K.I.S.S. Keep It Super Simple

You enter a trade and then sit at your computer watching the market tick away. You find yourself scanning Forex Factory and other economic news outlets for the next few hours, unable to think about anything but what “could” happen to your trade. You can’t sleep at night because you are so addicted to trading the smaller time frames and to watching every price movement that all you can think about is the market. But despite your hard work and passion for the markets you cannot seem to find any consistent success. Does this sound familiar?

The reality is that most traders are not consistently successful. It only takes one trade to blow up your account or undo months of hard work. But just the same you only need 1 big winning trade a month to be a successful Forex trader.

How is that possible you might ask? Well, I’ll bet if you go look at your trading account history right now you might just find the answer yourself.

Have you ever thought to yourself I wish I did not take that trade or that was not in my trading plan. Along our journey to trading mastery we have all reached this point at some time in our trading careers.

You see, most of you are losing money because you are trading too often, and you are trading too often because you are fixated on over-analyzing the market, Forex news variables, and lower time frame charts (I consider any chart under the 1 hour to be “lower time frame”).

Sure, it’s possible to make money from sitting in front of your computer 8 hours a day staring at each tick (Watching the paint dry), but why in the world would you want to? Let’s face it, watching the market tick away is not really that fun, NOR is it productive…at all.

Shifting your focus to the daily charts requires mental fortitude and whole lot of patience, this takes intelligence and forward-thinking and a realistic attitude. Anyone can put on a winning trade and get lucky a few times, but how do you think it’s possible for some people to successful in the markets, to the point where they make a living from it? It’s because they have taken a longer-term view and they realize that their success is not defined by any one trade. So, if you want to turn your trading around, it’s time to swallow your need to “control” the market and for instant gratification, and begin taking a longer-term view of the markets by focusing on the daily chart time frame.
While the amount of money you risk per trade is a highly personal decision that depends on your individual portfolio, trading the higher time frames can allow you to risk a bit more per trade than trading the lower time frames. Take note: I am NOT insinuating that you should risk more per trade, I am saying that when you only TRADE 12 TIMES A MONTH (or thereabouts), you clearly can risk more money on one trade than if you are trading 40 times a month. So, this is an answer to the question “Reginald, I can’t make as much money trading the daily charts as I can on the lower time frames” taking fewer trades each month allows you to trade more lots per trade. However, keep in mind, this obviously only works if you can remain disciplined enough to not jump back into the market on revenge after you have a losing trade.

Daily charts reduce the frequency with which you trade – slow and steady wins the race
One thing I firmly believe in is that obtaining trading success is largely a result of the quality of the trades you take…not the quantity. By simply reducing the frequency with which you trade, you will simultaneously improve your odds of succeeding over the long-term. You need to understand and accept the fact that 15-20 quality trades a month is going to put you much further ahead than 50 or 60 emotion-fueled impulse trades a month…no matter how good it makes you feel to take them. Remember, the tortoise won the fabled race because he was slow and consistent, instead of fast and full of emotion like the hare…

A lot of traders are under the impression that it takes a lot of money to trade the daily charts.
I am often asked: “Reginald how can I trade the higher time frames when I have limited capital in my trading account, and the daily charts require wider stop losses. I can only afford to trade the 15 minute chart for now, then when I build up my account I will trade longer time frames”… If I had a nickel for every time I heard this, well I would have a lot of nickles lol!

Many traders think this way, and it’s usually just because they don’t know enough about position sizing in the FX market or because they think by trading bigger position sizes on the lower time frame charts they are going to somehow make money faster.

Let me set the record straight: Through position sizing, you can trade the daily charts just fine on a small trading account…you just have to trade a position size that correlates with your current portfolio. You need to get rid of the “get rich quick” attitude and out of the mind frame of thinking that trading a 15 minute chart is somehow going to provide you with more opportunities to profit.

Looking at the chart below we can see that we have had a very bullish run from the bulls this month which has brought price action back above the 20 MA and wiped out all of last months price action. By paying attention to the signs on the monthly time frame you are able to drop down a few time frames and find trading opportunities that are inline with the bias you have obtained from the monthly chart.

The higher time frames are at the heart of how I trade and obtain my bias; my price action trading strategies and my overall trading philosophy revolve around taking trades that are inline with the higher time frames. I know what I am looking for on the charts, if it shows up, I enter the trade, if not, I do not do a thing besides walk away from my computer. It is as simple as that.

I have not been able to write as much as I would like to as my new gig has kept me quite busy, but that is a good thing. Since I cannot trade my personal account while I am on the floor I have been forced to adapt a trading style to gel with my new schedule. Which means I have been forced to make my living on the higher time frames.

I have been gone for a while and I must say it is great to be back!

Up 2,500 points this month

The market is back in full swing and we have been rewarded handsomely. In the last 24 hours I have had some nice gains and I am on track to another good month.

Perseverance goes a long way in this business. I started out this month from behind after  losing 4 trades in a row and digging myself into a small hole. I continued to execute my plan and manged to make back my losses and then some. I have also brought my batting average back to a respectable level.

The best way to pull yourself out of a losing streak is to have amnesia when you approach new positions. You got to forget about the last trade and how much you made or lost and move on to the next trade. Every trade is different and you do not want your emotions spilling over to the next trade. This allows you to stay focused and execute your plan based on what you see is happening instead of your emotions taking over and dictating what you do.

XAU: Respect is Earned

OMG! it looks like gold just does not want to quit. Looking back at one of my previous newsletters we anticipated a pull back on the daily chart to find an opportunity to add to our position. The chart below is a snap shot of price action on August 22nd when we projected the pull back.

Look at that we got our pull back and follow through on our buy setup. Not only did we got follow through traders but we even got a new high. Now that is what I am talking about!!!

You are probably wondering how I was able to project that price would not only pull back but eventually present another buy opportunity. The move we got from the bulls last week took a lot of buying power to establish. Buying power that could only come from big institutions. When you see big candles or moves that clear a lot of price action on the chart they demand your attention and command respect. On the chart below you can see how I have highlighted the powerful moves established by the bulls in side the grey areas and the buy zones that have been established based on these moves by the bulls inside the blue rectangle areas. A Buy Zone is the area from the prior low of a bullish candle or bullish move to the prior high. We typically look for pull backs to the 33% – 61.8% level  inside the Buy Zone. (The same applies in reverse for a sell zone created by a move from the bears.)

Now that we understand how to identify a Buy and Sell zone, your probably asking yourself how to incorporate these zones in your trading. It is easier than you think. First you must make sure that your Buy Zone is inline with your higher time frames. If it is counter to your higher time frames then you want to make sure that there is enough upside potential to your next area of resistance. In other words you want to make sure your risk to reward is on point. Now inside a Buy Zone you will see all kind of attempts from the bears to wipe out what the bulls have established. But it is your job not to be fooled by these moves, instead you want to be patient and wait for a buy opportunity to present itself inside the Buy Zone. This can be applied to any time frame but keep in mind that the higher time frames are always going to carry more weight than the smaller ones. So that means that Buy Zones on the higher time frames are always going to be stronger than zones created on smaller time frames. Now Rule number 2 is a Buy Zone is still valid until it is wiped out from the bears completely. If you follow these few rules and respect these Zones by trading with them your trading profits will soar.

GBP/USD Update: Discipline & Patience goes a long way

It is never over until it is over traders remember that. We have been rewarded for our discipline and patience as price has found it way back above the 8 ma and is now approaching our TP1. Traders always remember stick to your guns and follow your initial plan and you will be fine.

 

GBP/USD Buy Setup

Ok traders we got what we were looking for on GBP/USD. Notice how price action reacted timidly towards the 200 MA and gave us a higher low as it bounced off of the support area at the 200 MA. Then had the strength to close back above the 8 MA OMG!. The buy setup on the daily is starting to show some follow through which is a good sign for our long position.

I have entered the market with my stop in 2 different areas. But if you are just now looking to enter this trade I would place my stop-loss under the previous candle. So our entry point would be at 1.58273, our stop-loss at 1.57415 and our initial target at the prior high on the daily. Stay Tuned!

You must learn how to lose before you can expect to win

I have officially conquered a demon of mine traders. For the life of me I could not find any success in the markets during the summer. Year after year after year I would struggle and give back profits during this season. Well August in particular, but all of that is behind me. Now I did not close out the month with a lot of profit which is understandable for August,  but I did close out the month with style considering my draw down.

If you take a look at my draw down for this month it only reached .97%. This is less than 1% of my portfolio. How was I able to accomplish this you might ask. Well by taking my lumps, dusting myself off and continuing to push forward.

30% of my trades were losing trades. But because I had a defined risk unit and an area where I was looking to get out of the market if it went against me. I was able to cut my losses and preserve my capital for other opportunities. Trading is a lot easier once you take your emotions out of the game and just execute.

One strategy that I use that helps me to be less emotional and more objective while I am in a trade is to have a defined risk amount, one that I am comfortable with losing if the market moves against me. Have you defined a risk amount that works for you. If not then keep adjusting your risk unit until you are comfortable and no longer losing sleep over your positions.

Knowledge is power but applied knowledge is more powerful

Gold did explode, did you get some?

I sure hope you did because this thing has got a lot more upside potential. The monthly is triggering now as we speak and the weekly followed through on our bottoming tail from last week. I know your thinking to yourself does he have a trading crystal ball predicting these moves? The answer is yes and it can be yours for the low price of just kidding with you lol!

But with hard work, back testing, the proper money management & risk management one can become successful in the markets. But the question some traders have to ask themselves is am I applying what I know, am I executing when I am supposed to. A lot traders find themselves stuck like a dear in the head lights when it comes time to execute. And other traders throw their strategy or even their whole trading plan out the window during the heat of the moment and start trading on the fly.

It is important that you are disciplined but it is equally important that you apply what you have learned and pull the trigger when your plan calls for you to without hesitation, reservation, or fear.

Now Looking at the charts below we can see gold is gaining some momentum. So for my swing traders you can take the monthly or weekly as is with your stop below the last pivot on the weekly. But for my intraday traders and my day traders you might want to wait for a pull back on the daily as we are a bit vertical and due for a pull back. Oh I cannot forget about silver she is a beast as well. Stay tuned there is much more bullishness to come from both metals.

AUD/USD Trade Update (Up 264 pips)

I can’t forget about my good ole AUD/USD long position. We are up 264 pips at the moment and still got some good size on. Our stop-loss is at break even so we are trading with the houses money at this point. I am expecting a pull back so that I can add to my position. If price action fails to pullback, gives us a shallow retracement and then decides to rally, then be mindful of the resistance at the 1.06321 level stay tuned.

S&P 500 Trade Update (The Bottoming Tail)

Do you see what I see! Things just keep getting better and better for S&P 500. I mean are you kidding me a Bottoming Tail some call it the Hammer others call it the hanging man but regardless what you choose to call it, it is the second most bullish candle in our Candle Stick Alphabet, sitting right on top of the 20 MA. Need I say more traders, we are getting blatant strength from the bulls. A bottoming tail is formed when the bears start out dominant and are able to push price down to a lower level. But before the candle closes the bulls are able to overcome the bears strength and close out the candle as the side that won the battle. If you look at the chart below you will notice how in the past four weeks every time the bears attempt to muster up some strength, before the week is out the bulls have wiped out what the bears have tried to establish and then some establishing themselves as the side that is in control. In a lot of cases doing so in less time then the bears had to establish their strength, talk about power. This is why the Bottoming Tail is one of the most powerful tools inside our Traders Toolbox that we have at our disposal.

If you notice in the chart below we are starting to get some follow through to the upside as a result of the Bottoming Tail from last week. By spotting the right candles on the right time frames you are able take advantage of certain moves and opportunities as they present themselves with the confidence of knowing you are trading in the direction of least resistance.

$&P 500 Trade Update were in the money!

Man what can I say S&P 500 has been a beast. I mean did we pick the right time to go all in or what. Our Long position and add has paid us handsomely. As stated earlier we were looking to take profit at the top of the channel as price makes its way into the prior high. We are up 600 points and counting and we still got some nice size on this position. I am looking to get light on my position at the prior high on the monthly. It is rare in trading to have a home run but I think it is safe to say we knocked this one out of the park. Stay Tuned!

On another note have you ever heard the saying strike while the irons hot, get to gettin while the gettin is good, ride the trend till the end, Milk it dry etc… Although it is best to ride the trend as long as you possibly can during any season in the markets. During the summer since good trades  and solid trends are far and few between  (except this week in the market oh boy) one has to try to take advantage of any trend you find and follow the money. That means ride the wave and add till you cannot add no more. Now of course you want to keep your risk in check, treat every trade separately even if they are on the same chart, and follow your trading plan. But if there is money staring you in the face on a particular pair or commodity then stick with that pair or commodity because if it is paying and the other pairs or charts are choppy then the instrument that is paying is the one that commands our attention. As you can see in the chart above I have played S&P in a major way as well as AUD this past month because these are the charts that commanded my attention. In directing my focus to these charts I was able to avoid the whip saw and choppiness in other pairs that would have more than likely resulted in me giving some profit back.