by Casey Stubbs on March 12, 2010
Have you ever been trading and it seemed like every trade you made was a winner and you couldn’t make a wrong move? I have and I felt great and was on top of the world. Then suddenly, after two months of doubling my account several times I ended up going on a losing streak that brought my account down to zero and I could not buy a winning trade.
Has anyone else had this happen to them? Or am I just all alone in having wild emotional streaks and swings. I can tell you that during the move up I felt ecstatic and elation that was wonderful. Then when the losing streak hit I felt agony and depression and couldn’t eat because of the pain caused by losing all that hard earned money. The pain was made even worse because it came right after a long hall of hard work of growing my account for several months and all the sudden… BAMM right back to square one.
Growing your account balance is hard work and it takes discipline and determination to make it grow. When you lose all that you worked for and you have to start over again it is like, losing your job, your house all your possessions and having to start life all over again. I have had to do that before but that is another story for another time.
I started to say all this to say something simple. Don’t lose your account like that in the first place. So you don’t have to go through that pain. Use stops and have the discipline to follow your plan so you don’t have to go through that agony. When you go through something as difficult as blowing your account it takes a great amount of mental strength to rebound and keep on going.
Here are some key steps to help you have the mental discipline to be a great trader and become a pro trader. A great trader in not made by his strategy but by his dicipline.
- Write your rules down.
- Keep it posted on you computer in a place where you can see it.
- Take a break from trading if you have a bad day, let your mind clear up and have a fresh start.
- Emotions are you enemy! Keep control of them by following your rules.
If you have any other suggestions please write them down so that we can all learn here.
by Casey Stubbs on February 27, 2010
By Casey Stubbs– Casey is the founder of Winners Edge Trading, a forex resource for training and helping forex traders.
You did your research, wrote your plan and devised your strategy now you are ready to begin trading. First of all you should congratulate yourself on taking the time to do it right because that is a crucial first step. But don’t get ready to throw yourself a party just yet, because this is where the hard work begins. Now it is time to fund your account and test your plan and then re-evaluate. I would make sure to evaluate at the end of your first month because the beginning part of your trading is still very much in the testing phase.
After the first month of trading look at what worked and at what didn’t work then make changes to see what areas you are weakest in and what areas the plan is weak. It is important to look at the strong areas as well, that way you can build on the strengths and adjust the weaknesses. Now that you are beginning your journey in trading this is where the tough get going and the weak lose their money.
The most important part of trading is psychological, it is all in your mind. I know that personally when I have a bad trade or a bad day. It can sometimes cause me to have 2 or 3 bad days in a row after that. I get shaken and that carries over into the rest of my trading. So now that you starting with your trading plan make sure that you understand that you have go to be tough and protect your capital. Follow you plan and obey all the rules.
If you think that trading will make you rich than you have the wrong mindset right off the bat. We all trade to make money but it is not about getting rich. If you can get rich trading you will be able to get rich in other areas as well. What do I mean by that? I mean that it takes slow and steady gains applied with consistency and discipline. If you can do that in real life you have the ability to get rich and if you do it in trading you have the ability to get rich as well.
All behavior is a habit, take the time to create good habits on purpose and you can be a good trader and a successful person in life. Now that the trading plan series is over I will be moving over to other areas in trading to focus on. So look for more about the mindset of professional traders, this is a battle of the mind. That we must be willing to to conquer, your own worst enemy is your self or you can you can be your own best friend.
by Casey Stubbs on February 14, 2010
By Casey Stubbs– Casey is the founder of Winners Edge Trading, a forex resource for training and helping forex traders.
One essential stage of setting up a profitable trading plan is tracking the results of your trades. The reason you will want to do this is so that you can analyze that data and adjust your trades to optimize performance. Logging your trades is time consuming and is a less glorious part of trading but if you don’t keep track of your trades you will never be able to accurately determine if you have the ablity to improve your trading performance.
There are several items that are important to keep track of to have a useful trading log. First it is important to write down the date and time of your trade, along with the entry and exit price. In addition to keeping track of the profit and loss keep notes on why you entered the trade and if you were disciplined enough to follow your rules. I think you will find it interesting to learn that when you follow your rules your trades seem to go better than you when you just go by feelings. You can even take a screen shot and save it in a file folder that you may review later when you are analyzing your trading data.
You can log your trades by keeping a note pad on your computer desk and writing them down as you trade. That is a simple yet effective method for logging your trades. You can also develop a simple spreadsheet to keep track of all your trades by entering data into the fields you create. If you don’t want to you those methods there is even Forex trading tracking software called Trade On Track that you can enter the data and the software will help you analyze that data by generating detailed reports with graphs.
When analyzing data look at which trades are profitable and which ones were not and attempt to identify similarities in the wins and in the losses. Then attempt to reproduce what was working in the wins and eliminate that factors that were contributing to losses. Then test the changes and analyze again. Make sure that you note all the adjustments that you make so that you will see how they have impacted your trading performance.
With proper logging and analysis any trading strategy can be adjust to be profitable it just takes time and discipline to get it to work. This is a never ending process that can always be used to continually evaluate performance.
by Casey Stubbs on February 6, 2010
By Casey Stubbs– Casey is the founder of Winners Edge Trading, a forex resouce for training and helping forex traders.
It has been said before that money management is the key to forex trading success or failure. That statement is the absolute truth so today I am going to be discussing proper money management and inserting that into the trading plan. First let me explain what money management is. Money Management is determining how much money or amount of capitol that you are going to risk on any given trade. I will give you a tip here on this, the smaller the better.
The reason smaller is better is because when you have losing trades you will not blow out your entire account. I recommend a 1% total amount risked on each trade. This means that the total amount of risk on each trade when the stop loss hits is 1%. For example if you have a total of 10,000 in your account and you
risked 1% than the total amount you would risk would be 100 per trade. The way you determine your risk is to figure out how much it costs for each pip and than place your stop so that you would go over that amount. In this example of 10,000 if your pip cost is 1.00 than you can set your stop loss at 100 pips and your risk is a total of 1%. If you look at the trade and you only need a 50 pip stop loss then you can risk two mini lots because a 50 pip stop is $100.00 which is 1% of your account.
One other point in using risk management is to calculate your percentage based on each trade you currently have open. If you have two trades open figure the total risk for each one. Add the total up for both trades and that is how you will get your current risk. This is the most overlooked part of the trading plan and many traders don’t put much thought into it, which they later regret.
I will give you a real life example of how risk management can impact your trading account. I had a test with two open accounts and used different risk on each account. For the first account I had total risk of 1% of total account value and for the second account I placed trades with a %25 risk value on each trade. Each account I placed the exact same trades with the exact same stop loss. At the end of the month the account where I risked 1% was up 115% for the month and the second account was completely empty.
So use risk management wisely and you will profit in the end. Next week I will discuss logging your trades and reviewing trade data.
by Casey Stubbs on January 30, 2010
By Casey Stubbs– Casey is the founder of Winners Edge Trading, a forex resouce for training and helping forex traders.
Now that we have gone over several aspects of creating a trading plan this session I will discuss developing a strategy for your trading. This may seem like a difficult task but there are many profitable strategies out there. I like to develop my own but I also like to learn from the mistakes of others so I think it should be a combination of research and testing. When making a decision about how to either develop your own or find another strategy that others have prepared, you should ask you self these questions.
- Am I a long term, Swing or short term trader? Part of your answer to that question may depend on how much time you have to put into your trading.
- How much skill do I have in my trading, Do you need to take training courses. There are many excellent free courses available as well as paid courses that teach various aspects of trading. I took several free courses and several paid ones and I think I benefited from all of them. I however did not trade profitable with any of them until I finally got it after long periods of learning.
- Do you want a strategy that uses indicators or price action, which is reading the candlesticks. I prefer reading the candlesticks but I know people that use indicators successfully.
- Ask yourself once you write the strategy are you willing to stick with the rules test it and than analyze the results.? The answer to this question better be yes or you might as well stop reading now.
Next you need to start gathering information about how to develop strategies. There is good information for that provided right here as well as other Forex sites. Do your research thorough because this is an important part of your trading plan and if you take shortcuts here it will dramatically impact your profits.
Once you develop a strategy than you must write down the rules and begin the testing faze. Don’t take any ones word who says that they have the best system ever. Make sure you test it for yourself. You can do the testing with a small account and keep a log that you will write your trades down so that you can have accurate results. After you have tested than you can begin to tweak it and fine tune the performance and increase profits.
Lastly, make sure that you incorporate proper money management techniques into your strategy because if you over leverage account that is one way to make a great strategy a major loser.
by Casey Stubbs on January 22, 2010
Casey Stubbs– Winners Edge Trading
We have discussed many different elements in this series about creating a trading plan. So far we have discussed why you need a trading plan, setting goals and also choosing the Forex broker. In this installment of the Preparing a Forex trading plan series we are going to continue discussing brokers by talking about trading platforms.
With every broker you will get a trading platform in which you will place your trades with and getting the right platform is critical in your trading success or failure. There are some trading platforms that are web or java based, which run on the brokers website. There are also platforms that you download on your computer and run directly from your computer. I have tried several brokers and many different platforms and I found that using downloaded platforms on your own computer is always faster and more reliable. I have used web based platforms and I have experienced problems with freezing, crashing as well as slow execution times. There are several brokers that offer only web based platforms and I would avoid those, but if you do try them make sure you try the demo for a long time so that you are comfortable with them and have a high level of trust with the platform. One benefit of using a web based platform is that you can trade from any computer even go to your local library and place trades.
I recommend a trading platform that you download to your computer because the speed and faithfulness of the program is better than a web based program. There are some platforms that are common that can be found from many different brokers and then you can use the same platform from broker to broker. The most common trading platform available today is the Meta Trader 4 platform. This is a basic platform that can be found and used by traders with different brokers all over the world. The benefit to learning to use Meta Trader is that once you learn it and if you do plan to change brokers you will not have to learn how to use a new platform over and over again.
One key function that you should test in a new platform you try out is to make sure that you are able to customize your charts and be able to save them. It is also important to be able to have open several charts at once so that you can watch different corresponding pairs or different time frames of the same pair. If the platform has limited charting capabilities I would not use that platform . There are some charting companies that sell charts so you do not have to use the brokers charts. However you can find many good platforms that have charts included so why pay extra for charts when you can get good ones with your broker.
Another customizable element to consider when choosing your trading platform is the indicators and features that your charts include. Be sure to check and see if the indicators you use are on the platform and that they are easier to configure and plot. In my search for the perfect platform I have found some that left me confused and upset. I won’t take the time to go and spend on figuring out if it is not easy to use. Remember that your time is valuable and if you are wasting it doing non productive tasks than you won’t get paid.
Last key Point: Remember you are paying your broker good money for their services and make sure you find the right one or else take your business elsewhere.
by Casey Stubbs on January 14, 2010
In this series I have been discussing the importance of creating a forex trading plan before you begin trading. Please heed my warning here- I get letters all of the time from traders that lose all of their money and their account because they don’t take the time to learn before they jump in and start trading. When Traders do that they are gambling because they are avoiding all of the hard work that is involved in trading.
Last time we learned about setting goals for your trading, in this article we will look at choosing the right broker. There are several things to consider when choosing a broker that is right for you. One of the first things to look at is the spread. Since Forex brokers don’t usually charge a commission they get money from the spread which is basically a commission they just don’t call it that. The spread is the difference between the price you can buy and sell a commission. The difference is the money the broker takes and puts in their pocket.
This is important to traders because the better the spread the more profits you get to keep. This is more important to day traders and scalpers than for swing traders. Since I am a day trader the spread is important to me because I sometimes close a trade with only 1 pip profit. The tighter the spread the more profits I get to take to the bank.
One other important factor is the lot size that the broker offers for each trade. There are 3 general lot sizes that brokers use and they are: Micro Lot, Mini Lot and Standard Lot. The Micro Lot trades at .10 a pip of price movement and the mini lot trades and $1 a pip of price movement and a Standard Lot is $10 a pip. This is important because some traders will get into accounts that are bigger than they should. It is important to evaluate the amount you are willing to risk before opening an account. If you have $1000.00 to invest than you would do well to open a mini account. If you have 10,000.00 to invest it would be ok to open a standard account.
So do your homework and find the broker that is right for you and your style of trading.
Each broker has a specific trading platform that they offer to clients and we will be looking at that in detail in the next article of this series.
by Casey Stubbs on December 16, 2009
Casey Stubbs — Winners Edge Trading
Last time I wrote about developing a trading plan and I mentioned different elements that should be included in your trading plan. Read that article first because it will give you an idea of some important items to consider before begining to trade for the first time. The first thing you should consider is why do you want to trade in the first place. Is is because you want to replace your job and work from home, or possibly to earn extra income while you are working, or do you want to use trading as a tool to build wealth?
Once you determine what the purpose of your trading is than you can start to set some goals and lay out some other foundations for your trading plan. Lets say that you want to use trading at first to add extra income while you are working. Ask yourself some questions? How much money do I have to invest in trading, What time will you be available to trade and how much time will you be willing to invest in your trading each day. All of these factors will determine how you will trade and the trading strategy that will best fit your current situation.
For example now that you realize that you will be trading to give your self some extra income and you have 1000.00 dollars to invest now you can begin to work on some goals to give yourself something to work for. A good goal for a 1000.00 account would be to try for a 10% return on investment per month. So if you are trading after work you could also set the goal of trading exactly one hour a day. A 10% return on 1,000.00 would be 100.00 and 1 hour a day for an average of 22 trading days would be 22 hours a month. The first month you would be working for $4.50 an hour. Don’t let that discourage you because if you continue to profit at a rate of 10% a month that 1000.00 will grow rapidly at a pace that will pay off well.
I have attached a spread sheet that shows you what a 12 month period of earning 10% a month will look like?
So you see that from a minimal investment of 1000 you can have a great return and if you keep at it for several years you will create a great deal of wealth. Just remember to have a plan in place and set goals so they you can see if you are making progress in your plan. Every month evaluate your trading to see if you met your goals or not, than adjust and evaluate again.
by Casey Stubbs on November 30, 2009
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Casey Stubbs–Winners Edge Trading
Hello,
Nick B. has given me a chance to write for this great forex community. So I want to start off by thanking Nick for this great opportunity to be a part of a useful community that helps traders learn. This column is going to focus on the discipline and psychology of trading and I will be adding updates about once a week. The first article is about getting prepared to start trading if you are a forex beginner. A trading plan can also be used for a profitable trader that wants to analyze his current trading so that he may be more profitable.
The first thing that any trader should have is a trading plan that will map out how the trader plans to do business. A business has a business plan so trading should be no different because you should treat your trading as a business. The old saying may be old but it is true if you don’t have a plan than you are planning to fail. The trading plan should be thorough and thought out and should be written down reviewed often.
You may be asking what should be included in your trading plan? I have prepared a list that might help you get started to prepare a trading plan for yourself. So make sure you include your goals and mindset, your broker and trading platform, trading system and strategy, money management procedures. There also should be documentation of each trade made so that you can analyze your system, which will help out to show the results of your trading. Also include whether you will add additional deposits and withdrawal procedures and how you plan to invest the profits. Trading is not as simple as it may seem and there is quite a bit of planning involved.
After your plan is complete it should be printed and reviewed to see how your are performing according to the plans goals. At the review session is when you should make changes if certain areas of your trading plan are not working for you and or not achieving the goals you have set. A plan is never set in stone it is to be used as a guide to help you understand if what you are doing is working or not. If your plan is not working make adjustments to test your plan.
In this series I am going to be looking in depth at each of these individual areas of the plan and how to get the most of your plan. So check back each week to learn how to put your trading plan together so that you will not enter the forex market unprepared without a plan.
Thanks,
Casey
