#1 Trait of Successful Traders

Ever wonder “What is the most significant trait shared among successful traders?” The answer is preparation. Doing most of the work before the trade occurs. Studying and knowing all of the possibilities before the trade is executed. Being ready to attack, not just react.

Remember the saying “Knowledge is power.” That is not entirely true . . . Knowledge is only potential power and what you do with that knowledge will determine its power.

We must be ready for anything. That means thorough knowledge of our trade plan, market structure and what constitutes a valid signal. All of these must be aligned before we place a trade. All most all of the work required takes place long before we ever enter the market.
Another essential trait successful traders share is the ability to be disciplined. They have the ability to control their trading state (emotions) and their focus. Always remember we cannot control the market, all we can do is control our response.

Why do traders hesitate even when they get a valid signal? The number one reason is they don’t know the probability of the outcome. Why? They have not thoroughly tested their trading system and plan to know the probabilities. If you know your entry, stops and targets beforehand, you can eliminate the emotional investment in any trade.

“Your life will not change when you know what to do; it will change when you do what you know.” – Anonymous

What are you doing every day to arm yourself with the knowledge to conquer the markets? What pain are you avoiding that is holding you back; preventing you from achieving the discipline and control necessary to be successful? What is keeping you from making the commitment to get the work done so you can experience the unlimited upside the market can provide?

The Success Equation:
Preparation = Confidence
Confidence = Execution
Execution = Repetition
Repetition = Habit
Habit = Discipline
Discipline = Serenity

Don’t be another market casualty. Dedicate yourself to winning the battle before it is fought; study, prepare and then attack. Let fear and pain be the other guy’s problem while you enter the markets with a well-crafted plan, relentless approach and a fearless attitude.

Be willing to do what others won’t and you’ll get what others can’t – acquisition of a lucrative skill and the payoff of consistent results that will provide limitless possibilities.

In the trading game, you’re either making money or making excuses.

Decide to start making money.

Rick

The Holy Grail

Hi Traders.

Let’s be sure that we clarify one thing . . . the hardest reality traders must face is that they have to work most diligently on themselves.

We’ve found the proverbial Holy Grail – it is you . . . but, if you want things to change, you have to change.

“Between stimulus and response . . . lies our freedom to choose.” – Steven Covey

So know right now, you must pledge to take total responsibility for your decisions and actions.

Your success relies completely on your individual ability to follow directions and adapt your trading plan and system to your personality. In other words, there is work involved! Realizing this fact and getting past any unrealistic expectations will determine your learning curve and time line for success. Are you committed?

Here’s the deal  .  .  .  there are pro traders out there that have more knowledge than you, more resources than you and better systems than you.  They rely on the fact that you are unprepared, undisciplined and afraid.  Do not think for one minute they don’t know this. In fact, they are counting on it. Ultimately you will be consistently making money or consistently making excuses. How do we know this? That used to be us. Think of this as a fast moving train – you are either on board, watching it pass you by, or getting run over.

Ask yourself “What am I doing everyday to achieve my personal, professional and trading goals?” Make sure you are working deliberately and congruently. If not, make the necessary changes and do whatever it takes to get and stay on track. You have to be willing to do the work that others won’t – but you’ll attain the the things that others can’t . . . and I promise it’s worth it.

We are here to help prepare you for victory in the financial war that is the markets. Pro Trader Network is a legion of like minded professional traders that are about making a difference, doing what it takes, and building a skill that can provide a life-changing income.

This is a network of Winners.

Glad you’re with us!

Rick

The Freedom to Choose

“Between stimulus and response is our freedom to choose.” This is the famous quote from business author Steven Covey.

We often think of freedom as liberating and expansive. In trading however, this freedom is what kills most traders.

Freedom in a boundless environment like the markets is dangerous. We are taught from birth that boundaries are necessary for our personal safety, growth and development. It is no surprise that when we experience a setting that has no boundaries, we tend to test; to discover where the new lines are or might be drawn.

We soon find out that the market punishes our indiscretions and makes us pay, literally, with our financial resources.

How is it that when we make a mistake, or we are careless in our trading, even though we usually know it instantly, that we repeat these costly behaviors – knowing we will be punished as we have been in the past? The fact is we are not ready for the freedom the markets afford. We are not ready to take total personal responsibility. “Most people do not really want freedom, because freedom involves responsibility, and most people are frightened of responsibility.” -Sigmund Freud

We have grown up to be blamers. We may momentarily take responsibility – “Oh I know better!” But we really don’t. We will find anything and anyone to blame. “This system sucks” or “That guy lied to me about . . .” We will do everything except look in the mirror and critique the person we see.

I learned from a good friend and professional trader that there is only one reason why I was struggling early on – it’s my fault. That’s it. Where you are today in your trading and in your life is your fault.

We all make choices, and with those choices come accountability. We can blame things and others, but that is a waste of time. The only way to overcome this plague is to first recognize it’s your fault. Then we can move forward to fix it. You need to forgive yourself and start fresh – with new purpose and resolve. The beauty of life is that it’s never too late to change. That is the revelation of the freedom to choose. We can always learn and always improve.

I have been fortunate to have had several successes in my life – from business, to family to friendships. So when I take a personal inventory, I feel privileged.

I have made mistakes, but I have paid for them and learned from them. My mission is to always find someone smarter than I am or better at something than I am and emulate them – shortening my learning curve and getting the highest return on my time investment. It took me a while to formulate this mission – only about 25 years. Now I listen more than talk, act more than procrastinate and study more than goof off. I have a good ear and mind to filter nonsense and do my best to avoid being careless and too impulsive.

When I listen to people try to convince me of something, I look at where they are in life and I ask this question – If I listen to everything they say and do everything they’ve done, the best I can do is get what they have. On the other hand, if they listen to me and do everything I’ve done, they can have what I have. Who should be listening to whom? If I desire what they have, be it success, abilities, or attitude, I shut up and listen. If not, I do not invest any time or energy.

The point here is that you have the freedom to choose, to change, and to be successful. The freedom to choose transcends trading. We know by now that to be successful in trading takes commitment, discipline and a sound plan. Your life is no different.

How can you expect to be successful in trading if your life is in disarray? They both require the same amount of attention and determination. Forgive yourself, get organized and get focused.

But, even freedom has limits. The fact is what we perceive as true freedom is really not. There will always be rules. All we are free to choose is which rules to follow and which to ignore. That is why we fail. We tend to ignore the rules that require work, responsibility and accountability; the path of least resistance – even though those are typically the rules in our society that afford us the greatest reward. The same is true of the market.

As many of us have discovered, if we have chosen to ignore the rules, life and the market will impose them – and often at a great cost. Our true freedom comes from self-reliance, resolution and diligence, and the opportunities they create. What are you doing to create or be prepared to take advantage of such opportunities?

In life and in trading opportunties abound. We have the freedom to choose – to be prepared or not, to miss or to take advantage.

“Forces beyond your control can take away everything you possess except one thing, your freedom to choose how you will respond to the situation.” -Viktor E. Frankl

Rick

Pros and Cons of Demo Trading

by Bill Boyd

Trading is a skill that takes time to learn. Think of it like Boxing. It’s also a skill that takes time to learn. If you get into a professional boxing ring without any training, you’ll get beat up physically! If you get into the Forex ring without any training, you’ll get beat up financially!

The similarities are that both the examples are Skills and both require psychological preparation. The difference is that one is physical and the other is financial.

We can get over a physical beating usually in a few days or weeks, BUT a financial beating can be devastating and easily affect us for the rest of our lives, not only does it hurt our hip pocket but it can cause problems with our relationships and family. So when we get into the Forex ring we have to be prepared.

The Professional Boxer

When a professional boxer gets in the ring he has already been practicing in a safe environment usually for years, this safe environment is where he can make mistakes without having medical treatment. He can also spar with other opponents that have more skills and experience then he does and he learns from them. He also has someone there to watch him and give advice and guidance. Then when he is ready, he gets into the ring and boxes for real, he’s accepted the risk and KNOWS that he can get hurt, but he’s also studied his opponent and done his home work, so he KNOWS he has a good chance. He can still lose this round but if he wins most of them he will take the money home. BUT! What about the psychological side? Does he fear getting into the ring? Sometimes! But he’s aware of it and he can control how it affects him in a way that is beneficial. Will he be thinking about the money he’ll make? Or will he be thinking about the fight as is happens and planning his next moves during the breaks? He’ll be analyzing the results from the previous rounds and making changes in his strategy for the next round.

The Professional Trader

Can you see what’s coming next? If so than, you’ve learnt to analyze what you read and form a projection into the future. (A very valuable skill for the FOREX Trader) A forex trader, like the professional boxer, will not get into the Forex trading ring without being prepared first. He might not spend years practicing in the Demonstration Account, but he will at least have spent a month or two or three, sparing with the Forex Market in a safe environment that he won’t get beat up in. He’ll practice trading forex against all the other traders and learn from them, and he’ll also have someone watching him and giving advice, and guidance. Then when he is ready, he’ll get into the Forex trading ring and trade forex for real, he’s accepted the risk and KNOWS that he can get hurt, but he’s also studied the Forex market and done his home work, so he KNOWS he has a good chance. He can still lose on this trade but if he wins most of the trades he will take the money home. BUT! What about the psychological side? Does he fear getting into the forex trading ring? Sometimes! But he’s aware of this fear, but he can control how it affects him, in a way that is beneficial to his forex trading. Will he be thinking about the money he’ll make? Or will he be thinking about the things that are influencing the market as is happens and planning his next trades while he waits for the results? He’ll be analyzing the results from the previous trades and making changes in his strategy or continuing with the one that’s working, and planning for the next Forex Trade.

So it’s easy to see that trading with a Forex Trading Demonstration account is something everyone should do before getting into a live Forex Trading account.

The practice account will give the trader MOST of the skills necessary, to be able to trade profitably, giving them the training ring to spar in.

BUT A BIG WARNING!!!

Like the Boxer the Forex trader has learned to manage his emotions. This is often overlooked by new Forex Traders, but is probably what separates the successful investor from the ones that keep getting beat up! If you are considering getting into the Forex trading Ring, then be sure to practice first, and find all the information you can about controlling your emotions. Fear, greed, impatience, are the main culprits of financial bashings, so keep an eye out for them, and learn how to beat them before you get in the ring with them. Understanding these emotions will enable you to use them to your advantage in understanding the market, the market is influence by these emotions and if you understand them you can have them on your side, thus giving you an advantage.

Five Fatal Flaws of Trading

by Jeffrey Kennedy

Close to ninety percent of all traders lose money. The remaining ten percent somehow manage to either break even or even turn a profit – and more importantly, do it consistently. How do they do that?

That’s an age-old question. While there is no magic formula, one of Elliott Wave International’s senior instructors Jeffrey Kennedy has identified five fundamental flaws that, in his opinion, stop most traders from being consistently successful. We don’t claim to have found The Holy Grail of trading here, but sometimes a single idea can change a person’s life. Maybe you’ll find one in Jeffrey’s take on trading? We sincerely hope so.

The following is an excerpt from Jeffrey Kennedy’s Trader’s Classroom Collection. For a limited time, Elliott Wave International is offering Jeffrey Kennedy’s report, How to Use Bar Patterns to Spot Trade Setups, free.

Why Do Traders Lose?

If you’ve been trading for a long time, you no doubt have felt that a monstrous, invisible hand sometimes reaches into your trading account and takes out money. It doesn’t seem to matter how many books you buy, how many seminars you attend or how many hours you spend analyzing price charts, you just can’t seem to prevent that invisible hand from depleting your trading account funds.

Which brings us to the question: Why do traders lose? Or maybe we should ask, ‘How do you stop the Hand?’ Whether you are a seasoned professional or just thinking about opening your first trading account, the ability to stop the Hand is proportional to how well you understand and overcome the Five Fatal Flaws of trading. For each fatal flaw represents a finger on the invisible hand that wreaks havoc with your trading account.

Fatal Flaw No. 1 – Lack of Methodology

If you aim to be a consistently successful trader, then you must have a defined trading methodology, which is simply a clear and concise way of looking at markets. Guessing or going by gut instinct won’t work over the long run. If you don’t have a defined trading methodology, then you don’t have a way to know what constitutes a buy or sell signal. Moreover, you can’t even consistently correctly identify the trend.

How to overcome this fatal flaw? Answer: Write down your methodology. Define in writing what your analytical tools are and, more importantly, how you use them. It doesn’t matter whether you use the Wave Principle, Point and Figure charts, Stochastics, RSI or a combination of all of the above. What does matter is that you actually take the effort to define it (i.e., what constitutes a buy, a sell, your trailing stop and instructions on exiting a position). And the best hint I can give you regarding developing a defined trading methodology is this: If you can’t fit it on the back of a business card, it’s probably too complicated.

Fatal Flaw No. 2 – Lack of Discipline

When you have clearly outlined and identified your trading methodology, then you must have the discipline to follow your system. A Lack of Discipline in this regard is the second fatal flaw. If the way you view a price chart or evaluate a potential trade setup is different from how you did it a month ago, then you have either not identified your methodology or you lack the discipline to follow the methodology you have identified. The formula for success is to consistently apply a proven methodology. So the best advice I can give you to overcome a lack of discipline is to define a trading methodology that works best for you and follow it religiously.

Fatal Flaw No. 3 – Unrealistic Expectations

Between you and me, nothing makes me angrier than those commercials that say something like, “…$5,000 properly positioned in Natural Gas can give you returns of over $40,000…” Advertisements like this are a disservice to the financial industry as a whole and end up costing uneducated investors a lot more than $5,000. In addition, they help to create the third fatal flaw: Unrealistic Expectations.

Yes, it is possible to experience above-average returns trading your own account. However, it’s difficult to do it without taking on above-average risk. So what is a realistic return to shoot for in your first year as a trader – 50%, 100%, 200%? Whoa, let’s rein in those unrealistic expectations. In my opinion, the goal for every trader their first year out should be not to lose money. In other words, shoot for a 0% return your first year. If you can manage that, then in year two, try to beat the Dow or the S&P. These goals may not be flashy but they are realistic, and if you can learn to live with them – and achieve them – you will fend off the Hand.

Fatal Flaw No. 4 – Lack of Patience

The fourth finger of the invisible hand that robs your trading account is Lack of Patience. I forget where, but I once read that markets trend only 20% of the time, and, from my experience, I would say that this is an accurate statement. So think about it, the other 80% of the time the markets are not trending in one clear direction.

That may explain why I believe that for any given time frame, there are only two or three really good trading opportunities. For example, if you’re a long-term trader, there are typically only two or three compelling tradable moves in a market during any given year. Similarly, if you are a short-term trader, there are only two or three high-quality trade setups in a given week.

All too often, because trading is inherently exciting (and anything involving money usually is exciting), it’s easy to feel like you’re missing the party if you don’t trade a lot. As a result, you start taking trade setups of lesser and lesser quality and begin to over-trade.

How do you overcome this lack of patience? The advice I have found to be most valuable is to remind yourself that every week, there is another trade-of-the-year. In other words, don’t worry about missing an opportunity today, because there will be another one tomorrow, next week and next month … I promise.

I remember a line from a movie (either Sergeant York with Gary Cooper or The Patriot with Mel Gibson) in which one character gives advice to another on how to shoot a rifle: ‘Aim small, miss small.’ I offer the same advice in this new context. To aim small requires patience. So be patient, and you’ll miss small.”

Fatal Flaw No. 5 – Lack of Money Management

The final fatal flaw to overcome as a trader is a Lack of Money Management, and this topic deserves more than just a few paragraphs, because money management encompasses risk/reward analysis, probability of success and failure, protective stops and so much more. Even so, I would like to address the subject of money management with a focus on risk as a function of portfolio size.

Now the big boys (i.e., the professional traders) tend to limit their risk on any given position to 1% – 3% of their portfolio. If we apply this rule to ourselves, then for every $5,000 we have in our trading account, we can risk only $50-$150 on any given trade. Stocks might be a little different, but a $50 stop in Corn, which is one point, is simply too tight a stop, especially when the 10-day average trading range in Corn recently has been more than 10 points. A more plausible stop might be five points or 10, in which case, depending on what percentage of your total portfolio you want to risk, you would need an account size between $15,000 and $50,000.

Simply put, I believe that many traders begin to trade either under-funded or without sufficient capital in their trading account to trade the markets they choose to trade. And that doesn’t even address the size that they trade (i.e., multiple contracts).

To overcome this fatal flaw, let me expand on the logic from the ‘aim small, miss small’ movie line. If you have a small trading account, then trade small. You can accomplish this by trading fewer contracts, or trading e-mini contracts or even stocks. Bottom line, on your way to becoming a consistently successful trader, you must realize that one key is longevity. If your risk on any given position is relatively small, then you can weather the rough spots. Conversely, if you risk 25% of your portfolio on each trade, after four consecutive losers, you’re out all together.

Break the Hand’s Grip

Trading successfully is not easy. It’s hard work … damn hard. And if anyone leads you to believe otherwise, run the other way, and fast. But this hard work can be rewarding, above-average gains are possible and the sense of satisfaction one feels after a few nice trades is absolutely priceless. To get to that point, though, you must first break the fingers of the Hand that is holding you back and stealing money from your trading account. I can guarantee that if you attend to the five fatal flaws I’ve outlined, you won’t be caught red-handed stealing from your own account.

Overnight Success

Many newer traders perceive, in spite of all they are told, that somehow they will be the exception; they will reach the pinnacle of trading consistency and profitability in a matter of months. Amazing.

Statistics will show that in all most all vocations, only 3% reach the level of expert – that is, they are performing at the height of efficiency and intellect.

The prevailing perception that somehow trading is a quick way to financial independence or a fall back position for a troubled economy is attracting wide-eyed newbies in droves. Missing in the message perpetuated by marketers of crap and get-rich-quick nonsense is the required investment in time. That is no mistake. Who would purchase a product that requires a commitment to learn or reveals there is actually work involved?

I get so many questions and requests for short-cuts, indicators, system rules, etc. Stop all ready. My reason is not that I do not want to share. The fact is, I could give you everything, but that would not help you at all. If you do not possess the commitment or desire to learn the skill of trading; even a robot will not help. You must understand that learning this skill and becoming successful at it will take time.

The next logical question is “How much time?” If you want to trade for a living, are exceptionally dedicated, and study your ass off, you can plan on about two years. What?! Many of you will take issue with that forecast, but I actually took a year off of what I really think. That’s really not very long if you have a college degree or have spent any time in the adult work force. It took me 7 years to achieve the level of professional trader – after being a professional in real estate development and telecom for over 30 years. The truth is, the time component will be unique to each trader, but the aspiration is the same – the sooner the better.

The challenge will not be learning the basics, manipulating a chart or reading price action. It will be the psychological challenges – the discipline, the trust and the confidence. Because of this, there is pretty much an 80/20 rule in effect. 80% will give up. 20% will stick it out and only a small percent of those will make it to consistency or to pro – the same as just about any other professional endeavor.

You may think I’m cynical, but I want to be clear about the reality of what you are getting yourself into. There is no doubt many of you are committed to learning – but you are not committed to changing; changing your mental approach and your psychology – that will be the downfall of so many. We all have the capacity; we just do not have the desire, the will, or the drive. You can always learn the technical aspects, but be aware that your psychology will exert the greatest toll. Focus on this the most.

This psychology is the missing component that is so often under-emphasized – usually only mentioned in a paragraph or two in most courses or online instruction. It is 90% of the skill trading and requires us to change our perceptions, our beliefs, and our truths.

This change you will first begin to sense, then feel and then understand. At first it will be difficult and uncomfortable – many of you are going through that now. After some time, it will transition toward pleasant, peaceful and humbling. You will be astounded at your confidence and resolve – relaxed intensity – an expert.

How to get there? Here’s a challenge – try to follow your rules and trade plan to the absolute for one week. Then two weeks, etc. Now you get it. This repetition will build consistent behavior, consistent action and a consistent psychological trading state.

As always, the time to start is NOW! . . . so get to work!

Rick

The 3 Biggest “Newbie” Mistakes

When “newbies” or new traders first begin to get involved in trading, they start scouring the internet forums, chat rooms and websites for information. Their first inclination is to get as much information they can for free – and that’s OK because there is a lot of solid information out there to build a good trading foundation. However, remember these are just the basics. Trading has many nuances required for success and consistency – just a few of which are a thorough understanding market structure, trading psychology and trade plan development (in addition to lots of practice and screen time.)

The typical perception is that people are getting rich with little or no effort; that, and trading is so simple that anyone can learn it in a minimum amount of time. These perceptions lead to common mistakes made by new traders over and over again. Here are the Big 3:

1. No Trade Plan – Most new traders assume a trade plan is just a set of rules to enter the market, place stops, and set profit targets. Not so. A good trade plan has been back tested thoroughly to provide statistics that will build the trader’s belief in the trading system and eliminate surprises and uncertainty. For example, knowing the average draw down, average losers in a row and average duration of the trades to profit targets will help eliminate the anxiousness and avoid the classic mistake of closing trades too early and staring at every tick with emotional schizophrenia. A trade plan is more than just a set of entries, stops and targets; it is the complete synopsis of your trading system’s performance and execution. That is why trade plan development is the most critical element in your success as a trader and a skill you must learn. (More on trade plan development in future posts.)

2. System Jumping – There are an infinite amount of systems and indicators out there. Newbies are impatient. Their expectations are unreasonable. The tendency is to abandon a system after the first losing trade or add the next magic indicator that will produce overnight wealth. Trading is a long term endeavor; that is if you want to make lots of money and ultimately trade for a living. True, you will have to sort through a few systems to find one that conforms to your personality, however jumping from system to system will not get you further down the road. The challenge is to have the discipline to stick with a system and become an expert at using it. We recommend trading one pair on one time frame – and get really good at that. Back testing will prove whether or not your system has a positive expectancy (profitability over time.) Then trade the system and tweak it to your personality. You can then add other pairs or time frames after you achieve some consistency. Don’t rely on someone else to give you the end all, be all system. It is not out there. If fact, the system really doesn’t matter. It is your discipline to follow the rules that will make or break your account. So get comfortable with one system and work it. This will get you in the habit of following your rules, manipulating your platform efficiently and developing your trading mindset. Slow and steady will always win this race.

3. Live Trading Too Soon With Large Lots (Too much Risk)– New traders often think that with just a few hours of study and following someone else’s advice, they can enter the market and play with the pros. Putting your capital at risk without hours of practice is suicide. Most newbie mistakes can be attributed to aggressive trading, lack of platform dexterity, no rules of engagement or no clear, actionable trading plan. These are typical and often recoverable. The most egregious behavior while making these mistakes is doing so with huge risk (trading large lots.) This is like jumping out of a plane without a parachute. The consequences of this risky behavior will be a substantial loss of capital – unless you are independently wealthy all ready. If you do have money to burn, you will continue to re-load your account with new funds to convince yourself your past mistakes were a fluke. This should serve as a wakeup call to slow down. These mistakes can all be resolved by practice (in a demo account or live micro account) – not just any practice but “Perfect Practice” – that is, you must practice with the focus and intent you would use as if your income depended on your success in the market. If you had to make a living tomorrow as a trader, would you still exhibit such reckless behavior? No – you would calm down, get focused and work your plan. This mindset will be the starting point for consistent profitability and will make the transition into live trading with larger lots less stressful.

Needless to say, there are other challenges new (and old) traders must face; but the three described above are the most common for new traders.

The fact is, especially in trading, the anonymity afforded to those online leads to many false claims of success and perpetuates the perception that trading is a “no brainer.” These claims are often the appeal for new traders and the motivation for getting into the trading game. Once discovering that trading is not as easy as it looks, newbies are hit with the reality that many people in forums and chat rooms lie. In order to save embarrassment, they will do the same. But most important is that they will lie to themselves; clinging to the idea that they can somehow fake and/or grind out their way to trading success. This delusion will never lead to the desired goal of trading nirvana. The fact is that most forums and chat rooms are filled with losing traders – remember the often quoted stat that 90-95% of traders lose money.

The good news is we can break this cycle by making the commitment to learn the skill of trading and admit to ourselves there are no short cuts (Welcome to the 5-10%!) The best part of all is that the hard work literally pays off!

Rick

Most Current and Common FAQ

Traders,

I continue to receive a slew of common and redundant questions. So, rather than answer each one individually, I thought I might take the time to post the responses in this Article.

1. I have done my back testing, but still cannot “Pull the trigger” on a trade. I am still nervous and unsure. What am I doing wrong?

While back testing is the key to acquiring data and system performance, it is only half of the equation. It is forward testing that will build the belief and remove hesitation in execution. You have to practice implementing what your back testing data has revealed about your system’s performance. This practice is the only way to get you behaving efficiently and consistently. Remember, everything we have learned to do well has taken practice and repetition. Trading is no different. You will never duplicate your back testing results 100%, but you can achieve results within a few percentage points if you are focused and diligent during your practice.

2. What’s the deal with all of the trading psychology stuff?

Your personality is your best friend and worst enemy. Clearly you can see that trading is 10% mechanical and 90% psychological. The reason I focus so much on psychology is that there are inescapable biological issues in our brain that we need to re-train and work around to be a consistent trader. Because this is so prevalent in new and struggling traders, it must be addressed before one can realistically consider trading as a viable means of income. Would you not take the same approach to any other challenge, profession or opportunity that you expect to produce a high level of financial return? Acquiring any skill takes building belief, repetitive action and constant refinement to get to the level of expert (unconscious competence.) Trading is no different, so we need to use the same approach to master our own trading psychology.

3. I have been watching the Market Structure videos and have practiced identifying Support and Resistance. What do I do from there?

Price re-tests areas of support and resistance repeatedly and as a result we are looking for price to get stuck or hung up and continue with the trend and/or possibly reverse momentum as the trend is exhausted. These levels, along with your trade plan, create potential trade set ups. After labeling key levels, put S/R in context with current price and see in the near term and long term where price might gravitate based on its current direction. Look at your trading time frame and notice candle patterns, candle color and oscillator behavior. Based on your rules, prepare for a valid signal based on these potential set ups created at areas of Market structure.

4. How do you know to stay out of trades even when you may get a valid signal?

For the most part, I stay out of trades on valid signals if the pairs providing the valid signal were not showing potential on the higher time frames in that day’s top down analysis. If there is volatility occurring because of news, I will revisit a previously ignored pair. I am looking for set-ups on higher time frames and corresponding entries on my trading time frame. That will eliminate lots of the noise and brain clutter when looking at multiple pairs. I simply commit to patterns, set-ups and price action that I easily recognize and can act upon. I will miss many winning trades. I don’t care. The important thing is that the trades I do take meet my rule set and therefore the majority of them are winners.

5. What is the secret to a high winning trade percentage?  

You will notice two key elements of my trading style. I do not over trade. I only have two intraday trades open at any given time. Once committed to a pair and trade, I wait for the trade to play out. These two techniques alone reduce my number of losing trades dramatically. I will increase lot size to increase profit size, but I am not interested in trading for trading’s sake. I trade for profit and profit alone. As a result, I am very selective, conservative and patient and have fewer losing trades. I also stick with things within my areas of expertise that I can easily recognize and act upon.

6. Where can I learn your trading system rules and strategy/trade plan?

You can’t. The thing most traders do not understand is that you must make the trading system and trade plan your own. Just as no two people are alike, no two people will trade alike. I am showing you trades and giving you the processes I use to execute them. Your process and system will differ, if ever so slightly from mine, because your back testing will be different and your forward testing will be different. I have all but published my rules and trade plan via the videos I produce. I will not formally publish them because if I do, and when they do not work out for the traders that can’t implement them or do the required work, I will l have to deal with the fallout from their negligence or incompetence and I simply do not have the time.

7. What do you mean by “break above, close above” when you are describing price action?

For a key level or price to be irrelevant or lose its relevance in the context of the time frame you are observing, price not only must break above (exceed a previous key level,) but it must close at a price higher the previous level. This is a clear sign that the collective participants are no longer captive to the previous high price level. When broken by a higher close, we can look to the next key level of price (support/resistance) for a potential re-test.

8. Do you use Pivots and can you direct me on how to use them?

I do not use Pivots but they are widely used just like Fibs. I feel it is a matter of preference as statistically they can be comparable to Fibs. I do not feel they offer any better advantage and provide more clutter to my charts. That is just my opinion. Peter Bain is the guru of pivot point trading and I’m sure you can find his training material on the web.

9. Can you recommend a good broker?

Due to constraints in the U.S., I am using currently using Forex.com. I have no other relationship with them other than as an account holder.

10. I have been looking at your trade videos and my Synergy APB candles and price action do not look the same as yours. Do you have a proprietary Synergy APB indicator?

No. I use the standard Heiken Ashi indicator that is supplied with the MT4 platform. I do not use Synergy APB candles.

11. There are so many different TDI indicators on Forex Factory. Which one do you use?

I use the very basic/original TDI indicator. You may download it from the FAQ section on the blog from question 4.

12. Why can’t I join your Skype or contact you on Facebook or LinkedIn?

I reserve Skype for only very close business contacts and a very small group of private clients. Skype is a distraction when trading and those in my list have a clear protocol and rules for usage that minimizes the distraction. We use Skype purely for business use and not as a typical “social” media tool. Facebook . . . where do I begin? Frankly, I do not have any interest or time to maintain a Facebook page because I am not that important and don’t want to entertain or share the mundane. I have the blog that is specific to traders that are serious about making money and that is about as far as I want to go in terms of being “out there.” For that same reason, I am not interested in building a network on LinkedIn. When I initially started the blog, it was recommended by a friend to join Facebook and LinkedIn. So far, they have only added to the 100+ spams I must delete everyday when I check the blog. The blog affords me plenty of exposure and interaction with the people I want to be around and by virtue of the subject matter, keeps the rest away. Old fashioned email is and will always be the best way to contact me.

13. Can I have a job with your company?

I do not have a “company” per se. It is just me and a few support teams I hire as needed. I made a conscious effort to remove myself from the “rat race” because of previously having many employees, being responsible for the livelihood of hundreds of people, and having to deal with the lack of personal responsibility that pervades the human population. I am at an age and place where I just want to pick and choose how I spend every minute of my time without the trappings and travails of the rest of the world (or more employees.) Thank you for asking. Learn how to trade and you won’t want or need a job!

Rick

SPECIAL REPORT – The 3 Greatest Enemies of Success

Hey Traders,

Just wanted to let you all know that I appreciate your participation and continued support.

I have been working on a lot of great information in response to your emails and questions. Soon there will be other ways we can interact. You’ll want to stay connected to the blog for announcements about future plans and processes – all to benefit new and struggling traders.

I’ve attached this killer Special Report about The 3 Greatest Enemies of Success.

You don’t want to miss this great read! Brian Tracy is awesome!

Here’s the link to the Special Report:

Pro Trader Network SPECIAL REPORT – The 3 Greatest Enemies of Success

Talk to you soon.

Rick

Stats, Poker, Cars & Ammo

One of the philosophies that began to change my trading results was introduced to me by one of my mentors. This philosophy made perfect sense to me and like everything else I do, it was based on . . . you guessed it . . . back testing. The crux of the philosophy is simply not to rely on hunches, or feelings or even just plain old experience as to where to place stops and profit targets, position sizing, etc. It was based on the use of empirical data, or statistics. The statistics are based on the back testing results for what I have determined to be a valid set up.

I looked at every signal, determined the most profitable trades, observed how the indicators behaved during those trades, calculated averages of stops, profit targets, winners, losers, etc., etc., This is how I developed my trading plan and subsequent rules to build a case for entering the market. I don’t like to guess when I have money on the line and I like the odds to be in my favor.

Many traders use the standard 10 pips above swings for stops and are all over the map for profit targets. You may notice over time that “head fakes” up or down usually target these areas to take out these stops. I don’t know if there are such things as stop hunters, I just know it happens quite frequently. I got tired of being stopped out only to have the market roll back over in the direction of my trade and as I sat frozen, not knowing if I should re-enter, when to re-enter, where to re-enter or how to control my emotions. I just got used to another loss and swore I’d never do it again. (And of course I did it again – over and over!)

The other big problem I had in my early trading experience was that I got so nervous and excited when I was actually in profit. I always closed a trade way too early, only to watch the market move another 100-300 pips in the direction of my trade. I froze again . . . do I re-enter and chase the trade? What are my exit rules if I do? Where are my stops if I do? I also had to figure out where to place my profit targets consistently so that I could relieve myself of the anxiety of staring at my computer for hours on end watching each tick that may go against my position.

The result of this behavior and these actions was that I became programmed to expect a loss.

It’s just like the Las Vegas visitor that budgets $500 for gambling losses before actually gambling. And sure enough, when returning from a trip to Vegas, inevitably the question comes up “Did you gamble? . . .  did you win or lose?” And the answer is almost always the same “I budgeted $500 and when I lost it, I stopped gambling . . but I had fun.” Losing is fun? We will do anything to justify the result and the result always reveals our underlying intent. If you expect to lose, you will. No one in the general public ever really studies gambling statistics. That’s why most people lose and they expect to lose. They know they have not done the work or have the knowledge to prove they really can win or should expect to win. There are very successful gamblers. They analyze stats, apply a rule set, increase their edge and as a result, expect to win.

From 2003 – 2006 I was doing a lot of business in Vegas and poker was getting popular on TV. I liked playing cards in general and poker in particular. I started studying and reading about odds, stats, etc. I played 3 days a week at the Mirage for 8-12 hour stretches. Knowledge, patience, control, confidence and rules. Once these improved, so did my winnings. Every time I sat down, I now expected to win. It changed my entire focus and attitude. Yes I lost some hands, but I made other players pay to beat me. I became a formidable player and this became clear after a few hands when I would sit down to play. I would start with $100 in chips and within one month was winning an average of $600 per session. That was not that much money to risk or to win, but it was the consistency that was my goal. I also knew that for my level of knowledge, to ramp up to the higher limit tables, I could easily be outmatched by players with a higher tolerance for risk, more experience and more knowledge. I knew I had to pay my dues before advancing to that level.

It wasn’t long before I began to apply this mindset from poker toward my approach to the market. The subsequent lessons from my mentor to use statistics began to fill in the gaps. Compiling the data, using the same rules for analysis, applying the same rules to my trade parameters . . . I soon began to develop some consistent profitability. The great transformation was now every time I placed a trade I expected it to be profitable – my back testing stats proved the odds were in my favor.

That is ultimately where your mind must be. It will never be there until you develop the belief in your trading system by proving it will produce a profit over time.

Every time you turn they key in your car, you expect it to start. Why? Because historically it has proven time and time again that it will. When it does not, you are surprised. But, you know with a high degree of confidence that with some regular maintenance, it will continue to start over and over again.

Just like a trading system with a positive expectancy. You expect it to win, but know that occasionally it will not and that perhaps tweaks are required. Again, over time, you know it will produce a profit. Without back testing, it’s like crossing your fingers every time you turn the key, maybe the car will start or maybe it won’t. Most of us could never accept that level of uncertainty, yet traders do it every day multiple times.

If you do not have this backtesting data, this ammunition at your disposal, you are doomed to lose the gunfight. You will always be shooting blanks against traders firing back with nukes – those that follow their plan and rules without deviation  – those that have done the work, paid their dues and rely on the fact that you won’t. My mentor summarized my experiences after I shared with him how much I had lost trading and how much I had spent on crap before I finally got it – he simply said “Welcome to the Machine.”

Rick