Triumph Capital

22/09/2023

What happened to the wealth tax? Despite failing to survive politically in several countries, economists and advocates say the idea is due for a resurgence. https://on.ft.com/3sYtXYt

21/09/2023

Benefits of Investing in Cryptocurrencies

Cryptocurrencies are a new and innovative asset class that offer a number of potential benefits to investors. Here are just a few of the reasons why you might consider investing in crypto:

Potential for high returns: Cryptocurrencies have the potential to generate high returns on investment. In fact, some cryptocurrencies have experienced price increases of over 1000% in a single year.
Decentralization: Cryptocurrencies are decentralized, meaning that they are not controlled by any government or financial institution. This makes them more resistant to inflation and other economic shocks.
Security: Cryptocurrencies are secured by cryptography, making them very difficult to hack or counterfeit.
Transparency: All cryptocurrency transactions are recorded on a public blockchain, making them transparent and auditable.
Global accessibility: Cryptocurrencies can be bought and sold anywhere in the world, 24/7.

Of course, investing in cryptocurrencies is not without risk. Cryptocurrencies are volatile, meaning that their prices can fluctuate wildly. Additionally, the cryptocurrency market is still relatively new and unregulated, which means that there is a risk of fraud or scams.

However, for investors who are willing to take on some risk, cryptocurrencies offer a number of potential benefits. If you are considering investing in cryptocurrencies, be sure to do your research and understand the risks involved.

Here are some tips for investing in cryptocurrencies safely:

Only invest money that you can afford to lose.
Diversify your portfolio by investing in different cryptocurrencies.
Store your cryptocurrencies securely in a hardware wallet.
Be aware of the risks of fraud and scams.

If you are new to cryptocurrencies, there are a number of resources available to help you learn more about this asset class. You can find helpful articles and videos online, and you can also attend cryptocurrency meetups and conferences.

19/09/2023

24/07/2023

"Risk management is the only thing that separates the winners from the losers." - Mark Douglas

21/07/2023

"The market is never wrong, but opinions often are." - Jesse Livermore

07/11/2022

1) Absence of a trading plan

You have your trading account and there's a world of options or instruments to choose from so why not jump right in? This could be one of the most common pitfalls for traders as the lack of a clear trading plan for traders at the beginning of their path is due to inexperience.

As such, its crucial to construct a trading plan whether you are a novice or even veteran trader. This mistake is all too common, resulting in hasty or ill-conceived decision-making as a lack of research or familiarity with instruments can lead to losses.
Instead, a fruitful exercise is todetermine the solid parameters for entering and exiting the trade and follow them as closely as possible. Depart from the plan is permissible except in periods of increased market volatility to close the position and reduce trade risks. In the long-run, this tactic is generally more apt to yield positive results, although at the first glance it may look overcautious.

2) Problems with recognizing mistakes

Did you get unlucky, not your trade? Or did you truly recognize that you made an error. Often times people are likely to blame anything or anyone before themselves, which is why this mistake ranks so highly on this list with regards to trading.

Not recognizing your mistakes is a common error that can be related to overconfidence in traders' assessments of the situation. The market is always changing, and consequently a new important circumstance could appear. However, for newcomers it seems that they need only a little bit to stay calm and wait while loss disappeared and then there will be a reward.
Ultimately, your technique and forecasts could be relevant, though traders should not use these as a surefire predictor for future. Even the largest investment banks and international organizations are changing their expectations and forecasts. There is nothing wrong with it: nowadays the world is difficult to predict. Probably it was always like this, but now it is more often told.

3) Emotions

Nothing is ever as good or as bad as it seems. Still, it is worth noting that emotions are an integral part of trading for most individuals. The prospect or payoff of some nice trades often brings a healthy excitement and a competitive spirit to those for that are trading.

However, the reverse side yields an inverse effect on traders that can trigger deep sorrow with loses or outright depression. Greed and fear lead to mistakes and these emotions should be dispelled for any longer-term trader.
Instead, make your goals for the day and tune your trading strategy on a shorter-term basis. In doing so, this technique allows a trader to reduce a level of emotion and better control or minimize the number of spontaneous decisions.

4) Always buy low and sell high

It's so easy when you look at a chart in hindsight to identify the highs and lows. In real time however, this practice is slightly more complex or unpredictable. What seems like a good moment for reversal at first glance can very often turn out to be a small stop in the midst of the trend.
Don't be lulled into knee-jerk moves as a result of this narrow line of thought. Instead utilize a range of tools such as oscillators (technical indicators) that are helpful to determine entry/exit moments. Moreover, by estimating the strength of the current price trend, you can be better informed to execute your strategy.

5) Overconfidence in your trading strategy/performance

You are on a roll and can't be stopped. Maybe it's time to rethink your career after the stellar month you have just had trading...then the wheels come off. On the opposite side of the spectrum from having no trading strategy is being overconfident in it.

After the trader has tested it on very long historical data and if it has successfully had worked out for several months before, it is rather difficult to take a critical look at its shortcomings. A series of losses at first glance seems only a black stripe, which is about to end.

It is paramount that a trader always needs to keep an open mind to the notion that the market can change dramatically and unexpectedly. The economy can enter next macroeconomic cycle phase, the policy or other economic conditions could have changed, or seemingly any different scenario could be a game changer.
Strategies should be time to time subjected by a critical review for relevance, sometimes by your colleagues or another set of eyes. Critical thinking is one of the best lines of defense against a seemingly bulletproof strategy.

23/12/2021

THE 3 HACKS THAT WILL TRANSFORM YOUR TRADING.

This lesson is about real-world mental thought processes that professional traders use to succeed not just in trading, but in life. I’m going to show you what pro traders think and how they act that allows them to achieve massive success in the markets.

We are going to go over specific thought processes and mental routines that you need to start practicing and mastering. I’m going to give you some exercises you can start working on today, to get real results. The key for you is going to be, sticking to them, religiously, day in and day out.

The primary divide between a newbie trader and a professional, is their trading mentality. In fact, the difference between successful people and those still struggling in any field or endeavor, is mentality.

To put it a bit more succinctly; if you want to fix your trading, you first need to fix your mind.

Here’s how:

1. Learn to completely detach yourself from live trades

Perhaps the single most defining characteristic of a professional trader is the ability to mentally detach from live trades. Beginning and losing traders are not yet able to do this, hence they struggle.

Your goal is to literally feel nothing after you press that buy or sell button on a live trade. Once you get to this point, you stand a much better chance at making money in the markets because you will largely eliminate emotion-born trading mistakes.

Once A Trade Is Live,Avoid the Charts

Professional traders have learned that the easiest way to detach mentally from a live trade is to simply avoid the charts. After you place the trade, simply walk away; turn off your computer and leave it be until tomorrow at least.

Starring at the charts won’t help; you cannot control the market, you can only control yourself. It’s critical you let the trade play out without your involvement. In order for your trading edge to work, it needs to play out without you meddling with it, over a large sample size of trades.

Screen Watching Will Ruin You, Second Guessing

Watching the charts as your trade is live, just for amusement, is stupid. If that sounds harsh, it’s meant to be. There is no bigger trading mistake than watching live trades tick by for no good reason. It’s like being on a diet and purposely driving yourself to McDonald’s every day when you’re hungry and trying not to eat the food. It’s. Not. Going. To. Work.

You don’t need to feel the ups and downs of the market with a live trade on. You don’t need to and you shouldn’t want to. Save yourself the torture.

What happens when traders watch the screens all day with live trades? A number of things, but most commonly it results in second-guessing. You will second-guess your trade idea when price starts moving against you a little bit. You will second-guess your profit target as price moves up then pulls back against you a little bit. There are many other scenarios that result from watching charts too much. The bottom line is, if you want to mentally detach, you have to physically detach from the charts.

Your goal, in order to mentally detach from live trades, is to set the trade up and forget about it, just walk away.
How to do it:

The way you solve any type of trading problem is by making a conscious effort to change your trading routine and that will lead to new, positive trading habits.

As with anything, simply removing the problem (the charts) can be a massive part of solving the problem. You have a problem with a person? Removing that person from your life usually solves the problem. Don’t communicate with them anymore. You have a problem over trading and making stupid trading mistakes? Remove yourself from the charts when you have a live trade on.
Find a distraction, it can be an activity, a hobby, anything really. Just make it something you do every time you have a live trade on, so that you are building it into your trading routine to ultimately make it a habit.
Another way to mentally detach is to make sure you have no way to access the charts during the day while you’re at work or school or wherever. Delete that trading app from your phone.
Perhaps you could even have someone else manage the trade for you and you give them instructions on what to do and what not to do. The bottom line is that you need to have a plan for how you will purposely remove yourself from the charts after putting a trade on so that you can learn to mentally detach and start trading like a professional trader.

2. Start thinking of trading as a mental ‘war’

However, you have one thing they may not; a sickening desire to be the best and to play the game with more discipline than them, because that is how you will beat them.

Imagine there’s a gun to your head as you’re trading and each click of the buy or sell button is literally a life or death decision. Sounds extreme maybe, but that is how serious you have to take this if you want to be in the top 10% of traders, you certainly aren’t going to get there by taking it lightly.

The point here is that you are competing against real people, it’s not just you and a computer screen and the charts, not at all. Trading should be thought of as the ultimate mental sport, a true battle of wits, if you will. You’re in the land of big boys, hedge fund managers, time to get your ‘war paint’ on and stop pretending this is some get rich quick Hollywood movie.

The opponent is the enemy and you are here to defeat them, you are literally trying to take their money. If you don’t think like this, I promise you won’t take it serious enough to maintain the consistent discipline required to win.

Don’t come unprepared:

Whatever you do, don’t show up to the battle unprepared. Many traders open their charts after funding their live accounts and they are literally like a solider showing up to fight a battle with a pocket knife.

If you don’t want to lose all your money in a week, you need to be 100% prepared for the mental test that is waiting every time you open your laptop and click on that Meta-trader platform icon.

Important note: Whilst we are aiming to be prepared and extremely self-confident in our trading approach, we are not reckless or foolish. Being well prepared and confident is very different from taking stupid risks and being overly aggressive in the market. In fact, part of being prepared is understanding money management and having everything planned out before you push the buy or sell button.

We are not gambling or playing around, this is serious and we are ready to take on the competition in all areas: Mind, Method and Money management, the 3ms.
How to do it:

To master anything in life, you must learn, practice, repeat. Trading is no different. Except that in trading, there are many people online offering education and advice who perhaps aren’t the best to learn from.

I am probably the most competitive person you will ever met when it comes to trading, business and entrepreneurship. So, when it comes to conveying to you the mindset you need to succeed in the market, I am the man you want. Here are some tips on how to start viewing trading as a competition and how to prepare for it:

View each trade as a negotiation, a deal. It’s a contract of sorts, so take it seriously and make sure you dot all the I’s and cross all the T’s. If you were sitting next to someone in a room and either you lose money or they lose money, you would be much more focused than you are just trading by yourself. Starting thinking of this as a competition where other people are trying to take your money. Do this, and you’ll naturally start focusing more on the important things like money management and being consistent in all aspects of your trading approach.
Train and prepare. Does a boxer just show up to the boxing match without months of preparation and training? No, of course not, and if he did, he would be pummeled. You develop confidence through honing your skills and learning, mastering your craft.
Stay motivated to stay on track. You have to work on this, at least initially. Motivation isn’t something only “lucky people” have. It’s a lifestyle, a mindset that you have to train yourself to achieve through reading and repetition of proper actions.
Understand chart psychology what your opponent is doing and thinking. You can do this by learning to interpret the price action bar by bar, by following the footprint of money.
Get yourself psyched up when you open your charts. You can do this by reading trading affirmations that you like. You can even use music or motivational videos on YouTube for this. I use to listen to Highway to the Danger Zone in my early days, every day before looking at the charts. I still do sometimes. It always gets me psyched for the “danger zone” of the market.

Bottom line; trading the market is basically a mental war. Think of it as such and treat is as such. If not, you will surely be defeated in battle.

3. Don’t let money make you ‘funny’.

Money screws with peoples’ minds. Whether you’re making it or losing it, there will probably be some psychological side effects that come with it. Professional traders know that to make money consistently they have to fix this problem. You want to fix your trading? You have to fix your money mindset.

The primary mental hurdles that face traders in regards to their money, are the following:

Fear of loss, fear of missing out. Fear of loss causes traders to let small losses turn into big ones, because they are simply afraid of taking any loss. Fear of loss also can cause traders to be afraid to trade, letting good trades pass because they’re too afraid of a potential loss. Fear of missing out generally means you are chasing trades that you missed for one reason or another. You get mad at yourself and you start getting afraid of missing out on the profits, so you jump in at a terrible entry point, typically this results in a loss.
Risking too much per trade and all the problems that come as a result. I’ve written myriad articles on this.
Not knowing where to exit the market or how to exit. Self-explanatory, see solution below.
Generally speaking, having no capital preservation plan is the reason most traders fail and it’s the reason they let the money make them ‘funny’. Your money management plan IS the most important part of your entire trading approach, don’t think you can skip this part.

Here’s how to do it:

The only way to overcome money management problems is to predefined, pre-plan and just be prepared for losing before you enter a trade. Remember, any trade can lose, there’s a random distribution of wins and losses for any given trading edge. So, go into every trade understanding and accepting that it could be a loss.

A capital management plan is the only way to train yourself out of any bad habits in regards to risk management, risk reward and so on. Your capital preservation and risk management approach are your life-line in the market, it’s your oxygen. Without it, you will quickly suffocate.
You need an exit plan for stops and targets, etc. Don’t just ‘wing it’ on every trade. Plan out where you will exit for a target and a stop loss BEFORE you push the buy or sell button.
No matter how small your account is, treat it with the same respect and approach you would if it was a $1 million account or even $1 billion. Same principles apply.
Electronic digits on a computer screen can seem fake, cold, not real. To counter this, get some monopoly money or casino chips and get two jars. Each time you win put some in the winning jar, each time you lose put some in the losing jar. It will make the money seem more real to you as you touch it. I even suggest withdrawing profits from your account regularly and taking them out of your bank and touching the actual money.
Can you sleep at night with the money you have at risk? Ask yourself, how do I feel going to bed, can I live with this amount? If you can’t fall asleep because you’re thinking about the money you have at risk, it’s time to lower your risk amount.
You need to remain disciplined and consistent. If you stay disciplined with your money management approach for a year and then you go full-tilt and gamble it all on one trade like an idiot, not only will you risk losing all that money, but all the work you spent staying disciplined will be for nothing. You owe it to yourself to stay CONSISTENTLY DISCIPLINED. It’s the only way to make money OVER TIME. Never deviate.
Make this stuff into mantras that you repeat to yourself daily. Believe in it, own it like a seasoned pro. Do this if you want to join the big boys.

30/09/2021

“Focus, patience, wise discernment, non-attachment

07/06/2021

The Art of Cutting Your Losses

One of the most enduring sayings on Wall Street is "Cut your losses short and let your winners run." Sage advice, but many investors still appear to do the opposite, selling stocks after a small gain only to watch them head higher, or holding a stock with a small loss, only to see it lose even more.

No one will deliberately buy a stock that they believe will go down in price and be worth less than what they paid for it. However, buying stocks that drop in value is inherent to investing. The objective, therefore, is not to avoid losses but to minimize losses. Realizing a capital loss before it gets out of hand separates successful investors from the rest. In this article, we'll help you stand out from the crowd and show you how to identify when you should make your move.
Key Takeaways

Although stock market indexes typically move higher over longer periods of time, individual stocks don't always keep pace and many less successful ones can suffer long periods of losses.
It is not uncommon for individual investors to hold losing stocks, expecting a turnaround, only to see it fall further still.
In a worst-case scenario, the company goes bankrupt.
Having a written plan will help you decide when and why a losing stock should be removed from the portfolio.
Stop loss orders can be used to automatically exit a position and take a loss when a stock turns sour.

Holding Stocks With Large Losses

In spite of the logic for cutting losses short, many small investors are still left holding the proverbial bag. They inevitably end up with a number of stock positions with large unrealized capital losses. At best, it's "dead" money; at worst, it drops further in value and never recovers. Typically, investors believe the reason they have so many large, unrealized losses is that they bought the stock at the wrong time. They may also believe that it was a matter of bad luck, but seldom do they believe it is because of their own behavioral biases.
1. Don't Stocks Always Rebound?

A glance at a long-term chart of any major stock index will see a line that moves from the lower-left corner to the upper right. The stock market, over any long-term period, will always make new highs. Knowing that the stock market will go higher, investors mistakenly assume that their stocks will eventually bounce back. However, a stock index is made up of successful companies. It is an index of winners.

Those less successful stocks may have been part of an index at one time, but if they've dropped significantly in value, they will eventually be replaced by more successful companies. The indexes are always being replenished by dropping the losers and replacing them with winners. Therefore, looking at the major indexes tends to overstate the resiliency of the average stock, which does not necessarily bounce back. In fact, many companies never regain their past highs and some even go bankrupt.
2. Refusing to Accept Blame

By avoiding selling a stock at a loss, many investors do not have to admit to themselves that they've made a judgment error. Under the false illusion that it is not a loss until the stock is sold, they elect to continue to hold a losing position. In doing so, they avoid the regret of a bad choice. After a stock suffers a loss, many investors plan to hold onto it until it returns to its purchase price. They intend to sell the stock once they recover this paper loss. This means they will break even and "erase" their mistake. Unfortunately, many of these same stocks will continue to slide.
3. Neglect

When stock portfolios are doing well, investors often tend to them like well-maintained gardens. They show great interest in managing their investments and harvesting the fruits of their labor. However, when their stocks are holding steady or are dropping in value, especially for longer-term periods, many investors lose interest. As a result, these well-maintained stock portfolios start showing signs of neglect. Rather than weeding out the losers, many investors do nothing at all. Inertia takes over and, instead of pruning their losses, they often let them grow out of control.
4. Hope Springs Eternal

Hope is the belief in the possibility of a positive outcome, even though there is some evidence to the contrary. Hope is also one of the primary theological virtues in various religious traditions. Although hope has its place in theology, it does not belong in the cold, hard reality of the stock market. In spite of continuing bad news, investors will steadfastly hold onto their losing stocks, based only on the faint hope that they will at least return to the purchase price. The decision to hold is not based on rational analysis or a well-thought-out investment strategy, and, unfortunately, wishing and hoping a stock will go up does not make it happen.

Realizing Capital Losses

Often you just have to bite the bullet and sell your stock at a loss before those losses get bigger. Hope is not a strategy, and an investor has to have a logical reason to hold a losing position. What you paid for a stock is irrelevant to its future direction. The stock will go up or down based on forces in the stock market, the stock's underlying fundamentals, and its future prospects.

Let's look at a few ways of assuring a small loss does not become dead money or turn into a much larger loss.
Have an Investment Strategy

Having a written investment strategy with a set of rules both for buying and selling stocks will provide the discipline to sell stocks before the losses blossom. The strategy could be based on fundamental, technical, or quantitative factors.
Have Reasons to Sell a Stock

An investor generally has quite a few reasons for buying a stock, but typically no set boundaries for when or why to sell it. Don't let this happen to you. Set reasons to sell stocks and sell them when these reasons occur. The reason could be as simple as: "Sell if bad news is released about corporate developments, or if an analyst lowers the price target."
Set Stop Losses

Having a stop-loss order on shares you own, particularly the more volatile stocks, has been a mainstay of advice on this subject. The stop-loss order prevents emotions from taking over and will limit your losses. Importantly, once the stop loss is in place, do not adjust it as the stock price moves lower. It makes more sense to adjust the stop price when shares are moving higher.
Ask: Would I Buy the Stock Now?

On a regular basis, review every stock you hold and ask yourself this simple question: "If I did not own this stock, would I buy it today?" If the answer is a resounding "No," then it should be sold.
Tax-Loss Harvesting Strategies

A tax-loss harvesting strategy is used to realize capital losses on a regular basis and provides some discipline against holding losing stocks for extended time periods. To put your stock sales in a more positive light, remember that you receive tax credits that can be used to offset taxes on your capital gains.1


The Bottom Line

Taking corrective action before your losses worsen is always a good strategy. In investing, avoiding losses is not always possible, but successful investors accept this and try to minimize their losses rather than avoid them. Selling a stock at a loss and receiving a tax credit is one benefit you will receive. Selling these "dogs" has another advantage: You will not be reminded of your past mistake every time you look at your investment statement.

03/06/2021

6 Steps to a Rule-Based Forex Trading System


Step 1: Examine Your Mindset

Know who you are: When trading the markets, your first priority is to take a look at yourself and note your own personality traits. Examine your strengths and your weaknesses, then ask yourself how you might react if you perceive an opportunity or how you might react if your position is threatened. This is also known as a personal SWOT analysis. But do not lie to yourself. If you are not sure how you would act, ask the opinion of someone who knows you well.

Match your personality to your trading: Be sure that you are comfortable with the type of trading conditions you will experience in different time frames. For example, if you have determined that you are not the kind of person who likes to go to sleep with open positions in a market that is trading while you sleep, perhaps you should consider day trading so that you can close out your positions before you go home. However, you must then be the kind of person who likes the adrenalin rush of constantly watching the computer throughout the day. Do you enjoy being computer-bound? Are you an addictive or compulsive person? Will you drive yourself crazy watching your positions and become afraid to go to the bathroom in case you miss a tick? If you are not sure, go back and re-audit your personality to be certain. Unless your trading style matches your personality, you will not enjoy what you are doing and you will quickly lose your passion for trading.

Be prepared: Plan your trade so you can trade your plan. Preparation is the mental dry run of your potential trades—a kind of dress rehearsal. By planning your trade in advance, you are setting the ground rules, as well as your limits. If you know what you are looking for and how you plan to act if the market does what you anticipate, you will be able to be objective and stand aside from the fear/greed cycle.

Be objective: Do not become emotionally involved in your trade. It does not matter whether you are wrong or right. What matters, as George Soros says, is that "you make more money when you are right than what you lose when you are wrong." Trading is not about ego, although for most of us it can be disconcerting when we plan a trade, apply our entire logical prowess, and then find out that the market does not agree. It is a matter of training yourself to accept that not every trade can be a winning trade, and that you must accept small losses gracefully and move on to the next trade.

Be disciplined: This means that you have to know when to buy and sell. Base your decisions on your pre-planned strategy and stick to it. Sometimes you will cut out of a position only to find that it turns around and would have been profitable had you held on to it. But this is the basis of a very bad habit. Don't ignore your stop losses—you can always get back into a position. You will find it more reassuring to cut out and accept a small loss than to start wishing that your large loss will be recouped when the market rebounds. This would more resemble trading your ego than trading the market.

Be patient: When it comes to trading, patience truly is a virtue. Learn to sit on your hands until the market gets to the point where you have drawn your line in the sand. If it does not get to your entry point, what have you lost? There is always going to be an opportunity to make gains another day.

Have realistic expectations: This means that you won't lose your focus on reality and miraculously expect to turn $1,000 into $1 million in 10 trades. What is a realistic expectation? Consider what some of the best fund managers in the world are capable of achieving—perhaps anywhere from 20%–50% per annum. Most of them achieve much less than that and are well-paid to do so. Go into trading expecting a realistic rate of return on a consistent basis; if you manage to achieve a growth rate of 20% or better every year, you will be able to outperform many of the professional fund managers.
Step 2: Identify Your Mission and Set Your Goals

With anything in life, if you don't know where you are going, any road will take you there. In terms of investing, this means you must sit down with your calculator and determine what kind of returns you need to reach your financial goals.

Next, you must start to understand how much you need to earn in a trade and how often you will have to trade to achieve your goals. Don't forget to factor in losing trades. This can bring you to the realization that your trading methodology may be in conflict with your goals. Therefore, it is critical to align your methodology with your goals. If you are trading in standard 100,000 lots, your average value of a pip is around $10. So how many pips can you expect to earn per trade? Take your last 20 trades and add up the winners and losers and then determine your profits. Use this to forecast the returns on your current methodology. Once you know this information, you can figure out if you can achieve your goals and whether or not you are being realistic.
Step 3: Ensure You Have Enough Money

Cash is the fuel needed to start trading, and without enough cash, your trading will be hampered by a lack of liquidity. But more important, cash is a cushion against losing trades. Without a cushion, you will not be able to withstand a temporary drawdown or be able to give your position enough breathing space while the market moves back and forth with new trends.

Cash cannot come from sources that you need for other important events in your life, such as your savings plan for your children's college education. Cash in trading accounts is "risk" money. Also known as risk capital, this money is an amount that you can afford to lose without affecting your lifestyle. Consider trading money as you would vacation savings. You know that when the vacation is over the money will be spent and you are OK with that. Trading carries a high degree of risk. Treating your trading capital as vacation money does not mean that you are not serious about protecting your capital; rather, it means freeing yourself psychologically from the fear of losing so that you can actually make the trades that will be necessary to grow your capital. Again, perform a personal SWOT analysis to be sure the necessary trading positions aren't contrasting with your personality profile.
Step 4: Select a Market That Trades Harmoniously

Pick a currency pair and test it over different time frames. Start with the weekly charts, then proceed to daily, four-hour, two-hour, one-hour, 30-minute, 10-minute, and five-minute charts. Try to determine whether the market turns at strategic points most of the time, such as at Fibonacci levels, trendlines, or moving averages. This will give you a feeling of how the currency trades in the different time frames.

Set up support and resistance levels in different time frames to see if any of these levels cluster together. For example, the price at 127 Fibonacci extension on the weekly time frame may also be the price at a 1.618 extension off of a daily time frame. Such a cluster would add conviction to the support or resistance at that price point.

Repeat this exercise with different currencies until you find the currency pair that you feel is the most predictable for your methodology.

Remember, passion is key to trading. The repeated testing of your setups requires that you love what you are doing. With enough passion, you will learn to accurately gauge the market.

Once you have a currency pair that you feel comfortable with, start reading the news and the comments regarding the particular pair you have selected. Try to determine if the fundamentals are supporting what you believe the chart is telling you. For example, if gold is going up, that would probably be good for the Australian dollar, since gold is a commodity that is generally positively correlated to the Australian dollar. If you think gold is going to go down, then wait for the appropriate time on the chart to short the Aussie. Look for a line of resistance to be the appropriate line in the sand to get timing confirmation before you make the trade.
Step 5: Test Your Methodology for Positive Results

This step is probably what most traders really think of as the most important part of trading: a system that enters and exits trades that are only profitable. No losses—ever. Such a system, if there were one, would make a trader rich beyond their wildest dreams. But the truth is, there is no such system. There are good methodologies and better ones and even very average methods that can all be used to make money. The performance of a trading system is more about the trader than it is about the system. A good driver can get to their destination in virtually any vehicle, but an untrained driver will probably not make it, no matter how great or fast the car is.

Having said the above, it is necessary to pick a methodology and implement it many times in different time frames and markets to measure its success rate. Often, a system is a successful predictor of the market direction only 55%–60% of the time, but with proper risk management, the trader can still make a lot of money employing such a system.

Personally, I like to use a system that has the highest reward to risk, which means that I tend to look for turning points at support and resistance levels because these are the points where it is easiest to identify and quantify the risk. Support is not always strong enough to stop a falling market, nor is resistance always strong enough to turn back an advance in prices. However, a system can be built around the concept of support and resistance to give a trader the edge required to be profitable.

Once you have designed your system, it is important to measure its expectancy or reliability in various conditions and time frames. If it has a positive expectancy (it produces more profitable trades than losing trades), it can be used as a means to time entry and exit in the markets.
Step 6: Measure Your Risk-to-Reward Ratios and Set Your Limits

The first line in the sand to draw is where you would exit your position if the market goes against you. This is where you will place your stop loss.

Calculate the number of pips your stop is away from your entry point. If the stop is 20 pips away from the entry point and you are trading a standard lot, then each pip is worth approximately $10 (if the U.S. dollar is your quote currency). Use a pip calculator if you are trading in cross currencies to make it easy to get the value of a pip.

Calculate the percentage your stop loss would be as a percentage of your trading capital. For example, if you have $1,000 in your trading account, 2% would be $20. Be sure your stop loss is not more than $20 away from your entry point. If 20 pips are equal to $200, then you are too leveraged for your available trading capital. To overcome this, you must reduce your trading size from a standard lot to a mini-lot. One pip in a mini-lot is equal to approximately $1. Therefore, to maintain your 2% risk-to-capital, the maximum loss should be $20, which requires that you trade only one mini-lot.

Now draw a line on your chart where you would want to take profit. Be sure this is at least 40 pips away from your entry point. This will give you a 2:1 profit-to-loss ratio. Since you cannot know for sure if the market will reach this point, be sure to slide your stop to break even as soon as the market moves beyond your entry point. At worst, you will scratch your trade and your full capital will be intact.

If you get knocked out on your first attempt, don't despair. Often it is your second entry that will be correct. It is true that "the second mouse gets the cheese." Often the market will bounce off your support if you are buying, or retreat from your resistance if you are selling, and you will enter the trade to test that level to see if the market will trade back to your support or resistance. You can then catch profits the second time around.
Summary

By fusing psychology, fundamentals, a trading methodology, and risk management, you'll have the tools to select an appropriate currency pair. All that is left to do is repeatedly practice trading until the strategy is ingrained in your psyche. With enough passion and determination, you will become a successful trader.