Trading Truths

Hello,
My name is Barry and some of you might know me as Pipoholic. I was a senior trader and mentor with Urban forex and Forex Watchers. I have been a trader for about 9 years and have been a full-time trader for 3 years now. I miss being a part of the community so I thought I would start this thread to maybe hang out with some of my old friends and see where it goes. Hopefully this info is helpful.

My plan is to start a document that talks about Trading Truths. This will be a growing thread and I will try to continue to add to the Truths as they pop in my head. If you are a veteran trader, feel free to add anything you want that is useful. These are some of the things I have learned through my many years of trading and it might just help someone that is new or struggling with being consistently profitable. I plan to be brutally honest and straight forward here. So, I apologize in advance if I hurt someone’s feelings. I do not plan to really get into any technical edges (although I am sure some will come up) as there are plenty of places out there to find that. But my plan is to talk about logical truths that will aid you on your journey. This will probably be long and drawn out. But I promise this info is a gold mine of knowledge.

When I say logical truths, I mean ways to think about trading that no one ever really talks about, but everyone who is successful in trading knows about. If you are new to trading, you probably have these huge dreams of what you will do with all the money you will make. You dream about the freedom from a job and not having to answer to anyone. You might dream of traveling and working here or there and living the life. But anyone who is successfully making money in trading knows how much hard work and sleepless hours it takes.

Truth #1
“Trading is nothing like you think it will be” I wanted to start with this topic as it is one of the most “Slap you in the Face” realities that will hit you when you start this journey. Hopefully if you are lucky you realize it before you lose a buttload of money. The reality is this job is not for the faint of heart. It takes hours and hours and hours of studying and learning and sitting alone behind a computer monitor. You must really have a passion for it to succeed. And when you do start to make money it gets boring. I know, I know, it is the perfect job, you can work from anywhere you have internet. The market is open 24/5ish so you can trade anytime of the day. Yeah, I gotcha! But it takes a certain type of person to succeed. I still remember to this day my first week after I went full-time. I had worked part time trading for about 6 years. I felt like I was good enough that I could make this a living. I had solid routines, I had great edges. I paid off all my bills and took the plunge. I quit my job and was ready to take on my new life as a full-time trader. My first day, I got up ready to attack the day. Started looking at my charts and stalking trades. Then I started losing trades left and right. What I quickly realized is I had so much time to trade it increased my fear of missing out (FOMO). The psychological side of having all this time was a huge negative. All the trading setups and routines I had were for trading when I had small windows and not much time. Now suddenly, I am sitting behind my computer with no one to talk to, no one to tell me what to do. I had to reinvent how I went about trading. I had to setup a daily schedule and build all new routines on how I went about my day. How I would look at charts and how I would plan my trades. Then the reality of “Man, I must make money now to survive”, hit me. This was the start of a completely new chapter in my life.

If you think this will be all parties and Lambos, think again. It is a serious job for a serious person! Why do you think only about 5% of the people who start trading become successful? It is not what you think it is. But if you are willing to put in the work, it can be done. I am living proof of it. I was a network engineer for 25 years. Now I am a full-time trader. Tip: if this sounds like you, then start right now with the routine of no sleep and long hours. Where I live at London opens at 3am, NY at 8am and Asia at 7pm. These are the hours I trade. So, I would say get use to the crazy hours now, because you will need to be in the market as much as possible. I sleep less now than I ever have. That is just part of the job.

Bottom line: If you are not ready to work harder then you ever have right now. Then stop trading cause all you will do is lose all your money. Go buy a motorcycle it is way more fun. This life is not for you. Trust me.

Truth #2
“Get your mind right” I firmly believe that trading is 80% psychological and 20% technical. The mental side of trading is hard. Learning to read a chart is easy. I don’t care how strong you think you are mentally; trading will challenge every ounce of will power and confidence you have. Trading will make you feel on top of the world one moment and ready to shoot yourself the next.

You must have full control of your emotions. You must have the ability to let losses happen and not ever think twice about it. Even if you have 10 losses in a row. The second you start worrying about your wins and losses the market has won and has you in her trap.

There are very few people that have this ability naturally. But most of us cannot do this without some sort of training. I say training cause just like the technical side of trading, the mental side must be developed. I would recommend meditation. Meditation will help teach you how to stay in control of the moment. Meditation is hard. Try sitting sometime for a minute and try not to have a thought enter your mind. If you have not trained in this, I bet you cannot go a minute. Meditation gives you a mechanism to over come bad thoughts like FOMO, losses, wins in a row, etc. It helps you purge your mind so you can focus on the task at hand.

I used to think you had to be like a machine. Trade without emotion! This is not possible. Everyone has these emotions. You cannot stop it. But you can control how it affects you. That is where meditation comes in. It gives you one of the best tools in your toolbox. The ability to have, accept and control your emotions. I have studied allot of successful businesspeople, athletes and traders. One thing they all have in common, they use their minds differently then most people. From Jack Nicklaus visualizing his next golf shot to me setting at my desk. A strong mind is a must.

You might not be into meditation or even have thought about it. But it does help with the psychological side tremendously. You will soon be searching for ways to combat the mental barriers that will show up for you. So you might as well get working on that along with your technical training now.

Truth #3
“Never use money you cannot afford to lose” This is probably one of the best pieces of advice I can give you. You need to fully except the fact that the money you start trading with will be lost. I am not saying you will lose it, but if you go into this arena with fear of losing your money because it is this month’s house payment, you have already lost it. The sooner you take the value of money out of the equation the faster you will succeed. Money needs to have no value. Good or Bad! Money is just an instrument. Just like your computer, your trading platform and your trading edges. It was not until I learned this tip that I started to see my account grow. When you give money value, you start to trade tight. You will second guess your trades and worry if they will win or lose. Trading is a numbers game. You want to win more than you lose. I have seen some of the best entries go from a win to a loss because of mismanaging the trade. Or someone closing out the trade early because they cannot handle letting a trade run. Then the trade makes double or triple what they actually made. All this is because they traded with money having value.

Bottom line: If you cannot afford to lose the money, don’t trade it cause your money has too much value for you to be successful. You are never going to take any money you fear of losing and turning it into a profit.

Truth #4
“You will never move the market” Us as retail traders will never make the market move one way or the other. So what does that mean? It means, if you cannot move the market then, you need to know what the person that is going to move the market, will do. In comes the institutional traders. All we can do is learn to ride the waves that these big players are creating.

Let me clear something up. When you go and spend your money and learn a trading method or you read the next great thread here. All you are doing is learning an edge. An edge is nothing more than a technique that gives you a glimpse of the big player and which way they are going to make a move. Now some of the hundreds of edges out there are good and if studied properly and executed properly can and will give you a leg up. And you can make some money. But don’t be fooled. That edge you use today might not work tomorrow. This is due to many things. Maybe the person or group of people that trade this certain pair likes to hit the button when the Fibonacci reaches 50%. If that is your edge great. You will probably make some money. But what happens if those same people (or new people) decide they will make more money when it reaches the 61.8% instead. Now your edge no longer works properly. Now this is just an example I am not saying you should trade Fibonacci’s. What I am saying is “Edges come and go”.

So never trust in an edge. What you need to learn is how those big players must get their money in and out of the market. Think of this, say you are one of those people that has millions and millions of dollars that you trade every day. When you hit the buy/sell button the price moves that direction. But you know that if you hit too big of a position it will make everyone one panic and jump on your coattail. So, you must be strategic in how you execute your trades if you want to make money. This can be difficult for the larger player. Here is something to think about. What do you have to have on every trade for it to work? You need a buyer and a seller. Right? A transaction does not happen if you don’t have each. So now let’s put that into terms you can understand. Let’s just say for simplicity sake that you as that big player has 100 million dollars to trade. You want to get your money in the market, but how do you do that? I mean if your money is sitting in your account it is not making money, so we must trade it. But if you say sell all 100 million dollars in one big move, what do you think will happen? The market might move for a quick moment. But as soon as all the buyers that you are selling to dry up or are satisfied, the market stops moving. Not to mention all the people seeing that price is dropping and decide to jump on board and sell also. The buyers are overwhelmed now. Then stops are hit and buyers start closing their trades in fear the market is going against them. How much money do you think you will make? You probably still have orders sitting out there that needs to be filled. Maybe only say 10 million was taking into the market. What are you going to do with the other 90 million? See putting yourself into their shoes changes your perspective. So, you must learn how the big players have to move their money in and out of the market to truly understand how to trade.

Bottom line: Edges come and go. Learning how the big player trades is the only way to have sustained success. Because if you understand this as a baseline, then you can flow like water and let your edges change as it needs to. So, stop searching for the holy grail. Stop jumping from edge to edge. They all work to some degree. Understanding the root of the edge is what makes the difference, not just hit the button at 50% Fibonacci. Study money management and how orders work. Study how the big boy (Navin’s term) works. Then you can see and edge for what it is. Then you can tweak the details to follow the future of the market. When you understand how money is moved you understand why price spiked up then when you jumped on board turned it drops like a rock and stops you out. I mean knowing what you know from the example above, it makes sense that the big player has to sucker people into believe it is a buy. The more buyers, the more orders he can use to sell to. Make sense?

Truth #5
“Understand Momentum” reading momentum goes along with truth #4 above. There are a lot of edges that help you read momentum. Finding a way to tell you when price will continue so you can stay in or when price is slowing so you can get out is huge for your success. There are signs that the big player has all their money in the market, which means they will start taking profit at some point. This is where we see decreasing momentum. I mean the only way they can make money is to close their positions. So, to close a sell position they have to become buyers. Right? There are also signs that the big player still has money to put in the market. This is increasing momentum. Ever heard the saying “The trend is your friend” ugggg. This saying kills me because it is only partially true. “A trend with momentum is your friend” I mean if you jump on at the end of a trend with failing momentum. Is it really going to be your friend? Or is it going to turn against you and stop you out. Leaving you confused as to why it did not work.
Bottom line: If you can understand momentum and you can understand how the big player has to move money, then you have the holy grail to trade. There are very simple ways to read momentum with nothing more than the candles on the chart. No indicators at all. I even make all my candle colors the same color. There is nothing about a candle color that will give you a true edge.

Truth #6
“Stop using indicators, Master the basics” Ok so this sort of goes with the other truths above. If you are struggling with success and you are using indictors to tell you when to trade…..Stop! The truth is indicators can only help if you understand how price action works from the most basic level. If you cannot open a chart and know based on price action where price should go, then indictors are only holding you back. Learn the basics of price action. This goes back to truth #4 and #5. Learn how the big player thinks and learn how to read momentum. Learn how to know if a support and resistance level will hold. Master the basics! Then indicators are more of a confirmation than a signal to buy/sell.

Example: I wrote an EA for MT4 that uses pivot points. I had a propriety way of using them. I got everything written and the EA worked well. I kept making tweaks as I found new data, but the EA would have 5-6 wins in a row and then 2-3 loses. After months and months of coding and tweaking I concluded that you cannot be a machine and just use indicators. I had to know if the area was logical based on the story of the big players. What momentum was doing. So now I have the EA just alert me when a trade is getting ready. Then I go to my charts without any indicators and the candlesticks the same color and I use my basics. If my basics say it has a high probability to work, then I take the trade based on the EA manually. See without that human interaction the indicators did not work. And trust me I tried. I spent countless hours testing and tweaking.

Bottom line: There are no indicators out there that will make you consistently profitable. If you don’t understand the basics of price action you are going to lose your money. Your edge with indicators might work for a little while, but if you cannot tell where the buyers and sellers are by looking at the chart with nothing on it. Your life as a trader is limited. Price action rules! And the keys to good price action is understanding the large players that move the market. Identifying where buyers and sellers are and identifying momentum when you get to or leave those areas.

Well I think this is a good start for now. There is a lot of powerful information above. If you really stop and understand what I wrote it will help you. If you are new to trading hopefully this will help you past some of the hurdles I had to deal with along my journey. Everyone starts somewhere, but the path to success can be way easier. If you have any questions or additions, please feel free to discuss.
Thanks,
-Pip

Good man, skipped your post a little... You seem to hit the spot with some. Just one question... Have you ever felt the force? Meaning that there might be some (yet) UNKNOWN (massive) factor that moves the market(s)? Have you felt sometimes that market seems to have the mind of its own or that is controlled by unknown? Well just a test to see how deep/long were you in the game... Similar to how truck drivers start seeing "black dog"

Wow...Pipoholic. Great start....perhaps the rough outline of a book in your future. I am saving this post and going to read it a few times as there are a LOT of insights in there. Thanks for sharing.

Waiting for the trolls to destroy this thread in 3,2,1...

Haha! I think they have already been scrambled

hope it will last for long
green pips to everyone

Sounds pretty great to me. I only started making money when I priced in risk. I price in for the entire trading range. I can hold many trades almost infinitely because I know exactly how much drawdown I can afford. The positions themselves become the savings. For this type of trading, a nano account is necessary to start.

Pips, in your opinion, would price levels or news be more important to a trader. I often see price hit a certain level then all the news turns around..

Nice post Pipoholic1!

I agree with 1-4, but 5-6 are debatable. I agree with you on your main point of #6 on not using indicators, but I'm skeptical about the part on price action. I'm not disputing whether price action trading does or doesn't have merit, but I don't think it's a universal truth that it's the way to make money in the market.

I agree with Pipoholic on this point. Price action is the key to trading and which everything else should revolve around. Indicators are a lure for the lazy who don't understand price action and don't want to take the time to learn but are just fine spending countless hours trying to find the right combination of indicators.

But honestly there is nothing new, profound or revolutionary in these "truths" posted by the thread starter. Don't mean to be disrespectful but they are rather obvious but yes ignored by many.

The big question is why does trade go the wrong way every time you make it? Well that's about market makers. In order to be successful do larger trades with huge stop losses not tight ones

Why care about micro pipes make big moves I stead never trade forex as day trades imo whipsaw is a bitch

Thanks for the input everyone. I do understand that there is a lot of debate over price action trading. Like I said this is the revelations I have discovered during my journey. I know there are plenty of people that have traded successfully using fundamentals and indicators etc.. But to truly understand price action is a game changer. I can take my bare bones chart with all the candles the same colors and no indicators and tell you what price should do pretty dang accurately. Now there are always some crazy event like war or an explosion somewhere that will make the charts to something out of the norm. But it normally come back into place. I remember seeing the explosion in England not that long ago on the bridge happen in the charts before it hit the news. So it does happen.

Also I am not trying to write a book or anything like that. I don't care about all that. I am not trying to change anyone's mind or preach this against that. I just like helping people. I miss teaching and anyone that knows me from forex watchers elite community knows my story and have heard many of my New York morning analysis I did as a mentor. So I am here to just do what I can, cause it gives me joy. I don't need money. haha

Abe16 I agree with you. This is nothing new. Just things I think you start to realize as you progress as a trader. My hope was to just give back and show people (mostly aspiring traders) where they should focus their attention. Or at least shine a light on some of the light bulbs that went off for me along my journey. Also like you say many ignore the basics and find themselves on a spiral of jumping from edge to edge trying to find that one special holy grail.

jeditrader -A lot of times trades goes against you if you A. Not know where you are in the larger story or B. The larger player is trying to build orders before it takes off. Have you ever taken a trade and know you got everything right and then it stops you out and then goes the way you thought? Sure you have, This is not a market maker. This is the fact that the larger player can only move price if there is enough buyers to sell to or enough sellers to buy from. The larger player knows this so they will move price to make people jump on board so that there is an influx of orders that they can take advantage of. This is the only way they can move large amounts of money through the market.

I never trade with a large stop loss. It is hard to make good profit if you have large stop losses and you need a very large account to make it worth it. I try to make as many "R" as I can per trade. If I have say a 50 pip stop that means I have to have my take profit at +100 pip to make one "R". Not my cup of tea. Remember you can make a great trade with very little drawdown. As long as you understand where you are in the bigger story. Then use the smaller time frame for entries. I take a lot of my trades on the 5min-15min TF but my trade is actually a 4 hour or daily. So my TP is always on the higher TF. This is how I get small stops and bigger profits. But you have to be able to read the larger TF story. Which means you need to understand price action very well.

TinderDater - News has very little meaning for me honestly. I do look at news but I only care if it is a Red news on the calendar here. And I only care about that if I am about to enter into a trade. I try not to jump in right before a big news event. If I am already in I don't care. The only thing you have to be careful for is brokers that increase their spreads on news. If you are trading small stop losses and the broker increases to say 10 -15 pips spread, it could knock you out of the trade. So if your broker increases spreads you have to take that into account. I have done my data on news events and a good amount of the red one don't really move the market. You have to remember that the lager players are already pricing future news into the price. The forecast what they think will happen. If they get the upcoming new correctly you will not see much movement in the price. But if they get it completely wrong then you see those big corrections. Plus a lot of times price turns at solid price levels on news moves. That is why I love true price action trading. I am reading what the larger player is doing and I understand how he/she has to move their large amounts of money in and out of the market. To me this is key.

Good discussion. I am trying to learn price action trading and am following some people on here that are using this methodology.

Well that being said usd/jpy just hit a daily weekly high so much for the s and p next few days

It's easy to trade all the time it's hard to not to trade imo just wait right lol

You got me interested in the beginning but later said some things that dropped my enthusiasm.
Could you maybe provide us with some TEs etc... Not sure if you are a scalper or not, would seem to think so...
What are your strong points... price action (scalping)?

Auricforecas - No I am not a scalper at all. But because I use my higher TF to give me the story of where price should move, I can use the smaller TFs and grab scalper style entries with very small drawdown and very small stop losses. This can only be done properly if I know what my bigger player is doing in the long run. This also lets me know that I can hold on to the trade longer and add positions along the way, increasing my profit. My idea is to take a trade with the smallest and safest amount of stop loss but take profit from the higher TF. That makes my risk to reward very very good. I want to get a minimum of 4-5 times my risk on any one trade. I hope that makes sense.

Jeditrader88 - Once you understand trading and how price has to move then it does not seem hard to wait for your entry. What you are talking about is FOMO (Fear of missing out). In the beginning of an aspiring trader, over trading happens all the time. This is because the trader fears they are going to miss a trade. It is this uninformed fear that makes them pull the trigger on every thing they think is a trade. I say uninformed cause when you can read the chart properly and you understand the way the larger player has to move their money, then all you are doing is waiting on them to build the orders they need to move the market the direction they want. So patience is just part of the plan. And because I can read where in the story the big player is, I can trade counter trend or with trend successfully. The only thing that changes is if I am trading counter trend then I tend to be quicker at moving my stop to BE and I will look for smaller TPs. Because price has a tendency to be a little more volatile and can change at any moment with counter trend. But I can successful trade either way by knowing what my big player is doing and at what point in their process they are at. The other part of why beginning traders over trade is because money is too valuable to them. When they lose trades they feel they need to take more trades to make up for the loss or they feel like if they wait then they are not making money. Either way money is the motivation for trading. Not the process of trading. Any good trader will tell you to focus on the process of trading. And not the money you can make.

Surfsup - Price action is great. I was the guy that jumped from edge to edge and mentor to mentor. But once I really start focusing on how the large institutional trader has to trade to make money, that is when I started understanding how to trade. You have to put yourself it the shoes of the people that move the market. Study trading from their perspective. I can tell you this. You can make money from just about every edge out there. More than likely it will only last for a small amount of time. Cause the market is always changing and the edge you trade today might change tomorrow. I mean go and look back on these forums here and see how many of them come and go. Some have a long life. But they all eventually fade away. One of the first ones I started with here was "Trade what you see, not what you know" There is still a lot of great info in that thread and it is still probably one of the threads with the most posts and it is practically dead now. My point is when you really understand how the market moves the edges don't really matter. You will see it as price unfolds. And any changes in the market can be adapted to as it happens. It is hard to adapt an edge if you only understand that your edge is when x cross Y and pullback to Z, pull the trigger. You do not understand trading, just the rules of your edge. I hope that makes sense.

Great points.

Well I would certainly want to see your trades, TE if possible.. because 1:1 R:R seems very good already.. specially if you check my TP20SL20 thread where we prove the power of this... Are you sure you are pulling 1:5 Risk:Reward? What is your win-rate?
I mean, just give me 10 of those (in a row) and I might retire in a week... What is your typical TP at this 1:5? TP100, SL20? How many of those could you do in a row... per year? Just give me ONE stream of those.. and I retire... Or let's say... TP50.. SL10... If you can enter trades within SL10 (aka 10 PIP "error" of entry) and at TP x4-5, you are operating at a GOD level.. I am not even joking... So at "minimum" 4-5 times RISK on any one trade.. which is it.. do you enter trades with even less than 10PIP "precision" or are you pulling more than 50PIPs per trade? I mean either is WTF (good?). In case you are making 50PIPs.. and at 10PIP SL.. you can pump this up to 500:1.. and be pulling 200%+ per trade! (more than a factor of x3 per trade)... Give me 10 of those in a row.. (with good certainty) and I retire...

So now I do not know... have I misunderstood you... or are you not knowing what kind of goldmine you are sitting on (if you are not billionaire already).. or are you joking I am eager to hear more about this! Please share.

Hi Pipoholic1, good start. I am unable to understand why most of the traders/analyst, like you, oppose using of indicators while graph is also an indicator.
The indicators opponents should directly trade from MARKET WATCH.
Will you please differentiate between PRICE ACTION and LEVEL TRADING?
Instead of writing long long paragraphs from you or us, I think we should come on practical aspect of trading. You take positions from smaller TF graphs
like 5M/15M Gaph. If you want to help us and certainly you are eager to give us better learning, I am posting here under only one 15M graph and request you
to please give reasons of buying/ selling, on the graph.
I also request you to give only one presentation every day, on any symbol of your choice, giving reasons of buying/ selling.
Good wishes for you and participants as well.