Observations Of A Newbie Trader

Well it's been nearly a month now since I started delving into the world of Forex. Just about thrown my computer through the window twice and almost had a nervous breakdown. Well not quite a nervous breakdown.

I have some observations I would like to share as I think they are good ones for people who have not yet starting practicing the art of Forex.

1. As far as I am concerned (at least at this point in time) the biggest risk to any trader is always yourself. I don't think it matters how good an investor you really are, or how good an investor you think you are, it is always your choice as to where and when you spend your money. Even if you are the next Warren Buffet I think things can and still do go wrong.

2. Know yourself. In this game I think you will start to find more things out about yourself than you may care to know. For example, if you have never had a million dollars before how are you going to know how you would handle this sort of money? The Sultan of Brunei(?) might want to take a lesson in this one. To put it another way, try giving a million dollars to someone on crack. Give another million to someone who has been married several decades and has two kids. Who do you think would handle a million dollars more responsibly? Same principles apply to everyone I feel.

3. Listen. I've only been practicing Forex for a month which (as far as I am concerned) means I know more than someone who hasn't been trading at all. I never said I was good at Forex, I just know more than you if you have never had anything to do with Forex before.

4. From what I have seen of Forex I feel it is 50% good Forex sense and 50% psychology.

That's it for now. I might add some more stuff as I progress. Hope some of the above was useful to someone on this forum.

...so..?

You understand the full psychological impact of trading, one month in? That's impressive. Next, you need a trading method to hone your psychology skills, right?

A lot of people match their personality type to the method they choose, I'd guess to relieve the shock of trading reality you just went through.

So, say, a forward, direct person steeped in reality and liking to take on others not doing it their way may take on a method that is at once simple in comprehension and comprehensive in scope. An avoiding person steeped in theory and liking to contribute to others may take on a method that is more like a program too complex to program. A person who is witty and wise and yet evasive and noncommittal may use a method that, in great experience over lots of people and dollars, adjusts the numbers of a tried-and-true indicator or drawing tool.

After almost 6 months of testing on Demo, creating my psychology, "trying" to stick to a system and discipline, trying to develop my own system...etc etc etc..oh yes...reading books BUT i did not pay any money to any "Guru" but only looked at FF

I have done nothing but blown demo accounts. Now I am not negative but very positive on this that any retail "newbie" is more prone to blow a real account if he is faliure on live account.

Any comments...by the way I uninstalled MT4 from my computer only to install it again after about 8 hours...thinking that why not try sticking to trading discipline and money management again...I am confused and any help is appreciated....at the end I know that this is still doable

ARTICLE by ABDEL IBRAHIM
"It's interesting to see that at a time like this-a time of economic concern, a time of confusion-that many people (including traders) get caught up in information that doesn't serve them in any way helpful. What do I mean? Well, if you look at most financial news networks or most financial news services, how often are they serving us information that is helpful in any way to our trading? I listen and talk to traders on a daily basis and it amazes me how much overwhelming economic information they know. However, when I ask them how it's serving their trading, I never seem to get a clear answer.

I've been fortunate enough to talk to some of the most successful legendary traders out there and really pick their brains to see how they think. If you've ever had the chance to read Market Wizards and New Market Wizards, there is some real wisdom in those books that most people don't seem to grasp. In New Market Wizards, Jack Shwager interviews a very successful trader. During the interview he asks him:

"Can you tell who will be a successful trader and who will not?"

The trader's response is very interesting. He goes on to say:

"Yes, on a less technical level, I can say that after years of studying traders, the best predictor of success is simply whether the person is improving with time and experience. Many traders unconsciously acknowledge their lack of progress by continually jumping from one system or methodology to another, never gaining true proficiency in any.

As a result, these people end up with one year of experience, six times, instead of six years of experience. In contrast, the superior traders gravitate to a single approach-the specific approach is actually not important-and become extremely adept to it."
Now, most traders might read that and think nothing of it. But look at how he talks about how most traders jump from system to system, never really gaining true proficiency in any. This is something I as well have come to observe in most traders. When I try to understand why this is happening it seems that it's the same reason each time.

As traders learn more and more about different indicators and patterns in the market, they become more and more desperate to find this "holy grail" system that will produce some astronomical winning results. They continuously jump from doing one thing to another. One day they're trading moving averages, the next day they're trading a bear wedge pattern, and the day after that they're looking for double top-they're just all over the place. Why is this? It goes back to the quote up top. Instead of focusing on ONE methodology and mastering it, what happens is as soon as a losing streak comes along or a trade doesn't work out the way they would have liked, they begin to think that something is wrong with the system, when in fact the real problem is the trader himself.

I often talk about how trading is a business and how it needs to be taken seriously if you want to succeed. A lot of traders approach the markets like they approach Las Vegas, with hopes and dreams. You fund your brokerage account and you think that you're going to hit the "jackpot." You sit down at the computer and you have no plan and no rules, and then you're surprised when you start losing money.

The only way you're going to be successful at this game called trading is by doing what successful traders do. They have very specific rules for entering or exiting the markets. They know where their stop is to be placed before even taking the trade. They also know the point at which they'll be taking profits before they take the trade. They don't jump in just to "see what happens." Equally important, they all have a very specific systematic way of trading. They operate from an if/then scenario. They think from a probabilities perspective and they know exactly what their odds are every day, week, month and year.

Here are a couple of things you should ask yourself:
1. How far have I progressed as a trader?

 

1. Have I mastered a system?
2. Can I perform it consistently without effort?

2. What am I doing to ensure my growth and success?

 

1. How will I measure success?
2. Am I constantly growing and developing?

As you approach trading from this point forward, remember that successful traders are constantly improving with time and experience using a single approach or methodology. It's important to realize that without that mindset, you are likely to get caught in the same trap as other traders. That is no plan, no rules, and no success."

Takes at least 2 years of trading real money before you even have a shot, imo. Just consider that lost money as education cost.

By what time a consistently improving novice trader shall get this...what are the specific rules? How do they know about the stops an where to put them in?...will this only come with experience and refining the ONLY system one is sticking with

This will be up to you. Or up to each individual trader based on how quickly they learn ,grow and master themselves before mastering any system. All new traders should heed the information posted in the first post on this thread. Know one's self before mastering one's method!

The rules of your system may be a duplicate of what another sucessful trader does or a slightly modified version of a successful traders system.

2 parts answer.

Part 1:


Stops are defined by the system you trade.

1. Some systems require a stop placed 20 pips behind the entry.
2. Some systems require your stop be placed behind a previous swing point.
3. Some systems require a stop be placed behind the moving average.

Part 2:

Yes this will come with experience but there is a catch to this. You can either experiment like a mad scientist and try and figure out where to place your stops by trial and error; or you can borrow information from another system and then refine it based on YOUR experiences trading YOUR system which as I stated before may be a duplicate of someone elses or a hybrid of someone or many others systems. And yes you must stick with your system and be very very very discplined and consistant!

Cheers

Thanks for your reply on this. Till now I have done demo only and have only lost. BUT I am still positive on this and will learn and hopefully evolve

I'm in the same boat as you dude. I just hope to keep on keepin on till I can figure this thing out.

I started trading a demo account with a $1000 in March and since then I've managed to bring it down to $850. I read posts of folks on this forum making hundreds of pips each day and making it look so easy and I wonder what I'm doing wrong.

Someone in this thread commented on newbies jumping from one system to the other. That's been me all these months. I don't think that's necessarily a bad thing at this stage of my learning. I need to know what all's out there before I can zero in on the the trading philosophy that I like and build a system around it.

I'm currently reading up on MQL4 so I can rapidly prototype different trading systems I have in mind. I'm a software engineer by profession so learning a new language is no big deal...actually quite excited about it.

Now what is the reason for me feeling better? Not because there are others in same boat as well. Well indeed it is comforting to know that loosing the demos (to which I think I am at least 90% attached like any live account) is natural learning curve in forex. Till now I have been loosing because I was trying to make money out of any system I have tried and this had led me to the vicious cycle of trading and trading and trading non-stop and eventually loosing all the small profits in big looser. Well NO MORE!...I am not going to do this anymore. I have set my per day PIP gain and this is so less that if I am not able to do that then FOREX is not for me...period.

Till now for last two days I have been successful with this non-greedy approach and will maintain it. This also has helped me to gain the peace of mind and concentrate on my regular work. Once I am done, I do not come back to the charts for that day...

Will keep posted on my experiments with FOREX

I looked into the mirror and its true...you can see the HOLY GRAIL if you kill the "itch" inside you

Ok This is for the people that are confused what not. Do not get discouraged if you have discipline, Good traders lose a substantial ammount of money before they figure out the holy grail, and then there are good traders that don't lose a substantial amount of money before they become successful. You know what the holy grail is? Its what is between your ears. My answers below

1. Trade style (plan). You need to find the trading style that you enjoy and works for you.
Personally I like price actoin. Why do I like it? Well simple because I want to learn what the market is telling me. I dont want to learn a system based on someone's theory of how certain indicators work togother for particular entries and exits. Indicators Lag, they dont tell you what a chart tells you at the current price.

NOTE!!! YOU WONT FIGURE THIS OUT TILL YOU TRY AND FIND SOMETHIGN YOU LIKE.

Here is a hint, You can fill your charts up with all kinds of indicators think you are cool and knowledgable and blow someone's mind away with all that crap - most professionals will laugh at these types of charts

Or

You can keep it simple Learning candle patterns, Ranges, Supply/demand, and draw trend lines, Pinbars (These all tell you much better than all those indicators). Learn pivots, dont worry so much about fibs, they are self fullfilled the M and W formations on charts tell you where big money moves.

2. Money Management. I put myself in the shoes of pro's ( i am no where near a pro), I don't trade for 5 pips here 10 pips there, I trade for an aim of 80+ pips per trade, what allows me this? Money management, dont overtrade the lots, i have just enough in a trade to where its not going to put me in emotion, being able to give myself a 100 pip stop loss for breathing room, maybe 125 pip stop loss? This works for me, read number 3 for why this works for me. Pro's trading full lots wont even be hurt with 100 pip stop loss why? because they can afford it just like I can afford my stop losses but I have enough room for trades to work out in my favor.

3. Patience (wait for the setup, I don't need to be in the market every waking moment). I wont miss the big moves, there are big moves every day, there have been big moves for years in the past. History repeats itself (another reason why I like price action - you will figure this out later if you trade that way)

4. Time Use a demo account to get familiar with the mechanic of trading and learning patience and moneymangement. You wont get good at trading till you have a rough time on a live account unless you are a genius. Dont spend too much time on demo maybe a month or 2 max, In the meantime save a couple hundred that wont kill you and open a micro acct, trade 1k lots or even .01K lots if they offer that (.10 cents a pip or .01 cent a pip) - Practice money management.

5. LOSE Greed. Dont look at your p/l as $$, you want to look at your p/l in pips because when starting off live you wont be starting with big money. but you can put yourself in the same frame of mind as the pros allowing for 100 pip sl's, being confident in your trades without emotions, making rational and sound judgement.

The holy grail is simple what makes you successful, if you fail you have not found the holy grail. Simple as that.

Please dont get hung up about my statement of 100 pip sl's, when you trade just as mentioned in some of this previous thread by others, your SL will vary based on the conditions of the trade and setup and TF and goal, I will use 15 mental stop loss when aiming for 15 to 30 pips on a breakout trade, I take those 30 regardless of what happens after.

Well said goods. I agree with most of what you've said. Except for opening the live account fast. Let me say that it took me two months just to convince myself if I should go down this path at all. I've read about 7 books on trading so far and those two months were spent looking for answers in those books.

I fully agree with you on indicators. I just don't get them!

good stuff TradeRunner...
I like the below point a lot.
Instead of focusing on ONE methodology and mastering it, what happens is as soon as a losing streak comes along or a trade doesn't work out the way they would have liked, they begin to think that something is wrong with the system, when in fact the real problem is the trader himself.