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Forex, Greed, and Risk

  • #21
  • Oct 21, 2007 9:16am Oct 21, 2007 9:16am
Quoting clockwork71
Minor -

I your recent post I saw two words that you might want to think about....

Definite and Precisely.

Unfortunately, these words don't really exist in Forex.

Probable and likely are better ones.

I know this seems petty, but trust me on this: No matter how dead sure you are about a trade - it can work against you.

Great thread though.

Clockwork
You mean that trader can never be sure in his trade? Then, the only way to work is to guess?

Then you surprised me, really....... :surprised

Is it a work or a game? What do you think? My opinion is (or, maybe, should I say, was??? ) that forex isn't the game. This is the Work. Still I have nothing from it, but I am sure, that I will succed in working there!

Please, I want everybody to share their opinions on this question here.

Sincerely yours,
MinorChant.
  • #22
  • Oct 21, 2007 10:06am Oct 21, 2007 10:06am
Quoting MinorChant
You mean that trader can never be sure in his trade? Then, the only way to work is to guess?

Then you surprised me, really....... :surprised

Is it a work or a game? What do you think? My opinion is (or, maybe, should I say, was??? ) that forex isn't the game. This is the Work. Still I have nothing from it, but I am sure, that I will succed in working there!

Please, I want everybody to share their opinions on this question here.

Sincerely yours,
MinorChant.
You are correct. Forex is work, just like the game is work to the pro athlete. We work with uncertainty every individual trade. You win this game by winning more than you lose, not by winning every time.
Clockwork's point is that you can't predict anything with absolute certainty. You'll never know precisely when a trend will end until after it does. But you can learn a few signs that will indicate when a trend may be getting weak.
Winning in Forex or any type of trading means to be consistently profitable, rather than correct every time.
If your account is positive at the end of the month, you won for that month even though you may have had some losing trades.
If your account is positive at the end of the year, then you won for that year, even though you may have had a few losing months.
Winning more than you lose is considered winning here.
Don't get discouraged, this takes a while.

Bill
  • #23
  • Oct 22, 2007 3:21am Oct 22, 2007 3:21am
Trev, thank you for you support! You posts are great! Only usefull information and nothing more. I hope, that I may ask you, if I will have some more questions in the future.

Quoting TrevA
You might find this site useful: http://www.babypips.com/school/

Trev
I heard a lot of times about this site, but I didn't manage to find there what I need. I think, that I need some kind of a system, a complex one, you know. I realized that elements are nothing without a system - only my opinion and nothing more.
Please, somebody, correct me if I am wrong.
Maybe experienced traders would like to say something about this site?
Still, I appreciate all the help!

Best Regards to everyone,
And GREAT thanks to Trev!
  • #24
  • Oct 22, 2007 8:37am Oct 22, 2007 8:37am
Quoting MinorChant
Trev, thank you for you support! You posts are great! Only usefull information and nothing more. I hope, that I may ask you, if I will have some more questions in the future.



I heard a lot of times about this site, but I didn't manage to find there what I need. I think, that I need some kind of a system, a complex one, you know. I realized that elements are nothing without a system - only my opinion and nothing more.
Please, somebody, correct me if I am wrong.
Maybe experienced traders would like to say something about this site?
Still, I appreciate all the help!

Best Regards to everyone,

And GREAT thanks to Trev!


MinorChant, Systems are for lazy traders or for those who think can optimized their trading discipline, it's best to go though all the hard work manually before you can really know how good a systems is.
  • #25
  • Oct 22, 2007 5:14pm Oct 22, 2007 5:14pm
Quoting MinorChant
Trev, thank you for you support! You posts are great! Only usefull information and nothing more. I hope, that I may ask you, if I will have some more questions in the future.



I heard a lot of times about this site, but I didn't manage to find there what I need. I think, that I need some kind of a system, a complex one,


Minor -

You don't need complexity. It will just make this harder than it needs to be, trust me on this.....I have tried several "systems".

Price Action (ala James16) has made a huge difference for me.

And yes, Bill was right.....my point wasn't that it was guess work here....it's just working in probabilities.

For example, you could be long the EURO, and a certain German bank announces it's going to lose billions in the sub-prime mess. This just happened recently.

Until them, most people thought Europe was immune to this scam. It showed that it wasn't. There is no system in the world that can prepare you for sudden news.

For that matter, no system can pinpoint where things are going to turn....it can only give you likely trades.

And Bill is right again when he says it takes time.....I am still working on it myself. I don't think learning ever stops.

This is why I love this.....not so much the money......yet.


Clockwork
  • #26
  • Oct 23, 2007 9:24am Oct 23, 2007 9:24am
Quoting scalpt
MinorChant, Systems are for lazy traders or for those who think can optimized their trading discipline, it's best to go though all the hard work manually before you can really know how good a systems is.
No, you got me wrong. I didn't mean automatic system. I am searching for manual trading system. For now I use MA, Support and Resistance, Elliot a little. It is the system for me. Can you tell me, what system do you prefer? What elements do you use in you trading? Every trader must use some kind of manual system, I think. Please correct me, if I am wrong.
I appreciate your help.

Best regards!
  • #27
  • Oct 24, 2007 11:51am Oct 24, 2007 11:51am
I have read whole the thread and I've passed through the same problems
let me tell my story. When I have heard about forex, I have opened a demo account with NorthFinance...
on the demo I have made some profits and i have decided to open a real account with them.
I have deposited 100 dollars.I was happy,
thinking I will make money. I opended the first order and when it went in +1 I closed the order.
(I was happier, because I have taken the first pip from forex)
I opened the second order that resulted in the loose of
the deposit. I have deposited another hundreds which I have loosed. I have read a huge quantity of literature
but i still can't make a permanent profit.
Unfortunately, I didn't manage to find the answer on Minor's question. I will appreciate all you help!
  • #28
  • Oct 24, 2007 1:08pm Oct 24, 2007 1:08pm
Comp,

You'll need to get an education in forex before you commit real $$$ to it.

1. Trade on demo for 6 months.
2. Trade one or two pairs max.
3. Learn to trade 2-4% of your account on each trade. This means that you'll need a total bankroll of much more than $100 to have a real account. $2000-3000 would make more sense. Most demo accounts assume you start with 5 to 10 thousand dollars.
4. Trade on demo until you are consistently profitable. Not profitable on every trade, but your winners more than make up for your losers.
5. Don't trade charts less than 4 hour timeframe.
6. Don't worry about which system to use. Just find one that you understand, and adjust it later. Better yet, try out 10 different systems on forexfactory, learn them, and see how they work for you.
7. Have Patience. This will need to be a lengthy endeavor if you really expect to make money in the long run.
Disregard all prognostications.
  • #29
  • Oct 24, 2007 3:13pm Oct 24, 2007 3:13pm
Pidgeon, thank you for advice. I am glad that you have answered my questions so quickly.
But I would like to specify some moments
5) why I should not trade charts less than 4 hours timeframe?
In fact, to understand the price movement it is necessary to track it on H1, M15 or even M5
6) can you recommend me any certain system? At beginning of my education I was confused by the huge quantity of systems that appeared to be unprofitable
7) It is really dificult
Thanks for the help!
With best regards!
  • #30
  • Oct 24, 2007 9:05pm Oct 24, 2007 9:05pm
i think you are flooded with too much information already (more than you could chew)
i wonder ... if you could won in the first place, what you should do next is to refine it, not to replace it, no?

any path/system you choose, it has boundary, no need to implement all / master them all.

choose (need not to be too wise about that)
  • #31
  • Oct 25, 2007 11:32am Oct 25, 2007 11:32am
Compestriss,

The 4 hour timeframe and above is a general recommendation. You could use the hourly charts too, but stay away from the lower timeframes. Its simply easier to identify longer term trends, and it forces you not to look at the charts too much on a higher timeframe. It allows you to step back, analyze the market, and make a rational decision, without having to worry about what happens in the next few minutes.

As to what system to use....most traders will tell you to develop your own. However, I would head over to the trading systems forum, and look at the ones with the most hits (the top 10 of them say) and then look for one that interests you. I've probably tried 6 seperate systems to date, and am currently using the Weekly scalping system from TKimble - with my own modifications. Read the first 30 pages or so of any of these system threads, so that you don't ask questions that have already been answered.
If you don't understand how the systems work from the forum, then you might need to go back to babypips.com and learn the terminology before starting to trade. Or, move on to another system that you do understand.

Here's one of the most simple systems I tried - Plot a 9 period EMA and a 100 period SMA on any timeframe. Trade when they cross. Its an extremely simple system, but you could start with that, and then build on it with other indicators that you prefer. Every system has losing trades and winning trades. If you know that your system will produce winners that are larger or more frequent that losers, then its a good system, AS LONG AS YOU STICK TO ITS RULES. This is harder than it sounds!

I'll let others add more to this....
Disregard all prognostications.
  • #32
  • Edited Dec 11, 2007 1:39pm Oct 26, 2007 1:07pm | Edited Dec 11, 2007 1:39pm
Quoting Gwan
i think you are flooded with too much information already (more than you could chew)
Gwen, actually, I was thinking about. After a little time I realized, that I have to choose one thing (for now) and study it well.
At the beginning of this thread Stace posted a link there Link Removed
I have read a few chapters, and I really liked it, because I don't have to read a lot of classical forex books - there are plenty of examples and patterns from these books. I think, that I started to understand some things, but I know that there are still so many things I have to know... I will take some time to read the whole book, and maybe after that I will understand more. Anyway I want to say thanks to all people, that helped me there.
I appreciate all your help!!! Thank you very much! Esp. TrevA! Your posts were a great help to me!
Anyway I will post there later, to share my opinion with all of you!

Best Regards!
Minorchant.
  • #33
  • Oct 26, 2007 1:30pm Oct 26, 2007 1:30pm
Thank you for advice, Gwen! I think, that I should really stop on something exactly. I hope, that on this forum I will find good system which will help me to understand the forex market
Thanks!!
  • #34
  • Oct 26, 2007 2:11pm Oct 26, 2007 2:11pm
great thread ! lots of awesome advice here.

i like to keep it simple my self and also trade larger time frame's (dailys)
try adding a daily line chart and note the breakouts ,its a great filter for finding the trend.

also when i find my self in a trend i try and maximize my profits by pyramiding my trades and moving stops to a 2% risk increments.
thats my 2 pips.
hope it helps
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  • #35
  • Oct 29, 2007 10:06am Oct 29, 2007 10:06am
Hello, thank you again Pidgeon. Yeah, you are right that is easier to identify longer term trends. But my opinion is that trading H4 for example needs a bigger stop loose, bigger the TF is, the bigger is the SL. Maybe there are larger targets, but for beginning I need a bigger deposit. And let’s suppose that a newbie begins trading on the real account and has some looses of 100 pips for example, this will scare him. And it is about the time you have to wait for a signal to come, on bigger timeframe you have to wait a lot for a signal. I think I as a newbie should do a lot of orders per day if I want to become a professional.
About system I will follow your advice, but I’m opting for one with a smaller stop loose.
The system with moving I have tried… it is really simple, but it did not give profit to me
Thank you, you have great advices
Best Regards!!!
  • #36
  • Edited 10:28am Oct 30, 2007 10:25am | Edited 10:28am
  •  TrevA
  • | Joined Oct 2007 | Status: my brain has a mind of its own | 166 Posts
Quoting CompesttriS
Hello, thank you again Pidgeon. Yeah, you are right that is easier to identify longer term trends. But my opinion is that trading H4 for example needs a bigger stop loose, bigger the TF is, the bigger is the SL. Maybe there are larger targets, but for beginning I need a bigger deposit. And let’s suppose that a newbie begins trading on the real account and has some looses of 100 pips for example, this will scare him. And it is about the time you have to wait for a signal to come, on bigger timeframe you have to wait a lot for a signal. I think I as a newbie should do a lot of orders per day if I want to become a professional.
About system I will follow your advice, but I’m opting for one with a smaller stop loose.
The system with moving I have tried… it is really simple, but it did not give profit to me
Thank you, you have great advices
Best Regards!!!
Hi CompesttriS

The 4H window is great for seeing the bigger picture. If you're trading in the 4 hour window, it's not about needing a bigger stop loss... rather it's about seeing how the currency is trending and trading with the trend. I would never enter a trade in the 4h without looking at the 1H, 30M, 15M and even 5M views. Each perspective tells you a story and the sum of those stories tells you when to trade and when to hold off.

Have you thought of using the 4H with the 15m? Use the 4H to observe trend and 15 min to time your entry? There is no point entering a trade when there is a strong move, rather, wait for weakness in a pullback then enter the trade. You will not see the weakness in a 4H chart but will observe temporary weakness in the 15M chart so use that to time your entry.

One more thing... trading forex is about making money, not loosing it. Don't take a high risk position with limited reward. (Risk/Reward issues are discussed at length in this forum). Try not to think about making pips, rather, think about ways to reduce your risk and save your capital. If the trade goes against you, exit immediately and stick to your system. Don't have a system? Then get one that works for you and be consistent with it.

Good luck.

Regards,
TrevA
  • #37
  • Oct 30, 2007 12:02pm Oct 30, 2007 12:02pm
i have not read many crappy post and just went straight to the answer.

what happens is simple. it has happened to me a couple of times.
i have just heard fear and greed are our worse enemies but i can add another 'over-confidence'.

this is truly bad. i rate it as the worse for an experienced trader.
when someone is overconfident takes whatever he has learned and start applying it but in a bigger scale, lets say if in demo you put tps, before a fibo.

and overconfident person will put them in the fibo where all the masses put them or worse even after resistance points cause he says, a spike is gonna get there and hell look at my success rate, i gonna get rich.

I ACCEPT IT!.
my biggest maniac error, i double accounts on days or weeks, but after that i start thinking i have discovered the holy grail, over-confidence kicks in, and BANG!!. money lost.

account wiped out!.
  • #38
  • Oct 30, 2007 3:46pm Oct 30, 2007 3:46pm
Quoting TrevA
Hi MinorChant

A few things for you to consider and some golden rules I like to personally follow:

  1. Always plan your trade and follow it to the letter. A consistent trading plan can take some time to develop so make one that suits your personality.
  2. Terminate your losses quickly if the trade goes against your plan. Most beginners nurture losses because greed kicks in. Don't do this.
  3. Let your profits grow as the trade goes with your plan. Don't let fear terminate your profits prematurely.
  4. Learn everything about technical indicators and then throw them away. They work in the past and the past is not an indicator of the future in forex. The only indicators I use are moving averages to show trend, pivot points to show daily bias and Chaikins volatility indicator to show trading intensity.
  5. Don't misuse the stop-loss. Take full responsibility for the trade. There are rumors that brokers hunt stop losses....
  6. Don't over trade. More money is made waiting rather than actively trading. Wait for the right setup that matches your trading plan. Waiting can be very boring but it pays off.
  7. Trade with the trend. Learn how to identify a short, medium and long trend and trade with the trend according to your trading plan.
  8. Avoid the currency when it is choppy, moving sideways or consolidating like the plague. Come back another day.
  9. Make sure your trading plan clearly articulates risk v.s. reward. Don't take high risk trades that yield low reward
  10. Make sure you become familiar with Daily, 4 Hourly and Hourly charts for the currency pair you trade. This will give you a birds eye view of what is happening. It's not good to be in the weeds (5, 15 minute charts) all the time.
  11. Master one currency before jumping into other currencies. Each pair has its own personality so pick just one and learn it's behavior.
  12. Consider buying insurance to limit risk and increase profits... i'm talking about call and put options.
  13. Learn the basics of fractal mathematics and how it applies to trading.
  14. Learn everything about patterns.... continuations, reversals, triangles.
  15. Learn everything about support and resistance.
  16. Buy weakness and sell strength... this is the MOST important concept to understand. For example, when a currency is strongly trending it often pulls back for a few periods to catch its breath. This is a weakness that should be traded.

Some people ask about my typical trading day so here's todays diary... I rose at 3am to catch the UK markets and sat around waiting until 7am for my first trade. The setup matched my trading plan so I entered th trade. 20 pips in my favor the market changed and began moving against my position. 20 pips became 5 so I terminated the position preserving a very small profit and paying for the commissions. (I hate loss). It was a good call because the currency pair began moving sideways along the top of a support line outside the parameters of my trading plan. I'm very happy with the trade because it went to plan and there was no loss. This is a business after all.

Yesterday I also rose at 3am... it wasn't until 12pm that I found the setup I had been waiting all day to appear. I opened the trade with 10 lots. It moved in my favor according to the plan so I purchased another 10 lots. 80pips later I exited the trade a very happy man. I'm happy to wait all week for this type of trade to appear. When it does I go all in.

I have really simplified many complex concepts into a few lines so forgive me if there is anything ambiguous of flippant here. If you need any clarification then please don't hesitate to ask.

Regards
TrevA

Thank you TrevA.

I will remember these wisdoms when I trade.

Forex Star.
  • #39
  • Nov 4, 2007 3:21am Nov 4, 2007 3:21am
Thank you TrevA, you have given a great advice to me. Now I can understand better the idea with the 4H. So, did I understand it right? I should trade only when I see the trend on H4, and then to find the beginning of the trend on the on M15 for example? So if I see an up trend on H4, but on the M15 timeframe is a down trend, should I enter the trade when I see the weakness on the M15? But if it continues going down after the weakness? What is the stop loss that you suggest me to use? Don’t you have a system to suggest me to use?
And how much time do you think it is necessary to trade on the demo, for beginning to trade a real account? Thanks for the answers
Best Regards!
  • #40
  • Nov 5, 2007 5:07am Nov 5, 2007 5:07am
  •  TrevA
  • | Joined Oct 2007 | Status: my brain has a mind of its own | 166 Posts
Quoting CompesttriS
Thank you TrevA, you have given a great advice to me. Now I can understand better the idea with the 4H. So, did I understand it right? I should trade only when I see the trend on H4, and then to find the beginning of the trend on the on M15 for example? So if I see an up trend on H4, but on the M15 timeframe is a down trend, should I enter the trade when I see the weakness on the M15? But if it continues going down after the weakness? What is the stop loss that you suggest me to use? Don’t you have a system to suggest me to use?
And how much time do you think it is necessary to trade on the demo, for beginning to trade a real account? Thanks for the answers
Best Regards!
CompesttriS

I'm very happy to help out and hope you experiment with different systems until you find one that is profitable for you. Profit is the most important thing here.

Definitely use weakness to enter a trade, especially if you believe a continuation will happen.

Move to a live account immediately but trade very small lots (1pip = $1). A demo account teaches you the mechanics but it is not real. Also, start with very little trades so that losses are minimised. Be prepared to loose your entire trading equity while learning how to trade. Also think about it like this... how much does one unit at university cost you? Now, if you invest the cost of one unit into a trading account and blow the lot, you have gained a significant amount of experience at the cost of one university unit! It's a simplistic view but one that worked for me. Try not to get too hung up on losses when you're learning or take them personally. Just accept the fact that you will loose while you learn and enjoy that you're learning a profitable skill.

Stoploss
Never let a winning trade become a loosing trade. Simple! It's better to take a small profit than a loss any day. If the trade goes against your plan then exit to conserve your trading capital. There will be more opportunities to trade later provided that you have money to trade. I use a mental stop loss and am very strict about it. I have no problems terminating a bad trade, even if it means loosing capital. I would prefer to loose a small amount than nurture a bad trade into a huge loss.

Timeframes
Trading with the trend is the most important thing you can do as a beginner. If you cannot make money with the trend then trading countertrend will cost you. H1 & H4 are great at telling you whether the market is bullish or bearish at a point in time. M15 is a finer grained sample that provides a clearer entry point. Used in conjunction with moving averages and bands, the M15 timeframe is great at helping you find a profitable entry point.

Moving Averages
I just want to say something about moving averages and how I use them. On the 15M timeframe I plot a 60 period MA. As you may have noticed, prices tend to revert back to the MA over time. This means that if you buy or sell outside the moving average then you are paying too much for the commodity at that point in time. When buying, I wait until the price is near the MA before entering a trade. The converse is also true for short selling.

Pivot points for support and resistance
Always keep in mind the current support and resistance levels when buying or selling and make good use of pivot points. Even though the pivot points for today are different to yesterdays, the market has a long memory which means that pivot points from yesterday or previous days continue to act as support and resistance levels today and into future. I have found a strong correlation between yesterdays pivot points and todays trading day.

Indicators
I'm not a big fan of indicators (except pivot points and MA) because they have almost 0% predictive value. Having said that, MACD can be very useful when finding entry points on the M15 timeframe and might be useful to those who feel secure when using such indicators.

Price & Value - An observation
This is the basic formula of trading: You agree on price but disagree on value. When you enter a long trade, you think that the price will go up and is undervalued. The seller believes the price will go down and is overvalued but you both agree on price and make the trade. One of you is right and the other is wrong. Whoever is right drinks champaign and the other is carried out on their back.

A naked chart tells you everything about price but nothing about value and it's the last thing to change. No wonder chasing price tends to loose money.... Throw in an MA and pivot points and you start to understand value. When the price is on the MA then the market consensus is that it is correctly valued. The further away from the MA the more "out of the market" the current price is and the more likely it will revert to the MA over time. Try not to buy when the commodity is over valued!!!! Why pay more when you can pay less?

TrevA
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