Profit Scenario Trade Blog Thoughts Of a Professional Trader

Dear Fellow Trader,

I believe that there are many traders who have problems with proper execution (of their strategy). During the past years I developed my method for an easy and precize execution which always helps me stick to my strategy. If you have ever experienced difficulties to follow a trading strategy, any strategy, this is exactly for you.

I thought that you may find it useful, so I put my thoughts together in an e-book and I hereby share it with you.

Take it as my big honest THANK YOU for being with us!

I wish you all a Merry Christmas and a Happy, Successfull New Year!

Go for it and download your FREE copy right NOW! Link:  http://www.profitscenario.com.au/My_Christmas_Present_For_You.html

Read it, Use it, Enjoy it!

P.S.: feel free to share this link with your friend: http://www.profitscenario.com.au/My_Christmas_Present_For_You.html

Posted under Market Psychology

I am very happy to announce that our private trading company has started to trade legally, officially and practically, as well.

After a long time planning, searching, selecting, preparing and forming procedures, this week we have finally started to work together with our complex strategies on the Forex Market. We model high growth managed funds with the flexibility of individual investors.

We trade all around the clock performing perfect mathematical trading series. Our strategy combination is well diversified both in time and scale ensuring the persistent and evenly distributed work load, gains and losses. Doing this our trading performance chart can converge to the ideal evenly raising straight line.

Forex Intraday Strategies Combined

We work with multiple trading strategies on multiple time frames on multiple currency pairs. We follow very strict trading rules and apply very tight, still exceptionally efficient Money Management rules.

I am very proud of my PARTNERS, I will be working with. The other day I was thinking about us. We are all individuals, having not too much in common but there are certain points we all met: all of us have already tasted success and continue to strive for it. We are all disciplined, committed, dedicated, hardworking and good team players. Unbeatable combination, isn’t it?

We, as a team, are highly multi skilled. We have good planners, good mathematics skills, excellent computer skills, great excel experts, statistical systems, genuine business leaders, great organizers, educated technical analysts, graduating financial advisor, and above all: disciplined Forex traders with broad trading experience. With these combinations we can not fail.

That is why we are so confident in our trading performance that we are going to report our daily trading results regularly, transparently and publicly in our website (coming soon). No comments, no explanations, no excuses: pure results. They are going to speak for themselves.

Check back for more details soon.

Our objective is to show the investment world of today that a small group of highly educated traders can beat any commercial investment structure and can set new standards in investment returns. We can. We will.

Posted under Market Psychology, Money Management

If you spend enough time watching and analysing charts you start to recognise certain principles and regularities of the movement either in time or scale or in both.  Sometimes you find those certain features absolutely useless and you find others useful and promising.  Apparently the wisdom is to recognise the difference between them and bring the most out of the useful ones.

The deeper you dig in your surveys the further you get.  After tens of thousand hours I have spent on the charts (more than 5 years now on intra day charts) I have got to the point when I had to make a very hard decision: should I believe what I’ve learnt, what others keep saying OR should I believe what I’ve just discovered – even if  that one is controversial?

I was so confused that I checked my discovery many times over and over again – and I always got the same results.

It has REALLY been (and still is) shocking and scary because I had to decide whether I throw away 80% of what I’ve learnt from others and follow my revolutionary new direction or not. Although my invention truly is revolutionary it still sounds logical.

Galileo Galilee (1564-1642) could be in the same situation when he set his face against the whole dominant system, disputing for heliocentrism over geocentrism. We all know that at the end of story he was forced to revoke his statements and to spend the rest of his life under house arrest.  Although he never gave up his firm belief, unfortunately, his tenet was only proved and certified some 200 years later. Until his death he kept burbling: ‘and yet it moves’.

So, now, basically I have two main choices left.

First, I can fight allegorically 80% of the Forex trader community to convince them about my truth. Or, second, I can remain in the background and keep trading according to my very lucrative rules. Publicity or pure money – that is all about it, basically.

You know what? Well, it is NOT that hard question, is it?  :-)

Now I am fully confident that I am right; my results and account size prove that to myself and to my family – that is what matters.  I keep trading in my own way making good money on the Forex market; I am happy with that. The fact that more than 90% of Forex traders keep losing their assets just makes me more confident that I am right doing something very different.

There is a saying that ‘There are two things people want more than sex and money – recognition and praise’. Yes, I think it is true but not with compromising money (and sex?) for recognition and praise, huh?

Posted under Market Psychology

There are certain Forex trading strategies, especially intraday ones, which work only in a given time period or in a specific trading session. There are other ones which triggered by time, for example news trading or session breakouts, daily high-low trading, and many more.  Those time sensitive trading strategies depend on time zones; different time zone setting greatly affects their outcome.

Although daylight saving settings could be so obvious, they are not.  For example here in Queensland (AUS), we do not have any daylight saving settings at all; probably that was the reason that I totally forgot that last year and I lost a couple of time sensitive trades wondering why they don’t work in their usual way at all.

Anyway, most of the World has to set the clock twice a year; that is why it is easy to forget. This weekend (Sunday, 30/10/2011) Europe and UK have to set the time backward by 1 hour.  Keep it in your mind, you too.

Unfortunately it’s not that easy, USA has different system so New York is only going to catch up with London the next week. (Sunday, 6/11/2011).

How do daylight saving settings affect your intraday trades?

First of all, if you work with time sensitive trading strategies you have to watch for timing.

Second, depending on your Forex broker’s location, your chart can be shifted by plus or minus one hour further from your usual settings. Unfortunately there is no rule for that, some brokers follow the daylight saving settings, while others don’t.  Make sure that you check with your broker in time.

Some trading platforms don’t allow you to set the time manually as that comes from the broker’s server time.  A good example for this is Meta Trader 4 (MT4) which is the most commonly used trading platform among private investors (approx. 85% of the traders hang on that).

Third, until New York is catching up with London’s time (1 week) we are going to have an hour less on chart from London lunchtime to New York opening as this period is shortening by an hour.
After 6 Nov we will have to wait another extra hour for high impact US economic news; after setting the clock they are going to come late night at 11.30 PM (Australian Eastern Time) which is a pain for us.

Watch for your settings, modify them if needed.  Do not forget that all mistake made cost you money: either by actual losses or by missed winning ones.

Posted under Technical Analysis

There are many ways to evaluate your success on Forex Market. You can measure the gain in percentage of capital, in percentage of the margin required (position size), in percentage of the ratio of losing/winning trades (reliability), in dollar value, in number of PIPs, etc.

Personally, I believe that there is only one way to measure the results – all the other ways are suitable only for the purpose of impressing the other traders / friends.

 Recently I saw advertisements saying that they managed to make 1000 pips in this month, or something like that; which is the perfect example of impressing others – without telling the whole truth.  Here is what I think.

 The number of pips you achieved during a certain period depends on many factors but mainly on the timeframe you worked on.  Scalping on M1 (one minute chart) you probably go for 5-10 pips per trade; in contrast if you swing trade on daily chart you most likely target a couple of hundreds pips per trade. Supposedly, you risk 1% per trade (and calculating with Risk Reward Ratio = 1:1, just to keep it simple) you can make the same amount of money in both cases.  Scalping for 5 pips within 10 minutes or swing trading for 120 pips in 2 days could give you the same result: 1% gain. 

Notwithstanding it sounds well that ‘I’ve managed to make 1200 pips in this month (swing trading)’ , we all know that it most likely 10 winning trades (say 10% gain, which is excellent). In contrast the fellow trader could say ‘I’ve managed to make 50 pips in this week, scalping’ and guess what? It does not sound that fancy but he made much more: 10 winning trades in a week, say 10% a WEEK! Can you see the difference between expressing the results? Try to read between the lines, always look for the whole truth.

Click on picture to enlarge

In this trade I caught 674 pips in 2.5 hours. Wow!  Sounds great!  But the truth is it gave me around 2.5% gain on my capital (which I was happy with but it’s far from my best trade)

Another ‘misleading’ calculation is when they claim that the ROI (Return On Investment – such a fancy, trendy term – unfortunately most of them slightly changed the way they use), so the ROI was 100%. Wow, everyone who made less than 100% last night should be feeling ashamed? No, not really. Again: they often calculate the gain only on that position, saying that, ‘Ok, the margin requirement was that much, I managed to make that much profit, so it’s 100%.

Wait a minute, wait a minute. What you missed to tell us is that you used very high leverage, that is the only reason you could gain that much (compared to position), first. Second, to be able to do that you had to have a 50-100 times bigger account so that 100% gain on the position gave you 1 or 2% gain on your total balance, right? Yeah, but saying 1 or 2% gain no one get impressed; that is why they like saying mumbo-jumbo percentages and/or pips.  They just want to reap the laurels; it’s so far from the truth. They don’t really lie; they just don’t tell the whole story. Do not be fooled by them because you don’t even notice and you fall into the trap, chasing the market, overtrading your account and/or you capabilities to chase the same results.

The other ‘favorite’ approach is when they say: ‘I’ve just banked another $150’. Yes, that is great but how much did you risked for that? $1500? Ahh, that’s miserable, don’t be happy with that, you are going to end up in massive negative balance.

I’ve been witnessed a conversation the other day. 2 fellow traders talked about their results, Mr. Big Head said proudly: I made $750 this week, how about you? Mr. Budget responded with downcast eyes: $100, mate. Wow, huge difference, who is the lucky guy, huh? Because I knew their situations I asked them to convert that to percentage. Mr. Big Head managed to make $750 per week on an almost $100,000 account which turned up around 0.75% gain. Mr. Budget earned $100 per week on a $2500 account, say 4% profit. Hmmm, huge difference, right?  Well, think it over who has bigger potential.

Without putting my nose in anyone’s business (or pocket), the only honest way to express (or to compare) the profit is to calculate the proportion of the gain on capital. If it’s 15-20% return per month that’s great; regardless its’ dollar value. That can be $100 or $1000 it does not really matter; for a long term +20% gain per month means wealth anyway (paired with discipline and proper mindset) .

Posted under Market Psychology, Money Management

 No one could miss the news day after day about Gold price that flies sky high reaching newer and newer all time high records. In parallel Swiss Franc (CHF) strengthens against everything so much that already jeopardizes the whole Swiss economy.

These things should not surprise anyone; we all could expect this because these are logical consequences. Why? Let’s talk about this.

I wrote an ebook more than a year ago, more precisely I published that on 08/05/2010, with the title of ‘The Biggest Recession in our days’. If you remember, in this ebook I discussed the economic facts and their consequences in the future. More than a year ago I predicted this global economic decline including and highlighting the Gold and Swissy rally (refer to that ebook page8), because those steps were so obvious. Why?

During global economic recession the investor’s risk acceptance converge to zero and they liquidate all their investments. They start it with derivatives and shares closing all transactions, regardless of their actual performance. Obviously, it is definitely not logical step, but seeing their profit melting, logical mindset jumps out the window.  The panic takes over the control and they sell out everything.  It is just the cherry on the cake that everyone was greedy , so they all used the biggest investor trap, the leverage, and it’s highest form available, when they bought their investment packages. Doing this they were, who actually induced this situation we are in again, with being able to sell much more than actually available (due to high leverage) and with forcing the prices unbelievable and illogical low levels. These low price levels obviously mean bankruptcy for investors and companies, as well. Trap, that’s what I call it. When greed gets an opportunity to use high leverage.  Here we are.

Anyway, the show must go on, smart investors don’t let the money sleep, they must be invested. Where and how? Commodity prices are falling, share markets are collapsing, stock market indices are falling down, property prices are sliding down, everything seem so dark. Only two stable opportunities are still shining: Gold and Swiss Franc.

Both of them already passed the test of time; they already proved that during depression they are able to hold their values. Gold always has been and still represents the real value; this is probably because people still associate the real value with the former gold reserve – which does not exist anymore.
Swiss Franc established its stable value ‘award’ during and right after the II. World War, which still stands. Investors think that if CHF managed to keep its value during a World War it cannot be any worse, so they can trust on that anyway, in any situation. You know what? Simple, because they think that and they keep exchanging everything to CHF, it really keeps its value. That’s exactly what we call self-fulfilling prophecy.

Well, these are the reasons, now, when everything else seems to lose the value, people turn to Gold and Swiss Franc and they invest all their liquid assets into these two. The next step is obvious, the more they buy the higher price they reach. Ahh, so its not so good for Swiss economy? Who cares? So, Swiss export is almost dying because of this reason, because everything from surgical instruments through jewels and watches and machinery, etc. became exorbitant, who cares?  The fact that Switzerland’s second largest export market, USA has to pay more than double than they used to pay in 2000, who cares? (back in 2000, when USDCHF was rated around 1.8, 1 US Dollar could buy 1.8 CHF. Today, 24/08/2011, this rate is 0.7936, meaning that, the same amount of 1 US Dollar can only buy 0.79 Swiss Franc.)

USDCHF Monthly Chart - ProfitScenario

 Just believe me Swiss economy cares because they are suffering from this. Exports and its forecast heads downwards, which means Swiss economy slows down, workplaces are being forced to close. 

Both Gold and CHF are highly overvalued by more than 30%. We saw many situations like this in history, right? Everyone used to call them ‘must have opportunity’ when they formed; and everyone call them bubble now, afterwards.

Posted under Market Psychology

Forex trading is a very addictive activity. First of all, there is a possibility to make money, I mean MONEY, without sweating; let’s admit that sometimes it seems to be a fairly easy job. Second, even if you just started to play on charts you could be right even at the first couple of times and manage to make some money – which is a fantastic feeling and inspire you for further trading.

But how close or far are you actually from being a successful trader?

Believe it or not, being successful in Forex trading and playing poker are based on the same principals. At the first sight, both of them seem to be gambling. At the same night when you were introduced to playing poker you could win a good couple of hands. Even a few hours later you could beat your friend (temporary), who taught you to play earlier.

The situation is exactly the same with trading. You could be winner at your very first trade. On the top of that, even if you lost a trade or two, you could feel that you were ALMOST right, just a small modification and it would be great.

Wait a minute, wait a minute. It could not happen at (for example) playing golf, right? After practicing the basics for a couple of hours no one was able to beat a player, who already plays for years. Hmm, that makes sense. But where is the difference? The difference is the luck factor which plays a big role in AMATEUR approach in playing poker or Forex trading.

There is a saying that:

Even a clock that does not work is right twice a day.

Do you know how I mean? Just because you won a couple of hands in poker, it does not mean that you are better poker player than the other one. Just because you closed in positive gain a couple of trades on Forex Market doesn’t certainly mean that you were right, or you were on the right track, at all.

There are millions on the World, who can sprint 100m in 12 seconds. There are thousands, who can complete that distance in 11 seconds. Currently, the World Record is 9.58 second for men (10.49 s for women). Those thousands are ALMOST there, right? Just a couple of tenth or seconds and they are there, right? Hmm, frankly, far from it.
Just trust me, to be able to cut away a couple of tenth and seconds cost them months or years, many many hard woring hours, sweat, pain, effort, focus, concentration.

Tricky, because the goal seems to be so close and tangible – but the path actually leading there is much longer. That is the trap.

The truth of Forex Trading is someting like this

If you take a closer look you are going to notice that both of playing poker and trading Forex  depend on probability theory and Money Management. If you are good enough to recognize the principals (probability theory, set theory, mathematical series, rule of big numbers) and be able to put them together and create rules to best describe the proven lucrative activity, you have your trading strategy. I mean, for longer term, not just temporary for a couple of hands/trades/nights. Combine that rule system with well-thought and optimized Money Management and you are almost there. I said almost, because still you have to follow those specific rules, you have to execute your trading system to actually make money (and that could be another hard part).

Trading on Forex Market is very tricky. Seems to be easy but just trust me, it is hard work. Long, long hard working hours, sweat, pain, effort, focus, time and money.
So, how close or far are you from your success? You tell me.

Posted under Market Psychology

Brokers’ advertisements keep saying that trading is as easy as clicking by mouse, and claim that it can be a ‘work from home’ job for everyone. They are stuffing our heads with those ads, you can’t miss them, you can’t avoid them. Unfortunately, when people hear and see something repeatedly, all the time, they start to believe it. That’s how all marketing campaigns work. The more they say, the more people believe them.  When those silly ads keep flowing as if from the tap, people start feeling ashamed not to be able to do that – after all everyone can do it – according to ads.

What they ‘forget’ to put in ads is the truth: more than 90% of their clients regularly, continuously and repeatedly lose their assets.  That is a statistical fact – no one disputes that.

Let’s put it this way: if in your profession, whatever it could be, only the ‘top’ 10% made money, all the others, the rest 90% didn’t, moreover they lost money, how would you approach? Would you just walk there and spend your money on your job? Would you just download and read a quick 5 page introductory know-how and ready to go? Would you expect to be in the top 10% with only that much preparation, education and experience? It could be a truck driver, a dentist, an electrician, a computer programmer, a jeweler, a commercial pilot or a builder, whatever it is. Would you expect to do that chosen profession with success in this way? No, off course you would not, no one would, it is silly.

Well, trading on the markets, especially on the Forex Market is a complex, standalone profession. Believe it or not, less than 10% win and more than 90% lose on Forex Market (non-official statistics shows even worse ratio : only 2% win and 98% lose). 

Without proper comprehensive and systemized education and sufficient experience no one can meet with complete success. Additionally, a good couple of professional tools are also required for trading: an adequate computer, solid internet connection, suitable broker with favorable conditions (quick and accurate execution, low spreads/commission, suitable Money Management requirements, reliable data stream, decent charting platform, etc.) , fast  and accurate news source, testing and statistical background, and ability to interpret them, planning skill, accurate execution, and many more.

I have never seen a successful Part Time Forex Trader, who, just on the side of his/her daily routine, by the way, could trade with success on the long term (>3month).  

There are so many things to be done in order to trade with success, as a part of preparation for trading, such as: checking economical news, interpreting their possible effects on price, analyzing charts starting from the longer time frame to the lower ones (D, H4, H3, H1, M15 and so on), determining the major support and resistance levels, determining the longer, the middle and the short trends, drawing/modifying trend lines, recognizing and interpreting candlestick formations (if any), selecting Technical indicators for confirmation (if any), validating the entry conditions according to the written (tested and proved) Trading Strategy, determining the exit points (Stop Loss, Profit Target) calculating the precise position size, logging trades, making statistics, etc.  Do not forget, we have to do all of them (and more) with perfection; every single mistake could lead to loss, costing money.

It’s not a wonder that many people lose money on the markets; they are just simply not ready to do that properly, they are just simply not prepared enough or at all for trading. Unfortunately, most of them never reach  that level because they burn their assets way before they get experienced.

I am convinced that this type of job –responsible investing or speculating with real money for a living- demands maximum effort, maximum commitment and clear mindset. It can not be done properly ‘just  on the side’ just with ‘two hours daily’ approach.

It doesn not certainly mean that you have to sit in front of your computer screen for 10 hours per day; I hardly spend more than 4 hours with trading daily.

But the preparation, set-up, data collecting and analyzing, trade logging, statistics, evaluating, modifying (if needed), planning and re-planning, learning, reading, etc. to remain up-to-date take another half day every day, 7 days a week.

That’s my way to ensure positive outcome as much as I can, to put all effort (time and energy) not just to get there to the upper 10% but to remain there, as well, as long as I want to.

I am a full time trader, I never said it is easy, I never said success comes by itself, just sit back and relax. I am fully committed to trading, that’s my job, my interest, my hobby, all my thoughts; that is my life.

I can not imagine trading at this level without full commitment; I deeply believe that is the only way to approach trading professionally.

Posted under Market Psychology

Dedicated to my friend, Steve

 There is no doubt that sound Technical Analyst knowledge is essential to trade successfully on charts.  However, knowledge itself is way not enough. I can not emphasize enough the difference between the knowledge and the capability to achieve something with your knowledge.  We all can agree the fact that the pure possession of relevant knowledge doesn’t guarantee the success .  Just think about the teachers and lecturers at universities. Most likely they have the most comprehensive knowledge in their profession; but how many of them on the Forbes list? Check their pay-slips and you will see what I am talking about. Those, who CAN and actually USE the relevant knowledge, make the most money.

Back to trading, especially on Forex Market, Technical Analyst knowledge is not enough. The knowledge itself makes you able to trade on market (not gamble); but personal trading experience is which gives you confidence to execute your trading plan properly. Proper execution –especially on longer term- based on confidence. It doesn’t matter that you can not execute your trades properly because you suffer from doubtfulness (in your knowledge or  in the trading strategy) or you just simple keep making mistakes during execution.  Every single trade you mess up costs money – from your profit, reducing your overall performance. The only thing which takes you closer to success is your personal experience.  There is no shortcut; everyone has to go through the journey.  Yes, it is going to be a journey, because building your trading confidence step by step is a procedure. Trade by trade, day by day, month by month you get closer. Every single Stop Loss and every single Profit Target gives you more experience. 

Don’t be in a rush, don’t chase the money; concentrate on precise execution and your profit will be there as a ‘by-product’. The more attention you can pay to details of the strategy the more profit comes.

Can you remember what Morpheus said to Neo (Matrix): ‘I can only show you the door. You’re the one that has to walk through it.’ That’s it.

Anyway, here you are couple things that can help:

1)      learn, learn, learn – don’t be satisfied with your existing knowledge; strive to get as much information as you can, remain up-to-date
2)      have your trading plan in written form and stick to that
3)      do your homework – analyze and evaluate your past trades and the current market conditions before trading
4)      know what you do – write your Trading Log Book and make statistics to see your overall performance and spot the mistakes (if any
5)      maintain strict Money Management with reasonable low risk
6)      focus on one thing, one single strategy and master that – preferable whichever make the most money
7)      get ready for every trading session, spend enough time with preparation (both mentally and physically)write everything down – what, when, why, how

… and be patient. Trading successfully on market and making outstanding profit is not a question of a moment, like a single trade. It MUST be a process with series of trades and continuous stream of profit.

Posted under Market Psychology

 Many years ago I used to be a top sportsman; I trained hard 8-10 times a week in my chosen sport to become a successful competitor.  While the others were just hanging around with friends I trained. While they were partying, I trained. While they were lying in their bed lazy, I trained. In my spare time I read books, articles about the human body, muscles, movements, nutrition and new techniques and tactics in the sport; I wanted to know everything related to sportsmen’s performance.  Week by week I trained harder and harder doing more and more exercises, practicing more and more, lifting heavier and heavier weights. I suffered from pain, I sweated a lot but I was very happy; I really enjoyed every moment of my training sessions. I knew that only hard work brings great results, so I felt good and satisfied when my heartbeat pulsed around 200/min. It never got easier; I could not afford to sit back, I always had to put 110% effort to ensure positive results. The long hours in the dojo, the pain in my muscles, the tiredness, the sweat, everything got paid every time when I stood up on the podium. I had a burning desire for success; I craved appreciation and real results so I did not fear pain or hard work.  I learnt that there is no high performance without hard work; there is no shortcut.  

 Nowadays I apply the same approach to Forex Trading. I’ve learnt a lot, I’ve read a lot, I’ve spent months and years collecting and analyzing data. I observed different market conditions, I analyzed hundreds and hundreds of different charts to be able to distinguish different situations and movements. I created huge databases and excel sheets; I analyzed statistics. In my spare time I read a lot about successful traders, about new trading strategies, techniques and tactics. I learnt probability theory, the rule of big numbers, the set theory; everything, which could take me closer to my objective: success. 

While other ‘traders’ just bought their newest ‘toy’ (another new computer, another IPad, or another trading robot), I invested in another trade on the FX Market. While they were chit-chatting on skype or phone, I kept analyzing and trading.  While they were partying on weekends, I analyzed my trades of that week and tried to fix my mistakes.

 I did not regret any minutes I spent learning, practicing and analyzing because those are what led me towards my objective: to become a successful trader on the Forex Market. I am craving success, so I do not fear trading, risking or even suffering from Stop Losses sometimes. I am fully aware that it never will be easier. I can not afford to sit back, I have to put 110% effort every day, in every trade to ensure positive outcomes (if possible).

Now, all my efforts and thoughts get well paid. I am satisfied because I proved to myself that I can work hard again and it has the targeted result, as always. I am proud because only very few traders can reach this level. Obviously, I am very happy because I make outstanding profit on the Forex Market continuously, ensuring the future of my family; and that is what every man strives for, isn’t it?

Posted under Market Psychology