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3 Tips for Improving Trading Profits

Forex Trading Profits

If you’re struggling with trading and have tried every trading strategy on the market with dismal results, read on as I’ve got 3 tips to help you transform your trading P/L from red to black.

Over the years, one of things that I that I have done right is avoiding chasing each new bright and shiny object (trading strategy), but instead have stuck to my core trading strategies and have worked on improving what I call “soft” trading skills.

This has paid off and has resulted in me doing something that few traders ever accomplish — consistent, profitable trading.

Here are 3  tips to help you make the transition into profitable trading.

Diversify

Although the EURUSD may be your favorite pair to trade, take a good hard look at the pair over the past 6 months and pick a day that  the EURUSD is consolidating (excluding year end).  Then flip through 20 other pairs and make note of which pairs were trending on that day.

Oftentimes, while one pair is consolidating another is trending.

A great example, was during the Labor Day holiday in the US.  In between the evening of Sunday, September 6th and the afternoon of Monday, September 7th the EURUSD was mostly consolidating.

While this was occurring, I was racking up major pips (hundreds) trading GBP pairs.  And when I say hundreds of pips, I mean from the entry price to the exit price — and not a 20 pip move for which I entered 30 orders.

At any given time, I am almost always trading multiple pairs with a goal of trading a minimum of 5 pairs concurrently.

The benefit of doing this is that it increases my odds of ending each week in profit, which is what we all aim to accomplish, right.  Look at this way, instead of stressing over one pair that was in profit and has moved against you, it’s much easier to wait and see if that move against you is simply a retracement when you have 4 other pairs that are in profit.  You stack the odds in your favor when you spread your trades over multiple pairs.  This is the same mindset that people have when they purchase multiple lottery or raffle tickets — it increases their odds of winning.

Trading Log

What gets measured gets managed.  And this applies to trading as well.  Keep a log of each trade that you take and use this log as an educational tool.

For me personally, I like to focus on my losing trades.  Over the weekend, I sit down and review the trades that I took during the week.  I assess if I am consistently following my trading rules.

If I lose a trade, but followed my trading plan then I’m happy with my performance, but if I find that I am not following my trading plan then I have to figure out why and what actions I need to take to get back on track.

Years ago, I realized that I was getting into winning trades, setting a profit target, but then closing out my trades prematurely.  My trading log showed that my profit targets were hit in most cases, so I gradually dropped that bad habit and formed a good habit of leaving my trades alone and checking them every 4-8 hours or when my audible alert is triggered.

Backtest Trading Strategies

This final tip is one of my favorites.  In fact, most of my trading time is spent as follows (30-40% backtesting, 40-50% analyzing the market, 20% managing active trades).

If I had to attribute one single thing to my success in trading in just a few years — it is my habit of backtesting my trading strategies and reviewing my past trades .

This single habit has helped me to gain the confidence that my current strategy (price action and using support resistance levels) results in profitable trades for me most of the time.

Each weekend, develop a habit of doing the following:

  • Identify your trading strategy
  • Open a chart of of favorite forex pair showing 6-12 months of history
  • Starting at the hard right edge of your screen, slowly scroll through the charts asking yourself prior to each candle the following:
    • Where’s my entry, profit target and stop loss?
    • If you have already entered an “imaginary” trade, ask yourself at each candle, if price has confirmed your trade direction, or appears to be reversing.  Work on getting good at looking for evidence that your trading bias is valid or invalid.

In my opinion, one of the best things that you can do to improve your trading results is to develop your trading “soft” skills.  These are the skills that surround your live trading activity, such as money management and risk management.

I challenge you to focus on these 3 areas of improvement for 30 days and let me know your results in the comment section below.

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3 Tips for Improving Forex Trading Profits

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EURUSD Weekly Analysis Aug 16 2015

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EURUSD Forex Trading Weekly Analysis – Week of Aug 9, 2015

Over the next few days, I will have a short-term perspective and bias on EURUSD as price is currently range bound.  I will be observing price as it moves between the support and resistance zones highlighted in the chart below while observing price action for a longer-term swing setup.

EURUSD technical analysis
Forex weekly analysis for EURUSD August 9-14 2015

(1) Resistance

My initial bias will be to look for price to make a slight move higher in the area marked (1).  If this occurs, I will be looking for signs of a reversal lower and will sell EURUSD closing the position in the area of support.

(2) Support

If price first moves lower into the support zone, I will be looking for price to drop to the area marked (2).  If this occurs, I will be looking for signs of a reversal and will buy EURUSD with a profit target in the resistance zone.

EURUSD Weekly Analysis – August 9-14 

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EURUSD Weekly Analysis – Aug 9, 2015

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Forex Trading Psychology Decision Making

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Live Forex Trades – 331 Pip Profit

Forex trading Profits

For the first time ever I show you all of my live trades taken in a single day. As with all of my live trading videos, these are actual real-time live trades that I took on Thursday, July 23, 2015 (and not a replay of previous market activity).

Over the course of the day, I entered positions on 6 pairs and walked away with a 331 pip profit!

My hope is that after watching this video, you develop a greater appreciation for the benefits of getting into trades and letting the trade play out (without unnecessary interference and premature exits).  While my trades were active I took my toddler outside to play for an hour, went shopping, home schooled, and spent most of the day away from my computer completing other activities.

If you have any questions/comments, feel free to leave them in the comment section below.

331 Pip Live Forex Trades Video

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Trading AUDJPY Support & Resistance Levels

Live AUDJPY trade

In yesterday’s post I reviewed an intraday forex trade that I took on AUDJPY and how I managed the trade when price action showed me that my short-term bias was incorrect.

Today I am expanding on that initial trade setup and how I was able to identify a new setup that supported my initial bullish bias of AUDJPY.

Technical Analysis Review

Intraday AUDJPY resistance
AUDJPY resistance

I showed you where I drew intraday resistance on the 5 minute chart.  This area represents where bullish price action was rejected and supported my revised short-term bearish intraday price bias.

Entry Setup

AUDJPY new support level
AUDJPY resistance becomes support

Fast forward several hours following my AUDJPY sell position and price has broken through AUDJPY and retested it as support.  And if you’ve watched my previous videos then you already know that I frequently talk about the importance of learning how to identify levels of support and resistance.  Learning this one skill can transform a trader’s results.

Price action then offered two excellent opportunities for traders to buy this pair as price rejected a move lower and continued upward.

Trade  Entry

AUDJPY price retracement
AUDJPY retracement

I missed the two retests of support, but managed to buy AUDJPY on a pullback following China’s GDP q/y and Industrial Production y/y announcements.

Forex fibonacci retracement
AUDJPY fibonacci retracement to 38.2%

For those of you who trade fibonacci retracements, notice how price retraced to the 38.2% level.  (If you want to learn more about trading using fibonacci retracements here is a link to a video that I created on the topic.)

Trade Management

Forex intraday support on AUDJPY
AUDJPY new intraday support level

As price consolidated I drew a line on my chart to represent intraday support.

As long as price action continues to demonstrate bullish behavior then I will remain in my BUY position.  However, if there is any indication that price is reversing to the downside then I will close my trade and wait for the next trade setup.

Trade Exit

AUDJPY bearish price change
AUDJPY price reversal

AUDJPY price action shifted downward after news on the US was released and Janet Yellen announced that economic conditions are “likely” to justify raising interest rates this year.  Price action demonstrated that my intraday bullish bias was no longer valid, which provided sufficient evidence for me to exit my position.

Key Take Aways

  • Rather than chase price I waited for a retracement before buying AUDJPY
  • Identifying key levels of intraday support and resistance helped me to develop my directional bias and avoid being whipsawed.
  • I maintained my directional bias until intra-day price action shifted.
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Forex – How To Profit From Being Wrong

Extraordinary Trading

Yesterday, I posted about the importance of understanding your trading bias and sticking with it until price action proves you wrong.  Today we are going to explore this topic further and review how being wrong can lead to big profits.

Entry Setup

AUDJPY 1 hour chart
AUDJPY Uptrend

The overall trend of AUDJPY is down; however, the pair has trended upward over the past few days.  The upcoming NAB Business Confidence announcement may be all that is needed to push this pair to a higher price.

Trade Entry

Forex trade entry
AUDJPY trade entry

Approximately 5 minutes prior to the NAB Business Confidence announcement I decided to buy AUDJPY with the expectation that price would move higher, and the intention of taking profits at 92.30.

Trade Management

Bullish AUDJPY price reaction
AUDJPY news-driven price action

As predicted the NAB Business Confidence announcement pushed price to the upside gifting me with a 30 pip profit in less than 30 minutes.  Not too shabby for trading the slower moving Asian session.

When trading intraday news announcements I am careful to never become too comfortable with quick gains.  Monitoring price action before and after major news announcements is a must for intraday Forex traders.

My initial plan was to reassess my trade once price reached the previous day’s high, but that plan was cut short when I noticed a price pattern that changed my game plan.  Let’s take a closer look at the price action that prompted me to change my mind.

AUDJPY reversal
Price rejects move higher and reverses

After the quick price burst to the upside following the NAB Business Confidence announcement I noticed that price was creating a pattern of short bursts to the upside followed by pullbacks.  This is not what I want to see for a continuous upward movement.  At this point I realized that my expectation for price to climb to 92.30 was wrong and in fact that price was actually reversing.

AUDJPY exit and re-entrance
Reversing AUDJPY position

I covered my buy position and entered a new sell position.  My decision to sell AUDJPY was further confirmed when price retested resistance before plummeting and erasing all of its news-driven gains.

Conclusion

Contributing thoughts and factors that went into this trade.

  • I did not have a long-term bias on trade direction of AUDJPY
  • Although my short-term trade bias ended up profitable it was wrong and I accepted that after price action proved my bias to be wrong.
  • I took my profits after noticing the reversal and did not let a winning trade turn into a loser.
  • I used a pyramiding strategy to increase the size of my position once price action confirmed the reversal to the downside.
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How To Score Big Profits While Trading Gaps and Traps

Forex Trading Gaps and Traps

It’s Sunday and EURUSD has gapped down for the third consecutive week.  I started this week with no open positions, but for the previous two weeks I sold EURUSD on Friday and profited handsomely when the market gapped downward over the weekend.

Gaps are one of my favorite setups to trade.  And today I am trading the  EURUSD on the 5-minute chart.

Trade Setup

Using the 1 hour EURUSD chart I identified a key level of support.  Last week, price repeatedly tested this area as resistance before finally breaking through.  I am now looking for evidence that price might revisit this level and become support.

EURUSD Trade Setup
EURUSD Support

 

Price Action Analysis

After a market gap, my first step is to begin observing price action.  I want to determine if price is going to close the gap within the next 24-48 hours, or continue moving in the direction of the gap.

Price action grabbed my attention when I noticed the large bullish candle circled in the screenshot below.  This single candle covered a significant portion of the open gap.

Forex EURUSD Chart
Bullish 5 minute EURUSD candle

My next step was to assess price action and determine my trading direction bias.  At this point, I was looking for signals that price was either going to move lower or finish closing the gap and continue to the upside.

My price action analysis showed me that price should be heading lower.  So, I began looking for further evidence to support my assumption and now bearish trading bias.

Let’s review how I came to the conclusion that price would move lower.

A Trader’s Role

Part of my job as a trader is to assess price action and constantly think ahead.  I think that my previous career as a project manager helps me with forward thinking and risk management, but perhaps more on that in a future post.

So, how would I know if the gap is going to close or not?  Well I don’t.  In fact, I am writing this blog post while I am actively in this trade.  What I do know is that my job as a trader is to read price action and mitigate the risks of falling for tricks and traps.

The Trick and Trap

Traders’ Sentiment

After the large bullish candle was followed by a pullback most traders would consider this as an indication that price is going to close the gap and continue to the upside.  However, I try to always also have the contrarian view.

EURUSD reversal

Notice how price stalled after the large bullish candle and reversed.

This has the potential to be a trick and a trap as most traders would look at the bullish candle followed by a retracement as being a setup to buy the EURUSD.

However, this is where I entered my first SELL order on EURUSD.

Trade Entry

Price bounces off of resistance

Price repeatedly bounced off of resistance

As price supported my decision and continued rejecting resistance, I added to my position in this area using my pyramiding strategy.

China Trade Balance
News related price spike

The next part of the trick and trap followed hours later after the China Trade Balance announcement.

Price spiked through resistance potentially trapping bulls and hitting the stop loss of bears who trailed their stop loss too close to current price action.  If you’ve watched my previous videos then you know that I frequently advise against smothering your trades with close stop losses.  This of course is subjective advice as my predominant style is swing trading.  However, if you are a scalper or intraday trader with small profit targets then you need to follow a risk management strategy that aligns with your trading plan and goals.

As price spiked to the upside this is where I would have ordinarily had another SELL order waiting to add to my existing position, however, I was distracted with writing this blog post.

For several hours following the China Trade Balance announcement EURUSD continued to retest resistance.

EURUSD resistance
resistance

In this area of consolidation and resistance, it is very likely that there are a lot of traders who are being whipsawed due to confusion about which direction price is moving in.

My advice is to determine your trading bias and stick with it until price action proves you wrong.

Profit Taking

EURUSD Price Action following Greek Deal
Bearish price action following Greek deal announcement

Just as price appeared to have settled underneath resistance, the unanimous deal reached on Greek sent price skyrocketing and along with that bulls who were previously long, those who chose to chase price, and those who had buy orders waiting in the 1.1160 to 1.197 area before price plummeted.  This is the trick and trap for those who hung onto their buy positions with an expectation that price was continuing higher.

As I observed the price spike my only regret was that I had already put on a full position.  I knew my trading bias and profit target.  The hard work was already done.  All I needed to do was keep my emotions out of the trade and either wait for my profit target to be hit or for price action to prove that my trading decision was wrong.

Watch my live trade of EURUSD on the 5-minute chart and discover just how much I profited from this very volatile intraday trade.