LFX Trading Proverbs

I have changed my mind about trading and poker, lol. I think trading is more like baccarat. Win, lose, or draw.

If you have not studied Statistics, then I would recommend that first. It is the math of probability. You don't need to know the math functions because you probably won't be using them. Instead study the concepts of probability and begin to understand it at a knowledge level. So, read it and don't worry about the equations. Also, study Bollinger bands to understand what they do, but do not study any trading methods using them. Just learn their function. If you can understand about how price and time form the graph, and the probability of where the next data point will occur, then you are halfway there.

The other half is using some type of indicator to predict tops and bottoms. Some people try to use lines. If you use lines, you are referring to dead trades and hoping their tops and bottoms form the current market movement. I prefer oscillating indicators. If you are using oscillating indicators, then first, you need to find the mean of the market, or the moving average that the market seems to rotate around. Once you find that, then you want to reduce it to find the reversal points where price changes direction from its previous high/low to its next high/low. This requires a lot research and analysis, which is why most people are too lazy to do it and instead try to trade lines. In my opinion, since most people trade dead lines, and most people lose, then I hypothesize it is a bad method. One method takes time and effort, but pays off in the end, while the other method is quick and easy, but quite stressful if you find yourself guessing too much.

Anyway, start by understanding the math of probability and how it can applied to predict price through time on a graph.

Dear Dkrock...thank you for the insights to your method...as another trader said...some real diamonds in this thread.
Hope you re well and i m sure you are!

Does not get much easier than that.

Few years ago, when I messed around with something similar I usually started with currency strength pairs 1 and 2 against 7 and 8, and then would only enter on above average volume.

This is something different.

this is what i m working on

each channel depicts a timeframe...on 1 hour i see where price stands at 4 daily and weekly....dont need more than that

This is an updated version of The Science of Getting Rich / Think and Grow Rich. It comes from a woman's perspective, the author, and is much more entertaining than the other versions. Highly recommend. After you click play, click on the "youtube" button and it will transfer you to the same video on youtube so you can bookmark it and also see other related videos from her.

Trading Fundamentally.
It is obvious that news moves the market. However, no one has a clue what the news will say beforehand, or how the market will react. There are trading methods used to trade news that mostly revolve around straddling a price point prior to the announcement. Depending on the depth of the pending orders and the lot sizes, the market can spike in one or both directions. Personally, as a retail trader, risking MY money, this is a dangerous trading situation and I avoid trading high impact news releases. However, it cannot be denied that news moves the market. On a day without news, the range between highs and lows is significantly reduced.

Trading Technically.
1. The overwhelming majority of price movement is done by banks using pending orders on a Level II platform. There is no central exchange, so the banks only generally see pieces of the pending orders queuing. The money must be moved, and the main objective is to create value from that movement. As the orders accumulate, they will place orders with the larger move, or next to it so they can take advantage of the momentum created. They also line up orders opposite the big moves to take profit once the market moves beyond their entry price.
2. As a retail trader, you cannot see this platform, so you have no idea what is coming. Your best chance of profit is to measure the momentum as it occurs and make a probable guess about direction based on that movement. This is best done by taking sample sizes of the movement, creating a mean from the samples, and trading to the overall direction the mean suggests.
3. With a proper sample size, the mean becomes a market equilibrium. If price is on the positive side of the mean, you buy. If it is on the negative side, you sell.
4. A time is just a time frame. Each one distinguishes the beginning and ending of the measurement of your sample size. All time frames make the same patterns, meaning only the size of the sample differs. This size determines the frequency of the crosses of the mean equilibrium and the distance between the mean equilibrium and the apex.
5. You only make money when the market moves vertically in your direction. You do not make money in drawdown or consolidation.

Trading Psychologically.
1. At some point a new trader is going to question his/her ability to trade and possibly determine their lack of success is due to some disorder in their personality. While this could be true, it also might not be true. However, let me first discuss it as if it were true. EVERYTHING you have learned in your whole life was a result of copying or interacting with someone, or something, else. The way you walk, talk, eat, play, argue, laugh, work, learn, spend, drive, and every other thing...a result of other people. Some of it is pure brainwashing and completely wrong. Some of it is correct. As you begin to study your trading failures you will realize how messed up you are. It is not just family traits, but also social engineering. All those sad songs, violent movies and video games, drug arrests and movies, drinking laws, protests, and on and on and on. Your subconscious does not decide positive messages from negative messages. Guess what else? It never sleeps. Everything you see, hear, touch, taste, or smell creates you. So, you have to change you, because a negative "you" cannot create a positive trading account. It is impossible.
2. Now, let's focus on your trading personality. Why do you get anxious? Why are you scared? Did you realize that either of these conditions shut off your logic? A trading fear based on a future event that has not happened is fake, but your body reacts to it on an emotional level. That is why you can review bad trades and wonder how you could have made such mistakes. It is because you cannot think logically when you are scared. That only happens in the movies, lol. In real life, you are in fight or flight mode. So, if you want to be successful in trading, you have to tame those responses. You cannot eliminate them, so don't bother trying. But don't think they can control you either. Here is something you may have never thought about before, but could solve your problem. Remember, you are a retail trader, so you cannot see what is about to happen. That fear or anxiety is natural and is based on anticipation. You can measure the mean and then use it to provide a probable clue about the direction of the momentum. BUT, when you decide on a direction, are you playing both offense and defense? Are you allowing drawdown and consolidation to occur inside your profitable trade attempt? Are you a victim of trading the so-called, "breathing of the market" by allowing trades to fluctuate up and down? If so, what is the likelihood that the logic function of your brain starts to panic? The decision you made is not working, because price reverses, stalls, or whipsaws, so you activate fear. Could this be the cause of your struggle?

If you want to try to make money trading, then consider trading with the momentum and targeting the sweet spots. Nothing else really matters because you do not make money unless the market is moving in your favor.

Very well said Dk, thanks. I'm not mathematically oriented or gifted, what would you recommend as the best technical indicator to make an educated guess on about the momentum?

Nearly all technical indicators are written against moving averages, so I think it makes since to start there. Find a moving average that you think "mostly" dissects the market between buying and selling. Your choice will depend on how tight or how loose you want to trade. It might also apply it to a preferred time frame. As for me, I found a moving average I liked on one time frame that "appeared" to more or less cut the market in half. Using that value, I converted it to a lower time frame and then began to "cut" it with various factors of its value. For instance, if you like 100, then "cut" it with 50, 25, 20, 10, 5 etc, factors of it that are aligned to it. If you choose something that is a primary number, like 37, then you have to round up or down. Once you have determined a value you think looks good, then start applying that number to oscillating indicators. Using the same number will draw the price action surrounding that moving average. Then by dissecting the oscillating indicator with the factor you chose, it will help you seeing turning points in the momentum of the market. Any value you choose needs to be validated in real conditions, so I suggest doing demo trades to see how accurate it is in real conditions and how comfortable you are with its results.

Since this is real money we are talking about, I use confirmation for my signal. This means I do not use only one indicator. I use multiple indicators. In each case I choose one that requires a different number to draw its picture, yet it aligns to the original value. This automatically means the calculations behind the movement are different. Personally, I prefer to use CCI and RSI type calculations with smoothing added to them. This reduces the head fake signals associated with using just the moving average value. If you have been trading very long, you know that price often hits and penetrates horizontal lines and moving averages to produce a trading signal, only to retrace itself. This is why lines are more dangerous to trade than moving averages. You cannot create a smoothing oscillating indicator against a line value, but you can against a moving average value. Granted, you can still be fooled because everyone trades differently and so someone who has a large position, or a group of people reading the same signal, can cause the market to head fake. The only one head faked though is them, but if you react to it, then you are also head faked. You can see this rather easily on a rolling trend. There will be jumps in the other direction by traders who are either taking profit, or trading too close the action. Since you use a moving average as a trend line, you will not fall into their trap. Unless the moving average is crossed and signals a reverse, it is merely a head fake. This is a great advantage to have. You can only trade what the market gives you, so tune into the market, not yourself. Good Luck.

Thank you. This will ofcourse take a while for me to get my head around, but will happen, sooner or later.

This is an example of trading sweet spots. The area in the green rectangle is the trading zone sweet spot. The area in the red rectangle is the danger zone, where I would be out of the market. Your entry/exits might vary depending on your tools, settings, and risk appetite.

Looks awesome DK. I like how you named them Surf and Tide. Makes a lot of sense. Are you plugged directly into an exchange now..?

Previous link is dead. Too cool to miss out on. Here is another one.

I have no idea why this video keeps getting deleted. Here are some links. The title is "You Are a Badass Audio book by Jen Sincero" if these also disappear. It is a modern version of Think and Grow Rich and entertaining.

Take very intelligent risk
Take well calculated risk
Take high probability risk

Just Risk It!

After reading this thread I can vouch for dkrock, he knows what he is talking about.

Thanks. It is just swing trading 101.