fulltime trader – Bullish on Coffee

September 16, 2019September 16, 2019

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

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

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,

September 11, 2019September 11, 2019

Forecasting is key

Forecasting, backtesting and having a trading plan are the three pillars of successful in the FX market.

Do you have a forecasting routine? If so, keep it up! (let me know what it is)

If you want to become a full-time FX trader, you will have to develop a trading plan, backtest it, and forecast potential moves.

That’s (more or less) everything you need.

What is forecasting?

Figured I probably should do a quick explanation of what I mean by forecasting…

It’s basically “guessing” where the market will go next and how…

Sounds rather easy right? It doesn’t even take that much time

Forecast for EUR/CAD on the 11th of September

This is my forecast for EUR/CAD, I just drew on trading-view the potential scenarios that could happen, I know there are many other potential ways the market could evolve during the day, but in my view, this is the most likely.

You could use different drawing colors based on “I’m willing to take this scenario” & “Not willing to take this scenario” (that’s actually a good idea, I should do that)

If it’s this easy what’s the benefit

Let me start this section with: I go a lot more in depth with my forecasting process, just scroll down if you already know the benefits

There’s five key benefits for a trader, ~~but I was lazy while building this infographic so here’s 3 key points..~~.

1- It will increase your confidence, you are able to track whenever or not your forecast actually took place, which in turn will increase your confidence in your ability to be a few steps ahead of the market (which is key to be profitable)

2- You’ll be prepared, doing your forecasting is basically drawing out all the possible/probably scenarios – you’ll be able to decide ahead of time what price action you’ll want to see before taking a trade – all you need to do is execute your plan

3- It’s easier to profit, having done your forecast in the morning you are a less likely going to miss a trade during the day since you are able to place your alerts at all the key areas. Plus, it also increases the likelihood of you sticking to your trading plan

And the bonus two…

4- It will decrease your emotional attachment to potential trades, and trades you are currently holding: by drawing out several possibility you know that there is no guarantee that the price will do exactly what you want it to, it doesn’t care, instead it makes you realize, we are only playing an edge

5- It allows you to switch from analyst to a trader.

It’s really important to be an analyst when it’s the weekend and when doing your forecasting, however, when the markets are live, and there’s a potential trade set-up in the making you need to become a trader, not an analyst. Having done the analysis that morning will help you execute.

Here’s a video explaining it if you don’t like reading…

My forecasting process

Now let’s dig into my process, that’s probably why you’re here (sorry for making you wait)

I recently did a tweak so here’s a breakdown of what I used to do and what I do now, not a huge difference, but really happy so far

I used to draw at least three possible scenarios:

Two potential entries, so how the price gets there and where I’d be interest
One scenario where I wouldn’t be able to take the trade, either the market goes in the opposite direction or just impulses through everything I was eyeing up

That was done first thing in the morning and last thing before going to bed, because that way I would force myself to think about the possible, the probable and admit, the price isn’t necessarily going to go where I want it to

In the morning it was to plan the day ahead, at night it was to have my subconscious think about the market while I was sleeping, and once again, forecast where the price would go over the next seven/eight hours

It was a really cool exercise, but I wasn’t getting the most out of it…

Now I do my forecasting somewhat differently

I use my trading journal to track those morning forecasts (I keep everything in my excel file, from reason to trade, to monthly asr, to journal, to forecasting etc, I like having everything in one place)

So to ~~quickly~~ explain, I track the day of the forecast, the pairs I’m interested in, the direction, then three potential scenarios that could play out (out of many), a screenshot of the potential moves + drawings.

Then here’s the addition, I then come back the next morning and figure out which one happened, sometimes it was a fourth option, that happens.

But here, you can see I had forecasted the move 12 times out of 15 – not picture perfect but pretty darn close.

How do you think that makes me feel? How would that make you feel?

More confident in your skill? Yes

Happy because you get to collect more data? Yes

More likely to execute the next time you see a trade set-up? Yes

I highly recommend you to do the same

It takes less than thirty minutes in the morning, yet you have the entire day planned ahead

You know what you want to see before taking a trade – that’s key, it reduces your hesitation to trigger a trade, and avoids you from taking low quality trades

You are also able to be “free” and that’s one of the main reasons people start trading, they want to have free time. If you don’t know what you want to see in order to take a trade you’ll just stay in front of your computer, and basically be a slave to the market.

Don’t be a slave to the FX market: Forecast in the morning

Anyway,

I hope you enjoyed this blog post! If you did, please leave a like or share it? ❤ Would mean the world to me!

Onwards,

September 9, 2019September 9, 2019

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!