and not others you’ll have truly mastered your trading plan, and that’s exactly what successful traders do – it makes executing it a lot easier!

It’s only with the right questions that our lives can improve

Most of the biggest discoveries started with why or how, so get used to those two words and use them!

Anyway, I will definitely fall into a rabbit hole if I keep writing this post, I hope you enjoyed it! If you did, please do leave a like or a comment 🙂

Onwards

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Fear

Fear in the FX market

Now, it may sound strange, why would a trader be scared? I mean, it’s not like he’s risking his life (Well, make sure you manage your risk…If you don’t then yep… I guess)

A good FX trader executes his trading plan with no fear.

A losing trader does not execute his trading plan BECAUSE of fear

Have you ever not taken a trade because you were scared? Scared of losing, scared of being wrong, scared of not being good enough, scared of losing money, scared of what other people will think of you etc?

Hell, I have…

The main idea behind this blog post comes form the book “Way of Warrior Trader” in it there’s a great section about fear

The book

According to the author – there are three instinctual fears: fear of loss, fear of pain and the fear of the unkown

I mean, why are we scared of getting killed by an alligator?

1- Afraid of the pain you would experience while getting chewed up by the alligator’s jaws

2- Afraid of losing your identity as you’re being digested in the alligator’s stomach

3- Afraid of not knowing where you’ll end up two days later after passing through the alligator’s guts

Way of the Warrior Trader

Makes sense right?

I mean I wouldn’t want to be killed by an alligator (well, definitely would be interesting)…

So why are we talking about this?

(Nearly) all fears we are faced with are either anticipatory or reflective in nature

Fear of the future

We are scared of the unknown, the unknown we are all faced with is the future.

We don’t know what will happen today, and even less so in the markets since we don’t control them (kinda wish we could manipulate them for my own benefit…)

Not being an author I’ll quote the book again because he puts it better than I could:

To render repeated attention to issues that are currently outside our perimeter of control is a waste of life force and a distraction away from the situations we do have an element of control over in the present moment.

Way of the Warrior Trader

Instead of being worried about what will potentially happen in the future, focus on what you can control – and that is the execution of your trading plan.

So what are a handful of tips to control your fear when it comes to placing a trade?

1- Forecast every single morning, and only take the trades you forecasted

2- Have a trading plan – and know the strike rates and expected return every set-up has

3- Backtest, that’s the only way to do the first two points, so keep backtesting

4- Focus on your breath – try to breathe deeply into your abdomen, it’s linked with the vegus nerve that will make you more calm (and also reduce heart beat I believe)

5- Meditate (eheh you thought I’d have given up on this one by now) it will make focusing on the present moment and push away all thoughts a lot easier

Scared of success?

Being scared of succcess, may sound like a strange thing, but it happens to a large amount of forex traders and is one of the main reason why traders blow up their accounts

Ed Seykota is a smart dude.

We all get what we want from the market in the long run

The biggest challenge you will face in the FX market is your mental side. Make sure your mindset is in the right place.

Once again, I swear this is (probably) the last time I quote him for this blog post

Nothing can weaken your resolve to follow through with a plan more than the lack of genuine desire to achieve the end result.

Without such a plan, you can be assured that one or more of the four poisons of doubt, fear, confusion and surprise will eventually infect your mind. Effective planning will always help to minimize (if not eliminate) these poisons.

Way of the Warrior Trader

Accept the loss, understand that you don’t know the future and you’re just playing out an edge, take the position and be happy whatever happens next because you executed your plan.

Executing your plan is the goal, ignore the end result.

Cool video by AK Fallible about fear in the market! Love his channel, definitely would reocmmend

Make sure you’re not afraid to take the trade if it fits your trading plan

Yep, a trading plan, backtesting and forecasting is key, what can I say 🙂

By having a trading plan you outsource the trading (to you) so you get to delegate the responsibility! Definitely checkout the last part of that video tho – one of my fav. scenes in Billions hands down ahah

If you think that it’s the mental side that’s holding you back definitely check out the book, I did enjoy it and hit me up with your questions!

I love digging into peoples brains 🙂

Anyway, have a good one, I hope you enjoyed this blog post! Let me know in the comments if you want me to do more post like this!

Onwards,

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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!

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Not doing shit is key.

Let me rephrase: Not taking trades is key.

Yep, you read that right, I’m here to say that doing absolutely nothing is (a hell of a lot) better than taking trades every single day.

Okay, this subject is mainly going to be about trading and investing, but it may apply to over industries too…

Do you know why you shouldn’t take too many trades? (Think about it for a few seconds)

Just wanted to give you a few seconds to think – I’m not addicted to pineapple photos!

There are three key reasons you may have thought about:

1- Trades in your trading plan don’t happen every single day so you definitely shouldn’t be taking more trades than what your plan tells you to. (Absolutely agree with this one)

2- Your broker commission, hell, I enjoy trading with FXCM, I don’t have (too many) issues with them, yet I’m still paying 5% of the risk I am willing to take per trade on average… (Fuck… I just realized it, it’s way too much )

3- Focusing on quality trades instead of just average trades.

I’ll mainly focus on this third point (even though the commission one just pissed me off ugh)

The importance of focusing on quality trades & not over-trading.

This may sound pretty obvious, but sadly it’s a lot harder to actually follow this rule. Mark Hutchinson (from Falcon Trading) brought up an interesting concept.

80% of the trades taken should be high probability trades and the other 20% can be valid trades.

You want to wait for those high probability set-ups before putting a trade on, but sometimes you can have a gut-feeling the trade will just go in your favor before you see the perfect set-up and you should still act on it.

I really like that rule, usually my trading follows a very similar breakdown between valid and high probability, and I do believe it’s really beneficial for me.

That being said, I didn’t stick to it last month (July) and I ended up having a negative month… Yep… It happened I have no shame, I committed a few mistakes, anyway, that’s not the subject.

You may know of Michael Marcus (he was one of the traders interviewed in Market Wizards) who, in less than 20 years, managed to turn 30,000$ into $80 million trading commodities.

I really like this book…

One of the quotes of his I really enjoyed is:

“One of the secrets to trading success is cutting down the number of trades you take”

When someone with his track record talks, I tend to listen, and that advice, is (I think) spot on.

Taking too many trades reduces the quality of your portfolio

Now let’s think about an investment portfolio, your returns will be the sum of all the trades and opportunity cost is really important here (in FX too due to leverage requirements) …

If you take trades that have a lower expected value you’ll reduce your overall yearly return and therefore make less money while increasing your risk, is that something you’re into? (I’m definitely not, I want the opposite)

I came across a cool website by Safal Niveshak – which I would highly recommend checking out (especially if you’re into investing)

The last article he posted was: Is your stock portfolio a warehouse or a museum?

In it he argues that we want our stock portfolio to be a museum and not a warehouse, which makes sense, so do go and check-it out

In it he quotes Jason Fried book Rework (a book I really enjoyed) :

“You don’t make a great museum by putting all the art in the world into a single room. That’s a warehouse. What makes a museum great is the stuff that’s not on the walls. Someone says no … There is an editing process. There’s a lot more stuff off the walls than on the walls. The best is a sub-sub-subset of all the possibilities.”

Jason Fried – Reword

Makes sense when explained like that? Right? We want our trade portfolio to be a “sub-sub-subset of all the possibilities” and only the ones where we truly believe to have an edge in.

From there, he picks the explain of Costco v. Walmart

Yep a screenshot, I’m lazy

We want to focus on returns on invested capital, 28% sounds a lot more attractive to me than 12% (which is still good).

Less is better – quality over quantity.

Now in this part of the post I’m really tempted to bring up Bruce Lee quote about not fearing a man that practiced a thousand kicks once, but fearing a man that practiced one kick a thousand times (see what I did here?) but that won’t be my main focus.

Instead I’ll just pick a recent example

One of my friends (Aldo) realized that taking better trades is not only more enjoyable but also doesn’t necessarily reduce your trading returns. Especially while traveling and not being able to spend as much time on trading.

That being said, I’m kinda forced to bring it up, I mean I love the guy…

Bruce Lee has another quote (not about the number of kicks this time)

He probably didn’t say this quote thinking about investing or trading, but it applies to everything in life.

Anyway, I hope this was helpful.

If this was useful and you enjoyed reading it, it would mean the world to me if you’d leave a like or even commented 🙂

Cheers!

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Turning your hobby into your “job”

Congrats! It’s amazing you’re at this point!

If you’ve recently came to realize you could take your side hustle/passion and make it your primary source of income congrats! That’s amazing, I still remember the day I realized I could sustain myself trading forex – was when I was writing cover letters for jobs just before graduation, I didn’t end up applying for those jobs after that realization (except one, McKinsey but they shot me down – something I’m grateful for)😊

But yeah, congrats, that’s really impressive! Would it be trading, photography, your blog, designing cool tee-shirts or whatever it makes me so happy when I hear people are making a living doing what they love.

Maybe you take photos of fruits and vegetables and somehow managed to turn it into a business… I mean it looks cool!

That being said, it’s not because you are able to go and turn your hobby into your sole income that you should quit your job or become a digital nomad – first you need to transform it from a hobby into a business and start looking at it that way.

When it’s a hobby it’s amazing, you get most of the upsides and you are quite blind to the downsides while being able to stop whenever you wish since that’s not the only thing you do.

Be prepared for the transition!

If you decide to take your trading and make it your income source and quit your job then be prepared for:

  • Having lower returns that what you’ve come to expect in the first first few months since you’ll have some added stress, it happens to a lot of people who just took the jump
  • Create a rather strict routine, it’s not because you don’t need to be at the office at 8 or 9am that you should still be in bed… You will have nearly no external barriers to becoming a couch potato, you will be the responsible for everything. While making sure you prioritize sleep, I didn’t in the past, and that’s one of my biggest regrets, making sure the brain gets its off time is really important
  • See your income fluctuating, you won’t be making the exact same amount every month/every quarter (which is why I believe it is extremely important to have a six-month cash buffer before taking the step (mainly to reduce the pressure)) That being said, if you make three times more (on average) than what you spend you can probably just take out a fixed amount every month/quarter depending on your choice.
  • You’ll spend way more time on your computer (next to an ikea plant)thinking that it will mean you will make more money – sadly that doesn’t go in hand, I wish it did, but instead it’s actually important to start disconnecting from the charts, if you spend too much time looking at them you will likely want to take a trade or micro-manage them – which in turn will probably have a negative impact on your income/returns.
  • Accept the fact that your passion is now your job, which means you will need to find a new hobby and start learning something new in order to maintain your self development and your brain plasticity.

An advice I would give to anyone about to go full-time with their trading or side hustle would be to measure the amount of time they spend on it while still spending time at their job. Why?

If you spend an hour and half on the charts while working per day, make sure you don’t spend more than three hours (the double amount).

I understand that it may sound counter-productive, after all, you have now way more time to improve your craft and boost those returns, but if you were able to get to this point and replace your income with if there’s no need to spend that much more time working on it. There’s a point where spending more time will not only bring you diminishing returns but also reduce the enjoyment you get from it.

Something Neil Cartwright also points out is keep doing what brought you to this point, keep doing the exact same thing, don’t become too cocky, it’s not because your trading as really improved that you should stop your previous routine, if you used to watch content everyday, keep doing it, if you were meditating, keep doing it, if you were back testing three times a week, keep doing it. You probably got the point by now, but, just keep doing whatever you used to do.

It brought you here so it must be a good thing!

Now it’s your primary income… It’s a business

Now it’s a business, so start thinking about your monthly costs, how can you optimize and streamline the process, how can you leverage up and increase your profits, get in touch with a great accountant and figure out how to reduce your taxation etc etc.

While talking about the business side it’s also important to mention the fact that most successful businesses don’t pay out a 100% dividend, instead they constantly re-invest in the company (usually they do it to buy new machines or have more marketing or hire more staff, for us that just means leaving money in the trading account).

Wish my reports looked this cool

Now, if you’ve already been on this blog you’ll have noticed I also provide a monthly trade recap, which is basically an overview of my month (I have one way more detailed that I keep for myself) but the reason I do this, is because I’m treating my trading as a business.

Businesses need to publish quarterly income statement and all the other stuff, why wouldn’t you? If you run a business selling tee-shirts, wouldn’t you be looking at your revenue/profit/ad spend/ROI etc? If you don’t I would be surprised if your store keeps on going.

If you own a coffee shop, I’m sure you will be looking at your profits, revenue, costs etc while trying to figure out a way to boost your profits and potentially open in a new location?

Trading is a business, so make sure you spend time treating it as one. Don’t forget to think about the monthly reports, create a trading report where you will write down every single trade you took, the return, the reason for the entry and exit and all of this.

Obviously, you will have to keep doing your Advanced Self Review and spend time trying to find the tweaks you need to go through in order to improve.

A good example would be my mentors, even tho they have been trading for more than five years profitably they are still reviewing their months in order to make sure they are still on their top game and continuously improving.

Make sure you still enjoy it – and don’t only do it for the money

It’s not because you are going to turn your hobby/passion into your primary income source that you’ll start to despise it, I still enjoy trading and learning about the market remains one of my favorite things to do. But, you must start treating trading as a business instead of a fun activity you do because you think it’s nice side income or just because you want to keep yourself busy. We all get what we want from the market, so make sure you align your wants to this new reality.

Lastly, it’s something I’ve only recently started to realize but it’s not because you are now making money doing something you love that you should be blind to other opportunities. Diversity in your income source makes you anti-fragile and that should be the end goal.

Aim to become anti-fragile – being self-employed and having turned your passion into your income source is fantastic but keep in mind there’s no shame starting something new on top of that or even potentially getting a job in a industry you’re really interested in.

And I definitely recommend picking up this book, Nassim Taleb is one of my fav. authors 🙂

For example, I’m really into space because my long-term goal is in that world, if I get the opportunity to work in a cool start-up with really smart individuals in that industry I’d jump on that chance.

Anyway, I hope this was helpful.

I hope this was useful! If it was it would mean the world to me if you’d like this post or even leave a comment if you’d add something to this article!

Cheers!

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