ETMA_The Evolution

New Traders Need To Know This:

This is a POST from Rolf @Tradeciety. I am a huge fan of his work.

What You Know Versus What You Think You Know About Being a Trader

1. What Is Trading?
Your first stage of being a trader is when you have no clue what trading is but you really like the idea of how much money you could make by just clicking your mouse. This is a potentially dangerous starting point, because already you are expecting exciting results, without any knowledge of your potential losses. Fact: Less than 1% of traders make money.
Tip: learn the foundations of trading and don’t trade an account with a big size until you are making consistent gains; better still, start with a demo account as you learn all the moving parts, then when you are ready to fund your account, start small whilst testing your systems in different market conditions.

2. Oh, This Is Easy!
Next, you start to have a few winning trades, without any prior experience and think trading is an easy way to get rich. Starting out winning is the most dangerous scenario for a newbie, because this gives you a false sense of security. Chances are that you have just been lucky and your excitement is leading to pure gambling habits.
Tip: Don’t increase risk and don’t start putting on big positions in your euphoria. The biggest winners in the markets are those who build up their wealth incrementally and reserve the rare big positions for exceptional market set ups. A good starting point is to risk only a maximum of 1% of your account in any single trade and if you find yourself in a losing streak, take a step back and analyze your trading behavior. Do this and you will develop winning habits.

3. Ok, Maybe It’s Not That Easy
Uhon! You suddenly get your wakeup call and realize that trading is not that easy after losing a bunch of money and blowing up your first account! Virtually every trader has done this… Learn from their mistakes! Apart from losing your hard earned money, the effect that a huge drawdown has can knock your confidence for a long time. Go back to demo trading and start to keep a trading journal of your trades, so you can see where you are going wrong and what works best for you.
Tip: Don’t give up. Just keep an eye on your habits. Review your trading journal once a week and continue to learn from your mistakes.

4. Your AHA – Moment
You realize that trading is not about entries and fancy indicators, but watching price and market conditions, waiting for your set up parameters to happen and developing a solid risk and money management approach.
Tip: Stop the system-hopping and find your “one thing” – your one strategy – you want to master. We are all different. Different market conditions and set ups suit different personalities. Know yourself and your system and learn the importance of risk and money management.

5. You Find Your Edge
You turn your trading around and see that you can finally trade profitably, but you don’t trust it yet. Your winning traders exceed your losses, but you feel that you are still perhaps missing something to stack the probabilities in your favour and reduce your risk. Keep writing your trading journal and reviewing what you do and tweaking your edge by analyzing your trading performance.
Tip: Don’t get too excited just yet. Stick to the plan and execute your trades the same way religiously. Plan the trade and trade the plan, day in, day out. Keep learning more about the markets you trade. Markets are living organisms who constantly change, and you have to adapt in order to stay ahead.

6. You Are A Consistent Profitable Trader
You have been profitable for a few months and see that you can trade profitably without sweating every up- and down tick. If your trading account is not big enough that your performance allows you to make a living off of it just yet, don’t try to find a shortcut, but grow your account slowly and steadily and never stop adapting to ever-changing market conditions.
Tip: If your ultimate goal is it to quit your day-job, don’t rush things. Remember the fable of the Hare and the Tortoise. The markets were here before you and they will be here long after you’re gone.

You can read more of Rolf’s work here at Tradeciety.com.

What i'm reading today, Enjoy.
B.R.

A Trade Checklist Helps You Avoid Losing Trades

By : Tradeciety

A major reason why traders struggle is because they approach trading from a disorganized and narrow-minded perspective. The average trader believes that trading successfully is only about finding the one indicator that gets them in at the best possible price to maximize his profits with small risk. Not all trades will be winning trades granted but to maximize the chance of success, a structured trading process can help you avoid losing trades. In the following article we take you through a seven step process that can help you trade with maximum confidence and a lower likelihood of breaking the rules.

#1 Does the setup meet your entry criteria? Can you easily spot the entry?
A good rule of thumb is that, if you can spot the trade easily and quickly, chances are high that you are correct. The longer it takes for you to figure out whether it is an actual entry signal or not, the worse the trade setup usually is. Many traders report that the good trades jump right at them without having to ponder and argue with themselves.

#2 Is the trade in your trading plan? Why not?
It does not matter which interview or biography you read, all successful traders from Marty Schwartz, to Paul Tudor Jones, to Ed Seykota, each trader mentions the importance of having a detailed trading plan. The reason why a trading plan is so important for your trading success is that a trading plan is usually written when the markets are closed and you have the chance to look at your charts without the stress and pressure of moving prices.
Trades who are not included in your trading plan are usually not there for a reason; because they should be avoided. It is therefore important to ask yourself whether you can take the trade with a clear conscience or if it would be better to pass on this particular trade if it is not in your trading plan.

#3 Is the trade in line with the direction of the trend? If not, are your reasons to enter good enough?
Although this point depends slightly on your overall trading strategy, trading with the trend can serve as an additional filter to keep you out of losing trades. Trading with the trend often results in trades with less drawdown, a smoother trade development and less psychological pressure. If you want to minimize the risk of losing trades, adding the additional filter of avoiding counter trend trades is another layer that can protect you.

#4 Are important news announcements scheduled?
Especially for intra-day traders, keeping track of upcoming news events is important. The news might not always change the direction the market is going, but news releases significantly increase short term volatility. Intra-day traders usually operate with relatively tight stops and are therefore vulnerable to price spikes caused by news announcements. Checking the news calendar for the day ahead takes less than 2 minutes and can reduce the likelihood of running into problems when you are about to take a new trade shortly before an important news event.

#5 Are risk and reward acceptable?
This is a point most traders get totally wrong because the general knowledge about the importance of the risk:reward ratio is incorrect. The combination of your risk:reward ratio and your winrate tells you immediately whether you can take the trade or to avoid it. For example, if your trade has a risk:reward ratio of 3:1, it means that for every 4 trades you need to have at least 1 winning trade to break even, which equals a 25% winrate. The formula to calculate the required winrate is: [1/(1 + Risk:Reward Ratio)]. The table below illustrates the point further:

Risk:Reward RatioRequired Winrate
1:1 50%
2:1 33.3%
3:1 25%

However, it is important that you define stop loss and take profit orders first and then see whether the combination of risk:reward ratio and winrate add up. Do not try to manipulate your risk:reward ratio in order to get a better value!

#6 How do you feel emotionally?
Trading is not only about what happens on your charts; the mental aspect of trading is of great importance when it comes to performing at your best level. Your emotional state significantly influences how you make trading decisions and perceive trading signals. Stress, worries and anxieties that you carry over from your daily life can be harmful for your trading decisions. But being too euphoric, exuberant and ecstatic can also lead to over-trading, neglecting risk and money management rules, or making other irrational decisions.
Trading is a performance game and it is therefore necessary that you are able to perform at your very best level.

#7 I accept to lose
Ask any trader and he will tell you that losing is part of trading; but when the trade is on, markets are moving in real time and your money is on the line, the perspective changes dramatically. Widening stop loss orders and adding to a losing position is what traders will do to avoid the inevitable. The two described trading decisions are a clear sign that you have not fully accepted the chance of taking a loss.
Be honest to yourself and before you pull the trigger, accept the fact that you cannot tell whether a trade will be a losing trade or a winner, before it either reaches your take profit or stop loss order.

Conclusion: Minimize your losses by following a structured trading approach

Following a structured approach can reduce the likelihood of breaking your trading rules. Especially when you are a new trader or lack discipline, printing out the trade checklist and checking it off for every trade, and keeping it right next to you will significantly increase your ability to stick to your rules.

Trend Following Wizards: Good January Start

Good start of the year for the Wizards, who started the year with a collective +5.63% in January.

Monday February 23, 2015

http://assets.amuniversal.com/1eab1b...01005056a9545d


Investment Lessons.

5 Tips To Get The Pro Risk-Taking Mindset

by Rolf - Tradeciety.com

People call themselves traders because traders trade, right!? But a more appropriate description of your job would be risk-taker. As a trader you bet your money on something you cannot control, where you have no influence over the outcome and even though you play your best game, do everything you possibly can and be 100% committed to your plan, you could easily end up losing without being it your fault. In this article we show you what being a risk-taker means and the mindset you have to acquire in order to trade successfully.

#1 Trading is dealing with the unknown

http://www.tradeciety.com/wp-content...4778907343.jpgWe touched on this one briefly, but it is important that you understand the full meaning of it. Although you might have a system that you trust based on previous results, any setup or trade can fail at any time. When you enter a trade based on your criteria, it is out of your hand whether price will reach your take profit or stop loss order. Traders often make this mistake to get married to their trades and believe that if a setup is especially promising it should turn out as a winner. This thinking is dangerous and wrong. You can never know whether your trade will be a winner or a loser in advance why would you enter the losing trades then anyways. As a trader you have to be indifferent towards the outcome. It should not matter whether you win or lose if you have done everything correctly.

Lesson 1: Understand that you cannot control or predict the outcome of a trade. Dont get married to your trades; you cant avoid losing trades. Being a trader means that you deal with the unknown.

#2 Risk more when your winrate is high

http://www.tradeciety.com/wp-content/uploads/graph.pngSport-betters have always known this. When you bet on a team that is more likely to win, you are willing to risk more because you have a higher chance of making money and when the team of your choice does not stand a high chance of winning, you risk less. Traders are not that smartWouldnt it makes sense to risk more when your winrate is 75% than when your trading strategy only has a winrate of 50%? A lower winrate means that you will have more losing trades. Therefore, the greater your risk per trade, the bigger your swings will be in your account balance.

Lesson 2: Dont arbitrarily risk a random amount of 2% on any given trade. Its a myth that risking 2% on any given trade is the way to go. Understand the connection between winrate, position size and the impacts on your account balance.

#3 Losing streaks happen. They are not your fault

Winrate is a long-term concept. In the short-term, anything could happen.

http://www.tradeciety.com/wp-content...s/streaks1.pngYou might have a back-tested and forward-tested trading strategy and you can fairly accurately state that your winrate is 65%. With this information you can foresee that over your next 1000 trades, you will come close to 650 winning and 350 losing trades. However, your winrate cannot provide any information about the outcome of the next 5, 10 or 20 trades. Having 10 losers over the next 10 trades can happen just as easily as having 10 winning trades in a row.
The data in the table below is based on a trading strategy with a 60% winrate. As you can see, even 6 trades in a row will occur every 245 trades. If you take 2 trades per day, you will have a losing streak of 6 trades twice per year. And in the meantime, you will experience several losing streaks of 3, 4 or 5 losing trades in a row.

Losers in a rowEvery trades
26
316
440
598
6245
7600

Lesson 3: Dont think that losing-streaks are your mistake. But even more important, dont lose your head when it happens. Commit to playing your A-game every single trade. Losing streaks will end.

#4 Adjust your position size

In the light of the previous point, it is important to analyze the effect of position sizing. Most traders have a very sloppy attitude towards position sizing because they dont know about the importance and impacts it has on your overall performance. As we have seen in the previous example, losing streaks are inevitable and not adjusting your risk and position size can be deadly. The table below shows a trading approach where the trader started with a $10.000 account and a 4% position size ($400). The trader experienced a losing streak of 6 losers in a row and did not adjust his position size, but always kept his original $400. As you can see, after the fourth trade risking $400 resulted in a position size of 5.3%, which is a significant increase.

AccountPosition size (4%)Risk in %
10.000 400 4%
9.600 400 4.2%
9.200 400 4.4%
8.800 400 4.6%
8.400 400 4.8%
8.000 400 5.0%
7.600 400 5.3%

The next table is how the account development of a trader that always used the same position size looks like. As you can see that by constantly adjusting position size, his losses are smaller and his risk per trade is also constant. There are two important messages that this example shows:
1) By adjusting your position size, you lose less in losing streaks and you will recover faster when the streak is over
2) The psychological pressure is smaller since you limit your losses and dont increase your risk while being in a losing streak, which by itself is mentally challenging already

AccountPosition Size (4%)Risk in %
10.000 400 4%
9.600 380 4%
9.220 370 4%
8.850 350 4%
8.500 340 4%
8.160 325 4%
7.835 310 4%

Lesson 4: Adjusting your position size helps avoid psychological problems and also makes recovering from losing streaks easier.

#5 Leave your emotions outside

http://www.tradeciety.com/wp-content...s/emotions.png

If you are into trading to make money, which is the only reason why we all are into trading, you have to treat it like a job. Your trading has to be repetitive, dull and boring. By this I mean that if you get excited during your trading sessions, celebrate your winners or cry over your losses, you are not a professional trader, but a hobby gambler. Trading is an activity of dealing with probabilities where you know that the correct combination of risk:reward ratio and winrate will make you end up ahead, no matter what. Your only job is to make sure that you execute your trades 100% according to your plan and dont get emotionally attached.
Trading has to be repetitive, boring and dull. Every day you look for the exact same things, your trades should look identical and you have follow a structured approach. Being a trader means dealing with probabilities and knowing that everything will be ok in the end, if you keep doing the same things day after day.

Lesson 5: If you are looking for excitement and entertainment, trading is not the place to be. A trader is rational, emotion-less and does the same things over and over again.

Daily Research, Enjoy.

Best,
B.R.

Ed Seykota Quotes:

1. “If I am bullish, I neither buy on a reaction, nor wait for strength; I am already in. I turn bullish at the instant my buy stop is hit, and stay bullish until my sell stop is hit. Being bullish and not being long is illogical.”
2. “Fundamentalists figure things out and anticipate change. Trend followers join the trend of the moment. Fundamentalists try to solve their feelings. Trend followers join their feelings and observe them evolve and dis-solve.”
3. “The feelings we accept and enjoy rarely interfere with trading.”
4. “Systems don’t need to be changed. The trick is for a trader to develop a system with which he is compatible”
5. “It can be very expensive to try to convince the markets you are right.”
6. “There are old traders and there are bold traders, but there are very few old, bold traders.”
7. “I would add that I consider myself and how I do things as a kind of system which, by definition, I always follow.”
8. “Systems trading is ultimately discretionary. The manager still has to decide how much risk to accept, which markets to play, and how aggressively to increase and decrease the trading base as a function of equity change.”
9. “Trying to trade during a losing streak is emotionally devastating. Trying to play “catch up” is lethal.”
10. “The elements of good trading are: 1, cutting losses. 2, cutting losses. And 3, cutting losses. If you can follow these three rules, you may have a chance.”
11. “Losing a position is aggravating, whereas losing your nerve is devastating.”
12. “The markets are the same now as they were five to ten years ago because they keep changing – just like they did then.”
13. “Luck plays an enormous role in trading success. Some people were lucky enough to be born smart, while others were even smarter and got born lucky.”
14. “Having a quote machine is like having a slot machine at your desk – you end up feeding it all day long. I get my price data after the close each day.”
15. “A losing trader can do little to transform himself into a winning trader. A losing trader is not going to want to transform himself. That’s the kind of thing winning traders do.”
16. “If you can’t take a small loss, sooner or later you will take the mother of all losses.”
17. “It is a happy circumstance that when nature gives us true burning desires, she also gives us the means to satisfy them. Those who want to win and lack skill can get someone with skill to help them.”
18. “Risk no more that you can afford to lose, and also risk enough so that a win is meaningful.”
19. “Dramatic and emotional trading experiences tend to be negative. Pride is a great banana peel, as are hope, fear, and greed. My biggest slip-ups occurred shortly after I got emotionally involved with positions.”
20. “Be sensitive to subtle differences between ‘intuition’ and ‘into wishing’.”
21. “The trading rules I live by are: 1. Cut losses. 2. Ride winners. 3. Keep bets small. 4. Follow the rules without question. 5. Know when to break the rules.”
22. “I usually ignore advice from other traders, especially the ones who believe they are on to a “sure thing”. The old timers, who talk about “maybe there is a chance of so and so,” are often right and early.”
23. “I set protective stops at the same time I enter a trade. I normally move these stops in to lock in a profit as
    the trend continues. Sometimes, I take profits when a market gets wild. This usually doesn’t get me out any better than waiting for my stops to close in, but it does cut down on the volatility of the portfolio, which helps calm my nerves. Losing a position is aggravating, whereas losing your nerve is devastating.”
24. “I intend to risk below 5 percent on a trade, allowing for poor executions.”
25. “I don’t judge success, I celebrate it. I think success has to do with finding and following one’s calling regardless of financial gain.”
26. (On losing streaks and over-trading) “Acting out this drama could be exciting. However, it also seems terribly expensive. One alternative is to keep bets small and then to systematically keep reducing risk during equity drawdowns. That way you have a gentle financial and emotional touchdown.”
27. “In order of importance to me are: 1) the long term trend, 2) the current chart pattern, and 3) picking a good spot to buy or sell.”
28. “Win or lose, everybody gets what they want out of the market. Some people seem to like to lose, so they win by losing money.”
29. “Fundamentals that you read about are typically useless as the market has already discounted the price, and I call them “funny-mentals”. However, if you catch on early, before others believe, you might have valuable “surprise-a-mentals”.”
30. “If you can’t measure it, you probably can’t manage it… Things you measure tend to improve.”
31. “The key to long-term survival and prosperity has a lot to do with the money management techniques incorporated into the technical system.”
32. “If you want to know everything about the market, go to the beach. Push and pull your hands with the waves. Some are bigger waves, some are smaller. But if you try to push the wave out when it’s coming in, it’ll never happen. The market is always right”
33. “To avoid whipsaw losses, stop trading”
34. “Pyramiding instructions appear on dollar bills. Add smaller and smaller amounts on the way up. Keep your eye open at the top”
35. “Markets are fundamentally volatile. No way around it. Your problem is not in the math. There is no math to get you out of having to experience uncertainty.”
36. “Our work is not so much to treat or to cure feelings, as to accept and celebrate them. This is a critical difference.”
37. “Before I enter a trade, I set stops at a point at which the chart sours.”
38. “Trading requires skill at reading the markets and at managing your own anxieties.”
39. “The positive intention of fear is risk control.”
40. “Speculate with less than 10% of your liquid net worth. Risk less than 1% of your speculative account on a trade. This tends to keep the fluctuations in the trading account small, relative to net worth. This is essential as large fluctuations can engage {emotions} and lead to feeling-justifying drama.”

thanks for the valuable insights!
I really love your thread!

tk

You are welcome my friend.

10 Great Technical Trading Rules

February 19, 2015 by Steve,

No, this is not me because according to FF Administration they think that i'm Steve Burns from new trader U that is selling and promoting my stuff here, well guys no this is not me i'm just a Follower of Steve's work like many other profitable and respected traders and blogger that i follow, nothing more nothing less.


We learned just to go with the chart. Why work when Mr. Market can do it for you? Paul Tudor Jones

Only price pays. In trading, emotions and egos are expensive collaborators. Our goal as traders is to capture price moves inside our time frame, while limiting our drawdowns in capital. The longer I have traded, the more I have become an advocate of price action. Moving away from the perils of opinions and predictions has improved my mental well-being, and my bottom line.

In developing a trading system of your own, you must begin with the big picture. First, look at the price action and then work your way down into your own time frame. You need to create a systematic and specific approach to entering and exiting trades, executing your signals with the right trailing stops, setting realistic price targets and position sizing, and limiting your risk exposure. Relying on fact, rather than being tossed around by your own subjective feelings, will insure your long term profitability.
Here are 10 great technical trading rules that will help you build a systematic approach to trading:

1. Start with the weekly price chart to establish the long term trend, and then work down through the daily and hourly charts to trade in the direction of that trend. The odds are better if you are trading in the direction of the long term trend.
2. In Bull Markets, the best strategy is to buy the dips. In Bear Markets, the best strategy is to sell short into each rally. Always go with the path of least resistance.
3. Support and resistance levels can hold for long periods of time; the first few breakout attempts usually fail.
4. The more times a support or resistance level is tested, the greater the odds that it will be broken. Old resistance can become the new support, and the old support may become the new resistance.
5. Trend lines are the easiest way to measure trends by connecting higher highs or lower lows, and they must always go from left to right.
6. Chart patterns are visible representations of the price ranges that buyers and sellers are creating. Chart Patterns are connected trend lines that signal a possible breakout buy point if one line is broken.
7. Moving averages quantify trends and create signals for entries, exits, and trailing stops.
8. Moving averages are great tools for a trader to use, but they are best used along with an overbought/oversold oscillator like the RSI. This maximizes exit profitability on extensions from a moving average.
9. 52 week highs are bullish, and 52 week lows are bearish. All-time highs are more bullish, and all-time lows are more bearish. Bull Markets have no long term resistance, and Bear Markets have no long term support.
10. Above the 200 day is where bulls create uptrends. Bad things happen below the 200 day; downtrends, distribution, bear markets, crashes, and bankruptcies.

Originally posted on www.seeitmarket.com

Beautiful stuff, enjoy.

Best,
B.R.

What The Pros Say About Risk Reward Ratio

“You should always be able to find something where you can skew the reward risk relationship so greatly in your favor that you can take a variety of small investments with great reward risk opportunities that should give you minimum draw down pain and maximum upside opportunities.” – Paul Tudor Jones

“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.” – George Soros

“Frankly, I don’t see markets; I see risks, rewards, and money.” – Larry Hite

“It is essential to wait for trades with a good risk / reward ratio. Patience is a virtue for a trader.” – Alexander Elder

“Paul Tudor Jones [had a principle he used to use] called 5:1. […] he knows he’s going to be wrong [sometimes] so if he loses a dollar and has to spend another dollar, spending two to make five, he’s still up $3. He can be wrong four out of five times and still be in great shape.” – Anthony Robbins on Paul Tudor Jones

“The most important thing is money management, money management, money management. Anybody who is successful will tell you the same thing.” – Marty Schwartz

by Rolf - Tradeciety.com

Good Evening bassramy,

I have been trading binary options for a little over 2 years and am now finding my way across to trading the Forex market and firmly believe this is the route to take if I want to become a successful trader. While looking for inspiration and tips on a solid consistant trading system I came across a few posts of yours via the Extreme TMA system and it was very clear you are a person who knows what you are talking about.

It was from this I came across your thread and all it did was back up my initial thoughts. I am still reading through every post but wanted to thank you for your insight and passing of knowledge. Your posts and quotes make a lot of sense and is providing me with a decent framework to work from. While I am in no way advanced enough to make comment on any trades or systems (meaning I cannot add much merrit or input to this thread) I wanted to let you know I am here in the background always reading, studying and learning.

Please continue with the excellent work and I very much look forward to what is to come.

You have my most sincere gratitude.

Thank you Sir for your warm words.

I evolved a lot since the ETMA thread, as you can see i no longer trade the ETMA system instead i'm focusing more on the way the great traders did it that means Patience, Discipline, MRM (Money and Risk Management), trading psychology, back and forward test of my systems and a very pragmatic, dynamic and systematic approach to markets with the lowest risk and drawdowns possible, i believe and after 12 years of trading that this is the way to trade successfully and profitably, i don't like to reinvent the wheel so i'm following the steps of the great traders and do as they have done all of these years in following the trend.

Trading shaped my personal life also and made me a better person through the same principles mentioned above .

Best,
B.R.

Once again I cannot do anything other than agree with you. One of my biggest failings is patience and discipline. I am aware of it and am always working towards improvement but due to me starting out trading binary options i have only ever traded the smaller time frames and this I believe is the cause of my lack of patience.

You made mention in one of your posts of not trading anything less than a 1 hour chart and it is this type of trading i need to get my head around. 'Don't chase the trades but let them come to you'. It is this philosophy I am trying to develop but is easier said than done.

With guidance from people such as yourself I have no doubt I will succeed. I have found trading to be a passion of mine and I am determined to succeed. I am still reading through your posts and plan to continue to do so. Please keep up the excellent work.

One of the main ingredients of successful trading is Patience and Discipline and these comes with experience coupled with low leverage, higher TF 's, small position sizing and adequate diversification.

We as human beings seems to lack these 2 qualities and that's why maybe about 80 - 90% of aspiring traders fail, the rich quick marketing scams played by most of the Bucket shops Brokers ( The other las Vegas ) seems to aggravate these situations in thinking that trading the smaller TF, high leverage and big position sizing will make you richer faster, in reality its the opposite and its surely the clear path to margin calls, these scam marketing strategies are carefully marketed by these BS (Bucket Shops or ...) to steal the newbies money the legal way, just look @ these shops sites small print, its called moral hazard ( we will take your money and invest it but we are not responsible if "when" we lose it all, its not us its the market. ).

We aspiring traders, especially Newbies, tend to start in the opposite direction, instead (and because we have no clue what trading is) of taking the less risky road of learning to trade demo first, then trading small sizing and extra low leverage and huge Diversification to offset the risk and build on that as time go by and we became more experienced, we tend to begin by Jumping directly in the pool before even testing the water and trade with high leverage (500:1) big position sizing which could wipe us out in only one trade, we are optimistic we are looking to be rich in 1 year, we look @ the profits and ignore the risks of high leverage and big position sizing which could bring disaster to our trading accounts considering we don't have a clue of what we are doing.

With pro traders its the other way around, we look @ risks first then let the markets decide how much profits we will have, the first question before entering a trade should be " How much can i lose " not " how much can i profit " nobody can control the markets but you can control your losses and that is the only thing that you can control in this business and the pros know it, they know their expectancy and their risk of ruin because they back and forward tested their systems and they know exactly what will happen if they risked 1% or 2% or 5 of their trading capital.

Long story short, begin very small and don't go live until you are profitable on demo first even if it takes 10 Years to do so and then scale up, that is the most important advice that i can give to somebody today considering to trade the markets, being there done that so don't do like i did, learn from others and shorten your learning curve (For what is worth).

Best,
B.R.

Sound advice B.R. Thank you for your posting. You are indeed correct when you say my thoughts are with profits and not the losses. It's so simple now you have pointed it out and I cannot believe how blind sighted I have been! Posting read and understood. Thank you

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How Much Money Can You Really Make In Trading?
By Rolf - Tradeciety.com January 14, 2015

What is a realistic return that is achievable in trading? is among the most asked questions for new and aspiring traders. The trading industry wants you to believe that you can easily double your money week after week and with enough leverage, even the smallest accounts can generate substantial profits easily. But how true are such claims? We are going to take an honest look at what is possible, what to be aware of and how to plan your financial future in the trading business.

First things first: set realistic expectations

It is important that you start out with realistic expectations about potential profits and trading income. First, believing that you can earn a lot of money in a short time will put you in a mindset of a gambler and a risk taker. Believing that the next thousand Dollars are just a mouse click away is not a good starting point for a long term trading career. And second, if you start out with big goals and the belief that you will be able to quit your day job within the next year or two will negatively impact your mindset and psychology when you notice that after a few years of trading you are still far away from becoming a full-time trader. Traders who have the get rich quick mindset are more likely to quit early when they find out that trading is not the easy way from rags to riches.

The trade-off between risk and your return

Especially when new traders do not have the possibility to fund a decent trading account, they try to make up for it by taking bigger positions. Growing a small account is psychologically challenging because your average winning trade will be very small and usually not meaningful which will lead to overtrading and the abandonment of trading rules. But what will actually happen when you increase your risk with the goal to grow your account faster?
The following slideshow illustrates trade simulations and account growth based on a trading strategy with a 50% winrate, an average risk:reward ratio of 1.5 and a $10,000 starting account. All the different slides are based on the same trading performance statistics, the only variable that changes is the percentage risked per trade. It starts with 1% per trade and goes up to 15%.

1. http://www.tradeciety.com/wp-content...sk-630x470.png 1% risked per trade
2. http://www.tradeciety.com/wp-content...sk-630x470.png 2 % risked per trade
3. http://www.tradeciety.com/wp-content...sk-630x470.png 5% risked per trade
4. http://www.tradeciety.com/wp-content...sk-630x470.png 7% risked per trade
5. http://www.tradeciety.com/wp-content...sk-630x470.png 10% risked per trade​http://www.tradeciety.com/wp-content...sk-630x470.png 15% risked per trade

1. It is important to note here that, whereas the simulations from lower risk levels show smoothly rising equity curves that cluster around the same mean, the higher the risk per trade, the more volatility you will see in your trading account. Additionally, the risk of a margin-call rises significantly when using higher risk which you can see nicely by the simulated equity curves that fluctuate around $ 0. Another important thing to keep in mind is that the greater the swings in your account, the harder it will be psychologically to recover from a big drawdown of several tens of thousands of Dollars.

How big should your trading account be?

In order to know how big your trading account needs to be to generate a certain amount of money over a fixed timeframe, you should use the approach of backwards engineering. For many traders, this will be an eye opener and the first step towards a steady and stable trading career rather than approaching trading with a gambler-like mindset.
In order to precisely calculate the correct trading account size that you need to have to generate a specific annual income, you have to define 5 figures: (1) How many trades do you have per month, (2) What is your average Risk:Reward ratio, (3) How much do you risk per trade, (4) What is your actual winrate and (5) How much money do you have to make per year?

After you are clear about these figures, you can start the backwards engineering process. We updated the Tradeciety Risk Analytics tool and added an Income Calculator sheet that allows you to calculate the required account size to earn a certain annual income. You just have to plug in your own data and the Income Calculator performs the backward engineering calculations for you.

However, if you withdraw all your profits on an annual basis, you will hardly be able to grow your trading account beyond the starting account balance and therefore limit income potential. And second, the model is based on an optimal statistical environment it does not account for long losing or winning streaks. In the following you can see 3 random scenarios and how the variables change the required account size.

Winrate 55% 60% 50%
Risk:Reward 2.0 1.5 1.75
Risk / Trade 1.0% 1.5% 2.0%
Trades / month 10 12 8
Desired annual income $ 50,000.00 $ 50,000.00 $ 50,000.00
Required account size $ 42,517.00 $ 25,868.00 $ 47,668.00

http://www.tradeciety.com/wp-content...Calculator.png

Nine Surprising Things Jesse Livermore Said.
Posted February 16, 2015 by Joshua M Brown

There are those who would convince you that it is somehow smart or in your best interest to be manically switching your investments around, back and forth, long and short, on a daily basis. To pay attention to this kind of overstimulation is the height of madness, even for professional traders.
The most storied and important trader who ever lived, Jesse Livermore, would be tuning these daily buy and sell calls out were he alive and operating today. Because while he was a trader, he was not of the mindset that there was always some kind of action to be taking.
Jesse Livermores legacy is a bit of a double-edged sword

On the one hand, he was the first to codify the ancient language of supply and demand that is every bit as relevant 100 years later as it was when he first relayed it to biographer Edwin Lefvre. Livermore himself sums it up thusly: I learned early that there is nothing new in Wall Street. There cant be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again. Ive never forgotten that.

On the other hand, Livermores undoing came at precisely the moments in which he ignored his own advice. After repeated admonitions about tipsters, for example, Jesse allowed a tip on cotton to lead to a massive loss which grew even larger as he sat on it violating yet another of his own cardinal rules.
And of course, other than for a few moments of temporary triumph in the trading pits and bucket shops of the era, Jesse Livermore was not a happy man. Things havent gone well with me, he informed one of his many wives by handwritten note, before putting a bullet through his own head in the cloakroom of the Sherry-Netherland Hotel.

But he did leave behind a wealth of knowledge about the art of speculation. His exploits (and cautionary tales of woe) have educated, influenced and inspired every generation of trader since Reminiscences was first published in 1923.
In my opinion, some of the most useful bits of knowledge we get from the book concern Jesses discussion of timeframes and patience. Many traders, particularly rookies, approach the game with the idea that theyre supposed to be constantly doing something in and out, with a trembling finger poised to click the mouse again and again. Consequently, they get on the treadmill of booking wins and losses without ever really moving the needle. They end up with tons of brokerage commissions and taxes to show for their efforts, but not much else.

Being a trader doesnt mean one must always be executing a trade, just as being a house painter doesnt mean that every surface needs an endless series of coats.
Many rookies are surprised to learn that Livermore, the idol of so many great traders, advocated a lower maintenance, higher patience approach as he matured. In his early days, Livermore was dependent on the short-term funding and scalping activity of the bucket shops. Once he graduated and had his own capital, he was able to lengthen position holding times and could even afford to do nothing for extended periods.

Here are nine surprising things Jesse Livermore said regarding excessive trading:

1. Money is made by sitting, not trading.
2. It takes time to make money.
3. It was never my thinking that made the big money for me, it always was sitting.
4. Nobody can catch all the fluctuations.
5. The desire for constant action irrespective of underlying conditions is responsible for many losses in Wall Street even among the professionals, who feel that they must take home some money everyday, as though they were working for regular wages.
6. Buy right, sit tight.
7. Men who can both be right and sit tight are uncommon.
8. Dont give me timing, give me time.

And finally, the most important thing:
9. There is a time for all things, but I didnt know it. And that is precisely what beats so many men in Wall Street who are very far from being in the main sucker class. There is the plain fool, who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks he must trade all the time. Not many can always have adequate reasons for buying and selling stocks daily or sufficient knowledge to make his play an intelligent play.

Jesse was a trader but he knew the value of staying with positions and sometimes not trading at all. Once he began to follow tips from others or trade when he should have abstained, all of his progress had come undone, and with it, his sanity.

We are fortunate to be able to learn from his mistakes and to sidestep the errors that eventually cost him everything.

Enjoy, best.
B.R.

Nine Financiers.
Posted July 25, 2012 by Joshua M Brown

Legend has it that in 1923, a meeting of America’s most powerful men took place at the Edgewater Beach Hotel in Chicago. Attending the meeting were the following nine financiers and power brokers:

the president of America’s largest steel company,
the president of America’s largest utility company,
the president of America’s largest gas company,
the president of the New York Stock Exchange,
the president of the Bank of International Settlements,
the nation’s greatest wheat speculator,
the nation’s greatest bear and speculator on Wall Street,
the head of the world’s greatest monopoly
a member of President Harding’s cabinet.

It was said to have been both a celebration of their success as well as an opportunity to plan their future exploits and dominance. These were the captains of their respective industries and some of the most successful businessmen of the era.

But how did things turn out for these distinguished gentlemen? Within 25 years, all of these great men had met a horrific end to their careers or their lives:
The president of the largest steel company,Charles Schwab, died a bankrupt man; the president of the largest utility company, Samuel Insull, died penniless; the president of the largest gas company, Howard Hobson, suffered a mental breakdown, ending up in an insane asylum; the president of the New York Stock Exchange, Richard Whitney, had just been released from prison; the bank president, Leon Fraser, had taken his own life; the wheat speculator, Arthur Cutten, died penniless; the head of the world’s greatest monopoly, Ivar Krueger the “match king”, also had taken his life; and the member of President Harding’s cabinet, Albert Fall, had just been given a pardon from prison so that he could die at home.
And as for the Wall Street Bear, Jesse Lauriston Livermore, famous speculator in the stock and commodities markets, his end is perhaps the most tragic of all. A week after Thanksgiving in 1940, Jesse walked into the Sherry-Netherland Hotel in New York, had two drinks at the bar while scribbling something in his notebook, then proceeded to the cloak room where he sat on a stool and shot himself in the head. He was 62 and left behind $5 million, down from the $100 million fortune he had amassed just ten years earlier.

And the note he had scribbled?
“My dear Nina: Can’t help it. Things have been bad with me. I am tired of fighting. Can’t carry on any longer. This is the only way out. I am unworthy of your love. I am a failure. I am truly sorry, but this is the only way out for me. Love Laurie”

There are three major lessons we can take from this parable:
1. Those who are on top now are not certain to finish in that position and are not guaranteed everlasting success or happiness.
2. Be careful whom you choose to idolize.
3. The life of a professional speculator is an unpleasant one, filled with highs and lows but ultimately unsatisfying and, in all probability, mentally ruinous. Look no further than the example of history’s greatest speculator for proof of this.

The Road to Trading Mastery.

The novice learns self-discipline by working hard on what seems like drudgerysimple, repetitive tiring task work with no apparent pay-off until he feels like he can't go any further and then demands access to more knowledge of the master. The novice becomes an apprentice when it is revealed that the discipline of the task work and the applied self-discipline has laid the groundwork for the mastery of higher level skills which build on the basic skills and movements that have now become second nature and can be performed without thinking.

As you travel your own path to trading mastery, you might enjoy the original martial arts movie that launched a thousand tributes: The 36th Chamber of Shaolin with the incomparable Gordon Liu. You might also enjoy the Japanese "10 Oxherding Pictures", a Zen parable of journey of self-mastery, discipline and freedom. The Chinese offer us the Journey to the West and the tale of Sun Wu Kong, the Monkey King who tamed his monkey-mind through service and realized his Buddha-nature.

The Ten Oxherding Pictures
From The Manual of Zen Buddhism, D.T. Suzuki
By Shubun (15th Century)

http://www.sacred-texts.com/bud/mzb/img/bull01.jpg
1. Undisciplined
With his horns fiercely projected in the air the beast snorts,
Madly running over the mountain paths, farther and farther he goes astray!
A dark cloud is spread across the entrance of the valley,
And who knows how much of the fine fresh herb is trampled under his wild hoofs!

http://www.sacred-texts.com/bud/mzb/img/bull02.jpg
2. Discipline Begun
I am in possession of a straw rope, and I pass it through his nose,
For once he makes a frantic attempt to run away, but he is severely whipped and whipped;
The beast resists the training with all the power there is in a nature wild and ungoverned,
But the rustic oxherd never relaxes his pulling tether and ever-ready whip.

http://www.sacred-texts.com/bud/mzb/img/bull03.jpg
3. In Harness
Gradually getting into harness the beast is now content to be led by the nose,
Crossing the stream, walking along the mountain path, he follows every step of the leader;
The leader holds the rope tightly in his hand never letting it go,
All day long he is on the alert almost unconscious of what fatigue is.

http://www.sacred-texts.com/bud/mzb/img/bull04.jpg
4. Faced Round
After long days of training the result begins to tell and the beast is faced round,
A nature so wild and ungoverned is finally broken, he has become gentler;
But the tender has not yet given him his full confidence,
He still keeps his straw rope with which the ox is now tied to a tree.

http://www.sacred-texts.com/bud/mzb/img/bull05.jpg
5. Tamed
Under the green willow tree and by the ancient mountain stream,
The ox is set at liberty to pursue his own pleasures;
At the eventide when a grey mist descends on the pasture,
The boy wends his homeward way with the animal quietly following.

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6. Unimpeded
On the verdant field the beast contentedly lies idling his time away,
No whip is needed now, nor any kind of restraint;
The boy too sits leisurely under the pine tree,
Playing a tune of peace, overflowing with joy.

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7. Laissez Faire
The spring stream in the evening sun flows languidly along the willow-lined bank,
In the hazy atmosphere the meadow grass is seen growing thick;
When hungry he grazes, when thirsty he quaffs, as time sweetly slides,
While the boy on the rock dozes for hours not noticing anything that goes on about him.

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8. All Forgotten
The beast all in white now is surrounded by the white clouds,
The man is perfectly at his ease and care-free, so is his companion;
The white clouds penetrated by the moon-light cast their white shadows below,
The white clouds and the bright moon-light-each following its course of movement.


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