An average trader’s story to success in the financial markets
James Westbrook, 10 min read.
I started my trading journey about a year ago when a friend suggested I use Plus500 and immediately I found the whole concept fascinating, but the first 3-4 months were a disaster as I would blow a 1K account and fund my trading account again with 1K and blow that too.
After losing around 4K of my funds I gave up trading like many other new traders before me as it was tough mentally especially when cynical friends and family would shake their heads because I fell for ‘the scam’ of trading and ‘gambled’ the money away. This may ring a bell to many of you reading this article today.
Update
On the 7th of February 2023, James managed to achieve the number 1 status in the FTMO challenge, we are very happy for him, this shows that with hard work and skill, you can make a living from trading the markets.
What is the FTMO Challenge?
FTMO is a company that funds traders who pass their 2-step evaluation course, the course consists of the challenge and the verification, this helps discover if the trader has the talent required to be given up to $400,000 to trade with by the company and as a trader, you will keep up to 90% of the profits you make. Upon successful completion, traders are offered a placement in the FTMO Proprietary Trading firm
The Reasons Why I Was Failing at Trading?
It wasn’t until just after the Christmas break that my wife (who always believed in my trading) suggested I take it up again, but I had to identify the reasons why I failed and how I was going to succeed.
- Account size - there's no way you can make any real money from a small 2k account. I needed a funded account
- The platform - I had to ditch the trading phone apps and learn a professional platform like cTrader.
- Whilst still working as a carpenter in a workshop I needed a system to manage my trades. It just wasn’t possible to be glued to the screen whilst still in another job.
- Too many instruments - Instead of trading 30 instruments, I would concentrate just on the DAX, FTSE, Dow and Nasdaq instruments.
I was looking at various prop firms but all they offered were MT4 &MT5, but I have always hated this old platform, as I never truly understood it and visually it’s the most depressing archaic thing I’ve ever seen. Many people are charting on trading view and then entering trades on the MT4 mobile app, but this seemed so backward and slow.
Whilst researching FTMO I noticed they offered the cTrader platform and I believe they still are the only prop firm to offer it, immediately I loved the simple interface but also the power behind it.
Using an Automated Trade Helper
I discovered ClickAlgo while researching the cTrader platform as they were the biggest company offering trading tools and professional development services, so I contacted them to help me build a semi-automated trading robot to assist me with my trading. I needed something to manage the trades I place manually with the following features:
- A pre-set stop-loss in points.
- An automated break-even that factors in the symbol spread.
- Multiple take profit targets using percentages at different levels.
- A trailing stop loss with a target trigger and a step-in point.
All working with points and not pips (my mind works with points - I’ve never understood pips).
Building & Optimising a Trading Robot
I also needed a way to optimise the cBot settings so I added a trigger that would place a buy and a sell once a day at 8 am and then close every trade by Friday 9 pm. This way I could optimise the very best percentages for taking profits, the best trailing stop loss etc over historical data which was switched off when trading.
The robot runs on a Virtual Private Server (VPS) so even when the computer is shut it continues to manage the trades for me 24/7. Using ClickAlgo’s development service It took almost a month to get the bot built, sometimes it’s hard work getting the idea from your head, fully explaining it and then getting it working in real life. The team from click algo were brilliant and in the end, it worked flawlessly.
Optimisation, VP servers, and robots were all completely new to me. It was daunting at first but slowly it all started to make sense and fall into place. It was now time to test everything in DEMO mode before attempting to start the FTMO challenge.
Trial & Error Trading
Although I spent a long time optimising my robot, in the real world the results weren’t so good so in the end, I simplified the system to just one take profit. For example, the Nasdaq has a 40 stop loss, a break-even stop at plus 30 (plus 2 for the spread) and then takes off 80% at plus 80 which basically banks a 1.5RR (risk/reward) and leaves the last 20% a trailing stop.
I do however optimise the trailing stop trigger and distance once a week - and this seems to work well. The trailing can change between 200 - 400 points depending on the previous week.
Types of Indicators Used in The Strategy
The ClickAlgo team also built a custom round levels indicator, so simple yet incredible, I trade just indices and indices love round numbers. This indicator draws lines at a chosen distance, (100 points) the number of lines below and above the current price but most importantly it only displays the lines for the current 24-hour trading day - and then resets every day.
Economic News Chart Events
An absolute must-have for any trader as it displays high-impact news directly on the chart. I don’t need to check any external trading news website every morning and then try and remember what’s happening for the day.
You can download the cTrader Economic News Chart indicator for free.
Chart Drawing Saving Tool
Super useful in saving all your drawings for the week, having the ability to save all your hard work of drawing on the chart is a required feature for any trading platform,
Chaos Visual Reversals
The cTrader Chaos Visual Reversals indicator created by one of ClickAlgo's vendors cAlgoBuddy is actually really accurate in identifying reversals and usually gives you a warning that something is about to happen. The only time it gives false signals is when the market is trending really hard - although even then it’s quite good at signalling pullback entries.
Consisting of a fast and a slow W%R, smoothed with an EHMA (Exponential Hull Moving Average) Chaos brings a degree of order to your chart.
RSI Divergences
I use a combination of ClickAlgo's RSI divergence and another RSI divergence by a guy called Roman. Sometimes one is more accurate than the other so I have both running. I have different settings for each and I find them the most accurate on the 15 min.
Stochastic Relative Strength (RSI) Indicator
Based on the trading views version, it is great for overbought and oversold - and watching the cross-over for entries.
Pivot Point Indicator
This is an excellent indicator to determine price reversals, Posh trader's pivot point indicator points are, without doubt, the best Pivot indicator for cTrader, you can also find a similar version at ClickAlgo, both the indicators are free to download.
Exponential Moving Averages (EMA)
As part of my strategy, I use on the charts a 200, 50 and 21 period EMA.
Online Educational Material
I have literally spent thousands of hours consuming as much information as possible, I found these 3 youtube channels the best education out there.
Tom Hougaard
This guy is a legend and inspired me to not be a 'normal trader’ and to add and add to winning positions and keep holding and pushing through the pain when everyone else would close. His new book “best loser wins” is incredible. In trading, you have to lose well.
The secret mindset video has some pretty advanced stuff but without a doubt the most professional trading video out there.
Everyone knows Arty and his amazing teaching gift, especially his teaching on RSI divergence was a complete game changer for me.
The Trading Strategy Used to Pass FTMO Challenge
I do not trade a rules-based system but rather try and flow with the market and use the following whenever it presents itself. I always trade on the 5 min charts.
- Support and resistance I draw lines on the daily and hourly every Sunday night, I then add more on the 5 min as the week progresses.
- Round numbers always look for pullbacks or reversals from these.
- Trend lines I always draw trend lines, control-click and move the trend line to create a channel - such a powerful tip that
- Patterns I printed out every single pattern that’s ever been found and put them up around my house. I have memorised every single pattern to such an extent I can actually visualise them on the chart without even having to draw them.
I always thought as a more creative visual person rather than an academic person that this would be a disadvantage in trading, but I’ve come to realise that trading is a visual exercise and that actually helps me in seeing patterns that other people might miss.
- Breakouts/ reversals - only ever possible when used with RSI divergence.
- Gap close Every morning I draw a vertical line of the actual cash market close and then a horizontal line at the candle close. The amount of times a bounce will happen at this level is pretty common.
- Fibonacci Daily, hourly and 5 min. If the fib lines actually sync up with pivots, or round numbers even better.
- EMA’s The 200 on the 15min is always one to watch, The 50 and the 21 on the 5 min are great for pullback entries.
- RSI Divergence is The holy grail in trading in my opinion. Learning the difference between regular and hidden divergence takes some time but is worth it in the long run.
- GUT FEEL Never underestimate gut feel in trading. When you concentrate on just a few instruments you get to know almost their character and the way they move and you can almost sense what’s going to happen. When you find yourself flowing and not fighting the market is the best place to be.
My Automated Robot Helper
With a funded account you always have to be mindful of the daily drawdown. Start the day just risking 0.5% (20 contracts). After a couple of winning trades, the risk can increase to 1%. (40 contracts) When the daily loss starts to grow and the trend is on positions can be increased to 1.5% in 60 contracts. When a considerable increase in the daily loss has been achieved it may be possible to go large with 2% risk and 80 Contracts. Every morning this re-sets so before midnight it's best to close any trades that aren’t at b/e and then at the start of every morning the risk reduces back to 0.5%.
- If the market is ranging then at least you’ve banked some profit - even if the remaining 20% gets stopped out at b/e.
- If you manage to get in early on a trend day then the robot really starts to shine
- The strategy of taking 80% profit off at a 2:1 leaving a 1:5 RR in the bank has numerous advantages.
- As mentioned above it increases your daily loss Physiologically the confidence grows as more money is banked.
As more layers are added but then profit is taken this frees up available margin to trade with and add yet more layers. Simply putting a handful of large trades on and leaving them for 3 days eats all the margin up. The remaining 20% are basically allowed to turn into swing trades with a large 300-400 trailing stop. These are now risk-free trades.
On a trending market, you would be surprised just how much the last 20% can really add up to significant profit - especially when the layers start to add up.
When numerous layers have been added over the week it would be almost impossible to manage manually by hand - moving stop loss, trailing, TP’s for anything over 15 trades would be time-consuming and tedious. The robot runs 24 hours a day so even when I sleep it manages all my trades.
Testing My Strategy in Demo Mode
Everything was starting to click and work exceptionally well. I passed 15 challenges in demo mode. I once passed 10 challenges every day back to back for 10 days. I was regularly making 10k, 25k a day. `Sometimes as much as 100k a day. I once managed over a period of 2 days to layer up 150 Nasdaq shorts netting over 600k in profit.
When to close everything? That in itself is another mind obstacle. In trading, you have to entertain the unknown, embrace the unknown and hold for as long as you can. It won’t always work and there have been days I’ve waved goodbye to considerable profit - but that’s ok. It’s that very mentality you need to enter the elite of the trading world. So I knew the system worked and the potential was enormous.
However, Something Was Missing...
As soon as I went live with a real challenge the wheels came completely off. My emotions would get the better of me, I would lose all discipline and focus and have these terrible meltdowns. I would make the same mistakes over and over, my body would tense up, the anxiety would be almost overwhelming and my mind would turn to mush. I did in fact pass a few challenges only to fail verification twice.
The icing on the cake was when three days previous `i identified an awesome buy signal. I even wrote in big green letters BUY on the chart. As the market reached this level and started to break through my emotions were so out of whack I triggered and actually entered a short. Of course, this was a fake-out and took me out and then continued to rally up for 3 days straight! To actually ignore a big green sign saying BUY was literally all I needed that a change had to happen within my mind. When the heart rate rises you actually view the charts in a completely different way.
The Missing Link
It wasn’t until I stumbled upon a guy called Rande Howell who’s a trading psychologist. His videos on the trading mind are the best out there. Trading is 70% a mental game - only a small fraction is a strategy and yet it's the only strategy that people love talking about. Trading will bring to the surface every character flaw you thought you didn’t have - it will highlight every weakness in your mind and expose the very identity of who you are.
As crazy as it sounds one of my biggest stumbling blocks was that deep down I didn’t feel I was worthy of financial success and would subconsciously self-sabotage. I learnt to control my breathing and to relax my body. I learnt to trust my own abilities and say no to self-limiting beliefs. To not ignore fear but manage it. You’re simply going to have to learn how to do it afraid.
Once I started to put these things into place that was the missing link. I passed phase 1 in a day, and phase 2 in an hour. Completely stress-free.
https://www.youtube.com/user/igniteyourspark
I’m now enjoying my funded FTMO account.
I hope some of this will inspire you not to give up
How to Sign-up for the FTMO Challenge
If you think you have what it takes to become a serious trader then you can open a cTrader account with FTMO and apply for the challenge, if you pass you will get a funded account worth $200K to trade with.
