Taking Profit
There are several approaches to taking profit. For example some traders will put on several lots on a trade then when the market reaches a predetermined level they will close a small portion of the trade. They leave on the remainder lots so they can continue to be in the market and gain profits.
Then there are the traders that put on a small number of lots, add to the trade when they get additional entry signals and when the market tells them that the current trend is coming to an end then they close all of the positions.
If a trader is making money we can’t say the way they take the profit is bad. As long as we are trying to make money while trading, why not maximize the profits on a trade. We have been thinking, when the market reaches the point that a trader wants to take some profit and the market is still moving why not put a stop loss at the predetermined exit point and let all of the lots continue to run. There are a couple of ways the trade could be ended with a maximum amount of profit and a minimum amount of loss.
The stop loss could be moved up as the market moves up to protect even larger amounts of profit. When the market gives a strong exit signal then close all of the lots on the trade. If the market retraces then continues in the original direction of the trade, at that point the trade can reenter the market and make profits all over again. We know there is no wrong or right way to make money. Pick the way that fits your emotional ability, and trading style.
In any event continue to make money and have fun trading.
March 22nd, 2010Journaling Made Simple
We hope your trading is going well, along with your journal keeping. We have talked about this a lot in the trading courses and blog posts. If you haven’t started keeping a trade journal, we highly recommend that you do.
Keeping a journal is the best way for you to be honest with yourself. Nobody looks at the Journal but you, unless you want to show your trade journal to someone. The Journal is like looking into your inner trader.
Many traders keep a journal that simply notes the buys and sells they made that day. This is more like keeping a trading LOG and not a trading JOURNAL. A journal is more than tracking trades it is also about how you were emotionally and mentally during your trading day.
We are going to give you an easy way to take advantage of this. You will be able to do it today. You can do it in your journal, on a
sheet of paper or with your chisel and a stone.
When you finish you’re trading for the day, review how you felt about the day’s trading, both mentally and emotionally. Look for the exact time when you could have made a better decision and followed your trading plan. Now write down in one sentence, a positive statement that reflects how you will handle your trading tomorrow both mentally and emotionally. i.e. “Tomorrow I will act on the trading signals without hesitation or emotion.” When you start your trading for the day you need to write the same statement but in the present. i.e. “Today all my trades will be done without hesitation or emotion”
By doing this exercise you will be reminding yourself that you need to follow you’re trading rules. You will be reminding yourself
to be consistent in your trading which will give you better trading results with improved trading skills.
Go to either Launch Pad or Nth Degree trading systems. Scroll down until you see videos about Trade Journal and Trade Tracker.
Watch the videos then use the forms provided to keep your records. This is simple if you follow it and use the tools at hand.
Correcting A Misguided Thought Process 7 of 7
We have gone over some guidelines to help keep our thoughts about trading clear and on track. We have talked about:
Having a trading system and a set of rules.
Using trading capital that will not have an impact if it is lost.
Develop a win-loss ratio
Good money management
When we lose it can trigger negative emotions. You can lose money and recover but if our emotions and
self-confidence are lost then we will have a hard time trading and recovering from a loss. We can feel
bad about foolishly losing some resources and get angry at just plain losing, which will get things out
of prospective. We will then start to make some slight changes to our trading and not even realize it.
If we do not get it under control then our trading discipline can get lost and we will soon be out of
trading.
Traders need a system to keep them in control after losing on a trade. Many people that deal with real
time like traders and athletes will get a trainer or someone they can talk to. You will need another person
to talk to, to help you maintain balance and deal with things when you start to feel sorry for yourself.
Having a good attitude is just as important as money management and a good trading system. The system is
only as good as the trader and the execution of the trades. So we need to trade like a robot and suppress
our human emotions. Just follow the rules, develop a win-loss ratio so you know when to look for weaknesses
and manage the trades for maximum profit and minimum losses.
Meta Trader 4 Platform Quiz
Do you know what these terms mean?
Waiting for Update
Trade Context is Busy
Bid – Ask
MT4 charts are bid charts
Margin
Waiting for Update
“Waiting for Update” is a common message with a new account or when switching between a mini
and a standard accounts. There is an easy solution. Go to the Market Watch window, left click
and hold down the mouse key on the pair you want to see in the chart and drag that pair onto
the chart that says “Waiting for Update”. Release the mouse key and this will automatically
update the chart.
Trade Context is Busy
You receive “Trade context is busy” when you try to process two or more orders at the same time.
If you have placed a trade and do not wait until it processes completely and then try to place
the same trade or a different trade, the commands go into a loop and you get “Tread context is busy”.
The only solution is to close down the platform and restart it.
Bid – Ask
All Forex quotes have two parts, the BID and the ASK.
The Bid is the price at which you (as the trader) will open a sell.
The Ask is the price at which you will open a buy.
The difference between the bid and the ask price is known as the spread.
MT4 charts are bid charts
The current price shown on an MT4 chart is the bid price. When looking at a price bar or candle,
you must add the spread to the high bid price to know what the high ask price would have been,
or add the spread to the low bid price to know what the low ask would have been.
If you are in a sell (in at the Bid out at the Ask), you would not see the candle reach your stop
loss if you are taken out of the trade. For example with a stop loss of 1.45800 on the EURUSD once
the chart reached 1.45780 (2 pip spread) you would be taken out of the trade at 1.45800. Your take
profit would not trigger until the ask price hits. For example with a take profit of 1.45400 on
the EURUSD once the chart reached 1.45380 (2 pip spread) you would be taken out of the trade at
1.45400. These examples are based on our spread shown under normal market conditions. Our spreads
are not fixed and will fluctuate with news or other high / low volume conditions.
If you are in a buy (in at the Ask and out at the Bid), you will see the bid price on the chart.
Margin
Margin is the amount of necessary money needed to place/maintain a position.
Margin Level Percentage is calculated by taking:
Equity/Margin x 100 = Margin Level Percentage
Equity (your true Account Value) is your Balance +/- any open positions.
In normally leveraged accounts.
When a margin call occurs, all open positions are subject to liquidation at the prevailing market
prices without prior notice to customer.
When should I Review My Trading results? 6 of 7
How much of my account can I lose before I go back to demo trading and review what I am doing wrong.
We have heard from 10% to 35% draw down before you should stop trading and analyze what is happening.
We lean to the 10% area. You will have to decide what is right for you. Keep in mind the preservation
of capital.
Here is a little chart to see what it takes to recoup a loss at different levels.
% Draw down % Gain required to
Recoup loses
10 11.11
20 25.00
30 42.85
40 66.66
50 100
60 150
70 233
80 400
90 900
100 Out of Money
Once you reach your draw down level you should close all trades without thinking about it and find out
what you are doing wrong. Here are some things to think about:
Am I following my trading system?
Am I following my trading plan?
What is my state of mind?
How is my physical condition?
What do I need to do to correct the problem?
By following these simple rules of preservation you will be around for another day of trading and not be
emotionally and financially destroyed. We all can have a string of bad trades. The best thing you can
do is step back and give it some time. The most common problem of poor trading results is when a trader
gets away from the trading strategy that was successful for him. By using good money management and
following the trading rules will give you the opportunity to be able to stay in the trading game until you
can figure out what you are doing wrong. By having some rules to follow it is usually quick and easy to
see what is being done wrong. You should be able to spot some rule breaking by looking at just one losing
trade. You should not have to go for long periods of time and many trades to see that you are doing some
things different.
Is It The Market OR Are You The Problem?
Do you find yourself hesitating to pull the trigger on trades, and when you look back you say,
I could have made a lot of pips on that one if I had only.
Do you still leave trades on hoping they will come back. You know the “blowout trades”
that take all of the money you just made, and put you back to where you started or just
plain wipe out your whole account.
“Are You Set To Make The Wrong Decision On Your Next Trade?”
If you are not set to make the trade that your tested trading plan dictates you should make,
then your are set to make an emotional trade.
Do you keep making the wrong trades all the time? If so most likely you are the problem.
It is not the trading system you are using, or the market, or the limited time you have to trade,
it is YOU. You are the common denominator.
Solution:
Know your trading system
Follow the trade tracker
Keep a trading journal
Then
Make a trading plan
Follow the trading plan
These simple steps will help you develop the discipline to become a successful trader.
It is simple but it is not easy if you want to take short cuts and play the get rich quick game.
It takes time to develop the skill; patience, discipline, and persistence to become a successful trader.
But it is worth it when you get there.
Money Management 5 of 7
One of the basic laws to be used with the win-loss ratio is good money management. A win-loss ratio can
be improved with good money management.
The first rule is to trade money you don’t need. If you don’t need the money then you can be more in
control of your emotions and your trading. Make sure that the money you are trading with is not needed
for personal living expenses. You need to know that the more money means to you, the harder it is to
trade. To a trader money is just a means of measuring your trading results and success ratio.
Most traders feel that you should not risk any more than 5% of you trading account on any one trade.
We feel that you may want to consider 1, 2 or 3 % to start with. So if you have an account of $8000,
you should only trade $400 or 8 mini lots at one time using 5%. When you use 2% of your account you will
only be trading 3.2 mini lots per trade. The reason to trade with such a small amount of money is to stay
in the game and let the probabilities work for you. Preserve your trading capital so you can stay in the
game. The more investment capital you have to trade, the better the chances of the probabilities working
for you.
Win-Loss Ratio 4 of 7
How do you establish a win-loss ratio? How many trades do you need to do? The more trades the better
but you will need at least 100. We like to break in down in to groups of 20 trades and see what the
ratio is on this small group of trades. If your ratio gets better after 5 groups of 20 trades then
you are starting to know what your win loss ratio is. If you start out at 4 wins 16 losses the first
round and end up with 15 wins and 5 losses, you have become a better trader and more skillful at using
your trading strategy.
This means you have 25% losses and 75% wins. So if your wins are larger and the loses are smaller,
you will have a successful trading account. This means you will lose 1 out of 4 trades. If you
execute all the trades exactly the same then you can pin point the problem areas in your trading.
By doing the same thing each time you place a trade, you are developing a mechanical trading style.
You just see the trade and pull the trigger.
When you have a loss you need to still reduce the pain and emotions. You need to make the money you
lose not so valuable. Also set a limit of how much you will lose before you go back to demo trading.
All of your testing should be done in a demo account to get the skills you need to trade well.
It doesn’t hurt to go back to demo trading if you have a losing streak. Do another 20 trades, get
your rhythm back then return to live trading again.
How To Handle A Whip Saw Market
There is no system that can prevent the market from whipsawing. There will be times when you
will have a loss. By learning how to manage trades to minimize your losses your account can grow.
This is the way we like to take the higher probability trades. When we get a signal on
the 15 min or 30 min time frame then we look at every thing up to the 4 hour and see if
the signal is going in the direction of the trend on each of the larger time frames.
If they all give confirmation then you have a better chance of getting a high probability trade.
If you do not have confirmation of the trend on all time frames the strength of that trade is weakened.
You need to learn to use all of the indicators in our courses so you can determine what to look for.
If you have patience, and follow your trading plan then you can become successful at trading.
Once you have a solid understanding of how to trade manually and can read all the signals then
you can use the alerts to bring the trades to you rather than having to spend time looking for
the trades.
The Alerts are based on the entry signals in our courses. They save you time looking for trades.
You can watch many currency pairs at one time and only take the best trades. You will always know
which pairs are moving on any given day because the alerts will give you heads up.
How To Become A Smart Loser 3 of 7
If you have learned a good trading system and know the mechanics of entering and exiting trades and you
can make money on a demo account, this does not meant you have the temperament to trade successfully.
Most people can learn the mechanics of trading and talk the talk but they cannot walk the walk because
they do not have the proper attitude. It is the attitude that makes the difference between the
successful traders the not so successful traders. If we do not know how to lose then pain and the lack
of logic along with follow through on the trading mechanics will take over and you will lose and not know
until the trade is closed what is happing to you.
The advantage a trader has is to be able to spot trades that will give them a greater chance for success.
Since trading cannot be 100% then we have to be concerned about the 15 to 25% of the time when we are going
to be wrong. To have a better gauge of how successful a trade might be one has to get knowledge,
experience, and practice. To become a successful trader it is not so much about having big winning trades
but having more winning trades than losing ones. Trading is a numbers game so you can expect to win some
and lose some. It has a great deal to do with how you manage your trades. When a losing trade is managed
properly it can be a small loss rather than a large loss. When a winning trade is managed properly it can
become a larger win if you don’t get greedy.
To become a good loser you need to learn the difference between experienced losses and losses that cause
suffering. We first need to get the education and logic behind trading then we need to strengthen the
emotional side of trading. Having a trading system the gives exact entry and exit points can do this.
Systems that move with the market to let you know when to get out.
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