Forex Trading Philosophy

Dear friends,
after a year of live trading, reading countless posts, learning from experienced fellow traders came to conclusion to gather all my thoughts and share them with you. Please be advised that these are just personal opinions of a newbie, who is trying to learn something about the essence of trading.
You will not find anything new here. Everything I will say has already been said, stated and discussed in the past in other threads. In this thread I am willing to discuss mainly the philosophy of trading. "What does it has to do with making money?" one might ask. It has nothing to do with making money, yet everything to do with understanding how money is made and lost.
We could trade successfully by using trend lines, support and resistance, candlestick formations and patterns, MA crosses, indicators, etc. But have we thought about why they work? We could be a losing trader, but have we given a thought why they did not work? When you look back to your trade, you will see many reasons why it worked or did not work. We say "aha!" I know what went wrong! Next time I know what to do!
Now stop there for a moment. No, we do not know what to do. Next time is something different and something new. Only thing we know for sure is that we were on the wrong or right side of the trade. Yes, right or wrong side of the trade.
We look at the chart and think price bounced because there was support. When we are always told that price bounces or reverses on support and resistance we automatically detect all these levels that worked. But do we ever look at levels that did not work? What is the probability that they work or do not work? The same is true for candlestick formations and patterns, MA crosses, indicators, etc. What is the lesson to learn.
If we are insistent enough we will go deeper with analysis, spend months, years to align indicators, changing numbers, drawing more lines so that it will look like a total mess. We try to find out magic mathematical formula. Yet, when we see the light at the end, will come across to the same paradigm: it works, but sometimes it does not! This is like zooming in from Universe to atom endlessly but seeing the same things everywhere, the same structures and the same patterns.
What am I trying to say? Allow me to state that in bold: In markets everything works. Yet nothing is guaranteed to work continuously.
Let's look at the famous Elliott Wave theory interpretation. An analyst tells you that price is at X point now, that could be the end of the wave 2 and start of the wave 3. You ask him should I go long or short? He will start explaining: if price reaches A that will confirm reversal, if reaches B it will be continuation. If price reaches C, if it reaches D... etc. Now you insist: what do you suggest? Most common answer would be: it will either go up or down from here. Well, it goes up or down from any God given point! I wonder how good could be a super analyst from a kindergarten boy when it comes to predicting either up or down game? I really hope that should ringing bell in our minds. The only difference between these predictions is that the analyst may have slightly higher winning probability. Pay attention, may have. Now another bold statement: this business is all about high probability trade.
If tossing a coin gives you high probability trade, we will go for it. If hours of calculating endless numbers gives high probability trade, we will go for it. After all price will either go up or down. There are not much options. This is bless. This is curse. If we have to think about, this has to be the starting point.
I will take a break here.

Yeah, that's the idea at least. "What doesn't kill us makes us stronger". That doesn't always work. It's also said that "success breeds success". I would prefer to think that way.

As you said "nothing is guaranteed to work continuously. " That isn't only true in markets but in life..

Your damm right

2 different trading master (Ivan Krastins, Peter Crown) will use two different approach on a same Inside bar. One will say go long , the other go short. For sure, they will not be winners on this same entry but at the end both as tremendous success.

That made me to realize that success may be, not from entry but from trade management. Once in a trade, look to reduce your risk by
a) closing a portion of the trade at profit
b) Moving your stop to brake even
c) ride on a free trade

Profit will be dictated by your closing price compared to your entry, not from your entry alone.

The #1 goal may be to ride on a free trade ( paid by taking a profit or moving the stop to brake even. Price could go in any direction. All we need is to grab a portion of the move

Martin

here are my ten easy rules:

1. cut your losses
2. cut your losses
3. cut your losses
4. learn to loose
5. think in terms of risk
6. take profits
7. trade your own book
8. winners must be greater than loosers
9. be persistent, stalk trades
10. fall down, immediately get back up

that the only thing you can control is risk.

learn to think in probabilities.

drawdowns are unavoidable and one should know his uncle point.

Market has its own truth. Market is always right. Market is like a living organism by itself. It has veins through which runs green money. When we have enough understanding of market, it allows us to come closer to it, to breath together, it allows us to feel its pulse, the beat.
But first we have to learn to respect the market. Obey the rules. Rebellions has been always left without head on their shoulders. Market educates people with invaluable lessons, it teaches to be respectful, to be flexible, to look at bigger picture, to accept everything as it is, without any twists or interpretations. It teaches to be a bigger person, to be humble, to respect the rules and many more.
Also market teaches that every trade is unique like snowflakes, never two are alike. Every trade has a new condition, new circumstance. Market teaches us to look at thing through many different aspects and respect each others opinions.
Market hates fortunetellers with crystal balls on their hands. Market hates fearful people. Market hates stubborn and people with big ego. Market hates people who think can push the price to their direction. Market simply slaughters them.

i started trading a year ago too. i am a newbie as you are. this forum is full of gems (with the exception of intraday trading section) Read highly rated threads in Trading discussions section, especially threads with less discussions about indicators. Skip anything related to indicators, do yourself a favor.
No one can help you but yourself. No one can teach you if you have no wish to learn. good luck.

Im new to trading and have quickly realized its always better to aim low, but in a way in which winnings grow in a nice curve. Also, always be open and prepared to have to change things in your system. It's not for everyone, which is great. Without the losers, there can't be any winners....

A mathematical model can help push you in the right direction, but it's how you deal with the losing trades that might define your profits.

i specifically made this sentence bold . there are some threads i usually read with much interest. In one of them members seem have lost the ground. I am still observing with interest how they are reacting to some outside ideas which seemingly they fail to understand.
one of their sacred rules was "rigidity kills", yet this rule has been slaughtered by themselves. It is sad.
The most sad thing is when person believes that his believe, values, truths are the absolute and all the rest is nonsense. The moment you come to that conclusion it will be your end.
I have always advocated that "Everything works, yet nothing will work continuously".
However you can always make progress, move forward and advance. There is no limit to that.
I am a firm believer in human's absolute potential.
Unfortunately at some point we stop learning. We become so blinded by what we already know that for us everything beyond our knowledge is non existent or crap. This is tragedy.
What blessed are those who are open minded, open to new ideas, those who are not afraid of discovering new horizons, those who accept that they are not perfect but always seek perfection.

here is an experiment from one of my favorite mentalists. there is something to learn from.
enjoy:

Hi Tashkent,

Most of the traders are not even closer to where you have reached just in a year. I think you are almost on the half way to get the truth, keep going.

I have just one rule in my philosophy.

Try to think like a Big Player and you will probably be able to follow them. You should not have any lost trade then, simply because those guys move the market which means they never loose.

The rest, including tons of books, indicators, theories etc are bullshit. These toys are used by dealesr to attract the newbies and to convince them invest again and again.

thank you.
we should never stop learning and always be open to new concepts, never be afraid going against common believe.

i like to think that if a trading system is based on market structure rather than derivatives of price action (indicators, etc.), it will always work.

Markets can change volatility, but the principles of order flow does not.

they say rules are to break.
once upon a time there was believe that earth is flat. there was believe that sun moves around the earth. Newton's laws were revolutionary until someone discovered laws at subatomic level, which undermine Newton's laws. stating something against these beliefs was biggest sin. yet there were people who who changed everything, destroyed old beliefs. we know the destiny of most of them. but now we remember them as geniuses.
everything we believe could be wrong. therefore keep your eyes and mind wide open. be humble and willing to learn. do not reject anything only because you are not familiar with it or you do not understand and do not comprehend. and only then you will realize the truth.

food for thought.

http://www.ted.com/talks/kevin_slavi...our_world.html

I use weekly time frame. and I always WIN.

"
“If at first, the idea is not absurd, then there is no hope for it” Albert Einstein



"We can't solve problems by using the same kind of thinking we used when we created them" Albert Einstein

Everybody is different, but I'll describe what works for me:

1. A proven set of unambiguous rules — when to enter, when to exit, how many lots to trade — that eliminates all guesswork and emotion from my trading.

2. These rules must include a robust edge — one that will stand the test of time. Robust means that the rules must be based around behind-the-candles principles that have generated consistent, repetitive price behavior for many years.

3. An edge means that the method must deliver more winning pips than losing pips, over time, i.e. the method must be profitable without being propped up by dodgy or unsustainable MM.

Boby, you need to answer to that yourself. forex is not something you can learn from textbooks or five star threads in forums. there are so many systems some fail miserably using them, yet there are people who make huge money. from one thousand page book you can find only one page that really useful for you. that is how you develop your own trading method. there is no system that fit 100 percent your personality. you need to build everything yourself. and yes, it is a Sisyphean task.
the main fallacy of indicators is that they lag. they tell you the history. and you can see it without using indicators. when you came to conclusion that price can not be predicted using historic data, you will quickly understand indicator will not give you the edge you have expected.