Level up to trade forex successfully

Hi traders,

Trading is like a video game. In some video games, you can level up your character from level 0 to level 99. Final Fantasy anyone? As you level up, your attributes increase. Strength up, agility up, defense up and etc. At higher and higher levels, you can equip better weapons, heavier armor, faster boots. And defeat stage bosses.

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So it is similar to trading. As you level up in your trading skills, your ability to attack and defend against the market increases. You get better at knowing when to enter the market (attacking skills ), when to cut loss (agility skills ), when to stay out of the market (defensive skills ). Also, you are able to manage your position size, when to up or down your position size according to your experience (constitution and wisdom skills). Last of all, with each trade, you are aware of your own psychology (mind skills).

In this thread, i wish to share my mind games of trading. Remember, trading is a mind game. As i share, hopefully all of us can level up from our current level to level 99. At a high enough level (level 70-80??), we should be able to extract profits from the markets consistently. Do note that i am mainly a forex trader. So my charts are forex-based charts.

I will post my thoughts frequently and will help us level up from level 01 to level 99. Alright, i will be posting on level 01 soon. Bookmark this thread.

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Funny intro. Good luck.

Thanks! I am in the midst of writing level 01.

Hi everyone,

Level 01-10 will cover the most basic stuffs of trading. Yet these foundations are the most important to trading success. Remember the story of the 3 pigs and the big bad wolf? "I will huff and puff till i blow your house down!!!" growled the wolf.

http://i47.tinypic.com/2hqx8pc.jpg

Strong foundation = strong house to withstand earthquakes and hurricanes.

Weak foundation = straw house ready to crumble anytime.

LEVEL 01
ALWAYS TRADE WITH A STOP LOSS

Understand this and internalise into your soul. There are only 6 possible outcomes to any trade.
1) Large win
2) Small win
3) Breakeven
4) Small loss
5) Large loss
6) Account blown to zero

When stop losses are used properly, the worst that can happen to any trades is #4. However, if your trading system has a proven winning edge. then stay far far away from #5 & #6. And your account will grow over time.

Level 02 - Money, Mind, Method, Myself

A good trader is like a sturdy chair with 4 legs. If 1 leg is damaged, the chair become wobbly and very risky to sit. Would you risk your buttocks to sit on such a chair? Ouch!!

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Likewise in trading, there are the 4 M's to become a successful profitable trader. Each M represents 1 leg of the chair. When all 4 legs are in your trading system, your chair is in good shape and so are you.

A professional trader will strive to maintain a strong chair. Once the chair becomes creaky, they will repair it. However, a novice trader will try to sit on their 1-legged or 2-legged chairs. Which chair do you have?

Level 03 - Money Management

A quiz. Do you know who this guy is?

http://i49.tinypic.com/2uop1kk.jpg

He is Nick Leeson. He broke the 233 year old Bank of England with his trading in the 1990s. His trading losses amounted up to $1.3 billion dollars, which caused the bank to declare bankruptcy.

Why did i bring this story up on the topic of money management? Because proper money management is the first leg of a strong chair. If Nick Leeson had the discipline to use a hard standing stop order, to limit his losses, he may still be trading today. If the Bank of England had restricted his trading size to a certain percentage of the bank's capital, it may have still survivied. I did a quick internet check on Nick Leeson. Right now, he has a website about himself. He is doing speaking tours, books and movies deals. Not bad, i would say. If you aim to get famous through this route, that is.

However, i do not have $1 billion dollars to trade. I wish i would. So i am forced to practice strict money management on my trades. When i was a novice trader, i am already blown up my first 2 accounts. So i have been there and done that. So therein, i learnt a most vital mind game in trading. Never ever violate your money management rules. When you trade, define how much you can afford to lose. Not how much i want to make. In case you are asking, yes my first 2 accounts were my personal money.

Another important rule here: Learn to trade another day. When you are wrong, get it right by getting out. Avoid huge losses.

Trading is truly truly a mind game!

Level 04 - the smallest loser is the best winner

This is the difference between a consistently successful trader and a novice trader. A novice trader puts on a trade and sees imaginary money pouring into his trading account.

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He neglects risk control. He does not think "How much can i lose on this trade?". Rather he thinks "Oh yeah! I am going to make $1 million dollars on this trade. I can feel it. I can smell the money!" Hey, stops are for losers. I ain't no loser. And because he hates to put stop losses, he ends up losing 50% of his trading account on that "i can smell the money" trade.

A successful trader first priority is risk control. He decides beforehand how much he afford to lose on that one trade. He finds out where is the best logical place to put his stop loss. Based on that, he will determine what % of his trading account to risk on that trade. And then based on that, he calculate his position size. He will think like this:

Trading account = $10,000
Willing to risk 2% per trade = $10,000 * 2% = $200
Best logical stop loss for that trade = 40pips
Therefore, $200/40pips = $5 per pip
Position size = $10,000 * 5 = $50,000

A novice trader decides how much money he wants to win. A successful trader decides how much money he wants to lose.

The second M - the psychology of the mind

Most trading books i read tells me to remove greed and fear from my trading. The authors forgot one thing. Emotions are mental issues, not physical. It is not like going for a surgical operation, where the doctor can cut out dangerous lumps from your physical body. However, emotions are all residing in my mind.

How do you propose to a neuro-surgeon to cut out greed and fear from our brains? Maybe there is a ala-carte menu on the neuro-surgeon's desk. Click "A" if you would like to remove greed and fear. Click "B" if you would like to insert more love and joy. Thank you for the selection. Your operation will be completed in 3 hours. Thank you and have a nice day. But hey?! In another 100 years, it could be as common as going for a cosmetic surgery.

Therefore i am proposing a new way. The tai-chi master way. What do a taichi master do when he is facing a opponent who is stronger and bigger than him? The opponent comes in with a strong punch, yet the taichi master does not block it directly. What he does is to deflect the energy of the punch by guiding the opponent's hands to hit elsewhere. Not hit him. Then the taichi master wallops him with his shadow kick when the opponent is temporarily out of balance.

http://www.youtube.com/watch?v=kf44kawWBvY

When we trade, greed and fear will always be with us. We cannot control when they come. We cannot brute block them. These emotions are inside of us and stronger than us, like the giant opponent. So this is what we can do. We mimic the taichi master. We deflect and guide these emotions to our advantage. We need to feel these emotions, then channel these emotions and use them. Write down in your trading journal what you feel when you enter and exit trades. Observe for any recurring patterns. Are there any repeating emotions that causes me to make money or lose money? Identify these emotions. Use emotions to your advantage. Be like the taichi master.

Level 06 - Understand your personality profile

What are you? Are you a feeler or a thinker? Are you an extrovert or introvert? Do you like to do things slowly and steadily as a turtle? Or you talk and whiz about like a busy bee?

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Are you able to answer the questions above? If you wish to succeed in trading, you have to understand yourself. You have to find a market and trading lifestyle that is compatible with you. Think about this. There are over 6 billion people on this planet. And no one has the exact same personality as you. In other words, you are unique. Thus your approach to trading will also be unique. The market, on the same hand, is also infinite (almost). And because the market is infinite, it can also be able to accommodate any infinite number of trading styles. Therefore, the market can accommodate you.

So the next question is, can you accommodate yourself to the market? How can you do that? Simple. Find out everything about yourself by taking personality profile tests. There are many different types of personality profiling methods. To start off, i will suggest you to take a look at these 3 types of personality profiling.

Go and google
1) DISC personality test
2) MBTI (Myer Briggs Type Indicator)
3) OCEAN personality test

You may have spend some money to do these tests. But if you do, you should get some form of professional feedback after answering the test questions. Such as a description of your personality type, your strengths and weaknesses, your ideal career and others.

Or if you wish, just type "personality profile test" into google.

There are some free ones. I have listed a few below to help you begin. Please note again that i am not affiliated to these websites in any way. Have fun!!!

http://www.personalitydesk.com/learning-center

http://www.truity.com/

http://www.outofservice.com/bigfive/

Level 07 - Tennis in trading

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What does tennis got anything to do with trading? Plenty of similarities, apparently. Yesterday, i was watching the Wimbledon Men Singles Final 2012 between Roger Federer and Andy Murray. Wimbledon is played in England, and Murray being a English homeboy, got the loudest support from the home crowd.

Here are 2 highlights from the game which showed how champions win.

1) During the second set, when Federer was 1 shot away from winning it, he produced a most exquisite drop shot near the net. The true stuff of champions. Champions produce the goods when it is needed most.

2) During the fourth set, Federer is up 5-4. He is only 1 point away from winning the Finals, and he is serving the ball. He served up 2 aces to get 2 quick and easy points. Just as champions do when it is needed most.

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Below are the edges that tennis champions possessed and showed when it is most needed to win titles. These edges are the same edges we need to become champion traders.

1) Never lose your cool. Federer lost the first set but he remained calmed. Even if you lost the first set. Get up and win the remaining sets.

2) Never shout at yourself. Federer did not shout at himself. But Murray started to shout at himself from the second set onwards. From then on, he lost control of the game. Even if the game did not go your way, and the opponent forces you to the point of brink, never reprimand yourself.

3) Never doubt yourself. At one point in the second set, i saw doubts on Murray's face. He began to doubt himself. Every mistake he made, every stroke that did not go his way, he was doubting his playing ability. Federer believed in himself and his confidence never wavered.

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These 3 edges are how exactly what we need to become champion traders. Do you have those?

Here are the 4 M's i have mentioned earlier:

1) money
2) mind
3) method
4) myself

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Out of these 4 M's, the one that i feel that is of least importance to long term trading success is method. Why do i say? Think of it this way. There are millions of ways to make money trading. I did a google search on "trading systems", and it showed 113,000,000 hits. Some of these trading systems claim to have been "back-tested" and "proven" to make money in trading. Then they show you charts stating that if you have followed their proprietary indicator, you would have make money if you buy at the green arrows and sell at the red arrows. All these amazing indicators, for a low low price of $49.95 per month. But wait, if you order now, we offer you a 20% discount.

I am repeating myself but i will say it again. There are millions of ways to make money trading. You only need to learn 3 methods. One for a bull market, one for a bear market and one for a sideways market. If MACD above 0 and RSI above 80 is your buy signal, and you make tons of money trading off this signal, stick with it. . There is no one size fits all approach. There are 6 billion humans on this planet. All 6 billions are unique. You are unique. And because you are unique, your approach to trading will also be unique.

The key is this. Find whatever that works for you. It could take you months. It could take you years. For my case, i personally took about 2 years before i find a profitable trading system that works for me. It is a trading system that works for me because it fits snugly into my lifestyle and my personality.

What is your profitable trading system? Find it and you may be rewarded in your trading career.

This topic we will talk about the fourth M. In my opinion, this M is the most important M of all. I am going to show you a series of photos. And after you have seen each photo, you are going to answer a YES or a NO. YES if you think the person in the photo can trade. NO if you think the person in the photo cannot trade.

Photo 1
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Photo 2
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Photo 3 (Pistorius, the blade runner)
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Photo 4 (Nick Vujicic)
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Photo 5
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If you answer YES to photo 5, congratulations to you. You have climbed and conquered the highest mountain in trading. The mountain called "Myself". The monkey and baby cannot be traders, because their mental faculty is not developed. Pistorius the blade runner and Nick Vujicic can trade, if they want to, even though they have missing arms and legs.

What is the criteria to be a successful trader? Criteria number one is the ability to think. Trading is a mind game. If you think you can, you are halfway there on the journey to trading success.

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Level 10 - Myself Part 2

In level 09, what is the key to trading success? Yes, it is the person in the mirror. If you have not done so, look into a mirror and ask the person in the mirror. Am i really ready to be a trader? Am i prepared to be a profitable trader and not a losing trader?

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Trading statistics show that 90% of traders lose money and the 10% makes the money. In trading, it is a zero sum game. For every $1000 you win, you won it from someone else who lost it to you. And that person who lost it to you, he did not intend to lose it to you. On the contrary, he wanted to win it from you and take your $1000. Every trader wants to win. But if everyone wins in trading, where is your winning money coming from? Think about that.

Therefore, what is the determining factor to successful trading? Answer, it is me. Myself. If you have a winning mindset, your chances of taking away other people's money will increase. If you don't, you may be the 90% who gives the money to the 10%. Understand this well and you have level up one more level to trade successfully.

"Wealth awaits those who can play this game [of trading] well." - The Money Game

In most video games, at the end of each stage, there is a boss fight. When you win, you advance to the next stage.

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If you find that my postings on level 01-10 is useful, it would be good if you write down your thoughts. If you want to grow as a trader, this is a must-do step. When you write down what you think, you can cement your thoughts into concrete action.

You can answer these 2 questions to help you get started.

1. What level did i find it most helpful to me? Why?
2. How can i use that to become a more successful trader?

Email it to me at [email protected]

Happy writing!

Nice thread. Good info. I believe Mr. Leeson worked for Barings. Bank of England is the UK Central Bank.

You are right. It is the Barings Bank. Thanks for pointing it out.

I like this interview. Have fun watching it.

______________________

In this episode:
•Colin names the mentor responsible for making him a successful trader
•What happened to his account at PFGBest
•How he started with $800 and no clue what he was doing
•The two biggest things that he sees beginners doing wrong
•What he does to constantly improve his trading
•How his lifestyle has changed since quitting his day job
•And more!

http://www.youtube.com/watch?v=GcLQ4It3r60

http://www.tradingheroes.com/ttl-006...-fund-manager/

As the saying goes in trading,

"the trend is your friend .... till it ends."

Watch this video and learn how to trade with the trend. It may improve your trading results considerably.

http://www.youtube.com/watch?v=KtcbaXJfubI

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Do you know that money is liken to water? That is why we use monetary terms like liquidity, credit freeze, money flow and etc. If you want to understand what is one of the basic fundamental structures of the markets, you must understand water.

Why do we have bull markets and bear markets? It is because money flows in and out, just like the tides on the seashore. High tide means more water flowing onto the shore line. Low tide equates to less water is flowing in. So money behaves fundamentally in the same way. More money pouring into the markets will result in roaring bull runs. Conversely, when money begins to flow out of the markets, a bear market is on its way. However, note that the amount of money in circulation remains the same. Money taken out of the markets does not disappear. Yes it is gone from the markets, but money has only changed its form.

Water has three forms: it can exist as a solid, liquid or gaseous state. Water is liquid at 99 degree Celsius. The moment we heat that water to 100 degree Celsius, it is transformed into a gaseous state. Likewise, money has the potential to exist in all three forms too. It can exist as electronic money via credit cards. It can be transformed into paper money, for example as paper notes and cheques. Lastly, it can also be as solid money, denoted by precious metals such as gold and silver bullions.

Bruce Lee said this statement in his interview,
"Empty your mind. Be formless. Shapeless like water. Now you put water into a cup, it becomes the cup. You put water into a bottle, it becomes the bottle. You put into a teapot, it becomes the teapot. Now water can flow, or it can crash [like the US financial crisis of 2007-2009]. Be water my friend."

Learn to flow with the water. Know the flow of the money. Discern what the big players are doing with their money. Know where the big players are flowing with their water money. Then follow them.

http://www.youtube.com/watch?v=d7kgJ...ure=plpp_video

http://www.youtube.com/watch?v=QAVjh...ure=plpp_video

http://www.youtube.com/watch?v=xFPJm...ure=plpp_video