What Made Me A Profitable Trader

Tim Black hosts the live trading room for the Asia trading session. His background is in computers and technology. He is addicted to technology, charts and technical analysis and enjoys teaching and sharing his viewpoints in these areas.

I got an email from a trader who experienced much of what I’ve experienced in my journey to become a profitable trader. It was nice to be able to share some of these points with him. I hope this will help some other traders who are having similar problems. The email has been edited to maintain the writer’s anonymity.

The questions:

Hi Tim:
New to the website about a week and a half now and have been following you on the Asia trading session. Was listening to you Friday morning when you took over for Michael on the New York call and you mentioned you had crashed a couple of trading accounts. I have been watching and listening to you guys and trying to learn as much as possible. I can relate to the problems of the meltdown on MY account as I have come back from being down by as much as 50% to up by 25%(TWICE) in the past 8 months trading only the E/U pair and mostly shorting the big price fall from January. Unfortunately, I got careless with my account (overconfident) and left open positions (short) at the years lows back a few weeks ago. The price shot up on a weekday over lunch on those open positions and I am now looking at a real mess of an account. I have a UK FXCM account and have been using hedging strategies to avoid not closing losing positions. I have been able to work out of those positions when the price gets back close. I contacted Michael and he mentioned that you restructured your mindset and did 700% in a couple of weeks. He also mentioned (another room member) was way down before membership (like me) and now has rebuilt his account back up in 8 months. I just wanted to talk to someone that has been through the pain and suffering of drawdowns before and get maybe a little guidance to avoid the mistakes and get back on the right path to profitability. Michael suggested I order the Oliver Valez book on Daytraders tactics which I have. One thing that’s really tough in this business is checking your emotions. Its tough to not get demoralized when things are not going good. Everyone seems to doing really pretty well in the room judging from the posts. I think its great having lots of eyes in the room on the lookout for setups-helps everyone. Anyway, I want to get the most I can out of the site and from you guys as professional traders. If you could share some suggestions that turned things around for yourself and (another room member), maybe that could help me to get back on the profitability path. Thanks for your help.

This trader’s dilemma is so much like mine was, it’s uncanny. I tried to cover all the bases in my response:

I feel your pain, man. I’ve been exactly where you are. I’ve been really good at technical analysis since soon after I started trading (2004), I guess it’s the math geek in me that helped. But I really sucked at execution. I’d be WAY up in my account then do some stupid moves and be WAY down in my account. I tried trading equities and futures until I finally discovered forex and was able to manage my risk properly.

That was one of the things that saved my trading, risk management. If you’ve listened to me in the room at least once, you know that risk management is my baby. I preach it all the time.  No trade is 100% sure. No trade is more likely to succeed than another. Yes, through TA we determine high probability setups, but no matter how carefully we’ve analyzed, they can still crash and burn. SO, the solution is to ALWAYS manage your risk. NEVER put on a trade that will exceed your risk parameters (in my case 2% of my account) if you get stopped out. That having been said, I’m not OCD about the exact 2% figure. I will fudge it a little in the interest of getting a trade on before it gets away from me. But when I say fudge, I mean it may be as high as 3% sometimes, but usually not.

Second thing, you can’t trade without stops.  You don’t necessarily need hard stops put into your platform. But, be sure to identify a condition or price that will cause you to shut the trade down. I’m speaking from personal experience here. I tried it and ended up losing 75% of my account on a margin call.  I had lots of opportunities to get out of the trade at a significantly smaller loss. I didn’t. I sweated for two days; putting on/taking off hedges, etc. I lost anyway. It doesn’t work. Don’t do it.

Third thing that saved me is a concept I learned many years ago in college: The time to get pie is when pie is passed.  It wasn’t until I started being mentored by Michael that I actually applied that concept to my trading. Take profits when profits are there to be had.  I would have a trade up, say, 20 pips and just watch it go against me and stop out negative.  As you can imagine, that was demoralizing. So I will take a slice (1/3, 1/2) off if I see price action bouncing against me. With a little experience, you can anticipate the places price action could possibly reverse (moving averages, prior support/resistance, fib levels, etc.) and be prepared to take profit off at those points.  If I’m only a couple of pips up on the trade and it looks like it’s stalling or reversing, I may reduce my trade to reduce my risk and leave my stop loss where it is so the trade can still work out. Other times, I will move my stop to break even at those points.

Those are the mechanical answers to your questions. The psychological answers are a little more difficult.  I too made a bunch shorting the EUR/USD in Jan and Feb.  Unfortunately, that was like shooting fish in a barrel. You could almost not ever be wrong taking a short position in EUR/USD during that time.  If you actually started your trading in that environment, it may have given you a bad mindset.  Trading is NOT that easy – if it was, everyone would be doing it. 😉  Now, of course, there are times when it IS that easy. Your job, should you decide to accept it, is to determine when it is and when it is not. 🙂 Just so you know, trading has been atrocious since June, so don’t be discouraged if you’ve done poorly during the summer. Even the best of us have trouble trading during the summer doldrums. The smart traders just take the summer off.

I’ve always been a guy who’s had pretty good control of my emotions.  That may go back to my elementary school days when I spent several years wishing I was Mr. Spock. 🙂 Anyway, here’s what Michael had me do that helped me with any fear/confidence issues I may have had. Start trading a very tiny size. I mean VERY tiny. For instance, only risk, say, 0.01% (yes, I mean a fraction of a percent) of your account. Trade with that size until you’ve had five to ten consecutive profitable days, then double your size and do it again. Continue to increase your size as you have a run of consecutive days until you are trading your full size.  The result? When trading tiny size, it’s easy to take stops. They no longer are painful. You get used to it and it is significantly less painful and demoralizing.

Another thing to remember: Taking losses is part of the job. You have to hit the delete button in your brain when you get a loss. Your loss has to have NO emotional effect on your next trade setup.  If a trade meets your criteria, you have to execute it without emotion. You should still use your losses to analyze your execution and strategy, but you have to look at them objectively with no emotion attached.

That’s all the advice I can think to give for now. Let me know if I can answer anything else more specifically.

I hope this will help some of you in your trading. Please don’t hesitate to ask me further questions: timblack (at) winnersedgetrading (dot) com. If you would like to follow my trades, I’m on Twitter. If you would like more information about our live trading room click here.

May the pips be with you!

Tim

Secret Asian Man 😉


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  • Jean

    Thanks Tim for the article.I would like to share my experience .I started trading few months ago .Eventhough I was busy at university and other things ,it went good at the begining and doubled my 10 K account in short time.My mistake was keeping a position open without stop loss and once i had large negative amount , it would be hard to close it.I have to mention that i lost 80K in only three trades!Now i do make profit but then i lose them.
    i still have 25 % of my account, i will try to have a strategy , good discipline,and using ur advises hopefully i will be able to recover.

    Jean

  • Bocahtua76

    I need to read this to stay discipline. Thank you Tim

  • George

    Good stuff, Tim especially noted is… “Taking losses is part of the job. You have to hit the delete button in your brain when you get a loss. Your loss has to have NO emotional effect on your next trade setup. “… as a salesman and trainer for years we learned to cope with rejection in a similar way, most importantly there can be no negative carryover to your next attempt as it shows thru and makes you less effective, also important to keep in mind that as we have a win ratio (or sales ratio) each failure actually brings us closer to a successful trade…it’s the cost of doing business in sales and this approach can apply in trading also; no need to get hufffy about it. Great piece!

  • Winter

    Tim, great article. I was told and reminded over and over regarding MM and Setting SL when 1st taken up a Forex course 1 year ago… never know how bad it is until I blew a couple of my account. Never take step to correct the bad habit and still have some open in my current one.. Glad to know those who gone thru the same but manage to get out the mass eventully, and I strive to do so .. start by killing those long lossing open trade now. – CyclingBear

  • patricia h

    Hi Tim, how true and rite to the point the advice u offer. In fact rading has been a real tough journey for most of us be it novice or slightly advance. I personally have learnt n trade for past 2yrs and still find it so hard to trade well at times. Agreed this summer wa the toughest time ever, u think u know the technicals, hell even support n resistance levels can jus tbe broken like hell broke loose. Yes experienced margin call before and don’t want to go there anymore. In fact lsot confidence for a while. Now slowly rebuilding myself againt to take trades wiht as low as 1% risk of my capital. I have been trading real small so as to get myself to like u sugest make consecutive winnings before i m comfy enuf to increase maybe another 0.5 – 1% of my lot size. I don’t like hedging on losing trades, and see no solution actually in the long run. Of course there are some who just love tot rade this method.Well I guess we allneed ot identify what sort of trader we are in order to be succesful at forex ans still stay sane.

  • Vinomaker

    I can hear your voice through your written words and I am listening. I have been trading FX too long to not be profitable. I blew a 10K and then a 5K account to my shame. But I am still staying with it. Winners Edge has been truely enlightening and your article nailed so many things that are crucial to success. I will try harder to tune in and be mentored by those traders successful on this site. I took $300 to $2400 in 3 months with Winners Edge then I took it back to $900 in 2 days due to all you talk about. I have now got things rolling back to $1200 in 2 weeks so I am hopeful I will finally learn from all my mistakes and heed your advice. Money management and stops or lack of have been my downfall. But, NO MORE! Thanks Tim, for your calm and steady voice sharing as we go. You are appreciated!

  • Helen

    Great article – there have been a few times over the last few weeks when I have sat with my head in my hands despairing and wishing I had never started -without winnersedge and articles like yours I would have given up. Its good for the self esteem to know others struggle too and can turn it around. many thanks

  • nzphil

    Great article Tim It’s honest heart felt opinions like that that give us newbies confidence and shows us that we are not the only ones stuffing up and we can take our wins and our losses and learn to be better traders if we take things seriouslyand apply your advice .
    I look forward to trading with you in the coming weeks .

  • Dkoster77

    Nice!

  • Jxhayek1

    thx Tim, it’s really touching most of our feeling and how do we suffer and fight wth losses trying not to when we don’t use sl. and the price goes against us, yes it was bloody summer but wth ur help and CAesey and Sophia I hope I’ll stop this bleeding …

  • Patricio A.

    Great article, you rules!!! As I used to say, the key factor is the exit. Sometimes I exit a trade to early or to late….Great week for all!!!

  • Tradpat

    Hi Tim

    Being a newbie, I am taking every possible caution for not blowing my 1st account… I just started live this month.

    Your article has re-emphasized and re-confirmed to me the “soft” portion (MM, Emotion…) of trading is SO MUCH DIFFICULT to handle than the hard portion (TA, method…). I am practicing it.

    I thus will be very careful in my trading by making sure all aspects are met as preached by professional traders like you.

    Thanks for sharing the “insight tips of trading successfully.”

    p.s. If you don’t mind, I always have problem in setting stop loss on H4 tf. In Daily tf, I read many traders set more than 100 pips for major pairs, even close to 200 pips. Would you advise the setting no. of pips for H4 tf? Thanks a lot for your time.

    May you all have great pipping everyday 🙂

    Warmest Regards
    TPat

  • Thanks for the great article Tim. It’s honest, it’s realistic, it’s informative and it’s inspiring! Really enjoyed it, great job.

    Mark

  • Anonymous

    Tim, you nailed it. Often I have looked back at losing trades (big losers) and asked myself, “Why didn’t I just get out?” or reverse my position since the opposite of losing is winning… right? There are 5 outcomes to every trade, 1) win big 2) win small 3) breakeven 4) lose small 5) lose big. To be a successful trader all you have to do is learn proper money management and eliminate one of these possible outcomes. Guess which one? Getting a grip on emotions comes with time. I hear a lot of people grip about screen time and weird hours but that’s just the cost of admission to the big game and you’ll never win without it. Experience breeds confidence, confidence breeds success.

  • Brent

    Tim, Looking forward to being able to write a great article with that title, but for now struggling like many others and appreciate the writer and your reply. I am currently trying to back test Caseys system, so that I have confidence to follow through with the rules. In order to get pie do you need an IF rule within your trading plan that you can close partial if the trade mucks around etc?

  • Kemkamal

    hi..just like to share…i blew my account too,many times…somehow i realised,the cause was overconfidence..when u get 5 or more consecutive wins , things get a bit airy up there…
    since then , i was told “u need not swing on bad pitches” and “forex success is a journey ,x a race”..i always remind myself of these quotes and learn to be grateful what the market gives me in a particular trading..
    so far it has worked for me..hope it hleps someone too..
    my best wishes to every trader…

    kem

  • Wes

    Thanks Tim for your guidance. A very useful and valuable article that I can relate to with similar experiences.

  • Jaroslav

    dear tim, really great statement! I can only confirm all what you stated, my personal trader history is very similar – blowed accounts, deep frustration .. it changed after I attached the trading room, I learned so much in couple of weeks .. a way more then in the 1,5 year before .. now my performance is stabilized, I am constantly pofitable – not huge amounts, because I am still trading small size, but I am on the way up and I will increase my trade size soon .. thank you very much guys – michael, casey, tim, sophia .. I am on my way to manage trading for living, which was my secret plan :-)) god bless you. jaroslav

  • Walter V D H

    GREAT PIECE OF MINDSET.
    I THINK THE HARDIEST THING TO LEARN TRADING FOREX IS TO PUT YOUR MINDSET INTO THE EXACT MODE TO TRADE LIKE A ROBOT AND DISCONNECT YOURSELF COMPLETELY EMOTIONALY FROM THE TRADES LOSING OR WINNING NO MATTER WHICH SIDE THE TRADE IS GOING, TO BE ABLE TO SHORTCUT LOSSES AND LET RUNNING THE WINNERS.
    HAVE 3 ACCOUNTS BLOWN UP YET AND HOPE THIS WILL DO FOR LEARNING THE SKILL OF TRADING, BUT STILL HAVE PROBLEMS BEING PROFITABLE CONSISTENTLY;
    AVERIGE P/L IS POSITIVE BUT IN $ IT’S VERY NEGATIVE.
    SO BY FOLLOWING THESE COMMENTS I HOPE TO ADVERSE THIS NEGATIVE RESULT IN MY ACCOUNT.
    THANKS FOR THE INFO SHARED HERE FOLKS, GREAT JOB

  • Glenn

    Tim, What a great article. Thanks man. Your insight and help are truly appreciated. Now, how about sharing some of those pips LOL!!