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Seneca pilot Jan 4, 2013 5:53pm | Post# 1

The purpose of this thread is to discuss the truth about trading.

This will not be a thread about methods. I will not be discussing my methods. I want to discuss the true fundamentals of trading. The important things that are never discussed.

I will be adding to this thread once or twice a week as I have time. I trade London and live on the east coast of the US so time is sometimes tough for me.

First my resume, I have traded since 2002. I started in equities and migrated to futures due to the leverage and the trends. I began with forex about three years ago and have never looked back. I didn't make a profit for the first four years of trading equities. I figured out my style while trading futures. I was able to leave my job last June and am trading full time now.

This thread is a rambling in no particular order and its purpose is to discuss the basics to becomming profitable.

The rules for the thread are simple, if you agree with what's said great, throw me a vouch. If you don't agree that's ok too but be respectful. I love a good debate but won't tolerate personal attacks.

I hope you find something here you can use if you are strugling to become profitable.

Edit: I ended up talking about the method after all. It seems you can't make a point without an example.

EDIT: I opened a trade explorer,
http://www.myfxbook.com/members/MH60L

Seneca pilot Jan 4, 2013 6:24pm | Post# 2

First truth.


The trader must learn to take losses.

If you as a trader are unwilling to take a loss you will eventually take the mother of all losses. If the trader is unwilling to take a loss he or she will be forever closing trades with tiny gains that will never overcome their losses.

This was my hardest lesson. I consider myself a pretty smart person but this one was EXTREMELY hard for me. The natural tendency for me was to move the stop to breakeven as soon as the trade was into a decent profit. Of course the market will often roll over take out your breakeven stop and then race off to the target. You spent lots of time designing your method, you spent lots of time testing your method, set your stop and target and close the computer if you have to but you MUST be willing to take a loss.

I cannot stress the importance of this enough. Once I had a method with a positive expectancy this was the key for me to becomming profitable.

Please feel free to add your thoughts. I certainly have a lot to learn still and hope that discussing these points will help me in my trading as well as perhaps helping a few others along the way.

pipfarming Jan 4, 2013 8:21pm | Post# 3

First truth.


The trader must learn to take losses.

If you as a trader are unwilling to take a loss you will eventually take the mother of all losses. If the trader is unwilling to take a loss he or she will be forever closing trades with tiny gains that will never overcome their losses.

This was my hardest lesson. I consider myself a pretty smart person but this one was EXTREMELY hard for me. The natural tendency for me was to move the stop to breakeven as soon as the trade was into a decent profit. Of course the market will often...
I agree with you that one has to learn how to face red numbers and how to face green numbers (which is way harder to face than red numbers) with ease and stick to one's plans. My very limited experience (half year of live trading) taught me that, I need to have full confidence in my plans (systems) so that when the testing time comes, I can concentrate on discipline myself instead of worrying about the tides of market.

dfwfire Jan 4, 2013 9:07pm | Post# 4

First truth.


The trader must learn to take losses.
I agree this is probably the most important and often neglected reality for most traders. You have to be able to shake off a loss and not let it effect you. Regardless of what all the banner ads, random ebook authors, and delusional forum posters say- there is never going to be a system that wins 100%. Even theoretically if a system was perfect the odds are your mentality will not be and you will make a mistake. In the end- You will have losing trades. You will have losing days. You may have losing weeks or even a losing month. Learn how to just clear the loss from your mind and continue trading your system to the best of your abilities. Even if you literally have to turn the monitor off for 5 minutes and walk away- take a deep breath, get a drink, do pushups, or whatever you find helps clear out the negative energy and refocus your energy.

Seneca pilot Jan 7, 2013 8:26am | Post# 5

1 Attachment(s)
Ok I know its a lot of indicators but here's my chart set-up.

Junky, indicator laden charts will only increase indecision. Most people go down the indicator road. I certainly did. I still waste an hour or so a week adding one checking it out and then deleting it after a little testing. They all lag and they all will give you conflicting info. If you really want to confuse yourself throw up a bunch of indicators and then use multiple timeframes.

Everything you need to know to trade is on the chart I am posting. If the stochastics line up with my entry its purely coincidence.

If this trade works out, great, but the point of this post is not the trade its the chart. Its clean, uncluttered, and shows what I need to know.
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Seneca pilot Jan 7, 2013 8:29am | Post# 6

1.3045 is the hurdle. If it gets past there the target is an easy walk. Anyone want to guess why the target is 1.30675?

Seneca pilot Jan 7, 2013 8:55am | Post# 7

Next hurdle 1.3054. Why? Its the current day high, that's an important number.

Seneca pilot Jan 7, 2013 9:01am | Post# 8

Ok, now I move the stop to lock some profit. Only after getting this close will I do this. I think getting within three pips of the target good enough to lock some in. The target price is the decision line for bulls and bears so it is pretty heavily attacked from both sides.

Seneca pilot Jan 7, 2013 9:35am | Post# 9

Ok profit taken at 1.3065. Wanted out before market open.

1% risk 3.8% gain.

If I am only talking to myself this will be a short lived thread. Some body tell me Why I suck. I like a good debate, and could always learn from your views.

Todays truth: Indicators are worthless and are not needed.

scottymoll Jan 7, 2013 9:42am | Post# 10

Great thread so far. It looks like I got long at the same exact area as you. I'm still holding long from 1.3026. I will look for a pullback here to add additional positions, followed by another breakout to the upside. Although my trade entry was fine tuned off the 1 minute chart with an inital stop of 3 pips, I will look for profit targets on the 4hr-daily.

Also, it looks like you're a pilot. How long have you been flying? I'm an Air Traffic Controller at LAX, so I can appreciate your aviation enthusiasm.

Seneca pilot Jan 7, 2013 10:06am | Post# 11

I got my multiengine commercial licence three months before the September eleven attacks. Ruined my career path so I just fly recreationally now.

On Mondays and sometimes Tuesdays The bulls and bears are deciding whether the week will be up or down. The decision points are the two lines on the chart I posted. It isn't the purpose of this thread to go into trade strategy but I will trade around this area all week. I will use these prices for targets and entries.

Price is everything. Price at certain times is gold. This will lead into truth three.

Seneca pilot Jan 7, 2013 10:09am | Post# 12

And there is the target. Now Who wins Bulls, or Bears?

scottymoll Jan 7, 2013 10:22am | Post# 13

I got my multiengine commercial licence three months before the September eleven attacks. Ruined my career path so I just fly recreationally now.

On Mondays and sometimes Tuesdays The bulls and bears are deciding whether the week will be up or down. The decision points are the two lines on the chart I posted. It isn't the purpose of this thread to go into trade strategy but I will trade around this area all week. I will use these prices for targets and entries.

Price is everything. Price at certain times is gold. This will lead into truth...
Awesome! I wanted to get my VFR rating, but then saw a small plane flip and crash when I worked at SDM (Brown Field, San Diego). Even though it was a student pilot flying an experimental on a windy day, it still left a bad memory in my head.

Your decision points are interesting. I'll keep my eye on them throughout the week. I agree with you completely that everything needed to trade succesfully is in price alone. I too have been trading for 10 years and went through all the stages of an indicator junkie. It wasn't until recently that I realized that it was staring me in the face the entire time. Now my chart is completely indicator free and I'm trading better than I ever have.

catiron Jan 7, 2013 10:38am | Post# 14

In total agreement with your first two "truths". Accept losses and trade from a clean chart. Looking forward to more.

Seneca pilot Jan 7, 2013 10:55am | Post# 15

Awesome! I wanted to get my VFR rating, but then saw a small plane flip and crash when I worked at SDM (Brown Field, San Diego). Even though it was a student pilot flying an experimental on a windy day, it still left a bad memory in my head.
Flying and trading are similar in that the basice are crucial. Airspeed is everything when close to the ground. It is something I recommend to everyone who asks, flying is truly fascinating and lots of fun.

Seneca pilot Jan 7, 2013 11:10am | Post# 16

One thing about the decision points. Sometimes they are hit early Monday during Franky or London and never touched again. So I don't necessarily trade these price points every day. They are guides though. Typically long above and short below. I wish I had the patience to long or short off these areas and hold it for the week but I cannot seem to do it so I have adapted a short term strategy using these areas as a guide. Since trading is fractal the same principals apply on shorter time frames using daily levels instead of weekly. Again I wish I had a longer term view Because I would like to sleep through London and take one or two trades a week. I still only trade six or seven times a week and the returns are probably the same but I am lazy enough to want the longer term trades.

I am currently working on the longer term stuff on demo. I am hoping maybe I can use it in my investment account. I don't see ever being able to use anything longer than fifteen minute in my income account. Maybe one day I will mature enough to hold a trade longer than a couple of hours. :-)

Seneca pilot Jan 7, 2013 11:48am | Post# 17

I am done for the day. London close soon and all the volume goes away.

Truth three: Time actually does matter.

There are very important times during the day. The prices at these times are crucial.

It is important to understand I am saying time frames are not important, but prices combined with time are crucial. You can trade on any timeframe as long as you are trading the right levels.

Seneca pilot Jan 7, 2013 12:04pm | Post# 18

A good trader would have gotten the target I posted today. A great trader would still have been long into the supply level at 1.31049.

I hope to someday be a great trader but you don't even have to be good to make a living only adequate. Unfortunately it takes many years and lots of trial and error to become adequate as a trader. I am still trying to learn every day. Its part of the reason I started this thread. Helps to noodle this stuff out in a rambling thread.

Later :-)

Seneca pilot Jan 8, 2013 10:08am | Post# 19

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Trading truth:

Open a chart. It looks like there is endless opportunity. Price moves up and down over large areas with trends and in ranges. Looks like you could just trade anywhere if you have a good "system". Don't get sucked in. It looks great but its dangerous. It is important to identify high probability entry points. This is another way to dismiss indicator based systems. Indicators will constantly make you enter in no mans land.

The truth: You must identify specific places on the charts to place your trades and ignore all the area between these points.

The chart below has areas identified. The lines are just stuck on randomly so don't try to read anything into them. This illustrates the need to be selective and patient in your trading.

Notice in the top no trade zone there is a killer pin bar that looses. If you are sticking to your narrow trade areas you would ignore this trap.
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Seneca pilot Jan 8, 2013 10:28am | Post# 20

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I added a stochastic to the chart to illustrate What I am talking about. If you as a trader insist on using indicators, please don't just follow them blindly.
The entire length of no trade aone two has the stochastic in oversold territory and showing divergences. Ignoring this will improve you trading.

There are many ways to identify trade zones. Some traders use horizontal S&R, some use supply demand (Sam Seiden is a good search for this), trendlines, and etc. The lesson here that I had to learn the hard way is, only trade in areas that you have tested and proven give you an edge.
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