In a reply to a PM on S & R, I wrote:
"Do not put your S & R lines in BOLD"
By doing this, we are tricking our mind and subconscious that these are the BOUNDARIES of price action. These are NOT boundaries, only levels where we EXPECT price to do something.
Remember the movie "A Beautiful Mind" - that was a TRUE story. The mind is more powerful than we know in the way it directs our daily and routine life, WITHOUT THINKING.
We have trained it through our formative years and educated it in our later years to serve us for the rest of our lives. You may not realise it, but all we are doing on here is re-training our mind and brain on forex so that we can put it on auto pilot when we are trading. Don't believe me? Ask Baba G - he is fully trained and on auto pilot.
So, do not put any roadblocks on your charts or in your thinking because you are defeating the whole object and purpose of what we are doing.
Never under- estimate the power of the mind and subconscious
[font=Trebuchet MS]Hi Strat & 'team Strat'
Its taken me a long while to catch up with the amazing velocity of posts, as one of those who requested Strat start a thread I feel very guilty about my lack of contribution. Now, I realise that there are numerous mentions of 'skim reading' and taking the time to not only read but to understand, learn & internalise the valuable information contained in the links posted to this thread & appreciate that I haven't invested sufficient time on that yet.
However having made it to the end I thought I would...
Paul - I'm so glad you found us, I really am. However, I will NOT let you do to yourself what you did before so pay attention.
"'appreciate that I haven't invested sufficient time on that yet. "'
If you have recognised you don't know enough then STOP there and go back to the Path of Learning until you do. There is NO RUSH for you to jump into this, Paul. As long as people have to buy and sell things, these markets will always be here. There are brokers, banks, institutions, funds, hedges, trading houses, MMs all waiting to STEAL your money. Don't even THINK about competing with them until you KNOW and are VERY CONFIDENT in what you're doing.
Would you try and climb a mountain without all the training on safety, without all the correct equipment, without a guide, without practicing on smaller hills first, without a weather report?
I hope not, but that's what you're trying to do here, Paul.
Since I wrote the opportunity post, which I also qualified by saying something like if they stay as they are now, market conditions have changed. There are very few opportunities now - way too many long candles.
Paul, learn this very thoroughly, you will be making decisions on what you see and feel - there are no crutches (indicators) to lean on. You cannot just jump in like this. As you know, Nicola was one of the "stars" at the other place but it has taken her time to adjust to this and, read her psycho post - there are so many things we have to fight, don't make lack of education one of them.
There are many in your position, Paul, so don't feel bad. Keep asking questions on here because there are people who have gone through what you're going through, some still going through it and some who still don't have a clue what they're doing but are still working at it. Don't jump in until your light bulb has gone on.
Please don't do to me what you did on the other place - please.
To Trail or Not To Trail - that is the question
Nicole, I must have tried every stop that's been thought of. As I posted earlier, it is all about preference. It also depends where you are in a trade. If you are early in a trade, then you want as tight a stop as PA and your MM allows. When you have profit locked in and are in a trend a la EURJPY, you want to give it room to breathe by trailing behind each swing but that can leave a lot on the table. You can trail by a stop above the high of two days ago or 3 days ago. You can even try PSAR.
If the ATR is 181, then if you really want to trail, that is what it should be trailed by but that is a lot to give back.
You can use all these methods and then use a PA signal in the reverse direction to get you out rather than wait to be taken out
If the question is trail using your brokers platform then I personally don't like doing it. I prefer trailing manually at the end of each day. I give enough to brokers without giving them CONTROL over my positions.
Sorry it wasn't the answer you were looking for but I hope you get something out of it
Presents from my travels:
A COIL for Nicola, STOPS for Nicole, PLAN for Dan, Gladys Knights for me and THANKS for Dr. Joe
See chart - S&R lines removed for clarity
I wasn’t going to post this as it smacks of ego but it answers many of the questions I get like, “what’s the difference between you and other Price Action/Support and Resistance traders/threads?” etc., etc. This is a shining example of my method, my style of using Price Action/Support and Resistance plus other tools from my toolbox. It is not classic Price Action and I never pretended it was but it works for me and that is all that matters. My style is to look for long runs, I’m not interested in one or two day scalps. So……………………..
ROCK N ROLL ANATOMY OF A STRAT TRADE - EURJPY
I don’t know whether it is still going up BUT it stopped ME going up. Dr. Joe said my last buy would be a loser, which it is, so, STOP BUYING!
Classic hammer Jan21 – Buy Stop above high – not filled (Price below 20 and still steep down slope –see arrow)
IB – Jan 22 – Buy Stop above high – not filled
Neutral doji – Jan 23 – Buy Stop above high – not filled
Bullish IB – Jan 25 – Buy Stop above high –filled
Weak shooting star – Jan 28 – SL below low – stopped out (20 still sloping down)
The Animals are singing “The House of The Rising Sun” followed by the Stones’ singing “Honky Tonk Woman”.
BUOB & HL – Feb 02 – Buy Stop above high – filled
Price closed above 20 – Feb 06 – Bullish – 20 goes flat – see arrow
Bearish Bar (Dark Cloud Cover) – possible double top – SL below low – stopped out
Made HH inside coil
BUOB & HL – Feb 12 – another close above 20 - Buy Stop above high – filled
SL below Feb 12 higher low
Feb 17 - Potential higher low forming coil base line – Buy Stop above 20 – filled
Bullish bar on Feb 18 confirms higher low – price closes above 20 - SL for both orders below swing low
Feb 20 – bullish bar breaks out of coil – Min target = 940 pips – IB – Buy stop above high – filled – 20 turning up – see arrow
Something is happening – Sting is singing “Every Breath You Take”
Feb 22 – price closes above 50 – bullish
Feb 24 – Huge bar – TL drawn
Feb 25 – 20 crosses above 50 - bullish
Feb 27 – Stopped out at TL – Boss 20 coincidence?
March 03 confirms March 02 HL
March 04 – Strong close above BOSS 20 (and you thought you were strong - huh!)
March 05 - Buy stop above highs of consolidation for break out
Feb 27 to March 11 consolidation - flag pattern - Beatles are singing “Nowhere Man”
March 12 – BUOB – buy stop above high – filled – SL below low – 20 is supporting prices
We’re in FAT CITY – throw away all rule books – Everly Brothers keep on singing “BYE BYE LOVE”
March 15 – hammer type bar – buy stop above high – filled – SL below low
March 19 – neutral doji IB – buy stop above high – filled – SL below low
March 20 – TL drawn
March 24 – Strong bearish bar – almost a BEOB – is something wrong? The Beatles are singing “You’re Gonna Lose That Girl”.
March 25 – hammer type bar – buy stop above high – filled – SL below low – I think I hear John Lennon singing in the background “I’m a Loser”
March 27 – Open up charts to hear Roy Orbison singing “IT’S OVER”
March 27 – stopped out (small loss on last trade) BUT close still above 20
Now I’m singing Roy Orbison’s “Crying”.
I LOVE ROCK N ROLL TRADING!
Attached Image (click to enlarge)
It's week-end and I'm jet lagged (and up early).
On another thread, where I was Stratocaster 59, someone recognised that as being a guitar player,and asked me if I played country!
The ONLY country I like is "Blue Days, Black Nights" by Buddy Holly but that's rockabilly. I do like "Always On My Mind" but only by Elvis and not that old geezer. Although I have to admit to singing "Country Roads" at karaoke but only when suitably laced with liquor and girls!
I do know though, that if you play a Country song backwards, you get your wife back, your girlfriend back, your house back, your car back, your dog back, your cat back, your goldfish back.................
But I DO like Dolly Parton, the country Queen of Plastic
March 28, 2009
I have just received this email from FF. I knew nothing about this, so a very big THANK YOU to:
and of course, FF
You’ve displayed trading wisdom and experience throughout your exchanges at Forex Factory, and four of your peers have recognized by vouching for you! To find out who vouched for you, see the “Vouchers” section on your public profile.
To learn more about the Wisdom Vouching System, please read the FAQ: http://www.forexfactory.com/faq.php?faq=wvs
Meeting this four-vouch hurdle means you can now vouch other FF members. With this new permission comes responsibility, as the integrity of the Wisdom Vouching System now rests in your hands. Please read the FAQ carefully to learn more about these responsibilities: http://www.forexfactory.com/faq.php?...q_guidlineswvs.
Congratulations strat on being recognized as a wise and experienced trader, and thank you for your valuable contribution to the FF community!
I have mentioned it a few times in PMs and I think it is worth stating here.
Analysts and people on financial talk shows are PAID to analyse and talk.
What they say is irrelevant as long as they say something to capture their audience. They are NEVER WRONG. They ALWAYS have a reason why what they said the previous day or week didn't turn out and it was NEVER that they were WRONG - it was ALWAYS because the market did something else.
If these people were any good - they would be traders - and they are not - which is why they are analysts and talking heads.
Exactly the same with brokers who provide free (don't forget, they are trying to get your account) analysis. There is one broker who provides EW analysis on the major pairs. Each week he has to write that an "alternate" wave count took place because he got it wrong the previous week. I remember it being right ONCE and he actually wrote that he got it right for once!
And if you heed this advice, always remember that by the time something good hits these guys, it is old news and the MMs are setting up to go in the opposite direction. Remember the Telegraph headlines saying everyone was going to short the Euro?
I'll bet Dan's new bronze pick that the same thing happens with the US$ on the "new reserve currency news" - everyone and his brother is saying the US$ is finished and it's going to tank - I think it will take off! (But then I'm no analyst!)
Quoting w buffet jnr
Star Pupil of the Week, Dan gave you most of the answers but I'll just add a little more.
If you are drawing too many S&R lines then you are not really understanding price action. You should only be drawing those lines which have meant something in the past i.e., was there a lot of congestion? how many times was price supported/rejected? etc.
As I have previously stated, we should be careful with huge long bars. My preference is to see what the next day brings. If you have to think of ways to trade something like you are doing then you will be trading a loser. A winning trade stands out.
I think I have stated in a few posts what my use of the MAs is so it seems to me that you have either flash read this thread or you have jumped in at the end, neither of which will help you to trade this method.
If you had read and understood what we are doing here, you would have answered your own questions so, like many others who are trying to get the results without putting in the time and effort, I suggest you take the Path of Learning and start at the beginning.
If you truly were the Junior version of your namesake, you would know that his success is based on 95% study and research and 5% doing. It seems to me that you have it upside down.
I got a few PMs on my EURJPY trade from lurkers who I see trolling the threads I occasionally take a look at . You know the type, those who post
“Yeah, I agree with that. When I did it blah, blah, blah…………………….”
For some reason they think posting useless tripe on every thread and forum going qualifies them to be “watchdogs” or “super traders” or "legends" and then they “discreetly” ask questions via PMs which proves they know as much about trading as our two Yorkshire Terriers!
Also, for our regular posters, unless it is on a subject which I have said to only PM me on, please ask all other questions on the thread. It doesn’t matter how silly or stupid you think the question may be, go ahead and ask. If you never ask, you will never learn.
The reason for posting all your questions, thoughts, worries etc., on the thread is that we all learn from each other. As long as we share the information and help others in a positive and constructive manner, we will all move forward in our trading education.
As you should know by now, I don’t reply to lurkers and trolls either on the thread or by PMs (unless I can get a kick out of it.)
Back to the PMs. They asked something like, “If you knew it was going to be such a good trade, why didn’t you post it on the thread?”
So, the equally stupid answer is “To keep all the lubbly jubbly to myself!”
As I have mentioned a few times, I am only interested in trends and the major swings. I want to trade the swing high down to the swing low and Vicky Verka (Did I tell you I once new a girl called Vicky? Well, she....... …….you almost got me going then!). Trading from support to the next resistance doesn’t thrill me anymore (The Thrill is Gone – B. B. King).
When I see a price reversal bar after a trend (the longer the better), I jump in to position myself for the trend in the opposite direction. This is a high risk area and so I trade reverse position price action to keep me in or get me out until I see the signs of a trend change. I am about as good at calling tops and bottoms as I was at calling the weather in England.
Once I see the trend change, I start looking for other signs to tell me if it’s a trend or consolidation. Then I look for signs to tell me something about the trend. I have always been a "looker" - in fact I've been told I'm a "good looker".
I am an eternal trend optimist – I look to enter a trade in the hope that it turns out to be another multiple yearly salary trade.
I am frequently stopped out of trades, sometimes with 100 - 200 pip losses as I hold on, but these are so small relative to what is at the end that they are not even worth subtracting from the total.
It has taken me several years to become successful at this so don’t think you can read it once and then do it (Amin are you reading, understanding?).
I had a “light bulb going on” moment in 2005 when I recognized the 3 different and distinct areas of change within a reversal and development of the next trend. Then I realized I needed 3 different and distinct strategies for each area. Then I realized I had to go against all the rules and release the “rebel” in me if I was to go from an ordinary trader to a “bit better” trader.
If you look at my EURJPY trade, those 3 areas are clearly evident and for those who are struggling to see them, look for my clues. (Elementary, my dear Watson).
But I DO remember telling you this was a good trade – how many times did I post about this pair that “It keeps on going up until it stops going up”?
Maybe next time you will read, listen AND understand.
I was just looking over your eur/jpy trade strat, if I am interpreting it correctly it looks like you continually add on to your position as price moves in your favour, am I correct that you had about 5 open trades by the end of the move!?
If so can you share how you go about your money management with trades like these? For example do you believe in only risking 2 or 3% at any time or do you think its ok to risk more when having many open positions like this?
Also about risk/reward, do you look for a probable target before you enter a trade or...
Naws, I will repeat what I posted earlier which is that I teach the safest, lowest risk trading methods. These must be followed if you are to have any hope of making money in this business. Once you are consistent with this making money hand over fist and doing it in your sleep, then you can step it up and change gears.
What I did on that trade with regard to MM will not be taught or shown on here. Until you are one with price and able to dance with the Queen, then and only then, can this be discussed.
Your TOTAL trades should never exceed 2% to 3% of your account if you wish to survive in this business.
I'm not a follower of R to R and therefore not qualified to talk about it. If you look at my earlier post, you will see that, other than opportunities that price action may throw up, I'm only really interested in positioning myself at the beginning of major swings or trends. Other than targets from chart patterns, which I only use as a guide, I don't think or care about them - I just take what the market gives me.
Naws, you are young in your trading career, so stick with proven MM rules and methods as they will keep you in business. Do not get carried away thinking if you had done this and then did that, for that is the road to ruin.
Time Frame Selection
I never cease to be amazed that the selection of time frame is never considered in trading discussions. After being told, and then finding out for myself, that brokers, system sellers, auto robot sellers etc., and other scammers target wishful thinking wannabe traders with their M1, M5 and M15 time frames, it is hardly surprising that the majority blow their accounts within weeks, sometimes days.
To just arbitrarily choose a time frame to trade is like choosing the first girl you date to be your wife. For many, that decision is made by the ads that suck you in with their $1200 per day M5 scalping system. There is far more to consider when choosing a time frame to trade.
Jacko’s trading partner, Mark, used to be a broker and has witnessed first hand, the longevity of traders trading short time frames. Their trading life is very short and painful as you would expect for someone sat in front of the one eyed monster all day long trying to wring out 10 pips on M1. Similarly for those on M5 and M15. Just like a revolving door, he has witnessed them come and go. Add into this that many short time frame traders have more than one monitor, sometimes up to five. Is it any wonder that these guys are highly stressed mental wrecks?
For me, the time frame controls your trading destiny. I rank it as high as trading psychology and in fact, that is probably where it belongs.
How many traders consider the impact that time frame has on their profits? I will bet there isn’t one. Consider a trader using a “successful” scalping system on M1 time frame. These guys are looking to make 5 pips or 10 pips at the most per trade. The effort, stress, mental anguish to reward ratio on this is horrendous. When you consider that they are “in the hole” for 2 to 3 pips (spread) the second they put on that trade, it puts tremendous emphasis on the accuracy of exits and entries to come out in profit. To be successful on M1, you have to be in the top 98% of everything – method, entries, exits, psyche, etc.
If you haven’t realized by now, then, the shorter the time frame, the more accurate your method has to be, meaning that there is little leeway in your entries and exits. Miss them by a couple of pips and you are in the red.
Conversely, the longer the time frame, the more leeway there is in both entries and exits. Entries and exits on weekly time frames do not have to be as accurate as those on the daily time frame which in turn, do not have to be as accurate as those on H4 and so on. When we are boarding our train on the daily express, it doesn’t really matter whether we are in the first carriage or the tenth carriage. We all arrive at the final destination with plenty of time (relatively speaking) to get off.
Another factor in time frame selection that I have never seen discussed, or I will bet, thought of, is our personal suitability and compatibility. We must never forget that the markets are energy. We traders are energy. Energy is governed by the Laws of Nature and, as such, can be broken down into different forms, states and matter. One of the properties of energy is it’s vibration and harmonics. The market, and each one of us as traders have vibration and harmonics which revolve around our personal natural frequencies. Yes, like it or not, we are just matter constantly vibrating in everything we do at our natural frequency. The markets are there, always vibrating at their natural frequency.
There is a state called resonance which occurs when two bodies of the same natural frequency come together. What happens then is that these natural frequencies excite each other causing large amplitudes and vibrations which continue to expand and vibrate until they both explode. I have witnessed this many times in my studies and experiments.
What has this to do with time frame selection you are asking? Everything. If you are familiar with the dating service e-harmony, it is the same thing. We are trying to find our partner (time frame) whose harmonics are compatible with ours. We need a partner (time frame) whose harmonics ideally have a sine wave 180 degrees opposed to ours so that their peak harmonic is at the same time as our valley harmonic.
Still lost? In simple terms, you may say that you are going to trade M15 because you know of a method/system on that time frame which is proven to be successful and profitable. Yet, when you trade that system, you cannot get it to work for you, no matter how hard you try. Usually, the harder you try, the more difficult it becomes. There is nothing wrong with the system, it works, it has been proven by others. What is wrong is YOU. YOU are not compatible with that time frame. YOU have to find a time frame which complements YOUR harmonics. Until you work on a time frame that compliments and is compatible with your harmonics, you will never be successful, comfortable or happy.
This has nothing to do with the longer the time frame being the more comfortable for you. It is about matching a time frame that you feel comfortable with, that allows you to trade easier and better with the lowest amount of stress and anguish.
In my case, I know my time frames are Weekly and Daily. I am so comfortable with them that I feel “as one” with them. I would love to trade H4, yet, as soon as I drop down to H4, I get an uneasy feeling, I just don’t feel as confident or as powerful as I do on the daily and weekly time frames. For me to trade H4 would put me at a disadvantage before I even put on a trade. This is exactly what happened when I tried to do M5 and M15.
Pay attention to time frames and find the one which is compatible with you.
Dan, I haven't traded the energies (crude, natural gas, heating oil) since the 90s when I lost $tens of thousands on futures with them.
I wouldn't dream of trading them now UNTIL I felt sufficiently educated and trained on them. Just because you THINK you are successful at currencies does NOT give you the right to think the same for crude.
For a start, each financial instrument has it's own characteristics and idiosyncrasy that we need to "tune" in to before we trade. We can only do this with looking at thousands of charts and practicing on them.
Price action is price action and DOES work on any instrument but you need to know how to play the instrument first. Just because I can play guitar does NOT give me the right to THINK I can play the piano.
Crude, especially, is a WILD and VOLATILE, nasty piece of work. Just look at the length of those candles, pips - wise, and the length of the tails and wicks. They will suck you in and blow you out in bubbles without a care in the world.
You bit Nicola's bait with a huge open, gaping mouth - 350 pips! Nicola has been trading crude successfully longer than any of us. She is "in tune" with it. She can "feel it and smell it". Don't try to do what she does UNTIL you have put in the hours, time and effort to learn it.
I know of traders on other forums who daily publicised their pip winnings on crude to the envy of all other traders. Well he got his just reward and got wiped out by the Black Bitch!
Don't mess with her Dan - you are not big enough and good enough - yet
Naws - you asked about Money Management - here is something from my files:
The focus of this page will revolve mostly around the risk/reward ratio aspect, though another important piece is the equity percent of your account you are working with. For example, a rule of thumb for equity is never bet more than 2% of your equity on a single trade. So, for example, if you have $10,000 in your account then you should not bet more than $200 or 20 pips on a single trade (or else get a a micro-account so you can wager 200 pips or $200). Too often new traders lose too much and then get increasingly desperate in their trades to attempt to “make up” the lost money.
Ok, enough about equity. As I said above this page is going to focus on the risk/reward ratio.
In short, the risk/reward ratio means the amount you are risking (i.e. your stop loss amount) against the amount you stand to gain (your profit or limit on the trade). So if you enter long on the GBP/USD at 2.0040 and you enter a stop-loss or determine you will manually close the trade at 2.0020 if it goes the wrong way then your risk is 20 pips per lot.
Pretty simple so far, right?
Okay, now if on the same deal you determine that your target, or where you will take profit and close the trade is at 2.0140 then your reward is 100 pips (2.0140-2.0040=.0100 or 100 pips). So on this particular trade your risk/reward is 100 pips/20 pips or 5:1
Risk/Reward Ratio Example
Before we get into what ratios mean to you and what ratios you should aim for, lets try another one. Take a look at the below trade signal and figure out what the risk/reward ratio is:
Short Entry: 1.5950
Take your time, figure it out…
Ok, what did you get? Was it 2:1? If it was then you are right!
Risk = 1.6005-1.5950 or 55 pips.
Reward = 1.5950-1.5840 or 110 pips. 110:55=2:1.
Got it? Ok, if you don’t then read it a few more times, because this is very important. New traders too often do not set stop-losses and as a result may get a handful of 10, 20 or 30 pip gains (maybe even more) but then they get a 100 pip loss or worse because they keep hoping it will “just turn around” and it wipes out all of their gains plus some.
Now, here is where good risk/reward ratios become important.
Why is this important to me?
If you have a risk/reward ratio of 1:1 - meaning you risk the same amount as your reward each time - then obviously you have to win 50% of your trades to break even.
If you have a risk/reward ratio of 2:1 - or your target is twice as much as your risk every time - then you only need to win 33% of your trades to break even. Got that? You can lose 2 trades for every 1 you win and you will break even.
And it only gets better from there. Below are a few risk/reward ratios and the win percentage you need to break even:
1:1 - 50%
2:1 - 33%
3:1 - 25%
4:1 - 20%
5:1 - 17%
10:1 - 10%
A lot of new traders make the mistake of thinking “Ok I will just capture a few pips at a time, up to 10 or so” and they don’t even bother to put in stop-losses! What ends up happening is they may go on a streak for a few hours, maybe even a few days or more. But inevitably they get a big loss that wipes out all their profit and then some. When that happens you lose your confidence, your edge and you start to trade scared - and that only makes things worse.
The best traders I know practice good money management with good risk/reward ratios. Ratios of at least 2:1, up to 4:1. If you are a new trader I recommend you start with at least 3:1. The best traders sometimes don’t win 50% of their trades. But their wins are large enough where they make profit and then some.
Hope this helps
How to Succeed in the Forex Market
First off, if you are new and frustrated let me tell you I know exactly how you feel. When I started out I made every mistake you could. First I tried scalping (I didn’t know that was what it was called then, I just sold if I saw a huge green stick and bought if I saw a huge red one). I made a few pips at a time. If I got too far under I just bought more lots to get a “net position”. That worked great for a few weeks even until a one giant trade where I had bought four extra lots to “get a net position” wiped out all of my profits and then some! Big mistake. Next I tried trading the news. There was always a rise or fall with interest rate changes and all you had to do was buy or sell in the right direction, right? Sounds simple. In practice it is a little bit harder. Liquidity drops like a rock. The market tends to whipsaw, knock out stops or even go in the wrong direction you would expect it to. Again, Big Mistake. Lost a hundred pips on that one too.
And this a regular lot sized account, too, not a mini-lot account. Ouch.
Many new traders at this point give up and go back to their day jobs. Maybe I was smart, maybe it was dumb of me to stick with it but I did and I’m glad every day that I did. I went back to my demo account and figured out some trading systems that worked for all occasions. I read some books, took some online classes and kept plugging away at the demo account.
After I felt confident enough that I knew what I was doing I started slowly trading real lots again. And I started winning.
Occasionally I still will go back to demo accounts every once in awhile if I suffer too many losses and I lose confidence. Usually though I just keeping using the same systems I know to be profitable in the long-term and it works!
That being said, below are some things I’ve learned along the way that have helped me go from a horrible trader to a consistently profitable one. If you can master these I think you can make it in the currency exchange world too:
1) Use a demo account - and go back to a demo account every time you start to lose confidence or a significant portion of your equity - you should use a demo account until you’ve got your trades down to a science. You should get your trading style down to a consistent, systematic approach. Do the same thing every time. The hardest thing about trading real money is the emotions. When using demo account it is no problem to trade 2 lots with a 50 pip stop - the setup and risk/reward looks good right? When you start trading real money all you can think of is that you have 2 50-pip stops (or $1000) at risk that you don’t want to lose. Practicing over and over with the demo account gives you the confidence to say: “I’ve seen this chart setup over and over, I know that it will probably move in my favor. If it doesn’t and I take a loss I know that this trading technique is solid enough that over time it will be profitable.”
2) Keep a journal of every trade - and review them once a month or once a week. Preferably take a screen shot of the chart when you make the trade so that when you go back to review them you can see what you were looking at when you made the trade. Write about what was good about the trade and what was bad. If you keep doing this you will find that you start making less bad trades and more good trades. You will also hone what techniques you like and what works for you.
3) Take a loss as a learning experience. Write about in your journal what went wrong and what was right. Start making less bad trades and more of what you know to be a good trade. Remember that failure, if analyzed and learned from, is just a stepping stone to greater success.
4) Always use stop-losses. Every trade you enter you should have a stop loss. You should also at a minimum know what your goals (limits) are. If you are a beginner you should have both a predefined stop-loss and limits. Don’t be sorry if you miss out on some pips because of it. Write it down in your journal as far as what went right and what you could have done better. Remember this too: if you stop at at 40 pips and the currency continues to go against your prediction for a total of 80 pips you can always buy or sell then and skip the whole being 80 pips in the hole. Now you are only 40 pips in the hole! Only do this though if your original and follow-up analysis still hold true (for example, that the trend you were trading with has not been broken).
5) Educate yourself. Read some books. Take some online classes. One of my favorite books is “Forex Patterns and Probabilities:Trading Strategies for Trending & Range-Bound markets” by Ed Ponsi. I keep this one on my desk at all times in case I need to consult it.
6) Win at least 2:1 pips than you lose. Not in terms of number of trades (some great traders lose more than 50% of trades) but in terms of pips. This is called money management. If your wins are twice as big as your losses you will be profitable winning just 50% of your trades. If you in a setup you can’t win twice as much as you are risking don’t trade it. There are always other opportunities. For example, if you make 4 trades and only two of them are successful that is a 50% win rate and doesn’t sound great. But if you earn 100 pips on the wins and lose only 50 on the losses then you just netted yourself 100 pips profit (100+100-50-50=100)!
7) Rinse and repeat. Keep at it! If you lose confidence, go back to demo trading until you feel confident in what you are doing. Keep journaling every trade so that you can keep learning and improving. Keep reading books and other people’s analysis. Try to see the charts how I am looking at them and understand support/resistance and candlesticks. Come to your own conclusions about chart setups and try them out on your demo account.
More stuff from my files:
45 WAYS TO AVOID LOSING MONEY TRADING FOREXby Jimmy Young, CTA
Who is Jimmy Young?
Retired proven professional Bank FOREX trader with over 20 years of hands-on FOREX trading experience.
1) Knowledge Deficiency – Most new FOREX traders don’t take the time to learn what drives currency rates (primarily fundamentals).
2) Overtrading - Trading often with tight stops and tiny profit targets will only make the broker rich. The desire to “just” make a few hundred dollars a day by locking in tiny profits whenever possible is a losing strategy.
3) Over leveraged - Leverage is a two way street. The brokers want you to use high leverage because that means more spread income because your position size determines the amount of spread income; the bigger the position the more spread income the broker earns.
4) Relying on Others – Real traders play a lone hand; they make their own decisions and don’t rely on others to make their trading decisions for them; there is no halfway; either trade for yourself or have someone else trade for you.
5) Stop Losses – Putting tight stop losses with retail brokers is a recipe for disaster. When you put on a trade commit to a reasonable stop loss limit that allows your trade a fair chance to develop.
6) Demo Accounts – Broker demo accounts are a shill game of sorts; they’re not as time sensitive as real accounts and therefore give the impression that time sensitive trading systems, such as short-term moving average crossovers can be consistently profitably traded; once you start dealing with real money, reality is quick to set in.
7) Trading During Off Hours – Bank FX traders, option traders, and hedge funds have a huge advantage during off hours; they can push the currencies around when no volume is going through and the end game is new traders get fleeced trying to trade signals. There is only one signal during off hours – stay out.
8) Trading a Currency, Not a Pair – Being right about a currency is half a trade; success or failure depends upon being right about the second currency that makes up the pair.
9) No Trading Plan - 'Make money' is not a trading plan. A trading plan is a blueprint for trading success; it spells out what you see your edge as being; if you don’t have an edge, you don’t have a plan, and likely you’ll wind up a statistic (part of the 95% of new traders that lose and quit).
10) Trading Against Prevailing Trend – There is a huge difference between buying cheaply on the way down and buying cheaply. What was a low price quickly becomes a high price when you’re trading against the trend.
11) Exiting Trades Poorly – If you put on a trade and it’s not working make sure you exit properly; don’t compound the damage. If you’re in a winning trade, don’t talk yourself out of the position because you’re bored or want to relieve stress; stress is a natural part of trading; get used to it.
12) Trading Too Short-term – If your profit target is less than 20 points don’t do the trade; the spread you pay to enter the trade makes the odds way against you when you go for these tiny profits.
13) Picking Tops and Bottoms - Looking for bargains works well at the supermarket but not trading foreign exchange; try to trade in the direction the price is going and your results will improve.
14) Being Too Smart – The most successful traders I know are high school graduates. They keep it simple and don’t look beyond the obvious; their results are excellent.
15) Not Trading Around News Time – Most of the big moves occur around news time. The volume is high and the moves are real; there is no better time to trade fundamentally or technically than when news is released; this is when the real money adjusts their positions and as a result the price changes reflect serious currency flow (compared to quiet times when Bank traders rule the market with their customer order flow).
16) Ignore Technical Condition – Determining whether the market is over-extended long or over-extended short is a key determinant of near time price action. Spike moves often occur when the market is all one way.
17) Emotional Trading – When you don’t pre-plan your trades essentially it’s a thought and not an idea; thoughts are emotions and a very poor basis for doing trades. Do people generally say intelligent things when they are upset and emotional? I don’t think so.
18) Lack of Confidence – Confidence only comes from successful trading. If you lose money early in your trading career it’s very difficult to gain true confidence. The trick is don’t go off half-cocked. Learn the business before you trade.
19) Lack of Courage to Take a Loss – There is nothing macho or gutsy about riding a loss, just stupidity and cowardice. It takes guts to accept your loss and wait for tomorrow to try again. Getting married to a bad position ruins lots of traders. The thing to remember is the market does crazy things often, so don’t get married to any one trade. It’s just a trade. One good trade will not make you a trading success; rather it’s monthly and annual performance that defines a good trader.
20) Not Focusing on the Trade at Hand– There is no room for fantasizing in successful trading. Counting up and mentally spending profits you haven’t made yet is mental masturbation and does you no good. Same with worrying about a loss that hasn’t happened yet. Focus on your position and have a reasonable stop loss in place at the time you do the trade. Then be like an astronaut – sit back and enjoy the ride. No sense worrying because you have no real control. The market will do what it wants to do.
21) Interpreting FOREX News Incorrectly – Fact is the press only has a very superficial understanding of the news they are reporting and tend to focus on one element and miss the point. Learn to read the source documents and understand it for real.
22) Lucky or Good – Your account balance changes don’t tell you the whole story about your trading. Fact is if you are taking a lot of risk and making money you will eventually crash and burn. Look at the individual trade details. Focus on your big loses and losing streaks. Ask yourself this, "If I had a couple of consecutive losing streaks or a couple of consecutive big losses, how would my account balance look?" Generally, traders making money without big daily losses have the best chance of sustaining positive performance. The others are accidents waiting to happen.
23) Too Many Charity Trades – When you make money on a well thought out trade don’t give back half on a whim. Invest your profits from good trades on the next good trade.
24) Courage Under Fire – When a policeman breaks down the door to a drug dealer's apartment he is scared but he does it anyway. When a fireman climbs onto the roof of a burning building he is scared but does it anyway, and gets the job done. Same with trading. It’s ok to be scared but you have to pull the trigger. No trigger – no trades – no profits – no trader.
25) Quality Trading Time – I suggest 3 hours a day of quality, focused trading time. That’s about all your brain allows. When you are trading, be 100% focused. Half way is bullshit - it doesn’t work. Don’t even think that time spent in front of the computer watching the rates has any correlation to profitability - it doesn’t. Spend less time but when you're trading, be 100% focused on trading.
26) Rationalizing – Killer. Absolute Killer. Put your trade on and let it run. If it hits your reasonable pre-determined stop, you're out. Think of yourself as a prizefighter. You just got knocked out. Moving your stop is like getting up after being crushed with a knockout blow. It’s pointless. Things will only get worse. Don’t ignore the obvious. You're wrong – get out. Come back the next day and try again. A small loss will not hurt you - a catastrophic loss will.
27) Mixing Apples and Oranges – Have you ever done this? You see the EURUSD trading higher so you buy GBPUSD because it “hasn’t moved yet”. That’s a mistake. Most of the time the reason the GBPUSD hasn’t moved yet is because it's already overbought or some 4:30am UK news was bearish. Don’t mix apples and oranges. If EURUSD looks bid, buy EURUSD.
28) Avoiding the Hard Trades – Bank FX traders have an axiom "the harder the trade is to do the better the trade". This I learned from experience. When I needed to buy EURUSD and it was hard to get them, that’s when it’s necessary to pay up and get the business done. When it’s easy to get them, then sit back and wait for better levels. So if you are trying to get into a trade, or more importantly get out of a trade, don’t putz around for a few points - get your business done.
29) Too Much Detail – If your trading more than 2 indicators then you need to clean house. Having many indicators stifles trading and finds reasons not to trade. A setup and a trigger is all you need.
30) Giving Up Too Easy – Your first trade of the day may not be your best but certainly it’s no reason to quit. I have a preset daily trading limit and I use it. You can’t make money by making excuses. Getting trades wrong is natural and should be expected.
31) Jumping the Gun – Don’t be penny wise and dollar foolish. Wait for your trade signal to be clear. Put on your trade and give it a decent size stop loss so that you don’t get knocked out by random noise.
32) Afraid to Take a Loss - trading is not personal, it’s business. Don’t think that a poor trade is a reflection on you. It could be you're just ahead of your time or a commercial order hits the market and temporarily creates a small unexpected move. Again, place your stop beforehand and NEVER increase your pre-determined risk. If it’s going bad, it will probably get worse. I think that’s Newton's “body in motion tends to stay in motion…”
33) Over-Relying on Risk Reward – There is zero advantage in risk reward. If you put a 20 point stop and a 60 point profit your chances are probably 3-1 that you will lose. Actually with the spread its more like 4 to 1 (from entry point if it goes down 17 points you lose, or up 63 - you win; 17/63 is close to 4-1).
34) Trading for Wrong Reasons – Because the EURUSD is going up is not in itself a reason to buy. Buying EURUSD because it's not moving much is even worse. You’re paying the toll (spread) without even a hint that you will get a directional move. If you are bored, don’t trade; the reason you're bored is there is no trade to do in the first place.
35) Rumors – Rumors are rumors almost 100% of the time. Think about where in the motion you heard the rumor. If EURUSD is up 50 points in last 15 minutes and the rumor is dollar negative, well - then you missed it. Whenever you in motion with the trade, determine where you are entering.
36) Trading Short-term Moving Average Crossovers – This is the money sucker of the century. When the shorter term moving average cross the longer term moving average, it only means that the average price in the short run is equal to the average price in the longer run. For the life of me, I cannot understand why this is bullish or bearish. Easy to set up on software, complete with lights, bells and whistles, and good for the seller getting thousands for the software but in terms of creating profit - it’s a zero.
37) Stochastic – Another money sucker. Personally I think this indicator is used backwards. When it first signals an overdone condition, that’s when I think the big spike in the “overdone” currency pair occurs. To be overbought means strong and oversold means weak. Try buying on the first sign of overbought and selling on the first sign of oversold. You’ll be with the trend and likely have identified a move with plenty of juice left.
38) Wrong Broker – A lot of FOREX brokers are horrible. Get a good one. Read forums and chats in several different places to get an unbiased opinion.
39) Simulated Results – Watch out for “black box” systems. These are trading systems that don’t divulge how the trade signals are generated. Great majority of them are absolute garbage. They show you a track record of extraordinary results but think about it. If you could build a trading system with half a dozen filters using the benefit of hindsight, couldn’t you too come up with a great system. Of course going forward is an entirely different story. High-speed number crunching capabilities allows for building great hindsight trading systems, so BEWARE.
40) Inconsistency – Every business (FOREX trading included) requires a business plan (trading plan). Unless you have taken the time to write down a set of rules that you can and will follow, it’s likely your trading will remain unfocused and directionless. Make a plan, have rules, follow them. Set goals that are realistic and you will achieve them.
41) Master of None – Focus on one currency for technical trading. Each currency has a unique way of trading and unless you get intimate with it, you will never truly understand its underlying idiosyncrasies. Don’t spread yourself too thin – focus, master one currency at a time.
42) Thinking Long Term – Don’t do it. Stay in the moment. Especially if you’re a day trader. It doesn’t matter what happens next week or next month. If you are trading with 30 to 50 point stops, restrict your thought process to what’s happening right now. That is not to stay the long-term trend is not important. It is to say the long-term trend will not always help you when your trading a significantly shorter time frame.
43) Overconfidence – Trading is simple but not easy. Statistics show 95% failure rate of those attempting to become traders. If you're doing well, don’t take your success for granted. Always be on the lookout for ways to improve what you are already doing.
44) Getting Pumped Up – The trick is to maintain an even keel. When you are in a trade, you want to think exactly as you would if you didn’t have a trade on. To do this requires a relaxed disposition. This is not a football game. Don’t get psyched up. Relax and try to enjoy it.
45) Staying in the Game– I don’t recommend demo trading because traders learn bad habits when trading with play money. I also don’t think “letting it all hang out” right away is wise either. Start off doing trades and taking risk that is relatively small but still makes a difference to you if you win or lose. About a quarter to a third of what you expect to reach as your trading matures is reasonable.
Best Times To Trade Currencies
Forex is a 24 hour market and there will be good setups for profitable trades in the Asian, European and US sessions. It pays to look at historical price data on forex charts to see what time of the day you could be watching the market and what time you could be doing something else. The aim is to trade when the average trading range is worthwhile and stay out of the market when price is in a narrow sideways range.
The Major Trading Sessions in the Forex Market
The FX market is active 24 hours a day - it is important for the active forex trader to identify the times where there is the most volatility and largest trading ranges.
TOKYO 7PM-4AM EST
Tokyo is one of the principle dealing centers in Asia and is the first major Asian market to open. USD/JPY, GBP/CHF and GBP/JPY have large ranges, and offer short term traders opportunity.
LONDON 2AM-12PM EST
London is the most important dealing center in the world and the majority of forex trading takes place during London hours. For traders looking for volatility GBP/JPY and GBP/CHF provide large daily ranges.
NEW YORK 8AM-5PM EST
New York is the second largest Forex marketplace. For active traders GBP/USD, USD/CHF, GBP/JPY and GBP/CHF are good choices, with large daily ranges.
US EUROPEAN OVERLAP 8AM-12PM EST = 5am – 9am PST
This period is the most active - the best period for day traders looking for volatility.
London Trading Session
London opens at 8 am GMT or 3 am EST. Closes at 4 pm GMT or 11am EST. The most active pairs during this session are EURUSD with 39% of the trading volume, GBPUSD with 23%, USDJPY with 17%, USDCHF with 6% and USDCAD with 5%.
Europe opens at 7am GMT or 2 am EST, Closes at 3 pm GMT or 10 am EST. The European session is the most volatile session most of the time.
New York Session
New York Opens at 1pm GMT or 8 am EST. Closes at 8pm GMT or 3pm EST.
New York is the second largest forex market place.The busiest time is 8 am to noon EST. News releases can result in a volatile market. Trading activity usually winds down after the U.S. afternoon trading period.
The Tokyo session opens at 1am GMT or 8 pm EST and closes at 8am GMT or 3am EST. Sometimes volatility is low and sometimes good moves occur. The USDJPY is the most active pair with 78% of the volume followed by EURUSD with 15% and EURJPY with 5%.
More stuff from my files:
From a Professional Floor Trader who goes by the name - Phantom of the Pits
PHANTOM OF THE PITS RULES
RULE # 1
Assume your position is WRONG until the market proves it to be correct.
REMOVE position early if it doesn’t prove correct.
Don’t keep a position UNTIL it proves to be correct.
Don’t wait for the Stop Loss to take you out.
LEARN to be WRONG
THINK – When position is correct you have nothing to do.
This keeps losses SMALL – may not always be right but will keep you funded and trading.
RULE # 2
INCREASE your position CORRECTLY when you are correct.
Always start with SMALLER position, THEN add to it – NEVER have your entire position on until the position proves correct.
If initial position is 6 contracts, next add 4 contracts, then add 2 contracts.
In a WINNING trade, instead of taking profits – ADD positions
Most of your profit will come from winning trades which take off QUICKLY.
GUYS AND GALS OF STRAT THREAD LISTERN UP.He has just given you the grail.....
Strat, do you agree with The Phantom's two rules? What parts do you personally do or do not follow. Do you assume you are wrong the second you place a trade, and then remove it if it doesn't move quickly enough?
There is a saying "One man's meat is another man's poison" which means what might be good for me, may be bad for you. As you build and develop your style of trading you will try different things until you get to a place where you feel comfortable.
As I was developing my style, I tried just about everything I found, so with regard to these rules:
Assume your position is wrong - didn't work for me, made me negative
Remove position early - not part of my plan
Don't keep a position - not part of my plan
Don't wait for the SL - not part of my plan
Learn to be wrong - made me negative
Think - when position is correct...............correct
Increase your position - definitely
Always start with a smaller position - yes and no
If initial position.......yes and no
In a WINNING trade - most definitely
Most of your profit - depends what type of trader you are
You are talking common sense which many "so called traders" have little of or don't know how to deal with. They get so wrapped up in their "trading world" they forget to apply or even think common sense.
What you have stated here are facts which no-one can dispute. If you go back and read some of my answers and posts, you will see I say the same things.
I personally don't use R/R - if I did, I would probably never take a trade.
I do start out with risk no more than 2% of my account.
Cutting your losses - it's part of my plan and is controlled by my SL - I have already accepted the loss BEFORE I enter the trade.
Running your profits - the only reason I trade - see my EURJPY trade
Nobody, I repeat NOBODY, can tell where a trade might go. Sure, we have a good idea, others have fib projections, others have S & R, others have trend lines, others have pattern projections, others have pitchforks, others have cycles, others have time projections etc., etc. History can ONLY guide us to where we think the trade might go but that is all it is, a guide. Ultimately, the Queen (the market) will take us wherever SHE wants to go. The only thing we can do is jump on her train and stay on as long as it goes in our direction.
As I've said before, for me, I'm only really interested in trading big moves, or what I think will be big moves, major swings and new trends which at least have decent profit potential.
Stuart, I understand where you are at. You are being blinded by BS and hype and are trying to apply common sense to it. You are smart and have recognised that despite their grandiose claims, they have no more idea than you. Now, accept that and move on, for knowing this, you are already ahead of those traders with their "heads in the sand".
© Forex Factory