By Brian McAboy
“The Trading Turnaround Coach”

When it comes to business & investment pursuits, trading truly is a great business – but only if you treat it as the business that it really is.  Most traders get around to this only after taking several financial and mental beatings, but it when you finally do, the rewards are great.

Where most traders go wrong with it starts at the very beginning of their trading careers.  They see trading more as a simple way to make some money, rather than a real business – and they pay a steep price in both financial and personal terms for this error.

Remember when you first heard about trading?  It sounded relatively straightforward and potentially very lucrative while offering many great benefits: no employees, low barriers to entry, relatively low startup capital, just to name a few.

It didn’t take long though to discover that it isn’t quite as easy as it seemed at first, did it?  There are hundreds of choices to make and the possibilities seem almost endless.

Now because trading is often presented as ‘easy money’ and not a real business, it is quite common for new traders to just jump in with live trading thinking that if they can just start making some money with it, everything else will fall into place.  Either that or they just aren’t considering the challenges of making that money consistently over time.

When you approach trading as the business that it is, you realize several truths that make life easier in making a success of the endeavor.   You also realize several significant benefits and advantages that otherwise would elude you.

First of all when you mentally approach your trading as a business, it has an entirely different look and feel.  Many traders view trading as their future and for some it even becomes their identity.  When it is your business though, you remain detached to a degree because it stays separated from you, an activity in which you participate, a business that you own – while you keep your identity whole.  The feelings will still be strong, but at least some separation and needed detachment are there/

Secondly, without an entrepreneur’s mindset, the whole activity of trading gets organized only to a limited degree.  For those with the ‘easy money’ view of trading, it will only become organized and structured to the extent that you can get started.  When approached from the view that it is a business to be built, much more detail and forward thinking is brought to the matter, giving realism and proper perspective that otherwise is absent.

Third advantage is that of structure and patience.  You know that businesses are not built overnight, so the expectations from the onset become more realistic and thus more manageable.  If you are looking to ‘make lots of money fast’ instead of building a business, you will have disappointments and frustrations due to the unrealistic expectations not being met.

You avoid tremendous opportunity cost.  Every month that goes by that a trader continues to trade for little or no profit represents an opportunity cost because their time has been spent and investment capital tied up when it could have been generating a return elsewhere.

Probably the greatest advantage to treating your trading as a business is that of compressing the time to profitability.  When approached realistically from the proper viewpoint that trading is a real business, this causes you to properly plan your business, thinking through most matters that otherwise only get addressed as errors are made.  The most common denominator among failed traders and failed businesses in general is the lack of a business plan.

Go to any bank, angel investor or venture capitalist, and tell them that you have a great idea to make money.  Then tell them that you have no business plan.  They will tell you to go away, without giving you any money or even the time of day – because they’ve learned over decades that without a business plan, your odds of success become about 10%.  They also know that even if you do eventually succeed, your time to profitability will probably be unacceptably long for them to get their money back.

Another way, and probably the one with the greatest impact, in which the business approach gets you to profitability faster is that with a working plan in place, you will avoid the many detours and wastes of time and resources that can too easily occur without it.  How many traders do you know that have tried several different markets or at least different systems, yet still are not making the money they want?  This is but a small illustration of the savings of time and capital.

If you’ve enjoyed this article, feel free to watch the video presentation “Trading As Your Business” which expands on the matter by going to this link,

Click here to watch the “Trading As Your Business” video

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Well, yesterday’s trade didn’t go exactly according to plan.  As I mentioned I was aiming to get to the 38.2% Fibonacci, which would have been worth about 110 pips.  Things were going really well, and I think I got as close as 10 pips away from my target and then the market changed.  Luckily, once I was up I put a trailing stop-loss in place in case things didn’t go my way, and I was stopped out for a profit of 61 pips.  A good result, but it would have been better if I had bagged all the pips on offer.

This just goes to show that sometimes, everything is looking good but the market can change on you.  Reviewing the trade today, I think I would have done the exact same thing.  At the time the market changed, the stochastic wasn’t indicating that the market was overbought, and so I feel that I played the trade correctly; but I am glad that I put that trailing stop loss in!

Thought I’d do something a bit different from my usual retrospective trading reports. Just took a trade (well, entered it a couple hours ago) and thought I’d post my reasons for getting into it and what I hope to get out of it, then once its finished go back and review it. This trade is a bit of a continuation of a trade I took yesterday, and I’m hoping to get a similar reward to the price movement that happened in that trade.

Yesterday I entered a long position on the GBPUSD after getting a trading entry signal of the bullish engulfing candle coinciding with the other G7 indicators. I set my stop loss to 10 pips below the opening price of the bullish engulfing candle. As I was going to be at my desk, I let the trade run rather than set an automatic take profit. As the trade got up to the 38.2% Fibonacci level I started to meet some resistance and after a couple hours it hadn’t managed to break through that resistance level so I took my profit (just over 130 pips). A few hours later, the price retraced quite a bit.

A couple of hours ago today, there was another candlestick pattern that I thought would be useful to trade off. This is the trade I am currently in. The trade has been running for two hours now and I’m up about 40 pips. I’ve set a take profit level on the 38.2% fibonacci level, and that’s about 70 pips away from my current position. So far things are looking good; I’ll post again tomorrow to let you know how it worked out!

Today’s analysis is in a video format again at the below link…

www.forex-science.com/daily.html

The 360 video series is also available from tomorrow so make sure your check out…

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I know its a bit late for anyone to act on, but I thought I’d go over a classic trade that occurred yesterday on the JPYUSD.  As I said, too late for you to capitalise on, but it helps to become familiar with what a good trade looks like, and what to look out for when deciding when to exit the trade.

As in all trades, you want to be trading in the direction of the longer term trend; in this case, we are looking to buy.  The next thing we need is to identify a good entry point.  We use a variety of indicators to help us, but once we get into the high probability areas (high probability of the market direction changing) we need a signal to tells us to enter the trade.  I look for candlestick patterns to give me that signal.  In this example, the candlestick pattern that signaled the entry point was the hammer candle that I’ve highlighted on the chart below.  So now that we’re in the trade; we need to try figure out when to take our money.  Using various resistance points we can identify potential places where the trade may turn against us.  In this chart, the first potential place was the 50% fibonacci.  This line coincided with a previous resistance point, so we could suspect that it may happen again.  Again, we look to the candlestick patterns for help.  In this trade, the candlestick smashed through the resistance point and closed above it.  As it was still climbing strongly, we would shift our attention to the next potential resistance point, on this chart the 61.8% fibonacci line.  As the candle approached this line, the price action retraced forming a bit of a spike high.  However, we should never really act solely on one candlestick pattern, we should usually wait for a confirmation.  The next candle again formed a spike high, so that was the signal that there was a high probability that the trade was about to turn.  These candlestick patterns coincided with overbought stochastic so all the signs were there to close the trade.  If you exited at the point, you would have made a healthy profit of around 60 pips.  If however you ignored the signals and remained in the trade you would have given a whole lot back to the market.

Weekly Trend direction: Bullish

Weekly trend reversal level: 1.3538

Key G7 support levels: 1.3680/3700, 1.3640, 1.3600

Counter-trend opportunities:

Strategy: Whilst above the weekly trend reversal level buy dips to support levels after an entry signal.

Today’s trade suggestion:

Lots of fanfare in the news as the euro rallied up to 1.3800 and the highest level in a month. BUT…we are still inside the 1.3500 – 1.3800 range which has dominated the chart picture for such a long time. So despite the excitement, we are really still no better off than we were a month ago, and we still have the 1.3800 hurdle to overcome (with a daily close above) in order to look higher. IN ANY EVENT the G7 system direction for this week is bullish and we’ll continue to look to buy into dips whilst above the new weekly reversal level at 1.3538. Support levels are now at circa 1.3700 and then 1.3640/3600. We really need to drop a little lower than the current price before considering buying, and I’ll be watching and waiting for a clear G7 entry signal at the support levels before buying. Target 1.3800 and perhaps quite a sharp rally to 1.4000 (the big kahuna)

Summary:

Buy dips to supports after a clear G7 signal. Short term target 1.3800 and then 1.4000.

Update Friday: A double bottom at 1.3550 and an amble back to the top of the range at 1.3700 as expected.
What happens today is probably going to define the next medium term move. A drop back means there’s a good
chance of falling through the bottom of the range this month, whereas a move through the top could mean a
rally to 1.4000. If you are still long from yesterday’s live trading, ratchet up your stops to just under 1.3620 and
wait for the break!