Okay, probably a bit controversial but I am interested in some feedback on this. I have been studying FOREX trading for a couple of years now and am yet to take the plunge to live trading. I have read many different threads on many forums and my conclusion is that there is some good stuff out there but there is also a lot of junk. To me though, perhaps the most disturbing revelation is that most of the 'received wisdom' seems to fly in the face of good trading practice. For example, we are often told that it is madness to trade without a Stop Loss in place, yet often that just turns what could have been a profitable trade into a losing one. Below are some things that I have developed an opinion on and I am open to discussion about whether these constitute sound elements to developing a profitable trading strategy.
Obviously, my opinions are not unique so I take no credit for my views - I am just trying to justify in my own mind the most important aspects of a sound trading method.
1. A Stop Loss is not necessary for a good trading method. To qualify that statement if sound money mangement techniques are used then a position size should never become unmanageable.
2. The Trend is not my Friend. I have found that any trend-based system does not get you in early enough or stay in long enough to make sufficient profit to cover all the little losing trades when the market is ranging.
3. All indicators are effectively useless as the market can and will go wherever it likes (ie, where the traders as a collective take it).
4. In general, any practicable profitable trading method involves either a good risk reward ratio but with a not so good win loss ratio - or vice versa. You can't have your cake and eat it!
5. Most of the 'good ideas' put forward on forums are bogus and (maybe I'm being a bit cynical here) are designed to fuel the market with lots of long-term losing traders to benefit the 5% or so consistently profitable traders.
My conclusion is that the only profitable method is based on sound money management coupled with nerves of steel to bear the inevitable draw-downs.
Standing by for the hurricane!
Regards
Mike
Obviously, my opinions are not unique so I take no credit for my views - I am just trying to justify in my own mind the most important aspects of a sound trading method.
1. A Stop Loss is not necessary for a good trading method. To qualify that statement if sound money mangement techniques are used then a position size should never become unmanageable.
2. The Trend is not my Friend. I have found that any trend-based system does not get you in early enough or stay in long enough to make sufficient profit to cover all the little losing trades when the market is ranging.
3. All indicators are effectively useless as the market can and will go wherever it likes (ie, where the traders as a collective take it).
4. In general, any practicable profitable trading method involves either a good risk reward ratio but with a not so good win loss ratio - or vice versa. You can't have your cake and eat it!
5. Most of the 'good ideas' put forward on forums are bogus and (maybe I'm being a bit cynical here) are designed to fuel the market with lots of long-term losing traders to benefit the 5% or so consistently profitable traders.
My conclusion is that the only profitable method is based on sound money management coupled with nerves of steel to bear the inevitable draw-downs.
Standing by for the hurricane!
Regards
Mike
When you are wrong - admit it. When you are right - keep quiet!