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Yes, Give it to me

How to be a Profitable Trader Within the Next 180 Days (Even if You Are New to Trading) 

Last Updated: October 13, 2020

By Rayner

trading plan

Let me guess.

You’re into trading because you want financial freedom, to make lots of money, and to fire your boss.

You learn everything you can get your hands on. Trading books, courses, forums etc.

1 year has passed…

2 years have passed…

3 years have passed…

And you’re still not profitable.

The bad news is this:

Chances are, you don’t know what it takes, to succeed in this business.

And the good news?

I’m going to show you how to be profitable, step by step, within the next 180 days.

Let’s begin.

profitable trader

The law of large numbers and how it impacts your trading

First, you need to understand something called “the law of large number”.

So, what is the law of larger number?

The law of large numbers is a theorem that describes the result of performing the same experiment a large number of times. According to the law, the average of the results obtained from a large number of trials should be close to the expected value and will tend to become closer as more trials are performed. – Probability Theory

And what does it mean?

This means you need a large number of trades (at least a 100) for your “edge” to play out.

It’s impossible to be consistently profitable every week, taking 7 trades a month.

Because your trading results are random in the short run and will be closer to its expected value, in the long run.

If you want to learn more, watch this video below:

What is consistency?

Now…

For your “edge” to play out, you need a minimum of 100 trades, for the law of large number to work in your favor.

This means:

If you want to be profitable every day, you need 100 trades a day.

If you want to be profitable every week, you need 100 trades a week.

If you want to be profitable every month, you need 100 trades a month.

So…

Let’s break down some of the trading approaches you can employ.

High frequency trading – Trading at very high frequency, like 10,000 trades a month. You can expect to be profitable in most of the months, or even everyday like Virtu Financial.

Day trader – Trading an average of 3 – 5 times a day, you can expect to be profitable in most of the quarters.

Swing/position trading – Trading an average of 5 – 15 times a month, you can expect to be profitable in most years.

The more trades you put on during a shorter period of time, the faster your “edge” will play out.

But without an “edge” in the markets, the more trades you put on will lead you to blow up your account faster.

Understand this, and you’re ahead of 90% of traders out there.

Next…

I will share with you the exact steps on how to be consistently profitable.

Find a trading style that suits you

The best way to find out is, to read Market Wizards, by Jack Schwager.

You’ll be exposed to different trading styles by successful traders, and learn the essentials of what it takes to be a, consistently profitable trader.

Once you find a trading style that resonates with you, go all out and learn everything you can about it. (Let’s assume you want to be a successful swing trader).

Here’s how…

Books – Go to Amazon, and read books on “Swing trading”. I would suggest sticking to trading books with 4 stars or higher

YouTube – Watch videos on swing trading, and look for channels to subscribe to

Google – You can always find hidden gems here. Search for topics on “swing trading” and you’ll be amazed at the wealth of information available

Social Media – A gold mine here to learn from experienced traders

As you acquire trading knowledge, I would encourage you to write it down, or save it in a word document. This is to track what you’ve learned and to find out “the stuff” that resonates with you.

This should take you no more than 28 days.

Now…

You’re going to use this new-found knowledge and develop your own trading plan.

Are you ready?

How to develop your trading plan

A trading plan is a set of guidelines that define your trading.

The benefits of a trading plan:

  • Removes subjectivity in your trading
  • Reduce “roller coaster” experiences
  • Keeps you focus on your trading goals
  • Allows you to identify “problems” to work on
  • Prepares you for the “worst” possible scenario

Now you’re probably wondering:

How do I develop a trading plan?

By answering these 7 questions…

What is your time frame?
You must define the time frames you’re trading. If you’re a swing trader, then you’ll probably be trading the 4 hour or daily time frames.

What markets are you trading?
You need to state which markets you’ll be trading. It could be equities, forex, futures etc.

How much are you risking on each trade?
This boils down to risk management. You must know how much you’re prepared to lose on a single trade. For starters, I would suggest no more than 1%. This means if you have a $10,000 account, you cannot lose more than $100 on each trade.

What are the conditions of your trading setup?
You need to know the requirements of your trading setup. Whether you’ll trade with the trend, within a range, or both (For starters I would suggest trading with the trend).

How will you enter your trade?
You could enter on a pullback or breakout. Will it be a limit, stop or market order?

Where is your stop loss?
No professional trader would enter a trade without a stop loss. The first thing you need to ask yourself is, “where will I get out if I’m wrong?”

Where is your profit target?
And if the price moves in your favor, you need to know where to take your profits.

Disclaimer: Below is a sample trading plan that I came up with randomly, please do your own due diligence.

Sample trading plan

I’ll be using the IF-THEN syntax in my trading plan.

Example:

If I’m a boy, then I’ll wear pants.

If I’m a girl, then I’ll wear a skirt.

If I’m not a boy or a girl, then I’ll be naked.

You get my point.

Let’s begin…


If I am trading, then I will only trade EURUSD and AUDUSD. (The markets you are trading)

If I’m trading currencies, then I’ll focus on the daily charts (Timeframe traded)

If I place a trade, then I will not lose more than 1% of my account. (Your risk management)

If the price is above 200 EMA on daily, then the trend is bullish. (Conditions before entering a trade and time frame you are trading)

If the trend is bullish, then identify an area of support where price could retrace to. (Conditions before entering a trade)

If price retrace to your area of support, then wait for a higher close. (Conditions before entering a trade)

If price closes higher, then enter long at next candle open. (Entry)

If you’re long, then place your stop loss below the low of the candle, and take profit at swing high. (Exit when you’re wrong, and when you’re right)

Developing your trading plan should take you not more than 2 days.


Execute your trading plan to be a consistent trader

Once you’ve completed your trading plan, it’s time to take it to the markets.

I would suggest starting really small on a live account because you’re going to suck, really bad.

And if that’s the case, why not pay lesser in “tuition fees”, to Mr. Market?

Now…

When you execute your trades, 1 of 5 things can happen.

  1. Break even
  2. A small win
  3. A big win
  4. A small loss
  5. A big loss

If you eliminate #5, you are much closer to being a profitable trader.

Now…

You must execute your trades consistently according to your trading plan.

Because if you’re entering trades based on how you feel, instead of following your plan, then it would be impossible to tell whether your trading has an “edge” in the markets.

Secondly…

You cannot change your trading plan after a few losing trades. Even though I know you’re tempted to do so.

Why?

Because according to the law of large numbers, results are random in the short run, but will be closer to the expected value in the long run.

This means you need a minimum of 100 trades, before coming up with a conclusion whether your trading plan works, or not. Recall the law of large number?

You should be able to execute 100 trades within the next 150 days.

Record your trades and improve your trading performance

Simply executing your trades isn’t enough.

Because the only metric you get is your P&L. This doesn’t help improve your trading, except knowing whether you’re making money, or not.

Here are the metrics you should record:

Date – Date you entered your trade

Time Frame – Time frame you entered on

Setup – Trading setup that triggers your entry

Market – Markets you’re trading

Lot size – Size of your position

Long/Short – Direction of your trade

Tick value – Value per tick

Price in – Price you entered

Price out – Price you exited

Stop loss – Price where you’ll exit when you’re wrong

Profit & Loss in $ – Profit or loss from this trade

Initial risk in $ – Nominal amount you’re risking

R – Your initial risk on the trade, in terms of R. If you made two times your risk, you made 2R.

An example below:

stats

If you want my trading spreadsheet template, click on the link below and I’ll send it to you.

Screen capture your charts

After recording down your metrics, you’d want to save your charts for future reference.

Here’s how you can do it:

  1. Save the chart of the higher time frame
  2. Save the chart that you entered on
  3. Save the chart after the trade is completed

1. Chart of the higher time frame

This chart will give you the big picture of what’s happening. Depending on your trading style, this chart is usually one-time frame above your entry timeframe.

E.g. If you’re entering off daily charts, then the higher time frame would be weekly.

In this section, write down your thoughts on the higher time frame like:

Here’s an example:


2. Chart of the entry time frame

This chart is the time frame you entered on. You’ll mark out the entry and stop loss of your trade.

In this section, write down your thoughts like:

  • What’s the setup
  • Where’s your entry
  • Where is your stop loss

Here’s an example:

trading plan
3. Chart after the trade is completed

After completing a trade, you’ll save the chart with your thoughts on it.

In this section, write down your thoughts like:

  • Did you follow your plan
  • What’s your profit/loss in R
  • How did you exit your trade
  • How could you improve on it

Here’s what I mean:

trading plan
After recording and capturing your charts, you’re now ready to move onto the next section…

Review your trades and find your “edge”

Once you’ve executed 100 trades consistently, you can review whether your trading strategy has an “edge” in the markets.

To do so, you need to use the expectancy formula below:

Expectancy = (Winning % * Average win) – (Losing % * Average loss) – (Commission + Slippage)

If you have a positive expectancy, congratulations! It is likely that your trading strategy has an “edge” in the markets.

But what if it’s a negative expectancy?

Here’re a few things you can look at to fix your trading strategy

Trade with the trend

By trading with the trend, you’ll trade along the path of least resistance which will improve your performance.

Set a proper stop loss

You want to set your stop loss based on the structure of the markets and not the dollar amount you’re willing to risk.

Remove large losses

You can do this by risking no more than 1% on each trade.

Conclusion

Now it’s time to put these techniques into practice.

The first step?

Click on the link below to download my free trading tools (It’s going to help you a lot).

This includes my proprietary trading spreadsheet (with video tutorial), and trading checklist.

  • Hi Rayner,

    Thank you for sharing this step process to become a profitable trader.

    Have following your weekly blog and live webinar for the past 9 months or so.

    Have certainly pick up a lot trading knowledge from you and thanks for noble act of providing all this for free to the trading community.

    Just to check, do you know where could I download a free Net Equity Curve template.

      • Thanks for sharing your trend chasing result. You did mentioned you have intraday trading. Mind to share the myfxbook. U may drop it into my mail box.

  • Focus on whether what you are dong is right, not on the random nature of any single trade’s outcome.

    Spelling error. Otherwise a great article. Thank you!

  • If you mind to share trading profits , eg: myfxbook , that will be quite convincing a good consistent profitable trader in the making. thanks.

  • What are your thoughts on backtesting the trading plan? Great article by the way, I am currently trying to develop my trading plan right now and trying to decide if I should forward test with a demo then small account.

    • Hi Alex

      I didn’t find much success in backtesting because my bias tends to interfere with the results. So, I forward test instead.

      However it may work for you, so give it a go and let me know your progress.

      Cheers

  • I lost $500 because of my stupidity. I have no trading plan, no strategy and just start trading. This post open my mind about the real trading. I cannot back and get my money again but after this disaster, I think I will do it again. This time, I will trade in virtual account first, backtest my strategy with your excel for a few months and if I get enough win lose ratio and confidence, I’ll back to live trade again. I’m a swing trader, are daily and weekly chart analysis enough for me? What’s your opinion about this, Rayner?

  • Hi Reyner

    Nice to know you, I am a newby trader, the first at all, I wanna come to professional trader which profitable consistently, I start my trade in virtual account and lost $500 thats make me under very depression (even thought it is virtual).

    I wanna practice what you said in this blog, then I’ll practice again in virtual account, after read carefully I cannot found any link which shown the download your spreadsheet or video, could you advise ?

  • Hi Rayner.

    Its actually nice to find a fellow trader who would devote his/her time & effort so much to give the masses valuable knowledge that you normally need to pay to learn; For FREE!
    I know there a lot of free guides & tips out on GOOGLE but i never found one as compact & easy to understand as yours.

    I have been trading for about a year with a small capital, but i never did earn much. Been swinging from gains to losses and then back to square. (Well at least that account never died)
    I am very interested in adopting your swing trade with S/R technique. Because i think it makes sense the most to me given that i am a full time worker.

    I have a very small capital left from my account (<$50), i do not know if i can survive with this much capital on swing trades due to most of my friends who trades said that amount will not be enough. Anyhow i'm going to try anyway.

    Hats off to you friend for the contents you brought, it opened my eyes and showed me a lot of things i need to improve.

    Thank You.

  • Thank you Dude.

    Well Explained.

    Need little help regarding your below point.
    “If price retrace to your area of support, then wait for a higher close. (Conditions before entering a trade)”

    What does higher close mean. Ex: in an up trend..

    is it a bearish pinbar close price equals to it’s high. or the new candle, which creates just after the pinbar (ex: bullish candle) , that candles close price equals to its high.??

    and in case we could see a bearish price rejection (pinbar) in an up thrend, then what would be a higher close candle.

    Thank you and awaiting your favorable response.

    • Hey Alex

      No.

      A commission is a cost you incur whenever you buy/sell a stock. Usually, Forex has no commissions

      Slippage is the “extra” price you paid when the market moves away quickly.

  • Hi Bro,

    Your are doing an amazing work. Thank a ton. I’m just getting addicted to your every video and post. This things are not just videos or article, its your whole trading experience. May god bless you and bring all success in your life. Big love from India.

  • Thank you so much sir for all the information you shared, it help a lot though I never yet into trading I just want to learn first before I engage in trading. May I ask you a question sir can all the info you’ve shared be applied to binary option trading since the time frame is 1minute to 5 minutes time frame? Hoping for your opinion sir. Maybe in the long run I venture to other options in trading. Again thank you so much sir.

  • This is Amazing,

    The best and the most well structured information I have come across.

    I will definitely follow trough with this.

    Once again,
    Thank you!

  • Rayner God bless you so much for your dedication and commitment in helping traders become more profitable, especially we beginners.

    thanks a million times.

  • Thanks a lot Rayner for all the value you sharing out there. We’re really appreciative of it. Looking forward to learn more from you

  • To Start Trading does one has to have 1000 plus account or one can start with even £40 and also add to the account in the process or having such an amount is a waste of time

  • I stumbled over ur site recently and discovered that u re a God sent whose main priority is to help retail traders and to save them from untold frustration. Meeting you is incredibly awesome; I’ve read quite a number of your ebooks and the results so far had been phenomenal, thank you so much for ur benevolence and I look forward to meeting you in person
    Cheers!

  • hi Rayner,

    your learning is really a Holy Grail, but please emphasis on why trader could not stick to Strategy & analysis and how to eliminate it.

  • Hi Rayner,

    i found a different formula to calculate expectancy from your other article ( https://www.tradingwithrayner.com/risk-reward-ratio/ ) which is E= [1+ (W/L)] x P – 1.

    so, which one do you prefer to use?

    a. Expectancy = (Winning % * Average win) – (Losing % * Average loss) – (Commission + Slippage) ?

    b. E= [1+ (W/L)] x P – 1 ?

    btw, thanks a lot rayner. your articles help me a lot in my trading.

  • You are the most pleasantable and attractive teacher that i have ever seen. Once i gave up trading and one day by chance i could find a link related to one of your videos, then i was opened my eyes and determined to follow your teachings.

    I have a burning question that you said if you trade 1 hour time frame only focus maximum 1 hour and 4 hour only. But i have habit of going to the higher time frames like daily and weekly to ensure the area of value (support, resistance, MA ). Specialy to ensure whether it is the end of the
    trend. Please let me know is it a good trading strategy to go to higher time frames and get the idea about it to execute the trade in one hour time frame?

    Thank you and god bless you to continue your great work.

    • If you want to enter the 1-hour timeframe, you can use the Daily timeframe to identify key levels to trade from. Anything higher and it might not be too relevant.

  • Dear Rayner, I have always wanted to learn Forex trading and been looking for a coach. I’m blessed to have come across you videos on youtube. Thanks so much for the value you are adding to the trading generation!

    I have a special request. I wan to learn trading from the scratch and start trading on my own. Would you be kind through take me through a step by step coaching.
    Thanking you as I look forward to hearing from you

  • All your explanations are great and to the point. I learned a lot and I’m still learning. I understood many concepts from your material.

    Keep it up and thank you

    PS: I couldn’t locate your spreadsheet. How can I get it?

  • As a very new trader who is being drowned in info.. I’m finding your articles getting my motivation re-started., thanks Rayner

  • Thank you for your sharing. But I have a question. For those who have full time jobs and have limited time to trade every day, it will take a long time to complete 100 trades. Does this mean that I can only see results after say 1 year of consistent trading?

  • Rayner i want to say thank you very much, you are really a God sent to my life. Since i started reading and watching your books and videos have improved in my trading.

  • Thank you Rayner. I have spent money learning forex from ‘gurus’ but I never understood as I am understanding your teachings. You are one great mentor!

  • Hey Rayner. Thanks.. for adding value. I have a question. As regards screenshotting charts. How do I go about it ? Like tag the charts to the trades. Can I do all these with my phone. ?

  • Thanks for the great content! I entered in my email and received the download for the trading spreadsheet but I cannot get it to open. Is there another way to get it? Thanks!

  • Your such a gem! Always love and looking forward to reading your articles. You are a good mentor always ready to share knowledge.
    Thank you.

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