10 Lessons to become a better trader.

Lesson 1: Zones

 

*Price MUST break and retest every zone before moving to a further price point*

See price was going down on EURUSD. If it went right through two support zones without retest we KNOW 100% that price will come back to that price point again.

Here we see a normal down trend but it's very good because of all the retest so we can expect price to go down more.

The circle part is another part price broke though two zones I call it SMASHED and then before going down had to retest.

This is a fundamental rule of trading and should not be neglected even for experienced traders.

Lesson 2: Liquidity  

Each £ sign represents where the normal traders (who see the doji and sell/buy) would put their stop loss.

This is liquidity sure you can make money using dojis , double tops/ bottoms etc but if we see this play out in the markets we know the market makers (big players who move the markets) will hunt these stops before moving to the next price point 

Using this technique we can determine where price will go in the future. After market structure this is the most fundamental lesson in as I will call TRUE trading.

Look at what price does next.

Lesson 3: Institutional supply and demand.

Before starting this lesson we must first understand how the market makers (banks and institutions) make price move. 

If they want to move price up all they have to do is place a large amount of buy orders and price will move in their direction. However in order to buy you must have sellers which is why retail trading is so popular - the banks want you to trade in the opposite direction to them so they may take your liquidity to move price.

One theme they use often is called order blocks. Memorize this term because it will come again and again! And using this we find our true zones (remember market structure is first but institutional zones are where you can expect to see big moves)

Lesson 4 : Institutional candles (or FU candles)

Look at the above example. We see a doji (a possible sign of reversal) and this is where the institutions induced retail traders to an early short position. See the next candle? It wicked above the doji (manipulation) hit all their stoploss and then bam! Price dropped but only after liquidity was taken. 

This is called an FU candle you must have two confirmations in order for it to be valid.

1) Liquidity is taken (doesn't have to be a doji can be double tops/ bottoms anywhere where retail stop losses are)

2) After taking liquidity the same candle breaks structure

This is a very strong confirmation and you can see the direction the banks are trading and trade along with them.

Lesson 5: Imbalances 

What is an imbalance? In basic terms any place where price suddenly smashed through price without it being tested first. 

For example look at the marked out grey area. We see the imbalance a pure bearish candle with no retest in that area. We draw out our area from just the part where price hasn't been tested (from the previous candle close to the next candle open) that is an imbalance.

Look how perfectly price reacted to fill in this imbalance. It can be used as a way to determine where the market is going next or we can find entries using just the imbalance area

Lesson 6: News events.

Remember liquidity? 

Well it plays a big part here. The start of the news event starts (shown by S) Price immediately moves up about 100 pips in the first 5 mins. We know that this has induced a lot of liquidity into the market (everyone buying the big spike up) and also an imbalance which we have covered before. 

So we were looking to sell. Also we had an FU candle (another sign of manipulation so we knew the true intention behind this news event was to drop price) This concept works on all news events and when you understand this it makes me laugh how easy and fun trading news events really is. You can find a whole weeks move in just an hour so it's amazing.

Lesson 7: Risk to Reward and Risk Management

Blown accounts... I'm sure not even one trader ever became profitable before the markets gave them a rude awakening in the form of making you suffer by loosing all you have invested. The truth? It is simply impossible for you as a trader to ever "blow" an account (loose 100%)

This is why this is such an important subject - very much more so than any analysis and maybe this should have come first. ESPECIALLY to the new traders out there... remember the fundamental rule of the market! As stated in mark Douglas's trading in the zone (a must read) "Each moment in the market is unique" therefore no matter how good of an analyst you are... the possibility always remains that you can be wrong and loose the trade. Therefore risk per trade must be calculated. 

If not? Then you are not a trader but rather a gambler (who will end up depressed because the market will take all you have)

Lesson 8: Psychology 

I know some people may have been expecting me to post this lesson on deeper analysis but the purpose of these lessons are not to please people- I can only guide you and this is possibly the most important lesson of all!

You have heard before I'm sure that 90% of all traders fail. Ever stopped to wonder why? How can it be that 9/10 people always loose? That statistic is really quite crazy. Knowing this people still invest into trading and ultimately become part of the 90%. What makes the 10% of winning traders different? Just one factor as Mark Douglas puts it beautifully " they have simply learnt to think differently"

Lesson 9: Market direction and institutional order-flow.

We have discussed in the previous lessons some powerful concepts that constantly repeat in the markets - however it is of no use if you are trading in the wrong direction completely hence why mastering order flow is a must.

These lessons have been structured so that each lesson is connected to the last and as such, this concept will require all you have previously learnt to determine true market direction.

First we start with the basic concept - retail support and resistance zones. Using this we can understand that price will break + retest every zone before moving to a further price point. We gain some information on future price direction - either by expecting a retest or a continuation to the next zone after a retest.

Then we have our institutional zones. Price will not always perfectly react from these zones. However If we see a  setup on lower timeframes and price gives a perfect rejection we know banks are in the move - and are most likely looking to move price to the next zone.

Liquidity... Liquidity.... where to start! If only everyone understood just how "overpowered" this concept is. Above all concepts you should focus on this (not saying the others should be neglected). Remember this golden rule "the market is always attracted to liquidity". Especially on gold and more volatile pairs it plays even more importance! Banks will always look to take out as many traders before making a true market move - hence why if we follow where liquidity lies we know where price will come to in the future. Using this we understand more about market direction.

Lesson 10: The truth of trading and why over 90% of traders loose money.

In short trading is the hardest industry for anyone of get into. Simply because you start non profitable - and its your job to change that into profitable. But at what cost? Trading quite literally "plays" with your emotions it brings out the worse qualities (fear, greed, anger, depression). Before starting trading seriously you must understand this. One the most strong mentally will succeed - there are no shortcuts. And sadly most traders when they start trading won't be prepared for this and blow accounts and loose large amounts of money.

For example if I was to give 100 people-  totally new to trading - a $1000 account to trade with I can guarantee you - every single one of them would end up blowing the account at some point. They could make money luckily yes but overall would still loose it. The point I'm trying to illustrate is... trading isn't easy. It does become like so at a point but you will start by loosing money! So understand that. And don't keep investing money only to loose it.

That is one factor. The other is that the markets are manipulated. Very much so. Without proper guidance most traders will fail (and are failing) just like banks want - because their strategy's are widely known and stop losses easily visible. Remember... your wins are someone else's losses. It is the truth of the markets hence why banks need retail traders to "pledge" their money only so they can take it.

They know the common traders psychology (they have been doing this for a long time) and  move price action with the intention to play with the common mind with utmost calculation to ensure the true move is hidden right to the end. It is actually a crime- the fact most of the trading community is kept in ignorance about the true extent of manipulation. 

Honestly I wish I could say it differently and welcome everyone to start trading but the fact is its a sad industry. Its the reason its so publicly available- banks and brokers count on you to loose. Trading is a blessing but it is a curse for so many. And that's the dark truth. But the most disciplined and open minded will succeed but do you have what it takes to succeed.

I wish it was as easy as just finding a winning trade (signals) but its not! So much more is at play when trading and you can only understand this when you trade yourself. Finding a winning trade is only part of the play - how much do you risk? When do you close? When do you breakeven? Etc. So signals will NEVER work. I challenge anyone to show me one month's consistency using signals - but you won't find it trust me.

This lesson is the most important. Everything must have a foundation and you can not just run into trading without knowing what you are getting yourself into. Trading is resolved around money. And you have heard I'm sure " money is the root of all evil" but the fact is... Money doesn't bring out the worse in people. Nor does it bring out the best. It just shows who you were all along. Which is why trading is such a powerful tool in self-development. It forces you to see your faults and the most determined will fix them and aim to progress daily - which will lead to their eventual success.

Thank you for reading.

Have a profitable day :)