Top five Price Action setup’s

Every System has a personality behind. Some systems will be looking for crosses, patterns, divergences etc. With every analysis method takes the trader back to price action for entries.

“Trading is not about picking market’s direction, but about great execution” by George Soros.

List of my set ups

  • Break out failure
  • Break out pull back
  • Pull back
  • Complex pull back
  • Test

These setups when executed accurately tend to attack idiots in the market. Many of us human beings tend to assume and believe the market will mysteriously fulfill our goals. I define markets as traders making trading decisions: if 10 000 traders are participating on the EURUSD why would the aim to satisfy your desires? This question is important as it addresses to the mind some of the natural traits that have huge potential to end career i.e When the market is in a bull trend, it is difficult to wait for pullbacks, some traders get impatient to the point of counter trading. When the trader is shrouded by emotions, he feels late in an on going trend and his option for feeling early is to counter trade or enter in market movement that cannot be classified to any of the above listed setups.

Trends change every day and people hate frequent change (observe how a man acts when dumped by a girl), that desire to be unchangeable is the professional traders gold mine. In a bull trend: Sellers are reversing the trend but many buyers have got personal issues of entering late (usually when they don’t have guts to enter early, they won’t have guts to withstand counter trend threats). These people make a bull trend profitable.

In a trading range market: Buyers and sellers hove got equal control. Their knowledge for the fact that sooner or later  the market will break range boundaries is enough to keep them executing heavily around break areas. The unprofitable group are those who execute in the middle of the range. The likely profitable bunch are those who execute around range support/resistance.

In a bear market: Bulls are reversing the market but some bears have got personal issues of entering of entering late cause of doubt ( usually if they miss a whole sale entry, they become chasers. If they failed to have guts for an early entry, they wont have guts to withstand counter threats).

How does a Break out failure occur?

 

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Every imaginable occurrence is possible in the markets. This occurrence happens often in trading range markets. Emotional traders imagine a potential huge move after the break of support/resistance, majority enters before the break. Should the break fail break out traders get trapped in a very expensive trade. It also occurs at areas of trend change, traders see increase of depth and seemingly strong counter move, should it fail traders get trapped in an expensive trade.

 How does a break out pull back occur?

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This setup occurs when a break out failure fails at support or resistance. Some traders will marry the high probability breakout failure set up even in bad conditions (bad condition for counter trend breakout failure-good condition for with trend break out pullback) like a strong trend. It also occurs at trend lines. Trend line breaks, after the break traders will look for a break out failure set up, should it fail that’s a break out pull back set up.

How does a pull back and complex pullback occur?

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A pull back occurs in a strong trend when a trend suddenly surprises emotional traders with a huge move, many ones who missed it attempt to fade the first stall. Should a pullback trend fails to give them strength they get trapped in an expensive trade. A complex pullback occurs in a slow trend, deep pullbacks trap greed counter trend traders looking for an early reversal.

Using these setups as a weapon to attack idiots sounds simple for a dual auction process, that’s because the play does not work when taking them all with insufficient experience. The setups don’t work out smoothly hence the traders job is to manage that risk. Completely letting go of trades can give a trader an advantage because he gets the chance to clear his mind for a completely new trend next day.

Making money depends on discipline, how many times do you allow an order? Where is your target compared to price action target? If you have an entry rule of trying twice per entry, why not cancel the session when two setups fail? If you will be trading for 10 years and it’s still your second year, relax the decade is still young. Happy trading!

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Possible Bull on the AUD/USD

The past day ended well for bears, the trend continued to be bearish as identified by our analysis. We are more interested though about today’s trend. The market opened resuming yesterdays bear at price 0.79691, supply was lost for this bear around price 0.79413 at 04:00 am, since then the market initiated a bull pullback trend. Professionals would be looking for possible trend change  above price 0.79640.

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As visible in the screen short above, demand could not hold prices above 0.79640 with three consecutive failed attempts. To Sum this up and find a premise and bias for the day we have to analyze our market using multiple time frame analysis technique . 30 minute time frame is used for identifying the structure, 3 minute time frame is used for trading , 1 minute time frame is used for fine tuning analysis (momentum is fine tuned here).

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We now have our structure on the trading time frame. the trend is currently in a trading range and in slow trends like this one, higher probability entries are found in breakout failure and test. Before finding setups we first look at strength and weakness.

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A break below support will indicate that the bear resumed, a break above resistance will indicate a new bull. Are you trading the same pair? perhaps we can share some ideas together, Happy trading!

 

Intraday analysis for AUDUSD

The market looks bullish and strong. It showed it’s muscle yesterday when it broke above 0.79902 which is a price area defining a top of a range. Today the up trend continued to a new high 0.80423. The low 0.80170 which lead to the new high is accurate in defining an objective point of trend change. At 06:30am the market attempted to trigger trend change at prices below 0.80170 but failed leading to resumption of the trend. At 07:51am trend change was triggered successfully with a valid break out pullback entry minutes after the first break.

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Using multiple timeframe analysis technique to analyze the first step is always to define higher timeframe support/resistance zones (these are areas where price action will move to/from). When this is done accurately like in the chart above, the next step is to define the current trend in the three minute trading time frame/ trading time frame. Currently I see a bearish trend- I classify it as a pullback bear trend because the overall market in 30 minute timeframe is bullish and strong. The third step is to identify strength and weakness.

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In a trending market high probability trades are pullbacks and complex pullbacks. Traders who still would love to go long should wait for the trend to revert back to bullish before putting in some cash. At the moment the market is processing a complex pullback trade.

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I’m always open for sharing Ideas, if you have something to ask, looking for the right broker for you, looking for the best books to read as a trader, I’m freely available for help. Happy trading.

The psychology of participants within an up trend

An edge is necessary to compete in the mercenary game, that means knowing your opponents. During phases of the trend the trader have to ask himself: where is the winner? where is the loser? How can I join the winner? To answer these questions accurately the trader has to look at the market in trade execution perspective. I classify my opponents in three categories: Whole sale entrants (early traders), Retail entrants (late traders), Counter trend entrants (Reversal traders, scalpers).

The risks ran by counter trend entrants

  • Bias : This would result a trader to re-enter counter trend, the mind does alert a trader that what it perceives is counter trend. If that is the case there is a greater probability for the trader to get angry at himself leading to self destruct.
  • High loss rate associated with counter trades.
  • Loss of focus: this can happen when a trader misses a great with trend setup, when this occurs the trader gets to have options either to watch after the stop or reverse trade (effectively transforming him to become the late trader).
  • Quick session limit burst: Calling it a day because of limit burst is difficult.

The risks ran by retail entrants 

  • Protection stop size.
  • Extended time required for the position to be profitable.

The risks ran by whole sale entrants

  • Being too early : this occurs when a trader enters before entry bar.
  • Stop run : occurrence that became popular as market manipulation.

I believe there is a winner in all these categories of opponents which begs the question: who makes the most money? According to my experience counter trades lose a lot, late trades break even a lot, early trades make money a lot.

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In the screen shot above the red circles represent areas where counter trend traders are looking to take entries. The white circles represent wholesale price areas that professional institutions are looking to take with trend trades at. Late traders enter after these parties in any move.

Keeping this information in the mind while trading is useful, when attacking it is good to be in the side with the muscle, entering early with with-trend traders allows breathing room and flexibility with early break even . You would need that kind of flexibility at times when the pullback becomes more extended.

In real time it is horrible to take counter trades without the intention of scalping few pips effectively exiting quick. Most people who like to relax are unable to deal with quick bias change therefore cannot scalp counter trades. Profitable trades for weeks ahead!

How to study strength and weakness in financial trends

The trend in the market changes in blips. For consistent success, it is important to pay attention in shifting forces of supply and demand. After all, it’s the future where there is money to be made. To understand this article I assume you have knowledge on how to: define your structure (Areas where future price action will move), define trends (up trend, sideways trend, down trend).

Below is an image of a structured battlefield. An uptrend is spotted by a series of higher highs and higher lows, a side ways trend is spotted by multiple swings projecting around the same area, a down trend is spotted by a series of lower highs and lower lows.

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A practical method to identify strength and weakness in any market

Step One : Compare the momentum of the current price swing with the momentum of the previous price swing in the same direction, is the price fast or slower than before?

Slopes to expect

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The mind is capable of approximating any trend to the above slopes. The future trend is in the direction of strength and against the direction weakness. When the mind is confused about slopes, it is best to look for another pair. When using this approach it is important to be familiar with climatic moves as they occur in a visual form of strength while effectively a sign of weakness.

Step two: Examine Projection and depth: Increased projection is a sign of trend strength, decreased projection is a sign of trend weakness. Increased depth is a sign of trend weakness, decreased depth is a sign of trend strength.

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Finding weakness in financial markets help make sure your setups are in the direction of strength and against the direction of weakness. Profitable trading for weeks ahead!

Negative mindset impact on traders live account

The main reason for trading which is common to all traders is increasing equity. Most often than not, a large percentage of traders is trapped in negative thoughts, which in turn leads to negative actions taking their accounts to zero. In this post I try to reveal the psychology and danger of a negative mind.
1. Lack of experience leads to a negative mindset.
This is a top challenge for a new trader. It is caused by the inability to trust a clearly defined system, lack of trust leads to poor execution.
2. Lack of discipline
Trading is a subjective process, when experiencing a losing streak, most systems advise closing session, which makes it difficult for a desperate trader to manage a negative trading day.
3. Desire to catch huge moves
It is obviously every traders dream to catch every big move, but for short term traders it comes at an expense either by them failing to consider current market action as most important or them acting on their false picture. Negativity comes around when a trader is stopped out too much.
4. Over trading
Again trading is a subjective process, why not take the next trade in the same day if it can get you out of a losing  streak maybe turn a day to a positive day? This is a psychological bait that traps traders into an ungovernable draw down.
5. Lack of commitment
Trading is easy because anyone can place a trade, but making money is a responsibility. Uncommitted traders who fail to spend some time with the market restrict them selves from the experience required for success. Experience is not free as it requires time to gain it.
6. Excessive Leverage
Most brokers gladly provide leverage at a traders cost. Its the emotion behind a highly leveraged position that takes him out of the game. Most traders who use excessive leverage don’t know that they are classified as gamblers, their addiction is in the losing instead of the making.
7. Traders life style
Keeping a positive mindset is an exercise out side trading that successful trading wouldn’t happen without. Getting bored, getting drowsy, getting destructed and being late for session has a big chance to cost you money.
Terrible right? Its not the end, consider reading “The professional approach” by fortune.

Deep practice rules that every new Forex trader should follow

This post is inspired by Danial Coyle in his famous book “talent code”. He visited every country around the world to find places he referred to as talent hotbeds. His findings were that talent isn’t born but it’s grown. Danial Coyle’s research got more popularity among the sport industry but it was intended for all high performance industries including trading.

Before jumping to the rules I’d like to discuss some of the major key trading differences from other mainstream businesses today, the reason is that in my personal experience it was very difficult to switch from believing that “trading is easy money” to believing that trading is “smart money”:

  • Time: Traders don’t get a fixed rate of return i.e singers get paid per gig & sales, soccer players get paid per month. The market is highly volatile for traders making it impossible to predict future results. A 20 point profit can be archived in less than 60 seconds, netting $200 in a 100k  volume respectively.
  • Activity: Trading isn’t like any other business, it is completely unstructured. No formal education  guarantees success, no obligations, no refunds and no insurance. At the same time it is highly competitive considering that in each and every point there’s transactions occurring between parties.

To create structure for this type of environment new traders need to follow the following rules:

Rule One – Chuck it up

Deep practice feels like a bit like exploring a dark and unfamiliar room. You start slowly, you bump into furniture, stop, think and start again. Slowly and a little bit painfully, you explore the space over and over again, attending to errors, expanding your reach in to the room a bit further each time, building a mental map until you move through it quickly and intuitively. The instinct to slow down is universal… In the talent hotbeds I visited, the chunking takes place in three dimensions. First, the participants look at the task as a whole as one big chunk, the mega-circuit. Second, they divide it into it’s simplest possible chunks. Third, they play with the time, slowing the action down, then speeding it up to learn it’s inner architecture.(Page 79-80)

Absorb the whole thing 

This means spending time staring at or listening to the desired skill-the song, the move, the swing-as a single coherent entity. People in the hotbeds stare and listen in this way quite a lot… “We’re prewired to imitate”, Anders Ericsson says ” When you put yourself in the same situation as an outstanding person and attack a task that they took on, it has a big effect on your skill.” (Page  80)

Break it into chunks

The goal is always the same: to break a skill into its component pieces (circuits), memorize those pieces individually, then link them together into progressively larger grouping (new, interconnected circuits).(Page 84)

 Slow it down

Why does slowing down work so well? The myelin model offers two reasons. First, going slow allows you to attend more closely to errors, creating a higher degree of precision with each firing – and when it comes to growing myelin, precision is everything… Second, going slow helps develop something even more important: a working perception of the skills internal blueprints-the shape and rhythm of the interlocking skill circuit.(Page 85)

Rule two: Repeat it

There is biologically speaking, no substitute for attentive repetition. Nothing you can do-talking, reading, imagining-is more effective in building skill than executing the action, firing the impulse down the nerve fibre, fixing errors, honing the circuit… what’s the simplest way to diminish the skills of a super star talent (short of inflicting an injury?)… The answer: Don’t let them practice for a month … It only requires that you stop a skilled person from systematically firing his or her circuit for a mere thirty days… Myelin is living tissue. Like everything else in the body, it’s in a constant cycle of breakdown and repair.

That’s why daily practice matters, particularly as we get older…. Repetition is invaluable and irreplaceable… deep practice… spending more time is effective-but only if you’re still in the sweet spot at the edge of your capabilities, attentively building and honing circuits. There seems to be a universal limit for how much deep practice human beings can do in a day… between three and five hours of the day, no matter what skill they pursue. People at most of the hotbeds I visited practiced less than three hours a day.(Page 87-89)

Rule Three: Learn to feel it

The point is to get a balance point where you can sense the errors when they come. To avoid the mistakes, first you have to feel them immediately…(page 90) Deep practice is not simply about struggling: it’s about seeking a particular struggle, which involves a cycle of distinct actions.

  1. Pick a target
  2. Reach for it
  3. Evaluate the gap between the target and the reach
  4. Return to step one (page 92)

This procedural mindset does in some way provide structure to effectively behave positively in an unstructured environment. For more information about the secrets of talent purchase you a copy of “talent code” on amazon or download below.

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Two important considerations before investing in the financial markets

1.       Why do you want to trade?

There are two very popular reasons people choose to trade

·         Money: there is no doubt about it, few professions can take someone from ridiculously low capital to extremely high levels of capital in a very short amount of time with very few barriers to entry.

People like Nicolas Darvas turned $30 000 into more than $2 million in less than two years, this is a significant reminder to us  all just how quickly extreme wealth can be created by a trader when all the pieces of the puzzle fall together just right.

You don’t have to start with a ton of cash or earn some degree of cash to trading your way up. You can run your trading career rather quickly and cheaply.

When one considers different ways to turn a small amount of money into an extremely large amount, trading is often considered the quickest and easiest way to get rich.

·         Freedom : The next appeal of becoming a professional trader is a promise of infinite freedom and self-reliance

When trading there is no boss to answer to, you can virtually trade from wherever you want. There are no employees or colleagues to worry about, you can trade from your kitchen in the evening and cook at the same time and nobody would tell you it’s not done that way. This kind of appeal is fueled by the idea of complete self-reliance.

As a professional trader only you is responsible for your success. You don’t have to convince your folks or partner that your idea is a good one. You don’t have to worry about an individual on the other end of the business deal living up to his end. When in the zone only your results matter, no other person can stand between you and your potential for success.

2.       Do you have the right resources?

Just like any profession, to begin this venture you need resources that allow you to be accountable.

·         Strategy: This does not only include reading price action and taking trades correctly, but rather a strategic way of governing yourself as a business individual. A method of preparing for your trading session, a method of handling your thought process during the trading session, a method of recording everything that happens during the session and reviewing records for gradual improvement.

·         Motivation: As mentioned above that most people are motivated by money and freedom, most professionals argue that these are not good motivation long term. There are many ways to be rich besides trading, they provide the same money and freedom.

Stay with me and share some great trading information, do you like this post? Please share with your facebook friends.

Review: CMTRADING AFFILIATE PROGRAMME

If you are new to the net you’re probably wondering, what is an affiliate? how do people make money from it? even better, what do you need to make it work? For the sake of this review I will not be giving text book definitions but tell you exactly how I do it.

First of all I had to figure out how to market. My mind map included a social media page, online forums, blogs and websites. I couldn’t use all of these traffic channels at once due to personal limitations, like the rich man said ” take the stairs”. I opened a social media page and started publishing content with my links embedded in posts.

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My job is to bring clients to the company, when clients are happy with the service to the point of depositing funds, I get paid commission as promised. CM Trading affiliates get paid $300 per client on their first deposit. New affiliates also get a dashboard that looks like the one above, my ultimate goal is to increase the o’s on the right. Excuse the 0’s on the right, it was the first day of a new month, stats get restored to 0’s every month. With the aid of my mind map I expand traffic channels so that the numbers can add up.

I know right now you’re probably thinking do you really get paid or it’s just one of the fungazi schemes out there. During the first week of every month, the IB department gets busy processing the stats, on the second week of every month they send all the invoices to the financial department, on the third week your paypal tells you got money.

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Join my elite team today, if you are not sure where to start just send me an email or comment below, I will help you by all means.

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