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  • #101
  • Jan 22, 2011 6:29pm Jan 22, 2011 6:29pm
Nice thread. Method is simple to understand and follow. I also like the dialogue and thought process of what it means/takes to be a "pro" - consistently profitable. I have been at it for few years and can honestly say it took me awhile to stop losing money. If I had enough capital I would be devoted 100% to trading for a living. However, I work full time and use forex to supplement income. In a way that's good because my job serves as the 'distractions'.

I know what you mean by maintaining a thread is plenty of work. Not that I've ever started a thread that became big, but I see some of the other ones and they are hundreds of pages. I wouldn't want to do it, but I'm glad you at least started this one (if no other). Anyway, just want to say thanks again for sharing the method and your insights into trading.
  • #102
  • Jan 22, 2011 7:43pm Jan 22, 2011 7:43pm
Quoting 2+2=4ex
I have been at it for few years and can honestly say it took me awhile to stop losing money. If I had enough capital I would be devoted 100% to trading for a living.
Excellent. That's another big step... Not necessarily winning, but when you stop consistently losing, you're making progress. I blew a couple of accounts in my first 2-years. And in that time I learned a whole lot. Most importantly, that I didn't know half of what I thought I did about how to trade.

Having enough capital is the easy part. Confidence and belief in yourself if the hard part. Need capital? Go to the bank. Seriously.. Let's do some more math here. Let's say you feel you can afford to lose $3000. Let's further say that you are confident that you can be profitable, or at the very worst, only have an occasional losing month for a small percentage of your account (like 2-3%). Go get yourself a $30,000 loan. (Do yourself a favor, set up a corporation or LLC first, more on that possibly later). Open your trading account with the $30k, and put that $3k that you said you can afford to lose someplace safe that you will absolutely never touch it. Start trading. Use the profits to make the monthly payment on your loan. Do well enough, and you'll more than cover that each month. If you ever start running in to a really bad stretch, QUIT when you are down $3k. Take the $27k left in your account and cash out, add your $3k back to it, and give the bank back their money. Regroup and do it again later when you build some more confidence and can keep winning consistently.

Is it possible to do this? Absolutely. This is exactly what I did when I started out (not the same amount of money, but the exact same concept). And as I became more and more profitable, I was able to double-up on the loan payments so I'm on track to pay it off well before it's due. Still, I always have my "seed money" put safely aside (and occasionally add to it for a cushion), so even the in absolute worst scenario, I'll always be able to cash out and pay off the loan. In effect, I was able to start with 10-times the amount of money that I would have, and as a result, my 8-10% per month is more like 80-100% of my "seed". And the nice thing is, the monthly loan payment is fixed, but the account compounds, so each month it takes a smaller and smaller % win to make sure I cover the loan payment.

Remember, this is a business, and this is how businesses operate - other people's money....
  • #103
  • Jan 22, 2011 8:45pm Jan 22, 2011 8:45pm
Well this is certainly an eye opener. Well said, nice concepts here!

I think you would agree that if a person is not consistently profitable they have no business taking out a trading loan, right? Nowadays, with Oanda, we can deposit $10.00 and see if we can make it last longer than the last time .

Quoting cgrey
Excellent....
  • #104
  • Jan 22, 2011 9:08pm Jan 22, 2011 9:08pm
Quoting Dreamliner
Well this is certainly an eye opener. Well said, nice concepts here!

I think you would agree that if a person is not consistently profitable they have no business taking out a trading loan, right? Nowadays, with Oanda, we can deposit $10.00 and see if we can make it last longer than the last time .
It really depends on your risk. It keeps coming back to trading being a business. Like any other business, you run the risk of failure. If you're going to open a restaurant, chances are you will need a loan. If you're going to buy a McDonald's franchise, you're going to need a loan. If you're going to trade professionally, as a business, get a loan to be properly capitalized and make money by using someone else's money. You're not going to succeed if you jump in with $5k. Well, maybe you will, but can you survive on maybe $300-400 month income (and that's if you're lucky enough to pull in 6-8% per month)? But if you jump in with $50k, confidence, dedication, and a good plan that you've thoroughly tested and honestly believe can be successful, you've got a legitimate shot.

No... This is not something anyone should be doing until they are totally committed to trading for a living, have developed a business plan and proven some success. It would also be foolish, in my opinion, to take this approach without that deep understanding of markets. Trust me, I'm not putting $50k on this "system" in this thread, or any other. I'm probably not even putting $5k in to this system if I go live with it. My money stays where my strengths are, and where my knowledge and expertise will determine my success, not the luck of the draw or a line crossing over another one. If you don't have that, and you've decided to trade for a living full-time based on a system you found in a trading forum, or worse, a robot you bought for $97 from a "dear friend" website, you're doomed to failure before you even get started.

But for that person who believes they are ready (as 2+2 said above), when you've put in your time, and you're ready to make the commitment to make this your profession, don't let lack of capital stop you, there will be plenty of other hurdles that you will need to overcome.
  • #105
  • Jan 22, 2011 11:20pm Jan 22, 2011 11:20pm
Wow, an eye opener indeed. I never quite thought of the seed money and loan concept, although I have thought of getting private investors.

I know I can handle the larger account size. The actual balance size doesn't faze me. It's definitely something I will look to do and get into more, even if I never become a full time trader. My objective right now is to string another 6-12 consecutive months of overall profitable trading. If I can produce an average of 5-10% monthly after the 6-12 months (not saying every month, but on average) I will look to get $50K. With that capital devoted solely to currency trading and the rate I'm confident in achieving, I know I can pay my bills, live, save and increase my account.

The power of compounding is amazing. I believe Albert Einstein referred to compounding as the 8th wonder of the world. Or something like that.

EDIT: Just googled the Einstein quote on compounding interest. He said it's the most powerful force in the universe. I was way off with the wonder of the world thing, lol.
  • #106
  • Jan 22, 2011 11:25pm Jan 22, 2011 11:25pm
Quoting 2+2=4ex
Wow, an eye opener indeed....
Here's where discipline will come in. Make absolutely sure you put that 10% aside. And if you are down 10% in the trading account get out. Don't let the "I'll win it back next month" mentality kick in if you have a few straight down months that put you in the hole. Then you end up blowing the account and still having to pay back the loan. Discipline is absolutely critical, as is accepting if things aren't going your way and taking the time to regroup and try again. The bank will be all too happy to lend you money again next year if you've paid them back on time this time around. They won't even talk to you next year if you default on the loan...

And, do consider setting yourself up properly as a business (assuming you're in the US, that would mean a corporation or LLC). Aside from the tax benefits, you can protect your personal capital to a certain extent as well.
  • #107
  • Jan 22, 2011 11:39pm Jan 22, 2011 11:39pm
Quoting cgrey
Here's where discipline will come in. Make absolutely sure you put that 10% aside. And if you are down 10% in the trading account get out. Don't let the "I'll win it back next month" mentality kick in if you have a few straight down months that put you in the hole. Then you end up blowing the account and still having to pay back the loan. Discipline is absolutely critical, as is accepting if things aren't going your way and taking the time to regroup and try again. The bank will be all too happy to lend you money again next year if you've paid...
I understand what you mean. I would be dead set on giving the bank back the money with my 10% loss if the trading went sour. That is definitely something I would not play around with. I would also make sure not to quit my job right after taking out the loan. I would first make sure things went like the business model I planned before I rely entirely or almost entirely on the trading. Also would like to stash most of the profits into the seed money those first months while my regular job pays the bills. I am in the USA so corp or LLC thing will be neccessary. Again, thanks for the advice and help.
  • #108
  • Jan 23, 2011 6:46am Jan 23, 2011 6:46am
Quoting 2+2=4ex
I understand what you mean....
You're on the right track. Good luck!
  • #109
  • Jan 23, 2011 7:39am Jan 23, 2011 7:39am
Couple more questions:

"If the 08:00GMT open price is higher than the 00:00GMT open price, we GO SHORT.
SL is ALWAYS 20 pips.
TP is calculated as described above.

If neither TP or SL have been hit, CLOSE THE TRADE at the open of the 09:00GMT candle."

#1

Let's say your TP is 70 pips, how possibly you can expect 70 pips to hit

within 1 hour (very unlikely scenario)?

So basically, you closing at 9:00 GMT for whatever profit is there

could be 15 pips could be 30 right?

#2 Spread is included in 20 pips SL? Or, if I have 4 pips spread, I should

calculate 24 pips SL, right?

Thanks. that be it.

Regards, Sky.
Viewer Discretion Advised: Shall we shag now or should we shag later? :-)
  • #110
  • Jan 23, 2011 8:14am Jan 23, 2011 8:14am
Quoting SkyzerFX
Couple more questions:

"If the 08:00GMT open price is higher than the 00:00GMT open price, we GO SHORT.
SL is ALWAYS 20 pips.
TP is calculated as described above.

If neither TP or SL have been hit, CLOSE THE TRADE at the open of the 09:00GMT candle."

#1

Let's say your TP is 70 pips, how possibly you can expect 70 pips to hit

within 1 hour (very unlikely scenario)?

So basically, you closing at 9:00 GMT for whatever profit is there

could be 15 pips could be 30 right?

#2 Spread is included in 20 pips SL? Or, if I have 4 pips...

let me answer these questions.

#1: our target is to reach the monthly goal of 10%. so every trade should aim for this goal and we shut the shop once we reach that. lot of times we dont hit that goal in one trade, but we should aim for that. in my backtesting i have seen couple of times the first day of the month itself hit the 10% target. around 40% of times we went to end of month to reach or not reach monthly goal. remaining times we reached the target in first 15 days itself. we take whatever market gives in that one hour but our aim should always be to reach the monthly goal

#2: yes, include spread. but again its not a hard rule that we should always have 20 SL. risk should always be 2.5%, so adjust your lotsize based on SL. But 20 is a good number, so stick to it (based on tests). also i consider nearest support, resistence, round numbers nearby and adjust the SL 5-10 pips. not much. if its beyond this, i try to enter 50% at system price and remaining 50% at a discount (wait for retrace, but risk is we may not see a retracement). cgrey has shown the way, now its upto us to adopt to suit our trading style, personalities.

its such a simple system and you need to spend only a hour on this.
  • #111
  • Edited 8:30am Jan 23, 2011 8:17am | Edited 8:30am
Quoting SkyzerFX
Couple more questions:

"If the 08:00GMT open price is higher than the 00:00GMT open price, we GO SHORT.
SL is ALWAYS 20 pips.
TP is calculated as described above.

If neither TP or SL have been hit, CLOSE THE TRADE at the open of the 09:00GMT candle."

#1

Let's say your TP is 70 pips, how possibly you can expect 70 pips to hit

within 1 hour (very unlikely scenario)?

So basically, you closing at 9:00 GMT for whatever profit is there

could be 15 pips could be 30 right?

#2 Spread is included in 20 pips SL? Or, if...
No disrespect intended. I think it's more a matter of the "concept" of treating each trade as a part of the whole that may need to be clearer for this to "click" for you. Most threads, people need to get their head around "triggers" for the actual trade based on a bunch of indicators. In this one, the entries and exits are crystal clear, it's the money management aspect that is different for most people.

#1 - I don't expect to hit TP during the early days of the month. But, yes, it can happen. This month, I was demo-trading this before I posted. We hit the 10% target in three trading days, due mostly to a 78-pip 1-hour candle that occurred on January 4th. Large 08:00GMT candles do happen pretty often on this pair, and that's one reason this system seems to work. The TP is a target, that closes out our month if hit. It is not an expectation. Yes, you're closing in an hour with whatever you get. It has also proven to be rare that the 20-pip SL is hit during that hour, despite how "small" a move it is for this pair. On averages it's happened 4-5 times per month in my manual testing back to 2007. But 20 is the largest possible loss. Conversely, we close with MORE than 20 pips at least 4-5 times per month as well because the only thing limiting our gain is the TP we set (intentionally because it is our overall monthly target).

#2 - Check some previous posts for the answer to this. I've explained how I calculate to include spread here: http://www.forexfactory.com/showpost...8&postcount=58, and have also offered a couple of suggestions on how to handle this in another post.
  • #112
  • Jan 23, 2011 8:37am Jan 23, 2011 8:37am
Quoting cgrey
#2 - Check some previous posts for the answer to this. I've explained how I calculate to include spread here: http://www.forexfactory.com/showpost...8&postcount=58, and have also offered a couple of suggestions on how to handle this in another post.
Thanks, fair enough.. Good luck.. Unfortunately timing for those trades

are is in the middle of the night in my area. I won't be able to play with it,

But scrolling back and watching 0.00- 8 GMT times, I see those opportunities.

Only other thing to consider. We used to trade with Cable Tokyo EA, which

was also based on price action (Pattern) in particular hour and fractals right at the Tokyo open,

then Market changed and consistency of those trades run down.

Not sure how long back your setup is working, but Market could change

and what was profitable few month back could be not profitable next or

those patterns can move to different time. At least so far it looks OK.

Viewer Discretion Advised: Shall we shag now or should we shag later? :-)
  • #113
  • Jan 23, 2011 8:38am Jan 23, 2011 8:38am
For anyone... By all means - experiment with this concept using calculations that are more comfortable for you. Either from the perspective of risk, or win percentage. Always stick with the premise of a large risk/reward ratio though.. Without aiming for a lot more than you risk, this system will definitely not work.
  • #114
  • Jan 23, 2011 8:39am Jan 23, 2011 8:39am
Wouldn't that be a *small* risk/reward ratio?
You are in a maze of twisty little passages, all alike.
  • #115
  • Jan 23, 2011 8:42am Jan 23, 2011 8:42am
Quoting SkyzerFX
Thanks, fair enough.. Good luck.. Unfortunately timing for those trades

are is in the middle of the night in my area. I won't be able to play with it,

But scrolling back and watching 0.00- 8 GMT times, I see those opportunities.

Only other thing to consider....
Oh, I fully expect the market to change at some point, and yes, I've tried to express to everyone reading to not bank on this being their "system", but rather one of their many tools. For me, it's a distraction to keep me busy between trades. I'm a long-term D1 and up trader. I need little things to kee me busy between my 3 or so trades per month

By the way, 08:00GMT is the middle of the night for me too. Because of the simplicity of the entries, this is one of the rare cases where an EA actually does give you the same results you'd get manually. I do have the system automated, and my results are that of an EA. Roundrock also posted a link to an EA he created for this system at the beginning of page 5.
  • #116
  • Jan 23, 2011 8:43am Jan 23, 2011 8:43am
Quoting stevegee58
Wouldn't that be a *small* risk/reward ratio?
Small risk, large reward. Technically, yes - small ratio. Good catch
  • #117
  • Jan 23, 2011 4:28pm Jan 23, 2011 4:28pm
It's been bothering me that I haven't yet given Dreamliner a proper answer to his question about why I consider this gambling. I haven't been able to come up with a good analogy until now...

Football.. So, first, we need to agree that if you place a bet on a football game, it's gambling. No matter the odds, any team can beat any other team on any given day. If you buy in to this, read on. If not, I'll try to find a better analogy.

OK. You've done your research and found an edge. Your team has never lost when your starting QB has played against the other team's starting QB in good weather. Further, all season, the team with more rushing yards has won 80+ percent of the time, and your team has more rushing yards than your opponent. So, you have an "edge", and you place your bet. No matter the edge, you're still gambling.

45-seconds after the opening kickoff, it starts to snow. You had absolutely no control over this, it just happened. On your team's third play, your QB was hit, suffered a concussion, and your backup had to come play out the rest of the game.

So, here's the analogy. The opening kickoff = your trade enters at 08:00GMT. The weather suddenly changing and your QB getting hurt are changes in the "market". Your anticipated outcome was based on things that happened in the past but have changed in real time. Everything that happened in the past that led up to your decision to bet the way you did means absolutely nothing now.

This "system" makes no accommodation for real-time changes in the market. You are basing your entry, risk, and target on probabilities based on things that have happened in the past. Not entirely unlike when your system is entirely based on indicators that tell you what happened in the past.

So we come full-circle, and maybe here's the first answer to DL's other question about how do you profit from your understanding of the market? Maybe it's not always profit - maybe the question is how do you protect from losses based on your understanding of the market? Well, what if you had a weatherman friend that could have told you with 100% certainty that it would start to snow early in the game? Knowing part of your decision to make that bet was based on previous performance in good weather, would you still have made the bet? So, in trading, that "friend" is your knowing that instead of the snow coming, there was an interest rate announcement coming. It's a sure thing - it's on the calendar - you just need to be aware that it's going to happen - total immersion... The big picture.... Maybe the announcement won't affect you, but why risk that it could? Why not wait until after the announcement to enter your trade, assuming the market conditions are still favorable to your anticipated position?

One of many examples. I'll come up with more...
  • #118
  • Jan 23, 2011 4:31pm Jan 23, 2011 4:31pm
Now that my brain hurts, I'm going to remind us where we are as we get ready to start the new week.

For tomorrow's trade:

Our target remaining for the month is 8.96%
r:r = 1:3.584
TP Target: 71.7 pips
  • #119
  • Jan 23, 2011 4:57pm Jan 23, 2011 4:57pm
Very good illustration; but I'm still not sure I'd call it gambling, I might just call it "risk" which every legitimate business has. You never know what the future holds, and cannot be guaranteed that what you put your money on will bring back a profit. Still not convinced you are gambling .

Quoting cgrey
It's been bothering me that I haven't yet given Dreamliner a proper answer to his question about why I consider this gambling....
  • #120
  • Jan 23, 2011 5:56pm Jan 23, 2011 5:56pm
cgrey,

Do you have an excel spreadsheet you could upload to make the working out easier??
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