The Secret of Building a Highly Profitable Trading Account
Have you ever stopped to think why the trading techniques that work for the world’s best trading gurus aren’t working for you? Why can they achieve substantial gains while you’re left in the dust?
What do they know that you don’t?
In reality, they know a lot of things that you probably don’t. Let me let you in on a little secret—you don’t need to know everything they know. There is one characteristic that every highly successful trader in the world has, and if you learn to master this one detail and integrate it into your trading, it will be enough to create more profitable trades than 1,000 hours of looking and studying charts.
Are you ready for this? If you have failed to create a high-profit trading account until this point, I can all but guarantee that your trading is failing in one crucial area – you are not following a trading system you have learned, and trust. A good trading system would show you why you should be trading in the direction of the trend on the 4-hour chart, or that perhaps you are trading in time frames that are too small (1-5 min).
Trading with the trend puts the odds in your favor and makes it easier to read and follow your indicators and your entry and exit signals. If you fail to follow the trend you will never have a consistently high profitable trading account. You will waste hundreds of hours looking at charts and wonder why you never reach the profit levels you dream of.
Disagree? Consider these simple examples:
Example 1 – Johnny makes 50 trades on the one and five minute charts and never looks at the direction of the trend. He is trying to trade the news, listen to other traders, guess which way the market will move, and by how much. He lets a little move in the opposite direction grow into a big loss because he does not know which way the market is moving and does not set a stop loss because he thinks that it will come back. He closes a profitable trade when he has a little profit because he is not giving the market enough room to breath, and does not know which way the trend is going. He is hoping for the homerun, but he will never hit a homerun if he is always bunting (trading in the 1 and 5 minute time frames). He will have 25 wins and 25 losses and wonders why his account stays the same or dips a little.
Example 2 – Jane makes 20 trades on the thirty minute, one hour, and four hour charts only taking trades in the direction of the trend. She does not let the news and other traders influence her trading. If the market moves against her she has her stop loss places and knows how much she will lose on each trade. If she gets taken out at a loss it is always a small loss. She always lets the market breath and move freely without closing a profitable trade because of a little fluctuation in the market. She is not looking for a homerun. She is just looking for the market to tell her when it is time to close her trades. Jane is happy to take what the market is willing to give her at that time. She does hit a homerun now and then with little effort and emotion. Of the 20 trades, she will have 15-18 of them be successful, causing her account to grow steadily.
Why You Can Do Even Better Than Jane
The example of Jane assumes that she never increases the number of lots she trades or adds on to a winning trade as her account grows. If she is trading with 1% of her account at the beginning of a trade and then adds on to the trade as it goes in her direction, when she gets add on signals then she will multiply 3 – 5 times the profit on her account on a good trade.
Even if Johnny works twice as hard and places twice as many trades, he won’t be able to catch up. Jane will soon be getting more profits and compounding the growth each day. Why won’t Johnny be able to keep up or even catch up? Because Jane has been compounding her profits by trading with the trend and adding on to her profitable trades. When she loses, it is small; when she wins, it is big because she has been working the trade. Can Johnny realistically trade enough to keep up with Jane?
In order for you to become a consistently profitable trader you will need to trade with the trend, trade with the trend, trade with the trend.
5 Suggestions You Must Follow To Become a Profitable Trader
1. Trade in the direction of the trend
I had heard “trade in the direction of the trend” or “The trend is your friend” for years but didn’t quite get it. Then I read an article a few years ago, and it changed the way I look at charts and the market. In the article it stated that you should always trade in the direction of the trend of the four-hour chart. That seemed so long to wait for a trade. I was trying to make trades on the 1, 5, and sometimes 15-minute charts. Then I realized that I could still trade on the smaller time frames but only make trades in the direction of the four-hour chart. When I did this even if the trade went against me it seemed to always come back in my favor. This way I stopped hoping it would come back in my favor because I knew the odds were in my favor that it would come back for me.
I have also traded the 4-hour time frame successfully. This way I do not have to be in front of the computer as much and I have been making more money with less work. Try doing this on a demo account and see how it works for you.
2. Start small with each trade
When you place that first trade on a trend it can be scary. At this point in the trend you are not sure if this is a real trend or just a channel or retracement. Enter the market small, risking just a few lots until the trend confirms itself. Then you can add on to maximize the profitability of the trend.
Add to each trade when it starts to trend. We like to start out small with one lot when the trend is in question then add more lots as the trend proves itself. The add on positions are less risky than the first positions in a trend. The more the trend proves itself, the less risky it becomes. There are several add on signals in most trends, so why not add on multiple lots when the trade is headed in a direction, and then close all the positions when the trend comes to an end or when you have good exit signals? This way you can increase your profits on a trade by 3 to 5 times that of scaling out. Of the entry methods we have discussed you have two choices: start big and scale out or start small and add on.
I have heard many people say when you make a trade, you should scale out of the trade closing a portion of the trade as the trade starts to get more profitable. They usually start out with several lots. I thought this was strange to close a profitable trade when the trend was just starting to move. Also why put on several lots and expose yourself to more risk when you are not sure if this is a trend or not? I have come to the conclusion that the people who suggest a larger first position with scaling out of the trade is because they do not have any better exit signals than to just take a little profit as the trade progresses.
If you do not have a trading system that gives you exact exit signals and good add on signals then you could become a better trader if you found a system that would help you with this.
3. Trade with a stop loss
Trading with a stop loss is one of the most important parts of the trade. It falls under the category of money management. This is more important than the entry and exit points of a trade. The first loss is always the smallest and that is usually at the stop loss.
When you trade with stop losses, you have a much greater chance of being in the trading game longer than if you do not trade with a stop. On a trade system advertisement the instructor was saying he puts on his stop loss and his target take profit and goes and does something. He said he would have a profit or a loss. Most of the time he had a profit because he gave the market room to breathe. If he was stopped out, then the market usually was making a turn and changed direction. So he was stopped out at the smallest loss. Then, he would look to get back in the market the way the market wanted to go.
Successful traders have all lost money from time to time. They know this is part of the game. You just need to learn to manage the wins and losses.
4. Trust your indicators
One of the first things you should do as a trader is to become good at using some indicators of your choice, and then trust them. Your indicators will serve you well.
No indicator or even a set of indicators will be right all the time. But you need to trust them and use your stops for the complete trading program.
Most indicators have certain signals that are always right. If this is true, then why not wait for the ideal signals to present themselves and have more successful trades? You will make more money waiting for the signals to come to you rather than chasing trades and jumping in at every anticipated or hoped for signal. There will be a signal and a trigger entry point. Most mistakes are made when the trade is entered on the signal and not on the trigger entry point. DO NOT anticipate an entry signal; wait for it to come to you. The market will tell you when it is going to give you some money, usually through your indicators.
5. Follow your rules
Every trading strategy has some trading rules to follow. Every game has a set of instructions to follow to be able to win.
This is one time GUYS, that you should study the instructions and trading rules before you start to trade. There are a couple of reasons for this. One: you will not develop bad habits you have to break. Two: you will develop the habit of studying the markets, which is what you will have to do the rest of your trading career.
By learning the rules and following them you will then be able to develop a good trading plan. The trading plan is usually your way of trading the market, the way you will enter, exit, study and read the market. It will tell you the time you will trade and how much of your account you will trade. It will also show you how much of a draw down you will take and how you are going to handle your emotions.
The market does not care if you win or lose your money. The market does not have emotions. But the market will tell you what it is going to do if you will follow the rules of your trading system. Trading the Forex market is not a race with yourself or anyone else; it is an individual effort to develop your skills to be able to trade well.
LEARN THE RULES, TRADE THE MARKET, AND BE PROFITABLE.
My Overall Thoughts on Building a Highly-Profitable Trading Account
I think that quite a few of us want to be profitable traders without taking the time to become a good trader. The secret is learning and practicing a good trading strategy, being determined to follow the rules, and stick with it until you succeed.
If you trade with the trend and follow your trading strategy rules, profits are inevitable. Ask yourself if you’re willing to study and learn one strategy well rather than run with every new thing that comes along. If you’re not willing to take the time to study, practice, and follow the rules of a system, it will be really hard to become a profitable trader. If you are, you will have a very profitable account someday. That’s when you’ll know that you have made your dream come true.
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21 Responses to “The Secret of Building a Highly Profitable Trading Account”
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You obviously know how to explain it well. (I am a Johnny, by the way.) You have me down to the color of my underwear.
I have changed though. I am doing better now….not great, but better.
I wish I had read your blog earlier. Thanks for reinforcing my knowledge.
By the way, this applys to all trading, not just forex.
The success of any investing scheme really relies on consistency… An underrated value I feel!
kenneth
Hi. I can only agree, but at times about 3 indicators all at once gives a signal. Only then will I start with multiple lots, and if one of my signals give a signal of a possible trend direction, I will close half of my lots, and then I have a stress-free trade running. I can then wait for a strong trend reversal signal and close my trades.
I find this very effective, because after the close of the first part, automatically emotions are mostly eliminated with the rest of your trade.
I believe that the add-on way might work well, but to be honest there is many times that my trade is really riding the wave of a trend, when there is sometimes a sudden trend reversal which take back all the pips I made.
Thanks Jed for this very clear article ! Trading with the trend seems such a simple rule but is for most traders (including myself) very difficult to follow.
men those where all about me…..
i bleive the forex market is easy, it only re
quires discipline and consistency…
men u’ve said it all..i appreciate.
Good articles. I have bookmarked this site. Thank you
What you’re describing is exactly how I was trading – results as well!
So I’ve tried looking at the longer time charts and guess what? Imediately, first trade I a 213 point move on one of the indices I trade. Wow! I;’m converted to longer charts now. Actually I’d have got about 320 points, but I put a limit order in that I couldn’t move fast enough. Never mind – the markets are always there and I’m happy with the 213 points gain. Thanks for opening my eyes!
“If you have failed to create a high-profit trading account until this point, I can all but guarantee that your trading is failing in one crucial area – you are not following a trading system you have learned”
Man what bullshit!
If you are trading Forex with MT4 EA how can’t you follow the rules if the program is doing that for you? Let me refrase that sentence for you because it is incorrect:
“If you have failed to create a high-profit trading account until this point, I can all but guarantee that your trading is failing in one crucial area – you don’t have profitable trading system which gives you an edge over the market”
“If you have failed to create a high-profit trading account until this point, I can all but guarantee that your trading is failing in one crucial area – you are not following a trading system you have learned”
Man what bullshit!
If you are trading Forex with MT4 EA how can’t you follow the rules if the program is doing that for you? Let me refrase that sentence for you because it is incorrect:
“…I can all but guarantee that your trading is failing in one crucial area – you don’t have profitable trading system which gives you an edge over the market”
I have a son who has decided to change careers and learn currency trading. He is learning it on his own. Being a rather intelligent person to begin with, he took an online course and has begun trading from home. Is there any other additional means of learning he should pursue given your experiences? Thank you.
John,
http://forex-thestrategy.com
you are crazy, do you think traders fall for this
load of crap. well they do. what a shame. i here
so many traders over the years stick there chest
out and act as if they know what they are talking about. but in reality they are lost. i only had to
read the first two paragraphs to know with 100%
certainty who ever wrote this article is nothing
more then a pretender.
there are things millions of people do not know about trading that make them loose. if you all knew what i know you would all be wealthy, like me. the facts are its not trend or no trend, system discipline, its not reading price action like a child in candy store , you foolish foolish wannabees, i give one little secret out of 20 secrets i know that know one else knows, 1 that’s all. you fool will have to work on your own for the rest. this one secret will not make you rich.
but it will open your stupid eyes. what a bunch of sheep. pathetic. now what secret to give out?
no that one is two awesome. ok i know how about this one forex price and price action signals
almost always react in such a way for traders to loose money at critical moments in the market.
identify the critical moments and take the emotion out by expecting price action to be a trap. its all a scam rip off, get it? only if
you lazy bums quit looking for help, and taking advice from ass holes like this fool that just wrote this article you may be alright. don’t you
think his advice sounds like every other self per-claimed jerk off pretender on the web. no
one has ever made it big in trading by taking any
one of these fools advice. no one!! not one person ever!! you know how i know this? because
i know things about trading most of you will never know in a thousand life times about trading. stop asking others, or kissing there ass. they are trash who need attention. you want to make it? do the work!! tear the system apart.
every aspect of trading, scrutinize each subject
and piece of it, be fair and realistic. find out
what the reality of what you face is. then you will be trader. jerk offs. some people unbelievable idiots!!!
you are crazy, do you think traders fall for this
load of crap. well they do. what a shame. i here
so many traders over the years stick there chest
out and act as if they know what they are talking about. but in reality they are lost. i only had to
read the first two paragraphs to know with 100%
certainty who ever wrote this article is nothing
more then a pretender. get me
there are things millions of people do not know about trading that make them loose. if you all knew what i know you would all be wealthy, like me. the facts are its not trend or no trend, system discipline, its not reading price action like a child in candy store , you foolish foolish wannabees, i give one little secret out of 20 secrets i know that know one else knows, 1 that’s all. you fool will have to work on your own for the rest. this one secret will not make you rich.
but it will open your stupid eyes. what a bunch of sheep. pathetic. now what secret to give out?
no that one is two awesome. ok i know how about this one forex price and price action signals
almost always react in such a way for traders to loose money at critical moments in the market.
identify the critical moments and take the emotion out by expecting price action to be a trap. its all a scam rip off, get it? only if
you lazy bums quit looking for help, and taking advice from ass holes like this fool that just wrote this article you may be alright. don’t you
think his advice sounds like every other self per-claimed jerk off pretender on the web. no
one has ever made it big in trading by taking any
one of these fools advice. no one!! not one person ever!! you know how i know this? because
i know things about trading most of you will never know in a thousand life times about trading. stop asking others, or kissing there ass. they are trash who need attention. you want to make it? do the work!! tear the system apart.
every aspect of trading, scrutinize each subject
and piece of it, be fair and realistic. find out
what the reality of what you face is. then you will be trader. jerk offs. some people unbelievable idiots!!!
Trading with the trend seems such a simple rule but is for most traders very difficult to follow, because we’ve emotion :p
Thanks for sharing this information.
I learn and try intraday trading for 3 months but its too random to follow, mostly i am loose, even after i try indicator that said its profitable (or maybe its not match with my trading style).
I am gonna try to stick with 4hr chart from now on on going with the trend, and makes some profits in my demo account. Sometimes i confuse because the trend in different in multiple timeframe, for example in 30m chart the trend is bearish but in 4hr chart its bullish. Now i only trust 4 hr and daily charts, while using 1 hr and 30m to entry the trade,especially in the peak of 4hr charts while its making higher high or lower low.
And i also will try intraday using the direction of 4hr charts. Thanks Man
Not so great
Well, you have said what has been said time and time again, that is trading in the direction of the trend. But how do you determine the TREND. That is the the important issue. Hope to hear from you. Bye.
i just have to said if you can’t do the work your self. let someone trade for you…but if you stay in the game long enough, you will know the secret..
So true; the secret is really about being consistent with a system. There are plenty of roads the get to the same destination. Some roads are faster and some are longer. A system is like a road. Take the road you know best so that you will not get lost.
Visit http://www.businessclubworldwide.com for more forex lessons.
I have studied the topic and found that why I am not asuccessfull trader.
guy u know, just got a tip from u.. in the fx world the learning goes on , on ,on, Learn more at rapid forex.com
its good! i retwite this “The Secret of Building a Highly Profitable Trading Account” in my twitter!