Minimize risk, maximize profit and ride a trend

This forum has changed my professional life and got me fully into trading. Thread "Building an equity millipede" was the missing point in all my efforts. Of course, I had to change it slightly, so it respects my personality, but it got me there.

I started to trade this way while being at the university. One particular day stays in my mind even after so many years. As a student with not much money, I traded usually with a 200 EUR account, made some money, withdraw it, and trade it again with 200 EUR.

On that particular day, I have built decent positions (legs as Graeme liked to call them) on EURUSD. It was up around 3K EUR in equity - a huge amount of money for me at that time. I went for a run and when I came back I found all my trades closed at break-even. It was so painful to experience that I decided to stop trading for a long while and since then I was not a huge fan of building equity and waiting indefinitely, at least not in the forex market.

I tried many other approaches but did not find them so profitable and comfortable.

Later on in my life, I started a business that succeeded. Trading became a hobby and was not relevant in my income part and still is not. I love it, especially when I open a position at a very good level and it goes in my direction immediately after placing it. The profit that it generates is not that interesting anymore as other activities are more profitable, but the freedom that trading offers is just astonishing.

I came back to trading just as a hobby with no expectation of making a lot as I have more time than I had before. Also, I learned so much here by reading your posts and it is the only place where you can discuss trading and its challenges and people really understand you.

I am going to share what I've learned in those years.

When I finished reading "building equity millipede" I tried to follow any advice found in the thread. Very soon I realized that following any system is not about rules but about principles that work. Rules can change but principles remain untouched.

If someone gives you a set of rules you might be able to follow them for few weeks until you find some difficulties or a losing streak. Then you'll start to worry about the system and start finding something new. I've been there too and it took me about 3-4 years to stick to one method and make it work. I do not understand what kept me trying again and again but I am glad I kept being foolish.

Trading is not an easy job at the beginning and it is a pretty boring job once you make it work. If you worry that trading is not for you, stop worrying and quit before you spend too much time on it. If you know that it is for you, keep learning, and one day you find your success.

I'll give you guidelines in this thread, but no rules. You should adjust it to your personality so it works for you. You might prefer to close all your trades before you go to sleep because you might wake up a night, then this system might not suit you. You can even trade only weekly charts or 1min charts because you find it better and makes much more sense to do it that way. Feel free to adjust to your needs, personality, and time preferences.

Do not follow anything blindly and question every information I'll give you.

About entries

Entering a trade is basically your job. You have no idea whether it ends up in profit or loss. But you should have clear one thing. The direction you want to enter right now.

I might tell you about trends but you already know it. So please look at any chart and tell what direction it is heading. Is going up, down, or sideways? If it is going upward I want to buy. If it goes downward I want to sell and if it is ranging I want to buy at the bottom of the range and sell at the top. Do not make it too messy by looking at all timeframes. H1 and H4 could be conflicting. Weekly might say something else. So choose your timeframe in advance and make it easy for yourself. We are not building a rocket here, we are just buying stuff and then selling it.

I prefer to look at two timeframes. Weekly and hourly. Weekly for identifying supports and resistances and H1 for identifying entries. I might use daily and open on 5min or use any other timeframe. I just do not because then it becomes too confusing to focus. I know what I'm looking for and what is not an ideal entry signal for me.

You might prefer a different setup so use that one. Learn just one good setup and use it. Then do not do anything if you do not see it. Learn when to trade and when not. That way you remove all distractions from your trading.

Sometimes I open a position that is not following my rules in this thread because I find it at good support or resistance level. These trades might also appear here and you'll see them here so please ignore them at the moment. I opened a small account for purpose of this thread. I am going to trade there small positions. Do not get discouraged as you'll build up your account and then profits and also losses will be much more significant in terms of money.

An example of that trade is taken just recently and it looks like this (it is not taken on the small account dedicated for this thread)

But now let's get back to keeping up with the direction of the move because it is what matters here. I am going to show you screenshots from test account and how it looks like in action.

These trades are already closed in profit but will serve us well. You can clearly see that price started to decline and considered it as a good opportunity to enter the market. After the move I was waiting for small correction and then I place my trade with SL around 30 pips (sometimes I use 5pip SL, sometimes 70). I place SL where I consider being wrong about the market and I do not enter if SL should be wider. I'll better wait for different setup.

I use these indicators:
Simple moving averages: 5, 10 and 34.

I have recently entered USDCHF. SMA 5 and 10 are going up and the price dropped down to SMA and still tried to go higher. When you check it on the weekly chart, the price is doing basically the same. SMAs go up, the price dropped to SMAs and tries to continue upward. So I want to be a buyer. If you check H4, I might want to be a seller. But I chose to follow weekly and hourly charts so there is not so much confusion. I am not trying to be right, I'm trying to make money in longterm and to have an easy life.

Have a look at few setups I have marked. I have might take them if being at PC at that time. As you can see, not of them would be profitable. And it is alright. I take many losing trades.

Have you figured out what are my entry rules? Hmm...

Price have closed under SMAs with nice momentum. Time to sell? It worked here

And some possible entries in the past

Im in thanks for the thread very interesting

Thanks buddy, much appreciated.

Trading is boring as a hell

Trading is a very funny activity. Until you make it work and you become profitable. When you do not know what is good and what is not for your trading you might be opening trade after trade just because of the activity itself.

A friend of mine who is a very good trader and his account is bigger than you can imagine says that trading is like watching the same movie all over again every single day. You are bored of watching it again and you won't learn anything new. Of course, you can be looking for a new entry method, exit method, different position management technique, but why would you do it if your system works? You won't find passion anymore.

Are you ready for the most boring profession ever? Are you ready to watch the same movie that you saw yesterday?

This post is for you to think about trading and whether you really like it or you just like the image of a successful trader. If you don't love trading find some activity that brings you more joy and at the end of the day brings you more income. It can be any business or job.

Here are my trades I took yesterday and today on "show it" account. All of them died at BE - what a fun, right?

I went short on cable after getting a sell signal. I just waited for some pull-back as I was not comfortable shorting at that low price. There is a decent support bit lower on the weekly chart so I'll be moving SL to BE if the position is in profit 20-30 pips.

No more trades today.

GBPUSD moved to BE. It was a quick move.

GBPUSD died at BE.

This morning I have reopened but I am long now. Also, I have opened other trades as instruments started to move. I won't be checking trades much today so let's see how to develop.

Thoughts about entering with the flow

I wanted to show you three things by demonstrating GBPUSD trades.



1. when you open position in direction of the flow you will be able to move SL to BE quite easily and it does not matter what happens next. You can very likely catch at least 20 pip move in your direction. Sometimes you get unlucky and trade goes against you almost instantly. But in most cases price will try to go your direction.

2. It is better to open a position on pullbacks because you can move SL to BE almost immediately and there is a much higher chance that your position will survive the volatility of the market. Of course, when I know I'll be unable to check the market and I want to be in a position I'll enter even for a worse price and set up my SL further away. There is a lesser likelihood that the position survives but I prefer to enter anyway.

3. If the situation changes and you think that you are on the wrong side of the market just switch to the other side. There is nothing bad about being wrong. I have closed the EURUSD position in loss a few minutes ago and opened a short position. The market does not want to go up and prefers going down so there is no reason to stay in the trade. I might catch 10 or even 20 trades that do not go in the desired direction. But who cares?

Also AUDCAD is worth trying as it is sitting on an interesting support level seen on the weekly TF.

You might move SL to BE now on GBPUSD

Hi AdamO,
thank you for your thread.
Do you enter only after a pullback or are there other conditions? I checked post 9 but not all possible entries seem to have exactly the same rules..
Thx

Hi lorecavoli,

good point and thank you for the question.

I'll first answer it and then I'll try to bring your attention in a slightly different direction.

I usually wait for a signal and then wait until the price is between SMA 5 and SMA 10. Almost every signal is generated when the price is quite far away from SMAs. Therefore I wait for a pullback after the signal and then I jump in. I would not say it is a condition or a rule, I just prefer SL as tight as possible but at the same time giving enough room to every trade. Waiting for pullback gives me an opportunity to trade with less risk and having a higher probability of trade survival when I move SL to BE.

Today I knew that I would be out for hours so I could not check the platform and enter at a better price so I opened it when I could at the moment.

Please let me know if you answered your question clearly, I'll try to show examples if it is not clear.


BUT...

I'd like you to focus on a different thing. And it is looking for a direction of the trade. My thinking process looks like this:

I open the platform and go through charts. If I don't see a setup I go to the next pair. I usually screen about 20 pairs within 2-3 minutes. If I see a setup and price is around SMAs I go for it and place SL above or below the H4 candle. I'll show it later on. It is usually 20-40 pips away from an entry point.

And I go through the next pairs. Once I'll finish I close the platform and come back in few hours. Usually 4. Then I move SL checking the H4 candles. I move it only closer to the entry price until I'm able to keep it at BE. Then I act as if I would not have any position open and I wait for new signals. Sometimes I build more positions on one pair and then it becomes interesting.

I also usually set my TP area on a weekly chart or many times I just take profit after around 200 pips if I lost too much money on the way. Sometimes I have a series of bad trades and then I feel a bit uncomfortably so I take profit to restore my balance up.

That is basically all my trading activity. It is not fancy at all but does not keep me busy as usually there are not many signals and if any, they usually go my direction very soon after the trade is placed.

I used to open on supports and resistances but it kept me too much time in front of the screen. Today I prefer entering at a worse price with a wider SL and wait a bit longer to get into profit. Letting the profit run gives you plenty of room for errors and DDs are relatively small. I tried also lower TFs but it does not work very well for me as I tend to overtrade and keep opening trades as a crazy man. So higher timeframe is a safety parameter that saves me from myself.

If you know the direction you want to trade then it is pretty easy and you'll feel comfortable in the trade even it goes against you. If you like the system, feel free to trade it with me here and post your trades, we can go through them. I can give you my view on those trades and you'll see if it is aligned with your personality or not.

Best regards,