LFX Trading Proverbs
Welcome to my thread. I decided I should make my own thread, because like my Forex business, I LOVE not being responsible to anyone. I LOVE having no boss, no employees, no customers, no sales, and no hidden agenda!!!! Totally awesome!!
They say there is more than one way to succeed in Forex, but in all my experience, MY way is the only way I have found consistent. Yes, I have tried this, tried that, and advanced myself from system to system. Over time I found things that work and things that don't work. For me, once I stopped being stubborn and removed the things that don't work, or that don't work consistently, then I started finding peace. No, not profit yet, but peace. The demo was starting to work. As I added more things that I knew worked, I was able to improve my consistency.
No profit though. Why? I am a guy. I have an inherit need to show off for my special woman A strong need. Napoleon Hill (Think and Grow Rich), and even the Bible, tells us that without LOVE, we are nothing. For business, the emotion of love is essential for desire and creativity. Without the love of my special woman...there are no profits. It is as easy as that. Until that love encompasses you, then Forex remains just a puzzle, just a board game, and you can conquer it, but you will never make real money to your full potential.
People who discover they find themselves nervous, or emotional when they trade, might not have love in their life. It is not only my hypothesis. That book I told you about, Think and Grow Rich, proves love is a key ingredient as it was a common trait for over 500 of the richest men in America in the early 1900's. Ever heard the expression > Behind every good man is a good woman? and vice versa. Want to be successful in Forex? Fall in love with someone!!
Yes, it is one thing to develop the math, but an entirely different thing to use it to make money. This is why you may have noticed that two people can trade the exact same method and have two entirely different results. Emotions
I heard a story the other day that I had never heard before and I really like it. A boy got a new bat and ball for his birthday. He went outside and started talking to himself. He said, I am the best hitter in the world. He threw the ball in the air, swung at it, and missed. He picked the ball up and again told himself, I am the best hitter in the world. He tossed the ball in the air again and this time he swung harder and missed. He picked the ball up again and told himself again...I am the best hitter in the world. He tossed the ball in the air and this time with a mighty swing he missed again. He picked up the ball again and looked at it for a minute and then he said to himself...I am the best pitcher in the world!!
Hit the ball or pitch the ball...it does not matter. Just play the game!! Welcome
Proverb #1. What goes up must come down. What goes down must come up. If you trade pen and paper methods like all the Wall Street gurus want you to do, then you will not totally understand how useful this information is No, you will just say DUH, and close your mind. MISTAKE!
Oscillating indicators clearly paint the effects of up and down movement. When the oscillators range has been met, the market reverses direction long enough to pull the indicator from its upper or lower limit so it can effectively be used again to find the next high or low.
The banker traders have absolutely no idea what I just said. LOL! GOOD! Keep trading like its 1920 Meanwhile, those of you who want to use the "computing" power of your computer need to sort through various oscillating indicators to find the ones that use their ranges the most effectively.
The 0 line, or the 50 line, represents the midpoint of your range. To find the best range period, you need to know the equilibrium moving average of the market you are trading. Think of the market as a yoyo. The yoyo moves to the end of the string, then returns to your hand. Find the yoyo on your chart and use that value in your indicator. That will make the 0 line or the 50 line the point where the yoyo is in your hand. Simply trade from the point where it leaves your hand until it runs out of string. Then trade it back to your hand. When you master this, you will smile every time you hear about money management, or profit targets, or stop losses. You will wonder ... what?...why?...lol.
... about such yoyo stuff?
Proverb #2. Do not force an indicator to work just because you want it to work.
For instance, let's look at your standard MACD setting of 12/26/9. First of all, do you even know what those settings are measuring? Is your trading plan designed to trade when the 12 moving average crosses the 26 moving average? That is what a 0 line cross would signal. This setting is so screwed up they have invented a whole new indicator to measure what they call divergence, lol, which means the MACD has stopped functioning properly and we are going to use that as a signal somehow. Okay, whatever. When the MACD goes into "divergence", it means it has signaled a change in direction, but the price is not reacting to the signal. The MACD says sell, but price keeps going up. The MACD says buy, but price keeps going down. The really cool, or incredibly bad thing concerning divergence is that it is an after-the-fact observation. Like so many gurus like to do, they will show you historical charts and show you divergence and how you "COULD" have profited. Hocus pocus. It does you very little good when it is actually happening. So, why would you use a broken indicator setting? I have no idea. Do you?
You could use more appropriate settings and then the MACD signals actually work. Try the moving averages you are actually monitoring.
The MACD is just one example. You probably have others. If it is broken, fix it, or delete it.
Here is how your brain will see it. You get a signal from some other indicator that says to close the trade. You bad indicator does not agree. So, you stay in the trade and watch as pips disappear from your profit.
Or, you enter and the trade is struggling to move your way. Your good indicators are telling you to exit and reverse your position, but you search for any indicator that tells you to marry your trade. The bad indicator is now the place where your eyes become glued and you don't even notice all the pips you are giving to me
This leads to emotional trading because your subconscious is not stupid. It knows something is not right, so it creates anxiety and sends signals to your brain that you must take profit now, or hold onto the loss because it will turn around. So, you ignore the math, and instead you rely on feelings of fright or greed. It can all be avoided by simply taking out the garbage.
Proverb #3. Getting only one third of a move will make you ridiculously rich.
It is great to identify tops and bottoms. I use semaphores that are based on zigzag calculations and they number the tops and bottoms according to the momentum of the price. They also repaint because price does whatever it wants to do. Obviously this means I cannot trade to the semaphores, right? However, when you are creating or tweaking your method, they are very handy. I use the vertical line function of mt4 and draw dashed lines on the highs and lows. Using historical semaphores I can place lines on the semaphore quickly and easily. That is about the only consistent use for them.
Drawing vertical lines between highs and lows allows you to focus on each profitable move, one at a time. What I like to do is design my entry and exit triggers to occur AFTER the high and low. I do not specifically trade to find the high and low, though sometimes it is completely obvious. In the English language there are rules for speech and writing, and then there are exceptions to the rules.
Exceptions to high and low rules:
1. Super high candle was just formed. There is a high possibility of reversal. Drop to a 1M chart, quickly find a spot for a stop loss. Chances are the 1M chart will have more than one super candle, or at least a series of candles moving together along a trend line. Take the profit of the spike first. You can always enter again if the spike starts a sentiment, or trend.
2. Consolidation before the real high or low. When you see the market going flat, do not despair. NO, NO, NO. All it means is that some time frame has trend lines that are containing price. This is actually GREAT NEWS!!!! Why? When you shuffle through the time frames to find the one that has trend lines containing price, then you are on the same time frame that is moving the market. NOW, you have the SUPER EDGE!! LOL. Now you are about to make SERIOUS money!! When the trend line breaks on that time frame, hold on for the ride Oh, but anyway, sometimes at the end of consolidation the price will continue in the original direction, sometimes it will not. The market maker is gathering positions and waiting to see which one has the most imbalance and which one will make him the most profit. That is why it is good to find that time frame. Whatever the market maker decides will be instantly seen by you
Okay, back to normal. If you enter after the high or low, you reduce the probability of getting head faked. You reduce potential profit too, but it is about consistency. Consistency breeds trust, and trust breeds action. If you do not trust your entry signal, then you will just sit there and do the woulda, coulda, shoulda song and dance. Or, you will be happy you didn't enter, and that situation only makes you more fearful on the next signal. Now, you have complete doubt and are paralyzed. You might as well close mt4 and do something else. Why waste your time?
Exiting past the high or low should be a no brainer. It simply means that you rode out the move for all it had in it. You did not make up some profit target that got hit on candle 3 and then left you sitting there for the next 25 candles. You did not calculate some made up stop loss and then multiply that distance to create some fantasy point in the future where you will be a gazillionaire. LOL. Sorry. Someone will surely be offended by that!! No, instead you used the math of the market to stick with the trade until it reached the upper/lower limit of its equilibrium.
By trading from just after the high/low to just after the next high/low sometimes means taking a small loss because you actually got head faked. It does not happen often, but it can happen. Everyone has their own idea of market direction. It causes randomness. Therefore, unless you can read the minds and see what buttons the fingers of all the traders are pushing, you can expect to be wrong sometimes. Does that make sense? Observe any sports game. Let's say basketball. When the team brings the ball down the court, do you know, for 100% accuracy, who will shoot the ball? Do you know if he will make the basket? Do you know if he misses it, who will rebound it? If his team rebounds, will that player make the basket? So many variables, yes? Now suppose there are millions of players on the team. That is trading. You cannot be correct every time. Get used to it.
By trading from just after the high/low to just after the next high/low sometimes means you will break even. If the market has no direction, then it will range. Most of the time, the markets range. To make money in this situation you need your signal to have enough space between the entry and exit to cover the spread and produce profit. Sometimes the range is so tight that entries and exits fall inside the spread. Technically, it is a loss, but psychologically, call it break even
By trading from just after the high/low to just after the next high/low usually means you make money. In most cases you capture anywhere from 30% to 80% of the distance from the actual high to the actual low. You should win over 80% of all trades taken. The loss trades are those small head fakes and the break evens. Those are completely manageable when you compile the consistency of the winning trades. Consider this...waiting for high probability turns increases your psychological edge and therefore, rather than watching trades do what you thought they would do, you are actually in the market making profit. Sitting there scared made you 0 pips. Trading when the vertical movement actually occurs puts you in the high probability zone. Being in the high probability zone, time after time, compounds your account into wealth
Taking 30% (or more) of the pips from the high to low, over and over, and even losing occasionally, will make you rich
Proverb #4. "95% of traders lose" is an marketing statement and not necessarily true.
When you see or hear someone telling you that 95% of people who trade Forex lose...RUN!!!! It means this person DOES NOT trade.
In America, it is law that Forex brokerages provide statistics to their customers that show the percentage of winning traders versus losing traders at that brokerage. On average, at my brokerage, the report shows that only 73% of their traders have losing accounts. So, either we are the best traders in the world, or someone is not telling the truth.
It should come as no surprise that a person claiming 95% of people lose is either a marketer selling you an indicator or system they have obviously never used, or is some new trader quoting the thief.
"95% of traders lose" is the red flag statement that whatever is being sold, or said, is totally untrue. If it is a salesmen, be sure to unsubscribe from any further offers. Do not be a victim!!
Proverb #5. Understanding equilibrium will make you rich.
Remember the day your teacher talked about the bell curve? Did you pay attention? It is the secret to wealth.
The data can be used to distribute samples in correlation and regression analysis. In this analysis the data will produce a line of correlation in which the majority of samples lie within control limits. These control limits determine standard deviation and in most cases are sufficient to 3 deviations.
In trading, you can create these control limits through an indicator called a Bollinger band. Rather than being a straight line, the Bollinger band uses a set moving average and then calculates the control limits and automatically draws them on your chart.
That is your tool. But you still need to define equilibrium. Simply put, this is a moving average that price will gravitate to and then push away from. The push can be a bounce or a break through the moving average. Once you figure out the moving average that best fits the data for your currency, then use the indicator that I previously advised. Remember? The indicator with the range you most prefer. Set the period of that indicator to the equilibrium moving average. Now, every time the price crosses the moving average on the chart, it will also cross the 0 line or 50 line of your indicator.
If you did a good job, there are still probably instances where the indicator runs out of range and shows overbought or oversold. This is where the moving average placed on the indicator comes into service. Again this value should be a factor of the period setting of the indicator. In essence it changes your indicator to a higher time frame with each multiple. Adjust to find the spot when the indicator can cross the moving average and give you a good probability that a change in direction is really going to happen. Then make the Bollinger band for that moving average and place it on the indicator. You will need to remove the original moving average though, or the Bollinger band might try to reflect the moving average rather than the indicator.
Now you can see when price has moved the farthest away from equilibrium and is likely to return to it. This is some handy information
Now, you could take the time to draw trend lines, fibo lines, pivot lines, whatever, and then try to make trading decisions every time price is near a line. Or, you could just use this picture, take the easy money, and call it a day.
I had no preconceived notions about this chart. I simply drew a trend line from the first high you see until price crossed the trend line and headed up for good. The distance is 30 candles, or 30 periods. So, to demonstrate my point, I put a stochastic indicator under the chart, set the periods to 30, cut the %K in half by setting %D to 15 and got the attached drawing.
In reality, you want to do more analysis to find the appropriate number of periods to use. I am just showing you an example. The orange lines on the chart now represent the entries. The aqua lines on the indicator represent your highest probability. If you want moderate risk, you trade the yellow/blue crossover of the indicator. If you want low risk, you trade when the indicator crosses the 50 line until the yellow/blue lines cross.
I hope this helps you to understand. Obviously this is just an example. This is not my preferred period setting nor the extent of my trading system. It is meant to clarify and provide some guidance for the development of your method.
Proverb #6. Always use the 30M chart to design your trading method. It does not matter what time frame you prefer to trade, as long as the development and tweaking are performed on the 30M chart. The explanation as to why is too detailed, but it is a math related. Just do it and trust me
Thank you dkrock, completely understood now
Glad to see your own thread finally. Nice to see you post your thoughts. I know you are not going to show your method in detail but still interesting to read up your posts.
Hi dkrock, interesting thread here, but why is it in the comercial area? Do you sell something?
Hi stt and swissfortune. Thank you for reading and commenting. I welcome any proverbs you have learned too.
I made my own thread because I was tired of the trolls. This way I can prevent them from commenting As to why in commercial, it is because I make my living trading. I don't really have anything to sell, but since I am a business, why not put it here? It also keeps the troll traffic down
I'm enjoying your thread. Will look forward to more as it progresses.
I am beginning to see more members reading my thread, so I thought I would give you a little more background considering all the insults being cast my way currently. I was one of the original threads in Sure Fire Trading, but I ran into problems because some guys from Singapore were taking my methods and custom indicators and selling them for personal profit. The site owner decided not to do anything about it, and then went as far as to try to claim that anything I wrote in his forum was therefore owned by him. In other words, he wanted to steal my intellectual property too, for his own gain. He thought he owned my brain. Can you imagine? They were really upset when four of us had enough of this behavior, erased all our posts and indicators and left the site. Hey, you don't own me. He lives in South Africa by the way, so maybe he thought he owned me? Anyway the trolls on FF are currently trying to insult me to the point of providing them the recipe to Kentucky Fried Chicken, lol, but because of my past experiences, it will never happen. So, they assume that makes me an easy target. The worst part about it though is that everyone sees how they attack member traders, so most people just won't respond because they don't want to be attacked too. You are free to respond here
In those days it was me, irishtrader, and Russ Horn that were helping most people. Irishtrader and his method called Codex have passed away now. Russ Horn and his Forex Master Method decided to stick it out with Mark and publish the system with a series of CD's. I, on the other hand, still live on, and still have my secrets My technique back then was named AYCE, for all you can eat. It showed traders how to enter after the high/low and how to jump over consolidation. As far as I know, there are traders still using it today. However, I have improved upon it. AYCE was about trading by moving average trend line breaks. In other words, certain moving averages contain price and when they are broken, you have a good trade. Now, I have expanded beyond that to only one moving average that establishes equilibrium. Rather than using moving averages like trend lines, now I use standard deviation against market momentum. The equilibrium point is still a place where breakouts occur, but now I can measure the momentum of the breakout and determine when it has exhausted itself. I hope that explains it better. The pen and paper trading days are over in my world
So I was gone from forums for a long time after that. I came here last summer because a friend of mine from SFT wrote me an email describing a system he was experimenting with from a thread in FF. So, I joined so I could provide my analysis on it, and have been subjected to attack on nearly every post since then. I don't really understand why these people attack. It is obviously mental related. Trading is highly emotional, so somewhere a wire broke I guess.
Anyway, I hope on this thread we can have a more peaceful dialogue. I am thinking about creating a trade explorer, but I am wrestling with the idea because I really do not want to prove anything to the trolls in FF. However, perhaps it is helpful for the other members who are open-minded enough to explore other techniques. Seeing trade explorer results will comfort them amid the insult parade.
I am not sure though. After all the previous theft from my last thread I have to find a way to be comfortable. I will have to check out the various control settings and see if I can mask the pertinent data. The other problem I wonder about is that I do not actually trade from meta trader. I chart with it, but I do not place trades with it. Initially this was because meta trader had interface issues with ECN. Now though, maybe call it routine, but for me, it has to do with my broker not being able to understand my technique. I mean if a guy can open a webcam on someone else's computer, then a broker can surely open a charting platform from his own brokerage. Right? Finally because I do not trade from meta trader, I will have to mouse click two entries and two exits and of course my live account will have priority. So there will likely be some slippage occasionally from my real entry/exit and the one posted.
If anyone has any trade explorer experience, I would appreciate your comment. What do you think? Too paranoid?
Additionally, I realize most of you are going to want to see more screenshots. I will need to save these for the weekend probably because I trade 12 hours a day and then try to have a life too. Please be patient. If you have any special requests, I will screenshot it for you and provide analysis for you based on what my technique observes. You can then compare what I do to what you do and see another way of trading the same pattern.
Let me know if trade explorer or personal chart analysis sounds good to you. You will probably be more interested in how I would trade your currency pair than how I trade mine. Actually, my pair is a secret, which is another reason I am a little concerned about trade explorer.
Oh, when I do historical chart analysis I try to place my entry and exit where I would mostly likely do it in real life. If it is questionable, I look for the least profitable point. If I can still profit on a horrible entry or exit, then it only provides more confidence On questionable points I will often just use the next candle. If the signal candle is larger than most around it, and I can tell from the chart time that it is not due to a news release, I will often just use the halfway point as the target. You can also tell by looking at the previous candles and determine if the large candle was a trend line break. I have not discussed trend lines yet, but I definitely use them. If it is a news candle though, I always use the next candle to measure. I do not trade by placing pending orders. I only trade to real action. I do not attempt to trade spikes, so I start my trade at some point afterward. Usually I dive to the 1M chart and wait for the second reversal before I make any decisions. I have tried to conquer the 1M chart since I started trading Forex, lol. Who hasn't? But, it either is too volatile or the range shrinks to barely cover the spread. It is my opinion to not trade by it. However, there are times when there is no harm in looking at it With enough volatility and momentum it can show an entry or exit that is semi-reliable. I do not scale trades either. All in - All out. KISS - keep it simple stupid
I am interested in your opinions. If you like the idea of trade explorer, custom chart analysis, or have a trading proverb, please do not hesitate to respond. Thank you.
Wow, I really write a lot. Just one more thing to explain why what I do might appear so different to people.
There is really nothing wrong with drawing lines on your chart. Traders have been doing it since trading began. There was a time in my life where I had to drive semi trucks for awhile. During that time I did not give up on my trading. I drove for 10 hours a day and studied for 6-8 more. I hated driving trucks and so...per Think and Grow Rich...I developed my deep desire to trade.
I usually drove alone and as soon as I could I bought a truck with an automatic transmission. Yes, they make those. I wanted it because it removed the gear shifter and allowed me to put a desk in its place. Then I could put my computer on the desk and watch trades. It was really no different than having someone with me, so do not worry I was safe. It also allowed me to use electronic maps, so that was definitely good Check out any police car and you will a ton more distractions than I had. Anyway, since I was driving, what was one thing I could not do?? I could not draw on charts. I had to drive And usually there was not time to pull over and draw anything either.
So, I was forced by my circumstances to develop a more friendly method that would produce good trades without so much user interference. That is why what I do is so different. It is a self-drawing picture, and pictures tell a thousand words
Thank you for your time. I hope I am not too boring.
I wouldn't be looking to prove anything to anyone so no need to start a trade explorer for that reason. I'd look at it just to review your trades to try to see what you're seeing. If it's not too much trouble I think what helps the most is just some of your trades posted on a chart even if you don't explain your entry/exit. "A picture is worth a thousand words."
Thanks & continued success
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