This is a concept that I've been experimenting with for awhile and I finally have a workflow that works well and that I'm confident in sharing. It has helped me tremendously.
I haven't seen anyone teach this, so I hope that this technique helps you improve your trading too.
I've heard a few successful traders use this technique (or something similar) to become consistently profitable and that is what led me to explore it. But oddly enough, they don't teach it in their courses. Or they don't have a course, which is unfortunate because nobody will learn strategies like this.
Now, full disclosure up front…this is NOT sexy. It's hard, embrace the suck, work.
But if you are at a point in your trading where you need to figure out why you aren't getting the results that you are looking for, then trading Flash Cards could be one of the missing links that pushes you into consistently profitable trading.
Note: This is for traders who primarily trade technical chart patterns. It's one of the many techniques that we teach inside our TraderEvo training program.
How Traders Learn to Spot Profitable Patterns
First, I'll give you a quick background on how profitable trading is typically learned. You probably already know this, so I'll be very brief. I only mention these concepts to show you how Flash Cards can speed up what already works.
1. Watch a Live Market
Retail traders who log a lot of live screen time and only focus on one or two strategies will usually do much better than traders who do not put in the screen time. But the learning process will be slow, especially if you are a swing or position trader.
This is because you are not getting feedback fast enough. The more high quality feedback you can get right now, the faster you will progress.
2. Do Trading Simulations
Using a trading simulator like Forex Tester can speed up your learning time dramatically. If you have never backtested before, read this guide to get started. As you can see, you can learn so much more in the same amount of time.
When you want to practice your trading strategy, you can simply fire up Forex Tester and run through some trades. This is a great activity to do when you don't have any potential trades in play, or the markets are closed.
How Flash Cards Can Speed Up the Process
Now, what if you could put your trading simulator on steroids?
That would be Flash Cards.
First of all, there is no substitute for live chart time and doing backtesting in a trading simulator. You need to figure out if your strategy works in backtesting. If your method doesn't have positive expectancy, then Flash Cards won't help you. Also, you obviously have to get used to executing in live market conditions.
But once you have a trading strategy that meets your goals in backtesting, then it's time to become an expert at it. That's where trading Flash Cards can help.
Here's where it fits into the Trading Heroes Roadmap:
- Learn a trading strategy from a website or course.
- Create a Trading Sketch using this worksheet.
- Backtest your Sketch on as many pairs that you will trade live.
- If you like the results, begin forward testing it in a demo account.
- Now it's time to create Flash Cards…
How to Setup Your First Flash Card Deck
Once you have a trading strategy that backtests well, Flash Cards will help you etch a good setup into your brain. It can also help you improve your strategy because you might start to see optimizers that you may not have noticed before.
Here's how to do it…
Step 1: Put All of Your Backtesting Trades Into One Spreadsheet
If you are using Forex Tester, then simply export all of your trades and paste them into one spreadsheet. I suggest using Google Sheets so you don't have to worry about your hard drive crashing and so you can access your spreadsheets on any computer or mobile device.
The same goes for any other backtesting method out there. You can even use TradingView Bar Replay for backtesting and put your trades into a spreadsheet.
Using a spreadsheet may seem a little old school, but trust me, it's the most reliable and flexible solution out there. It allows you to test most “what if” scenarios later, without doing any custom programming or being restricted by the limitations of an analytics platform.
Step 2: Create a New Google Doc
Now create a new Google Doc. This is where you will store your Flash Cards for each trading strategy and version. I believe in versioning your backtesting, so you know exactly how one change affects your results.
Again, a Google Doc is not sexy, but it's easy to use and reliable. You can also use something like Mac Pages.
Step 3: Screenshot Winning Trades Only
Here's the thing…
You could screenshot every trade, both winners and losers. But that could take a really long time (especially if you have a low win rate) and I feel that it's unnecessary to review losing trades.
Only reviewing winning trades does three things:
- Shows you what a winning setup looks like.
- Saves you time by not having to document losing trades.
- Helps you overcome the innate negativity bias that most people have. I learned this concept from Chris Capre and it helps a lot. The “wolf” you feed is the one that survives…
For each trade, you need three screenshots:
- When the trades sets up. Having this chart helps you avoid hindsight bias.
- When the profit target is hit or when you decided to exit.
- How much additional profit was available after you closed the trade. This can be very important for optimization later. I express this in multiples of initial risk. I usually wait for the initial stop loss to be hit to determine total potential profit.
When creating a screenshot, mark four things:
- A vertical arrow where the trade set up. This allows you to easily see the entry point in subsequent screenshots.
- The stop loss level (red line).
- The entry level (blue line).
- The take profit level, if applicable (green line).
Now go through your backtesting spreadsheet and create a screenshot for every winning trade. You can set Forex Tester on the fastest setting because you already know the date that you want to get to.
Be sure to include as much history on the chart as possible, so you have some context on previous price action. This helps a lot with optimization and practice later. Add screenshots from multiple timeframes, for better context, if needed.
Add the date to each screenshot study, so you can easily go back later and insert other trades that you missed.
A key to creating useful cards, is to use the same screenshot format for every single trade. This allows your brain to focus only on seeing the setup and not be distracted by different screenshot formats.
When to Review Your Flash Cards
Here's when I use my Flash Cards:
- When I want to practice a trading strategy – I review my cards at least three times a week, to keep my setups fresh in my mind. This is much faster than manually running through Forex Tester to practice. Kobe Bryant used to come to his games four hours early, to warm up. The best become the best because of continuous and mindful practice. We need to establish similar routines.
- When I have doubts about an entry signal – There can be days when I'm feeling a little off and going back and forth on if I should take an entry signal or not. That is when I look through my cards really quick to see if my current trade looks like previous successful setups.
- When I want to optimize a trading strategy – If I want to do things like tighten my stop loss to improve my entry, or figure out how to get more return out of my trades, I turn to my trading Flash Cards. When you look at trades in quick succession, it quickly helps you spot patterns.
You may choose to use Flash Cards in other ways. But this is what works for me. Here's an example of it in action…
Final Thoughts on Trading Flash Cards
Yes, this can be a lot of work. However, investing a little time now, actually saves you a lot of time later.
Having a spreadsheet also allows you to add the potential risk multiples (R value) available on every trade to do some Advanced R-Multiple Analysis. For example, maybe you target only 1R on your current trades, but you see that your average R available was 8R.
That gives you a clue that maybe you can increase your profit target to improve your profits, without having to test different intermediate profit targets individually.
This is just one of the many techniques that we teach inside the TraderEvo trader training program.
What do you think? I would love to hear your thoughts in the comments below…
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