Trading: The Basics

Trading the financial markets is, in my opinion, one of the best of several ways to turn the tables of wealth in your favour. That said, the scary fact is that 90% of retail traders lose money and fail at trading the markets. Why is this? Put simply, it’s because they are not trading – they’re gambling. Most people who jump into the markets have no idea what they’re doing, don’t bother to do any research or learn the skills required to be profitable consistently, and then wonder why they lose money hand over fist.

I know this, because that’s exactly the mistake I made when I first started trading.

I learned about what seemed to be a simple strategy using GUPPY Multiple Moving Averages crossing each other in a specific way and jumped straight into the markets with no idea what support and resistance even meant, and no concept of risk management. This was a big mistake, and although I closed many profitable trades using this method, my loses far exceeded my profits, and it wasn’t long before I had wiped out my account equity through risky emotional trading.

As I had no concept of risk management strategies, I used a ridiculous amount of leverage trading CFD’s and I engaged in dangerous ‘revenge’ trading after losing half of my account equity on a position that turned against me. This wouldn’t have been so bad if I had been using a strict trading plan to remove the emotion, but as it was I ended up moving my stop loss further and further away from my entry in the desperate hope the position would turn around and move back in my favour. I kept moving my stop loss until I was risking several times the value of the position, and it eventually took me out with over a 120% loss. To make matters even worse, the market then turned around and began moving back in my favour – you can imagine my complete and utter devastation.

This led to a bout of emotional revenge trading which saw me wipe out the rest of my account value, to the point where I didn’t even have enough left to open a new position.

I was beside myself, and it was one of the hardest things I’ve had to endure emotionally.

A lot of people make exactly the same mistake, and a lot of them make these mistakes using money borrowed from credit cards, friends or family – money that isn’t theirs, and which they certainly can’t afford to lose.

So, although I love trading, and have now come out the other side after immersing myself in learning and practice, I am acutely aware of the dangers and risks involved and it is for this reason that I want to help others avoid the same mistakes I made so they can get to a position of being consistently profitable much more quickly than I did, and with less heartache.

Trading – The Basics

Risk Management

Risk management is THE most important part of any trading plan; without it, it is extremely unlikely you will ever be consistently profitable. If you go on-line you’ll find tonnes of information about trading with people showing you 1000% gains per trade and other completely unrealistic nonsense. Be very careful what you believe and buy into when viewing material on-line, and if you see anyone pushing trading systems or indicators that purport to realise massive quick gains then avoid them at all costs.

Trading is NOT a get rich quick scheme – it takes time, practice and discipline to master, and the amount you are able to make/lose per trade is directly proportional to the value of your account equity.

You should always know exactly what price you are looking to enter a trade, and exactly what price level you are getting out of a trade – whether that’s being stopped out by your pre-determined stop loss because your prediction was wrong and the market moved against you, or being taken out at a pre-determined ‘take profit’ level.

There are three basic rules I work to when managing my risk in trading:

  1. Never risk more than 1% of your account equity per trade
  2. Always use a stop loss, and never move it once in the trade unless doing so is part of your pre-determined trading plan (for example, letting profits run and using a trailing stop loss behind significant candles or price structure)
  3. Do not enter a trade unless you have good reason to believe you can achieve at least a 1:1 risk/reward ratio on lower timeframe trades (5 minute charts), or a 1:3 risk/reward ratio on swing day trades on the higher timeframes (1 hour, 4 hour, and daily charts)

Analysis

Analysing the markets is so important before jumping into any positions – if you haven’t analysed the markets intelligently before opening a position, then your gambling and risking losing a serious amount of money based on a whim. There are two type of analysis when it comes to financial markets – technical analysis, and fundamental analysis.

Technical Analysis is the analysis is price action on the charts. It’s look at support and resistance zones created by historical price data, and the information conveyed through each individual candle stick. There are many technical analysis indicators out there, and certainly too many to go through here, but I would recommend ignoring most of them until you’ve mastered the basics and are working profitably consistently.

The technical indictors I use on a regular basis are as follows:

  1. Moving Averages – these are basically dynamic support and resistance zones that are based on information derived from a set period of historical price data. I use the 20, 50 and 200 period simple moving average, and the 8 period exponential moving average (I use different combinations of these depending on what strategy I’m using, but the 200SMA is one a use consistently across all markets as it’s one of the key indicators used by the large financial institutions)
  2. RSI – this is the relative strength index and put simply indicates buying or selling strength in a given market. Some people use this to trade trending channels, but I only use this as a rough reference and it doesn’t form a key part of my strategy – it’s more of an added confluence that would help confirm justification of a position along with other more potent reasons
  3. ATR – this is the Average True Range and is again based on a pre-defined period of historical price action. The ATR gives an indication of the level of volatility in a given market, and I use this to determine appropriate prices levels for my positions stop loses by keeping them wide of normal market volatility levels which can vary throughout the day
  4. Support & Resistance – this is probably the primary indicator I use when it comes to technical analysis, and are basically important prices levels determined by and derived from historical price data. They are basically levels where a given market has consistently struggled to break through, and so offer some indication of good levels to get in and out of trades. If I’m in a trade and it’s approaching a key daily or weekly support/resistance level, then I’ll be tightening my stops and closely managing the trade as there’s an increase probability of it turning around and moving against me when price action reaches these levels. Support and resistance is a great way to determine management levels for your trades and should never be ignored. Support is a price level where price action moves down to and then bounces upwards from, and resistance is a price level where price action moves up to and then bounces back down from
  5. Candle Sticks – candles tell us a lot about the sentiment in a given market by showing rejection from certain price levels and the shape of a fully formed candle can often be used a entry or exit signals for trades. There are many different names for different types of candle and candle stick formations, but the key ones I use on a consistent basis are the Pin Bar and Engulfing Candle

Fundamental analysis is a little more complex, and a little more involved if you’ve not done it before, and basically involves digging into the fundamental information about a stock or commodity to ascertain if there is a strong possibility of that stock going up or down in price. This often involves staying on top of financial and business news, and reading company reports and financial data. This is important and should not be ignored.

Most people will tend to favour one method of analysis over another, and that’s fine, but I would certainly recommend learning both as different strategies will require different skill sets and information sets. For example, when buying physical stock shares in companies my predominant method of analysis is through looking at fundamentals, but when day trading through CFD’s or Spread Bets I tend to favour technical analysis.

If I’m investing in company stock long term, then I want to be sure the company has strong financial data, low levels of debt in relation to it’s revenue, and healthy rising profits.

Your Trading Plan

Finally, it is of paramount importance that you have a written trading plan that you have back tested on the markets you wish to trade. Having a written plan helps to take the emotions out of trading, and gives you a strict set of rules to work to when opening, managing or closing positions in the markets.

A trading plan is just a set of rules that you stick to every time you enter into a trade, and that is based on the results of your back testing analysis through historical data. Always backtest your strategies using historical price data so you can form a meaningful and consistently profitable set of rules to work to when trading. I have several strategies that I’ve learned and devised that I’ve back tested over years of price data, and this is what gives me the confidence that overall my strategies are profitable. This is so important, as there will always be losing trades, and that’s fine so long as your using good risk management to cut your loses early and run your profits, and if you have faith in your plan being profitable over the long term because you’ve tested it on historical data.

Back testing might seem arduous and a lot of work, and although it can be a time consuming process, it’s well worth the time investment to ensure you’re operating a trading plan that is consistently profitable over a long period of time (years).

A trading plan is essential for removing the emotion from your trading – if you let your emotions tag along for the ride you WILL lose money. A good plan makes all your trading decisions for you, so you can’t get caught up in emotional trading when price action moves against you. Devise a good plan, and have the discipline to stick to it and you will be profitable over the long term.

Getting to grips with the basics I’ve outlined here will put you in a much stronger position than 90% of people who trade the financial markets, and although it takes time to learn and practice before refining your ability and techniques, mastering these basic concepts will start you on the path to consistently profitable trading.

If you’re interested in learning more, or in some private tuition on the basics of trading and understanding the markets, then get in touch with me at littlegreyjk@gmail.com for more information.

 

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Today is the First Day of the Rest of Your Life

“The first and best victory is to conquer self. To be conquered by self is, of all things, the most shameful and vile”

-Plato

Well, what a year 2016 has turned out to be.

For me, as I’m sure is also true for the reader, it has been a year of fantastic highs, and some difficult, but valuable, learning experiences. I turned 30 years old, won a World Championship Tae Kwon Do title, became double British Tae Kwon Do Champion, had my second child and doubled the turnover of my family’s business (to name a few). I have undertaken, and completed, my education to become a fully qualified Personal Trainer, and I am getting ready to grade for my black belt in April 2017 having completed an impressive run of completing all of my coloured belt gradings with A* passes – something I worked hard to achieve, and a goal I set for myself 3 and a half years ago. I know better today who I am and what my purpose is than I ever have, and walking through the door to 2017 I am more excited about what my future holds for me than I have ever been.

I have set and achieved so many goals for myself this year, that I have proven to myself beyond any shadow of a doubt that I can achieve and excel at literally anything I chose to put my mind to, and direct my focus towards. This is a truly empowering feeling! The best part? That I am nothing special. The only difference between me and the next person is that I decided on and stated my goals and proceeded to take massive action to achieve them. I became obsessed with success in every field I applied myself to, knowing that if I did I would use the failures along the way as my stepping stones to success. The process of deciding what it is you want in life, and then going out into the World and putting all of your energy into taking the action needed to realise those desires is all you need to get to where you need to be.

There will be naysayers; ignore those people – they are usually always people who’ve achieved nothing in their lives and want to bring you down to their pit of sorrow for some company. You do not want to hang around those people too long, and you do not want to reduce your level of thinking by way of believing there to be limits to your potential, and to your ability to achieve your fullest potential. There are so many people in the World who have come from the worst circumstances, the most abhorrent situations, having been treated in the most despicable ways through the course of their lives, who have realised greatness. They have taken the pain of their past experiences and used it to fuel the fire of passion within them – a fire that when fed and allowed to burn bright, will be sure to light the road to success. These are the people who should be your inspiration in life; and remember, if you can see and recognise greatness in others, then you have greatness in you – you have to be able to see it in others before you can see it in yourself.

My belief, is that 2017 is going to be the best year of my life for the very reasons outlined above. I have achieved a staggering amount this year, and when I actually sat and wrote all of my achievements down from the last year, I was left speechless with the list the sat before me. I strongly urge that the reader take some time, before thinking of goals or ‘resolutions’ for the coming year, to sit and write out everything achieved in the past year. The process and the end result is both empowering and exhilarating, resulting in a dopamine dump of immense proportions helping you to shift to your most resourceful state. It is this state you must strive to be in when you sit to plan your life for any period that follows. As Tony Robbins says, every reason for a failure is a lack of resourcefulness NOT a lack of resources – if you’re resourceful, you’ll get any resource you need in life.

Grab a pen, a note pad and begin immediately; you’ll need it for your goal setting and resolution writing afterwards anyway.

So, now that’s done – time to plan the year ahead.

Now, this should really be done before the New Year so that time is available for the implementation of any preparation that may be required to get off to a flying start. In business, I like to start planning for the following years strategy around 3 months before the end of the current year. This gives plenty of time for brainstorming, calcifying ideas and preparation for the flying start. Pick a lead in time that works for you in your life and try to plan it into your schedule to ensure you stick to your commitment.

I wrote an extensive blog post on the subject of goal setting and accountability, and if you think you might find it helpful you can read that in full HERE.

In the good spirit of practicing what I preach, I will now list some of my key goals for 2017 below to allow the reader to hold me accountable to my stated goals. Remember, think without limitation when goal setting and strategising – any imposed limits will have been created in your mind and are only real because you made them so. Limits have a bad habit of suffocating creativity, and in planning something as important as the next year of our lives we need our creative juices to be flowing unrestricted and in abundance.

My Key Goals for 2017:

  1. Earn my Black Belt in the Martial Art of Tae Kwon Do in April 2017
  2. Achieve the ‘Best in Grading’ Award for my Black Belt grading
  3. Write and publish my first book by the end of June 2017
  4. Write and publish my second book by the end of December 2017
  5. Build a long term investment portfolio
  6. Learn, develop and prove a system for trading FOREX, Indexes and Commodities that is consistently profitable
  7. Engage in constant and never ending improvement in all aspects of my life
  8. Achieve my business and entrepreneurial goals and targets within the time limits I have set for myself
  9. Conduct a speaking tour of schools and colleges in the UK to speak to the young people of today about what tools they need to succeed in life that they aren’t necessarily being taught at school, and how to play the game of life. My aim in this endeavour is to give back to my communities and do everything in my power to add value to the lives of as many people as possible – the young people of today are the leaders of tomorrow; I want to do my bit to help set them up for success in realising their maximum potential. I will have the presentation prepared by the end of January 2017, and must speak for the first time before the end of March 2017
  10. Win the individual sparring event at the Tae Kwon Do British Championships as a Black Belt
  11. Deliver at least one blog post per week to my readers – to all of you who take the time to read my blog posts, I want to thank you sincerely; it means the world to me, especially hearing how they have inspired you and how they add value for you
  12. Start teaching my son Tae Kwon Do, getting him to the point where he can effectively execute the basic movements by the end of December 2017
  13. Find and buy a beautiful house in the countryside, perfectly situated to best cater for the various geographical commitments we have as a family – move in no later than October 2017
  14. Increase my income by at least 50% by the end of December 2017
  15. Go on holiday out of season to the Black Forest area in Germany with my family (the location stated here is my preference at the time of writing – the actual destination will of course be decided upon based on our preference as a a family unit at the planning and execution stage)
  16. Be grateful every single day for all the beautiful people in my life, and all the precious experiences they bring me daily. I love you all, thank you
  17. Attend and immerse myself in the Unleash the Power Within seminar in April 2017, held by Anthony Robbins (I am so excited about this!)
  18. Develop and grow my personal and professional relationships so they provide more value for both parties
  19. Look after myself; meditate, exercise, eat healthily and breathe
  20. See the lesson in every set back, failure or fuck up – learn from it, and move on
  21. Appreciate the beauty in every second – make time for it, soak it in and live it

What are some of your key goals or resolutions for 2017? I’d love to hear about them in the comments – it can be truly inspirational when a group of people collectively share their big dreams, goals and ideas.

Thank you for joining me in the thoughts for the last few months; I look forward to sharing more with you over the next year. I want to wish each and every one of you health, wealth and happiness for 2017 and beyond, and tell you that I believe in you. Anything you want is yours, all you have to do is go after it with a passion so fierce it’s infectious.

Remember; the sky is NOT the limit – we are limitless because our minds are limitless.

Happy New Year Everyone!

With Passion,

Jamie

Thoughts On 30

I turned 30 years old on Monday, and I’m happy to say I’ve been blessed to be able to spend it with the people I love and doing things I enjoy. So many people have wished me a happy birthday, yet about as many have added an interesting statement onto their wishes of wellness. That statement?

“It’s all down hill from here!”

People seem to have it in their heads that once you hit a milestone like your 30th birthday, your best days are over and you now start the slippery decline into old age.

I call bullshit.

I stand here on the precipice of my life, feeling as though I’ve spent the last 30 years climbing the mountain, and now I am at the peak ready to fly. The walk up the mountain was just the preparation. This, for me, is when life really begins. It’s like learning to drive a car, only you’re learning to drive and direct a meat wagon. All those hours of hard labour, successes and failures along the way, were the driving lessons – all geared towards getting me ready to get my licence, so I can head out on the open road on my own, under my own steam, and in the direction I want to go. This is where the learning really begins, this is where life begins.

You see, as I sit here at 30 years old and reflect back on my 20’s, it is obvious to me that I am a completely different person to that young man who was looking out on life from a rented house which I shared with my best mate, working a couple of part time jobs to try and keep the bills paid and fun flowing whilst I worked on my dream of becoming a rock star. How things have changed. I now sit here looking out on the next 10 years (and beyond) sharing my life with my soul mate (sounds corny, but for me it really is the only way to describe my relationship with my partner), with two beautiful little boys and financial liabilities in the form of mortgages and credit cards.

In the last year alone I have worked hard to become a World class athlete, winning a Tae Kwon Do World Championship Gold in July, I have worked hard to build my family’s business to twice what it was a year ago, and I became a double British Tae Kwon Do Champion winning a silver and two gold trophies for my performance at the event this weekend past. I am learning new things every single day that, as I master them, have the potential power to move the needle on my life like never before. I’m an open book, soaking everything in. My philosophy is to start from the perspective that there are no limits – there is nothing that is impossible – and my whole life revolves around pushing the boundaries to find out exactly how much I’m capable of. At the end of the day, if I say I’m going to do something, one way or another, I am going to do it. As they say, where there’s a will there’s a way, and I am one tenacious, motivated and driven little fucker!

“What the mind can see and believe, the mind can achieve”

What I find really amazing though, is the insurmountable level of personal development and betterment that I’ve undergone through my 20’s to the point that I wonder if I would even recognise the man behind the eyes of my younger self should I have the opportunity to meet him today. It is for this reason that I look out on my 30’s with excitement, determination and positivity. If I can come that far in the last 10 years, just imagine what I can achieve in the next 10!

My plan of personal development has only just begun, and one of the most wonderful things about it is that I have so far left to go. It’s knowing that I’m still a long way off where I want to be that excites me most – after all, learning is not something you can ever finish.

The next ten years will be focused on building the mental tools I need to realise my definition of success. It will be about learning and growth, and I am excited by the thought of spending the next 10 years and beyond turning over every single rock I can find to see what’s underneath it. I will be building my relationships and getting better at being a father, partner, son, brother and friend to everyone I love.

It’s all down hill from here? Bullshit. All that means is that the downward slope will accelerate my forward motion, it means I will have to use less fuel to gain speed and it will help to propel me to my goals and to realising the life I’m working so hard to build.

I’ve no doubt that the next 10 years will be the best of my life; the ground work is done, and now it’s full steam ahead – time to take the training wheels off.

Watch this space, or better still – come and join me on the ride; today is the beginning of the rest of our lives.

Don’t waste this opportunity.

Sir Richard Branson & the Red Hot Chili Peppers

What do they have in common, and what can we learn from them?

One of my favourite past times of late of enjoying watching music videos with my little boy – he’ll be two this November. Most mornings I make a special effort to stay at home rather than rushing in to work, as this affords me some quality time with my son and the time I need to ensure my own needs are met (that time with my son being one of those needs). I’m usually lucky enough to get his undivided attention for 20-30 minutes, where we sit together on the sofa in our living room, him on my knee, watching an assortment of music videos. I have to say, even at two, he has some good taste!

His favourite band to watch is the Red Hot Chili Peppers, with his favourite song at the moment being ‘Can’t Stop’. But why is this important, you may be asking yourself. Well, it’s important because through many mornings spent watching video after video by the same band, something became increasingly obvious to me – an important lesson demonstrated perfectly by this band.

Enter Sir Richard Branson.

Over the past 12 months I have been devouring books like they’re going out of fashion; all non-fiction and all of them devoted to personal improvement and business. Through doing so, I have read two of Richard’s Books, thoroughly enjoyed both and have become a big fan of him and the way he does business.

So, what is the answer to the question posited at the start of this blog entry, the connection between a pioneering businessman and one of the best and most influential bands in modern history? Fun.

When Sir Richard is considering options for investments or new business ideas, one of his prerequisites is to ask the question, ‘does this sound fun?’. What an excellent question! You see, in business and in all areas of life, it is of paramount importance that EVERYTHING we do is fun. We have to be oozing passion for everything we undertake in life in order for our endeavours to be a success. If you chase money, you’ll be miserable and unfulfilled – money is the evil demon in the corner that tries to steal your attention in this day and age, but it is a mirage; a blood sucking spectre that will suck the very life from you if you let it.

Instead, we must focus on our passions – those things that we would die for in life.

This is where the true value lies in our existence. It is why Richard and others like him are so successful – it was never about the money, it was about realising the passion in their dreams, regardless of the price. When you focus on your passion, your fun, money will always follow. If you love what you do, you don’t need to worry about being wealthy in every sense of the word.

Watching these music videos each morning with my son perfectly epitomised that for me, as every video RHCP have made is overflowing with fun; it’s around every corner. From the video game style of ‘Californication’, through using faux power lines as bass strings in ‘Otherside’, to singing down a yellow tube and jumping around like happy fools in ‘Can’t Stop’, this important lesson awaits to smack you in the face. There are loads of their videos out there that demonstrate the bands passion for fun, and I think this has been pivotal in their success and their ability to resonate with their fans worldwide.

Make sure you follow your passions in life, and always have fun doing so. Lift others whilst lifting yourself. Laugh often, and laugh hard. Be beautiful.

Both Sir Richard, and the Red Hot Chili Peppers should be an inspiration to us all for displaying and embodying these very qualities.

Life In Focus

It’s amazing how we can so easily go through life not considering or appreciating the things that hold true value, whilst focusing far too heavily on the things that have superficial value. For example, we are overly concerned with earning more money, getting that new car or gadget and generally increasing our perceived material worth, whilst simultaneously ignoring the ageing member of our family, not telling our parents and children we love them often enough and not making time for those who really add true value to our lives as conscious human beings.

I am guilty of this, and so are you… in one way or another, if we’re honest.

We stress about staying that extra hour at work to answer a few more e-mails or finish that last bit of paperwork, only to find that we missed seeing our beautiful children before bed. We get up early and rush into work to beat the traffic and the phone calls in a vain attempt at ‘getting more done’ (though it rarely works out that way), and miss out on the pleasure of dropping our kids off at school. We might miss birthdays or school plays because we had that big meeting in the city that couldn’t be missed, or because we have certain material obligations or commitments forced upon us by the will of others – are we really that weak and naive? Are we really that easily dominated by the materialistic nature that drives those who impose such distractions from the real value in our lives? Unfortunately, most of us, most of the time, are so easily led.

We seem to be hypnotised by the stern will of those who yell at us that ‘this is the way it has to be’, and ‘this is the way it has always been’. I vehemently disagree. Just because that was the way it was done it previous generations does by no stretch of the imagination mean that this is the way it should continue, or indeed that this is the best way. The only guarantee in life is change. I don’t care how things have always been done when we have evolved to see a better way – we know better. Let us be mindful of the risks of becoming trapped in the same old social dogma that went before us. As with the water under the bridge, we must embrace the ever changing tides of life – the beautiful evolution of it all. Let us not stagnate, turn sour and have the very nature of who and what we are destroyed by the parasites that thrive in such conditions. Isn’t that part of the problem we see with the world today? A world overrun with parasites, those who have everything invested in things staying the way they were so they can feast on the devolved flesh of society. There is no sense or value in this.

Tomorrow is too late to realise all this, as was so effectively and abruptly highlighted to me yesterday in a lesson from life that hit me in the face like a reverse turning kick from a World Champion kick boxer.

My Dad was in a plane crash.

He was lucky enough to walk away from it with his life and no injuries – and I can’t thank the Universe enough for that. Nevertheless, it focuses the mind and reminds us of what should be important to us; where the true value lies. A wake up call like no other.. I hope as much for him and it was for us.

There was nothing he could have done to avoid it. In fact, he managed the situation he found himself in like a true hero, and it’s because of his cool, collected calm and years of experience flying light aircraft that he is still with us today. I admire him for that in more ways that he may appreciate.

As he was approaching the airfield at which his plane is hangered, and upon attempting to lower the landing gear, he found that the front landing gear failed to deploy. After having tried to lower and raise it several times to get it to engage, the situation he now faced became coldly obvious to him.

He re-routed to a different airfield with better emergency capabilities, and then was forced to try and land his plane with no front landing gear at all. He approached the runway slow, with the emergency services at the ready, and just before he got to the numbers had to kill the engine and the plane literally fell out of the sky. He wasn’t very high at this point, but the plane dropped losing all lift and the nose hit the runway. He slid across it about 100 yards until he came to a safe stop, nose buried in the tarmac.

When I heard, my heart jumped out of my mouth. That man is a hero for handling that the way he did, and it’s because of his nerves of steel and resolve that he’s still with us today.

I am writing about this for you because of the profound effect it has had on me, and because of the huge value I can see in this lesson. I am writing this today so you too can benefit from this experience – I hope this helps to focus your mind as it has mine, and as I hope it has his.

Take that long weekend with your wife.
Pick your little boy up from school.
Go home early with a bunch of flowers.
Take the day off to go and see your children do what they love.
Be there and make the time for those who love you, and for those who you love.
Tell those in your life what they mean to you.
Say no to the things in life that don’t serve you.
Realise the difference between those things in life that hold true value, and those that don’t.

Tomorrow may be too late…