Good evening everyone,
Today I have picked up my virtual pen and want to share my system with you.
First, I will give you an overview of my story (keeping it short for you) and then dive right into how the system works.
PS: This system is very subjective. It doesn't not rely on fundamental analysis nor technical analysis. I will explain later.
First, I want to thank you all of the members in Forex Factory. I can get to where I am today because of all the knowledge you share on this forum. There are many people I considered to be my mentors and I want to thank you one particular person, pipEASY.
This is the his post that I have read over and over again for the last few years.
Just for your inspiration.
I started trading stocks when I was 16, grade 11. An uncle introduced me to the FOREX market half a year later and I have never changed ever since. Over the years, I have always had one goal. It's to earn a lot of money with FOREX and achieve financial freedom early on. To this date, my goal is still the same. Regardless of my personal goal, I want to share with you what works and what doesn't work over the last 5 years.
At first, I want to make fast money. I tried a wide range of systems and possibly all the indicators you can find on Metatrader. You may be surprised by how long it takes for one to try different combination hoping it will all work and make money. Personally, I know programming as well, but over and over again, I was unable to create a system that would generate a significant amount of money. So then I pivot.
Lesson: Indicators didn't work for me.
As I move from 5 minute to day chart, I start to gain more success. I start to be able to double my account in a reasonable amount of time. But I can't sustain the growth without bombing it at least once or twice. At least, the stress level decreased and I am able to manage between full university workload, all the volunteering I do and trading FOREX at the same time. Instead of seeing trading as a get in get out system , I see it as a half year bond with a significant amount of return. Once you expand your view on the trades' life, it takes the stress away.
Lesson: Long term trades is less stressful than short term
There are some traders that try to find the system or the signal that gives them the perfect entry. This is who I used to be. I want to make my next trade successful. I want the next one to work. I don't want to lose. But that only caused me to lose money, lose focus and lose time. Instead, I learn to give myself a range to succeed within. It will be further explained in my system. You may hear this over and over again, but you can't win every trade. Good traders have a lot of small losses and have big wins. This also compliment with the view that seeing your trading position as a half year bond. So here I propose an alternative, what if out of the next 20 trades, you only need to win 2 to 4 of them? Would that be easier? That gives yourself air to breathe and room to make mistakes and adjust. The best part is that these 2 to 4 winners will be able to cover your losses and then some.
Lesson: Give yourself a margin to adjust.
Over the years, I have hopped between different kind of systems. From MACD to EMA, from Rainbow to just naked eye ball trading, but none proved to be successful consistently for me. Then, I realize it doesn't really matter what system it is. Maybe my focus has been wrong all along. But then, I never gave up because I believe this is my ticket to financial freedom. Even if I never achieved my goals, the skills I learn here will be beneficial for the rest my of life. If someone has done it before, I can do it too.
Lesson: If someone can do it, you can do it too
Tomorrow, I will dive into the process I go through in making a trade. I have already shared some lessons above on how I view trading. In the end, it's not so much about the technique I use but the mindset of managing the risk. The faith that 4 out of 20 trades will succeed and cover all your losses and then some.
I'm looking forward to reading your thread, Thanks for taking the time to post!
I look forward to your process of trading
Yeah. Nice story. I have went through this before. Tough!
Thank you for all your replies today!
As I promised earlier, today I will dive into an overview of how my system works. Personally, I don't think my "system" is a mechanical, yes no process. Instead, it is a ranking process that filters out the bad opportunities and leaving the good ones.
So this is how I decide to approach in explaining:
This order is ranked base on importance. This means, understanding the concept of time is more important than leverage, for now. This is because I believe that each person can choose how much they leverage and that ultimately determines their speed in making money. Let's say you leverage 10 times using my system and someone else leverage 2 times. If we assume they both don't bomb their account, Person A should earn a return faster than Person B.
Time - Value of time
As you search through the forum, you will see this phrase over and over again "let your winners run". Let me explain. In the past, I like to think that I enter a trade with a limit of 60 pips and stop loss of 20 pips. If I have a winning ratio greater than 1/3 then I should be making a profit over all. But this method requires many many trades to make it happen. If you can't commit to 9 hours a day of continuous trading, then it's very hard to achieve the return you wanted. But after this long search, I realize there is a better way to make money.
If you want your trade to earn over 2000 pips in 6 months, you need to have the patience to wait for it to happen. As easyPIPs say, you have to wait for a caterpillar to turn into a butterfly. What I suggest here is to view a trade as a semi-annual or an annual bond.
If you are in the same direction of the major trend, time will be in your favor and the longer you hold, the more pips you make on the same lot of trade. At the end of the 6 months, you earn 2000 pips your initial risk, let's say, 80 pips, will seem insignificant to you.
Risk a little and hold the trade as a half year bond
So in terms of risk, 2000 is significantly higher than 80 pips and in terms of time, you only have to be there to enter a trade and the rest of the time is to let it grow. This is why I support long term trading instead of scalping. This does not mean I don't think scalping can make money. But it does not offer the lifestyle I wanted.
Entry - Taking regular risk
So then, the next logical question would be how many trades do you have to enter to have that earn 2000 pips in one trade? The simple answer is more than one. It depends on the quality of your entry. As you become better at trading, you entries will become better.
Pick the best trade of the day and enter every day
My entry methodology is to pick the best trade of the day and enter one every day. Over the span of a month, I will enter 20 trades. Out of these 20 days, I only need 2 to 4 of them to be long term trades and cover the losses with that. This gives you room to breathe and to adjust. You may lose your first trade but then over the next 20 trades, you are bound to enter a trade that would survive for the next 6 months or even a year.
If you can grasp the first two concept I mentioned above, you are set to make a profit in trading. Imagine you enter every day, picking the best trade only and you hold your winners over the span of 6 months. I can't help but to smile when my account grows every day. If you do the math, you will be happy about how little you risk for the amount of return you get.
Tomorrow, I will explain on how to increase the likelihood of having long term positions.
Excellent so far! Can't wait to follow along. I too, am a HUGE fan of Pipeasy.
Thanks for taking the time to share. Look forward to learning more.
Am also a fan of pipeasy. Listening, TQ
Seto, I've now read a lot of what pipEASY had to say and I like it - I look forward to your thread developing.
Your style makes sense logically but realistically the swap fees alone will take a huge bite out of profits.It seems only way you can make profit is by buying where positive swap is welcomed if your broker pays +swap.
For this reason I am reluctant to sell AU NU GU more then a day or two because of their steep swap cost.
Please explain exactly what pairs you prefer to trade and if you primarily buy instead of selling.
Thank you Davit
Thank you for all your replies. I see that some of you already have questions on how I trade and I am very excited to continue this thread.
I am sure your questions will be answered as I go through the rest of the topics.
Today I want to cover these two topics:
Multiple Currencies - Filtering opportunities
As I mentioned earlier, we enter one trade a day and that would give us approximately 20 trades a month. If you look at a single currency, not every day is a good day to enter. That's why we will choose a few currency pairs that we are comfortable with and select the best one each day. Currently, I trade these pairs:
Of course, the pairs depend on your personal preference. If you think you are a EURO master, feel feel free to pick euro pairs. The idea here is that you don't want to pick too many pairs to analyze each day. Or else, it would suck up all your time. I used to trade 10 pairs but then, if I can make money with 5 pairs then I am good to go.
Out of the 5 pairs you choose, pick the best one of the day!
Over the years, I have been trying to find a simple system that would work in any market and anyone. The things I try to teach you seems intuitive and if it effective only if you implement it. If you are reading the post and you feel that it makes sense, then great! Are you taking these ideas and implementing into your trading system?
Major Direction - Monthly Trend
When I first started trading one trade a day, in the first month, I only have 2 out of the 20 trades surviving. I was buying and selling USD/CHF at the same time. I was confused about where the trend is going and just entering with little insight over the long term trend. This is why we have to analysis the monthly trend. Up to this point, I have been explaining these concepts based on day chart. So then, I started to look at the monthly trend.
When we are looking at the monthly trend, we don't need to predict that far ahead on what's going to happen. We just need to see where the immediate trend is going (the next 3 to 6 candles). This makes the prediction a lot easier. At the beginning of each month, I will look at the monthly trend and see if it goes up or down. If I think it goes up, then I will trade in that direction for the rest of the month. The key is to make sure you get your monthly trend right.
Make sure you get the monthly direction right!
This all seems intuitive. But what if you get your monthly direction wrong? That is why we have 5 currencies in choose from. Let's say you think USD/CHF is going to go down. But then it is actually going up more often than not during the month. Then you wouldn't trade USD/CHF. You would wait till USD/CHF starts to go down again. You have other currencies to select from. Also, sometimes, the currency is going in your direction but then it will be forming a top. Then you would want to enter other currencies that has more potential because you don't want the reversal to hit your stop loss.
At this point, you probably notice I am trying to integrate all the elements together. It is all related to each other. And when all of them put together, it increases the chances of your position surviving.
Thanks for your continued sharing ....looking forward to learning more
Thank you for sharing. So far, what you described fairly meets what I seek.
I am subscribed.
Post often pls.
Sounds interesting and love your systematic approach.
Will be following along from South Africa!
Is this based on backtesting or making profit in real time?
When you are talking about a method that requires holding trades for 6 months, backtesting 6 months doesn't reveal anything useful.
How many years have you been trading this way?
If it is snowing on your side, drive safe. Thank you for all your replies, I will try to address them after I go through all the topics. If you disagree or agree to any part of the system, please tell me. I would love to make it better. Everyone has their blind spots and I love to learn about them.
Today, I want to cover these topics:
Batching - Spreading and grouping risk
Stoploss - Setting the max lost available
Batching - Spreading and grouping risk
Over the course of a month, I would have enter 20 trades to 24 trades. Then, let's say, 4 out of the 20 survives and become long term positions. For the 16 trades that you lose, you keep track of your losses. During the next 6 months, you can exit one or two positions to cover these losses. Whatever remaining you will let it run till the end and take a profit. After you take a profit, you restart!
Over the 6 months, exit one or two positions to cover losses
I like to group it by month because of time commitment and the stress level. You can group it by day and enter by the hour. All depends on how much time you have. The key is to give yourself space to lose and space to win. Instead of winning the next trade, try to aim for 4 out of 20 trades.
Up till this point, I have covered a majority of the big picture. These are the things I have discovered over the years that helped. I think as long as you have the big picture right, the particular trading method will work. Money and risk management first and technique second. The remaining focus will be more on individual trades which is entry and exit oriented.
Stoploss - Setting the max lost available
There are a million ways to enter. But I believe that it is always better to have a stop loss. If you play poker, it is knowing exactly how much you are risking and not going all in for every single round. And if you are a confident in your trade, the stop loss should be just right and a little bit more.
To give you an idea, my stop loss range around 50 to 75 pips, depending on the market condition. If it is uptrend, it will be placed at the lowest point of the dip. If it is a down trend, it will be placed at the highest point of the top. Sometimes, I missed the perfect time to enter (which always happen), then I will enter base on the latest 3 candles.
In an optimal scenario, price would not hit stop loss during reversal
The best place for stop loss is to put it near the support and resistance area, where the dips and tops are. It is important to know it is a fine balance between not getting your stop loss hit and minimizing your losses. There is no right way or wrong way to do it. It all base on how much you can tolerate risk.
Ultimately, your stop loss determines the survival of the position. Sometimes, even if you enter with the trend, the volatility is so high that it would hit your stop loss anyways. That is why grouping trades together is important. Sometimes, you will be afraid that you are going to lose this trade. That is okay. If you follow the trend, the market will always be in your favor.
PS: I know it is tempting to trade reversals and earn more pips, but since we are taking a long term approach to make profit. Reversals seem to be a short term solution and require more monitoring.
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