Q&A Ask me anything about trading

A question asked in my main thread:-
"I have been attempting to trade using "price action" alone but results have been disappointing so far. Although I don't doubt that there are people trading profitably from a naked chart, I have been finding it very difficult...when the day is long I can interpret all kinds of things into a chart.

That's why I find the concept of "value" as it is introduced by Ray very interesting. I guess being able to read the orderflow also greatly improves your trading when you can fine tune your entries or see big players getting long/short etc. etc. Is there also a way you can read orderflow ( orderbook) in Forex ? I would assume that large institutions would have ways to get a better picture of where liquidity is in FX other than just guessing, using round numbers or looking at support/resistance............................................"

My Answer: Unfortunately the nature of Spot Forex is that there is no centralised exchange. This means that there is no Limit Order Book, and that even getting reasonably representative volumes on each candle isn't straightforward unless your Broker provides a number amalgamated across several Liquidity Providers. So no advanced Orderflow Analysis is possible in the spot Forex markets.
Even without a Limit Order Book, it is usually possible to get a very accurate idea as to where Stop Loss Liquidity exists (all retail traders are taught to put their Stops in the same place). You can also see from price action where large passive liquidity has been revealed in the past. If this liquidity was not exhausted and price returns (assuming no important news events have moved the value), then its likely that there will be liquidity at that level again.

During the US session when the currency Futures volumes are reasonably high, it is possible to use Orderflow Analysis on the equivalent currency future in order to trade the Spot FX.

However the banks tend to trade wherever the volume is good, so even they trade the Spot Forex markets - especially during the European session - which means that they too can't use Advanced Orderflow Analysis for those trades. So they have to rely on 'Value Lines' (e.g. the yields), Price Action, amalgamated Volume, levels at key times (e.g. Session Opens, Closes, 'Fix' times, levels at key economic news times, Round numbers/wholesale levels) and divergences against correlated markets such as similar currency pairs.

Please note that I'm mostly a news trader and don't use much Orderflow Analysis myself.

I hope this helps.

Another question from my main thread:

"
Hi ian,

how would you know if the previous resistance.??
.lets say a previous high in daily chart..what tools or info we have to know if it going to break that level or will fade?
volume bid and ask in futures market?sentiment?
"
Hi juangecko
You are asking a very difficult question. Nobody can know if a supposed resistance or support will hold when tested!

So what I can answer is what I look at for clues and my basic presumption. Note that since I don't delve deep into OrderFlow, I'm sure that my answer isn't the same as some other Sharp Edge students who focus on much smaller timeframes.

The way I look at levels is that there are different definitions of 'holding' versus breaking.
Is a fairly short duration break during which hardly any volume is transacted really a break even if it 'broke' by a decent distance?
Or how about a break that was comprehensively rejected by high volume?

If you say that all those are still breaks, then you could say that in such a case then I expect a level to break when tested almost regardless of other factors. I expect a Stop Run which is market dependant based upon typical Stop Run size and whether it is close to a 'round number', even if it is only 1 to 3 ticks/pips!
So I don't set a Limit Order fade right at the level because A). The level may not actually be tested. B). If is is then I expect I could get a better price!

There are 3 basic reasons for the action of price around support/resistance levels (or you might more accurately say at support/resistance areas):
1. Value.
2. Liquidity.
3. Fear of being on the wrong side.

The first two are the main considerations for the big Commercials (who are the only ones who can drive price on a timeframe such as the Daily timeframe you suggested. While the third one is more of a consideration of the Market Makers who by definition would be most short when approaching a top and most short approaching a bottom. Thus they may withdraw their liquidity, making price more volatile - small orders move price much further when liquidity is very low!

So there you have it - those three are what I look at before price tests support/resistance in order to try to gauge what is likely to happen. Though in most cases I tend to wait and see what is happening before entering on the side of my expected 'winners' - but that's a reflection of my 'news trading' style!

A question sent via PM:

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To: ianf0ster | From: xxxxxxx | Sent: Jan 25, 2021 8:06pm
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Are you still trading this system?


https://www.forexfactory.com/thread/...53#post3637753

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And my answer:

Hi xxxxx,
I did their course and back-tested the system I was taught. I think I only got around a 75% win rate., but average win size was bigger than the average loss.
Then I tried forward trading it in Demo mode, but found I had problems with it:
A. I found I got bored and distracted waiting for a setup.
B. I was hesitant about entering a trades, which meant I was always very late - having waited for more 'confirmation'.

So although the MAX is a suite of courses which I recommend, I have never been able to bring myself to trade it live.

Instead I trade the economic (and sometimes political) news, plus key events (opens, closes Fixes and auctions) as I was taught by Ray at CompassFx. But his style is very much based upon Value, Levels and Orderflow rather than just Price Action and Volume , so it is more difficult to learn and there are really no indicators for you to blame when you get it wrong!

So which is the better system? Well Ray's is much, much more complete, but requires much more work and thought. But it is probably too much for most of those who are just looking for a conventional retail indicator based system. For those people one or more versions of the MAX is what they need.

I hope this helps.

I've also recently had questions about how I trade from some of my fellow students of Ray.

Now I can't explain everything because of the Non-Disclosure Agreement, but here is what I can divulge in this forum:

I'm able to spend what I consider to be fairly long periods intensely focussed, up to 1 or even 2hrs. But not for the 8Hr plus periods that Eusebio used to be able to manage in his trading.

I get distracted while waiting for a trade to set up, so I find that scheduled times really help me avoid missing trades.

1. I call myself a 'News Trader' which I am, but these days I'm more of an 'Event Trader'.
This means that I look to trade in Markets which during my trading will/are displaying high volatility.
I'm sh*t at trading low to medium volatility because when I take a position on the wrong side of such a market, I will be like a frog being boiled to death - not realising how hot the water is getting until I incur an uncomfortably large loss with no immediate prospect of recouping the loss.

These events include major Economic results, economic or political 'sound bites', Session Opens& Closes, 'Auctions' & 'Fixes' and the MOC madness.

2. I trade these in a way I have adapted since summer 2014 when I was first taught News trading (the Institutional way) by Ray.
This includes paying attention to the sentiment and market structure before the period of trading.

3. I have traded 'reverse pyramid' multi-unit, multi-level entry since long before Ray mentioned 'Buzzy' Schwartz. I don't know if she still uses it too, but at one time NNNNNN also used it. Though we were trading different markets and using different quantities and gaps between levels.

Back then I was trading CFDs and so didn't have the LOB available to me, so my gaps between levels were much more fixed and regular than they are today. Now I adjust levels and sizes based upon Price Action, Volume, Value Line action, Levels and LOB. But it still conforms to a rough master pattern with a hard (emergency) protective Stop just before my maximum pain threshold!

4. The upside to the way I trade is that I very rarely have a net losing trade. The downsides are that when I do they are big ones and when I get my entry just right I make the least money since I'm in there with only my minimum position size. However this is completely compatible with my personality.
******** WARNING Never trade a style that goes against your own personality - if you do then you are doomed to failure and frustration! *************

5. It took me a long time to discover that I do best if I take my first partial profits 'too soon'. Since I realised this key fact I have never regretted exiting too soon and seeing a strong price move resume. Instead I focus on looking for a new entry point to get me back in again.

6. I use most of what Ray has taught me, but still haven't been able to incorporated any serious OrderFlow analysis into my trading.
I use 2 different charting platforms: Sierra Chart and TradingView simultaneously. But I only execute my my trades on Sierra Chart (using both DOM and Chart simultaneously) because TradingView isn't good for trade execution.

Here is all I look at for my trading apart from my Newsfeeds and Economic Calendars.

Attached Image (click to enlarge)

Just to clarify, in the above picture I am trading the Micro Mini S&P futures contract, but only the middle chart is of the Micro, the outside charts are both of the ES - the e-mini S&P futures contract because the micro goes where the Mini goes and so the only really valid LOB and Delta information is that on the e-mini.

I just know somebody is going to claim that I don't really trade a real money account, or that I win big one day and so my results are just based upon luck etc.

Here are some screen shots which may help convince you otherwise:
My first trades yesterday, got back to desk from getting a cup of tea to find ES had dropped like a stone after the Johnson & Johnson vaccine announcement headline.( Note the full statement was not bearish - but the news-reading Algos only work off the headlines.

Attached Image (click to enlarge)

I was trading the Micro E-Mini, so the 2 trades combined netted me approx $105 after commission in less than 23 minutes ( it 's a 30secod chart).

My TradingView chart was showing my London Open 'Box' at that time, the ES bounced off the bottom of it to the tick! Too bad I was not back at my desk a couple of minutes earlier, or I could have entered the trade much lower down!

Attached Image (click to enlarge)

My statement for yesterday (also covers Tuesday , Wed and Thus. By coincidence although it only shows the last4 days ( that first entry is always 0 ), I didn't trade on Monday due to various reasons including getting a Covid19 jab.

Attached Image (click to enlarge)

My Monthly statement
And yes, I had my best week last week and I was a little down on the account before then - so what?
That is a +79% week in a moderate sized real-money account !

In another forum somebody was asking about how to avoid/curb account threatening trading behaviour.
I'm fairly experienced in account threatening behaviour having done it myself lots of times.

Anyhow, here is their question and my answer:
************Question*****************************
.... my “success” over several years is down to nothing but wild risk taking aka gambling.

I’ve been going into VERY oversized positions with momentum. Sometimes getting big wins. Mostly panicking and exiting and then spending days licking the wounds to my psyche.

Some may say that results are all that count. I’ve not had a losing year ever but feel stressed all of the time and don’t like this. Perhaps the wins are what is reinforcing my haphazard behaviour.


The crazy thing is that I have a very good trading edge. It should involve me risking no more than 1% a trade, and doing so at only at the open.

But I just can’t do it. I can’t even get around to documenting it. Instead I try and hit home runs. I’ve doubled my account in the past month and then given back 20% and feel way worse than before the large gains. It’s too much. This has to end.

Successful trading isn’t just about confidence in a trading edge. Trading is about all of the other stuff in our minds.

Now how to combat it.

I guess this is the first step to admit that I have a problem.

Any tips on resources of where to go to “fix “ my habit of self sabotage? Things that have worked with close to immediate effect.

Many thanks.

**************My Answer ***************************************

Hi, you are certainly right about the wins reinforcing the 'haphazard behaviour'. And 'haphazard' is putting it politely - face facts, ultimately it will almost certainly destroy your account!

Here is an email from Boris Schlossberg (of BKForex) on the subject:
********Start of Boris' EMAIL *******************************************************

Dear Ian
The Power of Negative Thinking

Most retail traders I talk to (including yours truly) suffer from a trinity of sins that ruin the best laid plans, the smartest strategies, the most brilliant research.

 

1. Fear of missing out
2. Anger at not taking the trade due to fear of losing
3. Revenge on the market due to a trade gone bad

The third of those sins is the most deadly because it always involves massive oversizing and the absence of any stops which inevitably leads to a blown account.

Here is the thing though. No matter how much “mindfulness” you practice. No matter how much you mediate. No matter how much vegan food you eat. You will likely never conquer your behavioral weaknesses through mental training or physical discipline. If you really want to play the game I think you need a very different approach.

First and foremost take all the money out of your primary trading account and put it into your secondary account which will act as the “bank”. Transfer just $1000.00 into your trading account and leave it be until you either have blown through the whole wad or doubled it. If you have a setup you like - trade it. If you want to trade my setup - be my guest. If you want to discover your own then experiment until you find something that works for you. That is your only job.

Will you still suffer from FOMO? Yes. Will you still have pangs of regret at trades not taken. Yes. Will you blow up that thousand bucks? Almost certainly. But do that over and over for a few months and you will most likely be able to keep the thousand bucks floating in the market longer and longer each time. You may not think so, but losing a thousand bucks over a period of three months is a vast improvement over losing it in just three days.

Once you’ve done the slow bleed for a few months try to teach yourself to stop trading if you lose $100 bucks in a day. See if you can do that at least 20 times consistently without breaching those risk limits. You’ll still bleed money, but you will habituate yourself to the single most important trait for the trader - the ability to leave the game when you are playing badly.

Lastly try to make 1000 trades without ever changing or lifting your stop. If you break that rule, start from zero and repeat until you can reach that goal.

So what will you learn by doing this?
You will learn how to lose - which is the only thing that matters in trading.

If you do this seriously something dangerous may happen. You may actually start winning.

Winning at trading is just another form of losing because it will instantly make you arrogant and sloppy.

You will want to double your trading size and start trying to bully the market. If that happens. It’s ok. Drop another thousand bucks and start all over. Eventually you will learn to keep your profits. Once you can double your thousand bucks two or three times you may consider the next step and double your starting stake.

Some traders may never get beyond that stage. And that’s perfectly ok. You can trade a small account for a very long time and just keep doubling a tiny base. I’ve known many traders who are capable of trading small accounts but do poorly once the size increases. It’s all about creating comfort.

Trading is not about strategy or indicators but about mastery of your setup. As Anthony Criudele says it's not the indicators I use, it's how I use the indicators

There are a million strategies for how to win in the market and a thousand opportunities to do so every day. But there is only one way to lose. And almost nobody wants to learn how to do that well.

**********End of EMAIL ******************************************************************

In many things I disagree with Boris, but trading much smaller than you can do is one where I completely agree. One trainer on a trading course was universally mocked for his erratic account. He would regularly (3 or 4 time per year) completely wipe out his trading account! But he always siphoned off the majority of money from his big ( 200% to 300%) winning months so he always had funds to replenish his trading account. He has been trading his own account for over 20yrs, so it obviously worked for him!

Good luck,
Ian

While on the subject of account size and psychology, I take a slightly different approach to Boris Schlossberg in that I also believe that it's vital not to have too small a live trading account.

So what is 'too small' and what are the advantages of having a larger account size than Boris suggests?

To me it is absolutely crazy to be undercapitalised, so you are risking more than you are comfortable with. This puts you under intense mental strain from the start of your trade (or even before entry) so that you are likely to do one of the following:

1. Prevaricate about entering the trade. - This is terrible because timely entry is the key to avoiding stress during a trade. Get a good entry and you are never under serious pressure!

2. Set your initial (or emergency) Stop Loss too tight. If this is combined with problem number 1. then its a recipe for consistent losses!

3. Exit too soon. You went to all that time and effort to get into a trade and a then hint of a reversal has you exiting because you're under such pressure to have almost every trade a winner. Resulting in frustration.

4. You're unable to trade multi-unit - absolute minimum for me is 2 Units, normal minimum is 3 Units but over 3 is better. Very few traders can trade even close to their best if they only trade a single Unit (whatever size that is)! If your account isn't big enough to trade 2 Units then few would doubt that you are undercapitalised.

Why do most traders need to enter a trade with at least 2 units? - Because you never know how far the trade will go. Of course it may immediately go against you and stop you out, or it may go 10 pips and then reverse (and stop you out unless you moved your Stop Loss into a profitable position or at least enough to cover your spread/commission). But equally it me go for 100 or more pips, how do you feel when you exit at +1 or even +10 and it keeps going to +50 or +100 ?
Personally I actually feel worse than I would taking a loss from a trade that was immediately 'went wrong' and stopped me out! So I always trade multi-Unit and take at least some initial profit 'too soon' at which point I make the trade ultimately profitable by moving my SL into profit. Then I can relax and try to manage the remaining units to milk as much as the market will allow me!

I just got a question via PM:-

To: ianf0ster | From: ******** | Sent: Feb 22, 2021 4:41pm
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Hi there. I've been reading through your thread about Ray from compass fx. Do you use his course training material and apply it to your own trading? Asking because I am keen to know more about compass fx courses and am thinking if I should sign up for it.

__________________________________________________________________________________________


Hi **********,
Yes I do use Ray's training for my own trading. Ray teaches complete trading for retail traders (including some things that very few of us can use until we get big account sizes). So I only use a small part of what I have learnt - just the parts that resonate with me, match my interests, the time I'm available for trading, my personality, skills, resources and account size. CompassFx offer training from other people apart from Ray, but since he started teaching retail in 2014 there has been nobody even close to matching him for those who are willing to put in the work. For those who don't want to have to choose which teachings to use and want a fully back-testable method, I always suggest courses from The MAX (which are more expensive than Ray's) cover much less but are easier.

If you want to find out if Ray's style of course and his style of teaching are a good fit for you then I suggest you try his 'feeder' course called 'Reading The Tape' which has lessons on every Monday (except holidays) and costs $99 per month. It's a steal at that price and gives you long enough between lessons for you to actually test out what he has taught before he teaches a whole load more! 'Reading The Tape' also known as 'the Monday club' is still quite advanced in parts, but it mainly focusses on trading the US Equity Indices (particularly the S&P500), but much of the teaching also applies to Spot FX, Currency Futures, Commodities etc.

A follow-up question from the same guy as above.
This highlights 2 important points:
1. The big Institutions can and do trade on much bigger timeframes than retail traders - if we are talking about trading swings rather than Momentum Trading or Market Making. It's also true that (for at least both Ray's (retail & institutional ) styles and for both the MAX Primer and the MAX Standard), the larger the timeframe the (slightly) better the win% rate.
2. If you want to live trade a big timeframe, then apart from needing bigger Stop Losses, you also need to spend a lot more time in Demo/Simulation in order to develop a successful style because you need lots of practice and subsequent analysis of your trades to se where what worked and what didn't.


*********************************************************************************************************************
Hi Ian


Thanks again for your email... I went back to look at rays YouTube videos, and it pretty much seems to me that Ray teaches mostly intraday trading on very short time frame charts.... Is that the case? I was hoping to learn something more along the lines of swing trading.

***********************************************************
Hi **********,
Ray teaches trading full stop. Do you think that the Big Institutions can either enter to exit positions of hundreds of millions of dollars on a 5 min pin bar?

It's true that most of Ray's students, indeed most retail traders, trade intra-day. If only because they can't stand the disturbed sleep of trading (for example) a 4hr chart - having to awaken in the middle of the night to check how the most recent 4hr candle closed.

This doesn't just apply to Ray, it applies to most educators of retail traders. When I did the MAX Lite course (no longer available) one of my fellow students decided that because the win % was higher when based on the 4hr charts and that he would be able to trade them while holding down a full time job, he would use those. I really admired his grit in managing to do that (in a Demo MT4 account) over the next 12 months. I think he made a simulated profit of something like 35%, but if I had done that my health would have suffered badly since it takes me a long while to get off to sleep in the first place.

The MAX courses (except for the scalping course which is based on rather different principles) are completely timeframe independent - just like the vast majority of Ray's teachings (again the exception is in scalping using Orderflow).
But of course had my fellow student been able to trade a 5 15 min or a 5 min chart, then even though his win % would have been a little lower, he would have made hugely more money because he would have been able to take more trades and to use smaller Stop Losses meaning bigger position sizes. So he might have been able to make 35% per month instead of 35% per year.

I just had my best day this year (I was trading the 30 second chart using a small fraction of Ray's teachings) can you guess how much I made? No, unfortunately not 35% - it was just under 30%. Ray has several successful students who trade the 1hr chart, I don't know of any trading longer timeframes than that but its possible that there might be one trading either the daily or even the weekly timeframe and so only taking a few trades per year.

The other thing to consider is that the vast majority of people can't learn to trade just using a 1hr chart or bigger timeframe! The reason for this is that trading is a very emotional thing to do. This is why people tend to lose the money they have previously made. Ray doesn't suffer from emotions when trading, so he admits that he can't help us with that.

Here are some comments from Ray's trading 'room' today:
(12:38 pm) Bruce K: Mark Douglas has a great 4-video series on trading probabilities over a set of trades (at least 20), rather than evaluating oneself as a winner or loser based on each single trade.

(12:40 pm) Ian F: @Bruce But I would say it needs to be many more than 20 trades !

(12:41 pm) Ian F: My discipline will easily last for 20 trades (but that is less than half a day for me).

(12:43 pm) Ian Foster: You can't learn about yourself if you only trade once or twice per day. AT least trade in Sim on a smaller timeframe to get 10 trades or more per day. Otherswise by the time you get to trade 20 you have compeltely forgotten how you felt on trade 1.


Please note that ForexFactory limit all so-called 'Commercials' to only one PM per 24hrs. So I can't reply to you as quickly as I might wish.

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Here is a simple but slightly unusual question because it comes from another student of Ray and was posted in his live trade room.

My answer highlights 2 things: - That different markets often require different techniques and that (for most traders at least) it's not a good idea to trade 2 markets which are very different (either in specification, in Volatility or in the techniques required) in the same session.

(01:12 pm) Murray: Ian are u still trading crude oil?

(03:00 am) Ian Foster: @Murray: Sorry didn't see you question. I'm not sure what you mean exactly, but short answer is 'No, not currently.' Longer answer is that I never really traded crude Oil - just the EIA (and for a while the API) Crude Oil Inventories. So I did so in just 2 ways which are not applicable at any other times. 1. Ray's LOB method., 2. Sam's High Volume on the report candle method.....

(04:07 am) Ian Foster: @Murray: .... You may wonder why I'm not trading them now having done so well on the EIA one at least. - Its because of the Margins - that means I can't trade it like I used to i.e before ESMA changes, using CFD's/Spreadbets. Also I'm doing so well trading the micro e-mini S&P Futures that I don't want to mess with that by trying to also trade a contract worth 8 times as much and with a margin of 30 times as much. That would mess with my head too much.

A question about what I have learned from my mentor:
Ian, may i ask what is your best thing about Ray that you enjoy using?

My reply:
There is too much to mention it all. But these are the main things from Ray which turned my trading around:
1. Understanding the business model of all the different institutional participants in the markets.
2. Value -A). Value Lines, B). Value for commercials based upon Liquidity and price (volume at price, C). Value in Economic news terms.
3. Volume, Deltas and Limit Order Book

His response:
I see, yes 1 is very important for me too...the retail gurus almost never tell us whats the difference in trading behaviour between market makers and large spec traders.


My follow-up:
The most important things I have learned for my own trading and from my own experiences are:-
1. I'm very suspicious of indicators - I want to see fundamental value. 2. I can't trade like somebody else, no matter how good their method/system appears to be (this includes Ray).
3. I prefer a high risk high reward style. I should have already known this from my stock investment history - it's not that I can't pick good safer stocks (on average) because I do that for my wife's portfolio all the time - its that they don't interest me as much as the higher risk ones that I pick for my own portfolio. Note that my wife's one is more successful.
4. Perhaps because of my high risk style, I find I do best if I don't hang on waiting for a big profit target - I always tend to exit 'too soon' (both partial and full exits).

Continued from the previous post:
He ask some more:
I see, good to see you and your wife are together in this business Ian. I showed ICT to my wife and later Ray to her. She had a difficult time adjusting to Ray because it seems overwhelming but as I learn more and more about the wholesale and retail stuffs, turns out we figure out what Inner-circle trader (Michael Huddleston) is trying to do in his mentor-ship course. What is your lot size you have for 1 partial trade if it is GBPUSD or EURUSD FX pair? And what account balance do you think is good for a full time career? I keep telling my wife 1k is too small to really make a living out of FX market assuming we are day-trading...what do u think?


My long reply:
1K is too small to make money from, but as I said a few days ago in my 'Institutional Education?' thread, it is enough for live practice if you are trading SpotFX at $0.10 per pip. But account size versus unit size is very much a personality thing. When I was trading CFD/SpotFX my unit size was $1 (per pip) . Now I'm trading futures my unit size is based upon the smallest contract which has decent liquidity.

My smallest initial entry size has to be 2 units, because that is the least with which you could take a partial profit and still leave a runner with a Breakeven SL. I have been trading the micro mini S&P future this year so that is worth $1.50 per tick per contract. But like I say, I trade high risk (meaning potentially large size). The MES liquidity during the main US session (before the Cash close) will support up to around 100 contracts a each price level - so I'm comfortable with scaling in if value doesn't turn too hard against me and as price goes against me (i.e. getting a better and better price) starting with 2 or 3 units and going up to a total just over 100 contracts. Most traders would think this is account suicide, but I limit my loss to around 1 (fairly poor) week's profits. With my style of trading I expect around 1 max stop-out per month.
Of course I can have more than one max stop-out per month - and that really hurts! Even with a very high win % you can get a string of losing trades.
But if I judge the volatility correctly, then it isn't too high as to be impossible to trade and it isn't so low as to not hurt quickly enough for me to get out of a bad trade quick enough to limit the damage, or indeed soon enough to be able to reverse direction and still come out with a net profit.

I have just been asked about a couple of things the Jennifer E. said a few years back:

Question 1: ..but why did Jennifer question whether value leads price or vice versa? She said:" The tipping point that changed my paradigm was Ray making a side comment about... which leads which? value line or price action? Both can. What a revelation! That's what helped me
finally agree that the market moves from liquidity to liquidity, sometimes regardless of news
or if value line is lagging price. I finally began thinking like a market maker."

My Answer:
if a value line is also a traded market in its own right (and most are), then it may well follow the price of 'your market'. Since all traded markets are affected by each other.

Question 2:
Yes, do you know what she meant by market moves from liquidity to liquidity?
paycheck to paycheck?

My Answer:
A Paycheck is just an extreme example of liquidity. but if you believe that large Commercial buying and selling is the thing which moves markets, then it follows that markets move from liquidity to liquidity because the big Commercials can only deal in meaningful size in places where there is sufficient Liquidity for them to do so!

A simple , but important question and its answer (imho):

Question: Ian, are u still on any courses?

Answer: That depends upon how you define a course. I'm still in Ray's live Trading Room and subscribe to his tweets in Smartalpha.
Many serious students of the markets never stop trying to learn more. This includes both Ray, Ray's bets students and also Eusebio the instructor/course designer for the MAX.
However it is dangerous and self defeating to spread one's study around too widely. Better to learn one thing at a time and add to that only once it's second nature.

OK, this isn't a question of me, but information and questions to a 'Money Manager' (with no institutional trading experience), who started out as a losing retail day trader and after about a decade turned things around and launched a 'fund'.
He gives a lot of insights and valuable information, shows how very different trading is for different people and finally answers some questions.
This video is from Optimus (a futures broker).



I'm basically a 'News' trader - so I'm trading things he considers to be noise - unlike him, to me news is a Fundamental!
But he is dead right about following your own rules 100%, about psychology being a major aspect of trading, about market changing character over time as the participants change, about cutting losses (relatively short), about re-entering if trades still meet criteria, about running profits, and about betting relatively small most of the time and yet being prepared to increase size on better looking trades or within trades as profits accumulate.

At the risk of being considered to be 'teaching' (which is not allowed by the NDA I signed), I have decided to write about Stops (really Stop Loss exits) because so many people have problems with them or questions about them and so many educators tend to either completely ignore them or to mention them selectively i.e. when a small Stop Loss would make a profit with their system but not when the same Stop loss would have resulted in a loss just before price went to target!

Here is a question from a member of the support group for Ray's students which I run (for free):
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I would be grateful if we could discuss the topic of stop placement. I am still confused. I asked a few times in class where Ray puts his stop. His answer was that he does not use stops. This does not make sense to me. Whether I use a "hard stop" or a "mental stop", I need to know a price level at which my hypothesis (that price will move in a certain direction) has failed. This decision needs to be made before the trade is put on, as the stop determines the financial risk taken with a single trade (tighter stops allow for larger position sizes). Without a stop - be it a hard stop or mental stop - I have no way of quantifying my risk in terms of USD risked on a trade. My belief is that without this information proper position sizing is simply impossible - I will be oversizing or undersizing, and both are mistakes. Some people (including Ray on some occasions) talk about having a 'catastrophic' stop somewhere. I yet have to understand where exactly such a stop would be positioned. @Ian Foster a few years ago mentioned Ray suggested risking 1.5% to 2% of account size on a trade is sensible. Not sure if that still stands. For myself, I do not risk more than 1% on a single trade but whether it is 1% or more, to determine the number of contracts transacted I need a stop loss price level. Otherwise my risk is unlimited. While the class and also the discussions here on Skype focus 99% on entries, the question of stops (and indirectly position sizing) are questions every one of us has to answer every time when we put on a trade. I would be grateful if @R*** and other senior members of this group would be willing to share where they place their stops. @N*** on one occassion said she uses an ATM in Ninja with a 2 tick stop. What method are other members using? I have often heard general statements like "it depends on how much risk one is willing to take" and whilst this is true, this statement is nothing that can be translated into a position size. To have a position size, I need to know the distance of my stop and what percentage of my account I am willing to risk. Grateful for any input from the group. Thanks A****
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And another more specific one:
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guys is Ray using 2 pip hard stops? He must be risking very little.
D****
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Here are some answers from other members of my group:

From N*** : As far as I understand he moves in to cover risk very quickly and hits again if gets clipped.



From I**** : A*****, I found this concept of not using a stop awkward at first but now i realise why he doesn't use them. I remember him specifically stating, "Most professionals dont use stops. They actively manage their positions ".
My take on it is: its probably in reference to very short term, scalp-like trades. Also remember, all his large positions are hedged
From D****:
By 'manage', those guys do hedging in various forms. He did an exercise once with a 10k account on mt4 and turned it into 100k or something like that in 1.5 months. Using 1%.
I am just stating what happened. I have no interpretation of this.
From N***:
Good topic for sure, only caveat is who wants 450 Ray trainees trying to run their stops after sharing in here
I am testing management as my main focus at the moment, it's tough work when optimising for low and high liq environments and the nuances around entries etc.
For the most part it seems to be about finding something that is optimal a reasonable amount of the time, knowing when it can underperform, and get used to living with the times you get clipped by a tick (or pt depending on instrument) and it running in your favour.
Work a process to deal with retests, multiple L2s etc whilst still getting you in for those situations it blips into your area and doesn't look back.
Logically sticking to a limited number of entry types goes a long way to building a robust management process 'easier'.

And my answer ( I was not in our chat while all the earlier posts were going on):
people forget that trade management including Stop placement, number of units entered, multi-entries, multi exits and target levels are all very personal to both the account size, the type of trade and the personality of the trader using them. Most traders will fail if trying to implement a strategy that's unsuitable for either their account size or for their personality.
So use a paper/demo/sim account and do extensive testing to find out what is comfortable for you because no two traders trade exactly the same though they may trade in a very similar way. This applies to partners as well as traders at random. If you look at (for example) BKForex, Boris trades completely differently to Kathy.