This just goes to show that we’re on the right path. Patterns are what turn chaotic data into something meaningful, and the patterns that we use do not only unlock one of the greatest advancements in technical trading, but also widely outside the markets with the discovery of the fib sequence. At the time of this writing, episodes 1-4 have been released in the first season.

A drop of water falling into a lake creates an eddy of rings that spreads out like the rings around Saturn. The displacement of water by the force of the droplet spreads evenly in a fractal pattern around the disturbance.

Step out your front door and you’re surrounded by them. Gaze at the clouds and marvel at their white fluff, different but the same; look closely at the leaf of a plant and notice its perfect symmetry with its structure and pattern repeated in other identical leaves of its life source.

The world is made of up vibrations and those sensations combine to create the fractal force of nature. Fractals are found in all forms of life and occur naturally in every host; human, animal, insect or plant life.

They are also recognizable as they shape the structure of harmonic patterns, causing patterns to repeat themselves over and over again and to occur naturally on any chart.

When we look at a chart, what most people see are candlesticks representing the emotions of the market. But at a first glance these emotions seem very complex.  When something looks complex we say it’s chaotic. Chaos theory is the term we apply when we look at the market as “a mess of candlesticks”, but if we can find the order within the chaos, that makes it easier to forecast. Fractals are what helps us put order to the chaos. The harmonic patterns are a repeatable structure that are fractal in nature. When examining the market in this manner we can turn the unknown into something a lot more comforting.

So how do you use fractals and how would you make sense of chaos and order? When you trade like we do, you are observing all the rules surrounding chaos and order, fractals and harmonics.

Picture this: You’re sitting in the basement watching TV when suddenly the power goes out. You’re left in absolute darkness and cannot see and inch in front of your nose. Within a millisecond you have gone from feeling very comfortable knowing your surroundings, to feeling very uncomfortable because you can no longer see anything for certain. Unexpectedly you have nothing but the TV remote in your hands and uncertainty shadowing you.

You now have two choices. You can embrace the uncertainty, knowing that statistically everything in your basement is still where it was five minutes prior to the lights going out and start walking toward the breaker switch to get the power back on; or you can assume that everything has moved around and just start walking in a random direction hoping that you don’t crash into anything.

The latter situation is how most people trade in the market.  They take the wrong approach becasue they feel uncertain. Chaos and order with fractals and harmonic pattern structures give us the certainty that no matter if the lights are on or off, we always know what to do, and when to do it.

That is the power of harmonics. The choice is easy. Harmonic patterns gives you the supremacy of trading with 70% probability on your side rather than groping around in the dark trying to figure out where to enter or exit a trade.

Know when to hold em, know when to fold em?

Gamblers who started the habit in their teens are around three times more likely to remain habitual adult gamblers. Life in general seems to endorse gambling, with lotteries, well-know horse races, dog races; in fact some people will bet on two flies crawling up a wall, if they have a predilection to gamble. Gambling is a very broad problem and is not as clear cut as we think. It is in every walk of life.

As traders, we need to learn not to be gamblers.  Our approach when trading should be based on considered, practical and technical evaluation of our harmonic pattern trading opportunity; our position and our risk. The question to ask ourselves is, are we gambling instead of trading? Do we need to get immediate results from trading, or are we content to let a trade ride and be able to accept a small loss or appreciate a good winner.

If traders gamble, they consider jumping into a trade around news, trying to capitalize on which way the market might head.  Some traders take what’s known as OCO trades (one cancels the other) which simply means they will put two trades on the same pair, one short, the other long. They are gambling and thinking they have a 50-50 chance of being right (or wrong).

• The difficulty with this gamble is the stop placement and the risk involved and the fact that price may not continue the way they think it should.  For instance a pair might go up (long) which results in the trader closing out his short position.  The pair can move up 20 – 30 pips before slamming back down again in one fell swoop, taking out the trader’s stop as it goes.  In another scenario, the broker, unable and unwilling to take a loss will sometimes hold the platform until price moves in their brokerage’s favor.
• The trader who has closed out the short trade is now forced into a losing position that can’t be closed out because the broker may have frozen the platform.  This freezing of the platform and movement of the spread by the broker, is called slippage.  Brokers often blame this slippage on their liquidity providers. It could be a combination of both companies conspiring against the poor luckless news trader.
• Risk versus reward objectives helps counter the tendency for traders to jump into a trade based on emotion. They can take a considered approach based on pure mathematical calculations.  This objective is consequently taking away the aspect of gambling on a trade and replacing it with more of a premeditated assessment of a reasonable outcome.
• Analysis and decision-making helps remove the emotional (gambling) aspect and allows traders to confine their prospective trading strategy to a 1:2 – 1:6 risk versus reward base.  Anything less than 1:2 becomes unworthy of the time to trade when the return is no more than risking one pip to gain one or one and one half pips.  Anything more than a ratio of 1:6 becomes an improbable trading scenario.
• If we find we are unable to stop trading breakouts, fake-outs, news and volatility then we know we are gambling. And we know our long-term prognosis as traders is failure. So, don’t let’s gamble on the news events or similar volatile events like Non-farm Payroll figures (NFP) out of the United States.

While we cannot predict when we’re going to take a winning trade, we can use harmonic pattern trading to give us an edge to know that 70% of the time, the PRZ will give us a measured point where price might turn. Let’s not gamble…let’s use harmonic pattern trading to give us an edge.

First you have to hold on to your composure. Then you need to prove those well-meaning people or people who don’t identify with what you are doing, wrong. To hold on to your self-control, you need to realize that these dream stealers don’t mean any harm. Their problem is, they don’t have belief in the method or your choice of career. I reiterate, it is not belief in you that is their issue, it is their lack of belief in what you are doing.

1. The first step is to make sure you have a sound knowledge of the harmonic pattern trading method. To that method, you need to add consistency and discipline. You need to approach your trades with the same constant analysis in each instance.
2. You need to have a trading plan. You need to follow that plan to the letter of the law. In that plan you need to build in a risk tolerance that will not hurt your account balance if any one trade doesn’t go the way you want it to go. The plan must have which pairs you will trade. You can adjust the plan and take pairs out if you discover their spread is too onerous.
3. You need to have a good broker. A dodgy broker is not conducive to a trader’s success. You shouldn’t always go for the tightest spreads; you should go for the reliability factor and know that your money won’t walk out the door if the broker has a bad month.
4. You need to have belief in yourself and live up to your own expectations. You need to not take trades based on fear or greed; not to jump into a trade because you think you will miss out on catching and riding a wave. You’re not a surfer, so why bother to try to ride every wave that comes your way?  You are a trader. You need to be discerning, unemotional, steadfast and cool-headed.
5. You need to understand if you have a losing streak, that it shouldn’t dent your approach to trading. Everyone has losing streaks. It is a matter of keeping those losers small and appreciating your winners. You have to remember that trading is taken over a succession of trades, not just a few.
6. Don’t show your dream-stealers your trades on a daily basis. They will be emotional if they see big winners or a few small losers in a row. While you have worked hard to become unemotional, they haven’t had that advantage.

Then you need the money to roll in so the naysayers can take a new look at your bank balance and know that you’re pretty good at what you do, after all. Oh, and then you can smile with genuine fondness and tell them that by sitting in front of the computer all day, you are keeping them in the lifestyle that they love.  Once you do get the money rolling in, your partner will want to see it consistently roll in too.  This is another good reason why when you trade your results have to be consistent so that you can correctly budget your expenses etc.  Even if you’re just doing this part time for a little extra cash (and I know quite a few of you who are really successful trading that way) it’s still good to be consistent with your actions and your results.  Then the people around you will be happy.

To excel as traders, we need to set ourselves some achievable goals and we need to be true to ourselves and truthful with ourselves. If we’ve blown up a trading account, we need to admit it and get on with the process of changing what we did to back ourselves into that corner. Whether we admit it to others or not is a moot point. We have to face ourselves down and show honesty and truth to our own conscious self.

So how did it feel when we blew up an account? It made us pretty unhappy, right? But the thing to take away from it is that the mistakes we made don’t have to be repeated. We shouldn’t just be prepared to rearrange the deck chairs on a sinking ship. We should never take a loss personally; we need to know that some of the best careers have come out of losing streaks; that to succeed at anything, it is better if we fail first. Then we discover some of the most invaluable lessons we need to learn.

We can find a new method of trading. If the one we favored didn’t allow us to make trading a career, then find another one. We can try harmonic pattern trading. The system that puts probability on our side.

We don’t have to gamble with our account; we can take measured, analytical steps to become better traders. We can become more disciplined for a start. Self-discipline is often the hardest characteristic to master. We can discipline others, we can discipline our children however when it comes to our own self-control we often lack the measures to keep us on track and to stick to our plan.

The way to help us develop this quality is to gain a perception of the hazards of trading. We need to know when we’re in danger of letting our heart rule our head; of making a rash decision over a more studied one. Once you see things slipping into your psyche that make trading risky and untenable, stop trading for a small window of time. You’ll benefit from the hiatus so you can re-break that bad habit.

We need to realise that not one of us is right every time. We all take trades that we haven’t thought through properly; take ones where we haven’t noticed news coming out and then we pay the penalty of the trade moving against us.

We need to leave the stops in place we originally set, particularly if we have carefully considered where they should be. We should have a logical position to place the safety stop. We need to know that if price shoots through that stop, then we are likely better off out of the trade. We need to learn something from that loss.

Never move your stop and stumble onto the slick path of a losing trade or when price action is moving against your preferred direction. Don’t try to outsmart the market or it will outsmart you. Be a trader who knows how he or she ticks and work on the ticks that need improving.

Join FXGroundworks.com. Get educated and then make a career out of this great line of business.

But how many times have we made the wrong call on any one of those things.  How many times have we made the wrong call on taking a trade?  Too many to count.

The important thing is to recognise that we’re not alone in our meandering journey into the world of trading; not alone in being on the wrong side of a trade…the world hasn’t stopped turning.  Even if we’ve blown up an account and lost our stake, the world hasn’t come to an end.  We’ve survived.

We’ve realised that in spite of our mistakes, despite the harsh learning curve that some of us have had to absorb, there is light at the end of the tunnel, and it’s not an oncoming train.

That light is FXGroundworks.com, our exceptional Harmonic Pattern Trading Educational site that teaches traders to be safe, steady, reliable traders.  To believe in their own ability and their future as an harmonic trader.  We teach you to know that people can make a good living being a trader.  It’s all in the effort, in the determination to study the craft, understand the market and the environment they work in and overcome the challenges to becoming an emotionless trader.

The site also alerts traders to patterns worth watching, worth analyzing.  FXGroundworks.com sifts through hundreds of charts daily, seeking the patterns with a given risk / reward that will meet a trader’s strategic needs.  The filters allow the trader to set a predetermined minimum / maximum risk vs reward, nailing that sweet spot between 1:2 and 1:6 that gives the trader the best chance of making consistent gains.

We provide statistical data on each pattern type, showing the success ratios of all the patterns so the trader can choose which patterns they want to watch.  The most successful patterns are, in order, the Crab pattern; the Bat pattern; the Butterfly pattern and then the Gartley pattern.

New patterns such as the 5-0, the Three Drives, the Shark pattern, the Alternate Crab, the Alternate Bat and the like have been subject to less analysis because they are new patterns.  This research is continually being updated and analyzed.  More data will be released once enough time has elapsed to provide a good statistical overview of their performance.  Preliminary research gives a positive look at several of the newer patterns.

So don’t wait.  Go to register and take out a membership or give a membership to that person who is hard to buy for, and who has everything.  Give them a minimum of three months to learn their way around the site and around harmonic pattern trading.  Then watch them shine.

Trading correctly should not be a parenthesis in your overall harmonic pattern trading methodology.

A parenthesis is a word, clause or sentence that is inserted as an explanation or afterthought.   Trading according to our plan should never be an afterthought.

Often, with the number of patterns available to them, people feel like they could, or should be trading all the time.  With this sort of mentality it’s very hard for someone to trade correctly all the time.  By correctly we’re talking about sticking to the rules set we outline in FXGW as follows:

In this case…if you mix with harmonic pattern traders, you will become a better trader.  People who aspire to be traders but trade on their own at home, not mixing with other traders, miss out on a lot of knowledge and the chance to improve themselves in this great career.

If you forego the interaction with people then all you have to rely on is a computer and trading can be a pretty lonely pastime.  The dry computer screen can’t ask you how your trade is going; doesn’t care where you put your stop, or discuss the next pending trade.

There are many different types of traders – people have diverse ideas as to what constitutes a good trading signal or what makes a prospective entry point.  They can differ on where support and resistance is located and they can have varying views on points where currencies will change direction.

But the successful traders all have a few things in common.  They have a trading plan; they mix with other successful traders; they keep their risk low and they let their profits run.  They look ahead to see the impact that events might have on their trades.  They take profits if they think any situation might have a negative effect on their positions.  They never move stops from their original position unless it is to lock in profits or reduce risk.

They don’t get emotionally attached to any trade.

FXGroundworks.com is one such place where successful traders gather.  Some get involved in the chat and some stay in the background, watching for those ever evolving alerts to signal that a trade is ready for consideration.

For the members who just pass through on a brief sojourn into harmonic pattern trading, learning this method is of no consequence to them.  They don’t realise that harmonic pattern trading is so well aligned with nature, that it becomes second-nature to them as a method, if they give it time.

For the members who intend to stay in trading for the long haul, FXGroundworks is where they will prosper, gain and grow.

We are complicated beings, we humans. The last thing we want or need is for a trading method to be complicated. However we do want a method that is:

a) easy for us to see opportunities
b) has the odds stacked on our side of the table
c) keeps our risk under control

The technical Harmonic Pattern Trading method is not that complicated. In fact it shows opportunities with much more clarity than a lot of other methods. There are a number of ‘points’ where the pattern measurements meet price. These points are based around certain ratios and patterns that can be measured with Fibonacci tools to give areas of common interest.

Underpinning all methods, our own trading plan and rules must still apply. While the Harmonic Pattern Trading method puts probability in our favor, our odds of succeeding with each trade still relies on our entry points, our stops and our risk tolerance.

We don’t need to get too involved in the make-up of the patterns. It is sufficient to know that the patterns meet the required measurements to be identified as a valid harmonic pattern. Traders who over-analyse patterns can drive themselves to distraction by dissecting the structure of patterns and trying to understand the PRZ (potential reversal zone) calculations.

The simple answer is to monitor the alerts provided by FXGroundworks.com in their membership alert table. The work is done for you; the risk calculated automatically, the pattern identified and easily understood.

One of the foremost factors that makes traders fail at this great career is their appetite for taking chances. Some of the world’s richest people have gone back to rags by simply losing their way and not managing risk, in whatever form it might have come upon them.

So if you’re a trader that needs a low risk tolerance by choice or by necessity, go have a look at the Harmonic Pattern Trading method on FXGroundworks.com. It might just be the thing that saves your skin.

It certainly can be the end result of gambling with your funds.  To put this into perspective, we need to examine what part of the market exposes us to the most risky aspects of trading.  These are some of those risky elements:

Volatility: 

This is a large part of the business of trading that does indeed put your positions and perhaps your account as a whole, at risk.  When volatility occurs, (caused by uncertainty in the markets) even though your trade might be at break-even, it does not mean you are immune from losing money, or protected from a broker sweeping past your stop and dipping into your funds.  Mind you, this is not always the broker at fault, it could be the liquidity provider off-loading their risk, though mostly the broker takes the brunt of the blame.

Gaps: 

In the Forex market, gaps potentially occur over the weekend when some markets are closed and some are open, creating an arena that can damage your trade.  For instance, the Asian markets close some hours ahead of London, Europe and the US.  Once the Asian markets are closed, there is still time for other markets to trade and affect the positions of Asian traders, particularly if news comes out that is not predicted, or an unforeseen event occurs.

Similarly, as the Asian markets open ahead of the US, London, European markets, there is a window of time for a negative effect on traders who can’t yet log in to their platforms and manage their position.

Gaps can also occur if liquidity providers reduce their bids or offers within a short time span, around major news events.

Liquidity: 

As global markets open and close by their own country zones, liquidity levels fluctuate and trades rise and fall according to participation by traders.  Lower volume means less liquidity, resulting in more unexpected and unpredictable movements.

Short term traders:

Short term traders who jump in and out of a market when liquidity is low, can often make a pair more volatile, and therefore more risky.  Pairs with a high ATR can move quickly in a short space of time as many short term traders strive to grab a few pips to improve their positions.

Leverage:

Over-leveraging your account balance can lead to a drain on your account in double quick time.  Be wary of brokers who offer highly leveraged options.  In the US, the authorities have mandated a maximum of 50:1 leverage.  This has yet to catch on in other parts of the world where more robust  leverage position sizes are still available.

So the rule of thumb…don’t be sucked in by the ability to trade larger sums of money than you have.  That’s like having a credit card with little or no limit.  Sooner or later you’re going to have to pay it back.  Brokers can close out losing trades on you by making a margin call (which simply means that if your account drops below 50% of the value of your current losing trades, they can close out those trades on you to make sure they can recover their money).

So to summarise risk:

• Trade within your limits and your experience
• Don’t experiment with risk
• Make sure you keep your eye on the ball and on your account balance
• Stay in the game by minimizing and limiting risk whenever and wherever possible
• Learn as much as you can by studying your chosen method (in our case, harmonic pattern trading)
• Have fun…but be a safe trader…be an harmonic trader