10 STEPS TO CREATING YOUR FIRST TRADING STRATEGY

Most new traders start by learning the trading strategies of other traders. I began my trading career this way as well. But, many traders ask, how do I get started with my trading strategy?

The good news: Creating your first trading strategy is easy.

The bad news: Creating a profitable trading strategy is hard.

Start with the right expectations. Forming a trading strategy is easy. Learn a few trading tools and indicators, and you can do it.

However, it’s not realistic to think that your first trading strategy will make you rich.

Finding an objective trading edge is tough. On top of that, you’ll realise that trading profitably goes beyond your trading strategy.

Then why should you still form your trading strategy? Why not just use the trading strategy of a successful trader?

Traders might share their tools and approaches. But no trader can or will guarantee your profits. Every trader is different. Hence, you can only benefit from a unique and personal blend of trading tools.

The best and most sustainable approach is to develop your trading strategy.

Follow these 10 steps to forming your first trading strategy:


STEP 1: FORM YOUR MARKET IDEOLOGY

Before you jump into creating your own trading strategy, you must develop an idea of how the market works. Most importantly, you need to answer this question.

Why do you think you can make money from the markets?

Form your market ideology by reading widely. Read about both technical and fundamental analysis.

Avoid get-rich-quick claims.

Think about demand and supply.

Doubt theories that claim that people are perfectly rational.

Your ideology will define every step that follows. Give it the attention it deserves.

Regardless, I urge you to follow one principle in your first trading strategy.

Keep it as simple as possible.

You don’t want to be overwhelmed by a complex strategy right from the start. Moreover, a trading strategy with more moving parts is harder to manage and improve.

STEP 2: CHOOSE A MARKET FOR YOUR TRADING STRATEGY

Forex? Equities? Options? Futures?

If you choose to trade forex, understand what you are buying and selling with a currency quote. Make sure you learn about the different models of forex brokers. Know how the margin is calculated.

Or if you choose to trade equities, you must know what a share means. You must know the difference between a blue-chip and a penny stock.

The point is there’s a lot to learn about each market. But you cannot start to learn in-depth until you choose your trading market.

Although I recommend futures trading for intraday traders, the choice is yours. The only rule is that you must understand the market you choose to trade.

STEP 3: CHOOSE A TRADING TIME FRAME

Before you gain any trading experience, it’s hard to decide on a trading time frame. You will not know if you are more suited to quick scalping or daily swing trading.

Should you trade the 5-minute time frame or the daily charts?

Hence, you can start by considering your circumstances. If you have time to watch the market for extended periods, try intraday trading.

When you trade fast time frames, you get fast feedback to shorten your learning time. Even if you end up with longer timeframes, what you learn from intraday price action will still be useful.

Of course, if you are not able to watch the market for extended periods, start with end-of-day charts. With sustained effort, you can learn enough to decide if swing trading is for you.

Choose Your Trading Time Frame

STEP 4: CHOOSE A TOOL TO DETERMINE THE TREND (OR LACK OF)

You don’t trade when you see a Pin Bar. You trade when the market is rising, and you use a bullish Pin Bar to trigger your trade.

You don’t trade when you see a Gimmee Bar. You trade when you judge that the market is going sideways, and you use a Gimmee Bar to enter the market.

Decide on a tool to help you judge the market context. (i.e. trending or not, up or down)

You can choose price action tools like swing pivots and trend lines. You can also use technical indicators like moving averages and MACD.

STEP 5: DEFINE YOUR ENTRY TRIGGER

Even with the right market context, you need an objective entry trigger. It will help you enter the market without hesitation.

Both bar and candlestick patterns are useful triggers. If you prefer indicators, oscillators like the RSI and stochastics are good options too.

Stochastic for Swing Trading

STEP 6: PLAN YOUR EXIT TRIGGER

You need to plan how to exit when things go wrong. The market can go against you, causing you losses beyond your imagination. Having a stop-loss is critical.

Learn how to place a stop-loss here.

You also need to plan how to exit when things go your way. The market will not go your way forever. Hence, you need to know when to take profits.

Learn how to place a target here.

STEP 7: DEFINE YOUR RISK

Once you have your entry and exit rules sorted out, you can work on limiting risk.

The primary way to do so is by position sizing. For a given trading setup, your position size determines how much money you are putting on the line.

Double your position size, and you will double your risk. Watch your position size carefully.

STEP 8: WRITE DOWN YOUR TRADING RULES

At this stage, your trading strategy is simple. You might be able to memorise the trading rules. However, you must still write down your trading rules.

Having a written trading plan is a robust method to ensure discipline and consistency.

It also provides a record of your trading strategy. You will find it useful when you are trying to refine it.

STEP 9: BACKTEST YOUR TRADING STRATEGY

With your written rules, you can now backtest the strategy.

If you have a discretionary trading strategy, backtesting can be an arduous process. You need to replay the market price action and record your trades manually.

If you have a mechanical trading strategy and a coding background, you can speed up this stage.

Nonetheless, looking through the trades one by one is a great way to develop your market instinct. Doing so can also help you think of ways to improve your trading strategy.

STEP 10: PLAN HOW TO IMPROVE YOUR TRADING STRATEGY

Your first trading strategy will not be profitable. But it’s okay. Your trading strategy is a living object. It is not static.

With your growing experience and knowledge, your trading strategy will improve.

But let’s not leave this to chance. Plan how you will obtain feedback and improve your trading strategy.

Forward test your trading strategy. Plan to take good notes of your market observations. Record your trades and keep your chart images in good order.

Avoid drastic changes to your trading strategy.

For this final step (which might take forever), remember that your aim is to achieve positive expectancy with every trade. Not positive profits for each trade.

Let statistics work for you. Don’t force your will on the market.

CONCLUSION

Follow the 10 steps above, and you will find yourself with a basic trading strategy.

This strategy is not the Holy Grail. But it is formed with your experience and according to your trading style. 

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What Kinds of Drawdown Should You Expect?

What Kinds of Drawdown Should You Expect?
The drawdown in your portfolio will typically be correlated to the level of risk exposure of your trading strategy. If your strategy is systematic, you can base future drawdowns on historical maximum drawdowns. If you are a relative value trader, who is looking for a currency pair to rebound after a substantial dip, then you should have an idea of how far you would let your trade move against you before you cut your position. Using historical data to determine theoretical past drawdowns is a great way to gauge maximum drawdowns or drawdowns over a certain period. But always remember, that your worst drawdown is yet to come.
The reward that you experience is predicated on the risk you take. If you are using a trend following trading strategy such as a moving average crossover, you should expect that the strategy will lose more than it wins, and, that you will experience prolonged drawdown, until the market begins to enter a trending phase. 
When you design your trading strategy you need to be cognizant of the types of drawdown you expect to occur, and be willing to accept this drawdown as part of your trading business.

Creating a Drawdown Plan
Unfortunately, drawdowns are part of forex trading.  Potential reward is inextricably linked to risk, meaning Investors will typically generate returns which are predicated on the level of risk they are willing to assume.

The key to managing a drawdown is to have a risk management plan that allows you to survive adverse market conditions. By creating a drawdown plan, you can determine how you will handle your risk if the market moves against you during an unexpected Black Swan type event or during a prolonged losing streak.

You can start this process by determining the maximum loss you are willing to assume before you terminate the trading strategy.  Your risk should be a function of the reward you are attempting to generate. For example, if you are looking to double your portfolio within a year, you might need to accept a risk where you may lose nearly half your portfolio.  Many newbie traders have a hard time understanding this concept and as a result they tend to blow up their accounts using excessive leverage.

You should also consider managing your drawdowns on a monthly basis, as well as, on an annualized basis.  Many trading plans have monthly cut offs, as well as, an annualized maximum drawdown.  For example, if your maximum drawdown for termination is 30%, you might consider a monthly maximum drawdown of 5-6 %.

What’s the Plan if You Reach Your Drawdown Limit?
A natural question you might have is what are you expected to do if you hit your monthly drawdown.  There are several techniques you can perform to mitigate your risk if you hit your monthly stop loss level.  For example, you could completely unwind your risk and flatten your positions.  You could also hedge your exposure with options which allows you to reduce your exposure but remain in your positions.

For example, if you are long EURUSD, you might consider the purchase of a Euro FX put option that expires at the end of the month.  While the premium might take you above the maximum drawdown for the period, you will have reduced any additional losses, but can participate in the upside if EURUSD moves in your favor.  Recall, a put option is the right but not the obligation to sell a security at a specific price on or before a certain date.

One of the benefits of trading the forex market is that most of the currency pairs are liquid and as a trader you can exit a position with little slippage at any point in time. While some currency pairs are more liquid during specific time zones, the majors and crosses always provide some form of liquidity.

If you have a position in an illiquid exotic currency pair, such as an emerging market currency pair, that is difficult to sell, then you might need to consider what type of proxy you can utilize if your losses exceed your maximum drawdown.

Part of your drawdown plan might be to trade a basket of currencies or products that are uncorrelated where you might experience a maximum loss in one security, but the other securities in your portfolio offset those losses.

Prior to trading, you should have an idea of how you will handle your drawdowns.  You should think about how you will handle your risk in specific situations.  Most importantly, if you are trading illiquid assets, determine if you can absorb an outsized loss, if the market moves abruptly in a manner adverse to your position.

Trading Pitfalls
One trading pitfall that novice traders typically engage in, is trading multiple related currency pairs using the same trading strategy.  These can lead to returns that are highly correlated to one another, and while the gains can be exceptional, when the market turns against you, all your positions can lose money at the same time. This is a scenario you want to avoid.

One way to avoid this is to run a correlation analysis on the currency pairs you want to trade in your portfolio to see if they are highly correlated.  If the correlation between the currency pairs are consistently above 80%, you should avoid using these currency pairs to trade the same strategy at the same time.

Summary
You need to understand that drawdowns are a natural part of trading.  You should expect that your portfolio will have drawdowns that are consistent with your trading strategy and risk management.  The maximum drawdown is a very important statistic that describes the peak to valley loss percentage associated with your trading strategy.

Since drawdowns are part of your trading business it is important to create a plan that will handle drawdowns as they occur. You should determine exactly what assets should be liquidated or hedged if the securities in your portfolio experience losses that are beyond the tolerance set for an individual period such as a month, quarter or year.

You should avoid trading highly correlation currency pairs or assets using the same trading strategy as your potential drawdown can be larger than you expect if the performance of your securities decline all at the same time.

By sticking to a drawdown plan, you are more likely to manage and weather drawdowns and live to trade another day

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Focus on the Trading Process not the Money

It may seem a contradiction to say that you don’t want to pay attention to the profit of a trade.  In fact, many of you might be saying that this guy must be smoking rope to say that profit is unimportant.  Well, to clarify, that is not what is being said.  Of course, profit is one of the main reasons why you are involved in trading in the financial markets.

However, when we discuss how you will garner your mental and emotional resources in order to become consistently successful, profit (in any one trade) is not where you want your focus to be. Profits come as a result of “probabilities” over a series of trades. In fact, profit can be a major distraction and the cause of erratic behaviors that beget unwanted results.  Let’s face it, results, consistent positive results, are what you want.  Anything else is unacceptable.  So, your main trading trajectory must encompass this reality.  Consistently successful trading requires a laser focus on what-matters-most; alignment of body, mind and emotions; and an ability to be truly disciplined, for starters.

The Distraction of Trading Profits

Let’s look at how focusing on profit can position you to attract the very undesirable results that you want to avoid.  Profit is transient which means that it is not only variable but it is random to the point of being capricious.  No matter how good your methodology, you cannot predict what price action will do.  The only thing that is certain about the markets is that they are unpredictable.   Due to this level of randomness, profit is an extremely inefficient data point to measure against results.

In fact, one of the worst things that can happen to you as a trader is to be profitable early in the game before you intimately know your strategy.  This type of profit is almost invariably luck.  Luck is totally unsustainable; and in your attempt to replicate these results you will reinforce bad rule violating behavior that is very hard to halt, creating many more losses as you attempt to extricate yourself from that abyss.  Furthermore, when you focus on profit alone, your attention is fragmented and your mental state is susceptible to distorting data due to a confirmation bias (the tendency to only perceive information that confirms your limiting beliefs about the current market and consequently denying information that is contrary but critically important).

Actually, you want to approach the trading process with your eyes wide open and embracing the fact that any trade can lose, and some will.  No matter how strong your strategy, you must accept the randomness of the markets and therefore be very serious about protecting your capital; in other words, using and relying on your stops.  In this way, you will begin to manage your fear…a very important skill.

One of the facts about consistently successful traders is that many of them have blown up accounts; and they came back.  When this happened, they realized that the world didn’t come to an end and developed a deeper appreciation for the importance of their stops.  They created consistency in planning their trades, trading their plan, following all of their rules, and thereby developed the capacity for emotional strength and endurance in the trade.

Trading is a process oriented endeavor for those who are serious about becoming and remaining a consistently successful trader.  In any one trade, it is not about the outcome.  You must remain dispassionate about that and reserve all of your focus to be honed on what you are doing and how you are doing it. 

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Weekly Forex Analysis | UsdJPY April 17 to April 21 2017

Flight-to-safety buying helped drive the Dollar/Yen sharply lower last week as investors responded to geopolitical risks, falling U.S. Treasury yields and negative talk about the value of the U.S. Dollar by President Trump.

The USD/JPY closed the week at 108.606, down 2.434 or -2.19%.

Throughout the week, the driving force behind the weaker USD/JPY was possible U.S. military action in Syria and North Korea, and a resurgence of a previously written-off leftist contender in France’s presidential race.

The possibility of a show of force against North Korea in response to its weapons tests grew after U.S. missile strikes against Syria the week before in retaliation for a chemical weapons attack on civilians.

The Japanese Yen also strengthened as investors weighed the possibility of a face-off between far-right candidate Marine Le Pen and left-wing candidate Jean-Luc Melenchon, who has surged in the polls recently. The price action suggests investors are preparing for a Brexit-like outcome in the election.

The USD/JPY also broke sharply after a key technical level on the longer-term chart was taken out convincingly. This move corresponded with broad declines in the dollar, following President Trump’s remarks to the Wall Street Journal that the greenback was getting “too strong.”

Also in the interview with the Journal, Trump also reversed a crucial campaign promise and said his administration will not label China a currency manipulator.

In economic news last week, U.S. producer inflation fell 0.1%, coming in below expectations and consumer confidence came in better-than-expected. U.S. retail sales also fell for a second straight month in March.

The major news was an unexpected plunge in consumer inflation and retail sales. Disappointments on both inflation and retail sales for March might give the Federal Reserve a reason to pass on a May rate hike.

Investors were also shaken on Thursday by the news that the U.S. military dropped America’s most powerful non-nuclear bomb on ISIS targets in Afghanistan.

Forecast

With geopolitical tensions remaining high and Trump’s call for a lower dollar, traders are more likely to watch the bad news over the good so we expect to continue to see pressure on the U.S. Dollar and support for the Japanese Yen.

In its own show of force, North Korea paraded its intercontinental ballistic missiles on Saturday in a massive military display in central Pyongyang amid rising tensions across the region. This action could spill over into Monday’s trade, putting the USD/JPY on the defensive early in the session.

Furthermore, the international community is bracing for a possible U.S. response to reports that North Korea may be preparing for its sixth nuclear test or a major missile launch, such as its first flight test of an ICBM capable of reaching U.S. shores.

Major economic events this week include a speech by Bank of Japan Governor Kuroda. In the U.S., traders will get a chance to respond to reports on building permits, the Philly Fed Manufacturing Index, Unemployment Claims and a speech by Treasury Secretary Mnuchin.

From the get-go this week, investors will likely be paying close attention to and reacting to the possibility of U.S. and Korean military activity.

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Weekly forex outlook 4 April 2017 to 7 April 2017

Weekly forex outlook 4 April 2017 to 7 April 2017 

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Marcel Link's book Trading Without Gambling

I have read lots of trading book. Some are good some are hard to understand some are present in a way so that people like the book. There are lot of trading books expert trader recommend. I have read most of popular trading book if not I will read them in future. 

Today I will talk about a book that is easy to understand and excellent book to me. I quite like the books because the book is contain lots of information that is usually ignore by new or even semi expert traders. I am talking about "Marcel Link's book Trading Without Gambling".

Marcel Link's explain 

The Trading Plan comes first and should account for the following parameters:

1.  Entering a trade.

2.  Exiting a trade.

3.  Stop Placement.

4.  Position Sizing.

5.  Money Management.

6.  What to Trade.

7.  Trading Time Frames.

8.  Back Testing.

9.  Performance Review.

10.  Risk vs. Reward.

The Game Plan consists of putting the parameters of the Trading Plan to work in day to day trading with the following benefits:

1.  It will force the trader to select a trading style.

2.  It will encourage market study.

3.  It will aide in helping pick the correct trades.

4.  It will prepare the trader for what the market has to offer.

5.  It will help in properly monitoring and exiting trades.

6.  It will keep the trader from overtrading.

7.  It will help with finances.

8.  It will keep the trader focused.

9.  It will take the gambling out of trading.

10.  It will make a better trader out of you.

Link uses a baseball analogy to explain that they are two different creatures that rely on each other to work.  "A good trading plan with no game plan won't work. That's like Pedro having the best fastball and curveball in the world but not knowing when to throw them or who to throw them at.  On the other hand, without a trading plan, a game plan is not nearly as strong.  It's like Pedro deciding he needs to throw a knuckleball in a tough situation, but realizing too late that he never learned to throw one.  But once he gets both of these plans working together, he can win a lot of games and be the superb pitcher that he is". 

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3 Important Reasons Why You Should Be Trading Price Action

1. Price action represents collective human behaviour. Human behaviour in
the market creates some specific patterns on the charts. So price action
trading is really about understanding the psychology of the market using
those patterns. That’s why you see price hits support levels and bounces
back up. That’s why you see price hits resistance levels and heads down.
Why? Because of collective human reaction!
2. Price action gives structure to the forex market. You can’t predict with
100% accuracy where the market will go next. However with price action,
you can, to an extent predict where the market can potentially go. This is
because price action brings structure. So if you know the structure, you can
reduce the uncertainty to some extent and predict with some degree of
certainty where the market will go next.
3. Price Action helps reduce noise and false signals. If you are trading with
stochastic or CCI indicators etc, they tend to give too false signals. This is
also the case with many other indicators. Price action helps to reduce these
kinds of false signals. Price action is not immune to false signals but it is a
much better option than using other indicators…which are essentially
derived from the raw price data anyway. Price action also helps to reduce
“noise”. What is noise? Market noise is simply all the price data that
distorts the picture of the underlying trend… this is mostly due to small price
corrections as well as volatility.

One of the best ways to minimize market noise is to trade from larger timeframes instead of trading from smaller timeframes. See the 2 charts below to see what I mean:

And now, compare market noise in the 4hr chart (notice the white box on the chart? That equates to the area of the 5min chart above!):

 
Smaller timeframes tend to have too much noise and many traders get lost trading in smaller timeframes because they do not understand that the big trend in the larger timeframe is the one that actually drives what happens in the smaller timeframes.

 But having said that, I do trade in smaller timeframes by using trading setups that happen in larger timeframes. I do this to get in at a better price point and keep my stop loss tight. This is called multi-timeframe trading and I will also cover this on future to show you exactly how it’s done. Is Price Action Applicable To Any Other Market? The answer is yes. All the price action trading stuff described here are applicable to all markets. In here, I will be mostly be talking in terms of using price action in the currency market but as I’ve mentioned, the concepts are universal and can be applied to any financial market. Price Action Trading Allows You To Trade With An Edge.

Price Action Trading is about trading with an edge. What is a trading edge?
Well, put simply it means you need to trade when the odds are in your favour.
Things like:
• Trading with the trend
• Trading With Price Action Using reliable chart patterns and candlestick
patterns.
• Trading using Support and resistance levels.
• Making your winners larger than your losing trades
• Trading only in larger timeframes
• Waiting patiently for the right trade setups and not chasing trades.
All these kinds of things above helps you to trade with an edge. They may not be
exiting and probably you’ve heard of these before but hey…this stuff is what
separates winners from losers.

What Price Action Trading Is Not
• Price action trading will not make
you rich…but price action trading
with proper risk management can
make you a profitable trader. Some
of you will go through this guide and
learn and make much money but
some of you will fail. That’s just the
way life is.
• Price action trading is not the holy
grail but it sure does beat using
other indicators (most of which
often lag and a derived from price
action anyway!).
• Price action trading will not make
you an overnight success. You need to put in the hard yards, observe and see how price reacts and see those repetitive patterns and then have the
confidence to trade them then you will be rewarded for that.
If you are one of those that are going to learn from this course and apply it to
your forex trading, my hats off to you and I say “go and succeed.”

Chart time
You need chart time to understand Price Action. For some of you, it may take a
while for you to understand, while some of you may be very quick to learn.
Observe the price action of the market. Go back to the past and see how the
market had behaved. What caused it to behave that way? You cannot be a
confident price action trader until you do this.
If you could simply read the charts well enough to be able to enter at the exact
times when the move would take off and not come back, then you would have a
huge advantage.
Trend lines, specific candlestick patterns, specific chart patterns, Fibonacci
retracement levels & support and resistance levels…these are the tools I use to
trade.
If you put the time and effort into learning them, it won’t be long before you will
begin to understand and see how all these things fit together.
Start learning to trade naked price action.

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WHAT IS PRICE ACTION?

WHAT IS PRICE ACTION?

This is the basic definition of price action trading:

When traders make trading decisions based on repeated price patterns that once

formed, they indicate to the trader what direction the market is most likely to

move.

Price action trading uses tools like charts patterns, candlestick patterns,

trendlines, price bands, market swing structure like upswings and downswings,

support and resistance levels, consolidations, Fibonacci retracement levels, pivots

etc.

Generally, price action traders tend to ignore the fundamental analysis-the
underlying factor that moves the markets. Why? Because they believe everything
is already discounted for in the market price.
But there’s one thing I believe you should not ignore: major economic news
announcements like the Interest Rate decisions, Non-Farm Payroll, FOMC etc.
From my own experience and from what I’ve seen, I say this “the release of
economic news can be both a friend and an enemy for your trades.”

Here’s what I mean by that:
• If you did take a trade in line with the result of economic news release you
stand to make a lot more money very quickly in a very short time because
the release of the news often tends to move price very quickly either up or
down due to increased volatility.
• But if your trade was against the news, you can walk away with all your
profits wiped out or a loss and the loss can be huge because markets can
move so fast during that period that there’s also the chance that your stop
loss cannot be triggered.

The chart below shows and example of what can happen when there is major
forex fundamental news release:

This is one experience I will never forget. I traded a perfect price action setup, the
trade went as I anticipated but a few minutes later, the market dropped down
very quickly.
My stop loss was never triggered at the price level where I set initially.
I tried to close that trade as many times as I could but it was impossible to close
because the price was way down below where my stop loss price was! Price
jumped my stop loss.
I just stood there and watched helplessly. After what seemed like an eternity, the
trade was closed by broker at the worst possible price way-way-way- down
below!
That single trade nearly wiped out my trading account. Instead of losing 2% of my
trading account, I lost almost half of it. I did not understand and did not know
what happened that night to make the market move like that. I could not sleep
that night.
Later I found out that it was a major economic news release that moved the
market like that.
Now before I place a trade, I head over to this website here to check the news
calendar: https://www.forexfactory.com/calendar.php?day=today 
If there’s a valid trade setup but If I see that the time is close to a major news to
be announced, I will not enter. There are exceptions where I will take a trade if I
see that I can place my stop loss behind a major support or resistance level.
The high impact news are colour coded in Red. That’s what you look for(see figure
below):

Here’s what you can do:

1. If a valid trade setup happening, check with forexfactory.com to make sure

there are no major news announcements to be made soon that can impact

your trade.

2. If there’s news to be released you can do these 2 things: don’t trade until

after the news release and wait until markets starts trading normally again,

or if you decide to trade, trade small contracts because the market is very

volatile when the news is released. This can works for you or against you.

You need to know what you are doing during these times.

3. If you already have a trade that has been running (prior to the news release

time) for some time and in profit, think about moving stop loss tighter or

taking some profits off that table in case the market goes against you once

the news is released. In an ideal case, you would have taken this trade a

while ago and that the current market price is far away from your trade

entry price and you would have locked some profits already and if the

market moves in the direction of your trade after the news release, you will

make a lot of money. 

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INTRODUCTION PRICE ACTION

To really understand price action means you need to study what happened in the
past. Then observe what is happening in the present and then predict where the
market will go next.
“Regardless of what you may think, all traders are forecasters, just like the
weatherman.”

 The weatherman knows where the wind is blowing from, sees the high and low
pressure systems forming over the land, knows the temperature variation, cold
front, hot front…you know what I’m talking about, right? Then what does he do?

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INTRODUCTION of TRADING PSYCHOLOGY 2.0

■ Adaptability. To a person, the best traders were adaptive and flexible. They were sensitive to market environments and altered their trading to fit changing landscapes. Often, they would quickly alter their risk exposure, sensitive to occasions when market action did and did not confirm their expectations. Even more broadly, they adapted to changing market regimes by learning new skills, broadening their trading universe, and reworking their analytics. What made them successful was not merely that they possessed a trading‘‘edge.’’Rather,they had found ways of continually honing and expanding that edge. 

■Creativity. The ideal for any trading firm is assembling a group of traders,each of whom delivers superior risk-adjusted returns in a relatively uncorrelated manner. Thanks to the power of diversification, that provides the business with a relatively smooth equity curve and allowsittoleverageitscapitaleffectively.WhereverI’veseensuccessful trading firms, I’ve encountered creative traders: ones who view markets uniquely, find original ways to generate ideas, and express their views in fresh ways that maximize reward relative to risk. Indeed, I would venture to say that I have never known an extraordinarily successful trader who was not extraordinarily original in his or her approach to markets. I refer to such traders as ‘‘idea factories,’’ as they develop robust routines for detecting opportunity where others see none. 

■ Productivity. My experience confirms the findings of Dean Keith Simonton’s seminal work on greatness: The elite performers generate better ideas because they generate so many ideas. Their hit rate is not necessarily unusually high, but they go to bat so often that they get their share of good pitches and hit their fair share of home runs. Knowing that their strength is processing information and generating ideas—not just holding any particular idea—they are willing to toss aside less promising trades and hold out for truly exemplary ones. This productivity is readily apparent on a day-to-day, week-to-week basis: The greats simply get more done than their colleagues. They organize their time and prioritize their activities so that they are both efficient (get a lot done per unit of time) and effective (get the right things done). How much time do we typically waste as traders, staring unthinkingly at screens, chatting with people who offer little insight, and reading low-priority/information-poor emails and reports? The successful traders invariably are workhorses, not showhorses: They get their hands dirty rooting through data and make active use of well-cultivated information networks. They realize that higher-quality inputs will yield superior outputs.

■ Self-management. I can think of few vocations that blend risk and uncertainty in as immediate way as trading. In many lines of work, good enough is good enough: Slipups are rarely irreversible or fatal. In financial markets, good enough is the expected, the average; it’s not what producesoutstandingresults. Maintainingfocus,optimism,andenergy level during periods of drawdown is not easy. Nor is it easy to attend to life’s many responsibilities when focused on fast-moving markets. Successful athletes realize that only very high levels of conditioning will allow them to deliver their very best performance. For traders, the conditioning is cognitive as well as emotional. Successful traders I’ve known work as hard on themselves as on markets. They develop routines for keeping themselves in ideal states for making trading decisions, often by optimizing their lives outside of markets.

Working with traders on a full-time basis, immersed in the daily realities of trading performance, has provided me with a front-row perspective on trading success. My overarching conclusion from years of coaching effort is that what makes traders good are best practices—sound methods for deploying capital and managing risk. What makes traders great are best processes: detailed routines that turn best practices into consistent habits. Adaptability, creativity, productivity, and self management: These aren’t just things that the best traders have. They are what best traders do—routinely.

The most important review you can conduct is not one of the research literature, but of yourself. If you place your best trading under a microscope,you ’llinitiateyourownreviewandthechancesaregoodthat you’ll observe how you best adapt to change, innovate, stay productive, and manage yourself. It is difficult for us to appreciate—especially during times of drawdown—that at some times, in some ways, we already are the traders we hope to become. Our task, in markets as in life, is to uncover the practices and processes that enable us to more consistently tap into the best within us.

Very few challenges are as noble or rewarding as fully becoming who you are at your best. Let the journey begin!

Brett Steenbarger

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The 5 Steps to becoming a trader

Step One: Unconscious Incompetence.

This is the first step you take when starting to look into trading. You know that its a good way of making money because you've heard so many things about it and heard of so many millionaires. Unfortunately, just like when you first desire to drive a car you think it will be easy - after all, how hard can it be? Price either moves up or down - what's the big secret to that then lets get cracking! Unfortunately, just as when you first take your place in front of a steering wheel you find very quickly that you haven't got the first clue about what you're trying to do. You take lots of trades and lots of risks. When you enter a trade it turns against you so you reverse and it turns again and again, and again. You may have initial success, and thats even worse - cos it tells your brain that this really is simple and you start to risk more money. You try to turn around your losses by doubling up every time you trade. Sometimes you'll get away with it but more often than not you will come away scathed and bruised You are totally oblivious to your incompetence at trading. This step can last for a week or two of trading but the market is usually swift and you move on the next stage.

Step Two - Conscious Incompetence 

Step two is where you realize that there is more work involved in trading and that you might actually have to work a few things out. You consciously realize that you are an incompetent trader - you don't have the skills or the insight to turn a regular profit. You now set about buying systems and e-books galore, read websites based everywhere from USA to the Ukraine and begin your search for the holy grail. During this time you will be a system nomad - you will flick from method to method day by day and week by week never sticking with one long enough to actually see if it does work. Every time you come upon a new indicator you'll be ecstatic that this is the one that will make all the difference. You will test out automated systems on Metatrader, you'll play with moving averages, Fibonacci lines, support & resistance, Pivots, Fractals, Divergence, DMI, ADX, and a hundred other things all in the vein hope that your 'magic system' starts today. You'll be a top and bottom picker, trying to find the exact point of reversal with your indicators and you'll find yourself chasing losing trades and even adding to them because you are so sure you are right. You'll go into the live chat room and see other traders making pips and you want to know why it's not you - you'll ask a million questions, some of which are so dumb that looking back you feel a bit silly. You'll then reach the point where you think all the ones who are calling pips after pips are liars - they cant be making that amount because you've studied and you don't make that, you know as much as they do and they must be lying. But they're in there day after day and their account just grows whilst yours falls. You will be like a teenager - the traders that make money will freely give you advice but you're stubborn and think that you know best - you take no notice and overtrade your account even though everyone says you are mad to - but you know better. You'll consider following the calls that others make but even then it wont work so you try paying for signals from someone else - they don't work for you either. You might even approach a 'guru' like Rob Booker or someone on a chat board who promises to make you into a trader (usually for a fee of course). Whether the guru is good or not you wont win because there is no replacement for screen time and you still think you know best. This step can last ages and ages - in fact in reality talking with other traders as well as personal experience confirms that it can easily last well over a year and more nearer 3 years. This is also the step when you are most likely to give up through sheer frustration. Around 60% of new traders die out in the first 3 months - they give up and this is good - think about it - if trading was easy we would all be millionaires. another 20% keep going for a year and then in desperation take risks guaranteed to blow their account which of course it does. What may suprise you is that of the remaining 20% all of them will last around 3 years - and they will think they are safe in the water - but even at 3 years only a further 5-10% will continue and go on to actually make money consistently. By the way - they are real figures, not just some Ive picked out of my head - so when you get to 3 years in the game dont think its plain sailing from there. Ive had many people argue with me about these timescales - funny enough none of them have been trading for more that 3 years - if you think you know better then ask on a board for someone who's been trading 5 years and ask them how long it takes to become fully 100% proficient. Sure i guess there will be exceptions to the rle - but i havent met any yet. Eventually you do begin to come out of this phase. You've probably committed more time and money than you ever thought you would, lost 2 or 3 loaded accounts and all but given up maybe 3 or 4 times but now its in your blood One day In a split second moment you will enter stage 3.

Step 3 - The Eureka Moment 

Towards the end of stage two you begin to realize that it's not the system that is making the difference. You realize that its actually possible to make money with a simple moving average and nothing else IF you can get your head and money management right You start to read books on the psychology of trading and identify with the characters portrayed in those books and finally comes the eureka moment. This eureka moment causes a new connection to be made in your brain. You suddenly realise that neither you, nor anyone else can accurately predict what the market will do in the next ten seconds, never mind the next 20 mins. Because of this revelation you stop taking any notice of what anyone thinks - what this news item will do, and what that event will do to the markets. You become an individual with your own method of trading You start to work just one system that you mould to your own way of trading, you're starting to get happy and you define your risk threshold. You start to take every trade that your 'edge' shows has a good probability of winning with. When the trade turns bad you don't get angry or even because you know in your head that as you couldn't possibly predict it it isn't your fault - as soon as you realise that the trade is bad you close it . The next trade or the one after it or the one after that will have higher odds of success because you know your system works. You stop looking at trading results from a trade-to-trade perspective and start to look at weekly figures knowing that one bad trade does not a poor system make. You have realised in an instant that the trading game is about one thing - consistency of your 'edge' and your discipline to take all the trades no matter what as you know the probabilities stack in your favour. You learn about proper money management and leverage - risk of account etc etc - and this time it actually soaks in and you think back to those who advised the same thing a year ago with a smile. You weren't ready then, but you are now. The eureka moment came the moment that you truly accepted that you cannot predict the market.

Step 4 - Conscious Competence 

You are making trades whenever your system tells you to. You take losses just as easily as you take wins You now let your winners run to their conclusion fully accepting the risk and knowing that your system makes more money than it looses and when you're on a loser you close it swiftly with little pain to your account You are now at a point where you break even most of the time - day in day out, you will have weeks where you make 100 pips and weeks where you lose 100 pips - generally you are breaking even and not losing money. You are now conscious of the fact that you are making calls that are generally good and you are getting respect from other traders as you chat the day away. You still have to work at it and think about your trades but as this continues you begin to make more money than you lose consistently. You'll start the day on a 20 pip win, take a 35 pip loss and have no feelings that you've given those pips back because you know that it will come back again. You will now begin to make consistent pips week in and week out 25 pips one week, 50 the next and so on. This lasts about 6 months

Step Five - Unconscious Competence

Now were cooking - just like driving a car, every day you get in your seat and trade - you do everything now on an unconscious level. You are running on autopilot. You start to pick the really big trades and getting 200 pips in a day doesnt make you any more excited that getting 1 pips. You see the newbies in the forum shouting 'go dollar go' as if they are urging on a horse to win in the grand national and you see yourself - but many years ago now. This is trading utopia - you have mastered your emotions and you are now a trader with a rapidly growing account. You're a star in the trading chat room and people listen to what you say. You recognise yourself in their questions from about two years ago. You pass on your advice but you know most of it is futile because they're teenagers - some of them will get to where you are - some will do it fast and others will be slower - literally dozens and dozens will never get past stage two, but a few will. Trading is no longer exciting - in fact it's probably boring you to bits - like everything in life when you get good at it or do it for your job - it gets boring - you're doing your job and that's that. Finally you grow out of the chat rooms and find a few choice people who you converse with about the markets without being influenced at all. All the time you are honing your methods to extract the maximum profit from the market without increasing risk. Your method of trading doesnt change - it just gets better - you now have what women call 'intuition' You can now say with your head held high "I'm a currency trader" but to be honest you dont even bother telling anyone - it's a job like any other. I hope youve enjoyed reading this journey into a traders mind and that hopefully youve identified with some points in here. Remember that only 5% will actually make it - but the reason for that isnt ability, its staying power and the ability to change your perceptions and paradigms as new information comes available. The losers are those who wanted to 'get rich quick' but approached the market and within 6 months put on a pair of blinkers so they couldnt see the obvious - a kind of "this is the way i see it and thats that" scenario - refusing to assimilate new information that changes that perception. Im happy to tell you that the reason i started trading was because of the 'get rich quick' mindset. Just that now i see it as 'get rich slow' If youre thinking about giving up i have one piece of advice for you .... Ask yourself the question "how many years would you go to college if you knew for a fact that there was a million dollars a year job at the end of it? Take care and good trading to you all.

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TMP System

General Guideline of the System 

Rules 1- Trade with ema direction 

Rules 2- enter with macd signal with the
ema direction (short term macd)

Rules 3- closely observe the 2 macd. if long term macd is red and short term macd is 
green wait for short term macd to become red then open trade. For buy just opposite. 

Rules 4- Don't open trade if at list 1 to 1 Risk reward not present ( This rules is not for all situation but generally we will follow this rules)

Rules 5- Money management Take 1% risk in every trade. I usually take 1 to 3 % risk in every trade. I start with 1% and then add position in profitable trade. If you are new trader take 1% risk for each trade. 

Rules 6- Be aware of market condition by using top down analysis. Understanding candlestick is very important. 

Rules 7- Be aware about major impact news. 



You can also add Trend line breakout for entry and Fibonacci for entry as well as exit.

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Trading Plan Content

1. Your personal skill assessment- Are you ready to trade real money? Why are you ready? Can you follow your plays without hesitation? Have you defined the criteria in writing of when you will start trading with real money?

2. Mental preparation- How do you feel? Are you rested? Have you had any mental or emotional traumas recently? Under what mental and emotional conditions will you NOT trade?

3. Determine Risk Level- How much of a percentage of your account equity are you going to risk on each trade? What is the most you can lose per month before you MUST stop trading? At what point, what is the criteria, do you increase the percentage you risk?

4. Goal Setting- What are your weekly profit goals? How do you determine your price targets before you enter the trade? Setup a monitoring method to track your profit target success. What are your goals short term and long term? How do you track the progress of those goals?

5. Trade Analysis- What is you pre trade analysis process? Do you have a methodical process in place for completing this? What is your post trade analysis methodology? Do you have a way to monitor your psychology during a trade? Have you developed a trading play book?

6. Homework- Have you developed a way of methodically doing your homework and research. How do you plan to document it? Have you outlined a continuing education plan? Do you have a trading library? Have you scheduled time to do your homework and research?

7. Busniess Plan- How much is it going to cost you to get into trading? What are your monthly expenditures? How much are you going to allocate to education? When would you reasonably expect to break even? What will you do with your profits? Do you have rewards in place for yourself when you meet certain stages of your plan?

8. Office Setup- How is your office setup? Do you have all the contact numbers to your brokers and internet service providers handy? Do you have a backup charting service (you can use a free one)? Do you have anti-virus software on your tradestation and do you run it every day? What do you do if your tradestation crashes in the middle of a trade? How do you plan to recover from a tradestation crash?

You should take these eight areas and add as many details to your trading plan as possible. The more complete your trading plan is, the clearer the path will be that you need to follow. You should revisit you trading plan about every three months to see how you are following it. Take a lot of time to complete your trading plan thoroughly it will benefit you more than you know.

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