Narrow Your Focus

"If you chase two rabbits, you will not catch either one."

- Russian Proverb


I'm currently reading a book called "The One Thing" by Gary Keller. It's a very practical book explaining what makes some people so extraordinarily successful in something and why others aren't. The One Thing is all about focusing one's attention and efforts solely on the one most important thing you or your business can do in order to be more successful. The people who succeed are the ones who can narrow their focus so much so that they only concern themselves with getting better in one particular area. Alternatively, the people who multitask, having their minds wandering everywhere, struggle to make any real progress.

How does this relate to trading? Well a Trader should focus his/her energy on the things that make them money. Once you find the answers you need and make adjustments and create good habits, then move on to another area which will increase the amount of success.

For instance, if you get better results trading daily rather than weekly or monthly, focus your energies on becoming a better day trader. If you try trading futures, currencies, and stocks and you get better results with currencies, well focus your energy there. If you get best results with the EUR/USD or the USD/CAD, focus there and get better. If after trading the 1,2,3,4,5,15,30 minute charts and you find your best results are with the 5-min charts, specialize there. Keep doing this until you end up with your best performing industry/product, time frame, enter/exit strategy, indicators, sensitivity settings, money management approach, etc. Once you keep narrowing your focus down to the lowest level possible (backed by favourable back testing results), stay there and keep doing the same thing over and over and over again. This is the "secret" to success, in any industry, in any relationship, in any diet, in any sport, in any goal really. Focus on what is most important to your success and master it, make it a habit, and then move on.

If you get a chance, pick up the book as it's a great read. Have a great weekend!

Warren Buffet is Wrong

It was he who first said.... "Rule No. 1: Never lose money; rule No. 2: Don't forget rule No. 1". 

Warren Buffet has taken losses, just like the rest of us. The idea that one has to never lose in order to win in the world of investing has to die a horrible death. Of course Mr. Buffet knows losses are apart of the game, especially when years ago he took a $900 million loss on the US dollar when he shorted it, thinking the dollar was doomed, only to see it surge soon after it bottomed. Or recently when Berkshire Hathaway lost $11 billion in the recent stock market sell off a few months back. 

No matter who the investor is, they have all taken losses, a lot of them. The goal though is to make more money than you lose. It's just that simple. Can you lose money overall if you win 90% of the time? You sure can if you're constantly over leveraged. Can you become incredibly rich being right only 40% of the time? You bet. The goal for every trader/investor is to simply work out a strategy and system that is favourable in the long term and effectively produces profits that when added all up, out weigh the sum of the losses. 

The reason Warren Buffet is so rich, is because he doesn't let the fear of loss stop him for going for the win. I think what he meant with this quotation was "play to win". He's taken losses but his winners vastly out shine his losers. That's how you and I need to be. Act on a winning system consistently despite your fear of loss. Being a trend follower, the losses will come... and when they do remember, they are the precursors to large financial gains. 

The 10% Rule

If you have a thriving trading account and you're making profit, congratulations on getting to that point. If you're trying to make a living as a trader, you should sit down and figure out a fair percentage of income to draw from the profits, all while retaining enough of that profit to reinvest and compound the value of your account. Just like every business, it's important to be profitable but it's also important to understand how much income one should draw from his/her account. Not only will this allow you to enjoy the fruits of your labour, but this will create a great habit of paying yourself first and slowly growing your net worth. We humans are very bad at taking action today, for a better tomorrow. We tend to think about the here and now much too often. So it's very important that you get in the habit of simply taking out at least 10% from your profits, every month for yourself. Open a bank account and name it "Financial Freedom" and every month, put 10% of your profits in there. Even if you only profit $100, take $10 out and deposit it in your Financial Freedom account. Over time, the deposits will grow and so will the balance. Don't wait for the magic day when you have "enough" money to start to save or withdraw profit. Do the same thing for $100, that you would with $1,000,000. This is the secret to building wealth and what many traders fail to understand, even when very profitable on paper. Pay yourself for your hard work and success and allow your savings account to grow along side your investment account. Patience is needed but this approach curbs the thoughtlessness we often have with money. Over time as the account grows, you'll be amazed at how phenomenal this concept truly is.

Grow More

I digress a bit in this post as I think I've outlined some really great trading principles that if followed, will help you and me become much better traders/investors. This post is about becoming bigger in a holistic way because if you only focus on one thing in life with your head down, that very thing you eventually accomplish may not bring you the happiness or aliveness you think it will.

When I finally started making some good money, I got excited, very excited. I literally jumped for joy on certain days when it seemed as if the future was looking very bright. I was so happy I finally found an approach that stood the test of time and was going to change my life. Soon after I hit my first two financial milestones,  I was left thinking...  what's next? Although hitting financial goals was great, each time, it didn't have the same excitement it did when I first made my first breakthrough. Now I'm not saying making money isn't great, but there are also other areas of your life you should focus your attention on as well. What good is all the money when you're sick, stressed, and fat? Health, education, entertainment, friends and family are all equally as important as finance. Find the time to be present and enjoy life, read a book, take a walk, play a sport, take your partner out on a date, increase the amount of greens you eat and reduce the sugar, dairy, and wheat in your diet. You'll ensure that you will be in tip top shape, happy, connected, and well educated for the world of tomorrow, all while slowly becoming financially independent.

Shut Out The Noise

Tonight I was watching TV while my wife was sleeping on the sofa and when I got up to get something to nibble on, the business news came on which flashed many breaking stories and business reports. While admittedly I stopped what I was doing to listen to what was being said, I soon realized it was mostly noise and wouldn't benefit me or my business in any way. Don't get me wrong, it may have a place for certain people in industry, but for me, a trend following trader, it would add noise and confusion to my life and that's not allowed. Lets be honest, all the news does is report on things that have already happened and/or consists of speculation on future trends, and are usually wrong. I quickly picked up the remote, and changed the channel.

As a technician and follower of the market, it's your duty to unemotionally take buy/sell signals, without bias. This is how you separate yourself from the average trader who typically falls apart taking long or short positions on oil, or the dollar, or the Dow Jones Industrial Average, simply because of the "fundamentals". Your job is to listen to the market itself, the price action, react swiftly, and monitor its progress. My advice is to not listen, read, or watch any piece of business news, hoping to gain insight on future investment decisions. Your charts are all the data you need in order to make good, valid decisions. At least then you will be basing them on actual market movement, happening at that moment in time, rather than projecting your preconceived beliefs on the market.

Be like the fly fisher who travels out into nature, where he/she can be alone, with their own thoughts, and simply listen and follow what nature itself is telling them. Be calm, relaxed, and breathe. Focus only on what you see and avoid the noise from others. That's your best chance for success in this business. Go catch those fish.

Keep It Simple, Stupid

Raise your hand if you've ever been "stupid" in your trading... come on, raise it. We all have made stupid mistakes, a lot of them. It comes with the territory. It's a tough game and between our emotions, lack of experience, and/or lack of a good strategy, it's hard to garner sustained success. Well I'm here to help and today, I give you a very powerful concept to absorb and own from now on. Simplify simplify simplify. The more simple your approach in the markets, the more success you will experience.  The most successful traders in the world (professionals, market makers, floor traders, super traders) are the most simple, focused people when it comes to making investment decisions.

My mentor, who traded his own account for 40 years, traded almost exactly the same way, day in and day out, for 35 of those years, up until his death. The first time I ever spoke to him, he asked me what I liked to trade and what time frame I use. I responded, "I like to trade currencies, the majors mostly, and I trade the 15 minute charts, the 30 minute charts, the hourly, and sometimes, the 4 hour charts." He abruptly and politely told me I was off track and I needed to be more focused. What he wanted me to do was choose only one market to trade and use only one time frame. This took me back a bit because every image I've held on to for years is one of traders being dynamic, with multiple computer screens in front of them, screaming and yelling at people, trying to ride any market they think that is trending. When he told me that all he trades is the S&P 500 E-mini futures market on a 2 minute chart, using a 30 minute chart for reference, every day, looking for the same occurrence over and over, I was shocked! What he had learned over the years was that having a great system and approach is good but it also should be applied and catered to a specific market and time frame. If you keep these variables the same over time, after a while, you get in rhythm with that specific market and the way it moves and certain details become clearer. You begin to understand more and get in the minds of the other players.

For example, if you were to trade the S&P 500 E-mini market long enough, you'd notice at the exact moment the market opens (9:30am EST), volume surges and the price tends to jump around a lot and/or move very swiftly in one direction. During lunch time, around 12:00pm-1:00pm EST, the market tends to ease up a bit and move slower. From 2pm -4 pm EST(market close), price action tends to flow in one direction or the other and trend a bit better. Now this is very important information. I used to be stubborn and think that information like this didn't matter but it does. It so very does! Specific information about how each market moves throughout a day is some of the most vital information one can have. There are many professionals who are very successful and only trade from 2pm-4pm EST each day, every day, and make a lot of money doing so, doing the same thing over and over.

Remember, this is a competition. You are competing against other people out there to earn profit. The only way it gets easier is to simplify the game. If you wanted to beat people at a game of one on one basketball, practicing on the same court and at the same time of day, day after day, how successful do you think you might be after awhile when different people stop by and challenge you to a game? How confident do you think you would feel that you could beat the other person before you even start each game? I'm sure over time you would feel extremely confident and with good reason. You'd understand the playing surface and how slippery it may be in certain areas, which side of the court receives the most direct sun light and how much, how tight or loose the basketball rims are, which way the ball may veer when the wind picks up, or even which areas of the court that have bumps or holes. Point is, you'd have an advantage. All those little things give you an edge. In the game of money, the super successful use every edge and advantage they can because sometimes, those are the things that differentiate the winner from the one who loses.

Take it from me, trade one market, use the same time frame(s), over and over, and you'll not only become much more successful, you'll be more relaxed doing so and that is just as important. It's also very liberating to know you can be more successful using one laptop screen, over the guy somewhere else in the world, in front of 8 screens, salivating at all the "opportunity" in front of him but only manages to lose in this game we call trading. Stay focused on the big picture while doing the same thing over and over, using the same frame of reference. It's not sexy, it's not as fun, but it's smart and it makes money. You do like money right?

Patience is a Virtue

One aspect of trading that is so often overlooked, but probably lies at the heart of most poor decisions ... is.... you guessed it..... patience. Lets be honest, the sole reason we trade and got involved in trading is to make money, a lot of it. And a lot of it can be made, don't get me wrong. The richest individuals in the world are investors and they got to be rich by harnessing the power of time. Whether they are conscious of it or not, the power of time and using money effectively with the power of mathematics helped them to amass a great deal of wealth. In the world of trading, having patience can drastically improve the performance of your account. There are countless examples of traders who lost almost all of their capital simply because they didn't master the art of waiting and risked too much or traded too often in hopes of out thinking the market. The ones who do make money, are the ones who understand a market will run, then walk. I want you to look at the graphic I prepared below. Click on it so it enlarges and absorb what's happening.

Now I initially called it "The Flight Path of the Trend Follower" but quickly corrected myself by adding the word "Good" to the title. I'm illustrating how closely a trader's progress looks just like market movement. Your progress is not going to be a straight line. Actually, your progress will probably seem stagnant more times than not. 60-80% of the time, your account will look lifeless, losing what you win over and over. That's okay. If you have patience and understand that, instead of out thinking the market, you follow it, understanding when she starts running again, you'll be there. Along the way to riches, you will experience good sized "setbacks" but they're not setbacks. It's just trapped energy spooling up to be released down the road.

Being a good trend follower means understanding markets take a while to work themselves out and make substantial moves, one way or the other. Trend followers trade as usual, expecting only what the market is willing to give. Buyers and sellers often "fight" so much that sideways choppy action can last what seems forever until one side wins and the people who stuck around long enough reap the reward. The good trend follower understands this thoroughly and it's what keeps him/her from betting too much or taking odd trades that go outside their system. They make trades listening to what the market and their system ARE telling them, rather than listening to what they feel the market SHOULD do. Big difference. As an ex Elliottician I still struggle with letting go of all the patterns I learned, hopelessly trying to forecast the future. Why? Well after years of study and lack luster results at best, I quickly realized that in real time, markets cannot fit in a box and that market will move and swing the way it wants. Also, if you ever become married to one or two possible outcomes, you tend to hold on to those beliefs even when the market is telling you it's not going that way. Trend following is all about finding out when the trend has changed, and simply taking action, moving your stops, and letting the market move while you get out of the way. She says to lose $800, you give $800... She gives you $500, you take back $500.

When using a good trend following approach, drawdowns will occur whether you are trading a weekly chart, or a minute chart. They cannot be avoided. Sure you can do your best and avoid certain phases, but for the most part, it's easiest to follow along and be there when price makes the big moves. Embrace the draw downs. They aren't so bad. They are simply a precursor for the main event. If you can master the art of patience while trading, after every drawdown period you will continue to add additional profit, and that's a beautiful thing. Just make sure you trade small and account for those drawdowns, otherwise you'll not only be late to the party, you won't make it at all.

"Change Is Automatic, Progress Isn't"

I was listening to my guy Tony Robbins this afternoon (I tend to geek out on personal growth material at times) and he made this statement. He wasn't talking about trading but just the same, it definitely applies. The markets and conditions are changing all of the time, day by day, minute by minute, second by second. The market doesn't care whether you are young, old, man, woman, a nice person, a bad person, skinny, big boned, etc. It just keeps changing, going up and down, taking people's money and redistributing it to others and vice versa. I'm emphasizing this point because it's very simple and small minded to get angry at the market because of lack luster results.The market simply doesn't care that you have taken 5 losses in a row. It doesn't care that you're spreading yourself too thin. It doesn't care about you, period. When we win, we say "I" did that! When we lose, we tend to look for someone or something to blame. Well, start with yourself. Look and see if there's anything you could have done better. Break things down and figure out if you followed your proven system correctly. If you did, stay on the same track. If you're veering off, get back on track and make the necessary adjustments. Take responsibility when you need to so you can change, grow, and move on. That is what success is all about. This is what needs to happen in order to progress. Eventually, it becomes a ritual and you'll stick to your guns time and time again.

I'm reminded of what my late mentor said about his trading... "I'm allowed to have a down day, not a bad day". What he meant by that was if he followed his proven system and lost for the day, that's a down day and perfectly acceptable. If he were to take chances and not follow his proven system, that my friends would be a bad day, and you're not allowed to have them.

Good trading everyone and have a great weekend.

Be Safe, Avoid The Announcements

Short post for today but the question usually comes up on what a trader should do during a major financial announcement, like today's Fed (Federal Reserve) announcement? In what surprised very few, today the Fed kept interest rates at their current level instead of raising them. Regardless of what the decision was I can guarantee one thing.... At 2:00pm EST, on every Federal Reserve announcement day, the markets go crazy, wonky even. I don't care how sophisticated your software is. Generally when announcements are released, the market swings so drastically that it's near impossible to profit, unless you're trading on a 1 minute time frame and/or initiating some serious short term trades. Be safe, stop your trading at 1:59pm EST and call it a day. Your trading account will thank you in the end. Take it from me who has learned the hard way in the past. Leave that risky game for the other guys and prepare for the next trading day. Cheers.

Be Right, Even When Wrong

I know what you're thinking... How is that possible in the world of trading? Well what I mean by that is, follow your proven system, time and time again so that even when you lose a trade, you know that in the long run, you're always going to win. It gets back to the previous points I made in the posts and I'm sorry if I sound like a broken record but always stick to the plan. Stop trying to win every trade. Stop changing your proven system when you take a string of losses. Relax, breathe, and think about carrying out your system on the very next trade because only then, will you be on track to build sustained wealth. Most traders become statistics because they just can't let the losses go. It consumes their mind and they go a bit crazy in the process. Soon after, goodbye capital.

Personally speaking, during the last week of August and the first week of September, I have doubled my trading account in value. As great as that feels/felt I'm aware that drawdowns and losses are around the corner. This is because that's the way the market works. Now if I lose half of my account in the next few days then we obviously have a problem. Generally, what you make when the market trends nicely, will be reduced by a certain percentage following that run. The trick is to stick to your system so that once the trend resumes or picks up again, you can be there, and who knows, you may double your account once again. Always be prepared to give a portion of your earnings back to the other players. It's the cost of doing business. But if you can take $10,000 and turn it into $100,000 in one year, do you really think you're going to concern yourself with thinking about all the losing trades you had along the way? So please, keep looking at the large picture... Trade by trade you will get to where you want to be. It's just not going to be a straight line. Remember, always position yourself to be right, even when you lose a trade. Your financial future depends on it, literally.

Please, backtest BackTest BACKTEST

I cannot stress this point enough. It's imperative you backtest every possible system or method strenuously! This will become your bread and butter, your "go to" for building profit, drawing income, and producing wealth. It needs to stand the test of time, in different market conditions. It needs to remain unchanged for a long period of time because this is how you will survive drawdowns. Which brings me to my next point. Your system has to be able to be properly backtested having past data and indicators remaining the same, whether you're looking at live data, or past data. Meaning the buy and sell signals remain the same once each bar finally closes, past or present. And this is where approaches like the Elliot Wave Principle fall apart. These types of approaches can never be properly back tested because they are always using projections of what is to happen in the future but valid wave counts, when live, can change. This means as you back test with old data, the picture and count may appear extremely clear yet when you were looking at that same data being drawn live, the picture was murky and full of different possibilities.

When backtesting, your approach should be 95-100% accurate when comparing live data to past data. This allows you to see just how profitable or unprofitable your trade method is over a period of time, and make necessary changes if needed. You also need to make sure enough sample data is tested. For example, if reading 1-5 minute charts, 2 months of data is great. Swing trading (30-240 min charts), 6 months - 1 year, and daily charts, 1-2 years of data testing is good. Me myself, I trade the smaller time frames but instead of testing just 2 months, I went ahead and tested 6 months, just to be sure I had a good reliable system. I stayed up at all hours of the night/morning for weeks, testing every time frame, and then multiple time frames on the same chart to find the absolute best sweet spot for each respective market I wanted to trade. Like I said, if you really want to be successful, it's not cheap. You have to put the work in. It takes a very long time to be an overnight success.

Once I found it, I still only paper traded for a few months to get used to initiating trades in real time and to get a feel for what results I could expect. Only when my real time results matched up with the past backtesting reports did I pull the trigger on my first trade. This is what you need to do. It feels nice to pull in profit but never forget how easy it is to lose in this game. If your system does not hold up and you take shortcuts by not ensuring you have looked at every possible outcome over time, it will cost you, I guarantee it. Success in this business is not by chance. Success come to those who plan for it and execute strategies that have a proven track record. Put your ego away and backtest the hell outta your approach and I promise, you will thank the gods you did.

Compounding Is The Key Ingredient To Wealth

In one of my earlier posts, I talked about slow-medium growth being far better and far more sustainable than fast growth. This is true but I neglected to illustrate just how "fast" slow-medium growth actually is. Finance is all mathematics and once you understand the numbers, it makes everything very clear.

As a trader, I typically take small bets on each trade I make to make more money than what's being risked. This typically nets me anywhere between 100-1000% annual returns. This may seem very high (and it is when compared to large hedge fund managers on Wall Street), but as a day trader, trading a much smaller amount of money, it can be done taking small amounts of risk on short term individual trades. Some traders have returned +2000% in past years. The point is, when you look at these numbers, one gets excited but the truth is, even when making a much lower profit on a yearly basis, when compounded, the returns can really add up (and quickly) once an account matures.

I wonder how much money you would have after 10 years if you invested $1 and grew it by 100% every year after?

1st year = $1
2nd year = $2
3rd year = $4
4th year = $8
5th year = $16
6th year = $32
7th year = $64
8th year = $128
9th year = $256
10th year =$512

$511 of profit in 10 years is not so bad from an investment of only $1. Realistically speaking, if you invested $1000 instead of just $1, that profit jumps to $511,000. Let's say instead of trading for just 10 years you wanted to trade for 20. I wonder how that would change the end result?

11th year = $1,024,000
12th year = $2,048,000
13th year = $4,096,000
14th year = $8,192,000
15th year = $16,384,000
16th year = $32,768,000
17th year = $65,536,000
18th year = $131,072,000
19th year = $263,144,000
20th year = $524,288,000

Now the game becomes exciting. I'm not sure of any job out there where you can make over $524 million in just 20 years. This is all because of the power of mathematics, more specifically, compounded growth.

Some of you may say, wait a minute, 100% return a year is a bit "unrealistic"!. Fair enough. If you shoot a bit lower, lets say a 50% return annually, you would still walk away with a cool $2,216,837.82. Point is, compounded growth speeds up the accumulation of wealth over time to a point where unbelievable returns are attained. Stop trying to do it all in one year. Have some patience and the days will come where speed of growth is the last thing on your mind. If you're like me, and never want to fully retire, then you have a very bright future ahead of you once you figure out a system that works out for you. Keep doing that over and over again and change your life forever in the process.

Be Indifferent

In the world of trading, every investor knows there are ups and downs. It's not a question on if they will happen, but when. How you deal with those "ups" and "downs" means everything to your bottom line. My advice... deal with them in the exact same way. Your path to wealth will be a journey of many peaks and valleys so the best thing you can do is take each win and loss the same way, while understanding sustained success in this business will only happen if you're incredibly emotionally stable. Emotions get you killed in this game so the better you are at doing the same thing, over and over, while keeping your emotions in check, the more profit and the less losses you will experience. Keep following the market with a proven system and your losses will continue to be small and your gains will continue to grow.

I've taken a lot of losses in my career and I know they aren't fun. The important thing though is if you looked at my monthly statements, the total of those losses, are generally less than the gains. At the end of the day, that's all that matters.

You're Not Alone

Being a trader can be one of the loneliest professions out there, especially if you work from home. I'm touching on this subject because no one talks about how being a trader can affect your personal life with friends and family. I've felt lonely and misunderstood my whole career so i know how it feels.

When I first started in the business, I got the "be careful" and "that's too risky" responses when I shared what I was getting into. Even my cousin, who he himself was a trader and is now head of the department for one of the big Canadian banks told me... "Scott, it's risky. Are you sure you want to do this?" These concerns are perfectly understandable and valid since so few people actually make good money in the world of investing. Funny thing is, when I went to family, experts, and associations looking for some form of help, mentorship, and advice, no one seemed interested to share any knowledge or at least point me in the right direction. Whether it be close family or strangers, I started to see just how competitive the trading industry is. The truth is, every trader has to take it upon themselves to not rely on others to help when in need. You need to put the puzzle together and that often comes from many different sources. It's very rare today to have a successful trader just offer up their method and every detail about what they do to remain ahead of the game.  

As I continued to trade (unsuccessfully), I struggled to fit in to a society that pretty much only respects someone who has a job. I'd go out to parties, talk to friends and family about what I was into, and the conversations would seem to die almost as soon as I mentioned I was a trader. I didn't look successful really. Average clothes, average car, and I probably had a low energy to me because of my current results. It's important to recognize, when an entertainer or an entrepreneur or an athlete experience obvious success, people tend to get excited and want to be around them. When you're in the trenches, working on your craft, with little to no success, people often write you off or simply ignore you.

Currently it's pretty much the same experience for me. I tend to not say too much when people ask what i do. I still look the same, I still have an average car, but my attitude and outlook is a lot brighter. I've chosen to keep my life fairly censored for now. Life is fairly simple right now but in time, I'm sure people will begin to notice that things are changing. They will recognize what I've known all along inside but that's the way the world is/works.

So my advice to all you hungry traders out there, whoever you are, wherever you are, you're not alone. Like my good friend's dad told me recently (retired Wall Street guy)... "If people don't recognize what you're doing is what you love to do and they smirk at building financial independence, f*** them."

Start Small

Anyone who proclaims that you need a million dollars to make a million dollars is lying to you, especially in today's world. As a trader, it's your job to understand that $500 could potentially be turned into $1 million with the right amount of money management and a good, sound system. It may take awhile, but it can be done. The best part is, this type of thinking leads to better decisions and much less risk than starting with say $50,000 or more. The main concern for any trader is risk management. If you're buying one stock for $500, then maybe you should reconsider that decision but if you're opening a leveraged trading account where you could be taking trades risking as little as 1 or 2 dollars, well that's a great start to build your account and make mistakes along the way.

Me myself, I would say now I take on trades with medium risk. Not too small, but giving myself a lot of room to be wrong. When I first started out, I traded way too large and eventually lost it all. Next time around, I was super conservative because I never forgot about the pain I had previously. I would take little trades, constantly trying to figure out a system that worked. Took me longer than I expected  (8 years) but when I had something that worked, I slowly started increasing the risk and the amount of capital in use, and slowly grew it quite substantially.

Take it from me, a seasoned trader who made all the common mistakes, play small to eventually win big.

Have "Realistic" Expectaions

Trading can be very lucrative at times and then at other times, can seem like no profit can be made. Being a trend follower, you have to understand that markets will trend and then slow, trend then slow, trend then slow, and you get the picture.

 In the real world, a trader's account does not just continuously profit day after day, week after week, month after month, no matter what Bernard Madoff tries to tell you. Just look how unrealistic that is.

Other web sites, books, professionals, use a similar but more believable path to trading success like this.

Sometimes a trader does indeed experience this type of success at times but it's not indicative of the long term. It just tells part of the story, the story that we all want to believe in. The reality though is, for all long term successful traders, their path to success looks similar to this.

While admittedly not as sexy, the good news is the line is still traveling upward, just at a much lower angle. As a trader your job is to do the same thing over and over again (providing you have a profitable system) and the profits will take care of themselves...And just like a hot air balloon, in the beginning, it will take more energy to experience lift and the rate of ascension will be slow. As you go higher, lift/growth becomes easier and as the wind blows your balloon sideways or slightly down, once everything clears, your balloon will once again rise. But the nice thing about trading is, there is no ceiling, no atmosphere to keep you in, and no outer space to eventually end your days as you know them. So the take away here is growth is slower than one expects in the long term even though there are times of tremendous movement in the short term. Just be "realistic" in that you understand the big picture so you don't freak out in frustration when things are not moving as fast as you want them.

Personally, when I first started to do pretty well, I was freaking out when my account didn't profit anything for 2 whole months. I wasn't losing money but wasn't making much. Then I looked at what I started with and realized in the last three months, my account had grown by +80%.  Not many traders could claim that but at the time, I was stuck on the last two months, cranky that I didn't make any money. Well that's the world of trading. When things slow, sometimes there is nothing you can do but to hang in there and keep taking trades knowing the big trades are around the corner once the trend resumes, you just don't know when.

Funny thing is, soon after, in one week that same account grew by over +248%. I used the same system all along but the only difference was the market started to really move and I was there to capitalize.

One trade at a time, while viewing the big picture, you will get there. Just understand it may not happen as fast or when you think it will.

Greed is Bad

Remember that infamous speech given by fictional character Gordon Gekko in the Hollywood movie "Wall Street", made back in 1987? The take away from that speech was that "Greed is good".

Well fact is, greed will get you killed. It's always been that way. Now it's difficult to objectively determine whether one is, in fact greedy from one moment to the next but in the world of trading, it's that voice in your head that convinces you to drastically increase your risk in hopes of making bigger profits. This can work for a period of time but inevitably, once you take some losses, panic sets in and in most cases, risk is yet increased with the absolute belief that brighter days are around the corner and you must now make up what you recently lost... and there we go down the rabbit hole.

I read a trading book that once spoke of a man who turned $10,000 into $1.1 million in two months. Every time he won a trade he would increase his risk. Each time he lost a trade, he also increased the risk. He was trading in a trending market where he was winning 75% of his trades. What do you think happened when the trend was over and price action slowed? Well, he started taking large losses and after each loss, what do you think he did? Well he made bigger bets thinking his previous performance would be mirrored the second time around. Well in about 1 month, he was back to $10,000 and became enraged, blaming the very system he used that previously grew his account exponentially.

Markets trend and then they slow. It has always been that way. When you win or lose, move on to the next trade with a level head and keep that ego at bay. In the long run, you can make a lot of money and become wealthy. But it takes time. Brick by brick you will build that castle but don't try and take shortcuts in trading. You will be left with nothing, with a confused look on your face.

Money management/risk management is probably the most important aspect of trading. Realizing and calculating how many times you win compared to how many times you lose and at what amounts, allows a trader to understand how much he or she should risk on each trade, and then when to gently increase those bets, while keeping risk the same. That way, win or lose, in the long term you understand you should be okay. Also, this allows you to understand the big picture. Medium growth is so much more sustainable than fast growth.

Remember Why You're A Trader

Greetings y'all. It's been awhile since my last post. My apologies as I was recharging with my amazing wife over in Europe. Brings me to sharing this very important point. Every trader needs to remind themselves why they trade. Why they deal with the stresses of becoming financially independent via the most challenging industry in the world. It takes a lot of work, it sucks at times, and takes an extremely long time to experience sustained success. Now the good part... Once things turn around, reward yourself. Pay yourself and the people around you a little. Do some things that allow you to appreciate the fruits of your labour. Yes it's a business but always remember at the end of the day, it's about increasing the quality of life, not sitting in front of computer screens 365 days a year. Take a break sometimes so you can enjoy your successes along the way. You'll be glad you did. Cheers.

Giving Back Is Necessary

Isn't it amazing how many "winners" there are in the world of investing? All these people around you making gobs of money. It sort of makes you feel a bit insecure doesn't it? Well the truth is only about 10 percent of investors/traders make money long term and probably only an average of 5% actually make a large return annually. So why does everyone seem to be raking in the mullah so easily, time and time again? Well, what we have here is a culture of people/businesses who generally only advertise and share their profitable investments. They conceal their failures and embellish their successes. A great big bunch of people who do their best to look smart and successful instead of feeling shame or ridiculed.... and don't even get me started on the advertising from companies promising they have the holy grail on how to make you rich in record time. The vast majority of people/businesses are simply using ineffective methods that generally end up losing large amounts of money long term.

The truth is, if we all simply viewed the financial markets with the right eyes, we can start to accept the flow of it all and understand a few liberating truths about money, and much more importantly, good ol' mother nature.

Have you heard these before?...

When you give, you get back.
No one wins forever.
When you give you receive.
Two steps forward, one step backward.
What's yours today, will be someone else's tomorrow.

I could go on and on but the point is, there are "two sides to every coin"... the "ying and the yang". Alright I'll stop now. We know instinctively that there is a give and take with everything, polar opposites. This means every time you win, someone loses and when you lose, someone wins. You're not going to win all the time and you're not going to lose all of the time. If I told you that for every trade you make, without even knowing whether or not you will win or lose, you will average a profit of $200, I'm sure you would take every trade you could without hesitation. This is because you have complete confidence of the long term results. Even if you took five losses in a row, most would stick on the same path knowing that winners are right around the corner. That is actually the closest a person can get to executing the perfect trade method... taking trades with little to no emotion, doing the same thing over and over again.

Yesterday I had a losing day. Like I said, it's apart of  the business of trading. It's the cost of doing business. It's what needs to happen, to give back parts of the profits you made previously, in order to make additional profit in the days or weeks to come. Markets are generally choppy, with spurts of quick, fast-paced price moves. Generally speaking, I have more losing days in a month than I do winning days. On occasion, I have made more money in one day, than I have after trading for half a month. Markets are completely irrational and erratic and yet there is a flow to them, kind of like white water rafting. Long term success means getting in the same flow of the market. When she says buy, you buy, and when she says sell, you sell. In relationship terms, you're going to be her "soul mate", or submissive spouse, depending on your view. In the end though, it pays off to be a good follower and it's how many traders eventually become rich.

These are the views of a trend follower. What I am and what I hope more will become. I've known some traders to be successful getting in and out of their trades, each day, and generally making money about 60-70 percent of the time. These people are in the minority and I question their long term results. Trend following, as I've personally found, is the truest and purest way to survive and prosper in any market condition, long term.

Next time you take a loss, simply say to yourself.... "NEXT!"

Be Happy With What You Make

Too often traders are too concerned with what they are missing out on; what they're leaving on the table. Even when they are ahead of the game and winning, they over concern themselves with what they are not getting. First of all, always stop and congratulate yourself when you make a profit trading. That is one of the hardest things to do for the average person. Second, realize and understand it could always be worse and at least you didn't lose any money.

A friend and mentor of mine recently passed away and I'm reminded of what he taught me... "Don't concern yourself with profits. Focus instead on reducing losses. Successful traders generally go into every trade expecting a loss."  That used to floor me and even now, it sounds a bit silly. But it's true. When I trade now, expecting to lose keeps me honest. On my toes. I know that losses are going to happen and to be prepared. So when wins come around, I always take that experience with a smile and appreciate the fact I didn't lose money.

Today for example, everything started out great. Both the S&P E-mini and Crude Oil were falling off the table. My account kept going higher and higher. Even still, I took time away from the computer, made a snack, watched some TV, and generally glanced at the computer screen every 5-15 minutes to lower my stops and check in on what was happening. Generally speaking, I'm extremely relaxed when I trade because I understand that whatever I make, may be taken away in the near future. I'm level headed to understand that I may lose, I may win, but I must stick to the game plan and take every trade that fits my method. It's through this process that in the long term, results will be favourable. Getting back to today, as price was making me look like a superstar, all of a sudden the market got a bit choppy, then reversed taking my stop out and leaving me with exactly half of what I was up just minutes before. Without any indication that the trend had changed, I proceeded to sell the market again once I saw another red bar appear and close minutes after that. Once again, my stop was hit and the market pretty much shot up like a rocket ship blasting off, leaving me with one win and one loss for the day (like I said before, I don't trade Crude Oil after 2:30pm EST).

Was I sitting there upset that I was wrong once? .. Nope. Did I feel a bit bad that I was only able to keep a fraction of what looked to be a much better result... maybe just a little in the moment. I ended the day with a good profit, even though I was 1 for 2 and that is what matters. I could have just as easily left with a loss for the day, but I didn't. I'm appreciative that I was able to make the little that I did and like always, I will sleep well tonight. Not every day will be big just like every day won't be bad. It is what it is. Take those wins with a smile and leave the shoulda coulda woulda's for the other hopefuls out there. Nobody knows the future.

Another Crude, Trending Day

This could be the return of the larger downward trend from a few months back but we shall see as time progresses. All we do is take each day at a time and follow the signals. As for this past Friday, the only sell signal we took was when we saw the close of the first red bar, as it fell well below the longer term larger red dots. This means the short term matches with the longer term and gives further evidence that we may be right in assuming price will move lower from there. Remember, we never know where exactly price action will go but it is our job to take each valid trade knowing some will work out and some won't. What the market gives us is what she gives. Today, it turns out our account saw more additional gains. We exited around 12:59 pm EST as the American markets closes @ 1:00pm EST due to the 4th of July weekend in the U.S.

Don't Be A Cry Baby

I'm going to touch briefly on the "elephant in the room". Yes people, I understand that it hurts and it's frustrating to lose money, especially when confidence is high. Just as your trade starts to move in the desired direction something unthinkable happens; the darn thing reverses and hits your stop and you're left thinking... "why me?" or "what happened?" or even "this method doesn't work and I've got to change it." It's true that every time you make money at any specific time, another trader is losing money ...and vice versa. Trading is simply a game, it's a competition. You are competing against other people. Like I said, when you win, someone loses. No one wins all the time and no one loses all the time (although it feels like the losses never end at times). The name of the game is making more than you lose. Everyone knows this intellectually but we humans tend to get emotional at times and that's when we typically fail in the game of the financial markets. You need to get it out of your head that you have to win all the time or that losses are bad. It's just apart of the game. Michael Jordan, arguably the greatest basketball player of all time, had a career shooting percentage of 49.7%. Sure we can round up but he barely missed more shots than he made and look what he was able to to accomplish in his career. Babe Ruth finished his career with a batting average of .342. Meaning for every hit he had, he struck out two times. Hell, in baseball, a batter has multiple chances to hit the ball, and if he/she fouls the ball on the third try, they can stay alive and keep fouling the ball until he/she makes a hit and sometimes, that hit wins the entire game. Imagine if these athletes simply gave up because they missed the mark. Imagine how different their lives would have been. In every game in the world, no one wins all the time and we know this. Money tends to complicate things but if you play to simply take more from the market than you give back, you can really change your life.

Stay calm, relax when you lose. Have a method that reduces those losses and lets you know when you're wrong. None of us have a crystal ball and no one can tell the future. Just do your best to minimize your losses and maximize your gains. I'll close with this... I've had many losing weeks and once I had a losing month, but it's not about that. If you're looking to make the same income from month to month in trading, don't be a trader and go to work for someone instead. At the end of the day I've made money and I will continue to do so when looking at my wins and compare them to my losses. The market can take away all of my profits in one month to where I'm taking a slight dip in my capital, and then literally in the first three or four days of the following month, double my entire account. The market moves in phases kind of like seasons. Just keep at it and be patient. When trend following, it's not so much about the number of wins vs losers. It's all about the value of those losses vs the value of the winners over the long term. If you're losses amount to $50,000 and your winners amount to $70,000, things aren't so bad. It's just hard to "feel" good when you're in the thick of things.

Crude Oil Falls Nicely

Today, the trend was almost completely down in Light Crude Oil. Like almost every Wednesday, the "Weekly Petroleum Status Report" was released and although price jumped quite a bit @ 10:30 EST, it eventually resumed the downward trend.

As you can see, when the price popped up @ 10:30, the second highest small red dot was not touched. We stayed in and were able to finish the day with a very good profit. Not every day will be like this but when they happen, it's very welcome. We took profit and exited @ around 14:11. Generally we stop trading Crude Oil @ 14:18 (because of increased/decreased swings of volatility), but today it made sense to exit a bit early due to a new low being made at the end of the day. Generally, price reverses violently when price drops or rises sharply near the end of the trading day (but not always).

Using a great trend following method allows the trader to remain somewhat calm and relaxed in critical moments in order to comfortably sit tight and let the market work itself out.

A Great Trending Day For The S&P500

As a trend follower, you only make real money when the market trends. Today was one of those days where we were able to not only make some money, but protect ourselves from larger losses. I've included a screen capture and will continue to do so moving forward so that not only can you see the value of a good trend following indicator, but also visually see where we were wrong and where we were right. Today was a winning day but I also have a lot of losing days. The trick is to ensure that when looking long term, your winning trades end up being much larger than your losing trades.

At 9:30 EST (When the American markets officially open) I took the first buy signal because I had a blue bar trading above the larger red dots (larger trend sell signal). Price popped up, hit the upper bollinger band and then slowly reversed until we got out of the trade when the blue bars turned to red. I'm a conservative trader so I always only sell the market only when the close of the red bars drop below the bottom of the large red dots. I sold the market @ 11:06 EST and followed the market all the way down until exiting @16:00 EST (when price action generally slows down because of the impending close of the market).

The S&P500 has been moving fairly choppily upwards for a long while now when looking at the daily chart. Hopefully volatility will start to pick up again so we can get back to making more money. Where it goes from here I have no clue but like always, everyday I just mindlessly take buy and sell signals, waiting for the market to give me what it can.

Weather The Storm, One's Right Around The Corner

With any trend following approach, there is something called drawdowns. A drawdown in trading is simply a measure of how much an account has lost until it begins making money again. When in a drawdown, traders often panic and worry until they give up on any progress they have made. I'm amazed at how little information there is on drawdowns when looking at any trend following method being advertised in books, courses, online, etc. The reason a trader needs to understand and expect these occurrences is so they can remain calm and confident when they inevitably do happen. Weather the "storm" until the sun comes back out again. Because we follow the market, when the price action stalls and gets choppy, it's unlikely your account will go up in value during these times. Losses will out number gains because we are simply working with what the market gives us. Once the market picks up steam, you will be there to reap the rewards once again. As a trend follower, you are not trying to predict the future. All you're doing is entering the market with systematized buy and sell signals, then following the market up or down along the way, setting stops at key resistance levels in order to protect yourself which eventually leads to profits.

I've used many methods in trading over the years and this is the only one that has stood the test of time, almost guaranteeing long term success. At the same time, rainy days will come and it's your job to be prepared and once the storm is over, be there to enjoy the sun once again.

Stop Being A Rebel, Swim Downstream

Looking back on my first trade I ever made with real money, I had the right idea. I bought the Canadian Dollar against the US Dollar in July of 2007. Why did I take this trade? Well because the US Dollar's value fell for weeks and each day it kept moving lower and lower. Naturally I looked at the market and simply followed the crowd. Before I knew it my account was up just under 200%. I was flying high but then the market turned on me eventually and not only did I lose the profit I felt I had made, I also lost more than 70% of my original capital. I can smile about it now but it wasn't fun at the time. What I lacked was any sort of exit strategy or knowledge on how to protect myself. The point is, the trend was clear and I just followed it and for a short while, it paid off. I was effectively listening to the market.

If I were standing on the side of a stream in a forest and I threw a twig in the water and closed my eyes for a minute or so, when I open my eyes should I expect to find that twig somewhere upstream? Of course not. That would be crazy right? But traders do this very often and that's why over time, all they're left with is little to no money. They look at the "stream" and say, I'm going to outsmart it. All they end up doing is getting hurt, even when mother nature herself screams... "I'm not going that way!".

The whole notion of buy low, sell high should die a horrible death in the world of trading. This will have you sitting on the sidelines waiting for the right opportunity to get in the game while the market makes its move and continues in one direction without looking back. It's those moves that are your bread and butter. Sure you will take losses when the market gets choppy but if you can minimize your exposure and are patient, those big moves (which statistically happen only 20% of the time), will greatly increase the value of your trading account. This is why when the market is choppy and moving no where, I typically take small loses and have small wins that generally break even, sometimes what seem like forever. When the market begins to resume its volatility again and makes those big moves, that's when it almost seems as if money is being printed.

Don't fight the obvious. Simplify your trading and be a good follower. It pays off in the end.

DON'T Fight The Current

The trend is your friend. We as traders hear this all the time but it's really the truth. One should internalize this mantra and make it his/her own. So often traders try and impose their views on what SHOULD happen next in the market rather than what IS happening. You should not worry yourself on projecting where the market SHOULD go next. Only concern yourself with where the market IS going. Current price action is all the information you need to make an informed decision as to what your next move should be. Take it from an ex-Elliottician, prediction in the markets will get you killed, eventually. Instead, only observe what the market IS doing in the present moment in order to gain profit.

Markets are erratic and almost completely unpredictable. The best you can do is follow the trends and let nature take it's course. Sure, you will be wrong at times, but when the trend picks back up and moves in a big way, your profits will definitely be higher than your losses.

The Good Follower

I've spent the last eight years of my life studying everything I could about the business of being a financial trader. I've studied almost every discipline, every doctrine, and listened to every finance guru I could and you know what, most of it was complete garbage. I can say that with confidence because I have put my time in, I have seen what doesn't work, I have gone through many tough times, it's cost me tens of thousands of dollars, it's frustrated me to where I wanted to give up, multiple times, and finally, after eight years, I've gotten to a place where I can confidently say I've figured out what works and how to win.

Now this is going to sound very simple and a bit stupid but here is the revolutionary idea. When a market is going up, buy that market. Conversely, when the market is heading lower, sell the market. That's it. That is the revolutionary idea behind greatly increasing one's chances at being right in the game of trading. When one can give up on the notion of "buy low, sell high", he/she is ready to follow the market. That's why I chose this web address. When making decisions in the markets as a Trader, it's good to be a follower; stop trying to be a leader. Trying to be the first one out the gate in the financial markets is suicide, eventually. Basing your decisions on what the crowd is doing is the best way to increase your chances of success. If they are buying, you buy. If they are selling, you sell. Now if you are constantly waiting for a trend to be clearly evident, you are never going to buy at an absolute low or sell at an absolute high, and that's okay. You want to put yourself in a position where you are just trying to take a large piece of the pie, rather than trying to eat the whole thing.

A good follower waits for a trend to be clear, he/she buys or sells in the direction of the trend, and periodically raises or lowers their stop levels towards the current price, to comfortably reduce exposure and eventually lock in profit. Following a market isn't as sexy as picking tops or bottoms, but it's the method that will always prevail as most effective when crunching the numbers over a long period of time.

When testing, looking at my personal trading performance for Crude Oil, trading only one futures contract at a time from Dec 2014 - June 2015, you can see I wasn't exactly right a whole lot. My winning rate was only 41.5%. There was also a period of time where my account lost as much as $4901.83 USD before starting to make money again. I share this because a lot of novice traders feel they need to make money over 50% of the time and if they take more than three or four loses in a row, they need to change their whole approach. As you can see, I had losing streaks of 6 trades in a row at times and still I was able to profit close to $17,000 USD, even after commissions and fees. This is because I would cut my losers short and let my winners run. Simply following the market, not knowing how high or how low it would go, but at the same time, getting in the game and raise or lower the stops until the market itself loses steam and eventually hits that stop.

In the posts to follow I plan to share more information with you by keeping a personal trading journal of sorts, of my method, performance, and tips in order to share the real truth behind financial markets and maybe I'll end up motivating another trader, like yourself, to become a good trend follower.