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SterlingTDR Jan 2, 2006 12:32am | Post# 21

Mark, before you go any further it may be worthwhile taking some time and identifying some of your problem areas. Why not make a list of some of the mistakes you've repeatedly made thus far. Next list your strengths and weaknesses as you perceive them and in this way you can "gear" your trading strategy accordingly.
Your definition of a trend is good but I think you should define a time period. In other words a "trend is in place when the market is making higher highs and higher lows for "N" hours. (mins, days or weeks)
I think your "stop" strategy is pretty solid but how do you determine when and by how much to move your initial stop once the market moves in your direction?
Which market do you intend trading?

Steve

firehorse Jan 2, 2006 7:41am | Post# 22

Hi,

Thanks for asking Alan,
No problem. All the more power to you for having the courage to continue in a public manner

A few more questions
Simply when the market is making higher highs and higher lows, then it is in an uptrend. The rule implies that I will trade with the longer term trend, instead of just trying to catch a ride on hot candle movement.
What period of bars are you going to look at and how many bars/how far back are you going to go?

This is because at any particular time, you can always pick a trend up and a trend down, just by different bar periods and how far back you go.
An example of a reason would be that the price has moved two full candles above/below -- support/resistance, whatever the case may be. Maybe the fundamentals indicate that the dollar is gaining/losing strength because oil prices are rising/falling. The rule implies that I need information to back up my trade instead of just throwing a dart at the chart and hoping for a bull's eye.
Read enough sources of information and you will be able to find something to back a trade in any direction.

Which sources are you going to use?
What candle formations are you going to use?
What will you do if there is a conflict of direction?
I was taught to place stops and limits above/below the last known high/low. I'll need to determine how many pips am I willing to risk and stop the trade there instead of moving the stop to avoid being stopped out. However, I'm a big fan of moving stops to protect profit.
Stops only work in the context of a strategy with a positive expectancy.

How far back in bars will you go for the stop?
If you are going to move the stop, what are your rules?
The limit is the tough one. On one hand you want to move the limit to continue making profit but on the other hand when the trade turns back then your caught in the psychological warfare of stopping the trade or not.
I agree that if/where to place the limit is a tough one but it will need be answered before the plan is complete.

Best regards
Alan

firehorse Jan 2, 2006 7:48am | Post# 23

Hi,
Why not make a list of some of the mistakes you've repeatedly made thus far.
Totally agree with Steve here

Worth spending a bit of time here.

You've paid your tuition, so you might as well wring out every last cent from the lesson and get your money's worth

Best regards
Alan

howtotradeforex Jan 2, 2006 9:50pm | Post# 24

Wow, you guys are keeping me on my toes and for that I'm grateful. I hope others are benfiting from this as much as I am.

Let's see, a list of repeated mistakes. Did you know that the definition of insanity is repeating the same mistakes and expecting different results? We want successful trading, not insane trading right? So here are the first repeated mistakes that come to mind:

1. Jumping into a trade just because a candle moves rapidly.
2. Reversing that trade just because that candle reverses rapidly.
3. Moving the stop as the trade gets closer to stopping out.
4. Trading without a stop, then watching the price move further and further away, knowing that it will return in my favor.
5. Trading without an exit. This one is tricky but I've lost a lot of money doing it. A predermined exit in a profitable trade insures profit. But having no exit in a profitable trade leaves you wide open for greed to take control of the trade. While your busy looking for more profit, the price is moving backwards a few pips at a time, eating away at your profit. Does that make sense?

More to come, this is great!

narafa Jan 2, 2006 11:58pm | Post# 25

Sorry to intrude, but I think you said everyone is welcomed

I just want to pour in some of the small knowledge I got reading stuff all over the previous 4 years....Don't think that I am experienced, I am just a beginner as well, but I am sharing information which might help...

Before doing anything, please consider answering the following questions:

A- Self Assessment Questions

1- How many hours do you have per day for trading?
2- How many days per week?
3- How many months per year?
4- What are your psychological strengths and weaknesses from all prespectives? (For example, if you get really angry when you have a string of losses, this is a weakness against losing streaks, so avoid using a trading strategy that produce many losing streaks, very simply )


B- Define Your Objectives Questions

1- What are your profit objectives?
2- Are those objectives realistic?
3- What risk level are you going to tolerate, per trade, per week, per month?
4- How will you know that your plan is on track?


C- Trading Ideas Questions

1- What pairs are you interested in trading?
2- Wha entry methods and strategies are you comfortable with? (For example, do you prefer breakout entries, pullback entries or volatility entries?)
3- What trading strategies in general do you like? Trend strategies, range bound strategies or volatility strategies?
4- Short term, medium term or long term, or a combo?


D- Conceptualization Questions

1- How much trading capital is available?
2- How much of that capital is a risk capital?
3-Are you going to be trading your own money, or could the money of someone else get involved?
4- What are your beliefs about the pair(s) you are going to trade?
5- Can you choose a time frame for your trading now?
6- Can you determine the best historical moves for that time frame and find what those moves have in common?
7- What are the patterns and the possible causes of strong moves in your time frame and how they start?
8- How those strong moves tend to develope?
9- How those moves tend to end?
10- What's the concept behind those moves and how can this concept be measured in an objective way?
11- How reliable are your entries on the chosen time frame and for the moves you are watching?
12- What is the false-positive rate? (This is when your concept or idea is present, but not followed by the expected move)
13- What would the reliability be if you add a stop?
14- Are the moves behind the concept give you a good reward/risk ratio?
15- How can this concept be improved without optimization? (Improved with things that make sense)
16- What is the worst case scenario that could happen while you are in a position?
17- Clearly define the concept behind the trading methodology you are having and see if it really works or not


E- Setup Questions

1- What are your setup condition(s)?
2- How do you time your entry?


F- Entry Questions

1- Is your entry technique better than random entry?
2- Does your entry technique allows you to catch high reward to risk trades often?
3- Is your entry technique producing low drawdowns per trade? (In other words, does the trade go too much against you before going your direction?)


G- Stops Questions

1- Does your stop point(s) makes sense given your objectives and the nature of the concept you are trading?
2- What is your stop strategy? Is it a fixed dollar amount, a fixed percentage of equity, a support/resistance stop, a time stop, etc...?


H- Profit Questions

1- What is your profit taking strategy? Do you use time exits, trailing stops behind your trade, dynamic stops like those based on moving averages, a profit retracement stop or you just simply have a certain dollar amount for your profit (Or pips amount)?
2- Are you re-investing your profits back or cashing them out? And which complies better with your objectives?
3- Do you ever experience fear when your trade is in profit?
4- Do you get mad when a profitable trade turns into a losing one?
5- How are you going to handle situations like those described in questions 3 and 4? Because they are definetely going to happen


I- Opportunity Questions

1- How much signals or trades are you making in a certain time period, for example every month on average?
2- If you are using a strategy that produces a signal every 2 weeks, will you get bored, or can you handle it normally without breaking your setup and entry rules and criteria?
3- Would it be better for your complete case, to use a trading strategy that produce many trading signals over a short period or one which produces few trading signals?


J- Position Size

1- What will be your position size for every trade?
2- Are you going to use a fixed position size for every trade you take, or are you defining your signals into a probability matrix in which you use higher position size for higher probability trades and lower position size for lower probability ones?
3- How is this position sizing methodology confront with your initial capital and your risk tolerance, both per trade and per capital?
4- Given your position sizing you chose, what is the average maximum drawdown that you might experience?
5- Can your account handle this drawdown and come back? (In other words can a few winning trades restore your drawdown shortly and get you back on track, or do you just need a large number of winning trades to come back from your drawdown?)
6- Do you have a strategy to handle position sizing during a severe drawdown, keeping your risk tolerance per trade within your accepted range, and at the same time, keeping the mouth of your market maker or broker shut?



Thanks,

Nader

SterlingTDR Jan 3, 2006 12:27am | Post# 26

Nader, impressive as it is, your outline is better served as a summary toward the end of this journey rather than a road map to it. The reason for this is that when information is dispersed in quantity it cannot be realised and it loses its value. That realization, point by point, is vital because in order for someone to follow rules or principles they have to become part of that individuals belief system, as it pertains to our business. Once a principle is part of ones belief system it becomes more difficult to act contrary to it, which is what we should be striving to achieve.

So, please, continue to participate but serve it up in bite sized pieces so we can fully digest it, won’t you? J

Mark,

Points 1-3 show you have an issue with impulse trading and points 4 and 5 appear to be the results of rationalising due to your emotions. Overall, I think, that there are too many ambiguities and variables to deal with and the resulting pressure is crushing you. Your trading decisions must be as black and white as possible with very little residing in the grey. Since these are the reasons you are where you are, don’t you think its time you made a few fundamental changes to your approach?

Lets start with the fundamentals:
Read enough sources of information and you will be able to find something to back a trade in any direction.” –Firehorse

Trying to analyse fundamental data is an art in-and-of itself. Alan’s statement above is completely right and I think the only conclusion one can draw from it is; why bother? Unless you have a Bloomberg terminal the price has reacted to the news before you even hear about it, so why not let the price analyse the fundamentals for you? I mean you are a trend follower, are you not?

Steve

howtotradeforex Jan 3, 2006 8:48pm | Post# 27

Whew, Nader! I'll have to get back to you on that one. Have you considered starting a business plan consulting firm? I believe you'd be very successful!

howtotradeforex Jan 3, 2006 9:11pm | Post# 28

Yes Steve, I have made my claim to be a trend trader and you're exactly right about the trade being as black and white as possible. So here's my first trade for January 2006: Long EUR/USD @1.2045 10k mini lot. On my daily chart, the last low on Dec 5th was 1.1658. That low has acted as support for one month, all the while the pair is in an uptrend. The low on Dec 31st of 1.1774 posed little or no threat, and now the pair has made a strong push upward. My stop is at 1.2020 and will follow the trade by ten pips automatically.(yea, I'm watching it!)

howtotradeforex Jan 3, 2006 9:59pm | Post# 29

Sorry to intrude, but I think you said everyone is welcomed

I just want to pour in some of the small knowledge I got reading stuff all over the previous 4 years....Don't think that I am experienced, I am just a beginner as well, but I am sharing information which might help...

Before doing anything, please consider answering the following questions:
A- Self Assessment Questions

1- How many hours do you have per day for trading?
ANSWER: 6PM to 10PM EST and 5AM to 6AM EST. Then I have to watch the price on my cell phone while at work, probably need to stop that though.
2- How many days per week?
ANSWER: Every day
3- How many months per year?
ANSWER: Every month
4- What are your psychological strengths and weaknesses from all prespectives? (For example, if you get really angry when you have a string of losses, this is a weakness against losing streaks, so avoid using a trading strategy that produce many losing streaks, very simply )
ANSWER: I'm Bipolar (or manic depressive in the old days) but as long as I take my meds regularly I do pretty good. Losing steaks just make me a better trader, not angry.


B- Define Your Objectives Questions

1- What are your profit objectives?
ANSWER: My first objective was to gain enough profit to pay off my wife's car, much to her surprise. But now my profit objective is to gain 20 pips per trade, anything else is a bonus.
2- Are those objectives realistic?
ANSWER: Yes.
3- What risk level are you going to tolerate, per trade, per week, per month?
ANSWER: I've been taught not to risk more than 2% of your equity. Easier said than done, but gospel just the same.
4- How will you know that your plan is on track?
ANSWER: I'll keep looking back at this journal and make sure I'm not getting off track.


C- Trading Ideas Questions

1- What pairs are you interested in trading?
ANSWER: USD vs EUR, JPY, CAD, GBP, and I kinda gave up watching the AUD.
2- What entry methods and strategies are you comfortable with? (For example, do you prefer breakout entries, pullback entries or volatility entries?)
ANSWER: I like to watch support/resistance and trendline breaks.
3- What trading strategies in general do you like? Trend strategies, range bound strategies or volatility strategies?
ANSWER: Mostly trend strategies, although Im not really clear on what constitutes a specific strategy.
4- Short term, medium term or long term, or a combo?
ANSWER: Well, at first I tried to be a short term trader, but now I believe medium to long term is going to work out better for me.

****************OK I'm tired. I'll keep working on this Nader. At least when I finish I'll be able to say, "Yes, as a matter of fact I DO have a trading plan!"***************

D- Conceptualization Questions

1- How much trading capital is available?
2- How much of that capital is a risk capital?
3-Are you going to be trading your own money, or could the money of someone else get involved?
4- What are your beliefs about the pair(s) you are going to trade?
5- Can you choose a time frame for your trading now?
6- Can you determine the best historical moves for that time frame and find what those moves have in common?
7- What are the patterns and the possible causes of strong moves in your time frame and how they start?
8- How those strong moves tend to develope?
9- How those moves tend to end?
10- What's the concept behind those moves and how can this concept be measured in an objective way?
11- How reliable are your entries on the chosen time frame and for the moves you are watching?
12- What is the false-positive rate? (This is when your concept or idea is present, but not followed by the expected move)
13- What would the reliability be if you add a stop?
14- Are the moves behind the concept give you a good reward/risk ratio?
15- How can this concept be improved without optimization? (Improved with things that make sense)
16- What is the worst case scenario that could happen while you are in a position?
17- Clearly define the concept behind the trading methodology you are having and see if it really works or not


E- Setup Questions

1- What are your setup condition(s)?
2- How do you time your entry?


F- Entry Questions

1- Is your entry technique better than random entry?
2- Does your entry technique allows you to catch high reward to risk trades often?
3- Is your entry technique producing low drawdowns per trade? (In other words, does the trade go too much against you before going your direction?)


G- Stops Questions

1- Does your stop point(s) makes sense given your objectives and the nature of the concept you are trading?
2- What is your stop strategy? Is it a fixed dollar amount, a fixed percentage of equity, a support/resistance stop, a time stop, etc...?


H- Profit Questions

1- What is your profit taking strategy? Do you use time exits, trailing stops behind your trade, dynamic stops like those based on moving averages, a profit retracement stop or you just simply have a certain dollar amount for your profit (Or pips amount)?
2- Are you re-investing your profits back or cashing them out? And which complies better with your objectives?
3- Do you ever experience fear when your trade is in profit?
4- Do you get mad when a profitable trade turns into a losing one?
5- How are you going to handle situations like those described in questions 3 and 4? Because they are definetely going to happen


I- Opportunity Questions

1- How much signals or trades are you making in a certain time period, for example every month on average?
2- If you are using a strategy that produces a signal every 2 weeks, will you get bored, or can you handle it normally without breaking your setup and entry rules and criteria?
3- Would it be better for your complete case, to use a trading strategy that produce many trading signals over a short period or one which produces few trading signals?


J- Position Size

1- What will be your position size for every trade?
2- Are you going to use a fixed position size for every trade you take, or are you defining your signals into a probability matrix in which you use higher position size for higher probability trades and lower position size for lower probability ones?
3- How is this position sizing methodology confront with your initial capital and your risk tolerance, both per trade and per capital?
4- Given your position sizing you chose, what is the average maximum drawdown that you might experience?
5- Can your account handle this drawdown and come back? (In other words can a few winning trades restore your drawdown shortly and get you back on track, or do you just need a large number of winning trades to come back from your drawdown?)
6- Do you have a strategy to handle position sizing during a severe drawdown, keeping your risk tolerance per trade within your accepted range, and at the same time, keeping the mouth of your market maker or broker shut?



Thanks,

Nader[/quote]

SterlingTDR Jan 4, 2006 1:05am | Post# 30

You posted a journal entry for a trade yesterday yet you didn't adequately document the trade set up (was it off S&R or a trendline?) and completely failed to address your stop loss. Also I assume that trade is still open since you haven't journalised your close and resulting profit or loss. In two weeks, when you look back, you won't have a clue as to what you did. Make sure you include all the relevant information and if possible a chart. Believe me it'll be worth the effort and it'll help you develope a measure of discipline which it appears you are lacking.

Frankly, if I were in your position Mark, I'd slam on the brakes and stop trading for a little while. From reading your posts thus far I'd say you need to spend a bit of time planning, preparing and learning a thing or two rather than charging in and repeating the same mistakes you've been making all along. Identifying and addressing your problem areas will be time well spent given the position you are in.

Regards,
Steve

howtotradeforex Jan 4, 2006 5:34am | Post# 31

Yes Steve, I have made my claim to be a trend trader and you're exactly right about the trade being as black and white as possible. So here's my first trade for January 2006: Long EUR/USD @1.2045 10k mini lot. On my daily chart, the last low on Dec 5th was 1.1658. That low has acted as support for one month, all the while the pair is in an uptrend. The low on Dec 31st of 1.1774 posed little or no threat, and now the pair has made a strong push upward. My stop is at 1.2020 and will follow the trade by ten pips automatically.(yea, I'm watching it!)
You posted a journal entry for a trade yesterday yet you didn't adequately document the trade set up (was it off S&R or a trendline?) and completely failed to address your stop loss. Also I assume that trade is still open since you haven't journalised your close and resulting profit or loss. In two weeks, when you look back, you won't have a clue as to what you did. Make sure you include all the relevant information and if possible a chart. Believe me it'll be worth the effort and it'll help you develope a measure of discipline which it appears you are lacking.
Steve I'm not sure I understand.
From what I see in my journal entry of the trade, the entry was made from support dating back one month, based on the uptrend. It clearly states my stop loss and an automatic trailing stop. I didn't set a target because the trade went twenty pips into profit. When the 20 pip goal was reached, I went to bed. Now, I'm posting the results:

Twenty pip profit was reached and the trade stopped out via automatic trailing stop. Wouldn't this be considered a successful trade?

SterlingTDR Jan 4, 2006 8:37am | Post# 32

Steve I'm not sure I understand.
From what I see in my journal entry of the trade, the entry was made from support dating back one month, based on the uptrend. It clearly states my stop loss and an automatic trailing stop. I didn't set a target because the trade went twenty pips into profit. When the 20 pip goal was reached, I went to bed. Now, I'm posting the results:

Twenty pip profit was reached and the trade stopped out via automatic trailing stop. Wouldn't this be considered a successful trade?
You're quite right Mark, my apologies. Next time I'll make sure I read a little more carefully.

I do think it would be worth while for you to journalise both your trade openings and closings for clarities sake, both for you and us. If possible can you attach a chart?

How are you timing your entries?

Regards,
Steve

howtotradeforex Jan 5, 2006 5:34am | Post# 33

1 Attachment(s)
This is the daily chart where the first trade originated. My second trade of 01/2006 was long EUR/USD from 1.2063, stop at 1.2040. The pair moved into the high 1.2130's so I moved my stop into profit at 1.2100. The trade stopped out for a 37 pip profit.
Name:  EUR_USD.bmp
Views: 424
Size:  683 KB

habeeb Jan 5, 2006 7:21am | Post# 34

Hi Howto...

Your image size is too big. Try saving it as jpeg or gif format with MsPaint.

Thanx and Good Luck
Habeeb

howtotradeforex Jan 5, 2006 7:20pm | Post# 35

Hi Howto...

Your image size is too big. Try saving it as jpeg or gif format with MsPaint.

Thanx and Good Luck
Habeeb
With all due respect,
I've just looked through several charts on the James16 chart thread, some of them yours, and they are much bigger than my first attempt. The properties window says it's 454 x 513, much smaller than the suggested 600 x 600. If you really think the size of my chart will make me more money, just let me know!

howtotradeforex Jan 5, 2006 7:39pm | Post# 36

1 Attachment(s)
Now, the uptrend is continuing. Price is hugging tightly to the upper BB but it did pierce the upper BB once. I've seen this go both ways. Sometimes price will continue and sometimes price will fall way below the band, reversing downward. I'd have a real problem waiting for this trade to reach the 100% Fib level to see what happens. Any thoughts?
Name:  EURUSD.bmp
Views: 396
Size:  592 KB

SterlingTDR Jan 6, 2006 1:31am | Post# 37

Now, the uptrend is continuing. Price is hugging tightly to the upper BB but it did pierce the upper BB once. I've seen this go both ways. Sometimes price will continue and sometimes price will fall way below the band, reversing downward. I'd have a real problem waiting for this trade to reach the 100% Fib level to see what happens. Any thoughts?
Here's a thought. You've stated, as I understand it, that your strategy is to trade with the trend and enter after a retracement to S&R or a trendline. Now I see you are bringing Fibbos' and Bollinger Bands into the equation.
What for?

Also, assuming you haven't added money to your trading account, both your first and second trades for this year violated your risk management rules.
Why?

Steve

habeeb Jan 6, 2006 2:36am | Post# 38

With all due respect,
I've just looked through several charts on the James16 chart thread, some of them yours, and they are much bigger than my first attempt. The properties window says it's 454 x 513, much smaller than the suggested 600 x 600. If you really think the size of my chart will make me more money, just let me know!



What I was referring to was the file size.

howtotradeforex Jan 6, 2006 5:31am | Post# 39

Here's a thought. You've stated, as I understand it, that your strategy is to trade with the trend and enter after a retracement to S&R or a trendline. Now I see you are bringing Fibbos' and Bollinger Bands into the equation.
What for?
The bands and the fibs simply show continuation and support of the trend. This is what I meant by having a reason(s) to take the trade.

Also, assuming you haven't added money to your trading account, both your first and second trades for this year violated your risk management rules.
Why?

1% of $400.00 = $4.00, it cost me $3.00 to take the trade so I'm risking $3.00, right? What am I not understanding here?

xxDavidxSxx Jan 6, 2006 6:38am | Post# 40

The bands and the fibs simply show continuation and support of the trend. This is what I meant by having a reason(s) to take the trade.



1% of $400.00 = $4.00, it cost me $3.00 to take the trade so I'm risking $3.00, right? What am I not understanding here?
Hello,


The 3$ is the spread. Its paid reguardless.

Your risk is where you set your stop limmit.
ex: s/l of 40 pips(you lose 40 pips if your stop is hit) 40$=10% of 400, 20$=5% of 400, 10$=2.5% of 400.

what the brokers don't tell you is that opening an account below 2,500$ means you cann't practice proper risk management.

25$ is 2.5% of 1000$
50$ is 2.5% of 2,500$

If you limmit your s/l to a number below 50 then you'll find that your stop gets hit alot only to see your trade target get hit later.

so just take 20 pip trade targets and 20 pip s/l and try to enter as close to resistance/support as you can and place s/l the other side.

Hope this helps

Dave


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