Silent Service Method
I am starting this thread due to several messages I get asking me about how to trade. I find this interesting, considering I don't really post that much these days. (I guess someone thinks I know what I am doing.)
I could have called this thread something like "The only system you'll ever need", or "How I became richer than all of Outer Mongolia scalping the MXN/JPY 15 minute chart". Instead, I thought that "Silent Service" kind of sums up how I like to trade.
For those of you that do not know, the "Silent Service" refers to submariners in the Navy. They spend most of their time underwater, moving silently. In fact, silence is a major part of what makes these subs so deadly. Silence is also what keeps them alive. Plus, I have always had an affinity for people that serve in the military.
I also like to "pick my spots". Subs will sometimes follow a ship for miles waiting for that "perfect shot".
Some thoughts before I start:
As I began to trade, I just kind of "fell into it" like so many others do. I didn't even know that you could "trade money" until about 15 minutes before I started. Since then, I have tried several different types of trading, and different strategies. I have learned that you have to play to your strengths.
This thread will be about my strengths, and how I trade. This doesn't mean that you have to trade the same way. Perhaps you might think I am full of it, or more than likely, you might find a nugget in here. It doesn't mean you have to use it all....but please do not "add filters" to this method in here - it only clouds the thread.
I have learned that the key to happiness really isn't the ton of money you make in trading. In fact, the best trades I take are the ones I am not even paying attention to.
Some things to ask yourself:
Do you really enjoy staring at this stupid screen all day?
I know I don't and have found ways to avoid it.
Would you like to know where and when your trades are likely to happen days beforehand?
I have found this makes trading really, really, boring. And profitable.
Does trading add or subtract from your happiness?
For me, it's interesting. That's it. I no longer think much about how "exciting" it is at all. In fact, I rarely even mention it to others. Boring. I also haven't had a losing month since October of 2007.
What are you looking for? What's the goal for you?
Stupid answers like "I wanna get rich, man" are spoken by people I call liquidity. I want to work from home and raise my kids.....that's a simple way to define it.
Give me some time, and I will post so things to think about and ponder......
Updated since the "Commercial" status has been enacted.
Although I am still in the Commercial Section, I am NOT charging for anything now. (Except some clients that hire me for TA) I have a section on the blog site (thetraderguy.com) that has videos and charts, etc. It is all free....
I only mention this because several people have made mention of the group and not being able to afford it. There is no private group that I charge for anymore....I just wanted everyone to know this.
Also, if $75 a month is a bit too steep - you need to question whether or not you should be risking any money at all.....just a thought. None the less - I am not taking money from anyone these days.
PS, for stock and etf scans.....check out this thread over here - InfinitySL has started posting his scan results. http://www.forexfactory.com/showthread.php?t=209106
One of the regulars on this thread, Arfer Daily, has compiled this index on the first 100 pages. I thank him for doing this! The pdf is below:
index1 first 100 pages.pdf
When we start trading, we do it based on some idea of what is possible. Normally we see some ad that has a rich-looking person standing next to their Lear jet or something like that. Of course that can be us, all we have to do is make a shitload of cash buying the Euro! (That's what we think at first.) We are going to make a ton of money, because trading is so damn easy. I mean come on! What's harder work? Climbing a ladder to paint a house, or pushing buttons on this ATM we call a computer???
Well, it doesn't really work like that does it?
I know you get into trading to make money, and to become rich. But think about it for minute: What are you really trying to obtain? Freedom.
Money allows us freedom to do things. Freedom to travel, freedom from certain worries. We can pay the electric bill with ease. We can get out of our crappy jobs and sleep in. Freedom to not be somewhere at 8 A.M. on Monday morning.
Money itself is nothing. It's the ability to do things and more importantly the freedom to do things is what we want.
A paradox arises for a lot of traders after a few trades. They give up on freedom, because at any moment - they could make money trading. So they sit at a computer for 16 hours a day. They trade 5 minute charts and stress out for 15 of those 16 hours. Is this freedom? I don't think so at all.
So why would someone do the opposite of what they are trying to accomplish? I don't understand it to be honest. (Although I admit to falling into the same trap myself when I started.)
I really want you to think about it. Even if you are making money, is it worth it? It all comes back to this being a positive experience.
This is why you won't see 15 minute charts on this thread....I tend to work with daily and 4 hour bars. On rare occasions, I will use a 1 hour bar, but only after I have decided it's time to get in anyways. Even in these circumstances, I use the 4 hour and daily to guide my 1 hour trade. I also use the higher time frame to set my leverage. (I'll explain this when a good example shows up.)
Believe it or not kids, you too can place a trade and walk away like I do....I promise.
Alright Mr Clockwork...your avitar title hooked me, now you text is reeling me in... i'll be following!
I know that there are going to be people bitching about me not posting any charts right away. It's alright, they can leave at this point.
The truth is I have found most of what makes a profitable trader isn't based on charts. I know this is a cliche, but I promise it's true. Of course I will post charts, but I want you to think about certain things first.
Besides, any idiot can read a chart.
This will be the first argument I am sure. Yes....I understand that 110% a week is possible. Yes I know that you are probably doing that every week... (Then why are you here?) But I thought I would lay out some reality for us "mere mortals".
The truth is this: Any gain is good.
I will be honest with you here, I make consistent gains every month now. It is now the end of February. These are the gains I have made so far this year:
January - 2.7%
February - 2.1%
Nothing too exciting huh? What if I told you that I did it with about 1 hour's worth of work a month? That's the kind of leverage you need to focus on, not 400:1.
For you jokers out there, it works out to be a 32.92% return for the year if I repeated these returns.
If you are not sure if you should be happy about making a return like that....take a look at your 401K and see what the "Professionals" are doing these days. Besides, I have several 4% months a year based on the method I use. You can too, but to think 150% a month is a goal is nothing but reckless trading.
Most of the time this is based on trading with a tiny account. I am not saying that a small account can't be useful, but let's be honest here: How many multi-million dollar businesses are started with $500? (If you don't think it's a business, your local taxman will correct you on this concept.)
There is another route we can take. We can slowly build our account up, and add to it as well. This allows us time to make the money, and add it as we (in theory at least) get to be better traders. Your retirement account is a good example. In order to fund it with enough money to retire on by your gains alone, it would pretty much be impossible for the average person.
You need to give yourself a break, and understand that compound interest is what will make the difference in the end. If you don't have $100,000 to start trading with, that's fine.....just add as you go along.
I would be remiss if I didn't point out that you should be profitable before you start adding money to your account. In fact, I recommend demo trading until you "get it somewhat", and then trading a small account for a while after that. When you add money, it should be gradually. There is a psychological difference in $.50 a pip vs. $5 a pip. You should build it up gradually. Don't psych yourself out.
There IS an adjustment to different pip values.
silent service method
Looking forward for more details
Like your intro and am always willing to learn. Looking forward to reading more about your trading style.
Hey clockwork71...32,92% return a year...LOL, I do that on hourly basis...
Sorry, I just needed to do this!
COUNT ME IN!!!
The silent part.
As far as news is concerned, I have several issues. I have tried to grasp it's importance and effect on price, and have failed. Luckily for me, it's profits that matter, and not understanding. (This is why perhaps most of the "experts" can be found in academia, and not on trading floors.)
One thing that I have noticed, is that a lot of the time price action tends to "lead" an announcement. I think this is because traders are "anticipating" a move. (Perhaps in front of CPI or something.) A lot of newer traders tend to think there is some conspiracy out there. Some "hot tip" that was "leaked" out for a few select few traders. I tend to think a reaction to news may already be set in the way all the trades are leaning. For example, if everyone is short the Euro, and there is severe negative news for the Euro....it confirms the herd's beliefs. Either way, as you will learn.....none of this matters. Seriously.
I do not want to get involved in a "Fundamentals vs. Technicals" argument here. I know that Fundamentals drive the overall trend. But I have found that an announcement of CPI -2.3% does not mean that I should short EUR/USD at 1.2450. In fact, does it ever tell you when to get in or out of a trade? (an example.)
Besides, it's hard to gauge how thousands of traders around the world are going to react. Hell, I never know how my wife will react, and I live with her. Plus she's only one person. Now try to imagine doing that for 800,000 strangers all over the world. Good luck with that.
Besides, there are few things less interesting than economic numbers. Yawn. If I wanted to learn all about it, I would get an Economics degree.
Take a look at one of your friendly news channels. CNBC is a great example. You have 8 people all trying to out yell each other. None of these people have any idea what's going on. As a fun exercise, count how many times a day one of the anchors asks a guest: "So what's the trade?" Or..... "Where are you putting money to work?" It turns out that's the entire idea behind having guests. Is it possible that some of these guests have a interest in your taking there advice/trades thus driving price up for them? It's all about the "hot tip" that is mentioned in Reminiscences Of A Stock Operator. Wall Street really hasn't changed over the years.
Besides, they have an interest in you believing that the stock market can bounce at any moment. If you actually think we are in a Bear Market for years, and cannot short stocks (like most people) - you won't watch them. They have a vested interest in you investing.....No viewers, no advertising. No advertising, no CNBC. No CNBC....no job.
Silence is the one thing that can insulate you from all of this stupidity. Trust me, there is nobody that has more interest in your portfolio growing than you. Not the news anchor, not the guy announcing the economic numbers, not me even....it's you. You are the key.
So turn off all the crap that is so readily available. If you listen to these people, you are going to lose a lot of money.
I am more interested in where the order flow is. I don't care why....just that it's there.
I approach trading with the attitude of - "It's the WHAT that matters....NOT THE WHY."
I am here to make some money, not speculate on rumors.
(For what it's worth) I have already learned LOADS from this Chris, I assure anyone reading this thread now that he is the real deal.
I for one am IN on this one
However . .
Even with all his sexy trading skill he will still simply never be as cool as that guy with the Alpha beard in his avatar, there are just some things money cannot buy I am afraid . .
EDIT - First posts are already best thing I have read on this forum in about a month (exception is Bemacs posts)
So true about CNBC, it is good entertainment though (yes yes I have a sick mind) And bloomberg has Cris Valerio . . . .
Everytime I put on CNBC I cant stop thinking "It's not a "TECHNIKUL BOUNCE !?!?!" its because of Obama and his blah blah"
It's also like that guys signature in here, "USD is dropping due to recent news of the USD dropping" lol.
Another Good thread to read!!!
Perspective. (Quality vs. Quantity.)
The biggest trick with trading Forex is that we are lead into it thinking about all the riches just waiting to be picked up. What most of us hear all too late in the game is that there are simply times where a trade isn't there. In fact, there can be several days in a row that there are no trades worth taking. Like the submarine that tracks an enemy in the open waters, there has to be a planned out attack. You don't just fire randomly. You have to be able to plan you emergency exit, (stop loss) what to use for you attack, (sizing) and how to exit. (uh....your exit strategy.) Trading isn't all that different.
How many of you actually have an exit strategy? Getting into trades is the easy part. When you exit can decide if you are going to be profitable or not in the end.
There's an old saying, "Nobody ever went broke taking profits." I would say that's a very dangerous way to think. It is a strange thing to think that you can be "right" 30% of the time, and yet be profitable. Or you can be like I was when I started, "correct" 75% of the time, and break-even or slightly down at the end of the day. That really, really sucked. (A nod to "Letting profits run.")
Have you ever looked at a chart after the fact and said, "Wow! Look at how easy that trade could have been, if I was just there....and hung onto it?" You tend to think only the best and brightest were in that trade. Why in the hell can't this be you? The answer is "It can."
It comes down to taking better trades over taking random ones. When you enter a trade, how many reasons do you have for being in it? "It looks cheap!" is not a valid answer. I like to have at least 2, and more often than not, 3 reasons to take a trade.
I have gotten to the point that I only take about 5-10 trades a month. What I have found is that one good trade can make up for a couple of "so-so" ones. Eliminate the "so-so" trades, and you are talking great returns.
If you can make 3% on one trade, or 3% on 20 trades...which one makes more sense to you? Do you enjoy the extra stress involved with pulling the trigger all the time?
The very first part of how I look at charts will deal with perspective, and what matters as far as order flow. You have to be able to see where the largest "barriers" of orders are. Markets tend to go from Point A to Point B over and over, despite what some people will tell you about randomness.
Of course I am talking about support and resistance, the basis of all trades I take. In fact, most of the time it's where a bar is that matters more to me than what shape.
I am going to show you how I look at S/R in a few. This will be the start of charting for those of you that absolutely can't wait. I would say though...focus on some of those first posts. Ask yourself questions about these things. If you are rushing to find your millions based upon a few random charts I post, you're in a heap of trouble.
This is not a get-rich-quick scheme. It's about enjoying the ride AND getting rich.
There is nothing new.
One issue all musicians seem to run into is the idea of being "original". It's not really an easy thing to accomplish to be honest. I spent so much time worrying about being "different", that it became a little bit of an obsession back in those days.
When I wrote songs for the band, I tried like hell to be different. I really did. And in some ways, I did. However, there is one thing that you cannot get around: Thousands of musicians came before you, and the chromatic scale still only has 11 notes. (12 if you count the octave.)
This means that the odds of finding a truly unique combination of notes is very unlikely.
I am here to tell you it doesn't matter. There are little "twists" you can do to make it your own. Trading is very similar to this.
There won't be some magical hidden indicator here. In fact, this is all basic technical analysis and price action. However, I have a way that I do it that makes sense to me. This is why I make money doing this. It really is that simple.
I just put this up so I don't get anyone expecting something "new". It does not exist. Leave the magical mathematical formulas to the "quants". By the way, they are the same people that got it handed to them last year.....
Just a thought.
Don't reinvent the wheel...use it as a tool.
P.S. - Next one will include a chart, I promise.
LOL @ CNBC. Too true. I love watching Joe Kernen in the morning tho, it's great comedy.
There is nothing new, but is anything so perfect that it cannot be made better?
Not all areas are equal.
You need to know that not all support and resistance areas truly matter. Anyone can pull up a 15 minute chart and start drawing support and resistance areas, but do all of them mean anything in the big picture? Hardly.
In fact, think of forex trading like this....
You buy USD/CAD at 1.0000, you take profit at 1.0100. That might be a decent move in your account....but it's only moved 1% total. This is part of why we need to look at the big picture. Stocks move like that all the time. However, with our leverage in this market....that move can hurt more than on say 100 shares of VZ.
The areas on this chart show where you would want to buy or sell. You have to be able to recognize the "boundaries" of the field you are playing in. Truthfully, I find that anytime you buy or sell in the middle of two or these lines or areas....you are gambling at best. You need to know where price is likely to react. Most of the time it's kind of just floating around, heading to the next destination.
There is a statistic you read about that says the markets consolidate 80% of the time. If you can recognize these areas, you will learn to love consolidation. (Unlike trend traders or moving average crossover traders who hate it.)
Most of the action is from Point A to Point B. (The different colors on the chart below.) However, you need to recognize that the same areas make price react. Over and over. I can tell you there is a lot of speculation as to why that happens. I can tell you one thing: It doesn't matter, it only matters that it does.
Again.....are you in this game to get an Economics degree? Or to make money? Stop asking pointless questions like this. I submit that questions like this are only to make you feel better. However, in the interest of entertainment, I have one theory. (It doesn't effect my trading either way.)
These big areas are where larger firms are buying. I have a friend that trades for Rubbermaid. Granted, he is hedging for a company which is a different game, but he gets orders like: "Buy the Euro at 1.25". Well, he has to buy a lot. So what he does is buy every time it gets there, and not all at once. Ok, enough "thinking".
So look at this chart below. Any thoughts that the market is random? I didn't think so.
You need to get good at this part, it's the foundation. A good house isn't built without a good foundation. You need to know these areas. You also shouldn't be bothered with trading anywhere else.
I know this chart is a weekly, and that's by design. I have this theory that the only areas that really matter are visible on the weekly chart. I know daily ones exist, but if they were that important, they would be visible on the weekly anyways. (If you think about it, it makes sense.)
You should go over all available charts on the weekly time frame, and do this. You are looking for places where price tends to bounce off of. Support and resistance is a place where price tends to bounce off of several times, then might go through....only to bounce the other way at the same price later. Old saying goes - "What was once the floor becomes the ceiling". You are moving through different levels.
Also, keep in mind that a support line isn't to the exact pip. These are areas, not brick walls. It is not uncommon to see 20, 40, 100 pip "zones". Please begin to look for horizontal support and resistance. In consolidating markets (most of the time they are...) it's crucial.
Practice, practice, practice.
One thing I did when I started to become serious about this business was to practice. I practiced on Forex Tester a lot. (A great investment if you ask me.) I also practiced identifying support and resistance.
One great way to do this is to get a demo account with a broker that offers a large amount of pairs. I don't want to recommend anyone in particular, and to be honest, it doesn't matter who you use. You are looking for practice at this point, not a "decent and honest" broker.
So when you find a broker that offers tons of pairs, you can practice identifying these areas over and over. You can even do it with odd pairs. (EUR/CZK anyone?) It works everywhere. Remember, you are just trying to identify where people are more likely to push price up or down. Not to the pip, but the general area.
However, I have one rule about this: The zone is going to be at either a number ending in "00" or "50" about 98% of the time. Like I said, it's a zone, so if price goes through 00 and gets to 11, it doesn't mean it's broken yet. Did it hold the price above for any length of time? Let it prove itself.
The point is that unless we are at a line on this weekly chart....there's nothing to do. No trade at all. I am not taking trades in the weekly time frame, just using it as a guide for the 4 hour and daily charts. By using only weekly resistance for the initial set up, you eliminate a lot of junk on the charts.
Below are some examples of what you are looking for.
I love Janet too!
Let us not forget the stock market. I firmly believe that the stock markets are where it's at lately. However, you have to be able to short stocks as well to make money these days.
I have been doing well shorting lately....
Here is a chart of a stock I was playing with recently. It's ANZ Bank out of Australia.
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