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Deconstructing how to trade

  • #1
  • First Post: Apr 10, 2011 11:24am Apr 10, 2011 11:24am
Hello, I've been studying forex for a little over a year now and I have a few questions for all of the traders here.

When I started learning forex, there were many forums to read, and many different approaches to forex trading. I was very confused and didn't know where to start (paradox of choice: why more is less).

Therefore, the motivation for this thread is to find out where each and everyone of you started learning forex. And how we can deconstruct the learning process to find the optimal way to learn (or profitability).

I still consider myself a beginner in forex trading, but I have many questions to ask and I'm willing to listen. I would like to ask each one of you that drop by this thread to take 5 minutes of your time to answer my questions. It may help existing and new traders find a more efficient/effective method of learning.

The following are my questions:

1. How long has it taken you to become consistent in your trading?

2. What kind of trader are you? (ie. fundamentals, technicals, price action, swing/day/position trader, etc)

3. Name the most important aspect/your edge that you apply to your trading (not the system edge where it wins 80% of the time having 1:2 R:R). This could range from using correct risk management, having a certain psychological mindset, finding the method that suits your personality, etc. Please give more details for this question if possible. If you don't know the answer to this question, perhaps it's time to reflect and find your edge.

I will start off by answering these myself.

1. Not consistent yet, still on demo.

2. Swing trader, trading using relative strength of currencies.

3. The most important aspect I apply to my trading is my psychological mindset. I have just started reading Mark Douglas's Trading in the Zone and I'm starting to develop the right psychological mindset for trading. I played a lot of football not too long ago and I can relate to Mark Douglas when he mentioned about the athlete's zone and how we should be in that mind state when trading. However, I don't know if this is the way to becoming more consistent in my trading. My efforts could be in vain for all I know.
  • #2
  • Apr 10, 2011 12:47pm Apr 10, 2011 12:47pm
Quoting idash

1. How long has it taken you to become consistent in your trading?
when I started verifying for myself what works and what doesn't by doing statistical analysis on patterns I read about, I became consistent. But doing such a thing is very sobering, cause you will find that the majority does not work over the long-term.

Quoting idash
2. What kind of trader are you? (ie. fundamentals, technicals, price action, swing/day/position trader, etc)
I am an intermediate-term trader (holding onto position for days to months) and recently began combining my researched patterns with some sound fundamental analysis.

Quoting idash
3. Name the most important aspect/your edge that you apply to your trading (not the system edge where it wins 80% of the time having 1:2 R:R). This could range from using correct risk management, having a certain psychological mindset, finding the method that suits your personality, etc. Please give more details for this question if possible. If you don't know the answer to this question, perhaps it's time to reflect and find your edge.
hm, well, doing what others are not willing to do, namely extensive statistical analyses on everything I read. It just cuts through all the bs.
And what I also found over time is that it is really hard to be profitable in day-trading. Trading costs just eat up everything.

Quoting idash
I will start off by answering these myself.

1. Not consistent yet, still on demo.

2. Swing trader, trading using relative strength of currencies.

3. The most important aspect I apply to my trading is my psychological mindset. I have just started reading Mark Douglas's Trading in the Zone and I'm starting to develop the right psychological mindset for trading. I played a lot of football not too long ago and I can relate to Mark Douglas when he mentioned about the athlete's zone and how we should be in that mind state when trading. However, I don't...
I like your relative strength thing, am doing something similar but on a fundamental basis, finding the strongest vs. the weakest economy.

In this forum there are a lot of believers in how important mindset is. I am NOT one of them. I think, a knowledge foundation needs to be built. You need vast knowledge about all the different odds, factors influencing the markets,... Without that, your mindset will not save you.
I love the analogy with doctors: They need to have tremendous knowledge about the body to be able to do an operation properly. Without that, the best mindset in the world will not save the patient.

And as traders we have the advantage of being able of making our entries and exits mechanical or even automating the edges we found, which means, mindset is then not needed at all. The only mindset you need to have is just applying the edge you researched over and over and over again.

enough of my ramblings
  • #3
  • Apr 10, 2011 1:19pm Apr 10, 2011 1:19pm
Thank you for your response custos.

I need to gain a sense of how everyone is trading. There is no right or wrong answer. If someone finds a unique way of trading that is working for him/her, that's great.

Applying the 80/20 Pareto principle to our learning process, we should focus on the most important aspects of trading. Everything else is noise.

I dislike hearing about people claiming they have spent over 5 years and lost a lot of money in forex before they have either made it or gave it up. I want to find a better way to improve this journey.



[quote=Custos;4534105]when I started verifying for myself what works and what doesn't by doing statistical analysis on patterns I read about, I became consistent. But doing such a thing is very sobering, cause you will find that the majority does not work over the long-term.
  • #4
  • Apr 10, 2011 1:28pm Apr 10, 2011 1:28pm
Quoting Custos
when I started verifying for myself what works and what doesn't by doing statistical analysis.
+1
  • #5
  • Apr 10, 2011 1:57pm Apr 10, 2011 1:57pm
1- i pride my self in being smart and a fast learner i began trading in january.
to be consitent i needed a strategy, and i found my style of trading couple of weeks ago

2-now, i'm a wholistic trader, i look at price action, and technical analysis as well as fundamental analysis. but i believe this market is dominated by politics and central banks. which brought me to believe this is not pure supply and demand like stocks. when i trade i try to ask my self what would i do if:

i was a central bank or a multi billion dollar enterprise
if i had billions of dollars, what type of holdings would i have (as money is a 24/7 and we are all in the market whether we like it or not) would i be comfortable holding euros, dollars, gold, silver, franks, if i was to hold cash where would i hold it Australia with a 4.75% interest rate?
what is the fundametal health of the economies? GDP, Exports, Consumer sentiments, Unemployemet, CB policies.
most importantly Who OWNS the financial system? THE UNITED STATES

whether u like it or not. IT ALL COMES DOWN TO THE US. THE ONLY THING THAT MATTERS IS US, AND OUR ECONOMY. OUR DOLLAR IS THE ONLY CURRENCY THAT MATTERS. for now...... until we stop being

1 the most powerful nation in the world
2 the reserve currency of the world

The dollar index dictates the movement of the market. here is why i think so.

all the majors are X/USD or USD/X. the crosses are actually RELATIVE VALUE of X/USD vs RELATIVE VALUE OF Z/USD= X/Z per USD.

and when something is out of wack its usually telegraphed. the CBs will hint, or intervene. did u see the yen TREMENDOUS STRENGTHENING just to have japan intervene to WEAKEN IT? so its in an odd pattern now.



one thing i learned by looking at charts all day long is. especially USDX the monster moves SLOWLY but hits at direction.
and jesse livermore basically said people are so caught up on fluctuations that they miss the big movements. and no one went poor taking a profit... however no one became rich taking a 4 point profit in a BULL MARKET.

look at the overall picture and you can find your footing, trade the direction of the USD and you WILL MAKE MONEY.
AVT INVENIAM VIAM AVT FACIAM
  • #6
  • Apr 10, 2011 2:20pm Apr 10, 2011 2:20pm
Quoting idash
1. How long has it taken you to become consistent in your trading?
Started in mid-2009, so ~2 years, and I am not proven successful but the last 2 months tell me I am finally doing something right.

Quote
2. What kind of trader are you? (ie. fundamentals, technicals, price action, swing/day/position trader, etc)
purely technical, positions from a few hours up to two weeks. trend trading combined with relative strength of currencies.

Quote
3. Name the most important aspect/your edge that you apply to your trading (not the system edge where it wins 80% of the time having 1:2 R:R). This could range from using correct risk management, having a certain psychological mindset, finding the method that suits your personality, etc. Please give more details for this question if possible. If you don't know the answer to this question, perhaps it's time to reflect and find your edge.
Knowing what works and what doesnt. Keeping things simple and not questioning what i am doing during slow periods.
Patience is key.
  • #7
  • Apr 10, 2011 5:39pm Apr 10, 2011 5:39pm
Quoting idash
3. The most important aspect I apply to my trading is my psychological mindset. I have just started reading Mark Douglas's Trading in the Zone and I'm starting to develop the right psychological mindset for trading. I played a lot of football not too long ago and I can relate to Mark Douglas when he mentioned about the athlete's zone and how we should be in that mind state when trading. However, I don't know if this is the way to becoming more consistent in my trading. My efforts could be in vain for all I know.
Great title! I always strive to deconstruct others' and my approach to trading.
Also, I've read that athletics (and a few others (military, card playing, etc.)) are good training to trade.

There's a few things necessarily consistent to mindset, such as knowing your method and keeping up with the numbers. Mostly, mindset changes so often, at least for me, that one is likely to adapt one's trading to the mindset one brings to trading, rather than visa-versa. Thus, there is no mystical perfect mindset.

In this light, I began trying a new way to cover mindset within a trade.
Situations I'm thinking about influence how I study a chart, so I developed a set of symbols that borrow from drawing tools to describe each major event I go through in the day. I make sure I warm up an event's symbol set with a few demo simulator trades to get used to it, and then mix this and/or various other events' symbol sets to match how I'm thinking at the time.

However you decide to deal with mindset, best of luck in your trading.
  • #8
  • Apr 10, 2011 7:20pm Apr 10, 2011 7:20pm
[quote=idash;4534016]how we can deconstruct the learning process to find the optimal way to learn (or profitability).



1. How long has it taken you to become consistent in your trading?

almost 4 years

2. What kind of trader are you? (ie. fundamentals, technicals, price action, swing/day/position trader, etc)

technicals, price action, day trader

3. Name the most important aspect/your edge that you apply to your trading (not the system edge where it wins 80% of the time having 1:2 R:R). This could range from using correct risk management, having a certain psychological mindset, finding the method that suits your personality, etc. Please give more details for this question if possible. If you don't know the answer to this question, perhaps it's time to reflect and find your edge.

I am a visual person. When I found a method to deconstruct charts and my interaction with those charts, and a habit of keeping good records of these charts, I found my personal edge. That gives me a mine of information over time to improve my trading psychology and trading technique. Since I started doing this methodical daily and weekly deconstruction my learning curve dramatically improved.

I don't look at dead charts (looking back historically). I look at charts that tell me about a moment in time, as if they are live. So having lots of snapshots of trades (capturing the weekly, daily, H4 and H1) that I took in the moment I took every one of my trades and in the moment I exited them, was/is very valuable. Without this record I would not be able to analyse what I was doing, where and why I was getting it right or wrong. I spent the first 3 years of trading without such records, I only needed to spend 3 months with these records (plus a good trading system and a few other techniques) to turn consistent failure into consistent success.
  • #9
  • Apr 10, 2011 7:51pm Apr 10, 2011 7:51pm
Hi Lovinit, what is your procedure for keeping good records of trades? I often find this a very tedious process and often dismiss it.

The simplest way I can think of to record trades (entry/exits) is to take a screenshot before and after, and make simple notes on it.

Perhaps there's a software that simplifies journal entries?


[quote=Lovinit;4534647]
Quoting idash
how we can deconstruct the learning process to find the optimal way to learn (or profitability).



1. How long has it taken you to become consistent in your trading?

almost 4 years

2. What kind of trader are you? (ie. fundamentals, technicals, price action, swing/day/position trader, etc)

technicals, price action, day trader

[color=Red]3. Name the most important aspect/your edge that you apply to your trading (not the system edge where it wins 80% of the time having 1:2 R:R). This...
  • #10
  • Apr 10, 2011 11:44pm Apr 10, 2011 11:44pm
Quoting idash
Hi Lovinit, what is your procedure for keeping good records of trades? I often find this a very tedious process and often dismiss it.

The simplest way I can think of to record trades (entry/exits) is to take a screenshot before and after, and make simple notes on it.

Perhaps there's a software that simplifies journal entries?




I use Forex Smart Tools trade log, but really you could make something yourself in Excel or Access. I used to find it a tedious process, because I was spending time on detail that didn't matter. Now I just do a screenshot and label it:

The second after I hit buy or sell to get in a trade, I arrange all my time frames for that currency pair in a row on the screen, hit print screen, open Paint, paste it in, save it with the file name as time date currency pair, to a weekly folder (Journal Screenshots/April 2011/week 1). When I exit the trade, I do the same, but use the same file name as the entry with 'x' at the end of the file name...that way I know the plain file name is the entry and the x title was the exit. If I take any other screenshots, like the better entry screenshot, or the take partial profits screenshot, or the better exit screenshot, I annotate the titles but keep them all starting with the entry time date so they will always be found together.

Then I open my Forex Smart Tools click on new trade, select currency pair, input the entry time and attach the charts. If I want to I will make a couple of notes. If you were using excel, you could simply have a column for currency pair, entry time and then provide a link to the folder where your charts are saved. Just 3 pieces of info, that's all you need to log the trade.

Because I do this whole process automatically every time I hit buy or sell it takes just a minute of my time, and has now become ingrained, meaning it feels like the trade is not complete unless I've done this.

It's the visual record of the decision that's important...at the end of the week when you do your review you can download a statement from your MT4 and copy and paste the trade details into your excel or into a word file. And then view each entry and exit picture alongside the data from the statement, and make more detailed observations, like, would you really enter this now, or is there something you missed noticing, etc. You will probably remember what you were thinking at the time, e.g. the doubts you may have smothered when you took the trade. I then make notes on what I am trying to analyse for - e.g. what my stop was, how long the trade lasted...only do what you want to analyse. So if you want to get a good idea of the kind of stops you are using, then add that column in when you do your weekly review. Whatever patterns you want to explore in the future you now have everything you need to determine how these would have worked in the past.

I do the same with a daily journal - I paste a picture of my daily chart for each pair into a word file...I try and predict what the next candle will look like (bull, bear, long, small). I find that most of my predictions are right...but then I can start seeing a pattern in the predictions that are incorrect...I noticed these are days when I get my worst trading results because the market was indecisive/choppy...so then I can analyse a whole string of daily charts where my predictions were incorrect and see the places in the trend where I should stay out of the market. Again, at the start of the day it takes just a couple of minutes to paste those daily charts into a word file and do an assessment of what price is likely to do. It not only establishes your bias for the day, but also gives you a historical record of in the moment daily charts that you can match up with your trade journal as and when you want to.
  • #11
  • Last Post: Oct 29, 2011 8:51pm Oct 29, 2011 8:51pm
Quoting Lovinit
I use Forex Smart Tools trade log, but really you could make something yourself in Excel or Access. I used to find it a tedious process, because I was spending time on detail that didn't matter. Now I just do a screenshot and label it:

The second after I hit buy or sell to get in a trade, I arrange all my time frames for that currency pair in a row on the screen, hit print screen, open Paint, paste it in, save it with the file name as time date currency pair, to a weekly folder (Journal Screenshots/April 2011/week 1). When I exit the trade, I...
I actually just picked up the same program.

Any more details that might be helpful?

Any updates...I'm looking forward to using it this week and enhance the details in my trading. I mostly bought it for the journaling factor, but the other tools look useful.
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