No Reason 2


BarroMetrics Views: No Reason 2

  • ‘Once the reason for a trade is gone, exit’.
  • What’s the best trade? ‘Being wrong and not losing money.’

These are among my two favourite sayings by Pete Steidlmayer. In today’s blog, we’ll see both principles in action.

Figure 1 shows the USDCAD setup:

  • The Rule of 4: on the 4th attempt at an extreme, the odds favour a successful breakout. If the breakout fails, expect the start of the move to be breached. In this case, the extreme is 1.33650 and the start, 1.3005.
  • The reason for the trade: because of the Rule of 4, I was expecting a valid breakout. For this to be true, we should not see acceptance below the FTP (yellow rectangle) low (1.3318).

The early morning manipulation first saw a breakout. So, now it was time to enter.

I enter on a retest of the FTP zone. I decided to reduce my position size to 50% (because of the pattern I mentioned in ‘No Reason‘). I had my stop below the start of the latest 1-d swing directional move (1.3226).

After entry, the USDCAD broke below and accepted below the FTP low at 1.3325 – the price action negated the assumption behind the valid breakout. For this reason, when the pair rallied, I exited the position at breakeven.

So, what now?

The trade is still on with a slightly lower FTP low (1.3368). My process:

  1. I wait for a valid breakout;
  2. Then I look for a retest of the FTP within
  3. (Usually) 6-16 bars (of the execution timeframe) of the breakout.

Let’s see what happens.







BarroMetrics Views: Hurdles!?

Unsuccessful traders face two major hurdles to their success:

The first I first learned from the late Mark Douglas, the Four Fears:

  1. The Fear of Missing Out.
  2. The Fear of Leaving Money on the Table.
  3. The Fear of Being Wrong, and
  4. The Fear of Losing Money.

Insidiously, the four fears set us up for failure. Imagine this: “We’ve just missed getting long by a tic or two. It then immediately roars up without us. We sit there stunned as the market keeps moving parabolically up – a humongous move and we are not aboard!”

So, the next time, with this memory fresh in our mind, we just jump in ……sure enough, this time, the trade goes against us, and we suffer a larger than normal loss.

In both trades, the market triggered at least one of the four fears. In the first, the fear of losing money and fear of being wrong and in second, the fear of missing out.

The second hurdle:

  • Seeking to control what is beyond our control – usually the outcome of a trade; and
  • Ignoring to manage what is within our control – usually our behaviour.

Successful trading requires a merging of our intellect and emotions – that’s the Holy Grail of trading – the road to profitability. But, newbie traders instead focus on a mythical holy grail method that does away with losses. The claims in my email inbox to the contrary, no such method exists (and if it did, would it be sold to you?).

Consistent profitability comes from producing a win rate x average dollar win greater than a loss rate x average dollar loss. And, we attain this positive expectancy when:

  •  we have a method that possesses a statistical edge,
  • marry the method with a money management approach, and
  • execute it on a consistent basis.

Pete Steidlmayer’s success equation remains as true today as when he penned it:

Market Understanding x ‘YOU” = SUCCESS

So how are you the ladder of success? Are you overcoming the two hurdles? If so, how did you do it? Care to share?

Success: Single Most Important Ingredient!

  • On BarroMetrics Views: Success: Single Most Important Ingredient!

“By the students, the educator is taught.”

Modern research is unequivocal – success comes from developing our ‘inner voice’. And developing that inner voice is to ensure compatibility between a trader’s Method and his MIND.

By that I mean to trade successfully you need to melding your intellect and intuition.

For example, for the discretionary trader, he is constantly drawing a line between being wrong and losing money on the one hand, and on the other, missing out and leaving money on the table.

To resolve the conflicting fears, we need both our intellect and intuition.

The tools we use are:

  • Intellectually: stats – MAE ( Maximum Adverse Excursion), Positive Expectancy Return, etc.
  • Emotionally – learning from our experiences to accept outcomes outside our control, e.g. the result of any individual trade.

The resulting experience provides insights into our behaviour – insights essential to our trading success.

The problem most newbies encounter is this: they are unawareness of the role of the MIND. They tend to jump from method to method, looking for the success that eludes them – not realising that part of the solution is within.

If you aren’t experiencing the success, your skill and knowledge deserve, perhaps you have not developed your Inner Voice?

Preparation and Prevention

BarroMetrics Views: Preparation and Prevention


Yesterday again proved the value of in-depth preparation for a trade.

I had been stalking the AUDUSD for around 10-days. Finally, the AUDUSD moved into my sell zone with momentum divergence on a 60-minute chart.  I also had determined the lowest price I was prepared to initiate the trade, where my stop and first exit target was going to be.

I turned to the 5-minute for my setup and entry. And just as my entry bar appeared to be forming, my home PC dies!

I had to:

  • Boot up my IPad Pro
  • Connect to the office PC via GoToMyPC (needed the AccuStrength service)
  • Logged in to my entry platforms (first time on Ipad Pro).

Luckily, the pair had not moved too far from my theoretical entry. So, I executed. Only problem?

I had set up the Dec AUDUSD CFD and not the FX pair!

Now Dec is an illiquid month. So, I immediately exited Dec (loss $250.00) and re-entered an FX position at .7674 (optimal entry .7684). The whole exercise cost me about 11 pips.

The point is that but for knowing my levels, especially the minimum price I was prepared to accept, the boo-boo with Dec may have cost me so much more.

The moral of the story: I ask the attendees to my courses to spend some time visualizing their trades:

  • Where they will be entering.
  • Stop placement
  • Target exit, if any.
  • What can go wrong? Plan and see their response.
  • What can go right? Plan and see their response.

Most times, the visualization does not come into play. But sometimes, like yesterday, it proves its worth. How about you? How do you prepare for your trades?


You, the Market and the Times



BarroMetrics Views: You, the Market and the Times

If ever there was a time when trading skills were required, it’s NOW!

For some time I have been of the view that a Black Swan event will shake the stock markets’ belief in Central Banks.

All over the world – from the US to China, from Europe to Japan – stock prices have divorced from the economy, and aligned with ‘easy money’.

Once this belief – that central banks can defy economic laws – is shaken, the central banks will be unable to prevent a correction that has been ten years in the making – ever since QE began in 2007. 

The question is how many retail traders are ready to meet the challenge.

In one sense, trading is relatively simple: buy lower than you sell. But, as my mentor, said: “The devil is in the details”.

Pete Steidlmayer’s equation for success was: You x Market Understanding led to success. The problem is both are difficult to come by.

Self-awareness, given human nature, is difficult because there is pain involved. Pain is seeing ourselves with all our flaws; and pain, if we elect to change.

Market Understanding is at least as difficult. There are so many conflicting ideas on how to interpret and respond to market information: from mechanical approaches to the esoteric ideas of Gann and Elliott.

What’s a trader to do?

Firstly recognise that our end of month statement, over time, will reflect the state of our knowledge and execution. If we execute consistently and fail to produce a positive return, our market understanding is at fault. That we can change.

But, if we fail to execute consistently, then we don’t know if it is the lack of consistency or our plan that is the reason for the losses.

So, the first steps are:

  1.  Formulate trading rules,
  2. Execute consistently, and
  3. See if, over a large sample size (30 trades), we generate a profit.

In this trial period, trade small. I recommend trading micro CFDs and FX where 100 pips will be only $10.00.  Once you have proven to yourself you can make money, you invest more capital.

So, where are you on the road of success – still flaying about seeking for that easy (doomed to failure) road to riches? Or are you ready to work for your success? Only you have the answer.

An Educator Gets Taught


BarroMetrics Views: An Educator Gets Taught

No sooner did I arrive in Singapore that I came down with a heavy cold. Not enough to send me to bed, but enough to affect my voice and energy levels. Still, I found the trip worthwhile given I learned something new.

We are now approaching Stage 2, Practical, Ultimate III. I have learned much – specifically, what I say and what is heard can be worlds apart. For example, I use a chart pattern learned from Bob Volman that I call an FTP.

The conditions for an FTP are:

  1. A sideways pattern in a timeframe e.g. a 5-period swing on a 290-minute chart.
  2. The FTP pattern appearing at the Boundaries of Congestion – either around the high or low of congestion.
  3. A breakout of congestion on the side the FTP occurs.

In this case, the FTP signals a valid breakout.

I thought the pattern was relatively straight forward and simple. That’s not the feedback I received via the practical exercises:

  • Some just got the pattern wrong.
  • Some had the right pattern but ignored the location of the pattern.
  • A few got it right.

The great thing was the exercises allowed the attendees to adjust their mistakes.

It got me to thinking. How effective are two and three-day seminars as teaching tools when unaccompanied by practical classes?

So what’s your experience with two and three-day seminar?

Do You Have What It Takes? 2

BarroMetrics Views: Do You Have What It Takes? 2

Motivation Dream Deadline

Yesterday I left you with a question: how do ensure that we operate from a foundation based on greater pleasure? I asked that because doing so ensures we maintain our motivation.

To answer that question, we need to delve once more into our human wiring.

  1. What drives our actions? The imbalance of pleasure and pain.
  2. What creates pleasure and pain? A thought gives rise to a feeling which gives rise to an action. That action produces results that lead to a thought etc.

The result of our actions tends to be determined by how closely aligned our perceptions are aligned with reality. The closer aligned they are, the more likely our results will bring us what we want (and that means pleasure).

It’s important to note that ‘our reality’ is the ‘out there as seen by the in here’.  Our perceptions determine what is real for us. If our reality is out of alignment with the way things are, then we are unlikely to get the results we want.

For example, if we believe that trading success is guaranteed by doubling down, then we are likely to go broke before we get rich.

The other mistake is to confuse reality with our thoughts. For example, we are long the S&P and the market suddenly dives. The reality is the market is moving against us, and we are losing $x.00. That’s it. If we catastrophize or indulge in wishful thinking, we are making our thoughts a reality – a reality that exists only in our mind.

What is the reality? It is that the market is moving against us, and we are losing $xx.00. That’s it. If we catastrophize or indulge in wishful thinking, we are making our thoughts a reality – a reality that exists only in our mind.

Our confusion of ‘thoughts for reality’ tends to surface when our fight, flight or freeze instincts are triggered. So, the best ways to deal with this primal fear:

  • Learn to accept uncomfortable thoughts and feelings for what they are – automatic responses to external events. Be comfortable with discomfort.
  • Prepare as best (and as extensively) as we can for ‘surprise’ and ‘unexpected events’ – by pre-planning our responses.

For example, Let’s say I envisage that I short the GBPUSD at 1.3307. And, no sooner do I get my fill, that the pair rallies to 1.3397.  How would I react?

I picture firstly how I would feel, then secondly, how I would react. I tell my students to ask, after entry, ‘what does the market have to do to prove me wrong?’ And to answer that question by ‘seeing’ their response is as

I tell my students to ask, after entry, ‘what does the market have to do to prove me wrong?’ And to answer that question by ‘seeing’ their response is as much detail a possible.

Through preparation and anticipation, we overcome the effects of ‘fight, flight and freeze’. Using the same process, we can ensure that the ‘pleasure’ side of the equation outweighs the ‘pain’ side. And in this way develop our grit to attain our goals no matter the barriers.

Pleasure and Pain

BarroMetrics Views: Pleasure and Pain

The results are in: Traders 3, Students 1.


The score represents the ratio of Traders over Students who have registered for Live the Life of Your Dreams, my ebook in organisation and goal achievement.

The ebook will be out September 30.

This week, I was asked what was the best book I have read on motivation. I must admit to having a love of reading, and, as a result, I do cover a lot of ground. You’d think I have difficulty nominating just one.

Nope, the best one is Jason Gracia’s The Motivated Mind. He provides a structured approach to getting things done. And, he has insights not available anywhere else.

For example: what are the elements of overcoming procrastination? Most authors say: The pleasure of success needs to outweigh the pain of action. 

Gracia takes the view that what is needed is this: (The Pleasure of Success and the Pain of Inaction must outweigh the Pleasure of Inaction and the Pain of Action).

The book is littered with gems and insights. Well worth a read. Best of all you can grab a second-hand copy for $0.58 from Amazon. New costs more, prices range from USD 28.15 to USD 32.71 (The Motivated Mind)

For the Amazon review lovers, attached are some comments from Amazon readers.

Customer Reviews

Solution to Impulsive Trades? II

BarroMetrics Views: Solution to Impulsive Trades? II

I’m still battling jet lag and now have a touch of the flu. So, today I’ll be brief.

When preparing for your trading, you reduce the chances of impulsive trades by being as specific as possible. For example in the AUDUSD Currency Strength Meter chart in Solution to Impulsive Trades?, the AUD could:

  • Form a bearish conviction bar down – suggesting downside continuation.
  • Form a bullish conviction up – suggesting upside continuation.

The two possibilities form the boundaries of the price action. That’s not to say either will occur; but by setting the boundaries we have anchor points by which to judge the subsequent price action.

For example, Figure 1 shows yesterday’s price action in the AUDUSD. The bar is bullish, but the range us below normal. So, I’d see that as suggesting more upside today that needs to attract buying as evidenced by at least a 75-point range with bullish form.

I’d be wrong if we saw a bearish bar today.  Anything in-between we’d have to assess at the end of the day.

So, how do we use the info? Use is limited only by our imagination. For example, if we went short on Friday, assessing the price action as bullish will allow us to exit before the stop is hit. If we went long on Friday, we could look to tighten out trailing stop and so on.

The point is creating detail specific scenarios inhibits impulsive trading; and the more you do it, the more accurate you become in assessing the day’s bar.

2016-08-23_19-20-09 AUDUSD 01





Solution to Impulsive Trades?

BarroMetrics Views: Solution to Impulsive Trades?

One of the most common refrains from traders is: “I lose money because I take impulsive trades. If only I kept to my plan, I’d make money!”

The implication is ‘I have to fix my psychology’. 

Sometimes this is true – there is a limiting belief that needs to reframing. I have found that most times, however, the solution is far simpler. By that I mean the trader fails to describe precisely:

  • The conditions that will trigger the trade.  And,
  • The conditions that will keep the trader in the trade.

Last week, I set Figure 1 as part of UIII’s preparation for the week.

Here’s the context to the assignment. UIII FX traders are asked to sell the weak currencies and buy the strong ones. Why? Because such pairs produce the biggest bang for the investment dollar. I have found two configurations produce the best results:

  1. At the start of a trending move – the corollary: when congestion has likely ended; and
  2. At the start of a parabolic move.

UIII’s who replied to the assignment took the for either:

  • The attached reply or
  • The AUDUSD is in congestion and accordingly, will look elsewhere for a strong or weak pair.

What do you think? I’ll post my assessment tomorrow.

2016-08-22 CSM AUDUSD


2016-08-22_09-50-22 GB HW

FIGURE 2 Sample Work