I was in university when one day, a Forex broker came to my school and organized a trading competition.
I took part in it immediately thinking…
“How difficult can it be?”
Well, I blew up my account in 2 days.
And that’s the official start to my trading journey.
Now despite the setback, trading opened a new world of possibilities for me.
I realized…
You can make an unlimited amount of money because there’s no “ceiling” to stop you.
Your trading skill is yours to keep forever (no one can take it away from you).
You’ll never be replaced by someone “better and cheaper” than you.
You’ve got no office politics to get involved with.
You don’t have a boss (or anyone) to answer to.
So…
When I had this revelation, I was running around like a headless chicken, excited by the future that lies ahead of me.
So, what did I do?
I studied everything I could find on trading.
Stuff like candlestick patterns, chart patterns, trading indicators, RSI, MACD, etc.
Sure, I was gaining knowledge like mad.
However…
My trading results got worst.
Here’s why…
If you’ve studied Technical Analysis, you know the information can be conflicting.
For example:
The market is in an uptrend but the candlestick pattern shows a Bearish Engulfing Pattern.
So which signal do you follow?
Or how about…
There’s a bullish RSI divergence, but the MACD indicator shows overbought.
So, do you buy or sell?
Clearly, there’s lots of conflicting information out there.
And that’s not all…
Because I was also lured by the “holy grail” syndrome — always trying to find new trading strategies.
I’ve tried harmonic trading, price action trading, indicators, and what not.
But here’s the thing:
By trying different trading strategies, it leads me to have an inconsistent set of actions.
And if my actions are inconsistent, how can I get consistent results?
Now at this point…
I was frustrated, confused, and mildly depressed.
But I’m not willing to give up just yet.
I wanted to know…
What are professional traders doing, that I’m not?
So, I went down the rabbit hole to look for answers.
And by sheer luck…
My answers came when I was hired as a trader at a proprietary trading firm.
Here’s what I discovered…
Every single profitable trader I came across has this ONE thing…
…an edge.
Now you’re probably wondering:
“What’s an edge?”
Well, an edge is something that gives you a positive result over a number of trades.
Imagine:
I make a bet with you.
If every time I toss a coin and it comes up head, I win $1.
And if it comes up tail, you win $2.
Let me ask…
Over the long run, who will win?
You, of course!
Because you have an edge in the coin toss (your winners are larger than your losers).
And it’s the same for trading!
You must have an edge in the markets if you want to be a profitable trader.
So when I had this “AHA” moment…
I went ALL IN to find my edge in the markets.
I studied research papers, winning traders, books, and backtest reports.
And using that information, I developed trading strategies that hopefully could give me an edge in the markets.
Did it work out?
Well, here’s the results of one strategy I developed…
And do you know how I feel?
Vindicated.
Because all my effort has NOT been wasted.
Now:
I know I have an edge in the markets.
I’ve got a skill no one can take away from.
I’ve got something which could feed me and my family for the rest of our lives.
The best part?
I don’t have to rely on anyone or anything (no bosses, colleagues, politics, etc.).
It’s all on ME now.
I’m in control.
Now, you’re probably thinking:
“But how can a retail trader like me find an edge and beat the markets?”
Well, that’s what I’ll cover later.
But first, let me explain why traders don’t have an edge in the markets.
This is important, so please read carefully…
Truth #1: Why Fundamental Analysis will cause you to fail
Here’s a true story…
Before I became a trader, I actually attempted to be an investor.
I bought a stock called Blackberry (its symbol back then was RIMM).
Anyway…
The reason I bought the stock was because revenue was strong and earnings were increasing year on year — it’s the darling of Wall Street.
It seemed like a no-brainer because the stock is fundamentally strong, and I should buy.
And that’s what I did… I bought Blackberry at $75.
Do you know what happen?
Well, the stock starting sliding lower.
From the highs of $80, it trickled to $70…
Then to $60…
Then to $50…
Then to $40…
Suddenly, all hell broke loose and Blackberry collapsed to single digits.
I was puzzled.
Wtf is going on?
And looking back on hindsight, Blackberry was “too slow” to catch up with the Smart Phone technology.
Players like Apple and Samsung came in and gobbled up market share, fast.
This led to the demise of Blackberry.
Here’s another example…
AMD had negative earnings in 2014, 2015, and 2016,
But, the share price gained 700% within the next 12 months.
You’re probably thinking…
“Wtf?”
So here’s the lesson…
The market can go up on bad news and go down on good news.
It’s near impossible to trade based on fundamentals, and it sure as hell difficult to find an edge from this approach.
Next…
Truth #2: Technical Analysis works, but it’s not what you think…
Unlike Fundamental Analysis, Technical Analysis relies on past prices (like candlestick charts, trading indicators, chart patterns, etc.) to make your trading decisions.
But, the same rule still applies!
If you want to be a profitable trader — you must have an edge in the markets.
So now the question is…
“How do you use Technical Analysis to find an edge in the markets?”
Here’s how…
1. Develop a trading strategy based on a set of rules
Perhaps its candlestick patterns, Support & Resistance, and etc. It doesn’t matter. What’s important is to define your set of rules so you can test it and see if it works.
2. Back test your trading strategy
If you don’t have programming knowledge, you have to do this manually.
You’ve got to scroll back the charts to the earliest date and “pretend” you’re trading live.
Then, you’ll identify your trading setups and record the results of each one of them.
3. Forward test your trading strategy
The other approach is to forward test your trading strategy.
This means you take your trading strategy and trade it in the live markets. It can be on demo, it doesn’t matter.
What matters is to see how your trading strategy performs in real-time.
Now:
What you’ve just learned is how discretionary traders find success in the markets.
However, there are a few problems with it.
I’ll explain…
Why manual back testing is a LIE
Here’s the thing:
When you’re doing manual back testing, you “see” the future prices ahead of time (as you scroll through the charts).
Now, if you know the market is about to move into an uptrend, you’ll focus only on long trading setups and ignore the short ones.
This means your back test results are inaccurate as you take trades which are “favorable” for you.
And it’s no wonder why your live trading results are worse than your back test results.
Moving on…
Why most traders give up on trading
Now you’re probably wondering:
“What about forward testing?”
Well, this is more accurate than back testing as you’re testing your strategy in the live markets.
But if you trade on the Daily or Weekly timeframe, it’ll take you months or even years to find out whether your strategy works, or not.
And if it doesn’t work, you’ve wasted many months (or even years) of your life.
After one or two failed attempts, most traders would give up on forward testing and claim that trading doesn’t work — and it’s a scam.
So now the question is:
How do you find an edge in the markets — without wasting time on strategies that don’t work?
That’s what you’ll discover in my next post.
But for now, here’s what I’d like to know…
What’s the ONE thing that frustrates you the most in trading?
Leave a comment below and share your thoughts with me.
Not able to be in profitable trade and waiting for stop loss hit in loosing trade, how to overcome it???
booking early in profitable trade and let me tell you rayner i am learning from your post various chart patterns most importantly support and resistance level and back testing it live market and it works fine
Awesome to hear that, Vickky!
There’s a lot of factors that could attribute to it and it’s not possible to go into details.
So go check out hese posts…
http://www.tradingwithrayner.com/set-stoploss/
http://www.tradingwithrayner.com/2-how-to-know-when-is-the-best-time-to-exit-your-trades/
What’s best strategy can I apply am using candlestick charts help me out thanks teo.
I’ve written about candlesticks extensively here… https://www.tradingwithrayner.com/candlestick-patterns/
Thank you for sharing this knowledge. What fustratrates me the most in trading is the use of trendlines. As the name implies TREND lines. The market is said to trend 30% and consolidate 70%. I prefer three points of contact not two points because any two points can be connected on the chart. I find trendlines to be confusing. How can one properly draw trendlines and channels.
Do not use them at all, instead try to focus on key levels
I did a video on trendline, check it out… https://www.youtube.com/watch?v=IwAEoJC4DNs
Thank you Rayner
Cheers
Scammers I don’t like the fact that there are more people making money on there you tube accounts then actually trading. If your starting out you can waste a LOT of money following the wrong crowd. There are only two people I listen to and your one of them Ray. Thank you for giving back and helping others learn as well…
Whose the other one
Thank you for your kind words, Tom.
I appreciate it!
…what frustrates me most in trading is that I don`t know where or what to look for when a trend is over and its reversing, i`m new to trading and love to watch,read and really learn a lot from your articles, I also do a lot of practising on demo.Thank you for sharing with us.
This post might help… https://www.tradingwithrayner.com/how-to-identify-trend-reversal/
I always appreciate the content you provide. Thank you! What I would really like to have is a very basic strategy that I can begin with and then ‘modify’ it to suit my trading style so I can finally find the ‘edge’ you speak about.
Hey Vincent,
The next few posts will be of interest to you. cheers
Rayner You are best in the best
Thanks bud!
Build up your mindset50%+strategy30%+skill20% and make it simple as you can.
Thank you for sharing, Yip.
Thing frustrates me the most is that, I diverts from the initial trading strategy on which basis I started trading..may coz I want more and more of trades….sir but your comment on back testing strategies have opened my eyes
Thank you for sharing, MM.
actually Teo i would more happy if i find that edge …..still looking
The next few posts will discuss it.
Stay tuned!
The one thing that frustrates me in trading is that, if the price of the stock drops very little, it immidiately produces big loss. But if the price goes up significantly, it only gives little gain. I think it’s so unfair!!!
I understand how you feel. That has nothing to do with being fair though, it’s just Math.
$100
-$50 (Market drops, 50% loss)
——–
$50
If market gains 50%, your money only gains $25
Market has to go up 100% just to get where you were at.
Have seen that comparisons many times
When i have 100$ and i lend to you $50
Thats 50% From my total
When you give it back to me it is 100% from my total
It still is the same value
It doesnt matter Imo
This post will help with your risk management and position sizing
http://www.tradingwithrayner.com/forex-risk-management/
Hi Rayner, is it possible to set take profit on MT4 platform trailing with a moving average automatically or you always have to exit trade manually when market trade below the moving average?. If so please send me video link if you have one.
Mankgodi (south Africa)
You can do it with an EA on MT4. I don’t have one.
I fail every time to find the right entry and end up missing opportunities
These posts will help with your entries…
http://www.tradingwithrayner.com/high-probability-trading/
http://www.tradingwithrayner.com/when-is-the-best-time-to-enter-a-trade/
Thank you for sharing. My biggest issues are, Fear of missing out, unable to change the sentiment (I made a few dollars being Long, now I am long biased even though the market is going down and I am stubbornly trying to make it being Long!!!), unable to take a loss and discounting my own trading plan.
I am looking forward to your next one that discusses the edge.
Thank you for sharing, Raj.
Rayner, you are the guy that rightly talk what Forex is all about.
Thanks for your open mind.
You’re welcome bud!
I always seem to be 2 steps too late in my trading. As if the market knows I am coming and then waits to catch me out…. I am sure I am not alone.
You definitely aren’t.
Thanks for sharing!
Reynard inexperience what you are sharing, I am new in this industry and I want to learn more from you, you are a blessing to many people, I’m excited for your next post.
God bless you more and more.
Thank you, Bobie!
Stay tuned!
Thanks for sharing, you are correct. For me, the ONLY thing that matters is real time price action and how it is interacting with my price levels.
Thanks for sharing, Lawrence.
I spent 2 years backtesting to prove to myself it can be done, that I am able to developing winning strategies and an edge and profit over time. Once that was done, I started live trading, both demo and funded. That is a whole ‘nother story. Backtesting is easy, forward testing is where my natural tendencies and habits take over. This is the hard part. I never knew how stubborn I was until I started live daytrading. The most frustrating thing about trading is breaking the rules that I made, losing a bunch of money, and afterwards seeing that if I just stuck to my rules my account would be exponentially bigger!
I know what you mean.
Still, thank you for your honesty!
Just want to thank you & congratulations Rayner
Cheers Jesse.
How can I develop an edge in options trading?
I can’t help since I don’t trade options.
Hmmm… You got me there Rayner, trust me. As I was waiting to read the main point, you took it away by telling us to wait.
Thanks, I’m patiently waiting as I need an edge. I’ve been compiling my own rules though as I’m looking forward to profiting from breakouts and strictly following trends. Thanks for your regular updates.
You’re welcome, Damilola!
hi Rayner,
Thanks so much for your teachings. One of my major problem is when i use 200Ma to know the long term trend, then 20 and 50ma for short term trend. Let’s say the trend is up in daily timeframe but down in the four hours and in the four hours it is showing nice lower lows and lower highs as well as respecting either 10ma, 20ma or 50ma. Do I trade the down trend in the 4hrs timeframe or should I wait till I see the start of a new higher highs and higher lows in the 4hrs timeframe.
I discuss trend in this video here… https://www.youtube.com/watch?v=cSWC2WwbhHE&t=139s
Good content for beginners. Everything is designed around larger accounts. Not much for good content for people with small to micro accounts. Rayner provides some of the best content I have found even though I have not traded forex yet.
Thank you for your kind words, Myron.
After one year of some success and some failure, and hopping from one strategy and time frame to the next, I have recently decided to take finding my system seriously and started learning how to program in Pine (TrandingView). In just a short time I can see how different time frames impact trades, commissions pile up, trading against the trend can hurt, etc. Automating these backtests allows you to discover so much more so quickly. Highly recommended.
Glad to hear that, Ryan!
thanks Rayner, the new strategy that has worked for me on demo, trying it today and yesterday on my live account, it’s hasn’t worked well and that’s could be frustrating. but with the result you shared am going to stick to it and hope it gives me good result
Let me know how it works out for you. cheers.
how to enter and exit a trade. how to set up tranding system.
These posts will help with your entries…
http://www.tradingwithrayner.com/high-probability-trading/
http://www.tradingwithrayner.com/when-is-the-best-time-to-enter-a-trade/
These post will help with your exits…
http://www.tradingwithrayner.com/set-stoploss/
http://www.tradingwithrayner.com/2-how-to-know-when-is-the-best-time-to-exit-your-trades/
Most Frustating – you exit trade n your strategy works. It seems it’s waiting for you to exit.
If you decide to break rule n stay few more moment; it cuts your throat n make you bleed.
In short exit with small profit or exit with hefty loss – this is one of the most frustrating and seems to be in DNA of most loosing traders.
I know what you mean. Thanks for sharing!
looking for profitable strategies so i can day trade established stocks (not low float stocks) Any recommendations for such strategies included in books or videos and/or sellers of such strategies will be appreciated.
Health and happiness to you my friend and everybody else
I’ll share more in the next few posts. cheers
Trading is frustrating just blew my whole account in two days but your comments help and will continue to push. Blessings Rayner
Keep on pushing!
Theo nice shares everytime
Think that the things frustrating also have an opportunity
You self have to find this
Thanks for sharing, Pete.
What frostrated me the most in trading was trying to be successful with a tiny account 50-100. Made me neglet all the rules and hunt endlessly for trades. The greatest myth is that you can become a profitable trader trading a tiny account.
Thanks for sharing, Damico.
You have said it all Rayner Teo….thanks always for valuable information about trading.
Ray, thanks much for the support you really rendered am grateful, not quite long I blew my account based on wrong management but reading your post I felt the possibility doing it wright again,,,,but little confused on trading support and resistance levels, when entering a trade in these levels.
You can learn more about SR here… https://www.youtube.com/watch?v=PuboYnBc0t8
My biggest frustration Rayner is entry point on a trade setup and when the market turns around and there’s a reversal. All of a sudden I’m stopped out
These posts will help with your entries…
http://www.tradingwithrayner.com/high-probability-trading/
http://www.tradingwithrayner.com/when-is-the-best-time-to-enter-a-trade/
Thanks for sharing. I just found you on youtube and I’m impress with the way you teach and share experiences. You come across as someone who is genuine.
I appreciate it.
It is nice explanation i waiting for next subjek, thank you
Stay tuned!
Best timeframes. Daily weekly 1 hour 2hour 4hour
Thanks for sharing!
I am having difficulty switching from demo to live trading and be profitable
Start on a really small live account to make the transition.
The thing that frustates me the most in trading is being in a winning trade, seeing the price running against it and being stoped out at a much lower profit or even at a loss. I find me asking why I had to wait instead of getting out earlier, as I lose time and money…
I know what you mean. Thank you for sharing!
The ONE thing that frustrates you the most in trading, I find a trade, all looks good, take the trade.
I walk away, trade progresses into profit all is going well, I leave it be, go to bed or go out.
Come back to the trade and I am stopped out!!
Hah, we’ve all been down that road!
Self doubt. When a successful strategy starts to consistently fail and then I feel like all trading could be based on luck and I potentially know nothing!
It happens to even the best of us. I know right…
Inconsistency of my own habbit…
Thanks for sharing.
Thank you for kind heart Rayner are just wonderful, am Stilheart from Cameroon in Africa my big time challenge is i made profit and i end up giving it back that really frustrate me.That is cause by lack of discipline and taking more trade at the same time. I will not risk more than 1 percent of my account but in most cases when am late to take a position i still force to take it and risk more just to see price reverse and wipe me out. that is killing me.
You’re welcome and thank you for sharing!
Thanks for sharing. I have recently started following you on you tube and I must say your webinars and guidance is pretty straight forward and easy to follow. The most frustrating thing for me is every day I decide that I wont follow the same mistake next day but when I am in live market I forget those decisions and make same mistakes again and again 🙁 Do make a video or post on how to control emotions…Thanks Again!!
I’ll look into it, cheers.
Hi Rayner,
Greetings from India,
I am very big of yours.
I have learned a lot from you.
according to me, the most frustrating thing is not following trading principles strategies.
in the morning I faced huge loss due to my own mistake of not following my own trading principle and this was the biggest lesson of my life and after reading your this post I got my confidence back.
thanks a lot.
keep it up, buddy.
Thanks for sharing, Mayur!
I want to know how to be smart in trade.
That’s interesting, thanks for sharing.
Meddling with my open trades, allowing my stop loss to hit but closing winning trades before hitting my take profit.
I know what you mean, thanks for sharing!
Hallo Rayner,
because of your very valuable as well as practical and instructive lessons I’m a true ‘admirer’ of you.
What so far turned not out clearly to me is the answer of the question whether based on your trading experience a successful strategy should be based exclusively on Price Action ( including Moving Averages) or a combination of PA and the traditionally popular Indicators (f.e. RSI, Stochastic, MACD).
My personal experience so far is mixed.
Your reply is very much appreciated as always.
Joerg
Nothing is exclusive.
There are traders who focus 100% on price action, some use a combination of price action and indicators, and etc.
Hi, when I read your post I wonder, will Rayner read me my mind? Well, the great memory of what you say has happened to me, what will be the solution? Thank you Rayner, I’ll wait for your next post.
Coming soon!
How can you me trade successfully?
I can’t.
I hate when a trade stop like a pip before my tp then turn around and hit my sl
I totally get you.
The one thing that frustrates me is one strategy does not work in all kinds of market. You need to have atleast 2 strategies which will work depending on the market conditions. It’s frustrating if one strategy doesn’t work and really demotivates me.
No one strategy works all the time, that’s why drawdown occurs.
But having multiple uncorrelated strategies does smooth out the equity curve over time.
What fustrates me is when l enter a trade on 15 or 1 hour chats it gets into profits creates hope in me and then later on the the trades reverses into los sometimes up until it hits my stop lossn
Thanks for sharing, Noel.
What frustrate me most is not finding the setups that I am looking for e.g a clear uptrend or down trend.another thing frustrates me is waiting for setups to be formed sometimes it takes hours.
Thank you for sharing, Dinna.
It requires full time monitoring both day and night, I don’t rest or sleep well like before since I started
It requires full time and attention, I don’t sleep or rest like before,