CONCEPTS FOR

SUCCESSFUL
TRADING
Key Information For New Traders
 CONCEPT S FOR
SUCCESSFUL TR ADING
The Chart Guys
Concepts for Successful Trading

Jason Bush Lamont Paung

Chart Guys Partner Market Technician

For more information visit us at

http://chartguys.com
CONTENT

1 INTRO TO TRADING

󰌕 Discover the conceptual basics of trading with a

brief introduction to the history and mission of
the Chart Guys

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2 TECHNICAL ANALYSIS

󰌕 A review of the first essential skill for every

analyst, candlesticks and patterns, price action
and trends.
1

3 PAPER TRADING

󰌕 Get serious about your trading strategies and

Concepts for Successful Trading

perfect them in simulated trading. Develop the
skills required for success.

4 EMOTIONS & PSYCHOLOGY

󰌕 Your biggest hurdle is your own emotional

response to the market. Recognize emotions and
biases and you will find more effective trades.

5 RISK MANAGEMENT

󰌕 The key to longevity in the market is proper and

calculated capital management that controls
your risk and ultimately, your losses.

6 SUMMARY & ADDITIONAL RESOURCES

󰌕 Summary and additional resources – Take these

with you on your journey.
 IN T R O TO T R A D ING

Trading in the market can consistent profitability in the Born from many perspectives
be life-changing but the markets, they must put in the with one centralized goal,
process of getting started is work. success in the markets,
daunting. Prospective traders our process has resulted in
are often overwhelmed by the The Chart Guys was founded countless lessons that have
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sheer amount of information in 2015 with the goal of affirmed a few key ideas.
available to them as they educating people about
delve into the world world of trading safely and profitably The following publication is
trading. A quick Google search in the financial markets. Our designed to provide readers
for trading advice will result in initial focus was on teaching with the foundational
an assault of advertisements, people how to apply technical concepts necessary to build
2 charming personalities analysis to their trading successful personalized
selling incredible “secrets”, strategies. The community trading strategies so that
and questionable guides quickly evolved to be much they may avoid the expensive
full of promises of success more, offering an effective mistakes that beginners are
Concepts for Successful Trading

through a few simple steps. space for personal and prone to making and benefit
Few resources will mention professional development from the collective wisdom of
how difficult trading can be. simply through organic the Chart Guys community.
As with most things, there is member engagement,
no easy path to success but consultation, analysis, and
most things worth doing are camaraderie.
hard. For a trader to achieve
 Temper your impatience. Focus on
education to advance your ambitions.
With preparation comes success.

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3

Concepts for Successful Trading

The first essential skill set entering the market; those After becoming proficient
every trader must learn who do are better prepared with the fundamental
is how to apply the basic to navigate the market concepts of technical
concepts of technical analysis. effectively. Perhaps the analysis, new traders can be
Understanding price action & best way to practice trading confident in trying their hand
patterns, support & resistance with technical analysis is on at trading live and taking on
levels, and trends are critical “paper”. Like practice before appropriately managed risk.
before one begins trading. a big game, paper trading is In our experience, practicing
Failure to master the basics a critical step in any trading technical analysis is essential
often results in heavy losses career and allows traders for consistent success in the
and we encourage traders to hone their skills without markets.
to study technical analysis risking capital, through
as much as possible before simulated trading.
 T E C H N I C A L A N A LY S I S

There are an infinite amount Technical analysts use When a trader begins
of ways for a trader to use historical price action and exploring technical analysis,
technical analysis in order current data to evaluate it’s easy to become
to operate successfully in the likelihood of market overwhelmed by a maelstrom
the markets. The plethora movements. It is often used of bright lines and ambiguous
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of information may seem in conjunction with the much patterns. The TCG method is
intimidating and esoteric more familiar approach a robust approach that allows
but in reality there are just a of fundamental analysis traders of any level to practice
few concepts that technical which aims to value assets an effective strategy that can
analysis depends upon. accurately based on their be run successfully as is. Much
Our goal is to equip traders past, current, and projected of its power lies in its simplicity
4 with the universal building future financial metrics like which makes it easily scalable
blocks of technical analysis so assets and liabilities. Using the and customizable for different
that they might build upon study of a tree as an analogy, traders and their goals. In
their understanding and fundamental analysis is akin to order to practice the TCG
Concepts for Successful Trading

develop custom strategies determining how a tree grows method, traders need only
that best suit their goals and whereas technical analysis is an understanding of integral
personalities. Traders need similar to determining if the technical analysis concepts:
not master every indicator wood of a tree is ready to be candlesticks, price action, and
or strategy in order to be harvested. Technical analysts trends.
successful, any one edge that are primarily concerned with
can be continually utilized the strength of an asset as
to extract value from the represented by its current
market is enough and most price which is driven by public
professional traders stick to perception which may not be
just a few reliably effective fundamentally supported.
techniques that they are
comfortable executing
repeatedly. It’s very much like
cookery where there is no
“right” way to do the task and
there are many ways in which
adding personal flavor to
established techniques result
in wonderfully novel recipes.
 I fear not the man who has practiced
10,000 kicks once, but I fear the man
who has practiced one kick 10,000
times.
Bruce Lee

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5

Concepts for Successful Trading

Candlesticks

Candlesticks are a popular way of market participants as

of displaying price movement much as it was by supply and
on a chart. They offer more demand. It is safe to say that
detail than the more common the price of rice is dependent
line chart as each period’s on the emotional response
open, close, high, and low of rice traders due to their
are represented in one unit, perception of supply and
a candlestick, which are then demand. The true power of
plotted in a series. Originating candlesticks is that they allow
in 17th century Japan, a traders to recognize shifts in
rice trader named Homma the ever developing price of
observed that the price of an asset, commonly referred
rice was largely influenced by to as price action.
the emotions, fear and greed,
 T E C H N I C A L A N A LY S I S

Price Action

Price action is simply the the development of market price action to the upside. A
movement of price over time psychology. Successful trader may find success in
commonly displayed through traders look beyond the buying after the presentation
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charts. By observing the flow superficial shape of a candle of the hammer, but a tactful
of price action as it develops or pattern and investigate the technician will dig deeper.
on charts, we can identify and underlying sentiment using Upon deeper analysis, we
position to benefit from the the full context of each visual see that this reversal has the
ebb and flow of market buying representation. In the chart potential to set a daily higher
and selling. A popular way of below is a popular pattern low to perhaps see further
6 anticipating future price action called the hammer. It is easily trend continuation.
is through the development recognizable and is typically
of patterns. Patterns are not considered to be an indication
definitive actionable signals. that the current down trend is
Concepts for Successful Trading

Rather, they are a lens into poised to see some opposing

Trends

They say, “the trend is your common practice of trading when price is making lower
friend” and at TCG we are with the trend is initiating a highs and lower lows. With
inclined to agree. Once a long position in an uptrend. the ability to reliably identify
trader can identify trends trends, traders can then apply
effectively, typically they will Trends occur when there the concept to multiple time
want to trade with the same is an imbalance between frames in order to get the
direction as the trend. Even buying and selling. An excess clearest overall picture of an
the most fundamentally of buying pressure will cause asset’s price action which
focused market participant the price of an asset to trend of course allows for more
engages in technical analysis upwards while an excess effective trades.
whether or not they realize of selling pressure leads to
it. Being able to identify if downwards trends. When TCG suggests approaching
an asset is trending, moving there is relative balance, price technical analysis with a

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with strong directional bias, will consolidate. There are few core principles. First,
or consolidating, moving effective strategies that can be determine the strength and
with minimal directional applied to trading under any efficacy of the current trend.
bias typically in a contained circumstances though most Second, review any potential
range, is a critical skill for traders will find they do best candlestick patterns that
every market participant to in trending markets. may support or negate your
develop since profit is made trend thesis. Finally, determine 7
from anticipating the most TCG considers price action relevant levels of support and
likely direction of the market that is making higher lows resistance which may act as

Concepts for Successful Trading

whether it be up, down, or and higher highs an uptrend locations for actionable signals
sideways. Perhaps the most whereas a downtrend occurs to develop.

Relevant Tips

◆ Never enter a long position ◆ Every trade needs to have

when RSI is over 70 or a a plan. Entry, stop, and exit
short position when the targets must be clearly
RSI is under 30 defined with rationale for
each decision made.
◆ Whenever possible,
enter bullish plays at
key supports or clear
resistance breaks. Enter
bearish plays against
proven resistance or the
loss of major support
levels.
 PA P E R T R A D I N G

Paper Trading

An athlete would not enter Traders must adopt this Developing the critical skills
serious competition without mindset when they enter the necessary to navigate the
any previous experience and market for the first time in market without risking capital
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expect to do well. First the order to establish a footing can be accomplished through
athlete studies basic theory to build upon. Failing to paper trading, simulated
in order to practice and adequately prepare for open trading that allows a trader to
perfect foundational skills and competition often results in make decisions using real-
strategies. The experience failure and costly hard-learned time prices.
gained from their mistakes lessons.
8 allows them to hone their
craft until they are ready to
compete with the best. This
is the time-tested method for
Concepts for Successful Trading

long term success.

 Trading without experience is like
piloting a plane without flight training.
Some people may be lucky enough to
take off, a couple might even land, but
the vast majority of people are going to
get hurt.

Investing time and effort adjustment on a paper trade Trading with your own money
into developing your skills after it has been initiated is a vastly different experience
through paper trading will because you “actually would than paper trading. Even if

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pay dividends down the line. have waited for that drop armed with a tried and true
Comprehensively document before buying” is an unrealistic effective strategy for trading,
your experience as you approach to trading the once fear and euphoria come
find trade opportunities by markets and will only inhibit a into play, it’s a whole new ball
writing down your reason trader’s ability to progress. game.
for entering the trade and
tracking entry prices and With regular disciplined 9
exit levels for both intended practice and by reviewing
targets and stop losses. The paper trading performance
idea is to prove profitability statistics, traders will be

Concepts for Successful Trading

in the market so it’s critical able to identify their most
that a trader is truthful about successful trade setups
their performance. When and develop a keen eye for
paper trading, it is very easy to spotting them. Discovering
modify an entry beyond the one’s preferred trading
scope of your initial trade plan parameters is the starting
after some more price action point for the development of
has developed. Taking liberties a personal trading strategy
with paper trading records will and is an integral part of the
only serve to misrepresent a learning process. As you find
trader’s true ability. To prevent success with your strategy,
this dangerous habit, we eventually there will be a point
suggest that traders close the where you feel confident
trading platform the moment enough to trade with real
after a paper trade is placed. money.
This helps to stop traders from
watching every minor change
and modifying a paper entry
inappropriately with the
help of hindsight. Making an
 EM OT I O N S & P S YCH O LO GY

Trading without emotion requires

accepting the losses that are a part
of every strategy just as readily as
accepting the gains.
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10

Emotional and Psychological Implications of Trading

Concepts for Successful Trading

Fear can manifest in a trader’s winners as traders assume Accepting stop losses with
behavior in many ways. Fear of that the good times will discipline is made much easier
missing out, FOMO, can lead keep on rolling without any if a trader has confidence with
traders to jump into trades too additional work on their part. the mechanics of trading and
late, fear of losing money often It’s easy to lose sight of all the in their strategy. This is why
influences traders to exit too planning and failed attempts paper trading is so critical,
early or not enter at all even that took place before the it allows confidence in a
if a setup is good, and fear winning trade when staring strategy through safe practice.
of being wrong commonly at big gains. Sometimes the In addition to a strategy with
leads to traders refusing to loss comes in the form of clearly defined entries and
exit positions, creating bag- wiping potential gains on a exits based on technical
holders. Euphoria is the other big winner due to lack of trade reasoning, a trader must also
prevalent emotion that rears management. TCG traders consider risk management
its influential head during live know that trading under the which, if done appropriately,
trading. The most common influence, emotional and will help immensely in staying
symptom observed in traders psychological, is a recipe for level-headed while trading.
with euphoria is complacency. disaster.
Some of the biggest losers
tend to come after the biggest
 The Chart Guys
11

Relevant Tips

Concepts for Successful Trading

◆ Successful traders focus
on a well developed plan,
not the profit potential.
Profits are a symptom of
disciplined trading.

◆ If you truly desire

proficiency, practice
until you have mastered
it. Trading stocks is no
different. Make practice
and stretching for
improvement a regular
part of your daily routine
even if it’s just 5 minutes.
 RISK MANAGEMENT

What is Risk
Management?

In order to make money

in the markets you’ll have
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to have skin in the game.

Given that a trader must
put capital at risk, good risk
management is a key element
to trading longevity. Making
money in the market is easy,
12 keeping and compounding
it is difficult. Risk must be
managed by capping losses
relative to account size in
Concepts for Successful Trading

order to stay in the game for

the long haul. This can be
accomplished by using a few
basic strategies, all of which
will require a trader to be
familiar with order types, the
execution tools of trading, and
position sizing.
 Risk management requires a trader
to be familiar with order types, the
execution tools of trading, and
position sizing.

Stop Losses

Imagine going to a casino to drawdown. For example, let’s but the core concept is this:
play blackjack. When you sit say that you buy FFGQ at by removing the fear that you
down at the table and place $120 per share right before could face complete loss, you

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your bet you know exactly an anticipated breakout. You remove aspects of emotional
how much you stand to lose, expect that the price will go trading that hinder all but
everything! Your stop loss in up but you are also aware the most advanced market
this situation is your entire that the price can drop just technicians.
bet since that’s the most you as easily if the market turns.
stand to lose. Blackjack is a To protect your investment The use of stop losses as part
high risk, high reward situation you place a stop loss at $110 to of your risk management 13
that results in a player either allow price action to develop strategy is a cornerstone of
doubling their money or while resting comfortably success in the market. Failure

Concepts for Successful Trading

walking away with nothing. knowing that the most you to use this tool opens your
Now imagine if you could could possibly lose is $10 per trading to unlimited losses
decide how much you want share. If the trade begins to and invites detrimental
to wager at the blackjack work in your favor, you can emotional influences that
table before the hand and the adjust your stop loss to $120, will cloud your judgment. Be
potential to reevaluate after eliminating all possible risk! sure to do additional research
each new card is dealt. Instead on proper and effective use
of a complete loss, you would Using a stop loss has two of stop losses. Appropriate
stand to risk much less capital major benefits. The first is risk management will have a
allowing you to play many simply that you are protecting direct positive correlation to
more hands. This is essentially your trading capital by your overall performance as a
what well placed stop losses mitigating losses when trader.
allow traders to do! your trade ideas are wrong.
Additionally, the emotional
A stop loss is an order set and psychological difficulties
to execute when a defined that arise from exposure to risk
condition which negates are more easily managed if
your technical thesis is met. you know exactly how much is
If your trade thesis fails, a at risk for each trade idea. This
stop loss order protects your concept is far too complex to
account from excessive capital address in significant detail
 RISK MANAGEMENT

Profit Targets

In the previous section we price begins to consolidate, or drawdown. As the drawdown

dealt with the subject of worse, enter a counter trend becomes larger, traders find it
potential losses, but what that erases gains. Should the even more difficult to exit as
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should be done when the worst occur, there are only two that would suggest admitting
trade works according to plan? circumstances that may result, to “being even more wrong”.
Believe it or not deciding both of which are sure to Both scenarios are easily
when to take profits is often include negative psychological avoided with execution of a
one of the most difficult implications of varying degree. comprehensive trade plan.
aspects of trading for new In short, we are removing
14 and experienced traders alike The trader will either relinquish emotion and psychology
because psychology and all the potential gains on the through binary decision
emotion are more heavily at trade, even potentially taking a making. If price reaches X,
play compared to entries. loss on the trade if they refuse then close the position.
Concepts for Successful Trading

to even move a stop loss

Imagine the previously order to ensure a break-even Profit targets need not be
mentioned FFGQ trade exit, or they will double down complicated. For new traders
works according to plan and on despair and remove their we often recommend setting
begins to develop into some stop loss order completely targets at the nearest major
significant gains. Once an with hopes that the price will price action resistance for
entry is profitable new traders rebound. The former is often the simple fact that it offers
often wonder just how much more devastating to traders a fixed target to use as an
further a trade can go as than simply being stopped actionable signal.
they become increasingly out of a trade immediately
euphoric, and perhaps greedy, as they must deal with the
from the potential of locking fact that they failed to realize
in gains. If you have earned profits that were available
$9 per share, what's to say to them. The latter is very
you won’t earn $15? Or even likely the primary reason that
$20 per share? It is very easy trading accounts are blown
to lose sight of your trading up as market participants
plan in this context and the who are unwilling to accept
elation from success often that they were wrong marry
fosters complacency even as positions regardless of the
Position Sizing

A general rule of thumb is to must utilize proper risk Risk on trade

keep the risk for each non- management to ensure there
correlated trade below one is always capital available to (% change from
percent of total account value. leverage. A simple equation average price to
An example of a correlated can be used to determine
trade would be two tickers maximum position size stop loss order
within the same sector. according to maximum risk price) × X = 1%
tolerance of one percent of
A trading account can take total account value: of account
1% account losses forever and
never reach zero. A trader

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As an example, let’s assume long there with a stop loss at .05 × X = $100
an account size of $10,000 $95, 5% away from the entry
and maximum risk tolerance price of $100. To determine
accepted is one percent of the maximum size that should be
account, $100. A trader sees taken, the trader might use
price is approaching a support the equation: 15
level at $100 and wishes to go

Concepts for Successful Trading

Solving for X, a trader would orders and so it’s wise to cap X = $2000
arrive at $2000, the maximum maximum risk to even lower
position size for the proposed than 1% of total account value
trade. Note that it’s often to become comfortable with
difficult for new traders the day to day ebb and flow
to accept being wrong an account might see over
and respect their stop loss regular trading conditions.

Relevant Tips

◆ Considering if you should ◆ If you place a trade and ◆ As a trade works in your
take profit? If you are do not place a stop loss favor, adjust stop loss
happy with the current and profit target, you orders to protect profits.
profit… Take it! should feel uncomfortable
and think “I am missing
something”
 CO N CLUS I O N

Armed with the information risk management rules, it is brings something different to
presented in this publication time for them to proceed with the table to benefit from. We
in conjunction with the free caution and transition into live hope that you will consider
video content found on the trading. joining TCG which we believe
TCG YouTube channel, traders to be a unique trading
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are ready to gain experience The material provided here is community in that while we
through practicing different designed to help new traders are all focused on securing
strategies through paper establish a footing in the world financial freedom through
trading. Before going live, TCG of trading. However, trading is market operations, we also
recommends paper trading a challenging endeavor and place a great emphasis on
a strategy over a sample size we find that most challenges doing good things which
16 of at least 100 trades to prove are best experienced with creates an incredible learning
profitability. If an effective friends. There is great value environment for independent
strategy has been mastered in a group of people with a discretionary traders.
and a trader can commit to centralized goal as everyone
Concepts for Successful Trading
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