Common Forex trading mistakes and traps

Common Forex trading mistakes and traps

There are common mistakes and ‘traps’ that give nearly all traders trouble at some point in their trading careers. So, let’s cover the most common mistakes that traders make which keep them from making money in the markets:

• Analysis-paralysis
There is a virtually unlimited amount of Forex news variables that can distract a trader, as well as tons and tons of trading systems and trading software. You’ll need to sift through all of these variables and forge a trading strategy that is simple yet effective, warning; this can be a very a difficult task for beginner traders.
The reason why, is that most traders seem to think that ‘more is better’, when in reality ‘more’ is actually worse, as it relates to Forex trading. There really is no need to sit in front of your computer for hours on end analyzing Forex news reports or numerous indicators. My trading philosophy is that all variables that affect a market’s price movement are reflected via the price action on a price chart. So, spending your time and money on trading software, systems, or analyzing

Why Serious Traders Need ‘New York Close’ Forex Charts

Hey Traders,

This is an extremely important lesson about why you need to be using New York Close Forex Charts to effectively trade the price action strategies I teach my students. If your truly serious about your trading, you should pay close attention to what I am going to discuss here… it will make a huge difference in your trading.

Let me explain why New York Close Forex Charts Are So Important…

In a nutshell, traders need to be aware that the normal Forex charts offered by popular  forex brokers out there are NOT suitable for professional price action trading or any form of technical analysis in my opinion. If your a serious trader you need to ensure that you have forex charts which open and close in true alignment with the New York trading session close

trade forex with Exscalper 1 automated forex trading Ea/robot unlimited edition and earn massive profit.

introducing automated forex robot exscalper 2014 unlimited edition.
Here’s the thing…

Most trading robots do not work… Have you asked yourself WHY?
Because a software curve fitted to old data simply cannot stand the test of time!
Yes, Hypothetically tested Robots “would have” performed well on the day and time that is now gone… is HISTORY!
These robots look great on paper but when forward tested FAIL miserably…
..Fact is, that the market is constantly changing, a Robot software tuned to work in the past will not work today.
Most people are completely unaware of this fact and are losing money buying and funding these old tired out robots and EAs that only LOSE MONEY!
So, what makes Exscalper EA™ so different?
How about a Robot that was fine tuned to work with the current market?
What if this robot was so darn good that you could see results almost in an instant! ..On your very First Day of using it?

Daily Affirmations Will Improve Your Trading

This article is guaranteed to improve both your trading and your life.

Don’t believe me? Well I am living proof that the concepts in this article work. I am not just talking about trading here, I am talking about life, happiness, success and freedom. Everything I have achieved in my life or in business can be attributed to the concepts in this article in some way. So do yourself a favor and read this article twice.
Today I would like all of my readers to leave a comment and tell me how you plan to use these new powerful skills to improve your trading or your life, I want to hear from you.
Anything  you want to achieve in this world can be attracted to you by following the core principles in this article. For those reading this who have the goal to become a better trader – please take this knowledge, practice it and harness it’s power to improve your trading and your life.
An affirmation is defined as: “The assertion that something exists or is true”. Daily affirmations are a widely practiced method for attaining success and accelerating your ability to achieve goals.
Napoleon Hill is one of my favorite authors, and in my opinion he was the best motivational coach of all-time. He became famous by interviewing many of the most successful people of his time like Andrew Carnegie, Thomas Edison, Henry Ford and others, and the one thing that they all seemed to have in common was that they “acted as if” what they desired most already existed before they had it.

The Ultimate Forex Trade Entry ‘Trick’ You Need To Master

If you’re a regular follower of my blog, you know I’ve written articles discussing “sniper” and “crocodile” trading and the benefits of this trading style. In today’s lesson, I am going to help you understand what this trading style is all about, and I’m going to show you exactly what it means to wait patiently like a crocodile for the ‘perfect’ trade entry to come to you. This trading approach is really the keystone that holds together my entire trading philosophy, and if you master it you will be one giant step closer to becoming a successful trader. Let’s get started…

So, what is this trade entry ‘trick’ Nial and why should I use it?

Glad you asked. The main idea of this trick is that when you see a price action trade signal or a trend, you don’t just jump in right away at market price, instead you do what most of the other traders are not doing, you wait for a pullback, retrace or a rest in the market. What exactly does this do and how can it help you improve your trading results?

The One Trade per Week Forex Trading Strategy

Sound too good to be true? Well, it’s not, and if you simply learn to trade like a sniper instead of a machine-gunner, and manage your money properly on every trade you take, you could approximately double your trading account in one year using solid money management. That is obviously not a guarantee or a promise, but I am going to teach you today that by simply being disciplined and following a well thought-out trading plan you could make a very decent return each year in the markets. I must inform all of you that this lesson provides examples of aggressive money management tactics, thus I strongly suggest each trader decide how much money they want to risk per trade according to their own risk tolerance and personal circumstances. In reality, it would be

How To Be In The 10% of Successful Forex Traders

We’ve all heard that only about 10% of people make it in the trading business, so how do they do it? What is their mindset like, what is their trading process and routine like? What are they doing that you are not? In today’s lesson, I am going to give you some insight into these questions that will hopefully be the catalyst for a significant improvement in your trading performance.

Lower your trade frequency

How frequently are you trading? Once a week? Three times a week? Twenty times a week? Maybe it’s so frequently you literally have no idea? The odds are, that if you are not in the 10% of consistently successful traders you are probably trading far too frequently.
I know that for me personally, the biggest ‘ah ha’ moment in my trading career was when I realized that I could dramatically improve my trading results by simply being more patient; by waiting for only high-probability ‘absolutely obvious’ trading opportunities.

Inside Bar Forex Trading Strategy

Inside Bar Forex Trading Entry

Inside bars are one of my favorite price action setups to trade with; they are a high-probability trading strategy that provides traders with a good risk reward ratio since they typically require smaller stop losses than other setups. I like to trade inside bars on the daily chart time frame and ideally in strong trending markets, as I have found over the years that inside bars are best in trending markets as breakout plays in the direction of the trend. However, they can indeed also be used as reversal signals from key chart levels, we will discuss both in this tutorial. Let’s discuss some facts about inside bars first and then I will go over some examples of how I like to trade them.

What is an inside bar?

An inside bar is a bar (or a series of bars) that is completely contained within the range of the preceding bar, also known as the “mother bar”. The inside bar should have a higher low and lower high than the mother bar (some traders use a more lenient definition of inside bars to include equal bars). On a smaller time frame such as a 1 hour chart, a daily chart inside bar will sometimes look like a triangle pattern.
Important note: Since the inside bar setup is by its very nature a potential breakout signal, I ONLY enter an inside bar on a breakout of the mother bar high or low. If I am looking to buy, I will place a buy on stop entry just above the mother bar high, and if I am looking to sell I will place a sell on stop entry just below the mother bar low.
There are different variations, but the way I determine an inside bar setup is if the inside bar is contained within the range of the mother bar from high to low. That is to say, I use the mother bar high and low to define the range that the inside bar can be contained within, others might use only the real body of the mother candle as the determining range, but I do not teach or trade it that way.
In the example image below, we can see the anatomy of an inside bar setup. Note that the inside bar is fully contained within the range of the high and low of the mother bar. You can have multiple inside bars within the range of one mother bar. If you see a pattern of consecutive inside bars that are “coiling” and all within the previous bar’s range, this can signal that a powerful breakout might be coming, more on this later.

Inside bars as continuation signals
The most logical time to use an inside bar is when a strong trend is in progress or the market has clearly been moving in one direction and then decides to pause for a short time.
Inside bars can be used when trading a trend on the 4 hour charts or the daily charts, but I personally prefer to trade inside bars on the daily charts and I recommend all beginning traders stick to the daily charts and until they have fully mastered and found consistent success with the inside bar setup on that time frame. I also recommend sticking to inside bars that are in-line with the daily chart trend as continuation signals until you have fully mastered trading them that way.

The best time frame for trading inside bars

I really only trade inside bars on the daily chart time frame. There’s good reason for this, and that reason is mainly because on time frames under the daily chart, inside bars simply grow too numerous to be worth trading. There can be long strings of inside bars on a 4 hour or 1 hour chart before a breakout for example, and trying to trade them will most likely cause you a lot of frustration due to all the false breaks that can occur on those chart time frames.
I get a lot of emails about inside bars, and many traders try in vain to trade them on lower time frame charts, and it really is just a huge waste of time. Once you gain experience, you MIGHT be able to trade inside bars on a 4 hour chart time frame, but that is the LOWEST time frame I would ever consider trading an inside bar on. The daily chart is the best for inside bars, and even the weekly chart can sometimes yield some very lucrative inside bar setups.
Inside bars can be used when trading a trend on the 240 minute charts or the daily forex charts, but I personally prefer to trade inside bars on the daily charts and I recommend all beginning traders should stick to the daily charts until they have fully mastered and found consistent success with the inside bar setup on that time frame.

The Simplest Forex Trading Strategy in the World

 

If someone asked me to describe my trading strategy in as few words as possible, it would be this; horizontal levels and price action. Indeed, trading price action setups from horizontal levels is the “core” component of my trading theory and strategy, and if you were to take away only one thing from my website it would be that you can learn to trade the market effectively by simply drawing the core levels on your charts and waiting for obvious price action signals to form around them.
After you finish reading this lesson, leave a comment, like it on facebook, tweet it on twitter and share it with others. :)

Why are horizontal levels so important?
If you want to learn to trade a “naked” price chart, you’ll need to learn about two things at minimum; price action and horizontal levels. Everything in the market starts with a horizontal line; this is the back-bone of my trading approach as well as the trading approach of many other great traders. Indeed, traders like George Soros, Warren Buffet, Jesse Livermore and others, all pay (paid) close attention to the key levels in the market, because they know that these levels are significant and can thus have a strong impact on the direction of price.
Horizontal levels help with timing and they provide “value areas” that can help you define your risk by giving you a price level to place your stop loss beyond. I have been a disciplined trader of levels combined with price action for years; probably about 80% of my trades involve an obvious “core” horizontal level combined with a price action signal. Horizontal levels provide us with a confluent area to trade from, but they are not the only factor of confluence that I look for; the more factors of confluence you have lining up with a price action signal the better. However, I do consider horizontal levels to be the “core” piece of confluence in my trading strategy and I want to show you guys some examples of how I use horizontal lines and price action to trade the markets. Ready? Let’s go…
Examples of trading with horizontal lines and price action signals:
I teach a plethora of price action trading confirmation signals in my course that I combine with levels and the trend, here’s a few examples of how I trade price action signals with obvious horizontal levels in the market.
• Trading horizontal lines in trending markets with price action from “swing points”
My favorite way to trade with horizontal lines is to trade them in trending markets from swing points. As markets trend, they create horizontal levels as they ebb and flow, these levels are what I call “swing points”, and we can find very high-probability trade setups by watching for price action forming from these swing points in the market.
Look at the illustration below, note how the market is trending higher and as it makes new highs it also creates resistance when it falls away from these highs, then as it pulls back the previous high / resistance actually turns into support (swing point). Thus, old resistance becomes new support in an uptrend, and in a down trend old support becomes new resistance, also known as swing points.
The way that we take advantage of these horizontal level swing points, is to watch for price action strategies forming near them as the market pulls back. Look at the blue circles in the illustration above, these are the swing points at which you want to watch for obvious price action signals forming, then you are trading from a confluent point of “value” within a trending market.
• Trading horizontal lines in range-bound markets with price action
Another excellent way to trade horizontal lines in the market is to simply watch for price action setups forming near the boundaries of a range-bound market. Unfortunately, markets do not always trend like we want them to, instead, they often swing between support and resistance in a trading range. Fortunately, trading with simple price action setups allows us to trade in any market condition, so we can still find high-probability trade setups even in range-bound market conditions.
In the illustration below we can see an example of what a range-bound market might look like. When price is obviously bouncing back and forth between a horizontal support and resistance level, we can wait for price to hit one of the boundaries of the range and then watch for price action signals forming there. This provides us with a very high-probability entry scenario and a very simple trading strategy. It also gives us obvious levels to define our risk and reward. Risk is defined just beyond the trading range high or low from the boundary you are entering near, and reward is defined near the opposite end of the trading range.
• Trading “event area” horizontal lines with price action
Event areas are horizontal lines that can be very high-probability areas to watch for price action setups forming near. Essentially, when a major price event occurs in a market, like an inside bar breakout or a pin bar reversal, price creates an “event area” at this horizontal level. You will notice that these event areas are significant most of the time because price will often stall or reverse as it re-tests them.
In the illustration below we can see an example of the creation of an event area as well as how it could subsequently be traded. Essentially, any price action signal can create an event area if it sets off a substantial move from the event area / horizontal level. In the example below we can see an inside bar breakdown occurred and then price came back and re-tested this event-area / horizontal level. As price re-tests the event area we would watch closely for price action signals, as the formation of a price action signal at an event area is a very high-probability event.
However, event areas also provide us with the ability to enter without confirmation from price action. This is a more advanced strategy that I teach in my price action trading course, but it is possible to enter “blindly” at the event area as price comes back to re-test it, that is to say without confirmation from price action.
• Real-life examples of trading price action at horizontal levels
Finally, I wanted to show you guys a real chart of the EURUSD and analyze its recent price action and horizontal levels to show how you could have used simple horizontal levels with price action to trade the market.
1) Note the trading range that the EURUSD was in for about 3 months earlier this year. Price was bouncing back and forth between resistance near 1.4550 and support near 1.4100 – 1.4000. We didn’t get a lot of signals in this range, but there were at least three good pin bars that formed off the support of the range that traders could have made some very good money on.
2) Next, as the trading range formed and the pin bars developed along support, we got an event area forming around 1.4100 – 1.4000. As price began to move lower from the top of the trading range before it broke out, it formed a long-tailed pin bar and then an inside bar right at this event area. Thus, a break of the pin bar low meant a break of the event area and we can see a significant move followed.
3) Next, we can see an inside bar and a pin bar setup that formed as the market trended lower. These setups both formed at horizontal levels and we can see they resulted in large moves to the downside that provided good risk reward ratios for savvy price action traders
In closing, trading horizontal levels with price action signals is the primary technique that I use to analyze and trade the market. It is essentially the “foundation” of my trading strategy and I believe it truly is the “simplest trading strategy in the world”, as well as the most effective. It is obvious that horizontal levels are very important in the market, and by combining them with my price action strategies you have a very effective and simple trading strategy.

Know When to Hold ‘em – Know When to Fold ‘em while trading forex

One of the most challenging decisions that Forex traders are faced with on a day to day basis is…knowing when to hold on to a trade and when to close it.
This decision is usually the one that gives traders the most difficulty and frustration, and it is something that you must learn to effectively deal with if you want to make consistent money in the forex market. Trade management is often the area that gives forex traders the most trouble; it is relatively easy to get into a profitable trade but it is much harder to manage that profitable trade in such a way that it produces an outcome you are satisfied with.
This article will only focus on one area of the process of trade management; knowing when to hold on to a winning trade in order to let your profits run, and knowing when to close a winning trade and take your money. Pardon the cliché, but as the Kenny Rogers song goes, “You’ve got to know when to hold em’, and know when to fold em”…(If you never heard the song click here: Kenny Rogers)
How to manage a trade with a big open profit…
While there are certainly worse problems to have in the world, trying to figure out what you should do with a trade that is deep in profit can actually be quite puzzling for many forex traders. The problem that traders in this situation face is whether they should hold their trade for an even larger gain that may or may not materialize, or close the trade out and walk away with a very nice profit.
What this decision really comes down to is one of logic vs. emotion. Take a look at the technical picture of the chart that you are trading while completely disregarding how much money you are up or how you feel. When you look at the chart from this perspective think about how big the recent move has been that you have traded, how much has price moved compared to the ATR (average true range)? Do you really believe there is a logical technical reason that such a large move will continue on in your direction before reversing, or are you just being greedy? Remember that just because a trade is heavily in your favor does not mean you should necessarily keep it open. If you are in a trade that is up more than 3 or 4 times your risk, you should really stop to ask yourself, “Do I really believe this trade will keep going up or down in a straight line or is it more likely to experience a correction?” It usually makes more sense to lock in most of your profit or close a trade out that is deep in profit, because if there is one thing we can all agree on about the forex market it’s that it ebbs and flows and doesn’t travel in a straight line for very long except on rare times of economic volatility.
Here is an example of the point above illustrated in the daily GBPJPY daily chart from mid – 2010…
Another example….
How to manage a winning trade in trending markets…
Trending markets can increase the odds of a trade moving in your favor and as a result the chances of being able to let your profits run into bigger gains. One good way to tell whether or not you should try and let your profits run when a market is trending is whether or not new highs (in an uptrend) or new lows (in a downtrend) are being made on near daily basis. If this is happening you can simply trail your stop loss along the 8 day ema or slightly above / below the previous day’s high or low and let the trade run in your favor until it reverses and hits your stop.
Here is an example of the above point illustrated in the recent EURUSD bullish move on the daily chart…

Another example…

 How to manage a winning trade in the midst of opposing price action or support / resistance level…
Another factor you want to look for when trying to decide if you should hold your winning trade or fold it is whether or not there is an opposing price action signal or a nearby support or resistance level. A nearby opposing price action reversal signal or strong support or resistance level can be a good reason to close out a winning trade. Also, if there is a previous support or resistance level that has held strong in the past, you might want to use this level for a profit target, usually putting your target just in front of the level works better than trying to squeeze every last pip out by putting your target right at the level or slightly beyond it.
Just as we can use price action signals to enter into high probability trades, we can also use the opposite signal to exit a trade. How many times have you been in a pin bar trade and then after a day or two an opposing pin bar forms? In this case you might want to trail up your stop to just above the high or below the low of the opposing pin bar, depending on which direction you are trading. Opposing price action signals can be used to exit a profitable trade if they occur in the natural course of that trade, however, you should not wait or depend on such an opposing signal to exit a profitable trade, it is just something to be on the lookout for in case you are in a profitable trade.
Here is an example of the above point illustrated on the daily GBPJPY chart:
Another example…
How to manage a winning trade when reaffirming price action occurs…
One of the best signs that a particular trade is a good candidate to be held instead of folded is reaffirming price action. For example, if you are long the market and you get a bullish pin bar or consecutive bullish pin bars that form in the context of the uptrend you are trading you can be reassured by this price action because it “agrees” with the direction you are trading. This is essentially the opposite of the “opposing price action” rule that we discussed in the point above. This reaffirming price action can be a very good indicator that you should hold a winning trade instead of folding it. Learning to “read” a price chart in this discretionary manner is really what distinguishes the pros from the amateurs.
Here is an example of the above point illustrated on the AUDJPY daily chart…
Another example…
How to manage a winning trade in different market conditions…
Another factor to take into consideration when deciding whether to hold or fold your winning trade is the current state of the market. Is the market trending or consolidating, quiet or volatile? In a strong trend you will likely have a better chance to hold a trade for bigger gains, in a consolidating market you are probably better off using support and resistance levels and / or opposing price action signals to exit your trade. It is crucial that you consider what condition the market that you are trading is in before deciding whether or not to exit your trade.
Here are examples of managing a winning trade in a trending market on the daily USDJPY chart and an example of managing a winning trade in a consolidating market on the daily GBPJPY chart:
Don’t count your money when you’re sitting at the table…
When deciding whether to hold or fold your trade it is important that you look at your trade in terms of risk to reward instead of the amount of pips you are up. This is analogous to not counting your money when you’re sitting at the table; don’t count your pips when you are in a trade but instead calculate your risk to reward scenario. Before entering any trade it is very important to figure out how much reward you can reasonably make relative to the amount you are risking. As the trade progresses it is important to remember your pre-defined risk / reward scenario, you really don’t want to take anything less than this pre-defined risk / reward amount unless there is a logical reason to do so like one of the points we discussed above.
If in doubt…
If you find yourself in a profitable forex trade and you are unsure whether or not you should hold or fold it, the first thing you need to make sure you do is NOT let your emotion influence your exit decision as this is one of the most common and detrimental mistakes that forex traders make. If all else fails you can always refer back to this article and the points discussed above, go through them and see if any of them apply to the current trade you are in, you can think of this article as a sort of “check list” for what to do when you are in a winning trade.

The Simplest Forex Trading Strategy in the World

trading price action setups from horizontal levels is the “core” component of my trading theory and strategy, and if you were to take away only one thing from my website it would be that you can learn to trade the market effectively by simply drawing the core levels on your charts and waiting for obvious price action signals to form around them.

After you finish reading this lesson, leave a comment, like it on facebook, tweet it on twitter and share it with others. :)

Why are horizontal levels so important?
If you want to learn to trade a “naked” price chart, you’ll need to learn about two things at minimum; price action and horizontal levels. Everything in the market starts with a horizontal line; this is the back-bone of my trading approach as well as the trading approach of many other great traders. Indeed, traders like George Soros, Warren Buffet, Jesse Livermore and others, all pay (paid) close attention to the key levels in the market, because they know that these levels are significant and can thus have a strong impact on the direction of price.
Horizontal levels help with timing and they provide “value areas” that can help you define your risk by giving you a price level to place your stop loss beyond. I have been a disciplined trader of levels combined with price action for years; probably about 80% of my trades involve an obvious “core” horizontal level combined with a price action signal. Horizontal levels provide us with a confluent area to trade from, but they are not the only factor of confluence that I look for; the more factors of confluence you have lining up with a price action signal the better. However, I do consider horizontal levels to be the “core” piece of confluence in my trading strategy and I want to show you guys some examples of how I use horizontal lines and price action to trade the markets. Ready? Let’s go…
Examples of trading with horizontal lines and price action signals:
I teach a plethora of price action trading confirmation signals in my course that I combine with levels and the trend, here’s a few examples of how I trade price action signals with obvious horizontal levels in the market.
• Trading horizontal lines in trending markets with price action from “swing points”
My favorite way to trade with horizontal lines is to trade them in trending markets from swing points. As markets trend, they create horizontal levels as they ebb and flow, these levels are what I call “swing points”, and we can find very high-probability trade setups by watching for price action forming from these swing points in the market.
Look at the illustration below, note how the market is trending higher and as it makes new highs it also creates resistance when it falls away from these highs, then as it pulls back the previous high / resistance actually turns into support (swing point). Thus, old resistance becomes new support in an uptrend, and in a down trend old support becomes new resistance, also known as swing points.
The way that we take advantage of these horizontal level swing points, is to watch for price action strategies forming near them as the market pulls back. Look at the blue circles in the illustration above, these are the swing points at which you want to watch for obvious price action signals forming, then you are trading from a confluent point of “value” within a trending market.
• Trading horizontal lines in range-bound markets with price action
Another excellent way to trade horizontal lines in the market is to simply watch for price action setups forming near the boundaries of a range-bound market. Unfortunately, markets do not always trend like we want them to, instead, they often swing between support and resistance in a trading range. Fortunately, trading with simple price action setups allows us to trade in any market condition, so we can still find high-probability trade setups even in range-bound market conditions.
In the illustration below we can see an example of what a range-bound market might look like. When price is obviously bouncing back and forth between a horizontal support and resistance level, we can wait for price to hit one of the boundaries of the range and then watch for price action signals forming there. This provides us with a very high-probability entry scenario and a very simple trading strategy. It also gives us obvious levels to define our risk and reward. Risk is defined just beyond the trading range high or low from the boundary you are entering near, and reward is defined near the opposite end of the trading range.
• Trading “event area” horizontal lines with price action
Event areas are horizontal lines that can be very high-probability areas to watch for price action setups forming near. Essentially, when a major price event occurs in a market, like an inside bar breakout or a pin bar reversal, price creates an “event area” at this horizontal level. You will notice that these event areas are significant most of the time because price will often stall or reverse as it re-tests them.
In the illustration below we can see an example of the creation of an event area as well as how it could subsequently be traded. Essentially, any price action signal can create an event area if it sets off a substantial move from the event area / horizontal level. In the example below we can see an inside bar breakdown occurred and then price came back and re-tested this event-area / horizontal level. As price re-tests the event area we would watch closely for price action signals, as the formation of a price action signal at an event area is a very high-probability event.
However, event areas also provide us with the ability to enter without confirmation from price action. This is a more advanced strategy that I teach in my price action trading course, but it is possible to enter “blindly” at the event area as price comes back to re-test it, that is to say without confirmation from price action.
• Real-life examples of trading price action at horizontal levels
Finally, I wanted to show you guys a real chart of the EURUSD and analyze its recent price action and horizontal levels to show how you could have used simple horizontal levels with price action to trade the market.
1) Note the trading range that the EURUSD was in for about 3 months earlier this year. Price was bouncing back and forth between resistance near 1.4550 and support near 1.4100 – 1.4000. We didn’t get a lot of signals in this range, but there were at least three good pin bars that formed off the support of the range that traders could have made some very good money on.
2) Next, as the trading range formed and the pin bars developed along support, we got an event area forming around 1.4100 – 1.4000. As price began to move lower from the top of the trading range before it broke out, it formed a long-tailed pin bar and then an inside bar right at this event area. Thus, a break of the pin bar low meant a break of the event area and we can see a significant move followed.
3) Next, we can see an inside bar and a pin bar setup that formed as the market trended lower. These setups both formed at horizontal levels and we can see they resulted in large moves to the downside that provided good risk reward ratios for savvy price action traders


In closing, trading horizontal levels with price action signals is the primary technique that I use to analyze and trade the market. It is essentially the “foundation” of my trading strategy and I believe it truly is the “simplest trading strategy in the world”, as well as the most effective. It is obvious that horizontal levels are very important in the market, and by combining them with my price action strategies you have a very effective and simple trading strategy. If you want to learn more about how I use horizontal lines and price action, as well as my other trading strategies.

Pyramiding – A Money Management Strategy To Increase Profits

this guide will show you how to “trade with the market’s money”. That’s right, I am going to show you how to scale in or “pyramid” into a winning trade, without taking on more risk. This essentially means you will add to an open winning position without taking on more risk and possibly even creating a risk-free trade, all while dramatically increasing your potential profit. It’s not too good to be true, but there are certain times when scaling into a trade works better than others, which we will discuss in today’s lesson. (Note: scaling in is the same thing as adding to a position or pyramiding in)
You’ve probably heard the saying “Cut your losers short and let your winners run”, but how do you actually do that? Today’s Forex trading training lesson is going to teach you how to properly scale into an open trade that’s in profit, so that you get the most out of your winning trades. You probably know that many of the major Forex pairs have been trending quite nicely recently, if not, then check out my recent Forex market update to learn more. With all these strong trends that are taking place recently, I thought it would be good a idea to chuck out an article to you guys about how best to maximize your winning trades. So, let’s get started….
Note: When you finish reading today’s lesson, please leave me a comment and let me know if you found this information helpful!
How to safely scale in or “pyramid” into a winning trade
Note that I have “safely” in italics above, that’s because there are basically two ways that you can add to a winning open position:
1) The stupid way – Scaling into your position but not trailing your stop up or down to reduce risk on the previous position(s), thereby voluntarily taking on more risk (something you should NEVER do).
2) The smart way – Scaling into your position at predetermined levels and trailing your stop up or down each time you add a new position so that you never risk more than you are comfortable with losing, or more than what you have predetermined is a good 1R value for you (1R = the amount you risk per trade).
I am going to teach you guys how to safely pyramid into your trades today, but before we get started I need to stress one thing:
WARNING: Just because you can scale into an open position that is in profit doesn’t mean you SHOULD. There are certain times when the strategies you are about to learn will work well and certain times when they won’t. In general, you can try to scale into a winning position when a market is in a strong trend or during strong intra-day moves. You should not try scaling in when the market is range-bound or trending in a choppy manner with a lot of back and filling.
Now, because you are adding a new position each time your current trade moves a certain distance in your favor, your breakeven point on the whole position moves closer to the market price. This means the market doesn’t have to move as far to put you into negative territory. Now, this won’t be a problem if you have trailed your stop loss on the previous position(s) so that you maintain your overall 1R risk, but where traders get into trouble is scaling into positions and not moving their stop losses to reduce risk. If this all seems a little confusing right now I promise the diagrams below will clarify…
Example scenario:
Let’s say the EURUSD is trending lower like it has been recently. You see a solid pin bar entry strategy that formed showing rejection of the 1.2625 resistance level. You decide that since price has respected this level and it’s obviously a “key” level, it’s a good place to set your stop loss just above. So you decide to put your stop loss for the trade at 1.2650….we ALWAYS set our stop loss BEFORE deciding on a potential profit target. This is because risk management in Forex trading is the most important aspect of the whole thing…if you don’t properly manage your risk on EVERY trade you WILL NOT make money.
Next, there is no obvious / significant support that you can see until about 1.1900, so you decide to aim for a larger profit on this trade and see if the trend won’t run in your favor a bit. Your pre-defined risk on the trade is going to be $200, to keep the math simple let’s say you sold at 2 mini-lots at 1.2550; 100 pip stop loss x 2 mini-lots (1 mini-lot = $1 per pip) = $200 risk
You decide to aim for a risk reward of 1:3 on this trade, so you set your initial target at 1.2250 and you plan on adding two positions to this trade, 1 when you are up 100 pips and another when you’re up 200 pips. You plan on doing this because the market is trending strongly and you have decided based on your discretionary price action trading skills that there’s a good chance the trend will continue.
Here is a diagram of what your trade looks like at the beginning:
The trade pushes on in your favor and you decide to scale in with another 20k units at 1.2450. Your overall position size is now 40k or $4 per pip on the EURUSD, this increases your potential reward to $1,000 if price hits your target at 1.2250. Since you trailed down the stop on your initial position to 1.2550, that position is now at breakeven, the stop on your new position is also at 1.2550, meaning your overall risk on the trade stays the same at $200.
Next, the trade continues on in your favor and you decide to pyramid in with another 20k units at 1.2350. This means your overall position is at 60k or $6 per pip on the EURUSD. Your overall reward potential is now $1,200 if your target of 1.2250 gets hit; note that your reward is now double what it was when you started whilst your overall risk is now at $0 as you’ll see now…
You trail down the stops on both previous positions to 1.2450 thereby locking in a profit of $200 on the first position, reducing the second position to breakeven and offsetting the $200 risk on your new position to $0…you now have a breakeven trade. The catch here is that the market is only 100 pips from your breakeven point on the whole trade, so there’s a bigger potential of the whole position getting stopped at breakeven…the good part is you have increased your potential for profit without taking on any more risk.
The trade continues on in your favor and hits your target at 1.2250, all three positions are now closed and you’ve netted a 1:6 risk : reward. You never risked more than $200, which was your predefined 1R risk amount, and you gained $1,200. This is an example of how to take advantage of a strong trending market like we have seen recently in the EURUSD and other markets.
Why I don’t scale out
I am sure that some of you are probably wondering about scaling out. I am not going to get into it too deep in today’s lesson, but if you want to read a previous lesson I wrote that discusses scaling out, check out my article on forex trade management.
I will say this: I don’t scale out, and I don’t recommend you do either. But, obviously what you do in the markets is up to you, however, I will briefly explain to you why I personally believe scaling out makes no sense. When you scale out of a trade you take partial profits on your full position as the market moves in your favor. Sounds good on the surface right? Well, the problem with it is that you are limiting your gains on a winning trade. We want to maximize winning trades, not minimize them. What I am saying is that by scaling out you are purposely limiting a winning trade.
You see, when you scale out of a trade you are cutting down your position size as the trade becomes more profitable by moving further in your favor. What this means is that as the trade moves in your favor you’re going to be holding the smallest portion of your position at the MOST profitable part of the trade…doesn’t seem like the best way to let your winners run does it? Remember…trading is about maximizing your winning trades and limiting your losers…I only see scaling out as minimizing a winner, and THAT is why I don’t scale out."learntotradethemarket"

How To Trade Trends In Forex – A Complete Guide

We’ve all heard the saying “The trend is your friend”, and while it sounds nice it doesn’t really teach us anything about trading a trending market or how to identify one. In today’s lesson, I am going to give you guys some solid information on trend trading that you can begin using immediately. Today’s lesson is all about trading trending markets with price action, and we are going to talk about how to tell when a market is trending and how to take advantage of these trends.
I hope you guys pay close attention to today’s article and refer back to it when you have any questions about how to trade or identify a trending market. In fact, if you email me asking about trends…I will probably refer you to this article!
Let’s get started…

The first step: Learn to identify a trend with nothing but raw price action

As you probably already know, there are tons of different indicators that you can put on your charts to ‘help’ you identify a trending market and trade with it. Many traders spend countless hours and dollars on trend-following trading systems or on indicators that just end up confusing them and making the process of trend discovery a lot more difficult than it needs to be.
I have always been a strong proponent of visual observation of the raw price action of a market, as you probably know. I also believe that simply observing a market’s raw price action, from left to right, is the easiest and most effective way to identify a trend and to spot high-probability entries within it.
Let me make a quick note before we proceed: A trend is not actually a strategy by itself; it’s just an added point of confluence that increases the probability of a trade. However, just randomly jumping in with a trending market is not an edge or a strategy.
As a market moves higher or lower, its previous turning points, or swing points as I like to call them, become reference points that we can use to help us determine the trend of a market. The most basic way to identify a trend is to check and see if a market is making a pattern of higher highs and higher lows for an uptrend, or lower highs and lower lows for a downtrend. This is just plain old visual observation of a market’s naturally occurring price action…no mumbo-jumbo trading systems or magic-bullets here. I’d like you guys to take a look at this simple diagram that I drew below; it shows us the basic idea of looking for higher highs (HH) and higher lows (HL) for uptrends and lower highs (LH) and lower lows (LL) for downtrends:
Note: each colored circle is highlighting what we would consider a ‘swing point’ in the market:


Thus, general observation of a market’s swing points is the first point of call in determining if a market is trending. If you do not see a pattern of HH HL or LH LL, but instead you see sideways price movement with no obvious general up or down direction to it, then you are probably looking at a range-bound market or one that is simply chopping back and forth.
Tip: You shouldn’t have to think too hard about whether a market is trending or not. Most traders make trend discovery WAY too difficult. If you take a common sense and patient approach, it’s usually fairly obvious if a market is trending or not just by looking at the raw price action of its chart, from left to right. Make sure you mark the swing points on your chart, as it will draw your attention to them and help you see if there’s a pattern of HH and HL or LH and LL, as discussed above.

Characteristics of trending markets

Trending markets tend to make strong moves in the direction of the trend followed by periods of consolidation or a counter-trend retrace before the next leg in the direction of the trend. You will notice this pattern happens in almost any trend you can find. Typically, what happens to many traders is that they will make some money during the periods of strong directional trend movement, but then they continue to trade as the market takes a breather from the trend and consolidates. It’s these periods when traders give up all of the gains they just made when the market was moving aggressively.
You need to learn to identify the different parts of a trend, this will help you avoid over-trading during the choppy / consolidation periods and will give you a better chance at profiting when the trend makes a strong move.
Here is an example of what I’m talking about:



In the diagram above, we can see that a trending market tends to move in spurts, moving in the direction of the trend and then stalling to take a breath before another leg in the direction of the trend. Now, all trends are obviously not exactly the same, but we do typically see the general pattern described above; a forceful move in the direction of the trend followed by a period of consolidation or a retracement in the opposite direction.
Now, these retraces are when we have the highest potential for a high probability entry within the trend. Often, a market will retrace to approximately the level of its previous swing point before the trend resumes. In an uptrend these swing points are support and in downtrends they are resistance. Look at the very first diagram in this article for a quick refresher on what I’m talking about. Also, let’s look at the chart we just looked at but this time with the support levels marked. These support levels resulted after the market began to retrace lower within the structure of the broader uptrend.
Note the ‘stepping’ pattern left behind by the swing points in this uptrend. As the market retraces back down to these ‘steps’ or support levels, we would focus our attention and watch for price action signals forming near these levels to rejoin the uptrend:



Note: These same principles apply in a down trending market but we would be looking for price action setups from resistance rather than support.
As we discussed previously, a trending market will tend to surge in one direction and then slow down and either consolidate in a sideways manner or retrace lower or higher, depending on what direction the dominant trend is. It is during these contraction or retrace moves that we can focus extra hard through our ‘sniper-scope’ and begin searching for high-probability price action trading strategies forming from previous swing points within the overall trend.

Trading from value in trends

My primary mission as a price action trader is to watch for obvious price action setups that form after a market retraces back to a confluent level in the market. This can be a swing point like we discussed above, a moving average level, or some other support or resistance level. Whatever the case, I am looking to trade from ‘value’ in a trending market. By value, I mean from an optimum point in the market that has proved significant before.
For example, in an uptrend I would consider ‘value’ to be support, since that is where the price of the market is likely to be seen as a good ‘value’ for the bulls, and thus they will tend to buy from that level and push the price higher. Whereas, in a downtrend, ‘value’ is seen at resistance, since the price has rotated higher within the broader downtrend; so it’s a good ‘value’ to sell from resistance in a downtrend. These rotations back to value points can also be called ‘trading from the mean’ or the ‘average’ price, this is why moving averages tend to act as dynamic support or resistance levels.
One tool we can use to find ‘value’ in a market is a moving average. I don’t use them all the time, but when I do I like to use the 8 and 21 day exponential moving averages. I use them as a general guide and a helper to find confluent points in a market. For example, often the 21 day EMA will align with a swing point in a trending market, this would be considered a confluent level since you have multiple factors lining up together. Then, if we see a price action signal there, we know we are seeing a setup form in a very high-probability area on the chart. See here:



Note: these moving averages should only be used as a ‘general guide’ and never as an actual signal (as in the old ‘moving average crossover signal’). We only use them as a helper to see dynamic support and resistance levels (to add confluence) and for trend direction. But just to be clear, our main focus is on visual observation of a market’s price action and levels, that is to say without any EMAs.

Don’t fall into the ‘breakout’ trap – Many amateur traders get stuck in a cycle of trying to trade breakouts all the time…this is not really an effective long-term strategy because the ‘big boys’ all know that amateurs are constantly trying to buy and sell breakouts. Instead, we want to enter closer to key market levels, swing points, EMA levels (confluent levels) in the market…always with confirmation from a price action signal. As a ‘regressive’ price action trader, we are looking to buy or sell from value within the trend…waiting for the inevitable pullback and then pouncing on an obvious price action signal if one forms.

Forex trends vs. other markets

One aspect of trend trading that I want to touch on briefly is that trends in Forex tend to differ from those in other markets, especially equities.
In Forex, bearish and bullish trends are typically equally as violent and potent…whereas in equity markets we tend to see slower moving price action in a bull market, along with lower volatility. Down-trending markets tend to be fast and volatile in equity markets. Forex trends tend to be the same in their volatility and price action whether the trend is up or down. The main reason is because it’s one currency against another in any given currency pair and this results in more balanced price movement.
Thus, in Forex, your trading strategy and plan will generally be the same for both up and down markets. Here’s an example of the EURAUD daily chart recently that shows just how consistent both down trends and up trends can be in this market…note how the volatility and speed of these trends were about the same:




In the equity markets, traders typically need to adjust their strategies or systems as a market moves from bull to bear or vice versa. But in Forex, whether you’re trading long or short, bull or bear, the volatility of a currency pair tends to say about the same. That’s not to say that volatility never changes in Forex, it just means that the particular direction of a Forex pair doesn’t have a very big impact on that pair’s volatility or price action, as it does in the equity markets for example.

Final notes on trading with trends:

Take advantage of trends when they happen – There is never anything concrete with trends…meaning you never know how long they will last for, so try to take advantage of them when they do occur. Markets typically only trend about 25 to 35% of the time, and the rest of the time they are range-bound or chopping in a sideways fashion. The trick is to learn how to identify a trending market so that you can get the most out of it and get on board as early as possible.
Counter-trend trading – Overall, trend trading should make up about 70% of the trades you take, and the other 30% might consist of counter-trend trades or trades in range-bound markets. It’s best to learn how to trade with near-term trend before you try trading counter-trend, because trading with the trend is naturally higher-probability than trading against it.
In conclusion, trend trading is perhaps the ‘easiest’ way to make money in the forex markets. Unfortunately, markets don’t trend all the time, and it’s the time in between trends that traders do the most damage to themselves. This damage is a result of not having the discipline to wait for high-probability setups to appear, and not being able to properly read a market’s price action to determine whether or not it’s trending.
I trust that today’s lesson has helped you get an idea of how to determine whether a market is trending or not and how to trade a trending market. Remember, there’s no ‘Holy-Grail’ for trend trading, but if you’re in doubt, the best thing to do is to just relax and take some time to visually observe the last few weeks of price data in a market…without indicators. This no-nonsense approach is hard to beat and will work if you know what you’re looking for.
Finally, I leave you with this little formula:
The Best Trades = Trend + Confluent level + Price action signal
I’ve touched on some topics that traders can use for short-term trend analysis today, and I expand on these topics in the members’ article section of my price action traders’ community. Trend following is a large part of my Price Action Forex Trading Course and of my general trading strategy. I’d really love to hear your feedback today, so please remember to leave your comments below & click the ‘like button’.
Good trading. mathew "learntotradethemarket"

The Minimalist Guide To Forex Trading & Life

The inspiration for today’s article comes from something I am currently experiencing in my personal life.  I recently sold my luxury house in Queensland Australia and am currently renting while my family and I decide where we really want to live. Our plans were to eradicate all assets and debt, as my wife and I are both quite young and with my profession as a trader and coach, I have the ability to be mobile. We decided that we wanted to try living a stripped down and nomadic lifestyle for a while and welcomed the freedom it promised.

However, this doesn’t mean all people will want to be nomadic and travel around the world living in different places. The lesson that I want to put forth today, is that as humans we tend to over-clutter our lives with addictions and materialism (houses, cars, so forth). Halfway through 2012 I said enough is enough and I set out to completely remove all clutter and unnecessary possessions, even small things. Basically, I wanted to be free of all these burdens…because I realized I had a bunch of stuff I didn’t need, and I felt it was holding me back. I had more than one car that I didn’t really need, I owned a house I wasn’t happy with and that was too big, etc. I just felt I had too many things that were cluttering my life and my mind; my goal was to set out to only have a suit case, a laptop, and my favorite book.

The reason I’m sharing this story with you, is because I believe that most of you out there can benefit from applying a similar logic to your life, i.e. de-cluttering, liquefy assets and removing debt.  People can interpret it however they want, but the core thing is to keep with you only what you absolutely need in an effort to save time, save money, remove stress, and more.

… So what the hell does this have to do with trading you ask?

What we are setting out to do today is to become ‘minimalists’ as applied to trading, and as we have discussed already, this can apply to other areas  of life too…getting rid of unnecessary things…all possessions that you don’t really need…all unnecessary emotional attachments to things, minimalism is almost a religion of sorts. Many of you know that I take a very stripped down and simple approach to trading the markets, and so if you think about the benefits of being a minimalist in everyday life, it really is no big surprise that it’s also the best way to trade the markets.
To find out more about “Minimalism” as defined by one of the blogs that I follow, click here.

Forget the stereotypical facade of a pro trader

The first step to becoming a minimalist trader is to lose the facade of the cliché trader with his lovely office, big wooden desk and several stacks of monitors with the latest trading software – you only need a laptop, FREE trading software (get it here), an effective forex trading strategy and your brain. The reality is that you do not need a big office, multiple monitors and an expensive data feed to be a successful trader.
The stereotypical facade of a “pro trader” is what many of us are addicted too…but it’s not reality…reality is a guy trading from a coffee shop on his PC.
Get rid of all the excess weight you have if you are still learning how to trade or you’re struggling to trade successfully. If you want to add a big trading desk with multiple monitors and all the bells and whistles after you become a successful trader, that’s OK. But don’t think you need to go out and drop 5 grand on your trading office in order to make money in the markets. Some of the best traders in the world just trade off a laptop. You don’t NEED an office with 3 computers or a fancy workstation.
I personally have gone from having a big trading office with multiple monitors back to an Ultra book PC and wireless internet, sometimes I even use my iPhone for my web connection…I realized my ego and greed took over before, and these things negatively impacted my trading.

Minimize what you put on your charts, maximize trading results

Unless this is your first time on this blog, you probably know that I teach what some might call a “minimalist” approach to trading. However, you might not know WHY I trade and teach this approach.
It usually takes every trader a certain amount of trial and error before they figure out that most of their trading mistakes resulted from ‘stupid’ things they did, and not necessarily from the trading method they were using. Most traders lose money because they make emotional trading mistakes; this is something most all of us can agree on.
However, the role that having tons of “crap” on your charts plays as a contributor to your trading problems, is often overlooked. Just as the materialist mentality of needing to buy more things to make us feel happy or fulfilled is a flawed mentality, so is the mentality that adding more technical indicators and analysis tools will somehow make you a better trader. One of the big secrets to success in all areas of life and indeed even to happiness is that less is often better. Just as having less material things in my life has significantly increased my peace of mind, bank account and time spent with my family, it can also help you to become a better person and trader.
I mentioned above that trader error is the main cause of losing money in the markets, not the particular trading method you use. However, most traders naturally assume that it’s their trading system or strategy to blame for their losses in the market. They then set out on a quest to find the ‘best’ trading method, adding indicators, Elliot Waves, super-turbo 5,000 trading robots, and everything else under the sun to their charts. This provides them with a false sense of security and hope for a while, until they realize it’s not doing anything to improve their trading results. The point here is that MORE IS NOT BETTER!
You see, as traders our trading mindset is the most important piece of the puzzle. However, the strategy or system that we use to trade with can and does have a profound effect on our trading mindset. So, when we try trading with 10 different indicators on our charts, we get confused, conflicted, and frustrated and once this happens it’s only a matter of time before these feelings result in impulsive and emotional trading. So, we can see that our mindset is perhaps the key to success in the markets, but because our trading strategy influences our trading mindset heavily, it too is very important.
The next time you want to put an indicator on your chart ask “Do I really need this? Is this really going to help me?”. “DO I REALLY NEED THIS?”….We want to only trade with what we need …..

How to incorporate minimalism into your trading routine (and everyday life)

• Ditch the forex indicators and trading robots and start over with a totally clean price chart. This act alone will do a lot to calm your nerves and your mind while analyzing the markets.
• Learn to trade with simple price action strategies. After you ditch the indicators you will need to learn how to trade off the raw price action of the market. Whilst this might seem different to you at first, I can promise you it’s a lot easier and makes a lot more sense than whatever messy method you were trading with before.
• After you learn to trade with price action, understand that you don’t have to spend a lot of time analyzing the markets each day. You can learn to trade in an end of day manner and fit trading in around your day job.
• Forget about trying to analyze 20 different markets each day. Minimize the markets you trade and this will work to sharpen your focus on the handful that you like the best. I focus on the major forex currency pairs and a few other markets like oil, gold, and the Dow.
• Don’t worry about multiple monitor setups, fancy trading desks, extremely expensive computers, monthly data feed subscriptions, or any of these other ‘luxury’ trading office items. Truth is, you don’t NEED them. They are nice things to have if you can truly afford them, but you really don’t need them to trade successfully. I can afford these things but I don’t have them anymore because I realized they were contributing to feelings of greed and materialism, and most of all I realized I just didn’t need them.
• One of the things I also did was got a P.O. box for my mail. This might seem like a small thing, but it’s all about downsizing and consolidating, and each little thing you downsize or get rid of adds up. Now, I only collect my mail once a week, this saves time and it changes the ‘process’ of your life…I took a minimalist approach to getting my mail, this freed up time and energy each day to devote to other more important things, even if it was a small amount of time each day.
• Make sure your trading room or trading location is clean and simple. Whether it’s in your home or from the local Starbucks, make your surroundings minimal. You don’t need 50 trading books sitting around, instead, pick your favorite 3 and keep them with you (hopefully one of those is my book :)). If you have to, put all the ‘junk’ that you really don’t need in a storage unit, I did that, and it really makes you realize that you don’t need the majority of the things you thought you did.

Conclusion

People like to hoard things; they hoard possessions, money, collectables, you name it. It’s a fact that when most people get a pay raise they simply tend to buy more things (crap) that they really don’t need, thus keeping them stuck in a perpetual cycle of consumerism and materialism. I am telling you that you do not need to live this way. You don’t have to be a slave to debt anymore, and you don’t have to try and keep up with the “Joneses”…who cares about the Joneses, they aren’t that interesting anyway.
You see, there’s a common thread between minimalism as a lifestyle choice, a trading choice, and happiness and success. That thread consists of the fact that material items do not bring you happiness, trading success is not the result of having lots of indicators and fancy office equipment, and success is more easily attainable with a clutter-free and streamlined lifestyle. Have you ever seen that show “Hoarders” on A&E? If you have seen it, you would agree that possessions don’t make you successful or happy. Materialism is a real addiction, buying things satisfies some primitive urge that we need to feel secure. This is very similar to why traders get addicted and dependent on indicators, reading economic reports, trading robots, and you name it. We tend to overlook the most obvious things in life, such as the fact that happiness is readily available for free by just spending time with loved ones, or that the raw and unobstructed price action of a market provides us with all the technical clues we need to develop an effective trading strategy.
From here, you need to take the next step and decide if you are living a cluttered life, and if so, how can you de-clutter it? Similarly, you need to take a look at your trading approach and decide if it’s simple, logical, and effective or full of clutter and confusion. If you want to de-clutter your approach to trading, I suggest you checkout my price action trading course and see just how much taking a minimalist approach to your trading will improve your overall trading results."learntotradethemarket"

A Guide To Exiting Trades Successfully

How many times have you been in a trade that goes in your favor a decent amount of pips and then it starts moving against you and you start to feel panicked? What about being in a trade that is up a nice profit and you decide to close it out only to see the market continue moving two or three times further in your favor without you on board? Is this just “part” of trading or are there things you can do to limit these types of frustrating trading situations? Today’s lesson is going to explain how you can make exiting your trades as simple and unemotional as possible.

Exiting trades is hard for most traders, but it doesn’t have to be. Like most other aspects of trading, people tend to over-complicate their exits and make them a lot more difficult than they need to be. It is the exiting of a trade that truly does separate the winners from the losers in the trading world. There are some very talented market analysts out there who can pick the market direction with 80% accuracy but still cannot turn a consistent profit because they are terrible at exiting the market.

Change the way you think about trade exits

When you think about “exiting a trade”, the first thing that comes to your mind is probably not a stop loss getting a hit for a pre-calculated loss that you knew had about a 40 to 60% potential of taking place. Instead, you probably think more about “rewards” and “take profit levels” when you think about exiting a trade, at least this is what most traders tend to think about it.
It’s pretty normal to think this way, because after all, most of us are initially drawn to trading from the idea of “fast money” or “quick profits” and “rewards”…and so it takes more brain power and forward-thinking to force yourself to think about losses and stop losses getting hit as an equally important part of exiting trades. So, don’t think you are alone if you have a fixation on profits and rewards…just know that you will need to “shift” your mentality on exiting trades if you want to have a chance at making consistent money in the market.
An important fact to understand about exits is that an “exit” includes profit targets AND STOP LOSSES, and an exit can also be a breakeven exit. Thus, it’s important to start thinking about stop losses as a critical component to your overall trade exit strategy, because how you manage losses and risk will decide whether or not you make consistent money in the market.

Accept that you simply aren’t going to win some trades

I’m going to tell you something right now that will have a profound effect on the rest of your trading career IF you decide to believe it and build it into your trading and money management plan: YOU ARE GOING TO HAVE LOSING TRADES. Whether or not you want to accept this fact is up to you. But, if I can promise you one thing about trading, it’s that you WILL have losing trades. How you manage your losing trades is a critically important factor in determining whether or not you make money in the market.
If you feel like you have already mastered your trading strategy and you have patience to wait for it to provide you with high-probability entry signals (you aren’t over-trading), the only other way you can consistently lose money in the market is by mismanaging your exits.
Here’s the “behind the scenes” reason why so many traders find exiting trades difficult or otherwise mismanage their trade exits; they are risking too much money per trade.
Think about it; if you have over-leveraged your account on a trade and it goes into profit for you, you’re going to have a very hard time taking that profit because relative to your account size you have a large open profit and as you sit there looking at that large open profit all you can think about is how much more you “could” make. You begin to justify reasons of why the market “might” keep moving in your favor and start “counting your chips at the table” by calculating how much more profit you could make on the trade if it keeps moving in your favor.
Of course…you are probably all too familiar with how the story ends…you don’t take the open profit for the reason I just described, and the trade starts moving against you and you are almost paralyzed in disbelief at how fast all your profit is vanishing. Your thoughts then move to the idea that “maybe” the market will stop moving against you and turn back around in your favor. You are now on the “roller coaster” of emotional trading that will eventually end in you losing a large amount of money…all because you risked too much on the trade.
Simple solution: ACCEPT that you aren’t going to win every trade and act accordingly. “Accordingly” means that you never risk more than you are OK with losing on any one trade, because, like it or not you COULD lose on any trade you take, not matter how “sure” you feel about it.

You need to be flexible but not emotional with your exits

As traders, we have to constantly ask ourselves whether our next decision in the market is a purely emotional one or one supported by logic and by what the price action is actually showing us on the chart.
Profit targets
Perhaps one of the most common mistakes that traders make in exiting their trades is moving their initial target further away ONLY because they think the trade will keep going in their favor. Most of the time, doing this leads to a smaller profit than what you had originally planned, or no profit at all.
Note: Just to be clear, I am NOT saying that you should never move your target further out from your entry or that you should never intervene and close your trades out manually, because if there’s a price action-based / objective reason to do so, then you should. The question you have to answer about profit targets is are you moving your targets around or exiting manually based on emotion (greed or fear), or is it based on what the actual price action is doing on the chart?
Remember, when you originally plan your exit for the trade, you place the profit target based on your mindset and analysis of the market just before you entered. You were probably a lot more objective and calm at that time because you weren’t in the market yet. Once your trade gets filled you immediately become less objective and more emotional as the market ebbs and flows. The best course of action in regards to profit targets, is often just to leave it where you initially planned it. Moving it further out as price approaches it is typically an action born out of greed…not out of logic. How many times have you done this and then the market hits your initial planned target or moves just a tiny bit past it and then rockets back against you, turning a solid open profit into a much smaller one or even a loss?
Even if the market DOES keep going in your favor after you moved your target further out, it’s still a bad habit to develop because it means you are reacting emotionally to what the market is doing rather than preempting your actions in the market and acting objectively. You cannot rely on luck in trading, eventually your luck will run out, probably when you need it the most. Thus, essentially what I’m saying here is that you need to stop moving your profit targets away only because the market is getting close to hitting them. Let them get hit if there’s no price action based reason not to move them; let your pre-planned profit target play out, then patiently wait for the next trade. This is part of developing discipline, patience and the correct trading habits.
Stop losses
You also need to be flexible but not emotional with your stop losses. You can be a little bit more rigid with stop losses than with profit targets. Meaning, with stop losses, it makes more sense to let the market take you out by moving down or up into your stop loss, that way you give the trade the maximum possible chance of moving in your favor.
The “set and forget” trade management concept that I teach is more important in regard to stop losses than profit targets. We need to avoid exiting a trade just because it’s going against us; we need to be much more disciplined with the set and forget concept by not exiting until our stop loss is hit in most cases.
If you manually close a trade out for a loss before it hits your pre-determined 1R dollar loss, you are also voluntarily eliminating any chance of the trade moving in your favor and this obviously affects the potential long-term profitability of your trading strategy. This is OK to do sometimes, IF the market’s price action calls for it, but a lot of times traders close out trades for small losses ONLY because the market moves against them a little bit, then the market moves back in their favor without them on board. As with profit targets, you really should only move a stop loss or close a trade out manually for a loss if there’s a valid price action based reason to do so.
Note: You should NEVER move your stop loss further away from your entry point, no matter what. This is like the cardinal sin of trading and it’s a fast track to blowing out your account. Stop losses should only ever be moved to reduce your risk on the trade, to breakeven or to lock in profit by trailing the stop.

Sometimes, taking a smaller profit is OK…

This point goes along with what we just discussed about being flexible in your trade exits. But, I wanted to mention this more in-depth since I know there are some misconceptions out there about taking less than a 1:2 risk reward and when / if that’s “OK”.
Basically, you don’t need to be totally “rigid” by always either taking a 1:2 or 1:3 risk reward (or some other pre-set reward) or no reward at all. Sometimes, it does make sense to close a trade out with a smaller profit if there’s price action telling you to do so…even if you haven’t reached a 2R or more profit.
I get emails from traders saying things like, “Nial, my trade came 5 pips shy of a 1:2 profit today but I didn’t take it and it turned around and now is at a loss”…this is where you need to monitor your trades and intervene if you have to. If the market gets really close to your profit target you should monitor the price action, if you are at a 1:1.5 or 1:1.8 risk reward and the market appears to be turning around (based on the price action)…there’s nothing wrong with closing the trade out and taking the profit off the table. You don’t need to let profits slip away just because you are trying to get some exact profit target, that’s also being greedy…situations like these is where the saying “don’t be a dick for a tick” came from.
You want to keep an eye out for a price action signal that is opposing your initial trade or for situations where the market spends a long time trying to touch a level but can’t quite get the legs to hit it. If you notice either of these things happening it probably means you need to intervene and possibly exit the trade early.

Set and Forget truly is powerful, use it with discretion though.

Many of you have probably already read my ‘set and forget trading’ article that talks about a very simple trade management technique which, as the name implies, involves setting and forgetting your trades. In other words, after you enter your trades you don’t meddle with them. However, there are exceptions to this rule, because the markets are dynamic and constantly changing…so we cannot afford to be 100% rigid in our approach to trading.
It will help if you think of “set and forget” as more of a “default” trade management technique…not something you do all the time despite what the market is telling you. Set and forget basically just means you don’t do anything if there’s nothing logical to do. It should be your baseline trade management point…meaning, after you enter a trade you don’t move your stops or targets around unless the price action that you see on the chart is implying that you should. You should consider “set and forget” as a nice metaphor for managing your trades with logic and objectivity instead of emotions like fear and greed.
Thus, the mental concept of “set and forget” is important, but the actual practical implementation of it will still require some monitoring and intervention. You will need to monitor your trades say once every 4 to 8 hours on average, and at the time you need to be as objective as possible as you observe the market. If a trade is working as planned, then do nothing. If the market has formed a huge pin bar reversal against your position but you are still up about two times your risk…then it probably makes sense to close that trade out manually and take the profit, because you have a valid price action-based reason to do so.
However, let’s say you check in on your trade and it’s gone against you by 20 pips but there’s no obvious price action telling you to exit. You would not close the trade at that point, you would instead leave it open and just let the market play out. Closing a trade only because it has gone against you a little bit is not a good enough reason to close it out…we need to give our “edge” (trading strategy) time to play out if there’s no logic / price action-based reason to close it out.

What is a “successful” trade exit?

Finally, you can determine whether or not you exited a trade successfully by answering the following questions:
1) Did I exit emotionally or logically? (“Logically” should be the answer)
2) If I lost on the trade, did I lose my predetermined dollar risk amount (1R) or less? (“Yes” should be the answer)
3) If I won on the trade, did I make 2R or more on the trade? If I made less than 2R on the trade is there a logic and price action-based reason that I exited before 2R was hit or did I just panic because the trade was moving against me? (“Yes” you should have exited logically no matter the size of your profit)