Interactive Tutorial Introduction

There are five essential steps to trading well. It doesn't matter if you're a pure technical analyst or a hard-line fundamental analyst. You must follow these five basic rules to keep yourself, and your account, out of trouble and on the path of profitability.

All financial markets, from stocks to forex, are potentially profitable and perilous. We seek to maximize the potential profits and minimize the potential risks in financial markets through identifying and applying price patterns.

We can teach you how to put the probabilities in your favor by showing you how to determine trends, read market conditions, and apply price patterns. But even though price patterns give you a leg up in your trading, you still must apply some common sense to your trading.

Below are the five most important aspects of your trading. These components are independent of trading price patterns. They are the essential building blocks that far too many traders overlook or never consider. Do yourself a favor and make sure you have these basics covered!

Five Elements of Successful Trading

5. Time horizon

You must decide on your timeframe. Is it a matter of hours? Or do you buy and hold for years? Are you somewhere in between? Only you can decide, and decide you must. All of your analysis needs to be relative to your timeframe. Focusing on your timeframe will help you to filter the noise from the signal in your trading.

4. Broader Market

Follow a broad market index and determine if it's bullish, bearish, or somewhere in between. Be objective about it by following the Dow Jones Industrial Average ($INDU), S&P 500 ($SPX), NASDAQ-100 ($NDX), Dow Jones Wilshire 5000 Composite ($WLSH), or whatever broad market index you prefer. Consistently follow the broad market and align your trading with the trend. Trade bullish price patterns in a bullish market; conversely, trade bearish price patterns in a bearish market.

3. Manage Risk

Measure and manage your risk before you ever enter a trade. Use a stop loss order. Have a worst-case scenario plan in the event the trade goes against you. Decide before you enter every trade where you're going to draw a line in the sand and take a loss. Keep losses small because you're going to have losses.

2. Diversify

Diversification is the only free lunch in the market, meaning you get something for nothing. What do you get by diversifying? You stand to the chance to achieve better results while simultaneously reducing risk. It's the best thing in the investment world. All you have to do is trade stocks that move somewhat independently of one another.

1. Position Size

It’s simple: Size matters. Commit an equal amount of capital to each and every trade. Adjust your trade size as your account grows or increase the number of positions. Every trade is its own unique event. Treat each trade as such. Consider your overall account equity and divide up into equal amounts, spreading these units across different positions.

Get these five elements of your trading in order and you'll be ready to make more money in the markets with the predictive power of price patterns.

How to Use the Interactive Tutorial

The Trading Price Patterns Interactive Tutorial is organized into 12 sections. Each section builds upon the previous section, starting with a fundamental understanding of how financial markets work. Key concepts and strategies that are taught in the first few sections are used later in the tutorial, so please make sure that you master the concepts in the early sections of the tutorial. Don’t skip over sections; read the tutorial from start to finish.