Rate my trades - A newbie diary

Hi guys

I have decided to start posting my trades, and the rational my limited experience provides here, in the hope of learning more.

So, to begin, I have just placed the following order.

USDCHF - Short at 1.5590, sp 1.6670 tp 13590.

I have placed this trade for the following reasons:

1) The last few days have all traded in a narrow range, with a high degree of indecision. It has ranged for a week, with all attempts to continue the move up faltering.

2) MACD shows that selling pressure is increasing and buying pressure is slowing

3) I am looking at fibs not only to help determine trend, but to set stoploss, take profit and entry point.

I will try and improve at explaining my thoughts, but bear with me!

Comments please?

http://img185.imageshack.us/img185/5241/image2pj.jpg

Hi LearnerDavid,

You done some good analysis here but your entry is what troubles me. As you have it now you are really only giving yourself a 50/50 chance of profitability. You see, you placed the order right in the middle of the channel in a long trend. What happens if this is just another rest period like what happened 5-13 may (approximately)? You likely would have been stopped out as the pair moved another 300 pips higher.

If you moved your entry away from the "noise" of the channel (under the support level for the past few days in the picture), then you let the market come to you instead of the other way around. If it doesnt come to you then that is fine, move on to the next trade (like a long breakout). Sure you will miss out on a few pips but trading a daily chart I think it is better safe than sorry.

I have outlined a few suggestions of how I might trade this chart. Dont let the indicators fool you, just because macd is starting to turn doesnt mean price will follow. Ive seen macd and rsi stay in overbought/sold conditions for weeks before price followed. Let the indicator help you make decisions but ultimately trade off the price and what is happening on the chart.

For your fibs I think you should move it back a few days to the overall start of the trend. I have made note of where I believe the trend started. It looks like your zigzag indicator (if that is what it is) is saying something different. To me the small rise where the ZZ starts isnt the start of the trend as price nearly retraced the entire move negating that as the starting point in my eyes. Some people might disagree though. Additionally your 100.0 level is just sort of out there in the middle of no where. You might want to pick the highest point which looks to be the most recent candle and have that be the top. There are a few good fib threads around here that may be able to give you more ideas as I am hardly an expert on them.

Also, if you do you major analysis on the daily you could then go to the 4 hour to get even more precise levels but I wouldnt advise going lower as then you will really start getting a lot of noise which can cause indecision (sometimes called "Analysis Paralysis"). Also it is a good way to see how price reacted to your levels at the time it was around them.

Hope that helps some!

Hi

Thank you very much for your comments. Very interesting stuff.

As it is I don't think my sell order is going to get hit anyway. I planned to close the order at the end of US trading and am going to stick to that.

In order of importance in deciding the trade I was looking at:

The chart. To my amateur eye the last few days look to be very much suggesting a downturn. It could be resting I agree, but to me, the chart spells downtrend.

The indicators were secondary. I felt MACD was backing the trade up, as were fibs (though you are right, I did not position them well). The zigzag I ignored. Mainly because the weight of info in my mind was against it, but also because I have never used it before and need to learn more about how it works, and how much it can be relied upon.

Thanks again!

David

OK

The trade was entered. Before entry I made the following alterations:

Set sp lower. I felt that it was too high. The previous days had risen up to 1.16198 - Any rise above that seems likely to continue up. So I set sp there.

Set sell order lower. I think I set my sell amount unrealistically high. If I am right about the trade the price will likely not go that high anyway and if I am wrong it will, meaing I will take the order and then head straight for stoploss. So sell order was set at 1.15400

So far it hasn't gone a pip beyond my buy position so hopefully I hit that right. Currently profiting a few pips for a total of 160 profit, trying to stem the urge to take a quick small profit!

I also forgot to mention the trendlines. I was reviewing your chart again and they just upped and smacked me in the face. I typically wouldnt take a small profit on a larger timeframe but it may be something to investigate as these are pretty pronounced TL's that could cause price to stall.

Also, where the green line is situated above resistance. If price keeps trading in the tight range it is similar to winding up a spring, eventually its got to pop one way or the other. In this formation, an ascending triangle, the break typically happens at the horizontal. Just something else to keep in mind for the future.

I do agree that it is showing signs of being overbought, as all the majors are after the whole euro-debt crisis. It will be interesting to see it all play out.

Yes, I think I have certainly missed a good few important factors in this trade (finding out what I missed is exactly the point of being here!) and I am still definatly debating closing it early. If for no other reason than I would like my first trade to be a profitable one. However I would prefer to start as I mean to go on and try to make the right decision for the right reasons.

The day ended a short while ago, with todays action producing a bearish engulfing bar (I think!), and additional selling pressure showing on the MACD and absolute strength indicator. For that reason I think I am going to let it run.

http://img339.imageshack.us/img339/3350/image3os.jpg

I notice Traderjai did not make any comments about the Martian Ray at the bottom of your charts. Is it used to kill Martians, or Humans?

hahaha uhm no, I certainly didn't. I can sort of see the macd in there. As for the AbsStr and RSImode, I came up empty. But hey, to each their own.

I personally prefer to stay away from the more abstract indicators. When you think about it, do you really think a bank is going to be looking at whatever absStr is? Doubtful. I prefer the main indi's. Moving averages, RSI, Stoch, Volume (despite its many weakness' in forex), and Bollingerbands for the most part. Now I do use some indicators that help make things easier like RSI bars, but they are all variations of a defined indicator that has been around for a while.

Yeah, I think I have too many useless indicators. Just trying different things and seeing what works for me

Right now the trade is hovering right around resistence set by the last week. I am watching it to see if it will break through and move further south, or just continue being stuck there. If it does I will close and take a small profit. I don't want to let this one run over the weekend for sure.

EDIT: By 'if it does', I mean if it does continue to be stuck. If it breaks through I will let it run the day out and close before trading ends.

OK, so I went a good few pips ahead and decided to drop to stoploss at breakeven and take the freeroll. It dropped and I stopped out with no loss.

I'm not done with this trade though to be honest. Today looks like it will form yet another cross, with more bearish activity so I will reivaluate on Monday. Would have been nice to take a profit on my first trade, and had I cut it sooner it would have been worth $500.

Some personal notes

1) Let the trade come to me. I would have gotten a much better entry if I hadn't have forced it and moved my opening position down. This was a big mistake.

2) I need to look a lot harder at the indicators I am using, and how they relate to one and another, as well as the overall picture. A lot more study needed there!

3) I am pleased that I avoided being results orientated in this trade. I have been a poker pro for a number of years so have learned to detach myself from the $$$ and try and make the right decisions. Its one of the few things I have in my favour

And that is part of what it is all about. Finding what works for you. I did the same thing, added all the magical little indicators from this forum and tsd, tried them out and what not. But I didnt always want to read the whole long thread about them and how to properly use them. I like to do things the hard way and am pretty stubborn in that regard.

My favorite is the RSI which I use in a different way than looking at oversold/bought levels. If you are interested, google "TASC Going beyone 70 and 30" by Jaime Seattele that will give you an idea of how I am using it. Though I did modify that some to fit my own personality traits.

1 other thing, and I usually try not to get involved in these matters but this time I will stick my neck out. This statement makes me wonder

A $500 profit on what, 40-50 pips sounds to me like you are either not using proper money management or you are trading a large account (and using proper money management). If that is the case than I feel you might benefit more from starting with a mini or micro. If it is a smaller account you may be overleveraging yourself which can lead to more risk than you need to take.

You dont go all in on your first hand at the table would you? I know Id rather bet small, feel the players out, maybe try to bluff them a few times, see if I can spot their tells. Trading is very similar except you can never really bluff the market because there is a lot more money riding on those trends than you can realistically afford to lose. The best thing is to find the trend and ride the coattails of whoever is making that trend (banks, govts, large institutions).

Depending on the trade I will typically put on 0.5% to 2.5% because a lot of this has to do with managing risk and not making pips. Making calculated judgments to ensure you dont walk away with a bad beat story.

But again it really is none of my business so I will just say that if you are trading a large account, you may want to scale back to mini or micro just until you get a feel for this. And if you are trading a smaller account you may want to look into your position sizing.

Either way, congrats on making your first trade, it is a big step for a lot of people.

Yes, I am currently reading a couple of books focused on indicators, this should hopefully help me learn more about what works for me, and then obviously I will need to drill down more into individual ones.

A 10k account, buying 1 lot. I do not plan straying above more than 1% risk, and am certainly not against going lower. As I said above I feel I can detach myself from the money, but at the same time I suppose I need to feel there is some risk reward to make it worthwhile and get the best out of myself. In much the same way I cannot play poker without money on the line. However small it is there has to be some or I am not capable of playing correctly at all. I am not money or results orientated. But I am risk orientated. I think that is normal for poker players.

That said 10k is a lot for me. I certainly wouldn't claim that its an easy figure. So pulling some out (maybe half), and trading .5 lot sizes would still matter more than enough. I will think on it.

Its funny. I was talking forex with a trader, and he commented that my questions were from the point of view of a poker player, not a forex trader. That they were in someways meaningless in the context of forex. He was right. In this we have a similar misunderstanding.

In poker very strict money managment is required, a person needs to be highly disciplined and very much in control of their feelings. We look for what is termed, EV, or expected value. The main question asked of any action being this, 'what is the expected value of x action, y action and so on? The player then looks to take the action with the highest expected value.

Most all in hands are much simpler than you think. I have pocket kings, he has raised, he is likely to raise with any hand from the top, say, 10%, he is likely to call my all in with any hand from the top 3%. So in almost every case I go all in. First hand or not it doesn't matter. If I make an all in here it has a positive positive expected value, thus.

I go all in, he folds 70% of the time. I make a profit with no risk by taking his raise + other 'dead' money already in the pot without even having to have the best hand at all. My hand is never even played since the opponent has folded.

OR

I go all in, he calls with one of the top 3% of hands as expected.

Which results in,

We have KK vs one of, JJ+, AK suited, AK unsuited. Which means that 62% of the time, I win, 37% of the time he wins, 1% we split.

Therefore my expected value is that I win money about 85% of the time. A large chunk of that with no risk exposure since he folds 70% of the time.

OK, he might have pocket aces, or he might have a worse hand and get lucky. But I still did the correct thing in expected value (essentially equity) and that is all that counts. Poker is about correct decisions, not winning or losing on any one hand. If you make the correct decisions, the money takes care of itself. If he has AA and the next time I am in the same situation I choose to fold instead I have fallen into the trap of being results orientated. Poker is not about results, it is about proper decisions. If you make proper decisions then you will achieve good results. If you play based on results you will make poor decisions, result, poor results!

We use good money management to ensure that the 15% of the time we get unlucky in this example we have only exposed a small fraction of bankroll to risk, and so can absorb runs of bad luck which will happen very often. I would not consider it strange to lose in the above situation 15 times in a row. However we might be in the above situation thousands of times in our life, giving the action a huge + EV regardless of how long after we sit down it occurs.

So yes, many many times I will go all in on the first hand

I hope to be able to apply similar thinking to forex in many ways.

ADDED: Oh, and betting small with a big hand is usually a very bad idea for many many reasons! It is probably one of the most -EV mistakes commonly made at a poker table. Sorry, I like to talk about poker too much!

You can't bluff the market, you probably need to adjust your metaphor accordingly.

EDIT: maybe this needs more explanation.

You don't bet small with a big hand because you let more people into the hand at a cheap price, and thus are more likely to lose, this doesn't happen in the market. You can over bet and scare people off their hands in poker, you can't apply a similar approach to trading.

Caution in poker can lower your win rate, where as it is never going to hurt your chances in trading, just limits your wins.

The poker analogy is really really over done, just be careful :-)

Lastly on the subject of poker

Caution in poker will often do more than lowering your win rate. A player who is too cautious will likely not have a winrate, unless you include losing as a 'win' rate. To cautious is a pretty much certain route to loss.

I'm not sure if your reponse was aimed at me or not. Either way it is true. Comparing poker ro forex might be overdone. But that isn't to say they don't share a good deal of factors, and I believe experience of one can help with the other, maybe hinder in some ways too.

As for my long response. I was more interested in doing two things. Firstly, explaining a little more of how I think, as much to myself as anyone else! And secondly simply because traderjai is being good enough to share so much insight with me. Poker is the expertise I have to offer in return so I offered it. Hopefully it is of interest.

Learn something new every day. I guess you can tell I am not very good at poker. I do have one friend that makes a pretty good amount playing online poker which I think would be even harder.

When I have a good hand I always try to bait everyone into staying in so I can up the pot more instead of just calling them all out at the begining. Which I guess in the long run does reduce my chances of winning since someone could pair up on the flop. Next time I play I will try that.

The whole idea of -EV and +EV is an interesting concept. I did some reading on it last night as I had only briefly heard it mentioned before in my prob and stats class. Thanks for the idea. It will be interesting to see how we can translate that into forex.

Im not sure your position sizing is correct in this case. 1% of 10k is $100 (I will use dollars sinces pounds bring in more math). Now, judging from your picture there looks to be over a 100 pip stoploss. This means that you should only effectively be trading 1 mini lot, actually less than a mini lot as each pip equals $1.

Also roughly judging the picture it looks like it went in your favor around 50 or so pips and you saying you were up more than $500. That equates to a standard lot (50 pips*1 lot*$10), which means your 100+ pip stop was effectively 10% of your account (100 pip SL*1 Standard Lot*$10=$1000).

If the money is really important to you, dont use all of it, especially when you are first starting out. A LOT of senior members around here have blown out on their first account. Not necessarily a good right of passage but it does seem to happen often. It also helps separate the wheat from the chaff as it flushes out the inexperienced because they think they cant do it. The ones left standing figured out what they did wrong, corrected it and tried again... sometimes a few more times though I wont mention names (traderjai) lol. Not sure who your broker is but I know Alpari UK goes down to micro lots where you are trading $.10 instead of $1 (mini lot) or $10 (standard lot). If you think in terms of percentages then a $1000 micro account is the same as a 10k standard acct. My problem was I wasnt looking at the percentages but the dollar amounts. $40 bucks is hard to get
excited about in a micro account, but that equates to 4% vs your 1% risk. Now I would take those odds all day long.

I think most forms of gambling including poker have two main dictums: Money management and return on risk. There are some great articles in Investopedia on risk and risk premium which is essential in Forex trading.

Watch your risk to reward ratios!

Always try to get min double what your risking.

Hi everyone

I didn't forget about this thread. Rather a combination of two things kept me away for a few weeks.

1) Went on a much needed holiday for several weeks
2) Studying

Anyway. I am back and want to look at where I left off and ask some questions.

As I expected the swissy did drop down a fair bit. All the way to the 0% on the fib, selling pressure seems to be returning and I am looking to enter a confirmed uptrend if one occurs. This pair looks to be forming a tweezer bottom on the one day today so the beginning of a reversal looks possible.

Also, I have been spending a lot of time looking at the indicators I am using, finding the ones which fit in with the trading style I am trying to learn. This is.

1) Follow trends. I am not looking to predict the market, rather confirm and ride trends as far as I can.

2) While I am not looking to day trade I want to hold trades for short periods. 3-4 days max. Ideally I will only enter trades Monday - Wednesday, maybe Thursday if a very good oppurtunity comes up. All open trades should be closed by midday/late afternoon GMT on Friday.

3) Focusing on the one day chart. This seems like the correct timeframe for initial assessment given the style I am trying to develop.

4) Initial assessment is based on candlestick patterns, and a general overview of indicators. With further assessment of indicators and other timeframes.

5) I am currently looking at the following indicators:

a) MACD
b) Fibos
c) Kagi
d) GMMA, long and short

I am currently only looking at the swissy for the simple reason that I need to focus on one pair while I learn to more fully understand the indicators I am using, and refine my usage of them ect. I intend to trade most pairs in the end.

I have the following question.

Given the style I am looking at, can anyone recommend settings for any of the indicators I am using?

I'll post charts etc later today.

David

So, back to the diary. Still looking at the USDCHF pair.

As you can see the downswing I thought was coming at the start of the diary came through nicely for a good few pips if taken. I ended up not taking the bulk of it as it came after I went on holiday. Ah well

Now we have what looks to me like a similar clear bottom forming on the same chart.

1) Going off MACD the pair looks overbought
2) The pair tried to make a final downward rally at the end of the week, and left us with a hammer bottom and what is almost (but not quite) a tweezer bottom.
3) Volumes on GMMA look to be turning bullish once again.

Please ignore Kagi. I am still trying to understand how to use it. In particular the correct settings for my trading style.

I am looking for further confirmations. In particular a crossover on MACD. If these come through I expect

To take a buy order (1% of equity) at around 1.10767

To initially set 3 sell orders at 50% and 61.8% on the fib, then manually track the final trade, hopefully up as far as 100%. Obviously higher if possible. As usual all trades will be closed by the end of Friday trading

Set stoploss at 1.0397, just below the bottom of the previous trading period.

Thoughts please!

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