Hello - Price Relativity

Hello, I'm new to ff but have studied the currencey markets with demos for about 4 years now. I've come to this conclusion. You need to have a good understanding of hoe price moves RELATIVE to something. This might be a moving average, a trend line, a pivot point, aweekly high, etc. If you're going to go short, you need to determine that price is at it's highest from your reference point. Go short, put in a stop that YOU think is a good place to put it, and set your profit or profit targets at a place where you think is the lowest price is going to go from YOUR reference point. I f the market moves in your direction, slowly move your stop , whatever you're comfortable with, till you get to break even, then LEAVE IT' until your profit targets start being hit, at be you can't lose. Opposite goes for long entries obviously. Managing your risk is vital. You must be able to ride out a string of losers and have plenty left to carry on Personally I'm considering risking under 1% per trade. That's it really, just wondered what anyone's thoughts are. Thanks in advance.

Agreed. Indicators really do help the mind understand price action. However, they need to be put into their place - an indicator is the tool to aid in understanding price action, not the other way around. Indicators help the technician determine the direction of the trade.

This said, with enough practice you can use anything (or the lack of anything) to trade the markets.

I personally just use a very, very simple technical trading system. I have 2 indicators and trigger my buys and shorts based on support or resistance.

About the risk - The least amount of risk you're willing to accept the better in my opinion. Conserve your capital at all costs.

You hit the nail on the head - price is relative. Pick a fixed point rather than a moving point to make your comparison. The monthly open as opposed to a moving average for example.

Risk can be managed in more than one way. Stop loss is one way. Hedging is another.

Thanks for your replies guys. At least two people think on the same wave lenghth as me!

I've just been reading the 4% a day forever, thread and done some quick math. If this were possible you could trun $1000 into over 18 million in just a year. As a new trader just about to go live, this is meant to be a joke surely? I'd appreciate some of your views and opinions guys. Thanks in advance

Not a joke at all. Most traders do not know when to quit so they keep trading and lose in the long run. The "trick" is to make 4% a day and quit. Come back tomorrow and trade again. Many will advise you to keep trading while you're hot. You decide what is the smart thing to do.

So in your opinion kenny it IS possible to take 4% a day, and turn 1000 into 18,000,000 in a year? I hope you're right, sounds a bit far fetched to me!!

11.7 million in fact... a Forex year has about 240 trading days more or less.

It would eventually be possible if the same conditions (position size and its relationship to equity) are maintained day after day, which involves continuous compounding and is not so simple to perform.

Assuming a risk of 2% maximum on each position:

With a 2% position size (risk 100 pips), you would have to make 200 pips a day. Doable for a hard core scalper but not very realistic over such a long period. Needs a LOT of rules and discipline.

With a 10% position size (risk 20 pips), you would need 40 NET pips every day which is fairly doable in very small timeframes... assuming your strategy involves several currency pairs and that you have enough leverage to handle the required margin.

Now the lots part:
For the first half of the year (and assuming that you indeed can do that daily compounding on a broker that allows nano units), capital would have grown at about 100+K and you're now placing several 10 lot positions (10% case). A month later you'll need 23 lots... next month 51 lots and on the ninth month 111 lots? It will be quite complicated to keep on growing at the same pace after 6-7 months... not only because placing the same positions will become harder on the broker side, but also because the relative pip value increase needs a solid work on your psychology to accept any loss at $100, $230, $510 or even $1110 a pip if you reached that point. That's when the curve demands a regression to the mean, as it does invariably in any statistically measurable activity. Hopefully by withdrawing a part of the profits made up to then, and starting over.

Exponentially growing gains are possible to some extent... but are not infinite.

11.7 million from $1000 in a year? I don't think so.
But depending on your skill, and if comfortable with the work and discipline required to produce a daily percentage between 1 and 4%, 100K is not out of sight...

Trick question? $1,000 becomes $12,xxx,xxx after 240 trading days.

Possible? Yes. Probable? No. Issues like liquidity get in the way.