simple and clear advice for new traders, no cryptic teachings

The reason for making this thread is simple: I learned from the teachings and gold nuggets from experienced traders in this forum, especially FTI, Crucialpoint, and jet trader. There is plenty of resource here in the forum, one just needs to look for it.

in the end it is not one true methodology, that gives you the golden goose, or the holy grail. Trading just like religion, is a philosophy, and there is truly not ONE TRUE GOD ( do not argue about this, i do not care, about your faith) but your faith on that god, and your perception of the world that makes your reality.
many different people have found ways to adapt to the market.

THE GREAT SECRET of the markets is: that there is no secret at all. many debates have been raised in the fact that the market is random or not random. I can prove to you that the market is UNPREDICTABLE but not RANDOM. In the end, the market has direction (bull, bear, ranging) but the next tick or wave one truly cannot predict. I know about the closing price for tomorrow of the fiber,loonie, aussie,suissie, or cable the same thing George Soros knows. NOTHING

although you might argue he has more resources than I do and more information gathering capabilities, which is all true. The market cannot be manipulated easily. there are regulators, FEDS, CB's, and there is a structure, of interbank, corporations etc... you see forex is a conglomeration of different interests, and not all are for profit.

when you deal with humans, one can observe the behavior and draw likely scenarios as to which action or tendencies a humans as a species have. but with more than 6 billion (i believe) humans, if you tell me. a mathematical formula or indicator, fibo line or what not can tell you with precision how the next person that walks in the door will react to a particular situation. i say b/s, probabilities yes, predictions no.

Technical analysis, CAN be profitable. indicators and lines CAN be profitable if you UNDERSTAND THEM AND USE THEM TO MEASURE the market to calculate YOUR OWN PROBABILITIES.
not just in possible outcomes, but in possible actions that YOU WILL TAKE, as a result of the possible outcomes.

unfortunately I cannot teach you how to trade, because only PRAXIS, can truly do that. Many people act as if they discovered some secret knowledge, and only a certain elite traders know this. B/S and I would really like to have discussion here with any such B/Ser.

What it truly comes down to is recognition of order prevalence and market sentiment. having a well thought out, money management plan that outlines

1 your threshold
2 your risk parameters
3 your VAR
and a well planned account growth target,and a buffer, not a get rich, make it big scheme, because EVERY reasonable trader here has found out, that REWARD correlates to RISK. one cannot use R:R in the conventional sense, as one never truly knows the REWARD part of the equation. ONE CAN ALWAYS control the RISK part. therefore i dare say that >the RISK the greater the potential reward, and the GREATER the reward the GREATER the risk taken.
it's a 1:1 ratio, i can see the argument of higher probability trade entrance, and it is true with experience and PRAXIS one finds a particular market condition that best suits us, however i maintain the position that the market is UNPREDICTABLE however NOT RANDOM.

once I or any trader enters the trade there is only two possible outcomes profit or loss. price will either move up or down, WHAT WE DO with this situation is what makes you profitable.

now because I AM SIMPLY TIRED of always coming into discussion and trying to teach people (i should not give a rats ass as to people's trading, you lose , i take your trade, i make a profit. However because i have taken so much from FF i want to contribute). I am not uncovering any new ideas, or anything that is not already common sense to the experience traders. but if i can help some one that is about to get it. then that is fine by me.

so i will no longer go replying and trying to set everyone straight, i will outline here how I PERSONALLY TRADE, and HOW I VIEW THE MARKET.

take it or leave it, argue or not, believe me or not.

here i will teach you MY WAY OF COPING WITH THE UNPREDICTABLY OF THE MARKET.

how i read the market:

if you are really interested in learning to read the market, the first thing i recommend you do is RESEARCH. As a new trader, we try to find creative ways to exploit the market and predict where price will be. pivot points, supply and demand, S/R, fibo lines, candle stick patterns, macd, stochastics, PSAR, BB and all kinds of things, some how looking for THE SECRET. as i have mentioned before the secret does not exists (yes patterns can be observed, and exploited, some systems work well over some market conditions, and etc....) but if you really want to be profitable UNDERSTAND the market. so you can truly know what action to take and why.

i encourage suggestions as to the RESEARCH, and if you really want to make money it is up to YOU to go find the information, not me to just lecture you.

economics: micro and macro, austrian economics, modern monetary theory, money creation, fractional reserve banking, how yields are raised or lowered, how CBs increase interest rates and their correlations in the market, forex market structure, interbank market structure, and how YOUR dealer fairs in this big money game. the reason behind this is that if you know economics at least browse and understand the principal concept, you can actually make sense of fundamental analysis and its POSSIBLE impact in the market

also when you are trading the market a crucial thing to know is how forex prices are quoted, and what is the USD role in the exchange market. how are crosses quoted, and how the majors impact these crosses.

what is the relationship between, options, equities, futures, commodities, bond yields, and the forex market.

it is important to have basic understanding of what one is trading
do your part of the work, and i will continue to guide.....

any takers? simply reply....

once we are done with the basics on the market structure, what the foreign exchange is, its importance on the world economy and factors that can impact the market.

we will move on into how to analyse the market, i personally am a technical trader, but fundamentals give you a good feel for market sentiment.

we will go into money management

a plan on how to have professional targets on percentage growth.

Advices every (new) trader should know. A simple advice can sometimes be hard to understand advice for new traders. New traders need time to grasp those simple advices. Probably this is why some forex basics are not so interesting for newbies until several trading accounts were blown out.

Nice advice.

PRAXIS What's that??

Unfortunately Crucialpoint ranks within one of these 'I've got a secret' bull shiters, although fortunately he comes across with some knowledgable and logical sense.

Does he mean this:

http://en.wikipedia.org/wiki/Praxis_%28process%29

Praxis is the process by which a theory, lesson, or skill is enacted, practised, embodied, or realized. "Praxis" may also refer to the act of engaging, applying, exercising, realizing, or practising ideas. This has been a recurrent topic in the field of philosophy, discussed in the writings of Plato, Aristotle, St. Augustine, Immanuel Kant, Søren Kierkegaard, Karl Marx, Martin Heidegger, Hannah Arendt, Paulo Freire, and many others. It has meaning in political, educational, and spiritual realms.

exactly what i mean, putting the theory into practice, there is no other way.
even after i am done discussing my methods and analysis, who ever the information might benefit will internalize it and in order to actually obtain any substance from it. he will need to practice and apply the theory in the markets.

although many people call crucialpoint "mental diarrhea", if you listen to his points, they are the same as FTI's, and the same as the finding that through market observation i have found.

the market is unpredictable but not random: if you had no past statistical data or if the markets where to BEGIN trading for the first time in their history TODAY. would you be able to trade it profitably?
the answer is YES. some traders call it , the dance or rythm. some call it multi dimentional market. but is acutally simpler than that.

quotes: bid/ask, moving according to orders. matching a buyer and a seller at different prices. each quote is a different order which brings oncoming information about the CONVICTION of market participants.

if you were to get rid off your charts and begin building as strategy, based on quotes, which tell you the movement of orders. you will come to a very enlightening realization of the different technical tools used.

starting with the chart itself which plots this order information into a visual statistical display. its a recorded HISTORY of price movement. correct?

then you move on to candle sticks (or bars but my personal preference is candles sticks) which visually give you an instantaneous read, of prevalence, distance, momentum, range, and volatility.

(if you are not sure how i read this information from a candle, ask me)

of course one notices that price has a pattern, or rhythm, a behavior that although unpredictable, one can make a calculated anticipation. (a delay)
as orders hit the book in a particular prevalence and the orders begin to diminish it signals a change in order flow per se. thus we notice the acceleration, loss of momentum, correction. and within this patter we can notice what other analyst call waves, corrective and impulses.

that are not really waves in the purest form, they have no amplitude or oscillation to be predicted by mathematical formulas, but observing this price behavior one can attempt to enter at a level that even if against our original position by risk assessment our VaR would be less than at other certain points. keeping in mind that at the end of the day either we buy or sell and all the same one can be "in the money or out of the money".

now how do we mitigate risk, and how do we handle the trade, is what makes us successful. not only the management of the trade, but what position size to use, how to reduce the initial risk, and buffer our subsequent entries by collecting risk capital. there is a reason Livermore used to scale into his trades. i believe is the best way to manage risk, however with less risk less reward. with more risk more reward so R:R as we know it is flawed, risk and reward go hand in hand. and it is always 1:1.

one needs to know our threshold, and it is different for each individual, what risk parameters we are implementing, what size of lots to use in the market as to not over leverage and have flexibility. what ROI targets we have for the month and how to withdraw funds from the account and place them in less risky assets as to be prepared for any eventuality, and not just have virtual cash in a trading account.

however i digress, first things come first.

the foundation is the BASIC KNOWLEDGE OF THE MARKET. i am open to discussion regarding the REASEARCH MATERIAL I OUTLINED

Now that's boasting. What about Jim Simons of Renaissance Technologies? The fellas at this group average 35-40% annual returns for over a decade now and that's provided their AUM is over 15 bln USD. Surely they must possess some proprietary tech, which is not available mainstream.

Seasonal factors across wide variety of markets plus some basic TA can be used to average more than decent returns in the long run. Seasonal patterns, which repeat every year, are very predictable - and that works for FX, equities, commods, etc.

Just some observations, really.

hi redlion,

very good points, i will add few of my observations - very crucial for trading and many traders doing mistakes in the beginning that they re trading only according to TA and dont have a clue about market at all, economics, correlations , i did the same mistake in first years. I also agree with u about unpredictable market and other things, i think it cant be done technically - a+b=c, but it can be done - probability, experienced eye and some basic rules, anyway market is different every day so for daytraders is crucial to know a lot about it, to have some bias, if it is ranging, how to react, be able to read news and what could it do with market and be flexible and have reasonable risk-management.

regards.

Fabulous tks

What wasn't mentioned is that once a theory is put into practice then the results are then used to either confirm or modify the theory. The modified theory is then put back into practice, once again either to confirm or modify. The key being that both practice and theory inform and effect each other in an endless loop until the truth, if it exists, is found, or until the theorist gets fucking tired and stops doing it.

(if you are not sure how i read this information from a candle, ask me)
could you please tell me more about candle information.

first of all i am of the belief that time frames do not exist, candles be it
daily, hourly, minute are simple measurements of price movement. usually quoting you the ask. this is a very important concept to grasp. there is no difference between the minute and the monthly.

when the ask price hits 1.3900 that will be the price the broker is willing to quote you at. now with that in mind. (lets use the daily for example)

in the course of 1440 minutes or a whole trading day, starting from wellington finishing at NY close. it tells you the open,high,low,close of a period of 24 hrs correct?

so what do I look for when analyzing candle sticks and formations? first of all these candles are created by buy/sell orders.
a positive candle tells you that there was more buying than selling pressure in X amount of time. a negative candle tells you the opposite

a calculation of ATR, or by eyeballing the candles you can measure the probable carrying capacity, or how many pips is probable to extract from the market.

by measuring or eyeballing the displacement (shortest distance from start point to finish) this is helpful in the quick read of velocity. as velocity is defined as displacement divided by time. (you don't need to know physics or calculate all these formulas but the laws of motion do apply to a moving price, i my experience. it helps with objective analysis.
knowing the velocity of price towards a certain direction, you can eyeball the momentum which is (mass)(velocity)= force (buying or selling pressure)

volatility= is defined as normal price fluctuations, or variations, deviations from the mean (how do you know the mean? a SMA can help, but not in the conventional sense, an SMA can also help with momentum measurement, and with fair market value for an average of time) example hourly would be 60 sma on a one minute or 12 sma on a 5 minute 2 sma on a 30 min. The most important thing about smas are the actual AVERAGE PRICE not the squiggly line. (if your focus is price itself, or try to trade from the fast moving quotes you will see why)

i found S/R helpful, but not as support and resistance (i usually just eye ball it or place very faint almost non visible lines) i do not try to get a historical turning point (predicting a turn) i simply use S/R to calculate actual current volatility.

i hope this clears things up. and if not, then please ask (however it is very important that you do research yourself on how candle sticks are calculated, and what these terms mean a simple wikipedia will do for the mathematical formulas of what i just mentioned, however DO NOT GET HUNG UP ON ACCURACY OF CALCULATION we are simply calculating PROBABILITES, OR EYEBALLING IT)

in a simpler way i will put it this way the larger the candle the more the price moved from the open the smaller the candle the less prevalence of those orders are being reflected. less conviction in buying or selling. eye ball the candles for average size, this is how much is possible to expect

Simple and clear advice for new traders, no cryptic trachings


1. Stay away from Trading System subforum
2. Start thinking for yourself
3. Stop your effort for finding "something"

I wouldn't say stay away from the Trading Systems forum alltogether, but there's a big problem in (new) traders mimicking other's style. The assumption that 2 totally different people can trade the same is impossible.

Nice posts Redlion.

some people never understand what i mean when i say, i swing trade using five minute charts. although its very hard to do, my profitability went up, the moment i started using the daily open plotted on my chart as a reference point.

you see anything above it will reflect as a positive candle in the daily, anything below it will be a negative candle.

by using the daily open to sort of feel whether participants are holding the currency or dumping it. it gives you a great guide.

if you notice that #1 price is being traded below the open for example losing upside momentum in the daily chart near an extreme of volatility area, the SAFEST entrances would be to sell the rallies or scale in on the rallies. using a five minute chart gives you the freshest foot prints, and if you ARE ABLE TO VIEW the market not CUT INTO time frames. BUT CONTINUOUS REPRESENTATION OF PRICE MOVEMENT.

only trading in the safest directions, the probabilities turn in your favor.
i encourage you to practice this.

although as emerald eyes said no one will trade the same way i do, but maybe you will find it useful to try.

lets move into money management:

one of the things that i have learned is, to always know your VaR.

VALUE AT RISK, please research this
also research what RISK is, and how to do a RISK ASSESSMENT.

it is very important to me to know my 0 leverage point.
if you are using a 1,000 dollar count for example you 0 leverage point would be 1 micro lot (10 cts per pip). for a 10,000 is 1 mini lot (1 usd per pip)

why you might ask? i use a scale in strategy phi : pi ratio is my risk parameter with a total threshold of initially 2% of account value. as my monthly target is 5% ROI (please research ROI)

however as i reach my monthly target and if i surpass it, then either i can
1 withdraw the excess from my account and invested in less risky assets
or i can use the excess profits to buffer more risk taking for greater potential reward, by moving my threshold up.

i always like FLEXIBILITY, and is something FTI taught me, as RIGIDITY KILLS.

i usually do not use stop losses and the debate has been already discussed in numerous threads so i really dont want to get into it here. i just know that there is stop hunts, usually at clusters, DNTs, and Barrier option levels, so i do not like stop losses, but that is because i have a well thought out money management plan.

everyone is different, and i am no one to tell you not to use them, i personally DO NOT LIKE THEM AT ALL, as they get in the way of my strategic money management plan.

the phi ratio is a fibo progression scale in strategy 1,1,2,3,5,8,13 with a corresponding pi progression RESCUE skew (not martingale average down, but strategically bringing my basis close to market to get out of a bad position)
pi is 3.14, example 1,3,9...

the way i determine the spiral is by total lots in the market underwater, and total pips needed to bring the basis back to b/e on a retracement. (thanks to fti) now this requires praxis.

you dont need to do it that way. you could scale in in two or three parts, and only add to the position when in profit, as livermore did it.

i really like scaling in as it reduces the loss if initial timing or assessment was flawed. but it reduces profits. as i said before risk reward is highly correlated.


now there are times when i go all in, when i scale in two parts, when i use the phi: pi, as said before PRAXIS and EXPERIENCE will dictate your actions as well as what the market presents to you. THE IMPORTANT LESSON HERE IS FLEXIBILITY AND A PLAN TO INCREASE PROFTIS, AND MINIMIZE LOSSES.

you dont have to do the go all in SL at x pips and TP at x pips, that is too rigid. find what works for you and USE EVERYTHING AT YOUR DISPOSAL. ALWAYS ASSESS THE RISK, PROTECT YOUR CAPITAL.

if at any point you do not understand what i am saying or the idea i am attempting to convey please do ask

you really should reconsider the whole fti language he has imprinted on you. you come here and talk about pi and phi and whatnot.... and it's all just bullshit that 99% of the trading community commonly regard with other names, and really, fti is probably the only person who calls them these. you'd do yourself, and readers, a favor by using their regular terms of 'scaling-in' and 'pyramiding'.

your whole pi is 3.14 yadda yadda is pure folly. that is pyramiding pure and simple, but pyramiding has nothing to do with pi! all-in-all pyramiding is simply increasing your overall position size in a profitable trade while not bringing the breakeven price too close to market movements... and this doesn't have to have any relationship to pi at all. taking that the range of price movement tends to change over time (as per your ATR studies will surely reveal) it's entirely reasonable to expect that from one area of volatility to another would require a different pyramid size to squeeze the most out of a movement without hitting a profit stop loss and exiting too early. you can even do a hybrid pyramid and scale-in and as price comes back to your breakeven by adding very small positions to edge the breakeven closer to the market price a little while also increasing your overall reward potential if price resumes your required direction, and again, this has no relationship at all to pi.

for someone who doesn't want to be rigid, assigning pi to pyramiding is pretty damn rigid and doesn't make any sense. just enter smaller sizes than your overall total and eyeball how big you should go depending on the current position versus breakeven price versus market volatility. no pi required, and likely not appropriate.

and re stop hunts... i'm just a nubcake, but it strikes me as interesting that on one hand you say there are stop hunts but on the other hand for me personally i haven't seen anything on a chart that hits me in the face screaming "i'm a stop hunt look at me". it all looks like normal market movements, and the reality is certainly that every single tick up or down is hitting someone's stop somewhere... and as an opinion i suspect that any 'stop hunting' isn't as major as anyone would suggest except perhaps for a slow steady push towards option barriers. if that is true, and i'm not suggesting i actually know because i don't, but if that is true then the majority of the time it's pretty prudent to use stops, and when getting close to option barriers adjust the trading size and stops accordingly. purely my own musings and certainly not factual.

hey nubcake you are actually correct on your assumptions, yes, according to Average range and volatility one needs to adjust position sizing according to the least possible level of risk.

having said that.

i have experimented with many different skews of pyramiding and fti phi: pi ratio holds up in practice and theory. there is much to learn about option barriers, DNTs, one touch, digital, and exotic options, as well as clusters stops. believe me the hunt for this profitable cascade is real.

you can profit from it by following along on suspected areas of clusters or getting in on the cascade and liquidating positions before on the bounce.

you see if you do a research on phi it is the golden ration. the reason why it works to scale in on the fibo progression is because it would take a 50% retrace to take out your profits, you have plenty of response time by then.

the pi is as you know the 3.14 the importance of having a correlating ratio is to have enough resources to rescue the lots underwater, you NEVER WANT TO BE OVER EXPOSED, knowing your threshold and your max rescue skew is always a GOOD IDEA to avoid the black swan, snowball against you scenario.

suppose i am in the market with at my 0 leverage point and it would take a 1500 pip movement against me to reach my threshold (granted i'm using foreign capital to buffer my risk taking) as the market moves and confirms your analysis, one can put more capital at risk to maximize profits. and if the market goes against you, you have a big leeway to hold or rescue.

but what you outlined in your post is a very viable alternative, you are a very intelligent PROFITABLE TRADER. or at least you sound like one.

discussions like this are constructive, i like you better when you are not ranting like a maniac talking out of your ass