The Paradox System

I was relating to the market in a downtrend and also an uptrend.

Thanks dove

Do you have other stories like the one about the forex main brain crash ? If you do I'd be interested in reading them!

I believe I might have posted this somewhere along the line. If not -- here it is:

Perhaps you remember one of the most impactful movies of our time, the Matrix? Morpheus believed totally in Neo to the point where he almost sacrificed his life to save him. Yet Neo did not believe in himself at the beginning, he was most uncertain about whether he was the one or not. So when he went to see the Oracle, she told him that being the one is like being in love, nobody tells you that you are in love, you just know it. The Oracle pointed to a sign hanging on the door: "Know Thyself".

Still Neo didn't believe in himself but when agent Smith captured Morpheus and a member of his crew suggested pulling the plug so the agents of the Matrix won't get access to Zion, something in Neo changed and he began to believe.

A little further down the path of the one, Neo "accomplished miracles" because he learned how to believe in himself fully and completely. And remember Neo had a mentor who believed in him beyond any doubt and who taught him how to use his mind to defeat the Matrix and its dangerous agents. Neo's mentor, Morpheus, showed him the path and helped him empower his mind, yet Neo walked the path to his own success after he started believing in himself and mastered his own mind.

Perhaps you were wondering, what has this to do with trading the Forex?

"Know Thyself"

Forex trading, or any trading for that matter, is a mind game in the first place. Some people spend a lot of time and efforts perfecting certain trading skills and knowledge like reading the charts and data, entry and exit skills, but any normal intelligent person can learn these skills; they are the easiest part of the trading game. They are no doubt necessary tools for your success but they don't make the biggest difference between a really successful trader and the one who is not successful. So what does make the difference?

Let's ask the question: what is your goal in trading the Forex? It is to make money. Period! Surely, while you're making the money and great profits you can have fun too and you should. But what you really need are specific mental attitudes and strengths to become a successful trader. These mental states are an asset that will help you in many other situations and contexts of your life.

The major three mental and emotional frames of mind that characterize the majority of successful traders are:

1. Discipline & Passion
2. Confidence & Courage
3. Patience & Smart Persistence

We'll touch upon all three briefly to make it as clear as crystal to you so you succeed in the Forex market. Like trading a Pair of Currencies these mental and emotional mindsets go hand in hand.

Discipline & Passion -

Discipline is really important! It helps you be more effective in planning your trades and in sticking to the good plans you established before entering the trade. Always have an action plan for stop and limit levels for the trade before you enter it, your analysis of the charts should cover up the expected upside and downside.

Passion means commitment and love for what you do. It is your passion for something that keeps you going, improving, constantly learning (remember Morpheus mentoring Neo) and persist beyond the ups and downs of the business. You need to know why you are trading because it is an awesome opportunity that you have to take, so develop a passion for it. Simply do what it takes to be successful and learn from the best.

A word of Caution: Never mistake your “passion" for emotion that you might feel while trading and trying to enter a trade without using clear and sound entry/exit indicators and rules. Have fun, learn, and stay tuned for future developments and grow as a person in strength and character while remaining emotionally detached when you get in and out of a trade. If you do, you are bound to incredible success in your trading.

Confidence & Courage -

Successful traders believe in themselves and their abilities to learn and grow, to acquire more competence learning from a mentor. There is no reality only perception, the Matrix can trick you but you can have your own special Matrix inside your mind that empowers you with an unwavering belief in yourself!

Have the confidence and courage to stick to your plan and stay within rules or trading even if others are doing the opposite. Keep your vision (end result) that you can make it in the market in your mind until you are successful in it.

If you experience a situation where you know exactly how a currency pair will go and have a sound trading plan then go for it! Sometimes people fail to follow their own good plans because all sorts of emotions get in their way, emotions like greed and fear. Stay calm and act with confidence and courage otherwise your planning, analyzing and information gathering will be totally useless to you.

You become more competent when you educate yourself about the markets and learn from successful traders. Self-develop: "Know Thyself", get into the habit of monitoring your emotions and questioning your limiting beliefs so that your mind works for you and not against you. Don't take things too personally, if you make a mistake then consider it to be valuable feedback so you become more successful, never a failure!

Patience & Smart Persistence -

An Indian wisdom says: "Life is always right!" we say: "the market knows much better than you do!"

Learn to listen and read the signs the indicators are giving you. Learn how to wait, observe and only enter a trade when it is the right time to do so and do not hesitate. Hesitation is a failure of becoming successful.

It can be hard to wait before your charts jumps into action. But a successful trader will enter a trade according to the direction of the prevailing trend or will wait until a new trend shows up and establishes itself. Even if you day trade and are not a long-term or position trader, you still are well advised within the indicators from ruining your profit chances. Also be patient means you stick with winning trades.

Practice "Know Thyself"; and you will be on the path of Neo, the one himself!

Here are 30 rules to improve your trading skills:

1. Don’t focus on making money

Focus on getting your trades to work. Money is a natural by-product of your edge being executed perfectly.

2. Think independently

Don’t take a trade based on someone else’s reasons. Make up your own mind on whether it’s a good idea based on your experiences.

3. Keep a tight journal of your results

How can you know exactly how well your edge is performing if you don’t monitor it? Just looking at the profit and loss statement from your broker at the end of the month will not tell you the full story. You need to fill out a trading journal after each trade.

4. Screen shot all trades

Whether it’s a winner or a loser, take a screen shot of all your trades and file them as part of your trading plan. Review each trade at the end of the week and see what you did right or wrong. “Those who do not learn from history are doomed to repeat it”

5. Have a risk management plan

Points 3, 4 and 5 all tie in together, but this is the most important. Remember the first rule of trading forex is protecting your capital, the second rule is, don’t forget rule number 1. Learn to manage your risk, be rigid in your rules and flexible in your expectations.

6. Don’t over expose yourself

Don’t trade multiple trades. Trading just one trade is a handful; so don’t expose yourself with disaster.

7. Once a trade is live let go

Emotionally disconnecting from the outcome of your trades is a crucial part of trading. If you are risking a dollar amount you are comfortable in losing, then you should have no problem letting go of the trade once it is live. Your mind set needs to be: I am playing a system that has an edge on the market. There are random distributions of wins and losses for any set of variables that define an edge. The result of this single trade is not important.

8. Trade just 1 set up or edge until you have perfected it before moving on

Don’t be the “jack of all trades and the master of none”. I know how tempting to play a set up you have just learned about, but you are never going to get it to work unless you have a solid trading plan around it and you know it intimately. See point no. 2.

9. Have a trading plan

If you fail to plan, you plan to fail. The problem with most small business ventures (your trading is a business, so treat it like one) is a lack of planning. You need to have a clear and concise plan for executing every trade you take. From entry to position size, stop loss, take profit as well as a plan for potential drawdown periods. Plan your trades, and trade your plan!

10. Back test

Even if you are learning a system or strategy, you need to get the feel of it before you let it fly on a real account. Back testing is the best way to internalize the finer details of the system and price patterns based around it.

11. Trade smaller position sizes

Only risk what you are comfortable loosing. If you become emotionally charged after a losing trade (or a winning one for that matter) chances are you are trading a bigger position size than you are really comfortable with. Forget the “don’t risk more than 1%” rule. Find an amount you are fine with loosing 10 trades in a row; or the potential max drawdown of your system.

12. Accept losses

Losing trades is the ‘cost of doing business’ for a forex trader. There is a random distribution to wins and losses for any set of variables that define an edge. If you experience a loss, shrug it off and move on…. Statistically it just means you are 1 step closer to your next win.

13. Get rich slowly

Trying to make good money in the forex takes time, 3-5 year plan in becoming a professional. If you try to force it, you will start to make fatal errors that will affect your trading account in an adverse manner. Take your time, it’s not a race.

14. Focus on the process

Do not become wrapped up in ‘is this trade going to win or lose’ mind-set. Focus on what you can control, a good entry (when your edge is present) sound trade management and logical take profit points.

15. Hit singles not home runs

It is much easier to be right about a 20 – 40 pip move then it is to be right about. 100 – 200+ pip move.

16. Treat your trading like a business not a hobby

If you want to be successful in this game you need to be focused and use discipline. Pro traders don’t take trades after a couple of cold ones while watching the football. They are professional in every facet of their trading routine.

17. Use affirmations

Using positive affirmations is a big part of your trading plan. Use them to enhance your discipline and get yourself in a ‘winning’ mind set.

18. Flex your discipline muscle

“To become what we want, first we must change who we are”. Exercise discipline in every facet of your life from exercise to diet and any other way you can. This will have a positive spillover effect on your trading. Do love chocolate; or a beer after work? Go without for 2 weeks! Discipline is not something we are born with, it is something that can be learned. Like a muscle, the more you exercise it the stronger it gets. Improve your discipline with a 3 step action plan.

19. Don’t over trade.

When we become tired, your decision making becomes impaired. Don’t overdo it, and plan regular breaks and regular rewards throughout the day. After achieving even seemingly insignificant goals reward yourself with a break and 15 minutes of what you love doing.

20. Don’t revenge trade

Revenge trading is taking a trade straight after a loss to try and recoup your losses. The chances of you viewing the market in a clear, calm, and unbiased manor are seriously diminished, and thus so are the chances of you winning that trade. If you are emotionally charged after a win or a loss, turn off your computer for the rest of the day.

21. Don’t average down

Averaging down refers to when you take a buy for example and the price moves half way to your stop, so you take another trade in the same direction. The mentality is the trade just needs to make it back to the original position and you are at break even. Trust me, you just don’t want to do it… it rarely works. See No. 3 & 4.

22. Be calm

You cannot make unbiased decisions if you are emotionally charged from previous trade. Turn off your computer and relax… Read a book and come back with a fresh mind tomorrow.

23. Set and forget

This is a trade management strategy (or lack of) for beginners to intermediate traders to help with trading psychology. The biggest issue faced by traders is second guessing their proven positive expectance system once the trade is live. It involves basically setting your stop/ setting your profit target(s) and letting price hit either one without interfering. You will be surprised how much you can learn to trust your decisions and how many more pips you can bank when you don’t interfere with your trades after they are live.

24. Be consistent

“We are what we do consistently. Excellence is not an act but a habit”. Be consistent with identifying your edge, your risk management & trade management & you will consistently make money.

25. Have at least one positive expectancy edge

All pro traders have at least one tested and proven edge on the market that they trade every day to extract consistent pips from the market. We are not speculators, but trade the system. Find on and stick to it. Once mastered, add another one.

26. Confirmation

Your edge begin present is confirmation enough, you can never be 100 % about a trade. A set up is a setup is a setup. If your edge is present then pull the trigger.

27. Don’t think you know what is going to happen next

Thinking is dangerous. Trade the system and it will take you into what is happening next.

28. Have a trading ritual

Example: When I trade I have a trading plan typed up and printed next to me with boxes to tick off as I go through my set up criteria. Then once the trade is finished, screenshot, fill out my journal and file the trading plan with my checklist.

29. Invest in yourself

You don’t know what you don’t know. And what you don’t know is potential profit to you and what you don’t know is potential risk to you. Follow the masters. The learning process is ongoing; you can always shave a few strokes off your game.

30. Don’t speculate

Some pro traders may tell you what they think might happen in the market next based on current sentiment or price action, but when it comes time to make a trade, they are trading a pre-defined, positive expectancy methodology or system with a specific set of entry and exit criteria.

Just re-started MT4 as per schedule and this is what my 1H is looking like.. Looks strange.
Can anyone confirm if they have the same and if this is correct?

It looks exactly like mine.

Thanks Dove

03/10/2016
DAILY
open@ 12xxxx
ROMAR: Resistance
EMA: Support
Parabolic: Resistance (if 19h EST stay same)
NOTES : We have daily in Consolidation. ROMAR down trend, 4 horsemans pointing UP . Parabolic flip yesterday (if 19h EST stay same)

H2
open@ 124.269
ROMAR: Resistance
EMA: Support
Parabolic: Support
NOTES : ROMAR down trend is disturbed with Purple and White crossing. 4 horsemans for UP with EMA/Smoth crossing

H1
ROMAR: Support
EMA: Support
Parabolic:Support
NOTES : ROMAR UP trend. 4 horsemans are in clear UP. Open below smoth abowe EMA, MACD still positive

NOTES : For now to much elements are mixed giving me no clear clue. H2 ROMAR still acting as resistance. I will wait 19 EST if Daily PSAR stay for UP I will look for long. If not I will not trade untill tomorrow rate decision.

thanks dove ! those rules are very true and should be zoomed and printed on my wall. I'll figure a way. I'll also translate it.

Went short at the EST 17:00 open. H2 ROMAR was still resistance (EMA below ROMAR) but price broke the rule by closing way above ROMAR. It then consolidated at that area for 3+ bars. I waited for H1 open below Smooth for entry. Target initially was ROMAR if EMA stayed below ROMAR, but once PA bounced off H2 50% Fib I exited.

For more explanation on this setup see post 363

Your first mistake is indicating Price as being a rule. There is no such rule for price - as price has nothing to do with the Paradox. Your second mistake is with EMA crossing purple and is now support and not resistance. Third mistake is not recognizing White as support with the 4 horsemen as support. Your forth mistake in not recognizing the accumulation of pips to the first support. So in general, it was a bad trade.

Purple / White / Smooth / EMA (that is the order of a good lined up..) and that picture show a good uptrend horsemen. With parabolic as support.. is like we have 4 melee warriors with one archer.

The Resistance in there is ROMAR. (that "maybe" in the next 2h candle is going to cross... maybe yes, maybe not... we dont know and we cant predict... is the reason that we trade the moment).

GoodLuck!

My trading plan for today. Comments are welcome.
Daily:
Romar: Resistance
EMA: Support
Parabolic: Support
Note: The daily is in an uptrend for the current swing. ROMAR trend still down. EMA/purple crossed, parabolic flipped. No resistance in immediate range (next the 50 fibo)

H2:
Romar: Resistance
EMA: Support
Parabolic: Support
Note: The Swing trend is up with the 4 horsemen and EMA. ROMAR still in downtrend but close to cross. ROMAR/EMA will cross for the upside or slide and continue for the downside.

H1:
Romar: Support
EMA: Support
Parabolic: Support (invalidated)
Note: ROMAR has crossed EMA for the long side

Note: If H2 ROMAR cross for the upside entry near support (1hour EMA). If ROMAR Slide Entry near resistance (1hour white) after the h2 indicating a downswing (4 horsemen down, purple cross EMA).

where is your Notes for Daily; and where is your projected Entry?

I edited my post and added the daily notes and put the projected entry at the end.

I long at 124.45,

I entry as a retrace to support fibo 50% with 4 horsemen in H2

That is why a plan is created with a projected ENTRY so you can check off each step projected for the entry. Otherwise the plan is no good and useless without seeing a projected entry.

Show your trading plan.

EDIT: By the way - there was not hit on the 50% according to my chart.

Thanks for the reply Dove. I've misunderstood this line from posts 363 "the 2 hour is still under EMA for the uptrend which means that 2 hour candle had broken the rule and must return back to trend on retrace; or on the next candle" which I thought the was this situation but reversed.

I've also realised I misread post 772 where it discussed the post 363 setup further and said "The entry for this 1 hour was with the 2 hour open candle below the 2 hour ROMAR SUPPORT." I thought that was a H2 chart in post 772 not the H1.

Redoing my notes now, no need to discuss this any further, apologies.

Do you think that it is right to wait for the ROMAR crossing EMA before entering the market long or do you think that this is too cautious?