Trading for a Living - Cliff Notes | Forex Factory

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Trading for a Living - Cliff Notes

  • #1
  • First Post: Jun 28, 2009 5:21pm Jun 28, 2009 5:21pm
Lesson 1: Money Management

Simple: Risk no more than 2% on each trade.

Example:

I have an account with $1000.00

2% of $1000.00 is $20.

The stop loss on my system is 75.

The amont of risk/pip is 28 cents.

So – can you trade for a living if your initial capital is $1000?

Hint: NO
  • #2
  • Jun 28, 2009 5:23pm Jun 28, 2009 5:23pm
Lesson 2: Mechanical System

Emotion is the downfall of many traders.

Take the majority of discretion away utlizing a mechanical trading approach.

A winning system that is forward tested by YOU and produces a winning track recored over a six month period.

Demo accounts are great for testing systems.

The hard part isn’t finding winning system - it’s finding a winning system that fits your personality.

If you can’t trust the system then it could be the grail and you will eventually lose.

If you can’t beat a demo account with the system you can’t be the real thing.
  • #3
  • Jun 28, 2009 5:34pm Jun 28, 2009 5:34pm
Lesson 3: Analysts Analyze – Traders Trade.

If you can beat the market you are in the minority.

The mythical figure is 95% fail… which is horseshit but that’s another thread.

I read a lot of FX related info… I love John and Wade and Bloomberg is a stable… BUT.

I NEVER trade based on an analyst recommendations.
  • #4
  • Jun 28, 2009 5:37pm Jun 28, 2009 5:37pm
Politicians and diapers have one thing in common. They should both be changed regularly, and for the same reason.
  • #5
  • Jun 28, 2009 5:42pm Jun 28, 2009 5:42pm
Lesson 4: Targets are a must

After you’ve demo tested a mechanical system you feel comfortable trading it you’ll know where your stops should go.

Intraday traders rarely use stops above 75 PIPS and often have a system for taking profit.

I like a two step process on taking profit.

I use 2 lots.

I close one after a 30 PIP profit and pull my stop to break even.

I close the second one based on my system.

The point isn’t how you stops and profit targets… it’s that you use them.
  • #6
  • Jun 28, 2009 6:08pm Jun 28, 2009 6:08pm
Lesson # 5 please.
  • #7
  • Jun 28, 2009 6:11pm Jun 28, 2009 6:11pm

Lesson 5: Realistic Profit Goals

Realistic will depend on many variables.

Beat the market for 6 consecutive months and you are on your way.

After you beat the market for six months move your goals up.

I like 5-10% as a day trader.
  • #8
  • Jun 28, 2009 6:19pm Jun 28, 2009 6:19pm
Acumen: I have, for some time now; Years, read your posts with a bent on gleaning a chaff or two but I now find myself understanding that You are among us . Some of us Winners & some of us Whiners

To those that have no understanding of what I refer to, all I can say is that you still have some Research to do.

It Is True: Successful Traders Still Post on FF.

No Financial Statements Required.
  • #9
  • Jun 28, 2009 6:22pm Jun 28, 2009 6:22pm
Lesson 6: Trade when the banks do.

The banks move this market.

They have certain prime hours they trade… learn them and trade only during those hours and your hit rate will be much higher.

We are retail traders… gnats on an elephants ass… you need to be on the right side of the market when they move or… you lose.
  • #10
  • Jun 28, 2009 6:27pm Jun 28, 2009 6:27pm
Hi Mike, what TF (and pair) you are refering to on your examples?

I know you like scalping but this sounds like M15 or 30M.
  • #11
  • Jun 28, 2009 6:29pm Jun 28, 2009 6:29pm
Quoting Bemac
Acumen: I have, for some time now; Years, read your posts with a bent on gleaning a chaff or two but I now find myself understanding that You are among us . Some of us Winners & some of us Whiners

To those that have no understanding of what I refer to, all I can say is that you still have some Research to do.

It Is True: Successful Traders Still Post on FF.

No Financial Statements Required.
I honestly believe that you are still around because you have a desire to help others learn this very difficult craft.

There are others here also... we often use sarcasm and levity to communicate but remain resolute in our goals here... to help others play this game.

Thanks for your kind words.

Mike
  • #12
  • Jun 28, 2009 6:31pm Jun 28, 2009 6:31pm
Quoting cobraforex
Hi Mike, what TF you are refering to on your examples?

I know you like scalping but this sounds like M15 or 30M.
Most banks traders have a 15 minute chart up for each pair they trade.

We should also.

Even if you aren't a pivot trader every one of us should have the dailies up a 15 minute chart.

Mike
  • #13
  • Jun 28, 2009 6:41pm Jun 28, 2009 6:41pm
Thanks Mike, my main analysis chart for daytrading is 15M but frequently looking at higher ones as well.

Chart is older one

Quoting acumen
Most banks traders have a 15 minute chart up for each pair they trade.

We should also.

Even if you aren't a pivot trader every one of us should have the dailies up a 15 minute chart.

Mike
Attached Image (click to enlarge)
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  • #14
  • Edited 8:10pm Jun 28, 2009 7:49pm | Edited 8:10pm
Lesson 7: Confluence

When two or more things align to create a stronger signal.

Take the attached chart of the usdjpy.

Take note of 4 red arrows pointing downward at the start of last Fridays trading session. (A mechanical system trade)

The market has moved to the pivot point during the Asian session. (Signal 1)

The pivot point is very close to a round number. 96.00 (Signal 2)

The pair is overbought on the 15 min chart. (Signal 3)

My system fired off a sell signal. (Signal 4)

My system would have been all I needed to place this trade.

However… when it was combined with several other ‘indicators’ the trade was a no brainer.
Attached Image (click to enlarge)
Click to Enlarge Name: confluence.gif Size: 23 KB
  • #15
  • Jun 28, 2009 7:59pm Jun 28, 2009 7:59pm
Some of the first people to read this post and comment on it are professional traders.

Those that never stop learning never stop earning.

m
  • #16
  • Jun 28, 2009 8:23pm Jun 28, 2009 8:23pm
Mike, you said "trade when the banks are trading", I'm with you on that.

My favorite pair is the EURUSD, I trade it only during the complete London session, this is my first trading rule.

Second is the EURJPY which I only trade during the Asian session till 2 hours before the London open. I don't trade this pair always but very frequently.
  • #17
  • Jun 28, 2009 8:31pm Jun 28, 2009 8:31pm
Quoting cobraforex
Mike, you said "trade when the banks are trading", I'm with you on that.

My favorite pair is the EURUSD, I trade it only during the complete London session, this is my first trading rule.

Second is the EURJPY which I only trade during the Asian session till 2 hours before the London open. I don't trade this pair always but very frequently.
The liquidity of the e/u makes it my favorite.

It often obeys pivots like a magnet.

It's also the best for obeying psych levels.

OFF TOPIC: I've been reading your thread more closely. Love your system.
  • #18
  • Jun 28, 2009 8:32pm Jun 28, 2009 8:32pm
How much value you put on correlated pairs, for example the USDCHF to EURUSD?

Driver55 uses it as a trading system, I also have always a USDCHF chart open to watch for S&R levels.
  • #19
  • Jun 28, 2009 8:37pm Jun 28, 2009 8:37pm
Quoting cobraforex
How much value you put on correlated pairs, for example the USDCHF to EURUSD?

Driver55 uses it as a trading system, I also have always a USDCHF chart open to watch for S&R levels.
I really like watching each tick when I'm in a trade.

The majority of the time I'll only be in one pair at a time.

I know that limits my opportunities but it allows me a greater understanding of the nuances and possible direction changes.
  • #20
  • Jun 28, 2009 8:42pm Jun 28, 2009 8:42pm
What would you suggest as a reasonable account to make a living with FX on good MM?

I know that it depends on your needs but let's say that the family outcome is 3000 $ (here in Ecuador you can live quite well with 1500$ if you don't have to pay rent)?


Your first post says it all but I think it's a good idea to have a number here.
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