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Bear Down! Trading Journal

  #11 (permalink)
 
Comeback King's Avatar
 Comeback King 
Tampa, FL/USA
 
Experience: Intermediate
Platform: TradingView
Trading: NQ, ES
Posts: 269 since Aug 2016
Thanks Given: 191
Thanks Received: 382

Any strategy can work or not work, and where you start and end is a journey that only you can take for yourself. I've heard it recommended that newer traders start on swing trading stocks first, then move down in time frame to their liking. I don't really believe in that myself.

Every market is a big league market, there is no such thing as a beginner market or rookie market so to speak. There are pro's and/or sharks everywhere, even in thin markets. No, the big institutions are not going to trade OTC stocks or whatever but if anyone thinks there are not pro's in there manipulating things then they are fooling themselves - that includes currency pairs. The ES is as good a place to start as any really and there are a lot of people trading it so you'll get a lot of advice and you'll find plenty of information on it where the same can't be said for metals, energies, etc.

You seem to be doing well enough so far so just keep at it. And I respectfully agree with my fellow Floridian about the gambling bit. What you're looking for is a mathematical edge over a series of trades. Any individual trade can either win or lose and often entry is the least important part of the trade. Your risk overlay and overall management plan are probably more important. Institutions and institutional traders lose money all of the time, even to the point of being in draw down over the course of a year. But over time they are grinding out a risk model that makes them profitable. Trading is a game or endeavor of chance, the outcome at the time of placing a trade is uncertain. I like the casino analogy. Think of blackjack. The casino has a mathematical edge where over the course of thousands of hands they will make money; it's guaranteed because of the structure of the game. But individuals come to a blackjack table all of the time and take the casino for $1,000, $10,000 or $1,000,000. But over time the casino makes money because of the built in mathematical edge. Would you say the player is gambling on every hand of blackjack but the casino isn't also gambling? It's really about probability over a series of events over time.

Mastercraft does make a couple of really excellent points that I'll touch on. First, it is entirely possible to be successful scalping but as a retail trader the deck is stacked against you. The big institutions have enough money to park order up and down the book, so they are occupying the top book positions at basically every spot. Their speed of execution is a million times faster than yours, partly due to algos and partly due to server colocation. Your sim trades are unlikely to be giving you realistic fills. In reality, you try to sell 61.0 but you might not get filled until 59.75. You don't like what you're seeing so you try to get out at 61.0 but you might not get filled until 61.25. So you show break even when your down 2 ticks. That might not sound like much but over time it adds up. I don't know that I'd call what you are doing scalping though. Scalping for ticks is a different deal than trading short price swings. Tick scalping isn't realistic on the ES for a retail trader but trading shorter price swings is IMO, where you are looking for 2-5 points.

Mastercraft also touched on a risk model. As you go through this journey, and before you use real money, you'll need to define some risk parameters. You can shoot for a 40% win rate and a 2R expectancy and the math will work out nicely provided you can achieve this. Or you can shoot for a 60% win rate with a 1R expectancy and that will also be profitable, provided you can achieve this in your trading.

The last thing I'd not is not to get attached to sim trading. Do it until you understand your process and plan and can follow it consistently. But for the vast majority of people, risking real capital turns things upside down and inside out. I think that the longer you stay on sim the more you delay this part of trading, and the longer you delay the money/psychological side of trading the longer it will take you to get it.

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  #12 (permalink)
 
Dabears2322's Avatar
 Dabears2322 
Chicago, Illinois
 
Experience: Beginner
Platform: ThinkorSwim
Trading: ES, CL, GC, ZB, YM, NQ
Posts: 131 since Jan 2017
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Comeback King View Post
Any strategy can work or not work, and where you start and end is a journey that only you can take for yourself. I've heard it recommended that newer traders start on swing trading stocks first, then move down in time frame to their liking. I don't really believe in that myself.

Every market is a big league market, there is no such thing as a beginner market or rookie market so to speak. There are pro's and/or sharks everywhere, even in thin markets. No, the big institutions are not going to trade OTC stocks or whatever but if anyone thinks there are not pro's in there manipulating things then they are fooling themselves - that includes currency pairs. The ES is as good a place to start as any really and there are a lot of people trading it so you'll get a lot of advice and you'll find plenty of information on it where the same can't be said for metals, energies, etc.

You seem to be doing well enough so far so just keep at it. And I respectfully agree with my fellow Floridian about the gambling bit. What you're looking for is a mathematical edge over a series of trades. Any individual trade can either win or lose and often entry is the least important part of the trade. Your risk overlay and overall management plan are probably more important. Institutions and institutional traders lose money all of the time, even to the point of being in draw down over the course of a year. But over time they are grinding out a risk model that makes them profitable. Trading is a game or endeavor of chance, the outcome at the time of placing a trade is uncertain. I like the casino analogy. Think of blackjack. The casino has a mathematical edge where over the course of thousands of hands they will make money; it's guaranteed because of the structure of the game. But individuals come to a blackjack table all of the time and take the casino for $1,000, $10,000 or $1,000,000. But over time the casino makes money because of the built in mathematical edge. Would you say the player is gambling on every hand of blackjack but the casino isn't also gambling? It's really about probability over a series of events over time.

Mastercraft does make a couple of really excellent points that I'll touch on. First, it is entirely possible to be successful scalping but as a retail trader the deck is stacked against you. The big institutions have enough money to park order up and down the book, so they are occupying the top book positions at basically every spot. Their speed of execution is a million times faster than yours, partly due to algos and partly due to server colocation. Your sim trades are unlikely to be giving you realistic fills. In reality, you try to sell 61.0 but you might not get filled until 59.75. You don't like what you're seeing so you try to get out at 61.0 but you might not get filled until 61.25. So you show break even when your down 2 ticks. That might not sound like much but over time it adds up. I don't know that I'd call what you are doing scalping though. Scalping for ticks is a different deal than trading short price swings. Tick scalping isn't realistic on the ES for a retail trader but trading shorter price swings is IMO, where you are looking for 2-5 points.

Mastercraft also touched on a risk model. As you go through this journey, and before you use real money, you'll need to define some risk parameters. You can shoot for a 40% win rate and a 2R expectancy and the math will work out nicely provided you can achieve this. Or you can shoot for a 60% win rate with a 1R expectancy and that will also be profitable, provided you can achieve this in your trading.

The last thing I'd not is not to get attached to sim trading. Do it until you understand your process and plan and can follow it consistently. But for the vast majority of people, risking real capital turns things upside down and inside out. I think that the longer you stay on sim the more you delay this part of trading, and the longer you delay the money/psychological side of trading the longer it will take you to get it.

This is an awesome post. I know it takes time to write all of that so I really appreciate all the feedback.

After looking at more and more posts and videos online I wouldn't classify my strategy as scalping because, like you said, I am looking more for those short term swings and aiming to hit at least 1.5 points. It's a small sample size, but I am at 1.02x risk, but I think I might be calculating it wrong. What is the most common way to calculate this? I am just dividing the realized net profit of the trade by how many points away I set my stop at. i.e, If I hit a 2 point trade and risked 1 point, 2/1=2x Risk. I am also using the absolute value to avoid the negatives from losing trades. Is there a better way of incorporating losing trades into this?

Also, how long would you suggest staying on the sim before going live? Is there a certain number of trades that I should try to reach, or a certain number of periods being consistently profitable, etc...

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  #13 (permalink)
 
Comeback King's Avatar
 Comeback King 
Tampa, FL/USA
 
Experience: Intermediate
Platform: TradingView
Trading: NQ, ES
Posts: 269 since Aug 2016
Thanks Given: 191
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You're calculating RR properly, though I'd suggest accounting for commissions in there somewhere. In terms of staying on sim, you could ask 10 people and get 10 different answers. The best advice I've been given was to sim until you are at a good technical level. The first step would some sort of written trade plan describing what types of trades you are looking for, how you will manage them, etc. You also need to consider a daily and weekly loss limit (if I lose 4 points today I'm finished kind of thing) as well as your risk size per trade. Most will say that you should risk 2% per trade as an absolute maximum, so if you have a $10K account you'd never risk more than $200/4 points on any given trade. I've never seen or heard anyone recommend more than 2% per trade but I've read and heard plenty who recommend much less. Other parts of your plan could contain your pre and post session routine if you like. Some plans are 20 pages long while others are half a page, it's a very individual thing. I think what's essential is that you document in some way how you will be trading so that you can compare your actual trading to how you want to be trading. It's very common to make trading errors, or trades outside the scope of your plan or intention; things like revenge trading, FOMO trades, etc.

So...once you are at a proficient level executing your plan and your plan is producing a net profit over a period of time then it's time to consider going live. You don't have to go live forever from that point on, and if you find that you're all of a sudden losing consistently then you can always go back to sim. For me, I've switched on and off from live to sim as I've learned new things and tried new things.

Again, you seem to be off to a good start - just keep at it.

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  #14 (permalink)
 mastercraft29 
central florida
 
Posts: 192 since Jul 2014

I agree with Comeback King, trading is a personal journey and only you can decide what is right for you. And his analogy of the casino is also correct, but that does not mean you are a gambler or gambling if you are a trader. Like I said, you can treat it that way, or you can clearly define risk / reward / probability. Gambling implies you have a 50/50 shot at winning or losing. And while the market spends most of the time in an area of 50% directional probability, there are times when the probability is 90 % (strong breakout). Most of the time the market is somewhere between 40-60%. So my point is you can buy / sell randomly and have a 50% chance of winning (which would be gambling), or you can wait for an edge.

I also agree strongly with him about not staying on SIM mode too long. He is absolutely right about only staying on long enough to develop your skills, but then it is time to go live to overcome the next set of obstacles (yourself). I reccommend you start practicing meditation / mindfullness now so by that time you should have the ability to understand yourself and emotions. Way of the Warrior Trader by Richard McCall is a great book that will help you in this area.

As for my comment about "cost of tuition" all begginners lose money consistently while you learn to trade. Starting in a market like the ES is a fast way to lose a lot of money. Unless you have deep pockets, and even then, you will be way better off to start in a market like forex where you can risk as little as $0.10 / pip versus $12.50 a tick in the ES (or any other futures market, I think the cheapest is around $6.25 a tick). So instead of trading and losing $100 on a single trade in the Emini, start with forex and risk $1.00 a trade. You can (and will) thank me later

You mentioned you are still in school and are concerned about time constraints and swing trading. I do not think this would affect you; there are several great swing trades every day, but that does mean some days you will not trade. Which I think would help you build paitence and discipline. If you want to scalp that is fine, just remember you must wait on high probability entries (60% setups) or you will lose money over time, and know it is extremely difficult to do. Also remember this is a life style, not a career. You are going to have to continuously work to better yourself day in and day out (not only in trading but in life as well). It is never going to be easy, and it takes a long time to develop / understand yourself and the markets. But I wish you the best of luck, and dont give up.

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  #15 (permalink)
 
Dabears2322's Avatar
 Dabears2322 
Chicago, Illinois
 
Experience: Beginner
Platform: ThinkorSwim
Trading: ES, CL, GC, ZB, YM, NQ
Posts: 131 since Jan 2017
Thanks Given: 63
Thanks Received: 125

1/18/17

CPI came in @ expected levels, US market seems to have better sentiment than the rest of the world today.

Trade 1: Right when my order got filled, tos froze and crashed. Went to the mobile app on my phone to manage the trade while trying to fix it. Ended up getting it back online to manage it. Risked 1 point, set target at 1.75 points, came within 1 tick of getting filled, drawdown of 2 ticks, bounced back up, manually exited at .75. bad exit and ended up going through my target of 1.75 points by 3 ticks on the candle after. Have to stop doing this. Bad habit. +.75

Trade 2: Price came down to PP, consolidation area from before, 200 MA. Got in on 2nd green candle, 1:1 RR @ 1.25 points. Nervous at the loss of momentum in the up trend so thats why I went 1:1. Should've trusted myself and went for the usual 1.5:1, but hindsight is 20/20. +1.25

Trade 3: Got in on strong candle and bullish bias thinking there was enough upside momentum to test 2266 again. Set target @ 65.50, 1xR, hit it after a couple minutes. +1.25

Done for the day at 2 ET. +3.25





Something I have noticed with this strategy so far is that trades will go in my direction by 2 or 3 ticks pretty quickly upon entering, usually around 5-15 seconds. Something to think about for the future is to go 2 lots and take advantage of those 2-3 quick ticks. I've been trying to wrap my head around this concept, but how would this affect my Reward/Risk? Would I approach this as 2 seperate trades?

I'm going to start to keep track of this in my spreadsheet to see how often this is happening.

Also guys, just saw your replies. Have some errands to run but will get back to you ASAP.

Edit 4 pm ET:
Made a trade right before I left the house because I liked the setup. Made it a custom OCO bracket order and let it work while I was gone. Long at 2264, cover at 2265.50. +1.5. 1xR. Not sure if I should count this in my spreadsheet since I wasn't monitoring it or anything.

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  #16 (permalink)
 
Comeback King's Avatar
 Comeback King 
Tampa, FL/USA
 
Experience: Intermediate
Platform: TradingView
Trading: NQ, ES
Posts: 269 since Aug 2016
Thanks Given: 191
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Again, really nice trading. Regarding the 2-3 ticks thing, I would agree that you should track it but it's likely that in real life you won't get the kinds of fills that you are now so what you are experiencing with this might be down to sim fills. If you do incorporate the 2-3 tick scalp by adding a 2nd contract I'd treat that as a 2nd type of trade for now. I say this because if/when you do go live you'd probably want to trade your current plan until you get a feel for how your fills are going and then consider adding in the tick scalping stuff.

And to add on to what mastercraft mentioned about Forex, that's a nice idea. I'm not really into currencies myself but the cost of losing there sounds a hell of a lot better than the ES. I'd imagine many strategies would apply to many if not all markets given a slight learning curve for that new market. Definitely something to look into, if not now then later if you find yourself in drawdown once live trading the ES.

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  #17 (permalink)
 
Dabears2322's Avatar
 Dabears2322 
Chicago, Illinois
 
Experience: Beginner
Platform: ThinkorSwim
Trading: ES, CL, GC, ZB, YM, NQ
Posts: 131 since Jan 2017
Thanks Given: 63
Thanks Received: 125


Comeback King View Post
You're calculating RR properly, though I'd suggest accounting for commissions in there somewhere. In terms of staying on sim, you could ask 10 people and get 10 different answers. The best advice I've been given was to sim until you are at a good technical level. The first step would some sort of written trade plan describing what types of trades you are looking for, how you will manage them, etc. You also need to consider a daily and weekly loss limit (if I lose 4 points today I'm finished kind of thing) as well as your risk size per trade. Most will say that you should risk 2% per trade as an absolute maximum, so if you have a $10K account you'd never risk more than $200/4 points on any given trade. I've never seen or heard anyone recommend more than 2% per trade but I've read and heard plenty who recommend much less. Other parts of your plan could contain your pre and post session routine if you like. Some plans are 20 pages long while others are half a page, it's a very individual thing. I think what's essential is that you document in some way how you will be trading so that you can compare your actual trading to how you want to be trading. It's very common to make trading errors, or trades outside the scope of your plan or intention; things like revenge trading, FOMO trades, etc.

So...once you are at a proficient level executing your plan and your plan is producing a net profit over a period of time then it's time to consider going live. You don't have to go live forever from that point on, and if you find that you're all of a sudden losing consistently then you can always go back to sim. For me, I've switched on and off from live to sim as I've learned new things and tried new things.

Again, you seem to be off to a good start - just keep at it.

So far with my strategy I haven't gotten up to a risk of 4 points, so I am good there for now and that should hopefully make me feel a little more comfortable when going live since my risk is on the low end. I think a good idea would be to get 20 days with this strategy and look over the results. From there I can write up a solid plan regarding actual strategy as well as pre/post market stuff. Depending on the results I can possibly go live and see how it goes for a few days and go from there.

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  #18 (permalink)
 
Dabears2322's Avatar
 Dabears2322 
Chicago, Illinois
 
Experience: Beginner
Platform: ThinkorSwim
Trading: ES, CL, GC, ZB, YM, NQ
Posts: 131 since Jan 2017
Thanks Given: 63
Thanks Received: 125


mastercraft29 View Post
I agree with Comeback King, trading is a personal journey and only you can decide what is right for you. And his analogy of the casino is also correct, but that does not mean you are a gambler or gambling if you are a trader. Like I said, you can treat it that way, or you can clearly define risk / reward / probability. Gambling implies you have a 50/50 shot at winning or losing. And while the market spends most of the time in an area of 50% directional probability, there are times when the probability is 90 % (strong breakout). Most of the time the market is somewhere between 40-60%. So my point is you can buy / sell randomly and have a 50% chance of winning (which would be gambling), or you can wait for an edge.

I also agree strongly with him about not staying on SIM mode too long. He is absolutely right about only staying on long enough to develop your skills, but then it is time to go live to overcome the next set of obstacles (yourself). I reccommend you start practicing meditation / mindfullness now so by that time you should have the ability to understand yourself and emotions. Way of the Warrior Trader by Richard McCall is a great book that will help you in this area.

As for my comment about "cost of tuition" all begginners lose money consistently while you learn to trade. Starting in a market like the ES is a fast way to lose a lot of money. Unless you have deep pockets, and even then, you will be way better off to start in a market like forex where you can risk as little as $0.10 / pip versus $12.50 a tick in the ES (or any other futures market, I think the cheapest is around $6.25 a tick). So instead of trading and losing $100 on a single trade in the Emini, start with forex and risk $1.00 a trade. You can (and will) thank me later

You mentioned you are still in school and are concerned about time constraints and swing trading. I do not think this would affect you; there are several great swing trades every day, but that does mean some days you will not trade. Which I think would help you build paitence and discipline. If you want to scalp that is fine, just remember you must wait on high probability entries (60% setups) or you will lose money over time, and know it is extremely difficult to do. Also remember this is a life style, not a career. You are going to have to continuously work to better yourself day in and day out (not only in trading but in life as well). It is never going to be easy, and it takes a long time to develop / understand yourself and the markets. But I wish you the best of luck, and dont give up.

I see what you mean here. If it was just pure gambling then there would be no point to try and find an edge.

I think the meditation stuff is great advice and something that I have not looked into enough. I haven't really looked into the psychology side of things enough, but it is tough as I am trying to just be as disciplined within my strategy. I have read enough where I know people can be successful on the sim but once they go live they blow their accounts. I am guessing this has to do with emotions being higher with real money so they aren't executing their strategy, but would be interesting to hear from your guys' experience on this.

I looked into forex last night and today, specifically EUR/USD and it seemed like the price action would be good for my strategy. My only concern is how much the spread would affect my results as right now about 61% of my winning trades are less than 8 ticks. So I guess my question would be how many pips do the big pairs typically move in 1 minute? From what I could tell it would be 7-15? Also what are the most active hours for EUR/USD? Seems like there is decent movement most of the day. This could be a good starting point to get into live the more I think about it.

TD Ameritrades commission structure is $0.10 per 1000 lot with a minimum of $1. On paper trading the spread is actually tighter on the non-commission fx, so that can't be right. I can't get a gauge on what the spread would be on live for td. Would it be better to go commission or non-commission?

For now I am going to stick with my strategy but will keep the swing side of things in the back of my head. I think this strategy won't let me get away from that as I am trying to use key spots where I think trends will continue/reverse so I am not just "gambling" and looking for 1 or 2 ticks. Like I said in an earlier post I am going to keep track of the initial reaction of the market when I enter to see whether I am doing a good job on my entries and staying in the right direction.

Thanks again Mastercraft and Comeback King for the help.

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  #19 (permalink)
 
Dabears2322's Avatar
 Dabears2322 
Chicago, Illinois
 
Experience: Beginner
Platform: ThinkorSwim
Trading: ES, CL, GC, ZB, YM, NQ
Posts: 131 since Jan 2017
Thanks Given: 63
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1/19/17

9:50: Market mixed overnight. Sold off 15 min after open. Expecting it to come down to 64 and probably bounce around for the day.

End of day review

I had more of a long bias so got a little hurt today. This is good to get a feel and tolerance for losing, even though it is still on the sim. Still hurt haha.

Trade 1: Got long at 9:45 on the pullback after the open. This doesnt really go with my strategy as the pull back created a LL, so shouldn't have made this trade but took a chance because of my long bias. Stopped out -1

Trade 2: Made the same mistake again 30 minutes later. Was a little bit better of a setup but not completely with my strategy. -1

Trade 3: Great setup on an inverted head and shoulers, HH and HL, got in, up 3 ticks quickly, then stopped out -1.25 10 minutes later. Just didnt work out. Happens! -1.25

Trade 4: Went against my strategy again by going long on a counter trend trade for NO REASON! Have to eliminate this. -1.25

Trade 5: Saw huge oppurtunity here. Coming down to S3 and 55 has been huge support. High RR trade at about 5xR. Hit profit. +5

+.5 on the day. Not a losing day technically but sure felt like it. Just gotta be patient. Very happy with being confident in my last trade and letting it work. Not happy with going against my strategy on some trades.

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  #20 (permalink)
 mastercraft29 
central florida
 
Posts: 192 since Jul 2014


Trading real money versus sim mode is very different. I believe the psycological part of trading is the hardest hurdle to overcome. You must master yourself before you can master the markets. This is another reason why i suggest trading forex versus any futures market. You have to trade the "I dont care size" so you can be objective and handle a series of losses.

The price action in the EUR/USD is the same as any futures, stock, ETF, bond, or any other market you can think of. Price action is universal; the institutions cannot hide what they are doing and leave foot prints (which is what price action is). Just look at a chart from 10, 50 or 100 years ago. Price action is based on human behavior and is part of our DNA (people behaving similarly in similar situations overtime). Once you understand price action, the traders equation and the market cycle, you can trade any market. With that being said, all markets do have their own tendencies so it is prudent to study any market before entering it.

If you are going to trade forex you need to open an account with FXCM. Commissions are $0.08 per 1000 lots (which is $0.10 a pip). The commission structure you mentioned at TD is too high and will cost you too much (you would have to make 10 pips just to cover commissions at $1.00 / 1000 lots). I am not positive but I think TD is a broker similar to an Etrade or Scotts trade, which day traders (or any true trader) do not use due to the extremely high and unrealistic commission structures. These brokers are just like your 401K account holder and just out to steal your money, so stear clear.

As for your comment and idea about scalping a second contract for a few ticks. You are ignoring the traders equation and you will lose money. You should not look for any profit target less than 1 point (2 for a beginner with a 2 pt stop loss) in the ES, or 10 pips in forex (minimum scalps). Just do the math and you tell me what happens after you take 10 trades (see below). Not to mention if you are not successfully trading one contract you should not even consider trading two. I know you have heard of high frequency trading firms scalping for a single tick, but they have a huge advantage over you (time, market entries, computer algorithms with no emotions just to name a few).

Lets say you trade 2 contracts, 2 point profit target on one and 1 point profit target on the second, with a 2 point stop loss on the entire position (4 points). Over the course of 10 trades this is your traders equation (assuming every trade you enter is a 60% setup).

Risk (4 points) x probability of loss (0.40) = 16 points lost
Reward (3 points) x probability of reward (0.60) = 18 points gained
Total net profit after 10 trades 2 points, $100
After commissions (assuming $3.50 / contract per trade) -$70

You are now left with a $30 profit assuming you manage every trade 100% correctly and with no errors, and assuming you win 60% of the time (both very hard to do). So this is essentially a breakeven strategy and you would need to win atleast 70% of the time to make a profit. Do the math for scalping at 1 point with a 2 point risk and you will see again that you have to win 70% of the time (TO BREAK EVEN!!) which is extremely difficult to do.

I hope this does not sound rude, or you think I am a jackass. I am truly just trying to help you understand, gain from my personal experience, and lead you in the right direction to make it in this business. There is a reason why 90% of people fail in this business and the number 1 reason (i believe) is not understanding the math and ignoring probability (only focusing on risk and reward). Along with all of the crooks out there selling you their indicators, or BS trading strategy that lead people down the wrong road.

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Last Updated on January 24, 2018


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