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From Muppet to Bastard

  • Post #1
  • Quote
  • First Post: Edited 7:41am Aug 26, 2011 7:26am | Edited 7:41am
Hopes for the Thread
Taking people from Muppet to Bastard . What I mean by that is that I hope that we will discuss the learning process that is necessary for taking us to become a trader that will be able to trade for a living.

My Forex background
I have always been interested in the stock market and got aware of the currency market some three years ago. My first introduction was via a friend that develops EAs. From there the interest grew towards TA, indicators and trading systems. Two years ago I opened my first live account. After testing a bunch of systems and making all the newbie mistakes there is (name one I have done it), I came to the hard conclusion that

 

  1. You need goals for you trading
  2. It’s a structured learning process that will make you reach your goals.
  3. Money management is everything
  4. You need rules for you trading
  5. You need a system that suits your personality

My first 5 posts will reveal the way I look at these 5 points and I hope that all of the above will be discussed in this thread.

I don’t mind criticism but please refrain from chit chat, small talk, trash talk, signaling, personal promotion, etc, you can save that for the EUR/USD thread (its already full of it).

I have a very simple goal for my trading:
In January 2014 I want to be able to live of off my trading

In order to reach this goal I need to break down the goal in smaller parts and answer questions like:

 

  1. How much money do I need for this?
  2. What infrastructure do I need (computers, screens, office, etc)?
  3. Which routines need to be in place?
  4. What broker(s) should I use?


For each month I set a goal. The goal is not money related and can be for example

 

  1. Research Pattern A
  2. Read and study book X
  3. Find all historical S/R levels between 1.4 and 1.45 on Fibre

As I stated in the previous post about Goals my short term goals are related to the learning process and if I can learn new things all the time I know it will help me towards the main goal.

I’m also in a state now that as soon as I turn a stone finds more things under it. If i found something that I want to learn more about I put it on my list of things to research and learn more about.
Money management rules can be really simple. I like that. These are my rules at the moment:

On each trade I risk 0.3% of my money (I have a script that creates the order with a fixed SL)

1% loss on the day is trading stop for that day
3% loss weekly is trading stop for that week
6% loss monthly is trading stop for that month

I want to scale in each trade so that a risk of 0.3% can be a 1-2% gain for a 30 PIP trade and maybe 2.5-5 for a 100 PIP trade. I still have some work to do here and will get into the subject later (Its not on the top of my list).
Some rules that I obey
1. I only trade EUR/USD
2. I trade Frankfurt and London sessions
3. Don't trade fridays or bank (US or UK) holidays
4. I trade when I'm at the computer. If I have to leave I need to set hard SL and TP on my orders. And set the SL to at least BE
5. I trade a live account

My daily routine is as follows.
Before trading the following have to be in place.
1. S/R levels that I think can be of importance
2. What-if scenarios
3. Definition of the kind of patterns I want to trade and how I should trade them.
4. Rules for scaling in (now the rule is not to scale in)

After a trading day I
1. Logg all my trades, print the pattern I traded, write down the actual R/R, etc (will get into that later)
1. Print the 5M, 15M, 30M, 1H and 4H charts
2. Write down what patterns I have seen and how they have developed
3. Note how and if my S/R levels have been in play
4. Write in an Excel sheet where Frankfurt and London have opened and closed
5. Write down the movement of the fibre

After each week I also print the weekly chart
  • Post #6
  • Quote
  • Edited 7:46am Aug 26, 2011 7:33am | Edited 7:46am
My system is still evolving and I not going to reveal exactly how I trade (for several reasons).There are a lot of other Threads devoted to trading systems. What I can say is who I am as a person and the prerequisites for my trading and how that effects which system I choose

 

  1. I'm very impatient
  2. I like simple things
  3. I get easily carried away
  4. I’m not as structured and disciplined as I would like
  5. I’m analytical and good at drawing conclusions
  6. I like to sleep well at night
  7. I have access to my computer all day (except for meetings and such) but cannot look at the screen all day
  8. …

From this I have come to the conclusion that I like day trading and that I like to trade the lower timeframes (up to 1H).

I have also picked up bits and pieces from a lot of people in FF, other sites and books.
I think that Less is more. One good trade setup is a lot better than many half descent ones.

After being inspired from people like Cloggie and Redsword11 I have become to like patterns and S/R levels a lot more than indicators.

That’s about as deep as I'll go into my embryotic system. That means that on my list of things to research more are patterns and S/R levels

Swede some good stuff here... Will be following along. Hope you are well!
Do your time and enjoy the ride...
Thanks,

Hope you are well. Will be trying to post every week. Been having excellent trading the last 4 months and I'm now getting some confidence back. I still need to be more structured and diciplined though.

Quoting Good Fortune
Swede some good stuff here... Will be following along. Hope you are well!
Quoting TheSwede
Money management rules can be really simple. I like that. These are my rules at the moment:

On each trade I risk 0.3% of my money (I have a script that creates the order with a fixed SL)

1% loss on the day is trading stop for that day
3% loss weekly is trading stop for that week
6% loss monthly is trading stop for that month

I want to scale in each trade so that a risk of 0.3% can be a 1-2% gain for a 30 PIP trade and maybe 2.5-5 for a 100 PIP trade. I still have some work to do here and will get into the subject later (Its not on the top...

I like seeing rules about stopping. Stop trading after so much drawdown not only by day but by week and by month.

One of my sticking points. It is very easy to ignore this after being on a roll and not wanting to see that little drawdown. Then, that drawdown becomes bigger and insanity sets in! lol

I think this gives needed additional clarity to risk management which should make it less painful to follow in practice.
Do your time and enjoy the ride...
Ok time to have a look on my goals for august:

 

  1. See how price reacts to roll levels (0000 GMT roll and 1700 EST roll) the next trading day.
  2. Find 1h S/R levels between 1.4 and 1.5
  3. Research double bottom/top pattern
  4. Read the book "Trend Following" by Michael Cove

Some of the things on my list are things I just picked up on forex factory or elsewhere. The Roll levels are such a thing

You can read more about what rolls are here http://www.futuresknowledge.com/educ...rex-rollovers/

In order to investigate this I have written a simple Custom Indicator that draws vertical and horisontal lines for the 0000 GMT and 1700 EST roll.

I will be running it in the strategy tester for 2010 and 2011 and for each day I'll collect the data and transfer it to a spreadsheet. Then I'll start to look for patterns. More to come...

Don't you know it. The rules are good just need to follow them thats the hard part. I have done my share of revenge trading and it is one of the things that I have struggle most with and that can easily kill you account. But it is just not acceptable. The only thing that work for me is shut the computer down and start doing something else.

Quoting Good Fortune
I like seeing rules about stopping. Stop trading after so much drawdown not only by day but by week and by month.

One of my sticking points. It is very easy to ignore this after being on a roll and not wanting to see that little drawdown. Then, that drawdown becomes bigger and insanity sets in! lol

I think this gives needed additional clarity to risk management which should make it less painful to follow in practice.
Here is a chart with the roll levels. I'm still not 100% sure that I got everything right (daylight savings and all). My broker is 3 hours of GMT.

Attached Image (click to enlarge)
Click to Enlarge Name: RollLevels.gif Size: 25 KB
Quoting TheSwede
My system is still evolving and I not going to reveal exactly how I trade (for several reasons).
...my list of things to research more are patterns and S/R levels
Quoting TheSwede
My daily routine is as follows.
Before trading the following have to be in place.
1. S/R levels that I think can be of importance
3. Definition of the kind of patterns I want to trade and how I should trade them.
After a trading day I
1. Print the 5M, 15M, 30M, 1H and 4H charts
2. Write down what patterns I have seen and how they have developed
3. Note how and if my S/R levels have been in play
Quoting TheSwede
Ok time to have a look on my goals for august:

 

  1. See how price reacts to roll levels (0000 GMT roll and 1700 EST roll) the next trading day.
  2. Find 1h S/R levels between 1.4 and 1.5
  3. Research double bottom/top pattern
  4. Read the book "Trend Following" by Michael Cove

Sounds as if you like the comprehensive approach; me, too.

IMHO:
Why skip the 1'TF?
Oh, I know: You want to avoid really studying PA, since you'll realize that, after you've read about all of the traditional patterns (such as db/t,h&s,tri, circle, etc.) and the various things traders call a line (s/r, TL, "roll" (untested idea for me also; thanks)), all the silly recording and 'when-to-trade' rules boil down to constant and endless practice trading and honing one's method.

It's great to make $ and keep a structure, tho, congrats.

I don't understand why you avoided studying regular indicators. They're great beginner work to learn variable splicing -- macd divergence ~ seeing a TL diverge, fast stochastics ~ picking changes in small waves, etc.
Also, a trading simulator is nice.
Quoting ha-pattern
Sounds as if you like the comprehensive approach; me, too.

IMHO:
Why skip the 1'TF?
Oh, I know: You want to avoid really studying PA, since you'll realize that, after you've read about all of the traditional patterns (such as db/t,h&s,tri, circle, etc.) and the various things traders call a line (s/r, TL, "roll" (untested idea for me also; thanks)), all the silly recording and 'when-to-trade' rules boil down to constant and endless practice trading and honing one's method.

It's great to make $ and keep a structure, tho, congrats.

I...

Not speaking for Swede, but with respect maybe he only has so much time available... Give him more years and he will probably have studied those... Or, whatever is most appropriate to his trading edge. I don't think from reading this page he is avoiding work though.
Do your time and enjoy the ride...
Quoting TheSwede
Ok time to have a look on my goals for august:

 

  1. Research double bottom/top pattern

Sam Seiden's explanation of supply & demand help in that category.
Maybe its a good idea to also look at the 1M timeframe after all the patterns emerge on all timeframes. To really study PA you might have to. But I don't like trading from the 1M TF. Too me it happens to fast and since I'm now only trading basic Candlestick patterns for the moment I believe that 1M just isn't reliable enough.

A morning star on 1M just isn't giving you as many pips as a morningstar on 5M or 15M. Or???

Quoting ha-pattern
Sounds as if you like the comprehensive approach; me, too.

IMHO:
Why skip the 1'TF?
Oh, I know: You want to avoid really studying PA, since you'll realize that, after you've read about all of the traditional patterns (such as db/t,h&s,tri, circle, etc.) and the various things traders call a line (s/r, TL, "roll" (untested idea for me also; thanks)), all the silly recording and 'when-to-trade' rules boil down to constant and endless practice trading and honing one's method.

It's great to make $ and keep a structure, tho, congrats.

I don't...
Thanks heard about that beore. Isn't demand and supply zones just the same thing as S/R? Will add it to my list of things to study.

Quoting EmeraldEyes
Sam Seiden's explanation of supply & demand help in that category.
Quoting TheSwede

  1. See how price reacts to roll levels (0000 GMT roll and 1700 EST roll) the next trading day.
  2. Find 1h S/R levels between 1.4 and 1.5
  3. Research double bottom/top pattern
  4. Read the book "Trend Following" by Michael Cove

Everything done except 4. So that will go into my goals for next month.

  1. Build a catalogue of reversal patterns
  2. Read trend trading again

Give us an update man....
Do your time and enjoy the ride...
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