Professional Gambling by ReaM

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Let's face it: FIFA will make more money than anyone else in soccer, same for casinos, the house always wins. Wichever game we play, we only play, wo do not make that game, we do not create rules, we are nobodies.

The same in forex, we play their game, they always win. And playing someone else's game is gambling. They can't lose, we can. We are Spanish Fighting Bulls, about to be slaughtered. We are Cannon Fodders, not cannons.

With this in mind, I place my orders.
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My entries: Whenever I think Price will fall I would short, whenever I think price will grow, I will buy.

Tell me, if you had a choice to place a trade with just an indicator or price only, would you trust solely the indicator? Really, try to place an order by looking at the indicator only. Or have you tried trading divergence in a strong trend? How did your account look after it? Was it zero or one dollar?
Let's face the reality: none of the crap a soldier carries will save his live. NONE OF IT. Only the gun, ammunition, helmet, the vest and the picture of your loved one, not the toilet paper not the dental floss, not the spoon, not the chewing gum, cigarrets, maps, compass,... nothing in that big fat backpack will save them...

Will those 1000 indicators make your profitable? Aks yourself this question! Soldiers carry all that extra stuff because it makes them safe, but it does not. It's still a car without airbags! Do you have all those indicators on charts, because they make you feel safe? Do you blame the indicator, if you lose? I know you feel safe, when things go according to plan, even if the plan is not working out. But this is a wrong feel of security!!! Throw all the stuff aways and free yourself from your misery and start finally listening to the price. Aks yourself this: Would you go long, when EURUSD is 1.5000? Or would you short the pair at 1.2000? Obvious answer, isn't it? Now, what does your indicator tell you? That's right, nothing! It says -0.0004567.

Throw everything aways from your chart, all those RSI, MACD, Stoch, SuperSignalUberMegaHereBuyCanlde100%win.ex4 indicators, all those robots (except of Wall*e, you can keep that one)

The purpose of this journal is to see myself trading from a different point of view. I do not post these things for others, only for myself. How selfish. I won't prove my results, whether loss or win, by a screenshot, too much hassle, I will just post results here, because it is better than on paper.

I will post results in % only, no pips. Because if my SL is going to get hit, no matter how many pips it is, it is still going to be a fixed percentage of my account. I guess 2%, sometimes lower. Profit factor comes by the end of the year.


Goals Trading Forex (in descending order, first must give way to second etc).
The hardest part is 1 and 2 and the impossible starts with 7.

 

1. Not lose money
2. Be profitable
3. Double my account and drop out of college
4. 100,000
5. 1,000,000
6. 10m
7. 100m and start a movie production company. Yeah, why the hell did I go to film school if not that?
8. 1 bil
9. Be the richest guy on the planet
10. Make Bill Gates borrow money from me (you'll get a friendly 5% credit, Bill)
11. Have more money than there is money in the world and let my profits be every pip the currency moves and even more. blah.
12. Whatever is in 11 multiply it by a factor of 10.
13. Die by drinking hot, molten, liquid Gold as a punishment for being too greedy.

Other goals:
Help family, disabled, poor with what I can and have. Not that I don't try that already, but with what I have is more like imagining helping others.
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Money Matters (spread, RR, pips, lot size)

Imagine yourself buying or selling a currency with your eyes completely closed, with no spread, 1000000 times in a row.
When you open your eyes, you should have about the same amount of money you had in the beginning as when you were still young (1000000 trades take time, dude!!!). For those more geeky onces we asume your account can go into negative and then recover back like my bank account which acts as a credit card. No calls from Mrs. Margin either. And not interest. We are in Wonderland! Wheeee!

Now add spread. Do the same again, if you won't make it in time, let your gradgrandchildren do it for you... so when they finally make 1000000 trades, their account is in minus for about the same number.

The house always wins! The house is your broker!

I want to make this more clear: It is spread and spread ONLY that makes you lose in Forex. If there was no spread, no you would not win either, but your account would be the same size again and again if you had no idea what you are doing. No matter how high the spread is, 0.1 pip or less, it is the catch, a rule in this game, that you cannot break. It makes positive account balance over time impossible! The house always wins. My house never wins that most beautiful house competition, but you get that.

About R:R, trueRR, TrendEdge, Beating the spread!

Same example as above, no spread. Place just as many trades with R:R 1:1, then just as many with 10:1, then just as many with 1:10 (you can tell your grandchildern to do that). Yeah, that means you risk 100 pips to make 10. And look at the results.
I assume you just placed another 30000000 trades and you see the same account size. Yes, no matter which RR you use, it will always be the same result.

In other words, if you risk 1 pip to make 100, you will be stopped out a hundred times before you make one win and opposite if you risk 100 pips to make one, you will have a hundred wins in a row before one loss wipes out all of your wins.

R:R DOES NOT MATTER!!! Every individual trade has it's own R:R, you can't put trades all in one system.

Now, I studied physics and got some of the math from it.
Did you know, that thinking of losing 1 pips to gain five (1:5) is utter bullshit? It is a complete nonsense! If you use 1:5, your chance to win is 1 in 5 only, if you risk 5 to get one, you will win 5 times then lose 1.

Your R:R is a constant! A freaking constant like a pi. That constant is however not exactly 1:1. Spread. Yeppi yepp.
If your spread is 1 pips and the trade is 10pips for 10pips, you end up with 1:0.9. That's the edge your broker has, not you!
Let's call that trueRR of 0.9

If you go to higher timeframes with larger targets and stops with the same spread of 1 pip, you will have a higher trueRR, if you hunt 100 pips with stop loss of 100, your trueRR is close to 1, it's 0.99.
Your goal is to keep it above 0.95 and as close as possible to 1. Do NOT take trades that have target of 8 pips, this will only hurt you over time. My min. sl and tp on EU is above 25 pips (trueRR is 0.96). Average I would guess 45 (trueRR of 0.975), maximum sl is somewhere about 80 (trueRR 0.985)

I calculate it by trueRR=(pips-spread)/(pips)

If you increase the number of pips of your SL and TP, your trueRR will get better, but it will never be over one, unless your broker will give you a negative spread... Yeah, imagine that!

So, from that it is not too hard to see that choosing higher time frames will make you much more successfull. MUCH MORE SUCCESSFUL!!! You move to H4 trades from M1 trades and your profit factor will move 0.1 up. And that is huge.
Profit factor is calculated but dollars won over dollars lost. So all your wins are 1500 dollars and all your losses 1000, you have a profit factor of 1.5. Imagine how huge 0.1 is! That's 500 dollars you win and not 400, that's 25% bigger wins.

Now, moving to higher TF will not save you, because we are still under 1, which is less than break even, which is, you are in a losing game from beginning on. The spread is still there. We need an edge. And it better be sharp enough!
The best edge of all is trend. Trend is your friend. Is your freaking lover! The TrendEdge is calculated by adding all bullish candles and substracting all bearish candles. The difference is The TrendEdge. So, if in one day, a pair moves 80 pips down, but then reverses and makes 120 from there, you have an Trendedge of 120/80, which is 1.5. Assuming we are in an uptrend, you should not have had any short positions on the 80 pips move down. Wait for a retracement and then go long with the trend. That 0.5 on top of your 0.99 makes your profit factor 1.49 (and if you trade M1 it is 1.39). ALWAYS TRADE WITH THE TREND!

But if you did trade on the 80 pips downmove correction, your TrendEdge is 0.66 in the example above! It's less than one which means you are probably to lose a dollar for every 66 cents win. All odds against you! The only thing that would save you here is your Personal Edge, you as a trader contribute a lot and that's where we all differ, in the end, it is what makes one successful. If you are a strong trader, I don't see a reason to trade with 0.66 instead of with 1.5. Skip the correction and wait for the move that makes the trend a trend.

In the end, Forex is about Beating the Spread! That's what makes forex so interesting. This is a goal of everyone: to be profitable, to be able to beat the spread.

Conclusion:

 

1. Choose the highest time frame you feel comfortable with. Moving from M1 to M5 is already a big step!
2. Trade only with the trend and with the trend only!
3. Find your personal Edge, find things where you succeed, backtest your strategy and look if you have a good profit factor (anything over 1 is profitable! min. 1.5 should be your goal while backtesting)

So, lets beat the spread out of your broker!!!

DD, abot pips and other things

Imagine there would be only 10 forex players and they owned the whole FX market and nobody else, and all the money being exchanged in spot market would be theirs.

Now, do you know that if they all use the same system, no matter how megaprofitable it is, there will be no winners and no losers. Because they all play against each other!

Now think about one guy finding a perfect system he bought on ebay from Chuck Norris and starts making money. The other 9 players would not like it and they would adapt to the other guy's techniques trying to find his secret and will be able to counter his moves making him lose. This is the reason no EA Bot would ever work!!!

If one team changes tactics in football, the other team has to look at it, analize and then apply a counter strategy. That's why one system works for a short time and then stops working - because money you apply your system to is now handled in a differnt way and you have to adapt your system to match the new market behavior, because you were stealing billions from them and they have adapted to you, now they want the money back. If you don't adapt, they will use their 14 days money back guaranty. Whenever you see market move against you, it is when you must think of it as that someone esle is getting hold of your money and if you do not adapt, you will continue losing.

Forex is like tic tac toe, you have a buy or sell option only. It is either one or zero, Forex is digital!!! It is so easy to adapt! Change sell for a buy. Just follow the market's new behavior, that's it!

Another important aspect is DrawDown. Double D's, but not as nice as Double D's. Not as nice at all.

I don't like the term money management, it sound lame like something I have to do, but I don't want to.
You are new to forex and you want to make money, right. Now you have your $5,000 in your account. Let me ask you. Would you like to lose $500 in the first day? Of course, not, you my poor little ones. But you will, you will... if you do not manage your money properly. If someone asks you, what do you do for a living, do not tell them you are changing currecies, like those guys in third world countries changing paper bills on bazars... The nicest chick will go away from you there. Tell them, you are a money manager! How cool's that? And when they ask, "cool, what's that?" You tell them you change money on interbank network and they're going to be like WHEEEE!!! me want toooo!!! But don't tell them about leverage and that the money you play with is their deposited money in banks hahaha! I did. There was an awkward silence after it.

Let me jump away from it for a little: Aks yourself:
Do you think, +1% on your account a day is enough or you want more? That's not a big number, 1. That's like the smallest integer lol!

Now, imagine yourself gaining 1% per day consistenly for a year.

Minus weekends minus holydays, we have 225 days a year you can trade maybe more, dunno, I just took the number out of my head.

That's you know 1.01^225 return on your investment. Just a momnet... I got a calculator here...= 9,38.

You know what that number does? It multiplies your initial investment after a year. That's right that's over 900% gain a year. Now you know that's some crazy number.
Tell me, why aren't you satisfied with this number 1? Professional traders are satisfied with a lot less, but you, yes I am talking to you, if your bank gives you not even 3% a year, why would you not like 1% per day? If your account is $1000 big, do you understand, that you won't be able to make more than a 10 dollars a day? Ever heard about being undercapitalized? The 115 dollars you made on that day and wrote here on FF to show everyone you are the best, you gonna lose them soon. You've already lost them! But don't worry! When your account grows, your gains will grow too! Just remember, 1% per day is not that realistic! That's the problem with small accounts. People expect the impossible: to turn an 1000 account into a mil. It is possible, but not if you are a beginner!
Be happy if your day ends with 0.5%.

To go back to DrawDown - that is the maximum you could theoretically lose if a couple or more than a couple of trades in a row are going to be losers.
Alright, let me shut up here, because I don't like all those guides telling me, it is like this and like that, but what the hell am I supposed to do? I tell you, Risk MAXIMUM 1%!!!! Especially on live account as a beginner. You even will have PLEASURE losing, because after you have lost you are not a pig all covered in sweat and shaking an all that.

PIPs... or there we go. I hate pips, I don't understand them, I don't want them. What are they. They are cents of cents of a dollar. How the hell did that happen? Well to tell you the truth, in banks they cut pennies into hundreds of pieces and keep it that way. It's so small you can sniff it. Sniff a cent of pips through a dollar bill. Banana phone!
No I am kidding, there is no pennies in bank that are cut into pieces, just as you don't cut 100 dollars in half so you can give your friend the half of it so he can get that girl under the bridge and finally become a man. That's right, you give him a full hundred so he can find a better one to become a better man, but hey, 100 dollars, how good will that be hahaha. Now imagine the 50 dollar one rofl.

Where were we,.... pips! Yeah pips.
Do you know, you can have positive results in pips for the week, but have negative profit? Yes, +315 pips this week, -$13,000 on account. YES. Because PIPS DON'T MATTER! Here in forum you might find experienced traders posting their results in pips - that might be due to privacy or to attract novice traders better (so they are more motivated to learn the style. OMG he made 160 pips!11)

If you are not through babypips school (yes, go to babypips and read that guide from beginning to the end), then this is how it is done to lose 1%: First, you look at where you place your stoploss from a POSSIBLE entry (not an entry that is already entered). Then you count pips, and then you calculate 1% of your account for this amount of pips and ONLY AND ONLY THEN you place your order. Got it? Playing with the same amount of $ per pip is dangerous. What if your SL is a lot more pips away, because a support line is a lill higher or something, are you risking 5% of your account now?

What I don't get in Forex, is that what I tell you here is very very very hard to filter through all that internet. There is toooo much information. They tell you not to turn a winner into a loser, but how? Did they tell you how? I might myself write a forex guide some day and tell you all the hows.
Did you know at all that you have to change the number if units you play with? Yes, every trade is approached individually, different stop, different take profit, different lot size, different everything. If your SL is before a round number, you better move it behind it! Less chance for it to be hit!

Dude, stock market is so much easier. I bought Nvidia when it was 11.42. Look at it now!
Forex is different. Forex can give you control, control of your trades, control of your own self. Is it a become rich very fast thing? Yes it is, because 1% per day is near possible and because 1% per day is a HUUUUGE profit. Even if you gain only 10% a year on your account consistently and your account reads 7,000,000. You know it's some crazy money, right?

It is NOT possible to make it in Forex by one trade. It is NOT a lottery! You will need to make trades over and over and over... And you need to win over and over and over. That's why it is not a click and get rich thing. Even if you ride from the top of the mountain until the valley of San Fernando, your profit will not be that huge and you won't be able to afford all those valley chicks. And repeating that success will be not possible if you have no idea about trading.

Millions will not fall from the sky, but they are reachable. Be like Wall*e, slowly gathering small gains over time to finally see lots of it in front of you. You can make it! We are not picking up trash and piling it up here, we are clear on that one here, right?

So much about Money Matters.
Again, I write it for myself and myself only.
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INDICATORS, SYSTEMS AND ALL THAT

How a good indicator based signal system comes to life:
PA (Price Action) is trading based on bars (candles), support lines, pivots, fibs, trendlines, channels. This is THE BEST WAY TO TRADE. It is much hard for a novice trader to trade PA because: once he hears a word wedge or a triangle, he starts finding them all over the place! Not enough time spent looking on charts.
What experienced traders do: they add moving averages and other indicators on to their chart trying to mimic their style. While the signals are very close to their Style, it is not the same. It adds additional errors, which all indicators have. Stochastics over 90, moving averages cross, enter on candles close, BAM, a loss.
NO INDICATOR BASED SYSTEM WILL EVER BE AS GOOD AS PA STRATEGY IT IS BASED ON!

Why indicator based systems are good and why jumping from one indicator based system to another is good: You will learn stuff. For example: if one strategy is based on breaking a previous high or low while moving averages are crossed and some indicator is above certain level, you will learn, that breaking of previous high or low gives you a certainty that the pair will most likely move higher, making you be able to make these trades with naked chart, bars or candles only later. From each indicator system your goal is to take the best part of it. So, why staying with one indicator based signal system is bad? Imagine, there is no high to break, but the pair soars 100 pips in a sort of a round bottom scenario. Would you miss the best opportunity of a lifetime simply because your rule said: there is no high to break?
Those who know markets well (check out James16 thread), will laugh at you if you say: I did not take the trade, because there was no high to be broken.

Try as many systems as you can (use LFH offline trading simulator, to speed things up), and learn price action from it.
Buy the book Stikky Stock Charts and read it! There is picture on every page and lots of drawing exercises. Yepp, learning PA with coloring books, lol!

You goal is to take from everything you tried the best. In one system you might learn how RSI behaves, in other Stoch, in other CCI. There is more to RSI than 70 and 30 levels. There is a 50 level!!! Wheeee!! It was a joke. You can plot lines on RSI, you can spot divergence, and if you know it's flaws (divergence in strong trend), you will simply improve yourself. Then you use MACD system and learn that, then CCI. Do as much stuff as you can to understand markets.

Many (or most) give up here. They start thinking no system works and give up but they miss the big picture: they never knew these systems would not work from beginning on and they are not aware of that they learned a lot, most of it unconsciously. Those few who realize, this is what it was all about:

The time of settling down with Price Action. You will find peace and calmness, that's the end of a long journey.

I also want to say, there is nothing better than a good teacher, whom I have never had. He would have been able to teach me forex in a month, because he knows what works and what doesn't. He would have showed you which trades to take and which not to. I am against seminars and all that, try to find a personal relationship with someone who trades for a living, so you guys can meet and sit at one computer and he would show you all the dark secrets (haha sounds like nice plot for a gay San Fernando Valley movie). It might cost you a ton of money, but it will be cheaper than starting with forex with real money from beginning on...
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THE MOST IMPORTANT WORDS

Trading is a 50/50 game. There is always a chance, that the price first runs against you before it resumes in your direction. Did you know, that the higher the win rate of a trader, the less money he makes?

Read it again. The more you win, the less money you earn. For a simple man, it is not simple to understand. Did you know that by blowing into a tube, you can actually suck things in? Don't know what it is called any more, hydraulic paradox I guess...or when a fat woman is jogging outside, her weight is actually bigger when moving? Funny, huh? Blame Einstein for that.

What I am trying to say, is winning in forex is a paradox. I feel like I am still losing money, but nevertheless my account constantly grows.
Those hunting high win ratio are simply letting their losses run in hope price comes back and when they are a couple of pips in profit, they close the trade, they cut their profits earlier, to prove to themselves that they have won. What a statistical error! Each single trade is meaningless! Profiting in Trading is to be observed as a statistical average. You have to win money over time, not on single trades. The whole purpose lies in it.

How to be profitable: trading is a 50/50 game and it shall remain so! Don't change the 50/50 to your favor, it won't work. Now, when you are in a losing position, simply lose, don't average down, simple let it be a loser. When you are in profit, let's say it reached R:R 1:1, ADD to your position, a smaller than original position size. Average up! And let it ride until you have twice as much as you were willing to lose. Do not incease your risk, if the position is going against you. If from beginning on you were willing to lose USD100, then after averaging up, if you unrealized PL shows -100, you close. And don't be upset about it, if the price goes against you, then the whole idea to trade that direction was wrong and the actuall trade was a loser from beginning on. Simply look for a new signal.

In short words: When you are wrong with the choice of direction, let it be a small loser. Remove your position, when you are wrong (by SL or by hand (mental SL, for experienced)). And when you are right: the market moved your way, add to your position to make the winner bigger than the loser.

Having your wins twice as big, you will only need a 33% win ratio to be at break even!

Read those short words again. Those are the most important words you will hear! And they don't come from me! It is my interpretation of the book "Reminiscences of a stock operator". Read the words again, in them lies the key.