What works? | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

If it works, it works... 3 replies

Metatrader4 On Linux, Finally Works 25 replies

Short Term Implied Vols Forecast Big Moves In The Works 2 replies

What actually works. 72 replies

Buy-Sell Signal Works 86% of the time.... 4 replies

Attachments: What works?
Exit Attachments

What works?

  • #1
  • First Post: Edited 6:13am Mar 3, 2012 4:01am | Edited 6:13am
I remember during my youth when I decided that I will be one of the quitarists of my times. At least as good as Paco de Lucia I practiced playing hours and hours for months so much that my fingers begun to bleed. At times I felt really frustrated because despite of all my training, my playing wasnt progressing as much as I would have liked it to progress. My playing still wasnt sounding nearly as good as Pacos

After some time, I had the opportunity to train with a really great instructor who taught me to use training methods, which improved my playing really fast. Well after some time other things like the opposite sex became.........and the career as a worlds leading quitarist wasnt as tempting anymore.

BUT......my point is that you can train a skill for hours and hours (or in trading months after months) and have little or no development in your trading, but if you know WHAT WORKS and train yourself with the help of these approaches, you can have fast an consistent results in much lesser time. You may call this wisdom. They are often just the little practical things you do as a part of your everyday routine.

Inserted Video


Inspired by Jack Larkins thread "So you want to be a professional trader" (which I think is a must read to every trader) I thought that it would be a good idea to try to collect the best ways to improve your trading into a single thread and give them to use of this community. I havent seen this kind of a thread here so Im hoping you guys would find this useful.

I have some good practices that have improved my trading and I will share them in the following posts, but I challenge you to share yours also. So that we can learn from each other. I think that in order for them to work for others also, you have to describe them in a detailed level. Im not speaking of the actual system, but more the ways how you use it effectively for trading independent of what is the system you use and what has helped you to develop as a trader. Therefore I suggest to consider atleast the following questions while describing what has been successful to you.

1. Describe the good practice you use in enough detailed level that others can understand what you are talking about.
2. Describe how you are using it in your trading.
3. Describe how it has been developing you as a trader.
4. Which have been the results it has made in your trading and how long it took to get to achieve them?

I hope that you will find this useful and will be posting your practices also. Im not a full time trader (yet) and a professional in training & development in my day job so my intentions in this thread is to try to collect something that could be called eg. a traders development path of a kind for the use of the community as well as for myself.

Lets keep the thread clean and concentrate to the essentials being the most efficient ways to improve your trading, which have produced consistent results in some "quantifiable" way! Its not in my intentions to be an owner of this thread or the idea so feel free to contribute anyway you like.

Lets create the wisdom of trading!

BR

Whistle
  • #2
  • Edited Mar 4, 2012 3:41am Mar 3, 2012 5:36am | Edited Mar 4, 2012 3:41am
Ok. Here is one, which I have found to work for me. After each trading day I answer to the questions presented in the attached excel file and wrote the stuff that it rises down into my trading journal, which I read through atleast once a week.

What it does to me is that it makes me to think of my success and failures in that particular day and helps me to better identify my thoughts during my trading, which were influencing to my decisions. That influences directly into my trading results. Im able to let my winners run and making less mistakes.

It also helps me to identify where I need to concentrate in a long run by showing the averages where I do good and where I should be developing myself a little more. Things you certainly are not otherwise able to see. An efficient self assessment tool of a kind.

As a trader you are solely responsible for your success or failure and it can be frustrating and costly to not to be able to identify your problems as well as success factors with trading. This may help.
Attached File(s)
File Type: xls Daily analysis.xls   45 KB | 533 downloads
  • #3
  • Mar 3, 2012 6:58am Mar 3, 2012 6:58am
Quoting Whistlepips
Ok. Here is one, which I have found to work for me. After each trading day I answer to the questions presented in the attached excel file and wrote the stuff that it rises down into my trading journal, which I read through atleast once a week.

What it does to me is that it makes me to think of my success and failures in that particular day and helps me to better identify my thoughts during my trading, which were influencing to my decisions. That influences directly into my trading results. Im able to let my winners run and making less mistakes....
early on I also thought that a journal is beneficial. But nowadays I think this is actually hindering people to really get success in trading.

Two functions of a journal:
1. assessing discipline => good
2. developing a system => bad

ad 1) if you use a journal to assess your discipline in executing the rules you laid out before, then a journal is a really good thing.
ad 2) if you try to develop your system out of a trading journal, you will ultimately only try to make your win/loss ratio better, i.e. make less mistakes,... and think that profits come, when you just have a higher hit-rate. However, the win/loss ratio is not equal to profitability. Even if you can through you analyzing your trading journal get a win-rate of 80%, it doesn't mean that you are actually profitable.
It will lead you down the wrong path both in developing your system and in developing your mind as a trader.
  • #4
  • Mar 3, 2012 9:43am Mar 3, 2012 9:43am
The biggest mistake new traders do that they want trade so bad they start seeing things (patterns / "good chances" etc... ) that realy are not there . Better wait for the almost perfect combination that would be high chance of success than look for 2+ trades a day or even more and fail (I'm talking about day traders ) . Tell me what is better take 30 trades a week win 15 , 15 lost (or even more) at 1:1 ratio , or take 2-3 trades that is almost perfect in your techincal aspect's and succeed ? Even if you risk more % and make less but good trades , I think the second choice is better .I know for me it is...
Think about that
  • #5
  • Mar 3, 2012 9:46am Mar 3, 2012 9:46am
Quoting LeanLowFx
The biggest mistake new traders do that they want trade so bad they start seeing things (patterns / "good chances" etc... ) that realy are not there . Better wait for the almost perfect combination that would be high chance of success than look for 2+ trades a day or even more and fail (I'm talking about day traders ) . Tell me what is better take 30 trades a week win 15 , 15 lost (or even more) at 1:1 ratio , or take 2-3 trades that is almost perfect in your techincal aspect's and succeed ? Even if you risk more % and make less but good trades...
it is also better in terms of compounding.
  • #6
  • Mar 3, 2012 1:55pm Mar 3, 2012 1:55pm
Really good points and valuable pieces of wisdom. What would you suggest that one should do in order to achieve a mindset to get there and why do you see these as important steps in becoming a better trader?
What is the way develop the system and what to do in order to be able to concentrate on the best trades and to turn them into consistent profits?

How have you guys been able to do that? What has worked for you?
  • #7
  • Mar 3, 2012 2:10pm Mar 3, 2012 2:10pm
Quoting Whistlepips
Really good points and valuable pieces of wisdom. What would you suggest that one should do in order to achieve a mindset to get there and why do you see these as important steps in becoming a better trader?
What is the way develop the system and what to do in order to be able to concentrate on the best trades and to turn them into consistent profits?

How have you guys been able to do that? What has worked for you?
Don't take trades if you are not possitive that it will go in the direction you want it to go . If you feel unsure about take or not to take a trade - don't take . Before taking trade look at all possible outcomes , timeframes of that pairs major s/r etc , upcoming news that might inflict that pair . Don't take random trades , better wait and let trade come to you , than make a bad trade , wait for the "perfect" picture and when you feel sure about it then pull the triger .
About strategy , i don't reccomand using someone elses strategys , you might take some elements of it , but stick with your strategy or if you don't have create one , by strategy i mean the way you trade not some magical indicators list ...When you finaly have strategy , look at past of the charts why trades went wrong etc , improve your strategy , then test in on demo account and see if it's good . Also DON'T use indicators that you don't know how they work , you should know EVERYTHING about the indicator you using , what its purpouse and what is most important don't rely only on inicators , they might help you by confirming or showing you possible pattern etc , but don't trade based only on indicator/s . Don't use only one time frame , look for all possible outcomes , learn from your mistakes .
  • #8
  • Mar 3, 2012 3:33pm Mar 3, 2012 3:33pm
Quoting Whistlepips
Really good points and valuable pieces of wisdom. What would you suggest that one should do in order to achieve a mindset to get there and why do you see these as important steps in becoming a better trader?
What is the way develop the system and what to do in order to be able to concentrate on the best trades and to turn them into consistent profits?

How have you guys been able to do that? What has worked for you?
research
  • #9
  • Mar 3, 2012 3:45pm Mar 3, 2012 3:45pm
Quoting LeanLowFx
Don't take trades if you are not possitive that it will go in the direction you want it to go .
Certainly the best advise I ever read on FF, now if you can just explain EXACTLY how that is done?



Trading in the Zone: The 5 Fundamental Truths

1. Anything can happen

2. You don’t need to know what is going to happen next in order to make money

3. There is a random distribution between wins and losses for any given set of variables that define an edge

4. An edge is nothing more than an indication of a higher probability of one thing happening over another

5. Every moment in the market is unique

Here are his 7 principles of consistency:

1. I objectively identify my edges

2. I predefine the risk of every trade

3. I completely accept the risk or I am willing to let go of the trade

4. I act on my edges without reservation or hesitation

5. I pay myself as the market makes money available to me

6. I continually monitor my susceptibility for making errors

7. I understand the absolute necessity of these principles. I never violate them.

It takes a lot for me to IGNORE you, but you can try.
  • #10
  • Mar 3, 2012 5:26pm Mar 3, 2012 5:26pm
Quoting Erebus
Certainly the best advise I ever read on FF, now if you can just explain EXACTLY how that is done?



Trading in the Zone: The 5 Fundamental Truths

1. Anything can happen

2. You don’t need to know what is going to happen next in order to make money

3. There is a random distribution between wins and losses for any given set of variables that define an edge

4. An edge is nothing more than an indication of a higher probability of one thing happening...
By that I meant , that sometimes people take trades because "they have to" , it is beter to wait for a good combination , when you see that combination you will feel certain about it , then it is high chances it will go possitive ,tho it depends on the trader itself , on the style he trade and system ...
My advice would be , don't trade only on candlestic formations/ patters / indicators , but combine at least 3 combinations and when all things are in the right place only then take a trade .
  • #11
  • Mar 3, 2012 8:12pm Mar 3, 2012 8:12pm
OK, I'll give it a try here, you sound cool, TS. Fellow guitarist here. Paco is awesome, though my favorite is Zappa.

Anyways, what I'm using right now is a little different than anything you've probably heard of. What I do is fade breaks-outs of trends on a 1 or 5 minute chart at a certain scope. (Stay away from low-volume pairs.) There are 3 types of break-outs: Those that come back to the break spot (BS), those that do not come back to the BS, and those that come back to a high/low that is near the BS. Most, 75%, come back to the BS. I'm not talking about little breaks that give you no time spot them and position yourself. I mean the ones that break and keep going for a couple hours to a couple days.

I am keeping a record of each instance and throwing them into one of the three categories for future reference. After a while you start seeing similarities and you have a saved history to compare new set-ups to. Obviously you want to stay out of the set-ups that look like the ones where the price didn't come back to the BS, and entry points rely on instinct. Instinct you can only develope with experience. Experience that is only gained through trial and error.

Find and record enough of these and you'll see what your stops should be. Definitely no more than 200 pips for any pair. Remember, you are looking for clear breaks, nothing less. They happen all the time.

Your lens should be focused no more than to the 3rd degree of compression on a 5-minute chart. Ex: On meta-trader, compress the chart to the max., now hit the decompress button two times. You can also stay at this compression on a 1-minute chart and look for break-outs there. DO NOT go out any further or more compressed than the 3rd degree compression on a 5-minute chart!! Stops will be different and this just makes it even more complicated.

That's all for now.
  • #12
  • Mar 3, 2012 8:48pm Mar 3, 2012 8:48pm
1. Accept that you have no earthly clue what is going to happen next in trading.
2. Accept that losses are part of the business, a cost of doing business if you will.
3. You must find find a method that suits your personality, if you feel more comfortable trading the shorter time frames trade the shorter time frames. Don't think you have to trade the 4hr or daily charts just because on someone on some forum says you have to.
4. DO NOT JUMP FROM SYSTEM TO SYSTEM. Just because you had a couple of losses with one system in no way shape or form means the system does not work. You were more than likely not following the system correctly or you just had a couple of correct entries that did not work out. You need to stick with a single system for a while to truly know if it works or not.
5. Keep it simple. There are lots of systems that can work. For me I trade simple candlestick patterns that I know most days will give me 3x my risk and only trade the London/NY overlap for about 5 hours a day using only the 15 minute charts. This is only as hard as you make.
6. You are not going to get rich quick trading, so stop thinking that you will.
  • #13
  • Mar 4, 2012 12:26am Mar 4, 2012 12:26am
Suppose you scalp 40 trades a day over a few pairs risking 0.1% per trade. Risk:Reward is 1:1 (plus spread). You win a mere 55% of the time. Compounded this returns 170% per year.

Most professionals seem to be ecstatic with 20% per year.

Negatively, perhaps…

: I got the maths wrong.

: scalping 40 trades a day is unrealistic (but over 10 pairs, that's only 4 trades each.)

: most pairs are too correlated to be considered separate trades.

: it’s virtually impossible to win 55% of the time with R:R=1:1 (plus spread). Re-doing the calculation at 51% strike rate yields a “mere” 21% return per year.

: risking 0.1% per trade is far too dangerous for the real world.

Positively…

: High frequency, small, low risk trades seem to have tremendous potential. You don't need a big edge or a big account. You don't need to take big risks, but you do need to take lots of losses. At 55% strike rate, 20 losses in a row would not be uncommon, but if the risk per trade is 0.1%, the drawdown would still be small.

: Compounding is the key. Profits and losses both grow exponentially, but profits grow faster.
  • #14
  • Mar 4, 2012 3:55am Mar 4, 2012 3:55am
Quoting LeanLowFx
By that I meant , that sometimes people take trades because "they have to" , it is beter to wait for a good combination , when you see that combination you will feel certain about it , then it is high chances it will go possitive ,tho it depends on the trader itself , on the style he trade and system ...
My advice would be , don't trade only on candlestic formations/ patters / indicators , but combine at least 3 combinations and when all things are in the right place only then take a trade .
I think this is a valuable piece of advice. I see it also as a kind of a training method for discipline. If you decide with yourself that you have to wait for these confirmations before entering a trade, it builds discipline and gives a solid ground to assess your behavior against. Easy to measure. Either you take them according to your rules or not and what makes you to comply your rules and what not....
  • #15
  • Mar 4, 2012 4:05am Mar 4, 2012 4:05am
Quoting Erebus
Certainly the best advise I ever read on FF, now if you can just explain EXACTLY how that is done?



Trading in the Zone: The 5 Fundamental Truths

1. Anything can happen

2. You don’t need to know what is going to happen next in order to make money

3. There is a random distribution between wins and losses for any given set of variables that define an edge

4. An edge is nothing more than an indication of a higher probability of one thing happening over another...
Great list. I have also read trading in the zone. If I remember correctly these are from the book. In order to apply these to a part of ones everyday routines, I think that they should be described in a little more practical manner, because as such one cant use them to identify ones thoughts and behavior in everyday trading decisions.

Meaning these questions should be turned into an assessment tool (like eg. a more detailed questionnaire) in order to be able to assess them against ones behavior.
If you eg. take number 6, what is monitoring in your practice. How do you develop a mindset to continually monitor your susceptibility for making errors, etc. Big list of things to consider while making decisions, but what is the path of uniting them into your thinking.
  • #16
  • Mar 4, 2012 4:26am Mar 4, 2012 4:26am
Quoting Zappa
OK, I'll give it a try here, you sound cool, TS. Fellow guitarist here. Paco is awesome, though my favorite is Zappa.

Anyways, what I'm using right now is a little different than anything you've probably heard of. What I do is fade breaks-outs of trends on a 1 or 5 minute chart at a certain scope. (Stay away from low-volume pairs.) There are 3 types of break-outs: Those that come back to the break spot (BS), those that do not come back to the BS, and those that come back to a high/low that is near the BS. Most, 75%, come back to the BS. I'm not...
Thanks man. Good insight. Zappa is great. Im nowadays more into a brasilian style like Joao Bosco, Celso Fonseca, etc.

I think you just gave a solid detailed instruction to researhing behaviour of the pairs one trades. Really good point to consider the level you zoom your charts. It definitely affects the way you see things and make decisions.
  • #17
  • Mar 4, 2012 4:46am Mar 4, 2012 4:46am
Quoting endroute
1. Accept that you have no earthly clue what is going to happen next in trading.
2. Accept that losses are part of the business, a cost of doing business if you will.
3. You must find find a method that suits your personality, if you feel more comfortable trading the shorter time frames trade the shorter time frames. Don't think you have to trade the 4hr or daily charts just because on someone on some forum says you have to.
4. DO NOT JUMP FROM SYSTEM TO SYSTEM. Just because you had a couple of losses with one system in no way shape or form means...
Great list of important issues, but can be easier said than done for many I think that one of the key issues in accepting points 1&2 is to try to accept the fact that we all are insufficient as traders every day (we are not EAs) and make mistakes every day in failing to identify important info in charts, taking setups, managing trades, managing emotions, etc. There is some great stuff related to this in Jack Larkins thread, which may be of help in ones everyday trading.

Points 3-6 are a really big issue and great points to consider (also 1&2). The way I see them is that they are the end result (or goals) of a certain path of learning, which I would hope to see documented more clearly after we have made some more progress in this thread.
  • #18
  • Mar 4, 2012 5:41am Mar 4, 2012 5:41am
Quoting AllanS
Suppose you scalp 40 trades a day over a few pairs risking 0.1% per trade. Risk:Reward is 1:1 (plus spread). You win a mere 55% of the time. Compounded this returns 170% per year.

.........: Compounding is the key. Profits and losses both grow exponentially, but profits grow faster.
This is also a good way to keep the big picture in mind and have a confidency to your system while trading, which can be hard sometimes especially after losses.
  • #19
  • Mar 4, 2012 12:35pm Mar 4, 2012 12:35pm
Here's the quick version of what works. There are numerous edges I know of, doubtlessly countless more that I don't. All of them fall into two camps. Those which require experience or those that require knowledge.

FF has a fair number of experience-based edges; namely, chart patterns that constantly repeat but require the studying charts until your eyeballs bleed. What it doesn't - and won't ever have - is detailed studying of other areas which will require testing things until your spreadsheets bleed. The commonality in both methods is the time they take to perfect in the former, or discover in the latter, which everyone universally underestimates.

The one thing I'd say is choose one avenue. Make sure it plays to your strength (ie, if maths isn't your forte, don't become a quant. If research isn't your forte, don't look for definites etc etc). Make sure it plays to the time you have available to study it. See the trading systems as a whole with the players, the orders, the fundamentals, the other currencies, the difficulties of size, the importance of relationships and finally the movement on the chart as a whole. You need to study just one part of that and become a specialist. A real specialist. It could be as simple as a chart pattern. It could be a detailed analysis of how size orders are placed through the crosses. It could be the relationship between time vs session vs speed of the market. It could be cross-pair volatility arbitrage. There's a whole multitude of things you can study, but make sure you know one single one like the back of your hand and play every single setup to the best of your ability. Remember though, no points for cleverness. Just one bottom line for profit.

Other than that you need MM obviously (read Van Tharp. Observe how FTI skews). Discipline (know what you're doing. Leverage is a trap that only a few people know how to really take advantage of). And a ton of hard work, obviously.

Also, if it helps you fathom out what's important, I think Mark Douglas is an idiot.
  • #20
  • Mar 4, 2012 6:42pm Mar 4, 2012 6:42pm
Quoting Whistlepips
1. Describe the good practice you use in enough detailed level that others can understand what you are talking about.
2. Describe how you are using it in your trading.
3. Describe how it has been developing you as a trader.
4. Which have been the results it has made in your trading and how long it took to get to achieve them?

I hope that you will find this useful and will be posting your practices also. Im not a full time trader (yet) and a professional in training & development in my day job so my intentions in this thread is to try...
So.... you weren't that great at your first gig. We all admire those who find what their calling is at age 2 and become superstars at 12.

The rest of us have to reinvent ourselves from time to time. Which is apparently what you've done.

Congrats
0 traders viewing now