Soultrader's Clinic :)

New one then ...

http://www.forexfactory.com/customav...tar13196_4.gif --TNT--
FX Student
Member Since Jul 2006
Posts: 116


http://www.forexfactory.com/images/icons/icon1.gif Question for Clinic
Hi Soultrader.

How are you? I hope you are well. I have been following you thread from the beginning and I must say FF need more thread like yours(Soaltrader's Clinic). I've been dying to ask you some question but only this week I am qualified to you requirement (2 years experience). Thankfully alot of my question had been asked by others. Ok lets get down to business.

If we take a look around, there are many type of indicators. Technical, Mechanical and Fundamental. I have been in this forum long enought to notice there are 3 ways people trade the market; (1) Predict the market, (2) Follow the market and (3) Trade blindly

Im not a pro but I am totally against with pridiction. One of the reason, that was why I failed in the past. I belive no one knows where the market is going. If they get it right with their prediction, I choose to say that they were just lucky. That is my opinion. Since Im still considerd as a newbie, maybe I am missing something.

Trader A: Cable is going to 2.0600. Once it reaches that level, it will retrace to 1.9800.
Trader B: How would you know?
Trader A: I use Fibonarcci retracement and extension.
Trader B: I'm sorry but I think Cable is going down to 1.8000. The fundamentals have shown us clearly that the market is going south. Cable have been over bought for a long time.

I would like to hear your comment on this topic. Is there something wrong with with Trader A and Trader B or like most people say,"This is Forex. Anything is possible"?

Im sorry if my english is bad. I can't think of better way how to ask the question. Engish is not my first language.

Thank you in advance Soultrader.


Hi matey, thanks for the question.

Not really sure what you're asking - both trader A and trader B appear to be longer term traders and both could be right but in different timeframes.

The question is why should you give a toss what any of them think? as a trader you must develop your own view on the market and disregard what anyone else thinks. Why do you think that forums are filled with newbies and devoid of many professionals? it's because newbies and intermediate trades actually care what others think, while the seasoned pro doesnt give a toss what anyone else thinks and just trades their plan, wether it's technical, fundamental or finger in the air.

Another two in my PM box also ...

Marsh
Member
Member Since Feb 2008
Posts: 9


http://www.forexfactory.com/images/icons/icon1.gif Hey ST
Im still working on my system with "mild" success. One of the biggest problems I am having is identifying price action. You mention that you do not use candlestcik formations (ie: inside bar, pin bar, etc) or price patterns (ie: triangles...). But without using those, I dont know when to get in or else what price action IS other than those.

My day usually goes like this: I set up my S/R levels on a pair, and watch it, waiting for it to head in the direction of one of those levels. Once it gets there, I wait for it to move away in the direction of the trend before entering (buy strength, i am not picking a bottom). Sometimes price has moved almost 30pips before i feel like its honestly heading back up, so i enter. I pretty much replicate that process to get out, which is me not picking a top. I havent really been too successful with this.

I tend to give back almost everying i gained. My most dissapointing trade was on G/U last week, where i played off of the most recent support level. It was a beauty and i was up almost 100 in no time. Then it retraces, and i wanted to stay in and let my profit run, and it came all the way back down to take my out at BE. then it went up again! for hundreds of pips!...Anyway, I dont want to sit here and rant, but it seems i loose like that way to much.

So, obviously i have a lot to work on (monemanagement, etc...) but my base question is can you define price action in your terms? What do you look for to determine if that potential S/R level actually holds?

Thanks

-Marsh

Fadetobla
Member
Member Since Nov 2007
Posts: 33


http://www.forexfactory.com/images/icons/icon1.gif Questions from Fadetobla
Soultrader,

I hope this message finds you in an excellent mood.

Would you please tell me how you manage to keep your emotions out of trading? Any technique? Because I have noticed that I get happy when winning and upset when loosing.

Would you also tell me how you manage NOT to cut your winners short?

Cheers,

Fadetobla


Starting with Marsh then.

First i never said i don't take notice of candlesticks, i said I dont take any notice of candlestick patterns - there is a difference. A candlestick pattern is a series of candlesticks, like a shooting star for example. I do however look at single candlesticks though i see no reason to give them exotic names like 'pinbar' 'hanging man' etc

I do look at them and look for rejection, but let me just point something out - they only look that way because pric happened to be at that level when the bar ended. what is a doji on a four hour candle could well be two lots of engulfing candles on the one hour - all bollocks of course.

The only thing that matters is where price is and where it's been in the near past (how far is dependent on your timeframe of course) not the shape of the candle at the end of the bar.

if trading price only you are looking for S/R Breaks and/or rejections. you will see that rejection no matter what the candle pattern is so don't waste your time learning that someone else defines this shape as this and that shape as that. Just learn to spot rejection.

lets talk about your other challenges. your said...

I set up my S/R levels on a pair, and watch it, waiting for it to head in the direction of one of those levels. Once it gets there, I wait for it to move away in the direction of the trend before entering (buy strength, i am not picking a bottom). Sometimes price has moved almost 30pips before i feel like its honestly heading back up, so i enter. I pretty much replicate that process to get out, which is me not picking a top. I havent really been too successful with this.


Right, firstly if you are trading the counter trend way - ie, looking for bounces on S/R rather than breaks of the levels then you do have to be more proactive. your goal in this scenario is to keep your losers small - to kep your losers small you need to be taking the trade as near to your stopout level as possible - so if support is at 1.500 for example and you've decided that a good stop would be 1.4985 then you want to be entering smack on support or slightly below it (bearing in mind stops will be hit if it falls more than 5 pips below) this way you can have like 10 bites at the cherry in return for say two winners. if you are countertrend trading then your hit rate will be smaller.

If however you are buying dips to support in an uptrend then you are still waiting too long to enter - lets say euro is rallying after a pause at 1.500. there is then a retrace back to test the break and price does indeed pause there (lets say a 30 min chart) what you can now do is look to trade the break long of lhe last candle - this way you are trading strength because the candle has to be broken AND you can have a tight stop at the opposite end of the candle your entered on.

Both ways are following the adage, cut the losers short - thats your first priority.

I tend to give back almost everying i gained. My most dissapointing trade was on G/U last week, where i played off of the most recent support level. It was a beauty and i was up almost 100 in no time. Then it retraces, and i wanted to stay in and let my profit run, and it came all the way back down to take my out at BE. then it went up again! for hundreds of pips!...Anyway, I dont want to sit here and rant, but it seems i loose like that way to much.


Well, there is letting your profits run and there is letting your profits run ...

you have to decide what kind of timeframe you want to trade - do you want to go to bed at night and know you have no open trades or are you happy to sleep on swing trades that could run for days?

Only you can decide on this, i've done both and it's quite possible to be comfortable with them all providing you arent playing too large. Thing is there are two ways of tackling this if you are a home run player (which you seem to be)

If you want your trend trades to be intraday - (ie you play the daily trend and when you close for the day all trades close also) then you need to know the average retrace for the pair you are trading so you can ride the trend for as long as possible without being shook out of a major move.

my research has shown that on cable the intraday retraces usually come in at less than 70 pips, if the retraces are stronger than that then you don't have a strongenough trend to keep it going for the day. therefore you need something like a 70 pip trailing stop as a maximum you allow the pair to retrace. This number is different for each pair you trade and it changes over time - you should recalibrate weekly on a two monthly scale.

if you are a swing trader then you need to know the average retrace based on the four hour chart or even a daily.- i'll leave that homework to you.

One thing is for sure, you need congratulating on your tenacity to hold on to a trend - most players cannot sit through a 30 pip pullback when they are 100 up - youve managed a full 100% pullback from those levels so clearly your mindset is getting right for a trend trader. It takes a long time to get that comfortable i can tell you so a pat on the back for that.


Fadetobla, interesting question.

See above for how to keep the winners running.

Keeping emotions out of trading is easy. just do lots of trades. The more you trade to your plan the more you can relax knowing that over a large number of trades you will make money.

The lack of emotion in trading is gained by following your plan again and again - it's gained from the sure confidence that your method makes money.

Of course you are happy when winning, but in any method you will get bunches of trades - sometimes those bunches will be winners, sometimes losers - the more you follow your plan time after time after time the more confidence you get - the more losers you see and the more winners you see - they just get blurred into one long trade. Thats what is meant when people say that trading is boring - it should be you just doing the same thing again and again, day in day out - that's how you become less emotional.

Think about something else in your life that in the past excited you - maybe it was the thrill of your first overseas flight on holiday - wow that was amazing eh, fun emotions looking through the window, the anticipation at the airport, the nervousness on landing or in tubulance... then after youve been a few times it's positively boring, i dont know about you but i cant wait for the damn flight and all that crap at the airport to be over.

Trading is the same - the more you do it the same way over and over again the more emotionally detached you get.

of course this can throw up more challenges because a bored mind makes thing difficult. My solution is answering things in here and playing games in my office. etc etc

Hope this helps you two.

just so those interested know i now post most days on my blog http://soultraderdiary.blogspot.com/

boring trades that last for days so dont waste time if you're a daytrader.

good luck all for the future

Ahhh so thats where you went... Ill check it out. Thanks!

Surely that can't be right? For one thing he mentions stops!

you forgot to put the rest of the sentence.

'then again what the fuck do i know - just follow the money and you can't go wrong!"

like most traders - just see what confirms your thoughts and ignore the rest.

im glad I bought you some amusement

Sorry Soul, could not resist the quip about stops - in view of your previously aired opinions earlier in this thread.

To all newbies out there, I commend a full reading of this thread.
Nowhere else in the Factory have I found such useful insight in dealing with the most difficult aspect of trading.

For myself I promise never to scribble in the bible again!
( I might bump it for visibility sometimes )

ahh, but have you seen the size of my stops?

ps, i still hate stops - so whats the answer as to why i use em?


COS I'M NOT HERE LOL

i would never use a stop if i were here, might as well paint a target on your head.

Have fun primate, thanks for the respect - much appreciated

Well, for the first time in ages i've had a message to the clinic worth answering.

Top Man. Stewart agreed to allow me to answer on the thread so you might all be interested in my response.

Hi ST,
Back in March you visited my 'journal' as I posted 40 live trades and developed my method.

You visited the journal and messed with my mind on the "exit" issue (how to stay in, scaling out etc). You told me everything I did not want to hear. :-)

Then you posted a reply in your 'clinic' at the following post. http://www.forexfactory.com/showpost...&postcount=270

Since I wasnt emotionally ready to heed the advice you gave (even though I intuitively knew you were right!) ....I went off and spent the next 7 months doing $12,000 of courses looking at indicators on short term (5 min) charts, to get me in earlier and time my exits better. Needless to say, the experience was vacuous. A waste of precious time and resources. Eventually I came back to exactly where I was 7 months ago. That simple robust systems work and its best if they are simple and robust only.....and trying to 'fix' the problems of simple systems usually just stuffs the method entirely.

So I am back to my simple "identify a trend" "identify a pull back" "use price action to trigger an entry".

And this brings me to my email now.

I'd love to hear any comments you might have on the following exit strategy. I am now ready to accept this approach as the robust truth, even if it means I give back pips and dont win as often.

So here goes....

1. Since I enter on price action + s/r (almost always in the direction of a trend.....
2. my logical exit becomes, "stay in the trade until I see DEFINITIVE price action at s/r that tells me the movement is now contrary to my trade.

NO scaling out.
NO moving to break even quickly
NO tight trailing stop.

Just stay in until I see price and s/r telling me that price has turned around.

Am I on the right track here?

BTW Typically my entries are off 4hr and 1hr charts - so I need to wait for the exit conditions to be met on the close of a 4hr or 1 hr chart. NO MORE LOOKING AT 5 MINUTE CHARTS TO EXIT A MOVE THAT WAS TRIGGERED OFF AN HOURLY CHART.

It has been a big step for me to get to this point. I have become so much a better (humble) person for the struggle I have had in the last 7 months, looking for a 'better way'. I sincerely believe that I failed in every respect to make a 'better system' than I started with in March. And finally I am ready to accept the consequences (less wins and giving back pips) in the name of robust trading principles.

I am sharing this with you because I find your destructive wisdom beneficial in the extreme. "Destructive" because you have a tendency to shake the crap out of us and get rid of all the stuff that sounds good but isnt....leaving us with truth.

I hope you are well and your trading is successful. (A quick peruse of your blog shows enormous pip gains recently).

Congratulations.
Stewartr
Australia

Well, thanks for getting in touch Stewart - not sure to take some comments as a complement or not lol. but i will.

Firstly, congratulations on actually still being around and putting in the time on those 12k training courses you spoke about. Many would have fallen by now and many have - take a look around at those who answered your thread and see how many have gone strangely quiet.

First tho let me say it was not a waste of money or time doing those things. You have to do those things and you have to spend the money. This is 'growing up' in forex just the same as finding out what your todger was for when 'growing up' in your early years (11 in my case!)

So the good news is that you didnt waste your time or dosh - the bad news is that you're still only 13 and don't graduate till 21.

That 12k was spent getting something that you just cant buy - you cant buy time. every month some arsehole comes on here that's not like anyone else - they dont have to put the time in and are avoiding all those lessons that no-one else has managed to avoid. They are special.

Funny thing is that those they say they are beating to trading nirvana thought exactly the same thing when they were in the first 6 months of trading. We all did.

The hard lesson here is plain to see - you will not be a trader until youve been in this game at least five years. it's your apprenticeship and unfortunately you can't avoid it.

Again Stewart and others you might not like what i'm telling you, and i would love you to tell me i'm wrong - but you can't tell me until you've been doing it five years - cos till then you won't know.

So don't despair at the money you've spent. It's all well spent to find out what does not work. You cant learn that it doesnt work without doing it - read all you like from me or others but you won't learn until you actually do it.

Very soon you might go into the 'autotrader' phase where you look for automatic trading robots. some exist that make money but there are very few that exist that work for a reasonable length of time - I've never found one for retail and i've tested, designed and traded literally thousands. you might find one like I did (google grailtrading to read) that works for a year or two - mine worked for just over a year from discovery and five years in all - it failed miserably in late 2006 and has lost consistently from then to even today (yes, i still monitor it)

Thing is though, you'll now say to yourself "won't bother with auto trading then" but you actually have to - although you will most likely come to the same conclusion as myself, the process will learn you so much about the market that you cant possibly learn any other way. So when these things frustrate you as they will, dont curse because it's all preparation for your 21st Birthday.

Most won't get there, if you do then hopefully we will become friends as i have with many during my own journey.

You ask:

So here goes....

1. Since I enter on price action + s/r (almost always in the direction of a trend.....
2. my logical exit becomes, "stay in the trade until I see DEFINITIVE price action at s/r that tells me the movement is now contrary to my trade.

NO scaling out.
NO moving to break even quickly
NO tight trailing stop.

Just stay in until I see price and s/r telling me that price has turned around.

Am I on the right track here?



Yes and no is the answer.

Staying in the trade till it is clear that the trend is dead is the right thing to do in my experience. Moving to break even is a good plan but the quickly bit is derived by the market and not by time. When the price chart shows you the next place for your stop then that is the time to move it - sometimes it's a matter of a few hours, sometimes days - the point is that the market will show you when you have learned to read it.

Certainly no tight trailing stop - they are arbitrary and not connected to the market - if you want a trailing stop they should be something like 3X the 20 day average range of your timeframe choice.

but in a nutshell and for shortness, yes - till price shows you it's turned around.

BTW Typically my entries are off 4hr and 1hr charts - so I need to wait for the exit conditions to be met on the close of a 4hr or 1 hr chart. NO MORE LOOKING AT 5 MINUTE CHARTS TO EXIT A MOVE THAT WAS TRIGGERED OFF AN HOURLY CHART.

I like to get your brain cells rubbing together and answering your own questions. So here's one for you to play with.

1. Why use more than one timeframe?

2. if you do use multiple timeframes - why use one so close?

Maybe it could do you some good to try alternatives. let me explain

The golden key to trading is all about risk management - that's why in the city they arent really called traders - they are risk managers.

To be successful in this game you must learn that risk is everything. Most of the time if you are a trend follower you will be wrong. it may take you five trades to find that one trade that pays for them all - that means you are going to see a lot of crap trades. You mention in your email my trades that i take - this month i've took over 800 pips - but almost every trade i took was a loser! - one good trade on usdchf made me over 1000 pips and made the month good.

I see a lot of shit - and remember i'm entering year 7 of my trading now. I know the market pretty well but i still only win on say 40% of my trades at best.

Trading isnt about spotting good trades - i see em every day but the rule is this - if the risk is too high then i don't take the trade - even if it's a gold filled certanty that i could spot a mile away - if the risk is not worth the reward then I don't take it.

How do you assess the risk? - it can change from day to day. Look at eurusd now - six months ago you would never have risked a 200 pip stop on eurusd because the chance of it moving say 5:1 reward were miniscule with a stop so large - so then the acceptable risk might have only been 50 pips for a 250 pip winning possibility over say three days. But now with common moves of 300+ in a single day larger stops don't have so much risk.

The thing is you can only learn to assess this risk if you have one thing - and that's time and experience - something you just can't buy.

Now when i talk about using a second timeframe so close - this might shock you. when i scalp I SCALP A FOUR HOUR CHART - here's the killer - i pair a four hour chart with either a one minute or a five minute chart!

That gives me the smallest risk possible to get into the four hour move i've identified - i decide on direction FOR THE DAY wait for the 4 hour to be where i think it's retracing from and then take every entry in that direction from my smaller chart. i have lots of losers -5, -9, +10, -15, -3, but then if im right on the direction for the day, it comes - +100 and more from a single one minute entry and very small risks.

I dont trade the smaller timeframes very often now - mostly i use daily charts and no others and look once a day. i use price action and just determine direction based on the daily chart - now for example im still looking only for shorts on cable and even on euro after this spurt up - it's got to do some more bouncing before i look long on most things.

Deciding on a direction is important to me - it means i can only trade one way and dont shift my focus from day to day. If im set for shorts and price is rising then it's no trading - go and do something else like having a life.

thing is that until you've gone through all the shit youve got to come Stewart you won't know how to read a chart properley. When you know how to read a chart you just 'know' you'll drop indicators, you'll see whats happening and you'll just 'know'. That's when you become a risk manager - knowing isnt enough - its the managing of risk coupled with that 'know' information that makes the profits happen.

I used to know a guy from the states who was a brilliant analyst - he could call a trade days and sometimes weeks in advance and often they were massive trades - but his risk management was poor and he didnt make money.

Learn to read the market, then learn to take the good ones - the ones with little downside and massive upside - learn to say no and walk away even when it looks obvious - if the risk is not in proportion with the reward then wait another day - it might be better tomorrow.

One day you'll look and see a setup so obvious and then you'll assess the risk and see it's small and take the trade - even then you'll lose lots - but one trade in every 5 or so will come good and you'll ride the fucker like a rodeo rider - after all, it took you ages and lots of work to get on this horse - why get off so soon?

Stewart, I'm very proud of the people i've helped in the past - many have come with the attitude to listen and learn whilst others were a waste of space and in for the bullshit ride.

I sense that you have that quality that will see you attain your goals. You have many years to go yet and a few thousand more dollars to spend - but spend it you will and one day that 12k will seem small in relation to what you earn - the first 10k is the hardest to get, but boy will you hold on to it!.

I dont post or peruse here much anymore because i just see the same thing happen again and again and less respect every time i read. more scam artists, more knowall newbies etc etc - it's just boring.

For you Stewart I tip my hat and wish you a rocky road - you'll learn more when the wheels fall of than any other time.

I just get the feeling we might just have a star in you, and i dont see many.

Godspeed my friend, Merry Christmas and here's to a stormy 2009 for you!

good evening.

Merry Christmas all!

did you know your links are broken?