Barry Thornton’s closed Forex deal analysis process

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Barry Thornton's closed Forex deal analysis process

The Beginning

When we started out at forex trading we were lucky enough to join a large group of over 30 day traders who traded the European and US sessions. Having just completed a number of courses we were still inexperienced but had been taught a basic method to follow. We also started building our knowledge of technical analysis by reading as much as we can. Books like Trading in the Zone by Douglas, Come into my trading room by Dr. Alexander Elder and the many books on technical analysis were our foundations.

We noticed a number of types of traders in the group.

There were the ones that were very knowledgeable about everything and new products in the industry. Traders that spent a lot of time on forums and in chat rooms and then the more experienced ones that focused on their trading.

We soon realized that there was a danger of becoming a perpetual student and industry participant on an ongoing basis and never committing to focused trading. On the other hand those activities were important.

So we created a forex trading career plan. For the next 2 months we decided to study and test everything there was available about Forex trading. We attended, bought and did every course we could find. Read every book and magazine we could find. Every concept was then related back to historic and current charts and back traded and demo traded. We were at it for 16 hours a day.

At the end of the 2 month period we had a good grasp of the price drivers in the Forex Market and the importance of taking day to day market information into account in making short and longer term decisions.

We also found many systems that gave exactly the same trading signal at the same time so a successful transaction could be explained by 4 to 6 systems. For example a new trend could be identified using a trend line violation, support and resistance, momentum, moving averages and a range of other indicators. So the technical analysis systems almost became less important and what was more important is knowing when and which currency was likely to move. That required so historic price behavior analysis and historic fundamental analysis to give clues about these movements.  Most of the conclusions we reached we by personal observation and experimentation.

I, unfortunately then left South Africa and we continued some of the research on our own.

Why we had given ourselves 2 months to do all the research is to focus on education and learning about Forex trading. After that the focus shifted purely to trading because we should be then know what there was to know about Technical and fundamental analysis.

 

The Break through – closed Forex deal analysis

So Barry started using a system where fundamentals and momentum pointed trades in the direction of a short or longer term trend. Before going live he back traded and forward traded his system extensively using a demo account and put into place a pre-trading and postmortem system for every deal.

The pre-trading analysis merely took a picture of the trade before entry recording the reasons for entry and envisaged exit.

The postmortem would look at the deal and determine the reasons for failures (if there were any) and reasons why the best result was not achieved.

These 2 disciplines of doing closed Forex deal analysis were the main reasons for Barry’s success.

  • They allowed him to change his system to reduce losses on an hourly, daily, weekly, monthly and annual basis.
  • They allowed him to change his system to exit more favorably on an hourly, daily, weekly, monthly and annual basis.
  • They allowed the market to tell Barry how it wants to be traded.
  • He found many more reasons for successful and unsuccessful trades and his checklist grew and grew.
  • Using this approach he could trade any time frame from the 1 minute to the 4 hour charts using the same principles.

Although analysis deals before and after trades is not new or earth shattering they were a break through merely because he did them. Not only did he do them but he put a lot of thought in analyzing the reasons for failure and found many unusual reasons for failure. More on that later in the course including the postmortem checklist.

Barry started trading big money (what was regarded as big those days) from day one.

 

Questions for the reader

Do you do a detailed postmortem on every deal that you enter on a demo or live account?

Can you find valid reasons for every single failure?

 

Continuous improvement / Postmortem survey

If you would like to take part in the continuous improvement survey please use this link

https://www.surveymonkey.com/r/BarryMilliondollarsurvey1

If you would like to view the results of the survey so far please use this link

http://www.moneymakingforextools.com/results-of-the-forex-trade-postmortem-survey/

 

Feedback, questions or comments

Please leave comments, questions and feedback using the facilities at the bottom of the page

 

 

18 Comments

  • Dean Sawyer

    Reply Reply February 27, 2015

    Yup. Review each trade immediately after it’s closed.

    • info@expert4x.com

      Reply Reply February 27, 2015

      Find very precise reasons for failure can take 10 to 20 minutes sometimes – You will be surprised but there are normally reasons for every failed trade. Also there are reasons why the maximum gain can not be achieved on every deal – takes time to find them.

  • Peter Godau

    Reply Reply February 27, 2015

    Very interesting so far and would rather keep going right through the whole course as it’s got my respect and attention.
    I have never journaled or written down trades and reasons which is not to professional i know but can see that a system is required to keep reviewing ourselves, our trades and reasons why to better everything we do.
    I class myself as advanced now and what i need if i am to excel to master trader is the 80% in the head trained to become a robot.
    Looking forwrad to the rest of the course.

    Peter G

  • Gabriel Sandor

    Reply Reply February 27, 2015

    Interesting. I agree that doing such analysis will improve your trading. Also you can compare how similar setups sometimes go wrong and sometimes succeed. All in all there will always be some uncertainty. It is like to forecast the weather, you have all the variables, the direction of the wind a storm and you can say tha t that storm will reach some city at a given moment, but sometimes suddenly de wind changes and the storm goes to the other side. I think that if you do that kind of analysis with time you’ll develop an “inner feeling” that will tell you if enter or not.

    • info@expert4x.com

      Reply Reply February 27, 2015

      Good Comment – Exactly – doing the same system, postmortem and analysis everyday for over 10 years will develop and automate your manual decision making – turn yourself into an intuitive EA with more precise rules. Like automatically getting out of a deal when a high volume spike is encountered when scalping – no thinking required.

  • Paul smith

    Reply Reply February 27, 2015

    I do have a check down list which I theoretically tick off before I enter in to every trade…..don’t always do it though !
    I trade off of the 1 and 5 min time frame after I’ve evaluated the bigger picture….things are often moving pretty fast ! This mornings trading for example, I took several losses to begin with….made them all back, and some, but I want to eliminate the knuckle head losses ! I feel they are all mental at this stage.

    • info@expert4x.com

      Reply Reply February 28, 2015

      Thanks Paul
      Finding reasons why transactions fail is the most important part of the process – that will refine your entries over time especially is done over years- remember the objective is for the market to tell us how it wants to be traded – not us to tell the market how we want to trade it. Sure way of stopping the mental errors.
      It sounds like you either entered against increasing volume or did not exit against increasing volume – do a postmortem to check on that – use the 1 minute charts. IN GENERAL(there are exceptions): Decreasing volume is like putting your foot on the gas for the direction of your trade – increasing volume is like putting yourself in reverse compared to the direction of trade.
      We will cover the failure checklist later. In the meantime you can start analyzing the exact time your transactions were stopped out or hit their target – standard broker account info – see if you can see a pattern.

  • Wayne Davis

    Reply Reply February 28, 2015

    For me, poor habits are very hard to break. Example- I have yet to command multiple time frame analysis. I find myself placing trades on the lower tf based on it’s movement first instead of looking at the higher tf for direction. Then, when I look at the trades, I find out that I place the trade in the middle of the higher tf candle based on the entry of lower tf candle. Confusing I know. I see the great financial potential in trading but it’s a huge source of frustration for me and I have thought about giving up many times but each day I’m drawn back to trading platform for another beating. Have a question for you Alex, should I wait for the close of higher tf candle before placing a trade on lower tf candle? I like the 10 min and 1 min charts. Thanks for all you do.

    • info@expert4x.com

      Reply Reply February 28, 2015

      One of the advantages of using faster time frames is that you can enter faster. If you are going to wait for confirmation from a higher timeframe you might as well trade the higher timeframe. Also you will have missed the entry on the faster timeframe and the signal may already have turned. You need to reconsider what you are using the higher timeframes for. Sometimes they are just a general guide – you need to determine what role they will play.

      • Wayne Davis

        Reply Reply March 5, 2015

        Hi Alex-have to admit I’m confused by your answer. Aren’t traders supposed to trade in the direction of the higher time frame by using the lower time frame to time the entry? If this is not the case, no wonder I keep losing. Are you saying I shouldn’t use a higher time frame at all? Thanks in advance,Wayne

        • info@expert4x.com

          Reply Reply March 6, 2015

          Hi Wayne – you are a bit off topic or are missing the point.

          There is nothing to be confused about if you are making the rules. Whose rules are you trading anyway? They should be ones you have created or tested and understand. Seems like have you missed the point of the course. Only trade rules that you have convinced yourself work and that are yours. Please re-read secrets 1 to 4 again.

          No, traders are not supposed to trade in the direction of the higher time-frame if their system does not require that. Support and resistance, swing and retracement traders, for instance, often ( very successfully ) trade directly against the trend shown in longer time frames.

          Thoughtlessly following so trading rule because of some course or because some guru said it is why most Forex traders fail.

  • Charles Floyd

    Reply Reply March 2, 2015

    Excellent article.

  • wayne mercieca

    Reply Reply March 4, 2015

    HI All,

    I am keen to do Barrys’ course. Is it still available.

    How do I sign up to do the course. Determine price etc?

    Thanks

    Wayne

    • info@expert4x.com

      Reply Reply March 4, 2015

      Hi Wayne – just click on Forex Millionaire of the TOP menu and read the instructions carefully.

  • Chah Ring

    Reply Reply February 15, 2017

    Was the key lesson learnt at the conclusion of the two months of study that technical analysis is less important than knowing when and which currency is likely to move?

    And if so, were fundamentals deemed to be more important than technicals in analyzing the “when” and “which”?

    Also, thank you for providing this forum.

    Best regards,

    Chah

    • Alex du Plooy

      Reply Reply February 16, 2017

      Fundamental are as important. They are discounted in the price movement. The results of fundamentals are reflected in price trends.

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