14 Year Old Forex Trader's Lessons

one of my favorite quotes.

hey red, i can find acceleration, but im not getting accumulation. Is that something important? is there even such thing as accumulation?

ADD: sorry found accumulation, not accelartion.

i have found a good book, recommended by many: Trading Chaos by Bill Williams.

you mean when i say if they are accumulating USD or dumping dollars?

that has to do with fundamental analysis

think of it this way: you have 1,000,000,000 USD, actions you take will have an impact, think like a bank. No action is an action inflation rate, what is the yield? how much purchasing power are you losing holding cash? you can lose millions if you dont take the right actions to protect it.

you will understand when you start to get the FEEL for price movement.
there is a flow and all is interconnected. the big players move slowly masking their moves but you can spot them by how price is moving, tearing, appreciating, depreciating. this is tough, again stare at the quotes for couple of days and get the feel for direction.

really all the research you can type the term and wiki at the end it should be there.

acceleration is a term of physics has to do with the vector of displacement, and speed and time.

Did you seriously just saw quotes and no charts and got a feel of price movement?

ADD: i was talking about the accumulation distribution line. an oscillator i think. never mind, leave the research to me, if i have any doubt or questions, will ask you and goldman for answers.

Thanks guys

start at the basics little dude, your chart, your ichimoku clouds, your moving average, you bollinger bands your S/D zones, your candles, they all try to measure the movement of price and some try to outline for you probabilites.

why do you want to know probabilities if you dont know the general direction?
its not hard look at the quotes, the actual price itself, write down you observations, how it moves, how it accelerates, WHAT TOOLS DO YOU need to calculate price behavior as a whole in order for you to trade on it.

the charts really just plot the quotes historically on a time scale and price zone scale. you will begin to see what i mean.

you cannot predict price but you can measure it, not forecast turning points but anticipate them, the market never changes yet it changes constantly, the monthly chart is the result of the tick not the other way around.

observe the quotes little dude, and begin to find ways to make sense of them, you will get the feel for direction, as they generally quote lower, or higher. they increase in movement at certain times of the day correlating with the opening or closing of the big forex centers.

you see the market has been traded for THOUSANDS of years, you are lucky enough to have computerized system that can calculate the probabilities for you. but how did people trade before ichimoku? or ADX? RSI? what data is really important for you to ANALYSE the market?

I hope this chart helps you a little

all this time i didnt care to look at oscillators. I just did a thorough research and tried to understand their true purpose. I looked at a beginner introduction to Accumulation distribution line, and momentum, and decided to check it out on my chart. I am going to be on my computer for a long time.

Researching, analyzing, backtesting, making sense of what they all mean.

@redlion.

I really don't know how people traded without all of that. I believe what i need to analyze the market is to...

i dont know.

please explain more.

I know it has something to do with scientific laws, accumulation, volume, and acceleration.

But how do people figure this out without the help of an indicator or a chart?

please explain more.

ADD: so people used the 'ichimoku, atr, adx, stochastics, with hand? so how do people know?

my head is really hurting.

explanation needed.

are you telling me they did this with price?
http://www.forexrealm.com/forex-imag...cators/ad1.gif: accumulation/distrib.
http://www.forexrealm.com/forex-imag...ators/adx1.gif:ADX
http://www.forexrealm.com/forex-imag.../momentum2.gif:Momentum


I have read a book in which a trader draws moving averages on his chart because he couldn't afford a computer, and he did so on a newspaper and his pen. To be able to do this by hand, let alone FIND the formula to all of this.. its amazing. I just realized how important math, science, and the cycle of life is to forex. Wow... i am astounded.

To tell you the truth, i have been trading the 5 pairs (gold, silver, eu, dow) pretty carelessly despite the profit made.

I have finally concluded that i am going to just focus on one pair: Eur/USD.

my brain still has enough capabilities to analyze on market well, than analyze 5 markets 20%.

bumapatria, a simple candle chart and a moving average can give you all the information you need.

what does a candle measure? OHLC of x period of time? what is acceleration?
rate of change of velocity, increase in velocity= acceleration decrease in velocity= deceleration, what causes the speed to change, BUY/SELL orders.

velocity is the vector of (displacement)(time) displacement is shortest point from start point to finish point= OPEN-CLOSE
momentum is (mass)(velocity)= think of the size of the candle and its range

you see candle is comprised of a 4 point data= open is the reference point, and which point closing below it will be prevalence in selling pressure, closing above it will be prevalence in buying pressure, with the highest and lowest depicted as the shadows of the candle. (a candle can tell you a lot) a formation of candles also, an area where buying and selling pressure dramatically has diminished can also tell you alot,

you see from high-low tells you the carrying capacity= range, how many pips is probable for the market to generally travel.


to put it in simple terms, by looking at price behavior, it appears to move in waves, but not perfect waves (this is were oscillators fail) you cannot predict magnitude, oscillation and amplitude.

but what is it about price that makes it look like a wave? what are the three laws that price ALWAYS obeys?

acceleration as buying pressure moves the quotes with increased speed away the candles reference point, into loss of momentum as that buying/selling pressure is diminishing, to correction when profit taking, position covering etc make the prevalence in buying/selling pressure, back to A acceleration

observe it, although you cannot predict when and where each shift in order flow will end up, you can observe it and make it part of your analaysis.

it follows a never ending pattern of A,B,C/ABC/ABC

that is just for candles alone lol

but moving average serves a purpose, depending on what is important to you to average.

averaging an hourly price movement in one minute chart is a 60 sma, on five minute chart is 12 sma, and so on

the average gives you fair market value for that amount of time, but it also lags when acceleration happens, price shoots away from the average, then as loss of momentum happens the average catches up to the price and when the correction comes again price accelerates away from the average in opposite direction. as well as it can tell you when price is cheap or expensive according to the average traded price for x amount of time. it can give you a good read for volatility and price deviations when taking the price as the mean.

and you can use your S/D s/r lines to give you a approximate volatility read as they give you an idea of normal price variations, and standard deviations.

keep the chart as clean as possible as to not obstruct the view of incoming data feed, all lines on your chart try to plot them in very light colors as to not give you optical illusions or opinions, YOU ARE THE ONE DOING THE ANALYSIS NOT THE INDICATORS

no disrespect to anyone but you guys are getting so complex, its easy to see which way to trade but the outcome doesn't fall into line. i am watching this thread with amusement now. i was hoping of perhaps some new ideas to assist me but alas i think that wont happen. i trade 2 simple ways the first way being very simple and i always hit 600 pips per 5 days thats what i live on and the other way using inside bar thats a fun thing. i wish you well young trader happy trading happy days

how did people trade without computers?

ponder this


PRICE direction,


if i ask you what was the price of the euro at the beginning of this month?
it closed at 1.42677

what was the closing prices for the euro this week?
1.36210 mon, 1.37054 tues,1.35772 wed, 1.35038 thur, 1.3480 (lets say) today.

do you see whats happening?
what was the trading range, volatility?
what is your value at risk?
how to enter at an area of least possible risk?


according to the news and fundamental analysis you get a picture of what is the market sentiment, what is cause of the effect, not only of the euro but the cause of appreciation for the USD. USD=safe heaven currency.

this is a simplistic example but you dont have to be einstein if you use your brain to analyse the data, the devise a strategy and assume you are wrong, to mitigate risk

thanks for the wish billy,

Simple and complex are just words, billy. Everything is the way they are. in my perspective, theres always more than meets the eye with everything. Look at the a b c's. Where on earth do people say this is 'a' this is 'k'? Theres always a deeper more in-depth meaning under the surface of everything.
These guys especially red, is not asking you to remember formulas and work them out! He's explaining how things work. How Forex trading works. Billy, this is indepth knowledge you'd never get in a book. Ive been hunting for a book or something to show this kind of explanation and information and found shit compared to this. This is not a goldmine, this is a whole planet of gold.

sorry you feel that way, trading is simple with practice, maybe i get to complex on my ideas but i like to know the UNDERLYING factors, and have scientific calculations, if bumapatria here cannot understand then i will put it in simple terms.

watch the price first and foremost.
large candles=large price range
small candles= decrease momentum

look at different time frames to see where price is at the moment in line with the bigger waves.
when do you short on your small time frame? when the hourly time frame is topping right? what greater set up than to short the euro on a down trend when the daily chart is topping, at the point where the hourly chart is topping, using the five minute chart to short at the best possible price

simple enough?

but always be aware that price cannot be predicted so be ready for any eventualities.


it is simple to implement theory with practice and experience, but i hope bumapatria realises what im trying to do. build his experience and give him, ways to objectively analyse price, once he gets good at it with practice, he can eyeball the charts and read the news and automatically come up with strategies and know HOW to observe.

@redlion:

so i can apply a similar method/analysis but instead use hourly closes no? those variables are changeable right?
regarding the VAR, volatility momentum, thing you came up with.

absolutely, what i want you to do is to analyse the market,
analyse the price movement
and analyse the direction

come up with your own strategies, and your own risk management.
only you know yourself best.

however the purpose for all these lecture is for you to start analyzing the market, objectively and continuous, with strategies according the the possible outcomes, that you arrive to with your analysis

Wow, does the thread grow!
Hard to keep up with you guys.
But a lot of interesting information here.
My humble rookie voice in the discussion:
Hey, don't charts like these give you a headache after a while?
When I open some of my older templates (by older I mean from half a year back) all I see now are pretty Christmas trees

Remember that there is some stuff that you can put on your chart (I am not sure whether you can call that indicator), which is completely independent of the price - I for one really like round numbers. It is quite amazing how the price acts around them.
Right now my charts are very simple. I have candles (regular Japanese not some fancy HA), I have round numbers, I have an EMA (I use it just not to lose the sight of general short term direction) and I have ADR boundary.

Thank you all guys for input and thank you bumapatria for keeping the thread alive - it's really a good read for a rookie (and probably not only for a rookie).

the first chart contains the following errors is circled red when should be blue on the todays price
and concecuently circled blue on loss of momentum of last leg sorry










hopefully a the pictures can help

i look for extremes in volatility deviations, loss of momentum in the downside or upside according to my feel for direction. always knowing
1 how this wave is in tuned with the hourly movement and the daily movement
2 the ATR of a period of24 for the hourly, ATR of a period of 12 for the five minute, andATR for a period of 22 for the daily. and what is the current TR to gauge exhaustion or if out of the norm.
3 open price as reference point helps visualize the daily candle as i trade from the five minute time frames.

most important of all, i objectively analyze the oncoming price, and do not let my analysis put opinions on my head. just probabilities.

i use a hourly SMA on my five minute chart and monthly SMA on my daily chart

these screen shots are of two demo accounts, as it contains some sensible data

if direction is down, i enter at the least possible risk which is to short rallies, if bullish the buying dips.