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[The secret to using multiple timeframes like a pro trader]
I’ll be honest.
I didn’t figure it out on my own.
Instead, I learned it from Adam Grimes and Alexander Elder.
So here’s the “secret”….
When you trade with multiple timeframes, your higher timeframe should be between a factor of 4 to 6 of your entry timeframe.
Confused?
No worries, I’ll explain…
Let’s say for example your trading timeframe is the 1-hour timeframe.
So, which should you reference as your higher timeframe?
1. Take 1-hour multiply by 4, you get a 4-hour timeframe
2. Then, take 1-hour multiply by 6, you get a 6-hour timeframe
This means your higher timeframe can be between 4 and 6-hour
Does it make sense?
Here’s another example:
Let’s say your trading timeframe is the 5-mins timeframe.
Which should you reference as your higher timeframe?
1. Take the 5-mins multiply by 4, you get 20-mins
2. Then, take 5-mins multiply by 6, you get 30-mins
This means your higher timeframe can be between 20 and 30mins
Trading is the transfer of money from people who f*** up more to people who f*** up less.
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[The truth is: trading is a get-rich-slow scheme]
You’re probably thinking:
“Then what’s the point of being a trader?”
“No way. I want to make fast money so I can quit my job.”
“But I’ve heard of traders taking a few thousand dollars and turning it into millions.”
Yes, it’s possible to make big returns from trading in a short period.
How?
All you need to do is risk all your capital on one trade.
And if you get a 1-to-1 risk-to-reward ratio, you’ve just doubled your account.
So, what’s the catch?
It’s not sustainable.
Because if you encounter a single loss, that’s the end of your account.
So, how should you approach trading?
As a get-rich-slow scheme.
I know it’s not sexy.
But if you stick with it long enough, it’s possible to grow your account to 7-figures (and beyond).
Here’s how…
• Let’s say you have a $5,000 trading account
• You contribute $5,000 to your account each year
• You earn an average of 20% a year
Now if you do this consistently for 30 years, do you know how much money you’ll have?
$8,278,170.
Yes, you see that right, $8,278,170.
In other words, when you think long-term, the sky is the limit.
Unfortunately, most traders are fixated on the now that they miss the big picture.
Don’t be one of them.
If you’re broke, don’t be a trader.
Instead, get a job so you can pay the bills.
Then, you can learn how to trade.
This puts you in a position of strength as you remove “the need to make money” syndrome.
Doing this will 10x your chance of success.
[Here’s why you need proper risk management in trading]
Imagine:
There are two traders, John and Sally.
They both start with a $1,000 account
John is an aggressive trader and he risks $250 on each trade.
Sally is a conservative trader and she risks $20 on each trade.
Both adopt a trading strategy that wins 50% of the time with an average of 1:2 risk to reward.
Over the next 8 trades, the outcomes are Lose Lose Lose Lose Win Win Win Win.
Here’s the outcome for John:
-$250 -$250 -$250 -$250 = BLOW UP
Here’s the outcome for Sally:
-$20 -$20 -$20 -$20 +$40 +$40 +$40 +$40 = +$80
Do you see the power of risk management?
So here’s the deal:
As a trader, you’ll encounter losses regularly.
But with proper risk management, you can contain these losses till it feels like an “ant bite”.
If you're desperate to make money from trading, you won't.
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[The most important formula in trading…]
You’re probably wondering:
“How do I know if I’ve got an edge?”
That’s a good question.
You can’t tell if you have an edge based on chart analysis, risk management, psychology, etc.
Instead, you must be able to quantify your edge.
Here’s the formula…
E = (average gain x winning rate) – (average loss x losing rate)
Now, don’t panic because the formula is easy to understand that even a 10-year-old can do it.
Let me explain…
Let’s assume you have the following metrics from your trading…
• Average gain = $500
• Average loss = $400
• Winning rate = 60%
• Losing rate = 40%
Next, plug those numbers into the formula and you’ll get…
E = ($500 x 0.6) – ($400 x 0.4)
= $300 – $160
= $140
Now, what does $140 mean?
Two things…
#1: It means your trading strategy has a positive expectancy (otherwise known as an edge).
#2: In the long-run, you can expect to make an average of $140 per trade.
Now…
Your expectancy will vary from one trading strategy to the next (and from trader to trader).
It’s possible to have an edge with a low winning rate because your average gain is much higher than average loss.
Likewise, it’s also possible to have an edge with a higher average loss than gain because your winning rate is high.
“Losing trades is like diarrhoea. It's a pain in the ass but eventually, you have to let it go." – Unknown
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[Avoid this mistake when trading multiple timeframes]
Imagine:
You want to spy on your neighbour for god knows what reason.
Perhaps they are doing illegal activities, you’re a nosy park, whatever.
But there’s a fence built between you and your neighbour so you each have your privacy.
How do you overcome this?
Do you take a trip to space and spy down on your neighbour’s house?
Of course not!
Why?
Because you are “too far” out and the sights (or images) you see will not be relevant to your needs.
You’re probably wondering:
“What has this got to do with trading?”
Well, it’s the same concept.
If you want to glean insights from the higher timeframe, you can’t zoom out too far because the information you’ll get is not relevant to you.
Trading is the hardest easiest money you’ll make.
Читать полностью…
[You can’t make money every day from trading if you don’t have this one thing…]
Let’s play a game…
• If you toss a coin and it comes up heads, you win $2
• If you toss a coin and it comes up tails, you lose $1
• You can only toss the coin once a day
Now let me ask you…
Do you think you can make money every day from this coin toss?
Of course not.
Because on any day, there’s a 50% chance you either get head or tail—and if it comes up tail, you’ll lose $1.
But what if you can toss the coin 1,000 times per day? How would things change?
Let’s see…
If you toss a coin 1,000 times, you’ll likely get around 500 heads and 500 tails.
(Every time it comes up heads, you win $2. If it’s tails, you lose $1.)
So if you do the math, you’ll end up with a net gain of $500.
Now let me ask you…
If you had this “special” coin and could toss it 1,000 times per day, do you think you can make money every day from tossing this coin?
Yes!
So, what’s the lesson here?
The frequency of your coin toss matters.
You might be wondering:
“What has this got to do with trading?”
Everything!
Because if you want to make money every day from trading, your frequency of trades plays a huge role.
That’s because the more trades you can do within a short period of time, the faster the law of large numbers can work in your favour (think of the coin toss example).
You can have a 90% winning rate with an average gain of $100.
But if your average loss is $1,000, you'll still lose in the long run.
[Have another source of income to tide over the tough times in trading]
Here’s the truth:
No matter how good you are as a trader, you’ll encounter losing streaks, losing weeks, and possibly even losing years.
If you do not prepare for it, you’ll face difficulties putting food on the table, paying your bills, etc.
And in such scenarios, it’s difficult to make good trading decisions because you’re trading with money you can’t afford to lose.
You’ll average into your losses hoping to make it back quickly or widen your stop loss so you don’t lose your money.
So what can you do about it?
Well, that’s where having another source of income helps.
It could be having a job, an online business, affiliate marketing, etc.—the more sources you have, the better.
Here are some ideas you can think about:
• Affiliate marketing (recommend products & services you believe in and get paid for it)
• Coaching program
• Online course
Earn advertising fees (from YouTube, Google, etc.)
Now, building multiple sources of income is like digging a well.
You want to focus on digging a well till water comes up before you move on and dig another well.
Otherwise, if you dig many wells at once, you’ll end up with no water because you didn’t dig deep enough.
And it’s the same thing for building multiple sources of income.
Quit trying to trade every level on your chart.
Instead, pick a spot to trade where you’ll lose small when wrong—and the market can reward you when right.
The result?
Less trading, less commissions, less mistakes, and a fatter bottom line.
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