I'm starting this thread inspired by tight Depth-Of-Market trading in futures, which sheds a totally new light on the FX market for me -- because the Forex market is the same as any exchange traded market and the same principles apply, yet many traders, and especially those starting out, are ignorant of them. Of course, we don't see DOM, but the principle still applies.
The goal of this thread is to explore trading with very tight stops and the fundamental concept of making profit in the markets:
a) that profit is made only from breakeven upwards;
b) that the name of the game is stop-running: players are pushing prices in tight ranges to unload into stops;
c) that the intention and capacity of market movers is unkown beyond the next few ticks (and that's why you have only 10-lines deep on the DOM, the rest is irrelevant);
d) that price action and TA is only good for identifying the points of contention and potential targets/magnets, but not future direction;
e) hence the true edge lies in the ability to catch a breakeven position with lower collateral cost than a 2-8 tick target and hold runners from there if momentum emerges.
For me this basically means one thing -- trade anything, with trend, countertrend, breakouts, but always with very tight stops and hold to reasonable targets from there. That is the only profitable way of trading I have experienced in more than five years.
To expound on the concept for discussion, below is a video by John Grady that basically sums it all up, which makes me want to throw conventional things like wide swing stops and profitable "setups" out the window. If the market moved two ticks in one direction, it can easily move two more, or four more, or grind forty more for that matter -- as long as there are stops to unload into, and no real opposition. This is very clear to see on the DOM in futures, less so in FX.
If the big players who enter and get out on pullbacks to their breakeven position, how can a retail trader make a profit by staying in? If the big guys keep fading expanding ranges and get out immediately and step aside if they don't get BE right away (which actually makes the ranges expand), how can a retail guy sustain them? So, here's the point to discuss in this thread -- and how it could be applied in FX trading:
The goal of this thread is to explore trading with very tight stops and the fundamental concept of making profit in the markets:
a) that profit is made only from breakeven upwards;
b) that the name of the game is stop-running: players are pushing prices in tight ranges to unload into stops;
c) that the intention and capacity of market movers is unkown beyond the next few ticks (and that's why you have only 10-lines deep on the DOM, the rest is irrelevant);
d) that price action and TA is only good for identifying the points of contention and potential targets/magnets, but not future direction;
e) hence the true edge lies in the ability to catch a breakeven position with lower collateral cost than a 2-8 tick target and hold runners from there if momentum emerges.
For me this basically means one thing -- trade anything, with trend, countertrend, breakouts, but always with very tight stops and hold to reasonable targets from there. That is the only profitable way of trading I have experienced in more than five years.
To expound on the concept for discussion, below is a video by John Grady that basically sums it all up, which makes me want to throw conventional things like wide swing stops and profitable "setups" out the window. If the market moved two ticks in one direction, it can easily move two more, or four more, or grind forty more for that matter -- as long as there are stops to unload into, and no real opposition. This is very clear to see on the DOM in futures, less so in FX.
If the big players who enter and get out on pullbacks to their breakeven position, how can a retail trader make a profit by staying in? If the big guys keep fading expanding ranges and get out immediately and step aside if they don't get BE right away (which actually makes the ranges expand), how can a retail guy sustain them? So, here's the point to discuss in this thread -- and how it could be applied in FX trading:
Inserted Video
"To the busy day / To the idle play"