In 21 Days: Practice Reading Charts, Understand the Price Action, Manage Your Risk & Compound Your Account

Hi everyone. I’m Atilla Yurtseven.

When we look at charts and; draw trends, find pivots, draw fibonacci, add fractals, different type of moving averages, bollinger bands, add some oscillators like RSI, CCI and etc. we simply look at the history. We only see what happened in the past but we don’t know, how price moved at that time. Even if we analyse 1 minute time-frame. We simply don’t know.

Think about moving average. If the price is far away from MA, we think that price will go back to the mean. This is not quite true. Price does not follow MA, MA follows the price.

I have coded and backtested a lot of known strategies like fractal breakouts, ma crossover, rsi confirmations, flag breakout and etc. Your best chance is lower than 50%. Let me tell you why:

When you enter a trade, what do you do at first? Set your profit and stoploss targets. Well, most traders do! However, we are told that you must set your target to at least 1:2 RRR right? And you trail the stop using ATR, STD or using your favorite trailing method. I have tested this too. None of them seems to be worked.

Assuming you have 1:1 RRR (risk to reward ratio). Your target is 20 pips and stop is 20 pips. If we are in a random world here, there’s 50% chance of winning right? Wrong! Theoretically you are right but which one will hit first? There’s still 50% change to hit stop-loss first. In this case; you have 50% chance of the 50% to hit the profit target first.

But wait; this is not quite true either. Because there’s a trend. If you buy at the top of the trend, it’s most likely you are going to hit to the stop-loss (if it’s too tight). If we step in after a retracement, there’s still higher probability for our TP. But did you know that, even if we have a support (strong or weak, tested or not tested), there’s 50% chance to break or bounce?

So, you are wondering why I’m telling this to you. Most of you, including me, paid thousands of dollars for trainings, signal providers (i didn’t), so called holy grail trading strategies. None of them worked! Right? They actually do. I mean it. They do! If they don’t work for you, you can not say it doesn’t work.

“What the hell are you talking about?”

Let me explain. Most successful traders chose one strategy. They stick with it and trade it. They manage their risk. They accept loses as their expenses. They know their best chance is 50%. They can chose their win-rate (yes they can). They can even profit from simple moving average crossover strategy. Do you know why? Because they are used to it. They have traded this single strategy thousands of times. If they lose, they know it’s part of the game.

We don’t know the future. We don’t know what’s going to happen when we take a trade. We don’t know if the trade will go against us or not. But…. There’s a huge “BUT”. We know one thing… We know how much we can lose in the worst case (more than 99%). If we know how much we can lose in a single trade, why don’t we use this in our favor? And it’s just that simple. Let’s have a look what can we do:

Manage Your Risk

You found a trade with 20 pips sl and 30 pips tp on a EURCAD chart. Let’s analyse this trade.

Your account balance is $10.000,00

First and most important question: How much can you risk per trade? What’s your risk appetite? We all know that more risk means more profit or more loss. Let’s say you want to risk 2% of your account. This trade is 1:1.5 which means; If you lose, you are going to lose 2% of your balance and if you win, you will add 3% to your account. So in this particular case, we will risk 2% of our account which is $200

Second question: How much 1 pip costs for EURCAD?
Today; 1 pips EURCAD is $7.55 - Can’t write link but you can find it on babypips
BONUS - 1 pips EURCAD calculation: Find how much is 1 CAD in USD. USDCAD = 1.3234 so 1 cad is 1 / 1.3234. Which is 0.755. This is the Point (tick) price. Multiply it by 10: 0.755 * 10 = $7.55

Third and last question: How much lot do i have to open?

Let’s find out our lot size using primary school math. Here’s the formula (no fancy, sexy symbols here):
LOT = Risk / (stoploss_pips * pips_value)
Risk = $200
stoploss_pips = 20
pips_value = $7.55
LOT = 200 / (20 * 7.55)
LOT = 200 / 151
LOT = 1.32

It’s that simple. You don’t even need 1:100 leverage to enter this trade. Nobody told you to go ahead and put all-in. Using this simple risk management, you are also compounding your account. If your stop hits, you will lose ~$200 (and you knew this), if your TP hits, you will make ~$300 (and you knew this). That’s it!

Compound Your Account

I hear you asking “What do you mean by compounding?”

Well, let’s consider this trade was a win. And now we have $10.300 in our account. And we have found one more entry with same stop (20 pips) and same target (30 pips). Let’s calculate the lot size:

New account balance: $10.300
LOT = Risk / (stoploss_pips * pips_value)
Risk = $206 (2% of $10.300)
stoploss_pips = 20
pips_value = $7.55
LOT = 206 / (20 * 7.55)
LOT = 206 / 151
LOT = 1.36

See? New lot size is increased automatically. If we lose, we will lose ~$206 and if we win, we will add ~$308 to our account. You have simply and automatically compounded your account.

One more time; We have found same trade but this time let’s see what happens if we lose:

New account balance: $10.608
LOT = Risk / (stoploss_pips * pips_value)
Risk = $212 (2% of $10.608)
stoploss_pips = 20
pips_value = $7.55
LOT = 212 / (20 * 7.55)
LOT = 212 / 151
LOT = 1.40

And after we lose this trade, we have $10.396 in our account and it’s still more than the previous account size.

Let’s lose one more time.

New account balance: $10.396
LOT = Risk / (stoploss_pips * pips_value)
Risk = $208 (2% of $10.396)
stoploss_pips = 20
pips_value = $7.55
LOT = 208 / (20 * 7.55)
LOT = 208 / 151
LOT = 1.37

New balance after losing $208 in this trade is $10.188
We won 2 times and we lost 2 times but we are still profitable…

Here’s my motto and you can not find it anywhere else:
If you don’t know your risk, you are playing a very expensive game

Practice Reading Charts & Understand the Price Action

Now what to do next? Most of us are great at running loses and cutting profits. We need to reverse it. What I recommend is to learn the price action. But you don’t need anyone to show this to you. Get used to it. Here what i can recommend:

  1. Stop trading both live and demo accounts for now
  2. Open 1 minute candle chart
  3. Watch it at least 3 hours a day for at least 22 business days (1 trading month)
  4. Don’t do anything else
  5. After a month, start trading in Demo account at least 10-20 trades (no need more in demo)
  6. If you are confident, switch to your live account
  7. Trade with the minimum lot size (0.01)

When you do something for 21 days, you used to it. You will understand how price moves. What can you expect. Just watch. Do nothing. If you come and ask me how i make money, all i can say is; I watch and wait for the right time!

Practice, practice, practice… Please do not trust any signal providers who promises you wealth and who promises you to make you rich quick. They can’t! Most of them are not even trading. Because, they are trying to make money by selling signals and courses. Patience is the key. Learn the correct thing. Learn the correct strategies. Know your risk. Be self confident. If you practice something wrong, you will get used to take losing trades.

And please remember; you hear and you forget, you see and you remember, you do and you understand.

Who am I? Why am I doing this?

I hear you are asking me why i have wasted my time to teach/tell what i know? Simple. I give it back. I have paid a lot to empty promises. I have free trading course in YouTube but wait; I’m not trying to get you to my training channel because it’s not even in English. I love sharing. I’m a computer programmer and i run my own company HandyCafe. I have written HandyCafe internet cafe software more than 15 years ago and it’s 100% free. I love sharing. Sharing helps me to practice and helps me to get used to it and makes me feel better.

Am I profitable? Here’s my verified myfxbook account. Ates - dumani - 3163306
(Can’t post link)

But again; this doesn’t mean that I’m profitable. There’s not enough trade & proof to tell this to you. Let’s wait for 3 more months and we can decide it together.

Disclaimer: These are not financial advice and for educational purposes only.

Plan your trade, trade your plan and trade safe,
Atilla Yurtseven

12 Likes

Nice, for a change, to see someone actually focusing on what ultimately is the critical factor between success and failure - risk/equity control and management.

Why is this? Because, as you say, trading is all about probabilities (although I wouldn’t personally agree with the 50% stuff). Which means minimising the downside and maximising the upside.

There are many experienced traders who have been emphasising this aspect, but it usually seems to fall on deaf ears. I guess it is, well, just too boring! And probably too slow for those with mini-sized accounts who can’t wait to climb into the “big league”!

But what other field of business does not consider its profits compared with its costs as an essential element in their progress/survival? If other fields need to do this why, then, would traders think they are going to make it consistently without seriously incorporating risk/equity management into their trading format? :thinking:

3 Likes

Thanks for sharing and for sharing! I’m with @anon46773462. I haven’t been demo trading all that long, but it astounds me the amount of traders that start trading with no risk management as part of their plan, or any plan whatsoever! And understanding costs and expenses just seems like something a trader would want to know from the get go. Learn that stuff people!

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Many traders including me will be very successful if we didn’t have mini-sized accounts.

It’s not really a risk management problem. It’s Greed.

Many traders will make consistently 2% monthly, but many traders have less than $10,000 accounts and 2% a month is light change. Hence we over risk to maximise gains which also maximises losses.

One thing I observed, when you over risk a mini-sized account, trading without SL of course. We are often quick to close positions in small profits and slow to close big losses. You account will only depreciate.

Here I am, knowing exactly what I am doing wrong and still doing it. LOL just can’t help opening my default 1 mini lot with my $1000 account.

Oh God! What is wrong with Me?

2 Likes

And there it is, in your own words! - as you rightly say: over risk to maximise gain”. It is a risk management problem - and as you point out, greed is one of the emotions that leads to such bad risk management. And that is one big reason why so many accounts held by otherwise totally competent people, go bust! :thinking:

This is also a risk/equity management issue!

It is not going to help by calling these issues something other than what they are. In trading, one has to be systematic and consistent and protect ones funds and their progress - all the time!. Otherwise it will always collapse at some point due to greed, frustration, negligence, even a night trading whilst drunk!!!

If trading for small sums in the early stages seems unrewarding then there really are only two choices:

Give up or take big risks…

Well that’s my opinion, anyway! :smiley:

2 Likes

Was a bit hesitant reading the post as I thought it was trying to sell something but this post is actually very helpful! No clickbaiting or teasing information. Thank you!

Nothing beats getting practice time in!

3 Likes

This all looks good in theory but the reality is very different. Watch price for 1 month really? Add some years to that, and even then nothing is granted. Risk management is very important, but it is not everything. A trader with low experience can have the best risk management on the planet, the only thing that is going to happen is that he will lose money slowly but he will lose, he just wont do it in a spectacular way like getting a margin call :crazy_face: lol.

3 Likes

Nothing is ever granted in any business. Some are just easier and/or less risky than others. Forex deals in probabilities and carries a higher risk of failure and demands a lot more input from the trader.

But you guys come here and read “how long it takes to be profitable” from others and then simply believe it as inevitable. In fact, often when people say it takes years, it is only because they themselves are not learning, constantly repeating the same mistakes and generally on the way out.

In fact, it is because you are not prepared to put in the work, and as an excuse you claim that it cannot take less than years. That is rubbish. Total rubbish. It only takes years because Newbies are lazy, jump from one thing to another seeking the “easy money method”, and impatient to fulfill their dreams of being a big time trader throwing around the thousands with a flash car and a holiday home in the Caribbean and a private jet to get there in

The answer to how long does it take is “as long as it takes for you to thoroughly learn your profession and learn how to control yourself”. And in that sense the commitment, concentration and focus suggested by the OP is very sensible, even if one does not take it too literally.

Of course it is not everything! You have to have something to apply it to! No one here has even said that!

Of course you have to have a method. You guys all want your Maserati on the drive to impress the neighbours but you do not want to learn how to drive it. See how daft you are going to look when you crash into your neighbour’s moped simply because you couldn’t control it!

Your method is your car and has been bought with your hard-earned equity. You immediately want to start racing around everywhere in it - but you can’t be bothered to learn how to drive it and how to even read your navigator to determine where you want to go and how you are going to get there! Your risk/equity management is what keeps you on the “road” and, what is more important, gets you to your destination.

No, risk management is not everything - but without it you are going to crash your car and all hopes of your Maserati with it.

But I guess this will only serve to get more flippant comment from the wannabes, so I’ll leave you to it.

maserati

2 Likes

Sorry man but if you or anybody think that they will be profitable in this business after one two or three months you are delusional. It just wont happen and i dont care how smart you are. You say newbies are lazy, jump from one thing to another, impatient, want house in the Caribbean, private jets, Maseratis. Well the point of my post was forget those high expectations and be prepared that if anyone wants to became a profitable they have a tremendous amount of work ahead and it will be a long journey thats for sure. For some it can take a little over a year for others close to two years and some got three ,four and five years and still not making money. Forex trading and easy dont go along, depending of the time you can put everyday into trading and learning you can shorten the time it will take you. One thing im sure off is that trading requires way more work that any newbie here thinks it does. Think its hard work? It will be the double or the triple of the work that you are expecting. I am not a profitable trader yet hope to get there one day, and this is not me frustrated that if i cant win nobody else cant either. Im just way ahead of all the bs that forex is easy, follow this simple things, bla bla bla::: Reality is trading requires hard work and commitment there is no away around this.

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Most of millionaires that i see online, they trade with someone else’s money. I know one guy in person who made a million dollar using $10K initial balance.

If you are a millionaire, you don’t even need to use leverage. Less risk, more profits.

Yes the problem is that most of us are not millionaires.

1 Like

Exactly!!! But i think catching the beginning of trend is possible. However, win-rate is still low. For example today I have longed EURUSD at 1.12823 my tp was at 1.13300

But I have closed the position at open price of the day. These but’s are the resistance of being millionaire :slight_smile:

I’m still profitable today. But first time in a month, i have decided to break my own rule and it caused killing my statistics…

Sucks that you closed that 12d buy eur/usd and the price reversed.But it was probably the right decision because price could of drop more from there.

Exactly… There was this trend line. However, I’m not trading trends. I use different strategy. I should ignore all other supports and resistance levels. It’s all emotional. I was planning to make at least 35 pips in this trade, maybe more!

Here’s my setup and targets. X is where i closed

that’s interesting, what does the different bar colors represent?

At the end what matters is that you made profits today, you will it yourself in the head for closing the trade and the price going up, but if you didn’t close and price went down you would be hitting in the head for not closing. But you are right its the emotions that sometimes makes us make this mistakes.

1 Like

Look at my AUDCAD trades. First short than long but I have chosen a wrong price (greedy?) to go long and they didn’t get filled. TP is the key here :frowning:

I know that lot sizes are very small but it’s all about my risk management. I’m still testing my strategy.

They are the confirmation bars of lows and highs. If you are using TradingView just add PowerTrend indicator i have developed. It’s this one.