TABLE OF CONTENTS

Table of Contents
Part One (Losing Correctly) .......................................................... 3

The Point ................................................................................................ 7

Process to Success .......................................................................... 13

Part Two (Technical Matters) ...................................................... 16

How to lose my way winning ............................................................ 25

2
 PART
ONE
LOSING CORRECTLY

3
 " YOU MUST BECOME AN
EXPERT IN KEEPING YOUR
CAPITAL”

It is stated - 80 plus percent of the participants lose all

their money in trading!

We want to know what they do incorrectly, so we can

do the opposite. More precisely, we want to know
how they think. It is their untrained thinking that
keeps them in that 80% group.

We find out what they THINK, by

seeing WHAT THEY DO.

You have TWO PATHS to choose from starting on

your trading journey.

4
 One sign path is labeled – Follow me to the - Big New Money! It
is a wide path.

The other is labeled - Follow me just to keep your- old little

money. It is a narrow path. This path sign doesn’t sound so
exciting.

Follow me to
Follow me just to keep
the - Big New your- old little money.
Money!

Most likely you came to this money opportunity because of the first sign.
Obviously to make money. It is the broad path that nearly everyone enters
on. Including me.

However, it is the path that leads to destruction. At least to financial distress

with 80% of the participants. So, we are going to start immediately by
changing paths. If you resist to change to the narrow path, you will only
frustrate yourself and everyone who loves you. The broad path that is
labeled “to the big money”, is part of the great lie.

So, start telling everyone you know, that you got into trading…

5
 “to learn how to lose
correctly.”
The money is at the other end of this path, not the other one.

I reference the participants as the many and the few. Like in

the Bible reference:

Matthew 7:13-14 (NIV)

The Narrow and Wide Gates
13 “Enter through the narrow gate. For wide is the

gate and broad is the road that leads to destruction,

and many enter through it. 14 But small is the gate
and narrow the road that leads to life, and only a
few find it.

THE POINT

6
 There are several items to trade and many ideas about

trading. Just like other events in life, business, sports, politics, you

are either winning or losing. For me, when first I retrained my

brain on how to lose correctly, it was immediate that my trading

results changed for the best.

Losing and everything about losing, is perhaps 95% of the

problem with traders. The obvious is – lose your cash and you

can’t play anymore. You are only invited to participate if you have

cash. If you can’t reformat your thinking about losing, that

means learning to “lose correctly,” then you might as well quit

now. At least you will still have starting cash.

Losing is perhaps the most important part and definitely the

most painful part of the trading process. Of the two outcomes from

engaging a trade, which results as either a Win or a Loss, the loss

is the natural problem. If someone does not get to the proper

understanding of losing correctly, the pain is devastating. Who

likes to lose?

“WE LIKE TO LOSE”

7
There are two facets of losing. The knowledge of losing and the

action taken that means you accept the loss. LOSING is merciless

on your psyche. That is why I say address this as the first principle

to trading success. To reach success, you have to go thru the

actual corridor of losing. However, if you get prepared to go thru

the corridor with the modified mental attributes, then you have a

good probability of reaching the other end.

As it goes, apparently only 5-20% of the people make it. I say it is

because they did not fully address this losing aspect as

“Number One Priority”

up front, and therefore they get entangled and just can’t overcome.

It is like one of those traps that once you get in and start jerking

around, it only gets worse.

Every person with common sense understands the

premise of being PREPARED.
We are going to retrain and reformat what you think about
“losing” so you know what to do when you are lured into the trap.

8
 And since trading is full of traps, you might as well be fully
prepared.

The 80% simply are not prepared. Matter of fact, the first trap is set with
an invitation to start trading! Since we know driving a car can be deadly,
we insist that everyone pass some competency test. The people who are
supposedly there to protect traders obviously know that 80% lose their
cash. So why not have everyone pass some competency test before
they enter the trading or investing game?

I think it is because the 20% set the rules.

RETRAIN and REFORMAT

I have trained my brain to understand the proper purpose for

losing and the awesome benefits of embracing the action of
losing.

9
 We have been programmed our whole life with the idea that losing
is bad and we don’t want to lose at all. Some people actually hate
losing.

You have to change

your view of this
understanding right
now!
Don’t ever think you will survive, unless you fully understand and
embrace the actions of agreeing with a losing position.

WHAT DOES IT MEAN TO LOSE CORRECTLY?

Don’t waste your mental energy trying not losing at all. You simply
have to lose at times with trading. It will happen regularly.

There are 3 directions in trading.

10
 UP

FLAT

DOWN
This losing is really like paying your fee to change from one direction to
the other. You have to pay to change lanes. The longer you stay on a
lane the more it will either make you or cost you.

While attempting to reformat my thinking about losing, one

of the first things I noticed was that certain terms invoked
problems or responses that negatively had an effect on me.

This leads us to our first step

11
#1 Start to rename terms to help your
brain to engage and act correctly with
the purpose of the term.

For example: the industry says, “cut your losses short.”

*When I am mentally dealing with the actions needed to “cut” a

losing trade, I realized that the whole phrase of terms affected me
negatively. I knew that if I changed the mental discourse to
“dispose of a losing trade,” it helped. *

Then I changed my vocabulary to speak in terms of a “bad trade”

and then, it was, “I need to realign my trade.”

Currently it is,

“time to realign my position.”

The term “realign” serves me well.

First it doesn’t invoke my ego

Secondly, it doesn’t feel painful.

I moved the whole issue from that fear and pain region of my brain.

This is part of the

Process to Success

12
The new terms make it easier for me to embrace the corrective action
that I need to take. It is like anything that needs to be realigned, it is so
easy to embrace realigning this or that. As a person with common
sense, I also realize that the sooner I realign my position to be in
harmony with the “movement masters,” the quicker my account
starts increasing in cash.

Question:
What ultimately is being realigned?
You will be an uncomfortable trader until you get this whole thing
about “Losing” completely “realigned” in you.

Do you like to be someone who has a heads up? You can start to
understand that you need to think about this component, because I
have now given you the “heads up.” Like with files on your computer, I
suggest you make a new file. Name as you will. Then you will practice
using it. Once you know how to access this process file and it makes
proper sense, then you will have the most devastating part of this
endeavor managed.

We want to have a real solid grasp on this before the real

trading starts, before we enter the corridor of what?

The corridor of losing.

13
Now with that said, it seems that this NEW understanding about
losing is not solidified until a real event takes place that calls upon
this new thinking paradigm.

Once I became a very happy realignment

specialist, the whole trading endeavor
exploded.

I suggest that you take the offensive position on discovering and

mastering everything about losing correctly. Please get yourself
excited about hanging out in the camp of “those who know how to
lose correctly” or more effectively stated as “those who are
masters of realigning their positions.”

This portion of the trading process gets 90% of my attention even

to this day

For you to master this, we will be finding and replacing your—

Personal Weakness(es)!

Now let’s take a break on

“losing mental matters”
and look at some technical

14
how to. But remember your
home base camp is to
“master all things about
losing.” Excuse me, I mean
“all things about
realigning.”

15
 PART
TWO
TECHNICAL MATTERS

Technical matters

All the information we need to trade correctly comes only from the

16
charts. Nowhere else.

Did I say that clearly enough?

Let me say it one more time.

ALL THE INFORMATION WE NEED

to trade correctly comes only from the charts.

Now it is obvious you need proper information about the item you are
trading. Whether it is a stock, an option, currency or futures.

The information we need is to answer a set of big questions. Perhaps

you might want to think of it as a two-piece puzzle relating to this whole
endeavor of trading.

What are the BIG questions in trading?

If you know the answer to these questions, you hold the key to trading.
Identify what the two pieces of the trading puzzle are.

17
 1.) When is an optimal time to ?
And
2.) When is an optimal time to ?

Once these answers are defined and executed, the rest is history.

WE will use the charts to tell us the answers and nothing else.

Did I state that clearly enough?

CHARTS:
http://www.freestockcharts.com/platform/v1

https://app.technicianapp.com

https://www.tradingview.com/

18
Look at a chart for examples.

19
Understanding the concept of “Losing”
Or (realigning)

Let’s invest some time on researching Cognitive Bias and Loss

Aversion.

Click the following links

Cognitive Biases:
http://en.wikipedia.org/wiki/List_of_cognitive_biases

https://hbr.org/2011/06/the-big-idea-before-you-make-that-big-decision

Loss Aversion:
https://en.wikipedia.org/wiki/Loss_aversion

Trading has many sets of two components: One is your

thinking paradigm, which generates your action response.
We will learn to think differently, which involves SEEING
things in correct context, which should allow us to act
correctly.

Trading is simple when you understand the components and have a

handle on them.

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 THE TRADING COMPONENTS

Your Thinking or Your Actions

LOSING OR WINNING BUYING OR SELLING

FEARFUL OR CONFIDENT ENGAGING OR DISENGAGING

PSYCHOLOGICAL OR TECHNICAL

PATIENCE OR EAGERNESS

21
KEEPING YOUR CAPITAL:
IT IS ABSOLUTELY CRITICAL THAT YOU MAKE THIS YOUR FIRST
PRIORTY. THIS PRINCIPLE OF LEARNING ALL THE ASPECTS OF
HOW YOU MIGHT LOSE YOUR CAPITAL AND ALL THE BEST TACTICS
IN PRESERVING YOUR TRADING CAPITAL ARE TO BE LEARNED
FIRST BEFORE YOU EVER EXPECT TO BE A PROFITABLE TRADER.

“To keep your capital” means several things:

One:
Keeping your capital is acknowledging that you will lose or offer
up, or give away, or whatever you want to call it, some capital at
times throughout the trading process.

There will be trades that you have to release some capital in order to get
out of the trade. You acknowledge that offering up some cash is a
powerful force that eliminates the markets ability to take all your cash.
You will do this in order to purposely preserve most of your capital.
Every time a trade starts to move against you, you will be faced with this
crucial situation. You now have a decision to make. Do I just wait and
see if it will turn around or do I decide to release the trade, which means
giving up some cash? This situation will happen all the time. Actually,
THIS IS THE MAIN EVENT that you will be faced with over and over. It
is what happens all the time. THIS is why you will have a clear
understanding of what you will decide when this circumstance presents
itself. This is the single most repeated dilemma you will be presented. I
say it is dilemma if you don’t know what to do. It is an opportunity if you
do know what to do.

What is trading in a nutshell?

• Changing your position as often as needed to stay in sync
with the direction of the instrument you are trading.

• Asking it another way: What is the main task of the trader?

Stay in harmony with the direction. That’s it.

22
Two

Understanding that losing some capital is like paying your way out
of trouble.

Mastering the timing of when to offer some cash is a monumental step to

taking yourself out of the 80% group. Perhaps you might like to see it
this way: Being able to offer some of your capital correctly, in order to
realign your position, is a sign of someone who is in control of their
trading process.

The market decides the direction. PERIOD.

The market decides when to change the direction. PERIOD.

What do you get to decide?

You will either have trades that you are receiving money or trades
that you are offering money.

The dynamics of money flowing towards you or away from you is

constant. When you have a live open position, you will have to
learn to be comfortable with this to and from cycle. You will
become familiar with this through simulated trading first.

Completely embracing the losing or offering of cash to realign your

positions does not mean you will not lose any capital. It does
not mean you will not have losing trades. It absolutely means you
will lose or offer some capital, but under your parameters. You will
learn to offer correctly in order to not be forced to offer all your
capital. Learning how to lose correctly, includes “why to lose”, and
“where to best lose”. It is perhaps better to say and think of
sacrificing or offering capital.

23
And while in the receiving mode, you are increasing capital.
The term “losing” is harsh on most people’s mindsets. So, you will
take all necessary time to understand this “LOSING” or decreasing
capital component while being a trader. It is perhaps the single
most profound component that the 80% don’t embrace.

When I am faced with a trade that is not

producing, (it is costing me something,
either money or time) What do you think
I should do with the position?

24
 HOW TO LOSE MY WAY TO WINNING!
HERE ARE SOME HELPFUL HINTS

(Some things I always know before I actually trade something)

• Study the movement of the instrument thoroughly before

trading it. Learn its parameters. (it’s personality)

• Knowing the average range (dollar amount) the instrument

can move during the day.

• Knowing the range (dollar amount) it can move during a

single 3-5 min bar.

• The “speed” in which it changes directions.

• Knowing the current resolve of direction of the different time

frames. Monthly time frame down to my time frame.

• What the dollar amount is within my loss acceptance. So, I

know how many shares to put on the trade.

• That I am fully prepared to close the trade unless it is a

“producer”.

• I know how much time I will allow for it to produce or it is

closed out.

25
FIRST AND FOREMOST:

IF YOU EXPECT EACH NEW TRADE TO BE A LOSER, A Thief

(IT’S WRONG UNLESS PROVEN CORRECT)

THEN YOU WILL HAVE THE MINDSET TO BE READY TO

TERMINATE THE POSITION. It is no surprise to me that I am
going to close a trade with a small cost. By default, that is what I
expect.

(New way of saying this could be “READY TO REALIGN” the

position, if the word “terminate” affects you negatively. So,
by default, I am “ready to realign” the position.)

To know that it is “correct behavior” to realign a trade is

monumental in itself. Matter of fact, that is my default
mindset. “I want to terminate a trade”. I want to terminate the
trade at the “correct time”. This correct time is built into my
parameters for trading. My template identifies the correct time
to terminate. I don’t need a reason to close the trade. Let me
say that again, I don’t need a reason to close the trade.

*But I do have to have a valid reason to keep a trade active. *

Questions:

26
What is the only valid reason to keep a trade active?

What and how many reasons do I need to close a trade?

What is a potential problem with the word terminate?

Now this might be getting confusing, because I am confusing

myself. I am trying to slightly confuse you in order for you to have
to think hard about this concept.

Let’s look at the two words I am throwing around right now.

Terminate and Realign.

The word “terminate” looks only to its end. Terminate – stop
or close the trade. If that is your thinking, you think you are
done. But the word “realign” suggests another step or at least
hints to a continuation. Trading should become a fluid of
sorts. You have multiple continuous actions you are taking.

One thing the charts don’t broadcast is if the next move is

going to be the big move. That is why we take the correct
signal to change directions when the market indicates to us
that it is changing directions. Does the market in anyway
indicate to us that this new direction is going to be a long
lasting one? I say sometimes. Remind me to discuss this

Most traders see opening a trade and at

27
some point closing the trade as the whole
process.
It took me a long time to realize that my action of buying and
selling or opening and closing trades were to be continuous until I
was in proper alignment with the movement of the instrument
being traded. Most of the time now I enter correctly and exit
correctly on trades, and when I have time, I enter again for a new
trade. Why do I enter again?

Because A.) I am ready to terminate the trade if I am wrong. B.) If

the trade proves me correct, then my account is increasing in cash

When you grow in confidence, you will be able to move fluidly and
continuously with the trading process. However, first is to learn
how to accept closing a “non-producer” or “thief” trade. Learn to
close (terminate) a bad trade.

As a mature trader, I now realize that when I am losing on a

trade, it is simply because it is not in harmony with the direction
that the market direction masters are moving the item.

Losing is the Achilles Heel to the unlearned trader. Invest as much

time as needed until you fully accept how losing works in this
arena. You master your way to success by mastering your ability
to use losing to your exclusive advantage.

“If no one can defeat you with the

power of losing, then they are
powerless over you.”
GUIDELINES

28
(A) ) YOU MUST AND WILL HAVE YOUR EXIT PLANS
IN PLACE, YOUR PRECISE REASON FOR
CLOSING
YOUR TRADE. What is your reason or reasons going to be
for closing a trade? I need to hear you speak it now. A
person should have a check list of necessary items to be in
place. Also listed, is a checklist of correct thinking
parameters. This list is to be evidenced before the first real
trade is taken. By having this document in place, you are
already doing what the 80% don’t do.

(B) ) Is the place you will close the trade at a price point or
some other point? Many people use price points to
determine the spot to close a trade. For example, on a
winning trade, if you thought that you wanted to make $500
and then the price was at the point and you are up $500,
then you would close the trade. On a losing trade, if you
are willing to lose
$265, and then the price is at that spot where you are down
$265, then you would close the trade.

I used to trade that way. I no longer think it is correct. At

least for me. I prefer to not be regulated by prices.
Meaning, if I am up so many dollars, I am closing the trade.
Or if I am down so many dollars, then I am closing the
trade. Being regulated by dollars affects me negatively.
Who says my dollar amount is correct on either the winning
amount or the losing amount? Most people, including me
have issues with dollar amounts. So now I choose to let the
move dictate the “distance of the trade.” It is a true reading.

BY LETTING THE CHART OR BY HAVING A CORRECT

SPOT TO DIRECT ME AS TO WHAT TO DO, I AM
AGREEING TO BE IN HARMONY WITH THE MOVE,
FOR AS LONG AS THE MOVE WANTS.

If the move wants to provide me with a $3000 move, why

29
would I be trying to limit it at $500?

30
Ask most people and they would default to the thinking of
taking the dollars, or using dollar amounts to make their
decisions. Keep in mind, you can do whatever you want. But
remember, if you continue to think like the 80% do, then you
will probably end up with the same 80% results.

(C) ) If you are new to trading, see if this next statement

sounds correct or incorrect.

YOU WILL HAVE YOUR STOP ENTERED AT YOUR

BROKAGE ACCOUNT. THIS IS ADVISABLE OVER A
MENTAL STOP, UNTIL YOU HAVE PROVEN THAT YOU
ARE DISCIPLINED. YOU WILL TRADE A SMALL
POSITION (25-75) SHARES, BECAUSE YOU EXPECT IT
TO BE A LOSER, A THIEF THAT YOU’RE GOING TO
TERMINATE.

The use of stops sounds so logical and something all smart

people would do. (Of course, I don’t use stops because I
have complete control over what I am doing and allowing
with each trade.) I know I can behave correctly. When I first
started, I couldn’t and didn’t have the discipline to trade
correctly. I bought into the deception that using stops
was all to benefit me. It was a two-edge sword.

(D) ) STAY IN THE SAME TIME FRAME THAT YOU

HAVE DECIDED TO TRADE.

(E) )ONCE YOU DO HAVE A PROFITABLE TRADE, DO

NOT; I REPEAT,

31
 DO NOT ALLOW YOUR PROFITABLE
TRADE BECOME A LOSER!

(THIS IS A PARAMOUNT POINT THAT STUPID

TRADERS VIOLATE ALL THE TIME)

After all the years I have been trading, I still occasionally let
this happen. It is amazing.

See if this next statement sounds correct or incorrect.

(F) ) BASE YOUR TRADE FROM A LOSS POINT OF

VIEW. EX: IF YOUR EXIT PLAN, YOUR KEEP YOUR
CASH PLAN, YOUR HIT THE DOOR FAST PLAN, IS
THAT YOU WILL RISK $100 or $500 PER TRADE,
THEN YOU ONLY PUT ON A TRADE THAT HAS THAT
LOGICAL REFERENCE POINT.

That statement is also both correct and partially misleading.

Once you open a trade, you are immediately exposed

to risk, and at that point the trade could start to move
against you. That is where you would have an X
amount of money that the trade could move against
you and you would fold. That amount of money should
also correlate to a logical point on the chart that also
helps you realize that the direction is really not going
in the direction you placed your trade.

(G) ) Another very important factor is “time allotment.”

Time allotment is a criteria based rule that should be
applied to each trade. Most traders simply don’t realize
that this is an indication of risk. Let’s say you open a trade
and it is not

32
 going against you. Most would just keep the trade open
and be expecting that it will at some time start in the
direction you placed the trade.

“A position that is not losing you money,

but is not producing income or in other
words, is not moving in the direction that
you placed the trade… is as bad as one
losing you money.”

When is the lowest risk present with an open trade?

33
 In other words, it is at the lowest risk of
loss when it is moving in the direction that you have the trade opened AND it
is moving in that direction. If I have opened a position to go up and it is not
steadily moving in the up direction, I will close the trade.

Let me state it again and perhaps in slightly different way: I don’t need a
reason to close the trade. I want to close the trade by design. I open a trade,
I want to close a trade. Period.

If you grasp the planned actions that I take, then you might ask- What
conditions must be present for you to keep a trade open?

I only need one reason to close a trade: What is it?

Study the manipulators, know their behavior before you trade them.

Show a Gap and how devastating it can be. That is why you will only have
trades open that you can literally SEE.

DO NOT PUT ON A TRADE BASED ON YOUR ENVISIONED PROFIT.

34
 Trading is a competition over losses. You must participate at the
point that presents the greatest potential for a loss to someone
else. Where is that point?????? This also has to be the
same point that identifies quickly if you are the loser.

BECOME A MASTER OF HANDLING THE LOSES, AND UNDERSTAND THAT IT IS ONE

OF THE SECRETS TO LASTING IN THE GAME OF TRADING. THE PERSON WHO
THINKS ABOUT, PLANS AND IMPLEMENTS ALL THE BEST STRADEGIES ON
PRESERVING HIS TRADING CAPITAL WILL BE YEARS AHEAD OF THE MASSES.
YOU MUST SERVE YOUR APPRENTICESHIP BEFORE YOU EARN CONSISTENTLY.
Changing your behavior is first before you make real trades.

• AGREE WITH YOUR ADVERSARY QUICKLY.

• PROVE ALL THINGS, HOLD FAST TO THAT WHICH IS

GOOD.

• LISTEN, FOLLOW, LIVE.

• ONLY THOSE WHO DO THE WILL OF THE FATHER WILL

ENTER THE KINGDOM OF GOD.

• NOT MY WILL, BUT THY WILL BE DONE.

IDENTIFY THE CHANGING OF THE GUARD, AND THEN YOU MUST,

REPEAT YOU MUST

Three types of trades: Thief, Non- Producer, and Producer

35
PARTICIPATE WITH THAT CHANGING.

How long will a move go in the current DIRECTION--- DON’T KNOW ---
DON’T CARE, IS THE CORRECT THINKING. YOUR ONLY CORRECT
ACTION IS TO BE IN HARMONY WITH THE MOVE. How do you stay in?
harmony with the move?

What is the purpose of trading? Why was trading created? To get

your cash out of the bank and into someone else’s pocket. How do
they do that? They simply stimulate your senses with greed.
What is the mechanism they use? They simply employ change.
Change the direction. It’s simply a Direction game.

It is about creating TRANSACTIONS.

Remember it is a create the loss

game

36
Draw 3 trades:

LOC –

LOT -

LOD -

At a glance:

Monthly, weekly, daily, 40 min, 6-1 min.

Basic start:

1- Rule- Determine time frame and stock you’re

37
 comfortable trading in. Both of these come after
much time is invested in viewing them. Learn their
personality. Speed of moves, range capacity,
volume, Bid / Ask spreads, etc.
2- Rule- Stay in this time frame only---while trade is
active. Only use this time frame for signals. Your
LOC.
3- Rule- Once a trade is profitable only let correct
signal determine when to exit. What is that
signal? The LOC change or a steep burst either
straight up or straight down.
4- Goal is to have a trading plan that 1st. - Quickly
identifies thieves (you must develop discipline to
immediately terminate these). By default, you have
a thief trade. 2nd. - Ensure that you are in position
to participate with big move.
5- Rule- Always terminate a profitable trade that that
comes back to even. Never let it go past your
entry point. This scenario means you did not get
change your thinking at the LOC.
6- Rule- Only keep a Producer active. Think about
this!
7- Rule- Only enter trade at lowest risk point. You
must have your qualifier that identifies this for you.

38
Make sheet with 3 types of trades. T, Np, P

No Control, learn to be the fast, small loser, constantly

on look out to realign.
What kills the driver? Not stopping at the stop signs or at
the cross roads.

What kills the trader? Not changing at the LOC.

Offensive/Defensive
Pants, keep my pants
Do what a loser does when losing, when you have a
profitable trade.

What does a loser do when they have a losing trade?

They do nothing except wait for the trade to come back

to even. Sometimes it does, they are happy. Sometimes
it doesn’t. That is when they lose all their cash.

Another thing that helps while having a producer is to

move up a time frame. Meaning go from a 5 min time

39
 frame to perhaps a 10 or 15 min time frame. This helps
you to let the producing trade stay active by giving it
more wiggle room. You would be using the longer LOC
for your signal to close the trade. I used this to help me
expand myself from being to hyper about taking
profitable trades off so fast. This is just a consideration
of altering the plan of changing immediately on the first
or slight break on the LOC. I say this because new
traders tend to either have their LOC to tight, to steep or
are just too anxious about closing a profitable trade. We
are referring to the LOC that is diagonal.

For trades being played in range (horizontal LOC) you

are taking the trade when it gets to the LOC. You are
actually learning to sense being fast to closing these
types of trades.

Many losers on the sheet, few winners

3X3, support, resistance, trend lines, timeframe, (exit strategy), fear, greed,
ego, opinion, 2:30, gap crap, earnings season, tops, bottoms, patterns, order
types, volume, time of day, selectivity, auto stops.

40