BFI Miscellaneous (7/7)

Common BFI Trading Mistakes 

A BFI Trader understands that they will be taking a series of trades in a certain way and that they will make trading errors and click certain things that they are not supposed to be doing and that is not in their own best interest. Understand these mistakes and make the solution a constant part of your arsenal, as you fill up your trading suitcase with the many various tools we may use to enter or exit the markets. 

There is no shame in making these certain mistakes; once. This lesson can save the vast majority a large portion of currency, but most realize it after they have made the mistake and paid their own tuition. Regardless of how you learn them, to make them repeatedly only means that you do not fully understand the proper analytical concepts of market movements. 

A BFI Trader needs to reach the level where they are confident in the first part of the trading game, which is the Analysis. Then and only then can you think about an entry, or executing on that deal or trade idea. Once traders understand the important principles of analysis and also of execution, any seasoned trader understands that the main underlying issue for most, whether they realize that or not, is the third part of this trading game which is Psychology; but we like to call it the ability to "allow deals to play out".  

The self-sabotage factor in trading is at its highest, because the trader trades strictly for maximum financial gain. We know that allowing a trade that is in the same direction as the monthly, (HPT), to run to a further target gives us the best returns. However, saying and doing are two different things. Most are quick to close out after a small movement in their favor. 

This is a psychological issue and has absolutely nothing to do with the analysis or the entry method being used. 

 "Previous" Market Structure

Has this sell zone been validated? 

Not yet. 

Although there occurred multiple BFI Footprints (a strong move that breaks previous structure), we are only concerned with the previous structure; previous to the origin. 

In the above image, we clearly can see the true and proper previous structure that matters for zone validation, which is all price action before the creation of the sell zone candle. You may need to imagine a vertical line at the sell-zone candle itself; but we are looking from that point and everything to the left, in order to determine whether or not a zone is valid and tradeable.

After the moment price breaks the previous market swing point to the left, we have officially validated our zone properly, and it is safe to assume BFI orders originated from that zone origin. 

There are two ways price can break the previous swing point and create the BFI footprint. It can wick the previous swing point, or it can completely break it with a strong body. 

 

The way price breaks the previous swing point tells us how aggressive the transacted volume was at the origin of the impulsive move. 

BFI footprint; by body. A very strong origin. 

BFI footprint; by wick. A valid usable origin. 

 

We understand by now that what we are validating and analyzing is the origin of this very precise impulsive move that caused this breaking of previous swing points. The origin of the move is the main key focus and concern for us because those are price-levels at which, from the origin, was a controlled push upwards. 

 Not Really A Valid First Retest

You should know and understand by now that we look at a chart and seek to find a validated zone, on your own desired macro timeframe, and attempt to trade the first retest of this validated zone. Since there was heavy buying there, we may also buy (heavily?) when price returns down there. If there was heavy selling from the origin of a downwards impulsive move, then we may also be selling when price rally's back up to this specific origin. 

 

The key here is in validating the zone properly, and in drawing the zone properly, so we can make sure whether or not we have the classic and least risk trade opportunity; a first retest of a valid zone. 

 

If a trader draws their zones by cutting wicks and not using the proper price range and boundary, and they also only use very small minor zones in the middle of a major impulsive move, that is a difficult way of profit-generation, as you may tend to see a classic wipeout on those instead of the first retest respect. 

Which zone is the valid zone? Red or Yellow.  

 

As a trader, our entire focus should be on a single zone, and not on a zone that constantly keeps changing with every retest. Drawing the yellow zone is not valid as this is not a zone; it is a price reaction to an already existing zone in red. The red zone is the valid zone and that zone stands as valid until it is wiped completely, as was the case here after the second retest with the sell OFV cleared, price shoots through the zone. 

 

The yellow zone is invalid because it gives the illusion that we are at a first retest of a valid zone when in fact we are actually likely to be a wipeout scenario since it is the second retest or third or fourth, which can be an expensive illusion. 

The lesson above is a simple one; make sure to look left and draw the original zone if there exists one. You may need to scroll back in history, but take the trouble and spend the extra few seconds and do it. Make sure this is a fresh zone, and not a retest of an already existing zone that we may be blind to. Make sure you are truly trading a first retest trade. This way, we do not find ourselves completely on the wrong side of the market. 

 Big Body Zones

There are a few times where the candle that creates the high or low for that market swing point, is actually a huge body candle, and using the base of this big body candle would create an unreasonably wide zone. These types of zones should not be drawn using such candles. Big body zones are not useful to us and we should never draw a zone on a very big body candle.

 

We want our zones to be the origins of the impulsive move, but we cannot use these candles for zones because the zone would then actually be including part of the impulsive move. We want the origin of the zone and nothing more, and we understand that based on what type of orders were being transacted, Buy OFV or sell OFV, we know the type of that specific zone. 

 

The best way to deal with these type of scenarios is to simply: FIND A BETTER BASE. 

 

We know that the high or low of the zone is never changed; the most expensive price or the candle with the highest high or lowest low; this high or low point will always be used to draw our zones. However, at certain times we may want to change the BASE of the zone and find a BETTER BASE.

Not a suitable base.

This would be the better base to be used with the high; from the high to a proper base. Proper Zone boundaries are drawn; usually the better "base" can be found on a neighboring candle or within a nearby cluster of candles.

Too Many Zones

This is a very common issue especially these days of traders with over twenty pairs attempting to trade and extract consistently and safely from the markets. A BFI Trader knows that they need to get very in-tune with a single pair, and they know they need to be able to catch a single A to B movement on this currency pair or financial instrument, and the rare ability to take a single trade from A to B, without sabotage, then we understand that taking multiple trades with multiple entries, from A to B without sabotage. 

 

Before any trader thinks they can try to take on multiple pairs, they should definitely be able to trade skillfully and consistently on one single pair. You must master catching an A to B movement on a single pair before you can ever imagine catching multiple A to B movements on multiple pairs. 

 

Some things take time; trading requires a seasoning process of years just like any other skilled profession. 

 

In order to do this and make trading very simple and effective, instead of absolutely exhausting, is to focus on a single zone at any one time.

In any chart, for any financial instrument, you will have a current market price. This is where we are today. We will always have a sell-zone above current price, and we will always have a buy-zone below current price, regardless of how far away they are at the time. 

 

Of course, we understand that there can be a million sell-zones above and to the left, and there can be many buy-zones below, but none of them matter, except for the most recent one. 

 

There is a most recent sell-zone that can be found; make sure it is the most recent valid one. There is also a most recent buy-zone that can be found below price; make sure it is the most recent valid one. 

 

These two zones are the only two zones we should be drawing. Out of these two important zones, we are heading towards one and leaving the other. It is the job of the trader to understand their context and where we are in price action today, but also where price may be headed, and where did price come from. 

 

We do not get paid to draw zones. We get paid to draw the most recent zone in which price looks like it is heading towards, or the zone where price may currently be sitting at. That is the only zone that matters and that is the only zone that should be drawn. 

Focus on drawing the most recent valid buy-zone below current price, and the most recent valid sell-zone above current price, for your desired macro timeframe. Price will be moving towards one of these two zones; that is the one to focus on. 

 

Price will not be in two places at once; so our focus should also remain in one place as well, exactly on the most recent zone that matters today. 

Middle vs Edge Trading 

This is another major issue that most traders experience and it is mainly due to impatience. Obviously impatience can stem from many different sources and reasons, such as the fear of missing out on what could be a potential trade. Some traders are satisfying a unique urge to be in the markets and they may feel very uneasy and uncomfortable when price is ticking up or down, and there is a fear of the price "leaving without them". This is clearly an insecurity issue and thus a psychological one. This course is designed to help facilitate more of the analytical concerns and the execution concerns. Some traders will create a zone and a trade out of thin air, just to have something to trade. The solution to this is inside the trader themselves. 

 

There exists financial capital, and there also exists mental capital. 

 

Most traders deplete the majority of their mental capital in so many rushed and impatient trades, that by the time the middle of the week comes along, they have already depleted all their mental capital and are totally exhausted. Trying to make a trade work is a very expensive trading style. 

 

The elite trading style that you seek is that of one where the BFI trader only watches one or two pairs, and is completely familiar with their movements and their higher timeframe monthly biases. They are looking to catch an A to B impulsive movement, or at least the majority of one. With three to five trading ideas per week, a properly positioned and pyramided A to B movement, or even several of them, is more than enough  results for a trading week. Take each week as its own candle, and focus on only a few pairs and on only being able to benefit from a single A to B price movement. 

Play at the edges; a BFI trader should already be positioned by the time price reaches the middle. The middle can be used by experienced traders for short term intraday trading, but it is a risky form of trading and can be quite stressful. Do not deplete all your mental capital, and also financial capital, on a series of trades that did not have much conviction and most come to later regret. A BFI trader always waits for the price action to print an appropriate signal, in a certain section of the zone. 

 

Never chase price. There is a deal to be made at this moment, or there is not. If you sit and wait there for a few minutes, rarely will anything change drastically. The hardest part of trading is the sitting and the waiting; the patience to wait for the right moment, where price may enter your weekly zone, in which you get to work for a short period of time, enter your trade, and you allow the market to do the rest. It is about learning to become active when price is within your zone of interest, and learning to be inactive and not to indecisively chase price as it travels from one edge to another. 

Analyzing On The Micro 

Another common mistake traders may make consists of conducting a form of "analysis" on the smaller micro timeframes. 

 

Macro timeframe for analysis. 

Micro timeframe for entry. 

 

We should not be sitting on a 15m chart (the micro time frame for a 4H zone), and analyzing the price action. Lower lows or higher highs; they do not matter. A break of structure can be used only if seeking a safe time to go breakeven. We can see where price is in regards to the zone, but on the micro, the higher highs or lower lows do not matter here, as there is more noise and unreliable patterns on these smaller micro timeframes. The micro timeframe should only be used for determining an entry point.

 

We understand that the entry point is a point where there is a simple click; but we also understand that it is essentially a timing concern. We want to see a valid signal within preferably the deeper portion of our zone. Price does not sit at a valid fresh zone forever. It reacts to the zone for a short period, and then it either respects the zone or it does not. Every reaction will be unique, and every situation will be unique. 

 

Macro timeframe is for Analysis. 

 

We know and understand by now that the macro timeframe is the timeframe we analyze price action on. For the commonly used 4H & 15m timeframe couple, you would analyze the 4H timeframe. 

 

What do we analyze? We analyze price action as it approaches an important opportunity zone, and we analyze how it reacts to this certain zone. We analyze to see if price has completely left the zone on our macro, and to analyze whether or not price is returning to a zone for a second retest. These are all questions that should be answered on the macro-timeframe. 

What Is Your Edge?

What is your edge in the markets? 

 

The answer should be clearly laid out. There should be no doubt as to what your advantage is in the markets. If you are not yet sure, then this section will help create the foundation for a structured trading edge or system.  Although we are small fry, we need to develop confidence and take advantage of the probabilities and the way markets are designed to move. 

 

An edge can be likened to a system, and a system can be made up of multiple systems. 

 

In order to trade the financial markets effectively and consistently, you need to have a complete trading edge that you can apply across any financial instrument. The system can be as simple or as complex the trader desires it to be, and they can automate it if possible. Simplicity is key. 

Trading System 

A key and integral and foundational part of the trading edge; is the trading system. This is where a trader has an exact and precise on when to click and enter a potential trade opportunity. Knowing exactly what we are looking for, and being prepared to click or get to work when price is in these certain areas of interest, is the key to understanding and implementing this portion of the trading edge. 

 

Valid micro-entry-signal 

Valid macro-zone 

 

These are the two green lights that we use for the BFI Trading system. When price creates a valid zone, by a certain impulsive move, there may be a trade opportunity that arises when price returns to the zone origin, in which our trading system says that there is a potential first retest opportunity to be aware of. 

 

The trading system is a simple but key part in the trading process. There are many complicated systems using slanted lines and/or different forms of indicators, leading or lagging. This creates a complex set of scenarios and circumstances for the trader to deal with and does not make decision-making simple and effective. 

 

A BFI Trader only looks for two signals, and that is simply a valid micro-candlestick signal to print inside the macro-zone. The decision should be quick yet thoughtful, and must be very precise. There are no conflicting factors pulling or pushing in other directions. The proper action is clear and logical, and it is performed, with little afterthought. 

 

That does not mean to click and trade every signal at every zone. Of course not. There are some zones that are not worth trading. There are zones against the monthly directional bias. There are zones already with a first retest occurrence. The better quality and better probability trade opportunities you choose, the better quality your results. Catching a few impulsive A to B movements per week can take a very short period of time and effort, but can take many years until a trader is able to do that easily and consistently. 

 

Do not forget the entire goal of trading; to catch a single A to B impulsive movement, or at least a healthy portion of that move. 

ATP System 

Add-To-Position system; optional for beginners. 

 

A BFI Trader understands that they are not trading to take many trades. A BFI Trader understands that we are not here to generate large trading commissions for the brokers, by executing many orders for very short periods of time. Even if it worked, there are other more effective methods to trade financial markets, and that will leave you with much more free time on your hands. 

 

Time is the ultimate resource here, in the end. Therefore, we believe in trading in a picky manner, and trading in order to catch the majority of an A to B impulsive movement, preferably from a valid zone. When we find ourselves in such a winning position, we believe in maximizing the benefit from that A to B movement by accumulating a large position, safely. 

 

A beginner should only focus on catching a single A to B movement, and holding the position to a single predetermined target, using a predetermined stop level, on a single pair. That is the prerequisite; the basic fundamentals are the most important to master because taking a single entry from A to B, properly and without issues, is a major tool in the arsenal for consistent profit extraction. 

 

A system that is specially designed to add to an existing winning position, and to pyramid the A to B movement in the most efficient manner. There are many different times and methods to do so; one method was introduced in the Position Pyramiding Section.

 

Profit System

The Profit System is the traders own unique method or style of getting paid. The only way to ensure a trader gets paid is by designing a system to do just that. A profit system is a very important piece of the trading edge because it is a very personal and difficult piece to handle. 

 

However, we can be sure of one thing. The math does not lie. We understand that there are only two types of trades that we can take; a buy-order or a sell-order. 

 

Every order, whether buy or sell, is either going to be alongside the monthly directional bias (the most recent ~10 monthly candles impulsive move) or the trade will be against the monthly directional bias. We labeled them earlier as HPT (high-probability trade) and LPT (low-probability trade). A trader can take either one or both, but an experienced trader knows that LPT's are the most difficult type of profits to extract. It is always advised to trade alongside the monthly bias. 

 

HPT (high-probability trade):

The way to maximize the profit potential of our edge;

Allow the entire position to run to a further target. 

 

LPT (low-probability trade):

The way to maximize the profit potential of our edge; 

Close partials at a nearby target. 

You may close half; close all; close majority; it is up to the traders own system/appetite. 

 

For an HPT, the best method for handling the profit-taking for all of these types of positions is to allow the entire position to run, to a certain predetermined target. 

 

For an LPT, the best method for handling the profit-taking for all of these types of positions is to close out either entirely or the majority, at a nearby target. 

 

For targets, see earlier sections. We can use a certain sell-zone as a target for any buy-orders. We can use a certain buy-zone as a target for any sell-orders. 

 

Create Your Own Unique Trading Edge

This is the unique part of trading. Everybody is copying everybody else. That is why the majority do not win consistently. Every consistent trader has only just become aware of what they do well, and focused and doing that in their own unique way. 

 

Every trader has their own unique style and personality. Some styles are better than others, but any consistent trader has learned to find exactly what works for them, and what they are comfortable with. It also is important to understand the difference between applying an aggressive style of trading versus applying a conservative type. 

 

With a proper trading system, a proper ATP system, and a proper profit system, you can be well on your way to generating consistent returns with various pairs. You will be able to relax and depend on your edge to do the majority of the heavy-lifting in any financial market. As traders, our primary goal should be on following our edge, and implementing  our edge, believing in it and sticking to it. By doing that over and over again, we can reach the point where there is little thinking, and more doing, since as you already know, the system has already pre-decided everything for us. 

 

Our job is just to follow it. 

 

Most are not able to take at least 8 trades, all in the same fashion, using the same system. That is the most difficult neurological wiring process into probabilistic thinking that ends up stalling most trading careers.

Volume & POC

Understanding the volume in your instrument is key in understanding your financial instrument. 

 

Order-flow volume (OFV) is the measure of the volume of orders entering exchanges at any certain moment. Although the volume may be coming from different sources and measured in different ways, the presence of large-volume and an understanding of the POC is key. 

 

POC: Point-of-control is a precise price-level at which the largest amount of OFV was transacted. It is a price at which a few yet very large market participants are interested in and may end up protecting this area or range. 

 

The POC can be likened to a magnet, and this unique price-level attracts the price action towards it, as price swings back and forth across this POC level. 

 

After BFI establishes their initial positions, price may swing back and forth across the POC level, but it will eventually swing and breakout in a certain direction; this direction depends entirely on the type of OFV that was being stacked from the previous market structure, usually at the high or low. 

 

Context in trading is key. We need to know where all of this is taking place; preferably within the range of a buy-zone or a sell-zone.

This is 15-minute price-action within a 4H macro zone.

Let us take a look at the image above and see a reaction of price to a valid macro sell-zone. We had a deep rally into the zone, and into the deeper half of the zone. From the range of the deeper half of the zone, we had a downwards impulsive move, or a strong sell-click. Two more slight rallies in the middle of the zone, followed by a complete sell-off of the rallies. the point of control established at this point is a very important one. It may just be the price at which we may have a very large market participant needing to transact a certain amount of orders at a certain price level.

This is 15-minute price-action within a 4H macro zone.

Now that price has reacted completely to the zone, we see that the zone is likely being respected, and protected. 

 

Notice the price-level at which the red line - the Point Of Control. 

 

The POC is an exact price-level at which the largest amount of volume was transacted. This is an area of major interest for a very few yet very large market participants.

Notice the POC level that was printed when the fixed range was used only to measure the initial reaction to the deeper portion of the valid zone. The strong sell-offs that originated from the deeper portion of the valid zone is an important distinction to make. 

 

Notice the POC level that was printed when the fixed range was used across the entire series of price action. The majority of the volume as price reaches the end of the zone and begins to leave, has already been transacted. 

 

We will notice that the POC created after the initial sell-off from the deeper part of the zone, is very similar to the POC created from all the market movements within the zone. This tells us that these two strong sell-offs that occurred at our sell-zone, were two large sell positions. As price continued to move within the zone, these positions were promptly protected. 

 

The way price moves around the POC level is not as important as understanding the type of OFV being transacted from the deeper portion of our zone. When a certain market participant takes control of the market by accumulating a certain type of OFV, price will eventually move in their favor. 

Just like banks get to work at certain attractive price-levels, so should we. We are not trading all day every day. We are identifying valid zones that are on the same side of the monthly directional bias, and studying the volume and the price action, within a certain zone of interest. We do not advise on trading everything in the middle and in between zones. 

As a BFI trader, your job is to understand the way price is reacting to your zone. You are also expected to understand the origin of the strong sell-offs and where they originate from within the larger context of the macro zone. You can use the volume tool in order to confirm a BFI presence, and then to allow the price action to unfold. 

 

BFI's have the largest lot sizes on the planet. We need to absorb and understand this key fact. That means when they buy, the law is created. When they sell, the high is created. By default, they get the best prices. We can use this to our advantage by looking for potential highs and lows within a zone, and then looking at 15-minute price action in order to see how price reacts to the range of that specific 15-minute candle that contains the high. As shown in the above image, when price leaves the zone, we can see that within the range of the candle range that created the high point, there is a sell-off or  sell click whenever price returns to this certain range. This is simply entry, and then institutional stacking, and then price leaves the zone. 

 

It is the law of the land: Add to position and protect the position. 

 

In the end, our system does not change. We trade valid micro-signals at valid macro-zones.

Business & Account Structuring

This section is not important for those who are not yet consistently extracting. There is a stepwise process to trading as a professional. Before a trader can worry about generating funds to withdraw between accounts, first the trader must generate the funds in the first place. 

 

After you design your own specific trading edge, you will be focusing on a single currency pair, and focusing on a single A to B impulsive movement from one zone to the next. Consistently doing this every week will create a stream of consistent results, and at the end of the month the numbers will tell us. 

From Your Brokerage Account 

We all begin with a certain amount of funds in a brokerage account. These assets under management are what will generate the proper returns, so we are able to end up with a certain amount of profits. 

 

To Your Corporate Bank Account 

A BFI trader operates on the private business side, and not on the public personal side. Operating under a limited liability company in your jurisdiction requires incorporating and operating under a business name. 

 

This limited liability company owns and operates a business banking account with a certain financial institution. Monthly, quarterly, or yearly returns can be contributed on a consistent basis. All distributions are received here. 

 

To Your Personal Bank Account 

Either in the form of a check or otherwise, issued by the limited liability company account, the personal trader can choose to receive their taxable fund distribution. The key part to understand here is that the way this amount you personally receive is taxed, is a question for your legal counsel. The only thing we can mention here is that any amount you receive or withdraw from the business bank account is taxable income. 

The key here is to understand the overarching process of cash-flow within your trading business. 

 

You can decide to withdraw a certain portion of all profits, either on a weekly, monthly, or yearly basis. 

 

You can decide to take a certain portion of the funds received personally and allocate it to other assets, savings, or investments. 

Trading Account Structuring 

After becoming a seasoned trader, one may begin to have separate trading styles in one. A trader may have a scalping strategy that earns very short term gains. The same trader may also have a swing strategy that, although not as many, generates proper gains over a longer period of time. 

 

These two types of strategies can be operated simultaneously, but it requires a certain level of fluidity in trading, and in trading with a clear understanding of a trader's own unique confidence in their own unique edge. 

Scalp Account

This is a very short term trading account that may be focused on short-distance trades, and short-term gains. LPT's can be considered here. Some traders consistently experience a series of trades where the market consistently offers them a certain amount of pips, but then takes them away. The traders duty here is to see if they would be more profitable if they found a way to get paid every time the market made the funds available for you. The expectations and the entire strategy and style of the trading performed on this account should be very well understood and refined. This trading style also depends on an extreme focus on a single currency pair, in which they are very familiar with the typical distance a certain trade travels in a certain day or in any given week. The 15m chart is a common decision for most to perform this style of short-term trading which can be used for a more "instant-gratification" and a much more active approach. 

 

Swing Account

This is the style of trading that most traders do not reach. There are many traders that have a very short term scalping style of trading. Very few of them can instantly change into the swing style of trading. The main and key difference and additional key requirement for swing trading is patience. This requires time to pass us; sometimes days or even weeks. Most are not able to allow a trade to play out for a few minutes or a few hours, let alone days or weeks. However, we know that potential risk-to-reward ratios can double, triple, and quadruple simply with the passage of time. This is the most profitable form of trading and the least performed. A swing trader has learned to not only scalp, but they have developed the valuable skill of patience, and are able to differentiate between higher timeframe trading, weekly zones, and sticking to the monthly directional bias; HPT's. 

 

You may have trading accounts structured in a way where you may close the trade or a large portion of your trade on the scalp account, and you can have a swing or long-term account in which you leave the majority of the position to run to a long-term target. 

Designing a specific scalp system to apply on a certain trading account is not the difficult part. The difficult part is in understanding the two trading styles, and being able to fluidly change not only your trading style, but your own personality and expectations, instantly and effortlessly. 

 

When taking an LPT (low-probability trade), a trader may consider it a scalp trade. Immediately the trader understands this, and understands the proper rules and methods of managing such a position, and the expectations that come along with it. A short-term profit system would be ideal.  

 

When taking an HPT (high-probability trade), a trader may consider it to be a potential swing trade. Any trade from a weekly zone can be considered a swing trade, and may have the potential of a swing trade. A trade that is in alignment with the monthly bias (HPT), and is also in a valid weekly zone, then such trades can be treated as swing trades with long-term potential. A long-term profit system would be ideal.

Trading "In Flow"

Here we will discuss the whole idea of trading in a certain zone where you do very little thinking and achieve superb results. This usually takes years of seasoning, and a great deal of experience in completing the certain function; whether it be navigating a vehicle, or trading financial markets. 

 

This concept of "flow" and being very in-tune with the price action is a very interesting principle and fact of trading. You cannot "try" and do it. You just perform a certain function or trade over and over again over a long period of time, then surely the trader can reach a point where it is not some emotional and torturous psychological freight train, but rather a game of developing certain mental skills such as thinking in probabilities and focusing on the outcome of a series of trades or a sample size, and not to focus on the outcome of any single trade or trying to predict a trade-by-trade approach.

 

The key here is to understand how and what can trigger the flow state. For those who are still in the early development process of trading skill, then this section may be read again at a later time in a different light. For those today who have felt this experience of trading "in flow", then we can try and understand what led us to this state. 

Requires A System 

The first way to ever even begin to approach such a state of relaxed concentration is to have a system or rules and methods that you follow blindly and without hesitation. If you are not able to stick to a certain mode of operation, then it is because you do not or have not yet found a certain system or set of rules that you believe in, and accept. A very clearly laid out trading edge is the first requirement here and that was discussed clearly in the "What Is Your Edge?", which is one of the most important sections in this trading education. 

 

Very few traders ever choose a system and decide to follow it, regardless of what the market does. This in itself is a trained mental skill that must be overcome and developed in order to establish the foundation upon which we will rely on to exposure ourselves in the markets and begin trading. The most essential key in this is that the trader truly believes and accepts the great efficiency within their trading system, that they are able to follow it to the tee without hesitation. 

Requires A Primer 

A primer is a preparatory exercise that can be performed in order to achieve a certain state of mind. I believe every trader needs to "prime" themselves before entering the markets. Some traders enter the markets looking and feeling miserable, and they expect for a miracle. This strategy of hope has proven to be expensive and useless. We need to prepare mentally for the battle ahead, and we need to achieve that frame of mind, even if you do not feel such a way at the time. This can be a five to ten minute breathing exercise, or even a certain physical exercise or certain sound waves that are able to place the trader in a state of relaxed concentration. 

 

Every trader must discover for themselves their own unique primer before they begin operating and trading within the markets. It is truly not important the way or method which you use to achieve your mental state of clarity. The main key here is to get into a certain state of mind of concentration and clarity, with clear intentions as to what the goals are; to generate great consistent returns, smoothly and steadily. Unfortunately, a negative environment is not conducive to this, and thus may require a change of environment. Learning to trade and then learning to transform into a consistently lethal trader is not an easy task and it is for the few. 

 

Trading markets can best be done from the point of relaxed concentration on a live chart. That is when you will achieve you most incredible results. The best trades and decisions are usually those not given much thought, but rather an instinctive decision that you know and "felt" to be the right thing to do. The majority of the population is numb to this feeling, but as a financial trader, this gut and instinctive feeling is crucial for a trader to accept and understand. This is the ultimate goal of any trader; to enter financial markets prepared to trade them live in the most effective state of mind. Most humans are not capable of remaining in this flow state for very long. However, we only need one or two hours of trading per day to achieve excellent results. Always being in the proper state of mind is a requirement to do so. 

Requires A Session 

We have clearly pointed out that in order to trade in the flow, which is the only time you will be doing exactly all the right things in the right way, without much thinking, a trader needs a system of rules to follow blindly, and a certain primer or exercise that is able to shift the traders mood mentally. 

 

Now we need to identify the third thing that can help a trader achieve there "in flow" trading. Choosing a certain session of trading liquidity is an important step. Studies have shown that it doesn't even matter which trading session you choose. However, a time where the London banks are open for business, and a time where the NY banks are also open for business, is a great overlap and are all times of great liquidity. 

 

The point here is to choose your session where you will prepare yourself to trade the markets for one or two hours for that specific trading day. Learn to let go of the trades that occur outside of your trading session if you are not prepared for them. Learn to see the way price reacts at certain times and in certain ways, throughout your trading session. After many sessions and the years pass by, you will begin to see patterns and common occurrences during your trading session and begin to adjust accordingly. This will increase your accuracy, and thus lower the size of the stop loss, and eventually end up with a higher and healthier risk-to-reward ratio.  

Requires A Pair 

Of course, we need to find the suitable pair that we desire to trade, if we have yet to choose. The key here is in deciding on a single financial instrument or currency pair. You must become familiar with the way it moves, with when it moves, and with exactly how and where it does it. You need to understand the instrument you are trading and be very familiar with the trading style. The typical range of movements both on an intraday basis and on a weekly basis should be understood. 

 

Focusing on one pair allows us to focus our attention on the ultimate goal of trading markets; to generate consistent returns. We do this by attempting to catch a single A to B impulsive movement, preferably from a valid zone. We trade valid signals at valid zones, in order to catch that impulsive movement and to be able to ride it to our destination. It is very difficult for most to miss such a move if they are solely focused on a single chart. Unless it is in some sideways movement, the trader is required to take advantage of those impulsive movements originating from valid zones on their chart. 

 

Listen; go on to ten and twenty pairs later. For now, just focus on squeezing a single A to B price movement on a single pair before ever thinking of adding many more. You will be trading many more pairs, but not yet and not now. With the proper seasoning on a certain single instrument, you will become much more confidence with price action and price movements, and trading in general. 

An Elite Trader 

An elite trader is a very special species. They have their own unique trading edge, applied onto their own favorite currency pair, during their own favorite trading session, and they trade in the flow. They have many years of experience trading live in financial markets. They understand themselves deeply, and they have a certain weekday productive daily routine and pattern that they have ingrained over the years. 

 

They always prepare themselves properly upon waking, and they have an active lifestyle outside of trading. They train their body, and feed their body, and also feed their mind. They understand a healthy body and mind will make performing their job much easier. 

 

They are results-oriented and results-focused. They have certain trading hours during which they are active. They are truly focused during those hours and do not like to be bothered. They understand when it is time for business and they understand the ruthless business they are engaged in, and they understand how to protect themselves at all times from all parties. 

 

They understand that the number one rule of trading is not to lose money, and the second rule of trading is also not to lose money. They understand the intricacies of trading and the psychological pains that it may pinpoint. 

 

However, before trading, the elite trader primes themselves for the performance they are about to conduct, and they enter the markets extremely aligned, and extremely focused, and absolutely with a clearly laid out plan of attack and rules of engagement. 

 

They are confident in themselves, and in their system and in their results. It helps if they have previous trading results to look towards, which can then create and continue the momentum cycle, in trading and in life. 

 

A new trader has Mt. Everest to climb, but if they desire then they can absorb the information and put these ideas and methods into practice and drastically shortcut the timeframe of learning to trade properly. 

Final Psychology Seminar