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(My Secret Trading Weapon) – The Most Important Ingredient to Trading Success

Today I want to share with you one of my ‘secret trading weapons’. This is something very real and practical … Something that, if applied, can make a positive change in both your trading results and your personal life. There is one thing that I consider to be my ‘secret weapon’ for trading the markets successfully. It is something that all of us have the ability to develop and employ in the markets, it does not cost any money and it’s the single most important ingredient to trading success…

What am I talking about here? Well, in all areas of life there is something that separates winners from losers, achievers from underachievers, and those that reach their goals from those that don’t. The ability to plan ahead and not let emotional decision-making rule your life is something that allows people to excel in their personal relationships and in their professional lives. One of the most important and prevalent defining characteristics of people who achieve success in their lives is that they have patience. Patience is perhaps the MOST important habit that a Forex trader can develop.

It is the patience to sit on your hands and wait for only the best trade setups that separates the winning traders from the losing traders. Patience is the defining characteristic of what sets humans apart from all other species in the world. When we employ patience we are using the most advanced frontal-lobe area of our brains that is responsible for planning and forward-thinking, and when we employ emotion we are using the older and more primitive limbic system area of the brain which evolved for use in fight or flight situations. So, which trader will you be; a patient trader who uses the more highly evolved areas of their brain, or an emotional trader who essentially trades like a monkey?

Patient Forex traders make money faster than impatient traders

Want to make money as fast as possible in the markets? Stupid question? Maybe. But, most traders do the exact opposite of what they should do to make money in the markets. The problem is that most traders trade with little or no patience because they want to make money now and have a skewed concept of what ‘making money fast’ actually means. They do not think about 1 year from now or 2 years from now. What good are you doing if you trade now with little or no patience and as a result your trading account value increases and decreases like a roller coaster of emotion only to end up negative at year’s end?

What you need to do is think about trading as a year-long process. Think about how you can build your trading account over the course of a year, not over the course of one day or one week. By slowing down and realizing that you need to have patience to trade only the most obvious setups and thus to not over-trade, you will inevitably build your account faster than if you enter numerous trades each day in a futile attempt to ‘force’ the market to make you money. You see, the market does not care about you, so you have to care about it by taking what it gives you and waiting until it shows you its cards by forming an obvious price action trading setup. If you can do this consistently for one year I promise you that your trading account will be larger than if you trade every day and over-analyze the markets for hours all day and night.

Allow your trading edge to work in your favor by employing patience

Having patience to let your trades play out in order to see the true probability of your trading edge is something most traders don’t do because they voluntarily lower the probability of their trading edge by meddling with their trades too much. Let me explain that in simpler terms…

Do you move your stop losses and targets around multiple times after entering a trade? Do you get stopped out at breakeven all the time only to see the trade take off in your favor? If you are doing these things you are likely trying to control the market and by doing so you are voluntarily decreasing the probability of your trading edge.

This is a concept that is a little difficult to grasp because most traders feel the need to move to breakeven or manually close out a trade that is moving against them instead of letting the market run its course. But, think about this, if you simply set and forget all your trades and let the market play out by either hitting your stop loss or your target, you are allowing your trading edge to work and after a large enough samples of trades you will see your trading edge pay off. Most traders take smaller profits than what they had pre-determined before entering, or they make the huge mistake of moving their stop loss further from entry and taking a larger loss than they had pre-determined. (Note: there are times when moving your stop or target is warranted, see my article on Forex trade management for more)

All of these mistakes are born out of a lack of patience, and until you understand that you do not need to meddle with your trades after they are live, you are going to lower the probability of your trading edge. Consider this; if you save yourself 2 losses by moving to breakeven and then you decide to move the next two trades to breakeven after getting up a small profit, but then these two trades also got stopped at breakeven when they would have been winners, you have just lowered the probability of your trading edge…even if you would have taken the 2 losses. Look here:

Risk = $100, Reward = $200

2 potential losing trades stopped at breakeven = $0
2 potential winning trades stopped at breakeven = $0

2 losing trades = -$200
2 winning trades = $400
Net profit of just ‘setting and forgetting’ and letting the market play-out by having patience to not meddle in your trades = $200

Now, this is a small example, but it shows you why moving your stops around and getting out at breakeven all the time or even manually closing your trades for small losses or gains BEFORE they hit your pre-determined stop loss or target can and will lower the overall probability of your trading edge and will thus cause you to have a very difficult time making money. The underlying point here is that you need to always make sure your actions in the market are in-line with the FACT that you never know for sure what is going to happen. By pre-defining your entry and exits and letting the market then play-out you are trading in-line with the fact that you do not know what will happen. But, when you move your stops and targets all around after the trade is live you are ignoring the fact that you do not know what will happen and you are acting as if your actions in the market will somehow cause the market to do what you want it to. Here’s the point: master your Forex trading strategy, develop a trading plan, then trade your plan and let the market do the work.

Patient traders know exactly what they are looking for in the markets

If you know exactly what your trading edge looks like and how to trade it there is no reason to not be a patient trader. In fact, by thoroughly mastering an effective trading edge like price action trading, you will find that you naturally increase your patience in the markets because you will know what constitutes a high-probability trade setup and what does not. Some traders decide to trade with no patience and thus gamble all their money away, other traders become skilled trading ‘snipers’ and perfect their trading strategy and trade the markets with a high-probability trading edge that is realized through the consistent application of patience. Remember, this is only possible if you are totally clear on exactly what your Forex trading edge looks like and how to trade it. For more on trading like a sniper check out my trade forex like a sniper not a machine gunner article.

Patience is critical before, during, and after a trade

We have talked about having patience while your trade is live and briefly about having the patience to pre-define your entries and exits. We have not talked about patience after a trade however, and it is at this time that you really need a lot of patience. Most traders feel some level of emotion after a winning or losing trade, the emotions are different of course, but no matter how much money you put on the line you probably feel either euphoria or disappointment, depending on whether you won or lost on the trade.

It is at this time, directly after a trade closes out, that you really need to step back and separate yourself from the market. You need to have the patience to not jump right back into the market on the emotion you are most likely feeling after a winning or losing trade. This is something you can write into your Forex trading plan. At the very end of your trading plan you can include a line that says something like “I will close down my trading platform and remove myself from the markets for 12 to 24 hours after any trade closes out”, or something similar. This will help to make this a habit and will work to reduce the amount of emotion-based trades you make.

Learn to enjoy and embrace being a patient trader

Sitting on the sidelines is a profitable position….by having patience and not trading, you are further ahead than you would be had you traded and lost…never be in a rush to trade because the market will always be there tomorrow…when in doubt stay out because it is a much more lucrative position to be in than to lose money.

Learn to enjoy and embrace the patience that is necessary to trade successfully. Once you begin to think of patience as the ‘most important ingredient’ to trading success, and actually understand how and why being a patient trader can actually make you money faster, you will have no problem waiting for the best trade setups, because you will feel like you are actually making money by not trading, which technically you are if it means you are avoiding low-probability / losing trades. So, you need to ‘trick’ your brain into believing that patience is how you make money…not trading a lot, because as humans we are naturally wired to want to trade a lot, thus you need to use your frontal lobe / planning part of your brain to allow logic and common sense to develop the positive habit of patience into your wiring, then it will become second nature and your trading will be relaxed and profitable. To learn how to trade simple yet effective price action strategies off the higher time frames that will allow you to relax and develop a patient trading mindset, check out my Forex trading course and members’ community here.

Ray Barros’ Blog for Trading Success

Your Journey to Consistent Profitability

My Last Suggestions for Improving

This will be my last blog. I’ll keep the site open until at least June 2020.

So, I thought, what would be a suitable topic? I came up with:

  • The two most influential factors that have affected my trading, and
  • A suggestion.

Without a doubt, one of the biggest influences (certainly for at least 20 years) are the works of Brene Brown. Her ideas provide the ‘why’ to the very effective ACT techniques. My key takeaways from her work are how the relationships between Shame, Vulnerability, Story, Empathy and Courage impact traders. Most important, her ideas draw us a roadmap on how to use ACT effectively.

Where to access her works?

If you subscribe Netflix, you can view a 60-minute video “Call to Courage”. She also has Youtube videos. And, finally, you’ll find some at her site.

The three books I would not miss are:

  • I Thought It Was Just Me (2007). The book is written for women but its ideas are applicable to traders.
  • Daring Greatly (2020).
  • Rising Strong (2020)

The other big influence has been the realisation that

For newbies, relying on either a mechanical or a discretionary rule-based system is not the optimal path. It’s more important to find a hybrid Method

For years I subscribed to this idea:

It was important for his long-term success that a trader find an approach that suited his personality.

Indeed, in my courses, I would recommend that students take a personality test.

(By the way, if you take the test, you will need to read “The Mental Edge in Trading”. Also, note that the categories named by Jason Williams are called by different names in the test. Below, I have attached a reconciliation snapshot).

I know that this is not so for newbies.

The reasons? Well:

  • For mechanical traders, they are unable to bear the sustained consecutive losses; losses that are part and parcel of systematic trading. And
  • For rule-based discretionary traders, the complexity of turning a theory of trading, into a set of rules, seemed beyond most.

What is needed is a hybrid approach that keeps the simplicity of mechanical trading while eliminating the frequency of consecutive losses. Of course, there is a quid pro quo: using this hybrid approach, the trader will miss some large moves. Still, the beta results showed a far greater trader improvement rate using the hybrid method.

Your job is to find an effective hybrid system that does the job.

Finally a suggestion. One of the critical trading maximums, more honoured by its breach than its adherence, is the need to keep a trading journal.

I’d suggest that keeping one is absolutely necessary if you want to join the winning 10%. Nowadays, there are so many aids to choose from. One of the best is Edgewonk. Also, I’m currently testing a new kid on the blog, Tradeary. Looks good. Both are relatively inexpensive.

Better equity journals look to incorporate qualitative factors into their analysis. But, for my purposes, I find I need to supplement them with Evernote. You can search YouTube (“Evernote trading journal”) for a myriad of ideas on how to set it up).

Using Evernote means you will need a screenshot apps. I use Snagit but it’s relatively expensive. A couple of free ones:

  • Greenshot
  • Snipping (comes with Windows)

That’s it, folks. Thank you! A huge thanks to you who have been following this blog. I hope I have been able to assist your quest for success. All the best for your trading in 2020 and beyond!

A special thanks to Chris Jackson and Bazz from Australia.

The Eureka Moments – 6 Steps to Successful Trading

You have reached the half-way stage: the Eureka Moment.

For me, it was a long journey. I didn’t spend too much time at Level 1 (Unconscious Incompetence). My upbringing and training prompted me to move on to Level 2 fairly quickly. But, I did spend an inordinate amount of time at Conscious Incompetence.

I walked both routes of Level 2. I started by looking for the Holy Grail. And, it was not until I encountered Pete Steidlmayer that got on the right track. My mindset turned from seeking to control the outcome of a trade to a probability mindset. I came to understand the importance of risk management and compounding.

What about you? Are you still at Level 2, flitting from freebie to freebie, willing to lose but unwilling to invest in your success? Or are you investing tons but investing in the ‘get-rich-quick’ products? Neither approach will bring you to Eureka.

The good news is there is light at the end of the tunnel. If you can get to the Eureka Moment, you’re on your way to success. The bad news is Level 3 has proven to be, in my experience, the largest stumbling block for many traders.

Time and again I have seen the situation where for a time they put it all together: they have Method, Money, Mind. Then the market throws them a curve. They experience either Ebb or Flow. The effect is the same – they revert to Level 2.

Until Brene Brown, I was never able to figure out why so many failed to recover from the setback. Now I understand what happens: their story for failure reasserts itself. It’s like the person that perpetually goes on a diet, loses weight, and then put it all back on and more.

Level 3 merely means that you know what to do. You now have to take your knowledge and apply it consistently.

That work takes you to Level 4, Conscious Competence.

  • You have reached this level because your Method has a positive expectancy.
  • You have reached this level because you have consistently kept your Psych and Equity Journals.
  • You have also consistently used your journals to improve your trading.
  • You have recovered from your Ebb stages, and you have kept your head during the Flow phases.
  • Your end-of-year results show a positive return attained through knowledge and skill and a little luck. You have learned to be aware of the impact caused by skill and that resulting from good fortune.
  • You have reached this level because you have learned to bounce back from setback.

With practice and improvement, you have made it to Level 5, Unconcious Competence!

Much of what you do now is unconscious – habits and routines form the bulk of your trading actions. You know when you need to apply analysis, you know when you need to stop trading and when you need to press your advantage. Consistent profitability still takes work, but that work takes less of a conscious effort.

So what is Level 6?

It’s a level of Conscious Unconscious Competence. It’s the level where you can explain to others (and to yourself) the unconscious habits and routines, the behaviours and mental models that form the basis for your success. It’s the level that many, for example, Ray Dalio, Pete Steidlmayer, look to share their knowledge.

These are the six steps to becoming a successful trader. Where are you on the ladder?

The 6 Steps to Successful Trading

Wait a minute, Ray! You said “six” steps in the title; but, the picture says “five”. No mistake, there are six steps, but the last one is hidden. You have to read the end of the series to know it.

Let’s have a look at the first step: “unconscious incompetence”.

We all begin here. We have unrealistic expectations of what the market will give us and how easy it will be. If you are unlucky like me, your first trades will happen to hit a flow stage (where everything you do makes money!). My unrealistic expectations confirmed, I sold my legal practice and then proceeded to experience seven years of losses.

Why is it newbies come into this game thinking that they can make a mere 10% per month? Just today, I engaged in a series of WhatsApps with an acquaintance from Thailand.

“I want to set a target for my trading. Something like I want to get 10% a month for my trading in 2020.” He messages me.

“10% per month? I can’t help you. The best hedge fund, Renaissance Medallion, averages about 30% per annum. It’s the best in the world. Most good hedge funds will average 20% to 26% per annum.” I replied.

“30% per annum it’s great for me. Now for me, I cannot find entry for trading. I cannot see how market going on.…”

Amazing, he doesn’t have the basics – clearly does not have any sort of trading methodology and still believes he can emulate the best trader in the world!

Unfortunately, most newbies enter the world of trading with this mindset.

Anton Kreil has a 90-90-90 rule: 90% of newbies will lose 90% of the bank wrong within 90 days. I don’t know how accurate the stats are, but I would not be surprised if the rule turned out to be correct.

At this level, you either learn to move onto the next, or you blow out.

At Level 2, “conscious incompetence”, you realise you need help. You begin to read books and attend courses. Here you take one of two routes:

  1. You hold onto your unrealistic expectations seeking the Holy Grail. You are seeking to invest as little as possible in your education. You want a Harvard degree, but you want the degree at the price of a fourth-rate university.
  2. Alternatively, you dig deep and discover the reality for trading success. You direct your efforts in that direction. Despite your efforts, the probability is, in the beginning, you will focus on Method, and perhaps Money. Mind, you either dismiss or suppress and consider it irrelevant to your quest

Initially, you will continue to lose money. At some point, you will realise that a Harvard degree is unavailable at fourth rate prices. This is not an easy step.

Recently, I was reading a rant in one of the chat rooms. The writer was freely going to distribute the material that cost him USD 3000. To say he felt ripped off is putting it mildly.

Now, I know there are many charlatans in our game. But, we do have avenues for research, for example, the Forex Peace Army. Carry out your due diligence before parting with your hard-earned.

In any event, as I read the exchanges, it seemed like the aggrieved party was complaining that he couldn’t apply the material. It was not the Method did not have a positive expectancy.

Newbies need to know that there are methods out there that might not suit them but still have a positive expectancy. The reason for their inability to apply them is: the method does not suit the personality. Unless the trader comes to this realisation, he will eventually opt out of the game.

The newbie that took the other route, a deep dive into reality, comes out the other side at Level 3, “the Eureka Moment”.

You realise you need Method X Money X Mind.

Your research has lead you to a method that suits your personality. If you are a mechanical trader, you understand that you will suffer periods of consecutive sustained losses. If you are a discretionary rule-based trader, you have overcome the problem of complexity. You have created a set of rules that you can apply to your trading.

You have worked out the answers to the four Money questions:

  • percentage of capital to risk per trade
  • position sizing
  • portfolio risk
  • when to add profits to and deduct losses from your capital.

Finally, you have obtained insight into the probability mindset that is essential to trading success. You maintain both equity and psych journals because you know they are the foundation for your improvement. Yo are primed for success.
(More tomorrow)

A Tale of Two Trades

In yesterday’s webinar, I sought to make two points:

The first: the advantage of mechanical systems lies in their simplicity.

The disadvantage lies in the fact that simplicity assumes the structure of the market. If that assumption is incorrect, then the system will sustain consecutive losses. For example, if you use a reversion to mean system in a trending market, then you will experience a drawdown.

The problem for retail traders is that they are unable to continue trading a system through its statistical drawdown. For example, a system may have the probability of ten consecutive losses. The trader experiences four and abandons the system.

The second point: the 4-Phase Framework overcomes the disadvantage. It does this by first identifying the trend of the trader’s timeframe.

I recently took to trades that illustrate these ideas differently.

The chart below is that of the AUDNZD. You’ll see that I managed to short the low of the move. I was anticipating a breakout. The chart also shows the soft stop exit.

AUDNZD, chart through the courtesy of MarketAnalyst

The next chart shows what happened after I close the position. I did not re-short.

AUDNZD, chart through the courtesy of MarketAnalyst

The final chart in the AUDNZD is the current position.

AUDNZD, chart through the courtesy of MarketAnalyst

The next chart is a similar trade in the EURUSD. I again shorted the lows anticipating a breakdown. I took a soft stop exit but in this case, I re-shorted. The chart shows the current position.

EURUSD, chart through the courtesy of MarketAnalyst

So what’s the difference between the two trades. It’s the context. Compare the next two charts.

The first is the AUDNZD. I am trading the weekly trend.

We see that it is that swing monthly resistance (red line). There is a weekly line up (blue line covered by the red line). The weekly line is overbought. The directional move up has paused, and acceptance below 1.0584 would probably see prices retest the 1.03869 area.

I had sold anticipating the break. Without acceptance below 1.0584, I had little interest in being short. Hence after my exit, I chose to remain sidelined.

AUDNZD, chart through the courtesy of MarketAnalyst

The next chart is that of the EURUSD. Again I am trading the weekly trend. But in this case, the monthly trend (red line) shows a clear picture. Unless there is acceptance above 1.1331, we should see a retest of the lows, with a strong possibility of new lows.

So, after I had exited the failed breakdown, I was prepared to re-short when it was clear that the primary sell zone would hold.

EURUSD, chart through the courtesy of MarketAnalyst

The evidence is clear: having a simple approach to trend identification will overcome the disadvantages inherent in a mechanical system. With that in hand, we can then apply the advantages – the simple execution rules for entry, exit, and trade management.

So, what you think? Do I have a point? Or do you think otherwise?

US Indices at Crossroads

I’ll use the S&P to illustrate the US Indices picture

S&P, Cash, Weekly, chart through the courtesy of MarketAnalyst

The chart above, the 13-week swing (quarterly trend), shows a potential sideways structure in the making. As the S&P, cash, moved into the Primary Sell Zone, the weekly volume has declined.

S&P, Cash, Daily, chart through the courtesy of MarketAnalyst

I have placed a 14-day ATR on the daily chart. Even more pronounced than the volume decline is the decline in range.

Normally, I’d be looking for a shorting opportunity – we see zone and setup. However, we have the FED and trader sentiment to contend with. We have seen before this pattern of:

  • a grinding uptrend
  • accompanied by declining volume and range

Have a look at an S&P chart for August 2020 to January 2020.

The reason why prices rose without worrying about the bears was due to QE. Can it be that traders will see in a Powell FED the same sort of policies?

I’ll be wanting to see some evidence of a FED forced to raise rates or evidence that bears have re-entered before taking any shorts.

An Indicator to Watch

I have been keeping an eye on the St. Louis Adjusted Monetary Base since the financial crisis. Its data shows the funds deposited by banks with the FED. If you are wondering why no inflation despite QE, have a look at the chart below.

St Louis FED, AMB

What it tells me is much of QE entered the FED and has yet to be made available to Main Street. Since the funds aren’t circulating, no inflation.

However, we can also see that since 2020, growth of the deposits has stalled. There was a breakdown in 2020 that produced another rally. Since then, we have meandered into new lows.

The chart below shows a clearer picture of the current situation. The AMB seems to be at crossroads, having formed a small congestion after the break to new lows. If we see the break continue, especially is the break accelerates, it will mean we’ll probably see inflationary effects three to six months later. Once that starts, history shows that it will be hard to stop.

St Louis FED, AMB

My cycle work shows a topping potential in US stocks in the last quarter of 2020.

I wonder what Powell will do if inflation starts to accelerate. He has shown he is no Volker. Let’s see what happens.

Fulfill Your Dreams

Zoe wrote: “Can you show me how you use ACT and Brown’s material in your trading?”

I believe the integration of the ACT and Brown’s processes have a wider application than just for trading. We can use them to lead more worthwhile lives.

Here’s how I view them.

In my view, the ACT method is composed of two distinct sections:

  • The left brain (the Commitment and Behaviour Changes in the diagram above) and
  • The right brain (Mindfulness and Acceptance Processes).

The left brain does all the planning. It identifies our values, it creates goals based on those values, and designs the actions, habits and routines that lead to the attainment of our dreams. The right brain is responsible for executing. Fusion and Avoidance are the two main barriers to implementation. Dealing with the Now through the Observer Self are the overriding tools for Acceptance and Defusion.

I have attached a summary of the ACT processes.

Brown’s material provides additional tools and the ‘why’ for non-acceptance and cognitive defusion.

Our hardwiring does not prepare us for success, especially trading success. We seek pleasure of the pain, immediacy over the future, comfort over risk etc. Our experiences define what each of us finds pleasurable, comfortable, safe, painful, uncomfortable and risky.

Brown suggests that early experiences lead to stories. Some continue to serve us. But, many lead to automatic responses that are no longer in our best interests. She outlines four skills (and their sub-skills) that we will need in our quest for success:

  1. Rumbling with Vulnerability,
  2. Living into our values,
  3. BRAVING trust and
  4. Rising strongly.

Together with the ACT processes, Brown’s approach helps traders fulfil their dreams.

I’ve received enquiries:

  • Is the April 18 event open to those not on my list?
  • Could I send details of what I’ll be covering?

Rather than send out individual replies, my answers:

Thanks to all who wrote in.

4-Phase Framework Questions

I received emails about the 4-Phase Framework:

  • Did I not send out invitations for the public presentation?
  • Can you give an example of a “soft stop”?

INVITATION

My apologies for the misunderstanding. The invitations to my list will be going out today and tomorrow. I mentioned in the post “Solution to a Burnt Trading Hand” that I had been running some beta programs. These are the invitation-only programs where I test my content to ensure that it will deliver on my objectives.

EXAMPLE of ‘SOFT STOP’

An opportune request.

Here is a trade that I exited last night. The chart below shows the entry and the two setups I relied on:

  1. The Head and Shoulders, and
  2. The 3-Bar Congestion.

I took the trade on a 60-minute bar and was filled at 1.1278.

EURUSD, 290-min, chart through the courtesy of MarketAnalyst

The “soft stop” for a 3-Bar Congestion is: prices should not return to its price zone. The chart below is a 60-minute. The rectangle marks what I consider the “critical return zone”. My ‘hard stops’ stops were placed below 1.1252.

EURUSD, 60-min, chart through the courtesy of MarketAnalyst

The “soft stop” conditions were elected. The question now was, where would I exit? My hardwiring said at the “entry point”. But, the market doesn’t care where I entered; it will do what it will do. So, the ‘soft’ exit needed to be determined.

Looking at the chart, I decided that, assuming I was not stopped out, there were three possibilities:

  1. The pair was forming a head and shoulders pattern. In that case, I could look to close out at around 1.1273.
  2. The pair would form a congestion pattern between the high and 1.1254. An exit around the Primary Rejection Zone.
  3. The pair would move to new highs.

The most conservative estimate was a return to 1.1273. So, that’s where I decided to exit. The actual price I decided upon was 1.1272.

The chart below shows what happened.

EURUSD, 60-min, chart through the courtesy of MarketAnalyst

That’s an example of a ‘soft stop’. Note that each set up in the 4-Phase Framework has its “soft stops”.

Of course, I was risking the break to new highs. In that event, I’d re-enter the trade. The important factor was rather than losing 30 or more pips, I kept the loss down to 7.

And yes, with the benefit of hindsight, I could have broken even. But imagine how I would have felt if the pair had gone to 1.1272 and then stopped me out?

The chart below shows the price action after the EU rate decision and FOMC minutes. (And no, I did not take part. Finally, yes, the trade is in the Psyquation account).

EURUSD, 60-min, chart through the courtesy of MarketAnalyst

Psyquation Revisited

We have had quite a few enrollments. And, following new enrollments, a few emails. This time the thrust of the message was the same: am I happy with the results?

Well, yes and no. Let’s have a look the start since its inception in Jan 2020.

Psyquation is following my Axicorp account. The capital base is USD 200k. I initially deposited USD 100k but then withdrew USD 30K. The stats:

Winning Losing Scratch

6 (13%) 16 (36%) 23 (51%). Scratch trades defined as a result +/- USD 125.00.

  • Avg win: $722.38
  • Avg loss: -$489.14
  • Expectancy return: $270.13

In my terms, I am in Ebb State (my avg win rate is 56%). I have no idea when it will turn. Three months is moving above the second standard deviation for duration. One more month and this Ebb will qualify as an outlier.

No , because as a professional trader depending on trading for income, I have gone for three months without a wage. Currently, living on savings put aside for this purpose. Also, I have earned some income from lectures for the CME.

Yes , because the drawdown is only -1.01%. That’s a loss easily recoverable.

I’ve been able to contain the losses thanks to the 4-Phase Framework with its soft and hard stops. If you don’t know what I mean by the terms, please search the Blog.

If you want access to the Psyquation trades, register at

My Psyquation page is currently undergoing maintenance. Hopefully, it will be up later today.

What Is the Use of the Stop Loss in the Best Forex Trading Success Stories

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There are many Forex Trading Success Stories. How many of them care about the use of the Stop Loss? How newbies and experienced traders care about the Stop Loss? Do you care about the Risk Reward? Do you trade having a Trading Plan? Or you invest because people tell you where to buy or sell?

One of the most dedicated members of Profiting.Me asked an important question to me. I wish him to live one of those Forex Trading Success Stories that can inspire every trader.

In his email, he said:

“I usually prefer stop loss of not more than 60 pips per trade and from time to time I will go for 80 pip. What I have realized with this approach is that I sometimes miss opportunities. So the advice I wanted to know was:

Should I stop to focus on stop loss pips and instead focus more on opportunities?”

This was an interesting question because the use of the Stop Loss is the Dilemma of newbies.

As first thing, you have to understand that I cannot tell you how to manage your trades. In the same way, I cannot tell you how to manage your money. Everybody manage their trades in the way they prefer.

But, there is one relevant thing that everybody needs to understand to manage trades in a proper way. It is the importance that you put on your Position Management.

This is common to all the Forex Trading Success Stories you see in the world.

Many newbie traders confuse the Position Management with the Trading Plan. This is a bad mistake that is very common.

Plan Your Trades Knowing How Much They Are Going to Cost

You should not limit your view to only one trade. Instead, You MUST consider the opportunities that the Trading Scenario is offering you.

Then, the managing of your trades must be according to the Trading Scenario where you going to invest.

Every Newbie Trader miss to ask himself a simple question:

“How much money is going to cost the trade that I am going to take?”

The number of pips you set your stop loss is not the most important thing.

You should focus on the Commission Cost of each trade you are going to take in the Trading Scenario.

So, you try to make an evaluation of the cost per trade. In this way, you see if the cost of your trades in a Trade Scenario is acceptable for you.

You MUST Think Bigger. Get a view that is bigger than the one you can have staying focused on a single trade.

Do you have a Trading Plan for a Trading Scenario?

Or you look for that one trade you can take in that moment, without considering the whole Trading Scenario?

If you have a Trading Plan you know what you are going to do. Then, you can hold one or more trades in red according to the plan.

With a Trading Plan for your trades, your story could become one of the Forex trading success stories.

What is relevant is how much these trades are going to cost before they give you a profit.

In the same way, how much the cost per trade can affect those trades you are going to close with an acceptable loss.

Commissions Costs can become very dangerous if you skip to measure them for your trades.

Why the Stop Loss is the Dilemma of Newbie Traders

When you are a newbie, you learn to use the Stop Loss with Risk Reward 1:3 or something similar.

The main reason is that the most of the pieces of information you get around in an easy way, are only for newbies.

They come from people who get paid to write them. In the same way, they come from those who are not profitable by trading.

To get the right tips about trading, you have to search specific topics. You have to look for that kind of info that only currency trading millionaires can give.

Successful Forex traders, even those you ask suggestions, would not tell you to don’t use the Stop Loss. In the same way, they will not give clear or detailed suggestions to use the Stop Loss in a specific way.

Let me be clear:

An expert trader cannot tell to newbies to don’t use the Stop Loss because this has consequences. Newbies are not expert traders. They lose money.

Newbie traders, alone, have high chances to fail with or without the Stop Loss.

A newbie trader takes a trade. This trade turns to red showing several pips of loss. Then, he gets panic, without know what to do. So, he looks for somebody to blame. It is so.

It is an emotional involvement.

A newbie trader takes months or even years to get experienced enough to manage his feelings in a proper way.

Indeed, to become able to trade in the right way, he needs to practice for the long-term.

Besides, he will get a big help by the use of a sizing plan to support a sustainable growth.

The Truth About Successful Retail Forex Traders and Stocks Traders

Now you should listen very well to what I am going to tell you.

If you want to learn how to earn money by trading in a proper way, you should not stay in the same room with newbies.

I know this could sound not good to your ears. But this is the way. This is the TRUTH.

Who wants to earn money in the right way, doesn’t want to listen to obvious things. In the same way, he doesn’t want to listen to inconsistent topics, by inexperienced people like him.

And more, you should not debate about trading with newbies.

Besides, you should not take advice from who writes content for newbies.

For sure, you have not to listen to who earns by affiliations and trading signals. In the same way, don’t listen to advice from Broker Account Managers and Bank Account Managers.

Take money advice only from who was already able to earn money by trading in a proper way. Period.

Who Was Able to Earn Millions Will Show You How to Become a Millionaire

I tell you a story, a little fragment of my story:

When I found the mentor who changed my way to approach trading, he had passed 4 Million in that moment. Around him, I have found other millionaire traders that had become my mentors too. One of them was reaching 2 Million in that moment. Others were reaching their First Million.

But a couple of them were on the extreme of 10 Million.

I show you the Account Growing of one of the traders who inspired me for years:

The veteran stock trader Gregg Sciabica, in 2020 passed the 10 Millions of his life profit. Later, he started his private hedge fund. For this reason, now his results are not more public.

Stocks and Forex Trading Success Stories – Greg Sciabica passed $10 Million in 2020

Ironically, being less confident can be a positive thing. people who are overconfident tend to trust their intuition too much. – Gregg Sciabica

What I am telling you is that if you want valuable tips about money and trading, don’t lose time with who is not able to earn.

You should not spend your time with people and communities that cannot help you to improve.

Instead, stay around of successful Forex traders in the world. Take the best from them.

This is what you MUST do. You will pay for their knowledge and expertise. In return, you get the growing of your skills and the improving of your profitability.

This is the way to turn your personal story to one of those Forex Trading Success Stories that inspire you.

An Expert Trader Knows That a Trading Plan Is Crucial for His Profitability

An expert trader knows that, in general, about the

90% of the trades he is going to take will get a wrong entry.

There is no way to get a 100% of perfect trades. NO WAY.

Even a Quantitative Trader cannot develop algorithms to execute only perfect trades.

For example, you open one perfect trade, but before of it (or later of it), you could take 10 trades or more with a wrong entry.

An expert trader turns this into an advantage because such circumstance is part of his Trading Plan.

The expert trader has a Trading Plan for his profitability in a Trading Scenario. This can involve several trades so as several entries.

The Trading Plan is a crucial resource about how a group of trades in a Trading Scenario, are going to pay.

How many Forex Trading Success Stories do you know, who cares about the Stop Loss around one trade only?

I am not talking about YouTuber traders who tell you to set your stop loss and buy their services.

I am talking about Forex millionaire stories. At least, one real Forex millionaire that you can know.

There are many Forex true stories of success so as many Forex failure stories.

Only Forex millionaires so as Forex billionaires can tell you how to earn millions in the Forex Market.

Nobody of them takes care of the stop loss per trade. They keep the focus on the Trading Scenario where they are going to invest. Their risk depends on the Trading Scenario.

One of my millionaire mentors, a stock trader, uses to repeat:

“If you don’t have a plan, you don’t have a trade.”

Why a Forex Millionaire Strategy Doesn’t Limit the Risk to a Single Trade

If you stay focused on only one trade, you have a limited “view” about your options. This doesn’t favor your profitability in the short, middle, and long-term.

Talking about the 60 pips of Stop Loss indicated by my student, I can show you the missing of profitability.

You take 10 trades or more. All them with a Stop Loss of 60 pips. You could get 1 of them at a perfect entry.

Going forward, you will realize that they are not making grow your account balance. The reason is that the most of them will hit the Stop Loss and others will get a small profit.

This happens because your focus was on the Stop Loss of 60 pips, missing the whole Trading Scenario.

If you limit the Stop Loss trade by trade, you are limiting your Profitability to the risk carried by each trade.

It causes a choppy behavior in your balance account. Besides, you are missing the reward of the whole Trading Scenario.

In practice, by all those trades that hit the Stop Loss, you are fighting to keep up the growth.

90% of trades can have a wrong entry, there is a high chance that only a few of them will give a satisfying reward. So, the balance account could not get a real growth by them.

The result is that you will spend weeks to recover all those losses, adding new mistakes.

But your focus will continue to stay on the Stop Loss per trade and on the losses to recover. Your focus will not be on the Account Growth.

Then, you will experience a perennial frustration caused by a wrong use of the Stop Loss.

Instead, you must focus on the growth since the beginning.

Forex Trading Success Stories That Can Inspire You

What inspired me in life can inspire you today and forever. I am a trader because I wanted to become a Trader.

But before than this, I found out about trading when I was in high school. When I was a teen there were not the tools we have today for trading. So, Financial Markets were more for rich people with specific intermediaries.

Today, everything is easy and people like me can earn money staying at home or everywhere in the world.

Trading has become more a “Software Developing Business for Finance” than a pure Financial Business. Of course, the purpose of the coding is to earn more money in a systematic way, by specific algorithms.

The Forex success stories that inspired me are very old. Behind them, there are people who were able to earn consistent money from Forex Market.

The difference between Successful Traders and who rejects the idea to invest on Forex is the perception of the business.

People, who reject Financial Markets including Forex are those who ask: “is Forex real?”

So, let me show you the most important and rich Forex trading true stories.

Would you like to get your story and your name added to the list of the Forex trading success stories?

In only one post, I am going to talk about a limited number successful Forex traders stories. Only 3. But there are many more forex trading true stories that you can explore by yourself.

I want to start introducing you a famous book that will inspire you by passion, traders wisdom and experiences.

The New Market Wizards: Conversations with America’s Top Traders

In The New Market Wizards, successful traders relate the financial strategies that have rocketed them to success. Jack D. Schwager encourages these financial wizards to share their insights. He asks them questions that readers with an interest or involvement in the financial markets would love to pose to the financial superstars.

The New Market Wizards is another Schwager classic, informative, and invaluable.

As in the previous volume, Schwager starts with a frank discussion of his own trading experience, followed by a surprising diversion comparing Saddam Hussein’s invasion of Kuwait with a trade that went wrong.

The rest of the book is broken into five parts. It includes several interviews with different types of traders and brief discussions of the lessons to be learned from them. It has a part on trading psychology. Besides, it includes a final part summarising the wisdom gained from all of the interviewees in 42 golden rules.

George Soros

Founder, Soros Fund Management LLC

George Soros founded the Soros Fund Management in 1962. The company gained tens of billion dollars over the years.

I already talked about George Soros and his partnership with Jim Rogers. They founded the Quantum Group of Funds in 1973.

George Soros has got an international fame on September 16, 1992. It was the Black Wednesday. The Quantum Groups earned $1 Billion in net by short selling an amount of 10 billion pounds sterling.

For this reason, George Soros holds the record of being the first person to get the highest earning in a single day.

At that time, Britain was part of the Exchange Rate Mechanism (ERM). The UK government had to hold the pound over a certain level against the Deutsche Mark to stay in the ERM.

But, on September 16, 1992, the Pound Sterling was not more able to stay above the lowest agreed limit. So, UK had to withdraw the Pound Sterling from the ERM.

This short sell made him famous. In that moment George Soros became:

“The Man who broke the Bank of England.”

His story deserves to stay on the Top of the Forex Trading Success Stories.

According to what Forbes reported:

George Soros is one of the largest supporters of drug reforms. For example, to use some drugs for medical purpose. His foundation donated about $200 million to drug reforms, since 1994.

Ethan Nadelmann, Drug Policy Alliance, said:

“He’s played a historic role in the evolution of drug policy reform from a movement that was on the fringe of U.S. politics to one that is in the mainstream.”

Stanley Druckenmiller

Founder, Duquesne Family Office

Stanley Druckenmiller worked at the Quantum Fund for more than a decade. He worked alongside with George Soros enough to consider him his mentor.

But Stanley Druckenmiller established his solid reputation with his Duquesne Capital Fund, before retiring.

Stanley Druckenmiller affirmed that his trading philosophy revolves around the preserving capital.

His work is the building of long-term returns. Then, it is the pursuing of profits, in an aggressive way, when trades are going well.

This approach emphasizes the value of maximizing the opportunity when you are right. Then of minimizing the damage when you are wrong.

Indeed, it downplays the importance of being right or wrong.

During an interview for the famous book “The New Market Wizards“, Stanley Druckenmiller said:

“There are a lot of shoes on the shelf. Wear only the ones that fit.”

A the end of the 1980s, the German Mark was suffering a constant depreciation. The serious situation around the reunification of Germany undervalued the German Mark.

Understanding such undervaluation, Stanley Druckenmiller saw an opportunity for purchasing.

At the beginning, he placed a multi million long position in German Marks. Later George Soros made him increase his position adding 2 billion German Marks.

The return was a 60% earnings for the Quantum Fund.

Stanley Druckenmiller learned a lot working with George Soros. His story deserves to stay in the list of the Forex Trading Success Stories.

Bill Lipschutz

Co-founder and Director of Portfolio Management at Hathersage Capital Management.

Bill Lipschutz turned the $12000 he inherited from his grandmother, into $250000.

But later he lost everything by bad personal investment decisions. By this loss, he realized the importance to work having a proper risk management.

In 1982, Bill Lipschutz attended the Salomon Brothers investment company training program.

In 1984, Salomon Brothers offered him to join a new department dedicated to the Forex Market. The intention of the company was to develop its business in the growing Forex Market.

Bill Lipschutz made hundreds of millions at the Forex division of Salomon Brothers. Earnings like $300 million dollars per year.

In the 1980s, such return per year was a lot of money for a growing market like Forex.

For this reason, Bill Lipschutz became:

Bill Lipschutz describes Forex as a very psychological market.

The market perceptions help determine price action as much as pure fundamentals.

Bill Lipschutz also agrees with Stanley Druckenmiller about trading on Forex:

How to be a successful trader in Forex, is not dependent on being right more often than you are wrong. Instead, you need to understand how to make money when you are right only from 20 to 30 percent of the times.

Bill Lipschutz empathizes the need to manage the risk explaining an important thing:

You should choose a trading size that avoids the forcing out of your position when your timing is inexact.

He made himself from scratch. he made hundreds of millions without a real background of experiences.

His story deserves to stay in the list of the Forex Trading Success Stories.

Understanding Risk and Opportunities in a Trading Scenario

I want to show you a Trading Scenario around NZDJPY.

The weekly chart shows the Spring in the Wyckoff Trading Range.

The supply action tested again the possibility to continue the bearish trend. But it failed. So the new buy block trades moved the price again into the range.

The Composite Operator accumulated consistent resources to test the reversing of the trend. So, the price jumped across the creek and then it ran throughout the range, marking new points of demand.

But, you see that the spring occurred too soon. So the remained supply was still strong.

The resources of the Composite Operator were still not enough to take out the Supply Edge. So the remained Supply tested again to continue the bearish trend. But the price has found an opposition to one of the higher points of demand.

The opposition in the backup shows that the Composite Man increased its resources.

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Forex Trading Success Stories – NZDJPY – Monthly

In the monthly chart, you see that the price could try to continue the bullish main trend, at least for a moment. But it has still chances to fail.

In the Demand Accumulation, there were opportunities to buy anticipating the markup. They occurred in the latest points of demand, going forward from the Spring.

Stop Loss in the NZDJPY Trading Scenario and Forex Millionaire Strategy

NZDJPY shows a throwback to

76, offering a buying opportunity in the highest point of demand. But the price had chances to fall to the lower points of demand.

On the chart, I marked indicative distances between possible entries:

190 pips.
Lower:

125 pips.
Lowest:

You understand that if you opened a trade at

76 with a Stop loss of 60 pips, you started with a disadvantage. The highest entry around

76, carried chances to fail.

As I told you, you cannot limit your “view” to only one trade. In the most of the cases, your entry point would be wrong.

This falls into the Trading Philosophy of the Forex Trading Success Stories I showed you.

The Bill Lipschutz and Stanley Druckenmiller Forex millionaire strategy describes a few things. Let me show these important concepts again. So that you can set them very well in your mind:

  1. Your success doesn’t depend on being right more often than you are wrong.
  2. You have to be right for the 20% or 30% of the times.
  3. That 20% or 30% of right trades should give you a consistent return.
  4. Choose a trading size that avoids the forcing out of your position when your timing is inexact.
  5. Preserve your Capital.
  6. Build long-term returns.
  7. Pursue the profits, in an aggressive way, when trades are going well.
  8. Maximize the opportunity when you are right.
  9. Minimize the damage when you are wrong.
  10. The Trading Plan is much more important than the Stop Loss.

In the NZDJPY Trading Scenario, you define your Trading Plan.

In the Wyckoff Trading Range, you skip trading before the Spring. After the Spring, you prepare your buying action in the Demand Accumulation. You do this, even if the markup could fail later.

If your highest trades get wrong entry points, the wrong Stop Loss of 60 pips gives you 3 things:

  1. It bites your balance account.
  2. It compromises your profitability.
  3. As consequence, the growing of your account becomes uncertain.

Forex Trading Success Stories: 69.48% of Realized Profit Buying ETHUSD

Stanley Druckenmiller’s long position on German Mark made me think of my buy trade on ETHUSD.

Stanley Druckenmiller gave a 60% of return to Quantum Fund. This is why he is in the list of the Forex Trading Success Stories.

I bought ETHUSD at a perfect entry. The purpose was to catch the automatic reaction in the bounce back.

I planned this first trade in advance according to the Trading Scenario in the daily chart.

This was my highest order in the initial buy action. I planned it for the beginning of the Wyckoff Trading Range.

The exit point was on the preliminary imbalance. So my trade reached the take profit giving me 69.48% of Realized Profit. This was a quick profit.

The Bounce Back in the Automatic Reaction is always Strong and Fast.

Later the price retraced back and I took a second planned trade.

It is relevant to consider that there was no leverage on this trade. So it was only the amount of money invested to give such large profit.

The 69.48% of return gave a consistent rising of my account balance. This shows also the increasing of my profitability.

I continue to improve. Then, I earn more money by trading, increasing my Profitability.

The impact of this buy trade is visible on my Profitability Chart. It shows the Growth of my Account for the latest 12 months.

Forex Trading Success Stories – ETHUSD – The Impact of the realized profit on the Growth of my Account

Conclusion

Answering to my Profiting.Me student, I am answering to everybody who shows the same doubts.

You have clear now that the Stop Loss does not matter much. But the wrong Stop Loss that you set trade by trade, can stop your account growth.

More damages come If you skip measuring the cost per trade. The fees have an extreme importance. You should compensate them.

I showed you the TOP 3 Forex Trading Success Stories. Those traders who are in the Pantheon of Traders.

They are currency trading millionaires. Or better they are Forex billionaires.

Their Forex true stories show the Forex millionaire strategy that makes you different.

As Bill Lipschutz said:

“It is very difficult to be different from the rest of the crowd the majority of the time, which by definition is what you’re doing if you’re a successful trader.”

This explains why you should not stay in the same room with newbies to debate about trading.

No Facebook, Telegram, Skype Groups or others will let you improve. It is so if you are a lazy trader and if you lose time listening to newbies.

There are people who contact me telling:

“I am a trader. I am a supply demand trader too. But I continue to lose money.”

These traders are in the wrong place and debate about trading with wrong people. Besides they are lazy in the changing of their wrong habits.

So, let me ask you a few questions:

  • Would you learn Forex Trading from George Soros, Stanley Druckenmiller and Bill Lipschutz?
  • Or you prefer a boy in a Telegram group who wants to sell you his Trading Signals for $20?
  • Or even you prefer to pay a millennial on Instagram who shares expensive golden watches and super cars?
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