Traders Edge

The statistic that 95% of traders fail is often well documented on the internet. At a first glance it does seem a remarkably high statistic but it’s also one that’s difficult to define.
If you’re a retail trader that’s just starting out then you may be sat at home using a spare room or office to trade from, how do you know that 95% of people who do the same as you eventually fail? What does failure look like?
Clearly if someone deposits money with broker, trades it all down to zero then closes the account never to trade again then you can safely say they have failed. What is more common for would be profitable traders it to spend a number of years in a cycle of losing and refunding their account, or perhaps floating around breakeven. Could you say these traders have failed? It depends on their initial objective but we can assume no one enters into this business to achieve that and no more.
It’s also fair to say that just because someone has spent multiple years in a losing and/or breakeven cycle it doesn’t mean they are failing, we all know there is all learning curve to this game and that can take a long time to flatten out. Those years could simply be defined as your education!
Nonetheless, as an individual, it’s important to define what we want from trading and to recognise when we are not getting it. There will come a time in every aspiring traders career where they will have to look in the mirror and decide if they truly want this, after all you will be spending a large portion of your time dedicated to the markets.
It's that dedication and multiple hours a week spent in front of the markets that people sometimes underestimate, coupled to that if you’re not getting the results you desire then it can start to have quite a detrimental impact on your life. It’s not spoken about often but it’s quite possible that you will experience the negative sides of trading, this may impact your physical health, mental health and relationships with your family and friends.
You need to define what your cut off point is, where do you draw the line and say enough is enough? You may need to accept at this point that trading is not for you, especially if its seriously impacting your personal life. If you get into this position then we recommend taking a complete break from trading, this break may need to last months rather than weeks and during this time you can address the things that have affected you. Pay more attention to your health and relationships and get yourself back into a stronger place. When you feel ready you can start to think about returning to the markets, however it has to be done in a carefully considered way.
Give plenty of thought to what prevented you from succeeding the first time around, what were the triggers that put you into a negative place to begin with? This part of the process requires complete honesty otherwise it won’t work. It’s often said that simple is better so it may be that you need to go back to absolute basics and trade with a strategy that requires less chart time, the daily time frame for example, make your strategy easy to follow so it’s less ambiguous to find examples of ‘good’.
Once you’ve built up the basics you can start to look at trade management, risk management and creating a disciplined mindset to be able to stick to the rules you have created. All the time you need to mindful of slipping back into negative ways.
Trading is often a delicate balance but you need to define your cut off points, recognise when you need to re-set and address other aspects of your life. You never know, it might just be what you need to take your trading to the next level!

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One aspect that often gets neglected when carrying out technical analysis is location. New traders often get caught up in what candlestick pattern is forming and completely lose sight of the overall context and what the wider price action is telling them.

A large part of price movement is driven by people interacting with the market, their emotions are built into their decision making and therefore we need to add this dimension to our analysis and learn how to capitalise on it.

Swing points in the market make strong areas to look out for future potential trades, simply because they attract so much attention. At Traders Edge focus on the really obvious key swings like the one highlighted in the chart on the top.

You will notice at these swing points that price had been either selling off or rallying for some time and it would have taken a lot of momentum to cause these moves. You can also see that quite an obvious ‘V’ shape formed when price reversed. It’s these areas we are most interested in.

It’s quite common that when price revisits these areas we see supply or demand step back in again. We also know that people initiate positions on the break of these swings points. Upon price breaking a swing high other traders will often enter short positions on the anticipation of a breakout, this is exactly the area where we can capitalise on that movement.

We can see in the chart at the bottom the blue arrow marks the high of a significant swing point, not entirely obvious as we have zoomed in but price had been rallying for some time, supply stepped in and created a significant swing point.

As this is the daily time frame you can see quite some time later price revisited this area at the yellow arrow. The important thing to note here is that price slightly probed above the high of the previous swing point. Undoubtedly many traders will have initiated buy orders on the anticipation of a break out, professional traders and institutions will have recognised this and been able to use that liquidity to sell into. The resulting move is clear with a false break and then a strong move to the downside. This momentum is increased as any long traders will be forced to exit positions with sell orders.

If you scroll back through your charts and look for significant swing points, see how many of them had false breaks, it’s surprisingly common. A whole strategy can be derived from this pattern alone if you study it enough and learn how to apply it. Revisit your charts and let us know how you get on!

Pivot Points can be a very useful tool for day traders who want to identify near term support and resistance levels for the upcoming trading session.
Pivot points are exactly that, calculated S/R levels where we can expect to see a reaction when price interacts with them.
There are multiple ways these can be used and it really comes down to what your strategy is and what other factors you may look for before entering a trade. Before we explore those lets first understand how Pivots are calculated.
The pivot and the subsequent S/R levels are calculated based on the previous days price action, more specifically the previous day’s open, low, high and close.
If you primarily trade the forex markets, which are 24 hour, then the levels will be calculated after the New York close candle.
The calculation for a pivot point is shown below:

Pivot point (PP) = (High + Low + Close) / 3

Support and resistance levels are then calculated off the pivot point:

First resistance (R1) = (2 x PP) – Low
First support (S1) = (2 x PP) – High

Second resistance (R2) = PP + (High – Low)
Second support (S2) = PP – (High – Low)

Third resistance (R3) = High + 2(PP – Low)
Third support (S3) = Low – 2(High – PP)

You can see these pivots in action in by looking at the first image at the top

Like with most things in trading sample size is everything. You need to observe how price interacts with the levels to gain confidence in how powerful they can be. Of course there are no guarantees and they won’t work flawlessly every time, trading is about building an edge but if you can see over a large enough sample size that pivot points and subsequent S/R levels do hold a good proportion of the time then you can work them into your strategy.

You can see a clean reaction off the pivot and then the S1 level in the bottom left image.

Most modern charting platforms will come with the Pivot Points built in so it would be a simple case of adding them to your charts. If you use MT4 then a quick google search will provide you with the necessary indicator.

We encourage you to scroll back through your charts and take a look at how effective these levels can be, we’re certain you’ll be encouraged by what you see.

How can Pivot Points be used in your trading?

Looking at the charts above and through your own analysis you will see that price does indeed react to the levels, however we don’t recommend you simply take trades blindly.

Depending on your strategy you could choose to exit your trades at these levels or even initiate your position. If you are long and price is approaching the R1 level then you may decide to take your profits in anticipation that price will react, the same is true of a sell position and price approaching S1.

Price approaching R1 could also be a good place to enter a short trade! However remembering what we said about not taking trades blindly, it’s important to build up confluence before entering a position.

A good example would be price approaching one of the R1 levels but is also approaching its daily ATR, this would be a good exhaustion move. If it also coincided with a traditional S/R level or had price action then this builds your case for a trade even further.

At Traders Edge we look for a break of trend lines and then a return to the daily pivot, ideally that will also coincide with horizontal S/R levels.

You can see in the image on the bottom right we identified those conditions and also had MACD divergence to add to our confluence factors.

Pivot Points can be a powerful addition to your trading strategy as long as you ensure they are only one element and not the only reason for taking a trade. The example above shows how we use them in our own trading and as long as you’re patient and take the best setups then you will be ale to pinpoint precise turning points like we have.

Have you ever noticed how quickly time flies? The months seem to roll on by and before you know it the year is almost over and you’re starting to think about all the resolutions you’re going to make for the new year ahead.
If you’re a long term losing trading this is the typical time that you re-energise yourself with the promise that this year will be different, you’ll dedicate yourself to trading and will finally crack it.

Is this a familiar story to you? How many of you reading this can say that you actually did it and are now settled into a profitable strategy?
A useful motivator is to look back over all the half completed trading journals you may have kept over the years, this can provide an interesting insight in to your approach to trading in general. There‘s a decent chance that you’ve attempted a number of different strategies and abandoned them at the first sign of trouble. How many of those have drifted slightly into drawdown and then the record keeping stops? If you’ve been diligent enough then you will have also made a note of the date these trades were taken, it may shock you to see how long ago those trades were taken!
Now is the time to take a long look in the mirror. During the time since those trades were taken how have you progressed as a trader? Have you moved forward and are you closer to being where you want to be? If you’re not yet consistently profitable then the answer would have to be no.
At this point, after acknowledging that you are effectively going around in circles, you have some decisions to make. Are you sure that you actually want to be in this business? Be honest with yourself about why you haven’t broken into the realms of consistency. There are a number of factors that could be at play here:
- Shiny Ball Syndrome – Are you being lured into trying new strategies because they make winning look so easy
- Are you becoming despondent and losing interest because you’ve suffered a string of losers?
- Are there things going on in your personal life that are stopping you moving forward? Maybe you’re time poor or even close relatives aren’t supporting you in your journey?
- Are you prone to making amateurish mistakes such as taking on too much risk, taking poor quality set up, not having a plan, not journaling properly?
What is quite common, and it takes some honesty to admit it, is that you are scared of failure. What if you completely commit to something, maybe even publicly to friends and family, and then you fail? The very notion of this is enough to stop many people from taking that ultimate step of commitment. This applies to many areas of life and endeavour however our experience has taught us that it is prevalent in the trading community. It what keeps you going around in circles, constantly turning to new strategies and not applying yourself when you do ‘test’ them out.
Only you can answer these questions but somewhere in there you will have the answers as to what your particular problem is. Knowing the problem is only half the battle, committing yourself to fixing it will be the considerable challenge.
The key here is to not get caught up in the idea that you are taking action and therefore moving forward. It’s very easy to convince yourself that you are taking action by keeping busy however if you’re honest the activity you are undertaking might not actually be moving you forward.
Reading another trading book, or researching yet another indictor to apply to your charts might feel like you’re doing something constructive however it’s unlikely to move you forward. Committing to one strategy, journaling appropriately and carrying out self review is taking action and far more likely to yield positive results.
Rather than jumping from one random activity to another plan your week ahead, keep of diary of the things you wish to achieve, making sure it’s ‘action’ and not masquerading as action, and review it and the end of the week. How much did you achieve? If there were things missed then write down why. Aim to get into a cycle of consistency whereby you take regular action each week. This mentality of focusing of the process will over time move you to where you want to be, you might not even notice it happening.
Taking action is totally down to you, you can choose to do so or you can choose to avoid potential failure by going around in circles avoiding commitment. Which ever you choose the time will pass anyway so make sure you choose wisely.

No matter where you are on your journey to becoming a successful trader, or even cementing your position as an already successful trader, you will be aware of a number of characteristics you need to possess. The list is long and includes such things as discipline, a winning attitude, a calm approach and dedication. In this article we want to talk about something that is not necessarily a personality trait but is something we feel isn’t considered as much as it should be, that is, consistency. What is it and how do you achieve it?
The first thing that comes to mind when people talk about consistency is being consistently profitable, it’s what ever trader aspires to however the implications of this are far reaching and go further than most people realise. Having an understanding of this is crucial to taking your trading to the next level.
When it comes to trading there are a number of elements that have to be consistently applied and only you can ensure this happens. Like most things in life you only get out what you put in and only you can honestly say whether you are doing the things necessary. Lets take a look at these elements in a bit more detail:
The Strategy
If you’ve followed our work before then you will know we’ve spoken about shiny ball syndrome. It’s easy to be tempted into switching strategies when the going gets tough, it should go without saying that this is the worst ting you can do. You need to commit to one way of trading, regardless of the short term results. When you’ve mastered your strategy you move in to the refinement loop but you must never deviate from the core rules, your whole edge depends on it.
Leant to Lose Well
People don’t like to talk about it but losing is a normal part of this game, it’s simply how probability works. As long as your loses are in line with you strategy rules then it shouldn’t affect you, it’s all part of apply your strategy consistently.
Your Routine
This is a big one, and often overlooked. Ask yourself how well prepared you are for the trading session ahead. Have you got a documented plan for the following day that highlights the potential setups? Without this you are walking into your trading session completely unprepared and the results you achieve will be comparable. It easy to get out of the habit of doing this, especially when you haven’t taken a trade for a few days and you rationalise with yourself that it’s ok to not bother completing your plan. This is the level of consistency we’re taking about, to do what you need to do, every day regardless.

At Traders Edge we’re also firm believers in having a routine outside of the market. We make a point of scheduling regular exercise and taking care of our diets. We do this consistently and make habit out of it. It no surprise to us that when you apply these principles consistently you start to see results and a benefit, the same applies to your trading, if you take an amateurs approach then you will get amateurs results.
We challenge you to analyse your own approach to trading, if you’ve not yet reached the goal of being consistently profitable then ask yourself what you can do to help get yourself there, only you will know the answer.

Check out our other blog posts on our website:
https://traders-edge.com/

Despite what you may read on social media or trading forums it is absolutely certain that you will suffer drawdown periods throughout your trading career. There will be times where the market is simply not conducive to your strategy, there may even be times where your own performance is not quite up to scratch and your results will suffer in line with this.

In fact, unless you are making a new account high then you are technically in drawdown. The question is how deep will the drawdown be and how long will it last?

A drawdown period that lasts any reasonable length of time will undoubtedly have an affect on you. It would be perfectly normal to lose your confidence, second guess your next trade or potentially mismanage a trade you are already in through fear of taking another loser.

As traders we cannot allow ourselves to be overruled by these emotions, certainly not if we wish to have longevity in our careers. But how do we learn to deal with extended losing periods and how do we help ourselves back to a new account high?

1. Understand and accept what is normal and realistic
The words in this title are crucial! Understand, accept, normal and realistic. It’s very easy for people to have a distorted perception of what perfectly acceptable trading results look like. Of course we all want to win but you must accept that you will have losing trades and that sometimes this can turn into a period of losing trades, this is normal, despite what you may read on social media!

2. Get good at losing
We have found from working with numerous traders that there is generally a lack of understanding when it comes to probability, or in some cases people do understand they just don’t acknowledge the realty of it in their own trading.
For example, on a 50% strike rate (which is a perfectly good strike rate if you have a positive risk reward ratio) it is statistically guaranteed that you will at some point have at least 6 losing trades in a row. If you are trading a longer term strategy and on average only take one trade a week, your losing period could last for a number of weeks or even months. Once you come to terms with this reality you can start to become more comfortable with the idea of losing periods.

3. Moving out of drawdown
This is where you need the mental strength and discipline that is so often spoken about within the trading industry. Discipline is trait that is certainly required but it’s not always clear what it really means. For us it’s about sticking to your strategy rules and following your process to the letter, through good times and bad. This is absolutely essential when you’re experiencing a series of losing trades as the temptation to deviate from what you know works will be at its strongest during a drawdown period, some people abandon their strategy altogether! Clearly this is worst thing you can do.

Now more that ever you need the determination to succeed and push through this period, if you can maintain your focus then you will eventually emerge from the gloom of drawdown a you will be a better more rounded trader for it.

Check out our Trade Recap for EURCAD from 26th April - https://traders-edge.com/eurcad-short-26th-april-2018/ … 👍

EURCAD - Short - 26th April 2018 | Traders Edge EURCAD - SHORT - 26th April 2018 - Our analysis always starts on the daily chart and for a currency pair to make it onto the watch list we first need to see a set up that gives a bias for the following days session.

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UK Oil Short Trade - As always we looked to time our entry short on the lower timeframes. On the hourly chart we can see MACD divergence across the prior highs which indicated a possible fading momentum. We then had a solid break and close below the 50EMA. These confluence factors combined gave us the green light to place our orders.

UKOIL - SHORT - 28th Feb 2018 | Traders Edge - Result = 1.5R UKOIL - SHORT - 28th Feb 2018 - As always we looked to time our entry short on the lower timeframes. On the hourly chart we can see MACD divergence across the prior highs which indicated a possible fading momentum. We then had a solid break and close below the 50EMA.