Equity Preservation

The first goal of trading is preserving equity - we are keeping enough powder dry to use when we get that clear shot and make the trades that count.

The reward is following the system

The initial reward is knowing you follow the system - the bonus is when the system rewards you for your professionalism

Stops - Risk Management

So what would be the approach for a system which you haven't traded before on an instrument you arent familiar with? Generally Not Greater than 2% to 3% per trade.

Some types of Stops to think about

Money Management Stops

Satic standard stops of up to 2% or 3% of account equity - Can also be used to calculate position size.

Percentage Move Stops

Exit when % has moved in one direction

Time Based Stops

Exit after a period when loosing

Technical Stops

• Levels of support +-ticks
• Moving Aveargs +- ticks
• Volatility Stops - Trend Channel/ Low or High/ MA +- Standard Deviation
• ATR % Stops

Money management

A good system can be ruined by bad money management- a bad system with good money management lets you bleed to death slowly

Money Managment is position sizing - you need to calculate or use a tool to control your position sizes.

• Work with 1 Lot - then increase when account grows - to a predefined level!
• Consistent gains + money management = WEALTH BUILDING
• Free position sizing tools in downloads

Money Managment Stops

If a good place for a stop is below the low of the day - 5 ticks and ( 2% = 20ticks) then Postion size =4

Trading forms a habit - good or bad

Trading results are the result of habits.

It takes years to ascend to the levels of being a pro, the unfortunate thing about new Traders with a virgin account is that could use their money wisely - choosing a system and obeying the rules - using position sizing at the outset - consciously repeating the correct steps over and over to learn good habits at the start - to program the subconscious.

What actually happens is they learn bad habits from the start and start to listen when the pain urges them to find help. A few may actually do it correctly from the start and learn good habits on the simulator - their confidence growing - they leap at the chance to go live and forget all the training and learn bad habits when live trading...

The trouble with Trading

The market can reward bad trading and punish good trading.

The trouble with trading is that it rewards Traders for doing it wrong just by luck - it teaches them they are great and that 2 year run that made them £200,000 was due to their inate brilliance - they will loose double that next time round- picking the lows of the next bear market, better to fail at the start in a controlled manner, get a burnt hand from the flame for doing it wrong, preserve some equity - put the losses down to the cost of the training and then put some gloves on...

The best training you can have is with real money -so make it last -start small.

Trading Framework - Defined by the Trading Plan

When Discretionary Trading or a pure system based on an indicator or signal generator we need to have a framework in place to utilise for the best control:

• The trade plan is what
• The System is the how -physical and logical
  • System
  • Method

Trade Plan

A Trading plan will have the following and more defined within it:

• Which Market
• Which Session
• Which System
• Risk Management
• Money Management - Positon sizing
• Trading Strategy
  • A Trading System
  • System Viability
  • Strategy Analysis
• Disastor avoidance and recovery
• Risk of Ruin?

Your Trading Availability

Example I trade Mon to Fri at 8am to 11am - i am available at that time or the market is best at that time

Markets

Currencies mornings? Equities Afternoon, Forex Pairs Evenings?

liquidity

When market is quite – do not use system x as single system –too many reversvals…

News and Market Events risk

Flat at major news Overnight positions none

Equity preservation

What you trade when you trade, what system you will use, your risk control and position sizing methods, For example risk no more than 2 to 3% of account per trade -by using a stop. Plan some sort of equity freeze – for controlling daily losses and even wins.

Red Card the Player

Have a control on your account – No point emptying the whole thing…. Maybe allow 25% loss and stop - freeze your account –take the player off the field and confiscate their boots until they can demonstrate they have changed. Trade in Sim until 1 month of profit and then top up the account if you can and go again

Preparation Each Day

Check your statement.

When you finish and start get a chart up on a HTF to view the market last thing – 30 min, 60 min Daily – understand where it is going when not trading Note Weekly, Daily levels, Pivots points, Obvious points of Support and Resistance, the trend

Check the economic calendar www.forexfactory.com - be on the sidelines when its red….

Daily - Weekly Analysis of your trades and profit

chart them in excel. Market, time, Trade type and pl Try to get an idea of when you are greatest

The trading system

Log every trade you take - Log every trade without fail in excel or in the ninja trader journal. Excel is better - Note Weekly, Daily levels, Pivots points, Obvious points of Support and Resistance, the trend, the candle pattern (1st bull candle to close above the crossover etc)…

Rate you Trades

Define and Rate the trades: Take time to walk through your trades at the end of the day - try and rate them on the basis of probability 1 to 3 - 3 star being the best. Over time try to recognise the trade setups based on their probability - each one will have even a checklist of supporting factors – multiple reasons to trade.

Back test

Give yourself a limited amount of Ticks or Trades per day for the time you want. Try tick charts, (maybe range or renko bars) on a fibonaci setting, 89,144, 233 chart If you use your ticks up – stop and go on the simulator – if you hit your target - stop and congratulate youserlf Win or Loose - Review and prepare tomorrow –switch it off.

The trading Method

When trading the brain is working in parrallel with you and this can be in agreeance or against your judegment… Try to define your logical statement in your thoughts that leads you to a trade….especially a good one…. Write it down into a logical statement. – it helps thrash out if you are at one with your style psychologically too.

E.G Are you battling with yourself? Stress can lead to “Trading Sabotage” and an end of a trading career…

HTF and TTF - See it from above and on the ground

Use several charts at once, daily, 60, 30, 15 for a HTF view of the action -don’t get too sucked in by TTF charts they hypnotise and fool you.

Identify Predict Execute

Define, voice, and practice the trade logic for each trade on the simulator – speak it. Tell it to an invisible trader at your side.

1. Identify -
   3 Star scalper trade setup · Long signal · Price retracement · Support from SMA, · Intraday level · Trading with the trend on the 15
2. Predict -
   Trend continuation to test previous high
3. Execute -
   EnterTrade: (High Probability Trade) o go long 2 @ 100…stops at 95 - target 1 limit as 110…target 2 at 120 o Target 1 hit move stops to BE - Trail stops in for Target 2