How To Increase The Winning Probability Of Your Forex Trades

In this article I am going to teach you some powerful skills that aim to dramatically increase the winning probability of your forex trades. Pay close attention to these concepts and start practicing them in your trading.


Price action trading strategies can be very potent ‘weapons’ to trade the markets with. We just have to learn to use them correctly and accurately. Most of us have a limited supply of bullets (money), so we have to make each bullet count and not waste them on low-probability targets (stupid trades).

So, how can we ‘fine tune’ our price action trading to make it into a high-probability trading ‘weapon’ so that we very rarely waste our bullets? This is your main mission as a price action trader; this mission is not an easy one and it’s going to take discipline, fortitude and the ability to pull the trigger only when your target is present. But, if you dig-deep and really want to be a profitable trader, you can make it happen.
So, without further delay, let’s get down to the business of getting your trading strategy ready to go to ‘war’ in the Forex markets:

Stop voluntarily decreasing the probability of your trading edge

Unlike lifting weights, where doing more typically makes you bigger and stronger, trading more will not make your trading account bigger or stronger. In fact, it will probably make your trading account a tiny little floundering wuss.

If you haven’t read any of my other articles on trading Forex with patience, go back and do that later. For now, I will briefly explain to you why trading less frequently will make you a better and stronger trader.
The reasons are pretty simple. First off, your trading edge is not always going to be present in the market, so you have to have the patience to wait to trade until it is. This typically means you will be out of the market more than you are in it, which is of course totally contrary to what most traders do. Most traders can’t stand to be out of the market, they feel an ‘itch’ to enter a trade that will not go away until they hit that buy or sell button. So they enter a trade not based on their edge, but based on emotion instead.

The point is this, most of the trades a losing trader makes are ones born out of emotion, or because they just feel like they want to trade. If we really stick to our predefined edge, price action trading in my case, we will naturally be waiting for our edge to form more than we will actually be trading. Any high-probability edge in the market is not going to be present all the time, we have to wait for a market to ‘show us its cards’ first, and it may only do that one or two or three times per week. So, the first and perhaps easiest thing you can do to increase the probability of your trades is to stop decreasing their probability by trading when your edge is not actually present! You can do this by employing the disciplined to ONLY trade when your edge is present…in other words, stop trading just because you ‘want’ to!

Confluence is like ‘steroids’ for a price action setup

Everyone knows I teach and trade price action. However, I know from emails that I get that a lot of people who follow me think that ‘price action trading’ means trading any old price action setup; they seem to totally ignore the market context that the setups occur in, which is actually just as important, if not more than the individual setup itself. Essentially, I am talking about confluence here, and trading price action setups at confluent points in the market is really the ‘core’ of my trading philosophy. I talk a lot about trading Forex like a sniper and not a machine gunner; well, waiting for price action setups to form at confluent points in the market is HOW you trade like a sniper. Traders who just enter any PA setup they see, without considering the context it’s occurring within, are machine gunners, not snipers.

There are many different ‘factors of confluence’ that I teach to my members, but for today’s lesson we will just stick with horizontal and dynamic support and resistance levels in order to illustrate the point. I use the 8 and 21 daily EMAs for dynamic support / resistance, and horizontal support / resistance levels are simply your classic technical analysis support and resistance levels that connect highs to highs and lows to lows.
To trade with confluence, we want to first scan the markets for an obvious, or well-defined, price action setup. If we find a setup that meets our criteria, we then look to see if it has any supporting factors of confluence.

In the chart below, we can see 3 price action setups that each has three supporting factors of confluence. All three of these setups had confluence with the near-term bullish momentum / trend, dynamic support from the 8 and 21 day EMA layer, and support from a horizontal (static) price level. This is one example of trading price action setups from confluent levels in the market.



To contrast, here’s an example of two price action setups that were well-defined but didn’t have any obvious supporting factors of confluence…

In the chart below, we can see two very good looking bullish pin bar setups. Now, the obvious problem with these pin bars is that they are against the near-term trend, which was clearly down at the time. However, on top of that, they also did not have any supporting factors of confluence such as a key horizontal support level, dynamic EMA support, a 50% retrace, or any other factor. It’s setups like THESE that I get emails from traders about asking “Nial, I traded a well-defined pin bar the other day, why did the market go against me”?

The answer is two-fold: First, it’s important to remember that not every setup works out, even a perfect looking setup with 5 factors of confluence can and will fail sometimes. Thus, we need to always practice proper forex money management. Next, in order to use our ‘bullets’ as effectively and efficiently as possible, we need to always make sure we take high-probability price action setups, meaning setups that are well-defined AND that are in agreement with the overall market context they’ve formed in, AKA they have confluence.



The point to take away from the above two charts, and the main point of this article, is that trading price action setups from confluent points in the market is the best thing you can do to improve the probability of your trades. Too often, traders simply aren’t patient and picky enough in regards to their trading, and they thus end up throwing their money away in the markets. Just remember that every time you find a potential trade setup it’s YOUR HARD-EARNED MONEY you are about to lay on the line, so ask yourself if the setup has enough supporting factors of confluence to be worth trading.

Think before you ‘shoot’…not after

Most beginning and losing Forex traders seem to behave as if they are best able to navigate the markets after entering. This is akin to an army general thinking that his army has the best chance of winning a war if they just dive into war first and ask the questions later. Fortunately, in (most) wars, governments usually plan and ask the tough questions first, so that they know what they are doing when they are on the battlefield.
In trading, most traders seem to do the opposite; they try to plan, think and strategize in the heat of the moment, when their money is on the line and they are the most emotional.

I’m not going to get into a long drawn-out discussion about the importance of trading plans and trading journals, because I talk about them extensively in other articles, follow the links if you want to learn more. But, I will say that we need to do our analysis and most of our thinking about the markets BEFORE we enter, this gives us the highest-probability of succeeding as traders. As soon as traders enter a trade and THEN start thinking about it and over-analyzing it, they almost always lower their overall probability of profiting over the long-term.

There’s nothing wrong with checking on your trade every 4 or 8 hours or so, but you should not be thinking about it much, if at all, in between. The best thing to do is to pre-plan all your potential interactions with the market, and then follow that plan to the T, this way you deny the possibility of emotion coming in and destroying your trading account.

Trade higher time frames

As I discussed thoroughly in a recent article on trading daily chart time frames, you can significantly improve your trading by ignoring time frames under the 1 hour chart all together. I actually NEVER look at a time frame under the 1 hour. There is simply no reason too, they are messy, full of random market noise and will tempt you to enter a trade that you know you shouldn’t. In short, if you want to improve your accuracy and the probability of your price action trade setups, focus on the higher time frame charts.

Money matters

If you want to give yourself the best chance at taking the highest probability trades and avoiding low-probability / emotional trades you’ll need to make sure you are not A) trading with money you need for other things in your life and B) not risking more than you are comfortable with losing on any one trade.
When you are only trading with disposable income and never risking more than you are OK with losing per trade, you will be much calmer and more objective. This will obviously work to help you to only take high-probability trade setups. Traders who are strung-out and frazzled because they are overly worried about the money they have at risk in the markets are naturally going to take low-probability trades because they simply are not thinking clearly.

Remember, you never know for ‘sure’ what’s going to happen

 

As traders, it helps to always expect a random outcome from our trades, even though we may have mastered a high-probability trading edge like price action. Even if we have say a 60% or 70% win rate, it is a randomly scattered win rate, meaning we never know which trades are going to win and which will lose. For instance, if you have a 60% win rate, you could theoretically lose 40 trades in a row out of 100 before you hit 60 winners. So, knowing this, we have to approach each trade as just another execution of our trading edge, while doing everything we can to put the odds in our favor.

Everyone knows that I don’t sugar-coat anything, so I’ll tell you that there is no ‘perfect’ trading signal, and that goes for ALL trading strategies and systems. Even if we have multiple factors of supporting confluence, a perfect trend, and a perfect price action setup, the trade can still lose. Thus, it’s important to trade with these facts in mind while simultaneously making sure you do everything you can to only take the highest-probability trade setups. If you want to learn more about confluence, price action trading, and how to combine the two for a high-probability Forex trading strategy, check out my Forex trading course and members’ community.

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Master One Forex Trading Strategy at a Time

Do you want to become a MASTER of your Forex trading strategy? If so, you will need to have laser-beam like focus, you cannot waver and change strategies every week like many amateur traders do. Bruce Lee was arguably the best martial artist of all time, and guess what? He was not born the best martial artist of all time. He earned that title through dedication and focus…he learned to become a MASTER of his craft…if you want to succeed in Forex you will need to do adopt the Bruce Lee mentality…

Forget everything you have learned up to this point in your trading career, because if you truly want to master a new Forex trading strategy you really need to wipe the slate clean of all the confusing indicator and software based trading systems you have likely used thus far. One of the biggest problems that plague traders who are trying to adopt a new approach to the Forex market is that they seem to bring a lot of preconceived notions and failed trading concepts with them. If you really want to excel at Forex trading and adopt a fresh new trading strategy, you need to focus on one strategy or way of thinking and stop allowing previously failed trading methods to influence your current perspective on the market.

• Train your Brain

Learning to master one trading setup at a time will help you properly train your brain to become more disciplined and objective, two characteristics that you absolutely must possess if you wish to excel at forex trading. The process of truly mastering and “owning” one forex trading setup at a time might take months or even years to accomplish, but your chances of making money are increased dramatically by doing so. After you completely master one trading setup you will know almost instantly whether or not your setup is present, there will still be some discretion involved, but owning and mastering a setup means that you have fine-tuned your sense of discretion when it comes to deciding which trades to take and which ones to pass on. Many traders search long and hard for some “holy-grail” trading system that allows them to avoid having to develop their discretionary trading skills, unfortunately for them, professional trading inherently involves a fine-tuned sense of being able to discern between A, B, and C grade trade setups.

The discipline and objectivity that you will require as a result of learning to master one forex trading strategy at a time should spill over into other areas of your trading such as managing your risk and remaining calm and collected. When your thoughts are scattered on multiple trading strategies and (or) you have little confidence in the strategy you are currently using, you are obviously not going to make very wise trading decisions. Learning to master and “own” one forex trading strategy at a time will solve both of these problems because your focus will not be scattered amongst multiple strategies and you will naturally gain confidence in each setup as you master them one by one. Essentially, our goal in mastering one setup at a time is to reduce variables in our trading, many traders do the exact opposite when starting out by actually increasing variables through analyzing greater and greater amounts of technical and fundamental market data. Yet, the reason most traders lose money is not because they aren’t analyzing enough data, it’s because they over-trade, over-leverage, and analyze TOO MUCH data.
 
• Learn to Think like your Mentor

Obviously, if you are looking for a new trading strategy or mentor, what you were doing before was not working for you. Thus, it is paramount to your success as a trader that you adopt the same trading philosophies that your new mentor or trading strategy teaches, wash your mind of what you have learned thus far and completely immerse yourself in this new approach to the markets. In regards to what we teach here at learn to trade the market, this means learning to master one price action setup at a time, as this is how I initially found success in the forex market and so it is also what I recommend all my students do. As I have stated previously, after you master one price action setup you can move on to master another, until eventually your forex trading arsenal is fully loaded.

• Specialization is the Universal Key to Making Money

What do most people that make a lot of money in this world have in common? What do Tiger Woods and Bill Gates have common? Or how about George Soros and Venus Williams? At first you might say “nothing” besides the fact that they all make a lot of money. But what is the fundamental reason, behind all else, that these people and others like them make so much money while the rest of the world struggles to get themselves out of bed in the morning? One word; specialization.

People that make a lot of money focus in on one thing that they are passionate about, and they do it over and over and over until they achieve the result they are looking for. Simply put, you cannot really make a lot of money at anything in life if you master nothing. All of the people in the above example have literally “mastered” one thing, sure they had ups and downs along the way, but they did not let that bother them, instead they transmuted this negative energy into motivation and pressed on because they believed in what they were doing. Had they got involved and distracted with numerous other side-projects or interests they simply would not have achieved what they did. In forex trading we need to focus on one price action setup at a time and become a “specialist” in it, get to the point where you find yourself being someone that other traders look to for advice on the setup that you “own”. Become an authority on each price action setup before you move on to the next, there is no sense in doing anything half-ass in this world, and trading price action setups is no different.

• How to Master the Setup

Mastering one price action setup at a time is accomplished through literally making it the only setup you think about or look for when interacting with the market. You essentially live, breath, and sleep this one setup until you feel confident you know every angle and condition it can or should be traded in. Keep a trading journal to record under which market conditions the setup excelled in and which conditions it performed weaker in. Find all the information out on the setup you choose and learn everything you can about it. Once you do this you can begin implementing this knowledge on a demo account, only after you master this one setup on a demo account should you attempt to master it on a live trading account. If you find you are becoming consistently profitable with this one setup on a live trading account and you truly feel like you “own” it, then and only then should you think about adding a new setup to your trading toolbox.

• One Setup does not mean One Variable

In closing, a very important distinction to make here is that one price action setup does not only mean entering a trade when you see a well defined pin bar or other price action setup. By learning to master one “setup”, we mean you learn to master trading that particular setup in a particular market context. For example, you might learn to master the pin bar strategy in a trending market and only enter or exit at confluent levels within the trend, this is an example of how a “setup” can mean the actual price action setup itself and the market conditions that it is traded in. So, in order to fully master one price action setup you must learn to master this setup in one particular market condition, perhaps you want to master the fakey strategy in range-bound markets, or the inside bar in down-trending markets; the totality of the actual price pattern itself combined with the particular market condition you trade it in is what you must master in order to consider yourself a “master” of one Forex trading strategy. To learn more about mastering the price action setups that I teach, check out my price action trading course.

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Know When to Hold ‘em – Know When to Fold ‘em

One of the most challenging decisions that Forex traders are faced with on a day to day basis is…knowing when to hold on to a trade and when to close it.

This decision is usually the one that gives traders the most difficulty and frustration, and it is something that you must learn to effectively deal with if you want to make consistent money in the forex market. Trade management is often the area that gives forex traders the most trouble; it is relatively easy to get into a profitable trade but it is much harder to manage that profitable trade in such a way that it produces an outcome you are satisfied with.

This article will only focus on one area of the process of trade management; knowing when to hold on to a winning trade in order to let your profits run, and knowing when to close a winning trade and take your money. Pardon the cliché, but as the Kenny Rogers song goes, “You’ve got to know when to hold em’, and know when to fold em”…(If you never heard the song click here: Kenny Rogers)

How to manage a trade with a big open profit…

While there are certainly worse problems to have in the world, trying to figure out what you should do with a trade that is deep in profit can actually be quite puzzling for many forex traders. The problem that traders in this situation face is whether they should hold their trade for an even larger gain that may or may not materialize, or close the trade out and walk away with a very nice profit.

What this decision really comes down to is one of logic vs. emotion. Take a look at the technical picture of the chart that you are trading while completely disregarding how much money you are up or how you feel. When you look at the chart from this perspective think about how big the recent move has been that you have traded, how much has price moved compared to the ATR (average true range)? Do you really believe there is a logical technical reason that such a large move will continue on in your direction before reversing, or are you just being greedy? Remember that just because a trade is heavily in your favor does not mean you should necessarily keep it open. If you are in a trade that is up more than 3 or 4 times your risk, you should really stop to ask yourself, “Do I really believe this trade will keep going up or down in a straight line or is it more likely to experience a correction?” It usually makes more sense to lock in most of your profit or close a trade out that is deep in profit, because if there is one thing we can all agree on about the forex market it’s that it ebbs and flows and doesn’t travel in a straight line for very long except on rare times of economic volatility.

Here is an example of the point above illustrated in the daily GBPJPY daily chart from mid – 2010…



Another example….



How to manage a winning trade in trending markets…

Trending markets can increase the odds of a trade moving in your favor and as a result the chances of being able to let your profits run into bigger gains. One good way to tell whether or not you should try and let your profits run when a market is trending is whether or not new highs (in an uptrend) or new lows (in a downtrend) are being made on near daily basis. If this is happening you can simply trail your stop loss along the 8 day ema or slightly above / below the previous day’s high or low and let the trade run in your favor until it reverses and hits your stop.

Here is an example of the above point illustrated in the recent EURUSD bullish move on the daily chart…

Another example…

  
How to manage a winning trade in the midst of opposing price action or support / resistance level…

Another factor you want to look for when trying to decide if you should hold your winning trade or fold it is whether or not there is an opposing price action signal or a nearby support or resistance level. A nearby opposing price action reversal signal or strong support or resistance level can be a good reason to close out a winning trade. Also, if there is a previous support or resistance level that has held strong in the past, you might want to use this level for a profit target, usually putting your target just in front of the level works better than trying to squeeze every last pip out by putting your target right at the level or slightly beyond it.
Just as we can use price action signals to enter into high probability trades, we can also use the opposite signal to exit a trade. How many times have you been in a pin bar trade and then after a day or two an opposing pin bar forms? In this case you might want to trail up your stop to just above the high or below the low of the opposing pin bar, depending on which direction you are trading. Opposing price action signals can be used to exit a profitable trade if they occur in the natural course of that trade, however, you should not wait or depend on such an opposing signal to exit a profitable trade, it is just something to be on the lookout for in case you are in a profitable trade.

Here is an example of the above point illustrated on the daily GBPJPY chart:


Another example…


How to manage a winning trade when reaffirming price action occurs…

One of the best signs that a particular trade is a good candidate to be held instead of folded is reaffirming price action. For example, if you are long the market and you get a bullish pin bar or consecutive bullish pin bars that form in the context of the uptrend you are trading you can be reassured by this price action because it “agrees” with the direction you are trading. This is essentially the opposite of the “opposing price action” rule that we discussed in the point above. This reaffirming price action can be a very good indicator that you should hold a winning trade instead of folding it. Learning to “read” a price chart in this discretionary manner is really what distinguishes the pros from the amateurs.

Here is an example of the above point illustrated on the AUDJPY daily chart…



Another example…



How to manage a winning trade in different market conditions…

Another factor to take into consideration when deciding whether to hold or fold your winning trade is the current state of the market. Is the market trending or consolidating, quiet or volatile? In a strong trend you will likely have a better chance to hold a trade for bigger gains, in a consolidating market you are probably better off using support and resistance levels and / or opposing price action signals to exit your trade. It is crucial that you consider what condition the market that you are trading is in before deciding whether or not to exit your trade.

Here are examples of managing a winning trade in a trending market on the daily USDJPY chart and an example of managing a winning trade in a consolidating market on the daily GBPJPY chart:



Don’t count your money when you’re sitting at the table…

When deciding whether to hold or fold your trade it is important that you look at your trade in terms of risk to reward instead of the amount of pips you are up. This is analogous to not counting your money when you’re sitting at the table; don’t count your pips when you are in a trade but instead calculate your risk to reward scenario. Before entering any trade it is very important to figure out how much reward you can reasonably make relative to the amount you are risking. As the trade progresses it is important to remember your pre-defined risk / reward scenario, you really don’t want to take anything less than this pre-defined risk / reward amount unless there is a logical reason to do so like one of the points we discussed above.

If in doubt…

If you find yourself in a profitable forex trade and you are unsure whether or not you should hold or fold it, the first thing you need to make sure you do is NOT let your emotion influence your exit decision as this is one of the most common and detrimental mistakes that forex traders make. If all else fails you can always refer back to this article and the points discussed above, go through them and see if any of them apply to the current trade you are in, you can think of this article as a sort of “check list” for what to do when you are in a winning trade.

The most important and useful thing that you can do when in a profitable trade is to stop and ask yourself, “should I stay in this trade or should I close it?” Have a logical think about it for more than a few minutes and remind yourself that you need to avoid an emotional exit at all costs. Refer back to the points above and ask yourself if any of them apply to you, make yourself a pros and cons list if you need to weigh the advantages of staying in the trade vs. the disadvantages. If after all of this you still cannot control yourself than you might need to seek additional help by reading some of our other forex articles or watch some forex videos.

 Producing a satisfying outcome for profitable trades is one of the most difficult aspects of successful forex trading, use the information in this article and the logical-thinking part of your brain to decide how to exit your winning forex trades and you will be in a very good position to profit on a consistent basis in the markets.

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Set and Forget Forex Trading – Keep Your Day Job

Set and Forget Forex Trading is as simple as its name implies; you simply “set” the trade up and then “forget” about it for a period of time. This has two major benefits: it makes it far easier to stay emotionally disciplined and it also allows you to go about your life as you normally would, because you will not be spending hours in front of your computer over-analyzing the markets…


Very often aspiring Forex traders become lost in a web of confusion with the amount of data that the various financial media outlets plaster all over the internet and television. It is extremely easy to experience “analysis paralysis” while trying to trade forex or any market for that matter. There are so many competing ideas and trading methods along with more fundamental data coming out every day than you could ever hope to digest, it can be very overwhelming to even try and make sense of it all and develop a forex trading plan based off this amount of information. One of the biggest psychological mistakes that almost every aspiring trader makes on their journey to success is firmly believing that the amount of economic data analyzed and (or) having a technically complicated or expensive trading method has a direct linear relationship with profiting in the market. In reality, as any professional trader will attest to, these factors usually have an inverse relationship with trading profits, at least after certain point. This essentially means that once you do a certain amount of analyzing market data any further time spent analyzing this data is likely to have a negative effect on your trading; it causes you to lose money.

Why it’s Counter – Productive to Analyze too Much Market Data

It may seem confusing or counter intuitive to the aspiring Forex trader when they first hear the fact that too much analyzing of market data can actually cause you to lose money faster than you other wise would. This is one of the inherent psychological traps that so often keep aspiring traders from consistently profiting in the Forex market and is the reason why many of them blow out their trading accounts and eventually give up all together. The main reason why this occurs is because human beings have an innate need to feel in control of their life and of their surroundings, it is an evolutionary trait that has allowed our species to perpetuate its existence and ultimately arrive at our current modern day level of civilization. Unfortunately for the aspiring Forex trader however, this genetic trait of all human beings works against those trying to succeed at Forex trading. In fact, most of our normal feelings of wanting to work harder than the next guy or spend extra time studying and researching for our jobs or for school are feelings that are really not beneficial to success in the Forex market.

The problem with trying to apply the idea of hard work to Forex trading is that beyond a certain level of technical chart reading ability and awareness, there really is no beneficial aspect to spending more time on tweaking a trading system or analyzing more economic reports. The bottom line here is that there are literally millions of variables involved in trading the Forex market; each person trading the market is a variable and every one of their thoughts about the market is a variable because these are all things that can cause price to move. So, unless you are somehow able to keep track of every trader in the market and all of their thoughts, you essentially have no control over price movement and trying to further analyze economic data or trying to come up with an overly complicated method is essentially just a meaningless attempt to control something that simply cannot be controlled.

Thus, the underlying cause of Forex trading failure begins with the idea that traders feel a psychological need to control their surroundings and when this emotional state meets the uncontrollable world of Forex trading it almost always has negative consequences. This problem works to snow-ball itself as well because once a trader loses a few trades he or she begins to get angry and wants to “get back” at the market. The way they do this is by reading another trading book or buying a different trading system that seems more likely to work or by analyzing the inner workings of every economic report they can find and trying to predict how it will affect market movement. Once this process has begun it is very difficult to stop because it makes logical sense to us that if we put more time in and do more work we will eventually figure out how to make more money faster in the Forex market. The difficult truth to all of this is that, as stated earlier, after you reach a certain degree of technical and fundamental understanding, any further research or system “tweaking” beyond that point will actually work against you and the rate at which you study more and do more research is probably about the rate at which you will lose your money in the market.

Less is more in Forex – Set it and Forget it

So how does the aspiring trader achieve consistent profitability in the Forex market if we are genetically primed to fail at this endeavor? The very first step in this process is just accepting the fact that you cannot control the uncontrollable Forex market and checking your ego at the door. The Forex market does not care what you have done in your life before; it has no emotion and is not a living entity. It is an arena where human beings act out their beliefs about the exchange rate of a certain currency pair. These beliefs are a result of emotions, and human emotion is very predictable when it comes to money. The point here is that the people mentioned in the previous section who are doing extensive amounts of research and trying to find the “holy grail” trading system are the ones who are trying to control the market and thus trading based off emotion and providing the predictability for the professionals to take advantage of. The paradox here is that professional traders do very little actual technical and fundamental “homework”; they have their defined edge in the market and they simply check the market once a day or so and see if their edge is there. If it is not than they just wait for tomorrow because they know that the Forex market is a continuous stream of self-generating opportunities, thus they do not feel pressured or anxious to trade. If their edge does show up then they set their orders and walk away, accepting the fact that any further action will only work against them because it will be a vain attempt to control the uncontrollable and would not be an objective action.

The logic of set and forget forex trading is this; if your trading edge is present then you execute your edge and do not involve yourself further in the process unless you have previously defined the action in your trading plan. Traders that decide to mess with or tweak their trade once they enter it almost always kick start an emotional roller coaster that leads to over-trading, increasing position size, moving their stop loss further from their entry, or moving their profit target further out. These actions almost always cause the trader to lose money, the reason why is because they were not objectively thought out, but were influenced by an emotional reaction that was caused by trying to control the uncontrollable.

Make Money and Save Time by Doing Less

It is a statistical fact that traders who trade off higher time frames such as 4 hour, daily, and weekly charts and hold their positions for multiple days, make more money in the long run that traders who “day trade” off intra-day charts. The reason many people are attracted to day trading is because they feel more in control of the market by looking at smaller time frames and jumping in and out of positions frequently. Unfortunately for them they have not figured out that they have the same amount of control as the swing trader who holds positions for a week or more and only looks at the market for twenty minutes a day or even less. The ironic fact about Forex trading is that spending less time analyzing data and finding the “perfect trading system” will actually cause you to make more money faster, many people are attracted to speculative trading for this very reason but then soon forget about the fact and start spending countless hours digging themselves into a huge psychological trap that many times they never dig out of. All you need to do to consistently make money in Forex is develop a written out trading plan, that includes a risk management scheme, with a definable edge and check the market one time a day for ten to twenty minutes. If your edge (price action strategies) is showing up than you set up your entry, stop loss, and target and walk away until the next trading day.

Trading in this manner actually elicits a snowball type effect of positive habits that work to further perpetuate your trading success. This entire article can be summarized in the following two sentences; people who spend more time analyzing market data and trying to perfect their trading system inevitably induce a cycle of emotional mistakes that work to perpetuate their trading failures and eventually result in lost money and lost time. People who realize that the market is uncontrollable and build their trading plan around this fact will inevitably arrive at a “set and forget” type mentality that induces an emotional state that is conducive to on-going market success and consistent profitability. The trading method used is one of the least important variables, but generally a simple method that offers a definable and profitable edge such as price action analysis is the best method to use to maintain your “set and forget” mindset. To learn more about set and forget Forex price action trading, check out my price action trading course.

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‘The Holy Grail Of Forex Trading Strategies’ – Daily Chart Time frames

Let’s face it, 95% of you reading this are probably not consistently successful traders, in fact, you’ve probably blown out a trading account or three by now. You probably enter a trade and then sit at your computer watching the market tick away or reading economic news for the next two hours, unable to think about anything but what “could” happen to your trade. Maybe you can’t even sleep at night because you are so addicted to the 5 minute chart and to watching every pip of price movement that all you can think about is the market. If any of this sounds all too familiar to you, it’s obviously time for a change; it’s time to start concentrating your trading efforts on the daily chart time frame.

You know how that old cliché goes about ‘getting what you’ve always gotten from doing what you’ve always done‘…well now is the time to make the change…the one lesson that I learned early on in my trading career that helped me the most, was that the noise and false-signals of a 5 or 15 minute chart (lower time frames) were simply not worth spending my time on or risking my money on. I believe that daily chart trading can be your “Holy Grail” in the markets, here’s why…

Trading the 5 minute chart (and other lower time frames) decreases your chances of success and is widely considered gambling:

I am going to tell you guys something right now that you may not have thought about before…you only need 1 big winning trade a month to be a successful Forex trader. Yup, that’s correct, 1 big winning trade a month.
How is that possible you might ask? Well, I’ll bet if you go look at your trading account history right now you might just find the answer yourself. You see, most of you are losing money because you are trading too often, and you are trading too often because you are fixated on over-analyzing the market, Forex news variables, and lower time frame charts (I consider any chart under the 1 hour to be “lower time frame”).

Some of you probably even know that this over-involvement with the market is why you are losing money regularly or struggling to keep your head above water. Yet, even though you know it’s keeping you from achieving success in the markets, you cannot break your addiction to trading lower time frame charts and over-analyzing the markets. But, the cold hard truth of the matter is that you will likely never be a successful trader until you first break this addiction…

Now, here is why I firmly believe that trading lower time frame charts is a waste of time and money.

Trading a 5 minute chart stimulates the reward centers of your brain…it gives you instant gratification. Having patience and discipline to focus ONLY on the daily charts takes more effort from your more highly-evolved brain areas. So, what it really comes down to is that traders who are addicted to the lower time frames cannot break free from the instant stimulation they get when they enter a trade…even if it usually results in them losing money, because each time they enter the market, their brains are flooded with endorphins from the “thrill” of potentially making a lot of money really fast. So, the point here is that traders who are addicted to trading a 15 minute chart are actually addicted to the feeling they get from entering the market, and this means they are unable to use their more advanced planning and long-term brain areas effectively. It does not mean they are incapable of using them, it just means that they either don’t know they are addicted to trading lower time frames, or they don’t know how to stop it.

I have personally only met a few day-traders who make money consistently, and they almost all seem really frazzled and strung-out, like a junky who cannot stop thinking or talking about their drugs (the market). Sure, it’s possible to make money from sitting in front of your computer 8 hours a day staring at each tick, but why in the world would you want to? Let’s face it, watching the market tick away is not really that fun, NOR is it productive…at all.

Now, let’s get back to my main point that trading lower time frames is decreasing your chances of winning and destroying your trading account. To focus on daily chart trading you need patience and mental fortitude, this takes intelligence and forward-thinking, it takes checking your ego at the door, and it takes a realistic attitude. Anyone can go to a casino and get lucky a few times at the poker table, but why do you think it’s possible for some people to win at poker again and again and again, to the point where they make a living from it? It’s because they have taken a longer-term view and they realize that their success is not defined by any one hand of cards, just like your trading success is not defined by any one trade. So, if you want to turn your trading around, it’s time to swallow your need to “control” the market and for instant gratification, and begin taking a longer-term view of the markets by focusing on the daily chart time frame.

Titus, I don’t have enough money to trade the daily charts…

I get this email almost every day: “Nial, how can I trade the daily charts when I need to have wider stop losses and I don’t have a lot of money in my account, I can only afford to trade the 15 minute chart for now, then when I build up my account I will trade longer time frames”…

Many traders think this way, and it’s usually just because they don’t know enough about Forex trading position sizing or because they think by trading bigger position sizes on the lower time frame charts they are going to somehow make money faster.

So let me set this straight for you guys right now: Through position sizing, you can trade the daily charts just fine on a small trading account…you just have to trade a smaller position size. But, let’s face it, if you have a small trading account you should not be trading large position sizes anyways! You need to get rid of this attitude of “getting rich quick” and thinking that trading a 15 minute chart is somehow going to provide you with more opportunities to profit.

Here’s the deal…Yes, there are MORE trades on a 15 minute chart, however, there are also more false-signals and there is more random market noise, so you are just going to end up taking more losing trades and stressing yourself out more. This all contributes to a poor trading mindset and ultimately to you losing more and more money.

Look at this chart below of the daily spot Gold market. There was an obvious pin bar strategy from February 16th that we discussed first in the members’ forum and then in the free commentary from February 17th, as well as in the members’ commentary. This trade setup was clearly with the existing up trend, it was well defined, and formed near two areas of support….a ‘no-brainer’ for savvy price action traders like my members. The point is this…if you wait patiently and hit one big winner like this a month, you are doing very very well. My main trading philosophy is to trade Forex like a sniper, and this is a prime example of how that’s done:



Why you need to make the daily time frame your primary chart starting today…

• Daily charts provide more clarity

As I stated before, lower time frames are full of random market “noise” and false-signals, you will eliminate most of this noise by simply focusing on the daily charts. Focusing on the daily charts will also give you a clearer view of the overall market picture and will naturally improve your ability to read the market’s direction both near and long term.

• Daily charts help you develop a more effective and accurate market bias

Understanding the overall daily time frame bias of the market is very important for trading the daily charts and the 4hr or 1hr charts too. I do teach 4hr and 1hr time frame trading, but it’s crucial to master daily chart trading first so that you get a feeling of the underlying market sentiment. This goes along with developing your discretionary price action trading skill; you have to learn to “read” the market and get in touch with its ebbs and flows…it sounds a little cheesy maybe, but the market talks via price action, and if you “listen” closely enough to what it is saying you can understand where it is most likely to go next.

• Higher risk : reward

While the amount of money you risk per trade is a highly personal decision that depends on your individual financial situation, trading the daily charts can allow you to risk a bit more per trade than trading the lower time frames. Take note: I am NOT saying you should risk more per trade, I am saying that when you only TRADE 3 TIMES A MONTH (or thereabouts), you clearly can risk more money on one trade than if you are trading 30 times a month. So, this is an answer to the question “Nial, I can’t make as much money trading the daily charts as I can on the lower time frames”…yes you can because when you trade like a sniper you inherently enter far fewer trades each month than if you trade like a machine gunner, so this allows you to trade more lots per trade. However, keep in mind, this obviously only works if you can remain disciplined enough to not jump back into the market on revenge after you have a losing trade.

• Daily charts reduce the frequency with which you trade – slow and steady wins the race


One thing I firmly believe in is that Forex trading success is largely a result of the quality of the trades you take…not the quantity of trades you take. By simply reducing the frequency with which you trade, you will simultaneously improve your odds of succeeding over the long-term. You need to understand and accept the fact that 2 or 3 quality trades a month is going to put you much further ahead than 20 or 30 emotion-fueled impulse trades a month…no matter how good it makes you feel to take them. Remember, the tortoise won the fabled race because he was slow and consistent, instead of fast and full of emotion like the hare…

Shift your thinking (Take this stuff seriously)


Trading success is a direct result of the way you think about the markets. So, if you view the markets as a game of chance that you just like to “play around with” and you think you will make money by getting lucky every now and then…your trading account will quickly shrink in size.
Professional traders view the market as an arena to spot high-probability setups, setups that virtually “jump” off the chart at them; they then trade these setups and risk only an amount of money that they are 100% comfortable with losing. They also view the markets as a reflection of their own ability to control their emotions and actions in an arena of constant temptation…most people cannot do this consistently, and that’s why many people are bad at trading. It takes consistent control of your emotions and actions in the market to produce consistent trading results.

To shift the way you think about trading, you need to start getting excited about patience and about NOT trading…understand that the way you are thinking now is the way most traders think about the market…and most traders lose money…so if you can learn to do what most traders don’t do and think opposite from them…it goes to reason that you will greatly improve your chances of making money…

Making the transition into ‘daily chart’ price action trading


Now that you understand why trading a 5 minute or other lower time frame chart is counter-productive to achieving long-term success in the markets, it’s time to make the transition to daily time frame trading. There is no sure-fire way to eliminate the temptation of the lower time frame charts, but if you re-read this article and some of my other Forex articles, you will reinforce the reasons why taking a slower and longer-term view on the market is the quickest way to making money as a trader.
The daily chart time frame is at the heart of how I trade and how I teach; my price action trading strategies and my overall trading philosophy revolve around taking a calm and stress-free approach to the markets. I know what I am looking for on the charts, if it shows up, I enter the trade, if not, I walk away from my computer.

The underlying point that you should take away from today’s lesson is that the more you push and “try” to make money in the markets by burning your eyeballs out staring at lower time frame charts, the more the money you so badly desire will elude you. Trading is an art, and like any art, it takes practice to become good at, but trading is a different beast because to excel at trading you need to take a largely “hands-off” approach, meaning you have to look at and study the markets a lot while actually “doing” relatively little (meaning not trading). Indeed, trading is the ultimate test of self-discipline and will power, and the more you develop these abilities, the more you will find that the profits you seek from the markets are not so elusive after all. If you enjoyed today’s lesson and want to learn more about developing a calm and stress-free approach to your Forex trading, check out my price action Forex trading course.

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Forex Pin Bar Method – Trading Pin Bars From Key Levels

Trading Pin Bars in Forex with Support and Resistance Confirmation, is perhaps one of the most effective ways to trade, if not thee most effective way to trade. This article will show some examples of trading pin bars from key levels. Follow along closely because this is likely to be one of the most valuable Forex trading strategy articles you’ve read.

Pin bars are one of the most valuable tools that price action traders have in their Forex trading arsenal. They often form at major market turning points, correction levels, or within a trend as continuation signals. When combined with a strong support or resistance level, pin bars can be one of the most accurate trading signals available. The best pin bar setups occur near confluent levels of previous price action as the market moves in one direction and then regresses back to re-test a previous support or resistance level. We can see in this daily chart of EUR/USD two successive pin bars testing a previous support and resistance level and then resuming downward movement

Pin bars occur in all market conditions; up trends, down trends, and range bound. The beauty of price action analysis is that it teaches you how to analyze market movement based on inherently generated data; namely price data. Reversal bars taken at confluent levels can act as a map to long-term profits in the forex market. Trader’s can design a highly profitable trading method entirely around pin bars if they so desire. The more confluence added to a pin bar formation the more accurate it becomes. We can see in this daily chart of GBP/USD below a beautiful pin far formed at a previous support/resistance level with the up trend and also at a Fibonacci 61.8 retrace level. The more confluence you can combine with a pin bar signal the higher its accuracy becomes.

Pin bars are adaptable to ever-changing forex market conditions and can be very profitable even in ranging markets. They can be very accurate if the formation is clear and obvious and combined with solid support or resistance confirmation. We can see in the daily chart of EUR/JPY below two very well formed counter-trend pin bars that formed off support in a range bound market that netted some serious gains for traders with a keen eye for price action analysis. Pin bars of this clarity and magnitude can be entered after the close on a market order. We suggest specific entry, stop, and target levels for quality pin bar setups in our member’s trading forum.

Pin bars can be taken at major market turning points counter-trend if they are very well formed. Often times long-term trend changes are set off by large pin bars that can result in some serious gains for traders aware of the potential. The daily USD/JPY chart below demonstrates how a large, well formed pin bar can tip off traders to longer-term changes in trend direction. Often times trend changes will occur rapidly and form what is called a “V” bottom with the bottom bar being a pin bar.

When pin bars form at the top or bottom of a consolidating market that is taking a breather after a large directional movement they can often signal trend resumption is near. In the daily chart of USD/CAD below we can see multiple pin bars formed at the top of a range bound market that was most recently in a large down trend. The last pin bar on the right side of the chart set off a very powerful move that resulted in a breakout of the range and subsequent downward trend resumption.

In conclusion, pin bar reversals are a great price action tool that forex traders can use in all market conditions. They are best played at confluent levels with strong support and resistance confirmation. Pin bars taken with the dominant daily trend are generally more accurate than counter trend pins. However, counter trend pins can set off long-term directional bias changes that can mean serious cash for traders with a trained eye. Pin bars work great at the tops and bottoms of range-bound markets and provide very accurate setups in these conditions. For further explanation and on-going market analysis on pin bar setups please check out my forex price action trading course and live member’s forum.

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The One Trade per Week Forex Trading Strategy

In today’s lesson I am going to show you how you could possibly make 100% on your trading account in one year by only trading one time a week. Sound too good to be true? Well, it’s not, and if you simply learn to trade like a sniper instead of a machine-gunner, and manage your money properly on every trade you take, you could approximately double your trading account in one year using solid money management. That is obviously not a guarantee or a promise, but I am going to teach you today that by simply being disciplined and following a well thought-out trading plan you could make a very decent return each year in the markets. I must inform all of you that this lesson provides examples of aggressive money management tactics, thus I strongly suggest each trader decide how much money they want to risk per trade according to their own risk tolerance and personal circumstances. In reality, it would be hard to double a small trading account without taking risks, but as we all know, without risks there is no gains. Just do me a favor and don’t rush out and start trading this strategy until your confident and fully understand it.

The main points to consider in today’s lesson are the following:

1) Focusing on quality of trades over quantity of trades is the quickest way to make money in the markets.

2) By preparing your trading strategy and trading plan before you begin trading with real money you will put the odds of success in your favor while diminishing the chances of becoming an emotional trader who loses money.

3) The keys to making the one-trade-per-week strategy work for you are being disciplined and patient.

The 1 trade per week strategy: Example

Let’s first take a look at the math behind the 1 trade per week strategy to see how it can lead to a very decent yearly return. Remember, this strategy is about trading with patience, if you do not believe that being a patient trader can pay off in the long-term; all you need to do is look at the examples below:

Please Note that your starting capital /account balance and what you decide to risk  per trade can be ‘any figure’ you choose and are comfortable with.  Some people may be more aggresive and some people may be more conservative with their capital risk management. Please understand that you should only risk an amount per trade that you are completely comfortable with.  I will say that many people teaching forex promote 2% risk per trade, I DON’T agree or believe that 2% is enough risk per trade to make any amount of substantial money long term with this particular strategy.  The below figures are just an example of how placing one trader per week could grow your account using several different risk reward and win rate scenarios.


Starting account balance = $5,000
Number of trades per week = 1 (average over one year period)
Risk / Reward per trade = 1:2
Risk per trade = $500
Reward per trade = $1,000
Assumed winning percentage = 40%
Assumed losing percentage = 60%
———————————————
52 trades in a year =
52 x .40% winning trades = 20.8 winning trades
52 x .60% losing trades = 31.2 losing trades
So, let’s say 21 winners and 31 losers over the course of a year.
21 x 1,000 = $21,000 profit
31 x 500 = $15,500 loss
———————————–
Total profit = $5,500 (110% return)

So, we can see in the above example that if you only traded 52 times in a year (1 time a week on average) and you used a risk reward of 1:2 on every trade while winning 40% of the time and losing 60% of the time, you have made a $5,500 profit on a $5,000 starting balance over the course of a year. This is a 110% return on your investment over a one year period, a very acceptable return by any professional’s standards.

Of course, you can always aim for more than 1:2 risk reward and this will actually allow you to trade even less frequently than once a week or have a losing percentage over 60% and STILL be profitable. For example (assuming risk of $500 and reward of $1,500):

52 trades: 36 losers and 16 winners = 70% losing rate and 30% winning rate (approximate):

1:3 risk reward:

16 winners x 1,500 = $24,000
36 losers x 500 = $18,000
——————————-
Total profit = $6000 (120% return)

Now, let’s dissect this a bit so that you understand the significance of these examples. Note that in both of the examples above you could have made over 100% on your trading account in one year by just trading 1 time a week. I’m willing to bet if you go look at your trading account history right now you have executed way more than 52 trades in the last year. In fact, some of you have probably executed 52 trades just this week or month.

In the second example we see that if you have a risk reward of 1:3 you can actually lose on 70% of your trades and STILL make a 120% return on the year! Just so you guys know, making 100% on a trading account in a year is up in the realm of top-performing hedge-fund managers and bank traders. (Read my Forex money management article to learn why I measure risk in dollars and not pips or percentages.) This strategy of only trading an average of once a week can really work for you if are willing to take the next steps…

How to make the 1 trade a week strategy work for you
• Discipline

It’s one thing to discuss a hypothetical example scenario, but it’s another thing to actually make it work for you in reality. So, what do you need to do to really make the one trade a week strategy work for you?
The obvious trait that is required here is self-discipline. You need to be disciplined enough to only trade the most obvious trade setup each week, and this might mean you don’t trade at all some weeks. Also, you may have to endure strings of multiple losing trades, so you need to have the discipline to not over-trade or over-leverage even if you have just had 5 losing trades in a row. You must understand that we are leveraging the power of risk reward combined with a mastery of your trading strategy to make money, but since we never know which trades will win and which trades will lose, we have to have discipline to remain calm and follow our plan even in the face of inevitable strings of losing trades
.
The point here is that you want to think longer-term about your trading and try and set an approximate goal of only trading 4 times a month, which will result in about 52 trades a year. Remember, this is not a concrete trading rule; I am just trying to show you that by trading less frequently than you probably are right now you can make a very decent return by learning to be a disciplined price action trader.

• Patience

Next, you need to have patience to make the one trade a week strategy work for you. Perhaps the best way to become a patient trader is to master one Forex strategy at a time, this way you will have total confidence in your trading ability and you will know exactly what you are looking for in the market. When you know what you are looking for in the markets there is no reason not to wait for your trading edge to appear, other than being an emotional trader. Thus by thoroughly mastering an effective trading strategy like price action you will naturally infuse a certain amount of patience into your trading mindset.

However, you must do more if you want to make patience a permanent part of your trading mindset; you must make a conscious effort to be a patient trader until it becomes a habitual part of your trading routine. The best way to do this is to create a Forex trading plan around the one trade a week strategy, this will give you a tangible reminder of what you overall approach is for trading the markets and will work to continually reinforce what you need to do to reach your trading goals.

Questions and Answers: 

Before we end today’s lesson I want to answer two questions that I get a lot of emails about and that I’m sure many of you will have regarding this article, so here goes:

Q: Won’t it be difficult to make a lot of money only trading once a week?

A: What is a lot of money to you? Is a 100% return in one year a lot of money to you? Obviously, if you have a $500 trading account a 100% return is only $500, not really a lot of money. However, if you have a $25,000 trading account than a 100% return is $25,000 in a year, this is a decent chunk of change to make for only trading an average of once a week.

But, if you are trying to get rich quick in Forex you are probably only going to lose your money even quicker. You need to understand now that the way you make money in the markets on a consistent basis is by learning to trade like a sniper and not a machine gunner. Yes, your account size does limit the amount of money you can expect to make in a year. But if you can grow your trading account 100% in a year, you will have no problem finding people to fund you. You HAVE TO manage your risk effectively on every trade otherwise you will lose all your money before you give your edge a chance to play out in the market.

Q: I don’t have enough money to only trade once a week, what do I do?

A: This is a question I get often. It seems that many beginning traders equate trading smaller time frames with being the necessary course of action for trading a small account. In fact, traders with small accounts need to trade higher time frames more than traders with large accounts. The reason is that the lower time frames are naturally going to have more false signals and whipsaws, this is going to cause you to over-trade and (or) over-leverage, and on a small account it does not take long to have a full account blow-out once you start over-trading and over-leveraging. Remember that trading more does not mean you are going to make more money, trading less frequently but with more precision gives you a better chance.

I can assure you that thinking you are going to make money faster by trading a small account on the small time frames is probably the fastest way to losing your money in the markets. I believe aspiring traders need to learn how to trade the daily charts first, as they reflect the most practical and accurate view of the market for my price action trading strategies, as well as act as a natural filter for the random market noise of the lower time frames.

If you would like to learn more about the ‘one trade per week trading style’ and other concepts discussed in today’s lesson – please check out my price action trading course and members’ community here.

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