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simplicity in trading

  • #1
  • First Post: Feb 2, 2009 4:40pm Feb 2, 2009 4:40pm
After spending much time here reading posts on this forum i've decided to place the worlds simplest and most complicated method on the forum for .

The secret: Trading is simple
The challenge: once profitable to atually believe you know what you are doing. This is very difficult considering how difficult it is to get actual statistics on what a good result is.

Those who are not profitable yet please try what you will find below before you decide to post an opinion.

Method:

1 - look at the chart
2 - decide which way price is going
3 - decide at which point on the chart you would admit you were wrong
4 - based on the above and the amount you are willing to lose on the trade calculate your lot size
5 - have you decided how far the price has potential to move in your desired direction?
6 - is the risk reward ratio satisfactory?
7 - once the above are in place you are ready to trade. Place your trade with stop loss and take profit.
8 - monitor trade at reasonable time interval and decide to either keep the trade or cut it.
9 - seriously review your trades.
10 - The moment you say the words " I hope that ..... " close the trade with the loss or profit and look for next trade.


The above are in my opinion the elements of all trading methods but are rarelly considered by potential traders. The result is that a simple job becomes complicated.
  • #2
  • Feb 2, 2009 5:49pm Feb 2, 2009 5:49pm
one of the reason why many use stoploss is because many don't understand the market

using stoploss is like saying I dun know where you are going babe so I just limit my loss (and my profit)

that's not trading, that's doing 50/50 all the time

the most logical answer to me is to cut loss everytime the market suddenly shifting. it would be very hard to understand this if most are too hungry to trade the smallest timeframe in a dream of achieving hundreds of percents of ROI.

the market, if being analyzed close enough is just a mirror of YOU.
if you feel bad after let your winning turn to loss, so does the market
if you think you had missed the bottom and thought should buy at any price not to miss the boat, so does the market

that's my opinion of the simplicity of the market
but I dun think I would be able to "read" it only through charts, charts are one of the tools, but not the essential one
  • #3
  • Feb 2, 2009 8:41pm Feb 2, 2009 8:41pm
Tools again would determine what you are trying to analyze. So most essential tool would depend on the trader, it could be astrological alignment of the planets even.. But just looking at charts is possible too.. depends on the trader and what type of info he/she wants out of it. But I do agree, most people put stoploss because they don't know where the market is going and acting in a 50/50 manner.. but what timeframe you are working with has nothing to do with that, I think once you know as a trader at what level your trade becomes invalid, it can work in any timeframe.
  • #4
  • Feb 2, 2009 8:50pm Feb 2, 2009 8:50pm
Quoting Gift_Art
one of the reason why many use stoploss is because many don't understand the market

using stoploss is like saying I dun know where you are going babe so I just limit my loss (and my profit)

that's not trading, that's doing 50/50 all the time

the most logical answer to me is to cut loss everytime the market suddenly shifting. it would be very hard to understand this if most are too hungry to trade the smallest timeframe in a dream of achieving hundreds of percents of ROI.

the market, if being analyzed close enough is just a mirror of YOU.
if...

So, what do you require to read market, beside charts?
  • #5
  • Feb 2, 2009 9:17pm Feb 2, 2009 9:17pm
Quoting Gift_Art
one of the reason why many use stoploss is because many don't understand the market
That's like saying the reason a skydiver uses a parachute is because he doesn't understand gravity. It's the complete opposite. He understands it completely and realizes he can overcome some of the effects but not control it. Just like a trader who uses stops. He understands the market and the fact that he cannot control it and sometimes has to limit its effects it can have on an account.
  • #6
  • Feb 3, 2009 12:28am Feb 3, 2009 12:28am
Quoting Gift_Art
using stoploss is like saying I dun know where you are going babe so I just limit my loss (and my profit)

that's not trading, that's doing 50/50 all the time

the most logical answer to me is to cut loss everytime the market suddenly shifting. it would be very hard to understand this if most are too hungry to trade the smallest timeframe ......
Using a stop loss is the equivalent of saying "you know what i could be wrong, or someone with more market influence than me may feel differently."It's admitting that you do not control the market.

To be able to cut loss everytime the market is suddenly shifting means that you will have to be pluged into the market 24 hours per day. This sort of trading is attractive in the early years but is in direct contrast to the reason most people get into trading in the first place. Personally i'd rather have the luxury of walking away from my pc not caring where the market is once i am done for the day and i believe this can only be done if a stop loss is employed.

I have seen many traders work as Gift_Art suggests and have the following final observation on the manner. The people who i have seen trade naked had a psycological stop loss where they knew how far they would alow the trade to go against them before cutting. They also tended to trade the smaller time frames. Many of them ended up blowing their accounts due to the invariable superman psychology with comes after winning all trades for a couple of days. They would gradually place larger trades and then leave a winning trade on overnight believing that it would continue in their favour and they would not have a stop loss. While this worked great many a time every once in a while a single trade would turn around overnight and eat up 70 to 100% of their equity.

So even though it is entirely possible to trade naked it doesn't help me sleep at night as i have not controlled my exposure.
  • #7
  • Feb 3, 2009 2:14am Feb 3, 2009 2:14am
So does it mean that veteran forex traders are not using stoploss?

Do we still need to use stoploss or just leave it there as a props?
  • #8
  • Feb 3, 2009 3:31am Feb 3, 2009 3:31am
if i had to generalize it then most veteran traders i have observed do use a stop loss one way or the other. The issue with stop loss is that you need to be smart about it. If you place your stop at a round number then you are just asking to get stopped out. Also keep in mind that your stop will be proportional to your potential gain. trying to get a return of 1 to 10 ie stop loss 10 pips target 100 pips is extremely disproportional and will prove frustrating as you will get stopped out many times. On the upside you only need 1 in 10 trades to work out for you to break even.
  • #9
  • Feb 3, 2009 7:01am Feb 3, 2009 7:01am
Quoting Lythro
Using a stop loss is the equivalent of saying "you know what i could be wrong, or someone with more market influence than me may feel differently."It's admitting that you do not control the market.
my point was:
if you know you could be wrong why trade anyway?
that's doing a 50/50 everytime you enter the market
in business we learn that 50/50 is too risky

most traders hedge, not using stop loss
ok remember the german who bet short on volkswagen stock on November?

from my experience, stop loss will not teach you how to trade like a real trader, it will never teach you how to be confidence in the market

Quoting Lythro
To be able to cut loss everytime the market is suddenly shifting means that you will have to be pluged into the market 24 hours per day. This sort of trading is attractive in the early years but is in direct contrast to the reason most people get into trading in the first place. Personally i'd rather have the luxury of walking away from my pc not caring where the market is once i am done for the day and i believe this can only be done if a stop loss is employed.
that's the reason why I wrote that too many hope on the hours and minutes
the market won't shift in a matter of minutes
but occasionally they do, you have to learn, there is no best method
trading is about learning

I trade only one a month or one every two month, because good opportunities where I can win 90% is not coming everyday (well I hope they do so ) but I'm in the market everyday ask me about everything and I know the answer since I'm in virtually everywhere

Quoting Lythro
I have seen many traders work as Gift_Art suggests and have the following final observation on the manner. The people who i have seen trade naked had a psycological stop loss where they knew how far they would alow the trade to go against them before cutting. They also tended to trade the smaller time frames. Many of them ended up blowing their accounts due to the invariable superman psychology with comes after winning all trades for a couple of days. They would gradually place larger trades and then leave a winning trade on overnight believing...
no, i dun have any psychological stop loss when trading stock
i read the market.

in forex it is a little bit tricky since a lot of market elements influence the price movement. but that's if you look forex as a single entity

forex movement is being influenced by stockmarket, by politics, by monetary policy, by corporate obligation, nations issuing debts influence the market

any single source of information is important, and know how to weight and value them will come from experience and knowledge.

i always suggest to start trading from stock then later one can move to forex since forex offer higher return with only slight a bit higher risk if one can trade stocks succesfully

no book that I read ever teach about this and I'm not saying that this is easy, I'm just saying that practicing and systemizing using stop loss will only lessen the chance of reaching this point

good luck in your trading career, keep learning, keep watching
  • #10
  • Feb 3, 2009 7:17am Feb 3, 2009 7:17am
Quoting Lonestar
That's like saying the reason a skydiver uses a parachute is because he doesn't understand gravity. It's the complete opposite. He understands it completely and realizes he can overcome some of the effects but not control it. Just like a trader who uses stops. He understands the market and the fact that he cannot control it and sometimes has to limit its effects it can have on an account.
i like analogy

i'm using a parachute but my parachute is in my brain and my confidence of my ability to read the market not in stop loss. the parachute is the life insurance, stop loss will never insured your account in the long run. if it does why 90% traders failed?

but, fortunately trading is easier than skydiving

skydiving will be finish for certain in perhaps 30 minutes, and you know for sure that you will hit the ground at about that long

in trading it is different, the lead time is just unpredictable, sometime it will take only an hour, sometime it will take 2 months or perhaps 2 years. in that 2 years you can freely go back up to your plane and rethinking of what could have been wrong. and BEFORE the next jump make sure to double check that the ground is safe enough to land
  • #11
  • Feb 3, 2009 7:29am Feb 3, 2009 7:29am
Quoting ALThau
So, what do you require to read market, beside charts?
learn everything you can
be fundamental, be technical, be a psychological trader, be a businessman, also be a chartist, be an economic analyst, read the macro indicators, everything you can grasp on

all of those knowledge will come useful to understand the market

people like Kramer are not just a luckybee who can predict the fall of US financial institutions like Bear Sterns and Lehman. there are people out there who continuosly read the market.

quoting from the Chaos Theory "always be here and now"

if you are not succesful in 2 - 3 years and start thinking that trading is gambling, don't give up, always stay here in the market ... the market will stay the same, but you won't.
  • #12
  • Feb 3, 2009 7:40am Feb 3, 2009 7:40am
Quoting forexpilot69
So does it mean that veteran forex traders are not using stoploss?

Do we still need to use stoploss or just leave it there as a props?
you know when my position is losing my broker always calls me and said blablabla basically trying to influence me to close.

when I'm up they also will call, telling me to take my profit

why?

so I could get back my liquidity and have my money ready to take another position ..... and another comission for the broker

if you are being stop, you have your money again and can open another position, that's how brokers get their revenue. brokers will love you if you are an intraday trader and will love you more if you are a scalper. and they do the stop hunting sometime.

BUT, there is a big but here

if you are a pure technical trader, you have to use stop loss

but my intention here is to bring up the idea that there are better ways to trade, and until you learn that, keep using the stoploss
  • #13
  • Feb 3, 2009 8:11am Feb 3, 2009 8:11am
Quoting forexpilot69
So does it mean that veteran forex traders are not using stoploss?

Do we still need to use stoploss or just leave it there as a props?
I always use a stoploss, though I'm far from a veteran
  • #14
  • Apr 26, 2013 10:46am Apr 26, 2013 10:46am
If you were like me living in China with a crappy internet connection believe me you would always use a stop loss!
  • #15
  • Apr 29, 2013 5:15am Apr 29, 2013 5:15am
I also I think you have to use SL or kill trade manually instead of using coverage.
  • #16
  • Apr 29, 2013 1:43pm Apr 29, 2013 1:43pm
what a nugget by lythro...I wonder if he bothers to check FF nowadays.
wo-yoy! wo-yoy! wo-yoy! wo-yoi! wo-yoy-yoy-yoy!
  • #17
  • May 2, 2013 2:52am May 2, 2013 2:52am
I was in trouble because I made my trading complex by watching too many pairs.

So my tip to simplify the trading is to look only one pair. I have started doing this and profit has started to come again.
  • #18
  • Oct 17, 2020 2:26pm Oct 17, 2020 2:26pm
Trading is an art. If you want to make money from this market, you need to have proper knowledge and education about the market.
  • #19
  • Last Post: Oct 18, 2020 6:24am Oct 18, 2020 6:24am
Quoting DexterDuncan
Trading is an art. If you want to make money from this market, you need to have proper knowledge and education about the market.
Yes to be expert in the art of trading, there is no alternative to knowledge and skills. And it takes time to achieve it but most people do not try to understand this fact. They waste time looking for short cut.
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