The life of a trading system on Forex Factory

There are so many losers, which all want to pretend there big players and making loads to boost there ego it's near on impossible to tell who's profitable and who's not, it's generally losers chasing losers.

Trading is easy, if you let it be it's really is a simple as this :-

1. Work out the trend with a good degree of accuracy ( not H4 candle crap )
2. Enter on a pull back with the trend.
3. If it moves against you get more.
4. Exit when there is enough profit or the trend is no longer valid.

That is it, cracking no.1 is the tricky part that and keeping it simple.

Prostitute wise, I wish I could afford them and a cleaner!!

That is exactly what all the self proclaimed gurus you're criticizing are saying, that trading is easy. At least for them. So how do we know that all those guys are wrong and you are the real McCoy? Can you please show us your Ferraris?


And what's that method giving an accurate read of the trend? Is it something we have all tested (e.g. HH+HL, MA, trend indicators), or something completely different? Can we use the method on 4hr charts or it doesn't work on that time frame?


That's what 60-70% of the trading systems on FF try to accomplish.


Really? Adding to losers? Are you sure? And how much do you add? And how many times? At what levels? And for how long? Until you realize that the trend is gone, or an opposite trend has started? Until you get a margin call? Until you can't stand the pain?


What is "enough profit"? Enough compared to the potential loss, a RR ratio? Enough to buy a car? 5% of the equity?


I don't find it simple at all, but I accept that my opinion doesn't matter. The professional traders don't find it easy and their opinion matters. They spend thousands of hours building and testing their systems and the systems usually work only for a limited amount of time. Then they have to be adjusted or abandoned and the work starts all over again. It's infinitely more difficult for the small retail trader trying to make a kill using his laptop and a 5000 dollar account. The only thing that is easy is to pretend that trading is easy and to give some very vague general advice like "buy the pullback" or "let your winners run" or "be disciplined". The devil is in the details, a tiny difference in the way you manage your trades or some indicator parameters can turn a profitable system into a losing one (or the opposite).

I have a pretty good method for establishing trend, ofcourse trends change or blips happen but over all still pretty good, easy and requires zero flashing lights as 60MM puts it, I save that for my classic Star Trek LOL

Obviously I don't keep entering that's suicide, I add a position every 20pips and use a SL of 40 or 60 first position ( same SL on extras ), with 40 it's 1/2 the cost if hit so I trade at 2x's the lot size, my risk is fixed and I aim for generally more than I risk, but sometimes only 1 position fills and ofcourse that hurts the profit size so kinda tricky.

Vagueness and giving up on predicting anything, it's just not possible to know what the up and coming news / order flow is, all you can do is go with the flow and play the numbers.

I'm definitely not a guru, most of my trades are posted live as is my progress at beating this game, screw ups, days where I mess around and blow my tiny on purpose account thankfully.

New method is 3 for 3 and +14% on the week, ofcourse thats only $10 ish on a $70 account, when ready I'll put her upto 2K just not quite there yet!

When cracked I hopefully won't need to take money from other FF members, so definately not a scammer hate them!!

i agree on most of that, except people make trading to difficult, then they get themselves confused, it does not need to be difficult, the simpler I make it the better my results become.

Abandon all prediction as previous said, is KEY the more I move away from predicting the better, everyone is trying to predict.

The subtle market changes have knocked me from being profitable to not a few times over the years.

Although it's been 7 years of something on Forex I get very little time to trade / watch the charts so it's not that long.

On the basis I don't predict, it becomes a that's enough $$$'s for that trade TP, sometimes news out soon TP, or markets gone slow TP, there simply is not a descent exit method, entry I've got nailed, Exit does not exist strangely.

And don't consider it adding to losers, consider it building a position at reduced exposure for each position with increased upside potential, as long as your sensible it's 1 of the best trade strategys going, why do you think the press bad mouth it so much, they simply don't want you to do it, they want you to add on the way up so when it turns back down it'll hurt you more and they get your cash.

It is interesting what you say about the trend. You are so right. It is the key to success.

Great post, LP!

You pretty much summed-up what goes on inside forums like this and has been going on for many years in retail forex. Many have (unfortunately) experienced exactly the steps you laid down. You should make a 12 Step Program out of it, LOL. It would be a great case study to keep people from wasting their time.

I'll give you three tips to help move you out of this mode of trading:

- Research, design, engineer/architect and build your own indicators from scratch (raw OHLC data).

This has many benefits, but the key benefit is that it forces you to develop an Edge. It is very difficult to be a consistently profitable trader, absent a reliable Edge. An Edge that you understand to the Nth degree.

- Use only those indicators that give you an Edge in all three (3) market types: Bullish, Bearish and Transitional. And, know the MFE/MAE average range for the indicators you select for any trade you ever make.

Anyone can be profitable in a directional market. It is when the market enters a transitional phase from directional to non-directional, that successful traders are weeded out from the chaff. The indicators you create, need to be very good at letting you know which market type you are observing and which types of trades have the highest probability for striking your target.

- Research, design and build a Custom Money Management System that is tailored to the Edge that your trading system, methodology or strategy produces on an empirical basis.

This is where most retail traders go absurdly wrong. If your MM out produces the capabilities of your Edge, then what's the point of trading. If your Edge is only good for 30 pips in one type of market (identified by your indicators) and you "hold-on" for a 70 pip result, when that 70 pip result is among the low probability outcomes - then you are no longer trading, you are gambling at a minimum. Your MM should match not only your financial goals (and this is where most traders just don't get it), but it MUST also fit within the empirical relevance of the probable outcomes produced by your trading system. And, that will be predicated on the degree to which you handled Tip #1 above. This is where you work out the details of proper leverage, equity per trade and specific target - all relative to expected system performance.

This is a Blue Print for becoming a consistent trader in any market.

- Research your own Indicators and know every technical detail about them.

- Design an Edge that is reliable under all market conditions and know its limitations in each market condition (MFE/MAE ratios).

- Design a Money Management System that is powered by your Edge. Trade within the limitations of the system and only the highest probability configurations.

There are simply precious few other ways in which a common retail trader in the forex becomes consistently profitable in any market.

You've learned the first half of the lesson all successful retail traders have learned all on your own. I've just given you the second half of that lesson in summary form - a blueprint for success. Many don't make it as far as you have made it thus far. They realize what you have learned and then they give up because they don't know the answer to the second half of the question:

- Research customized indicators (your own creations/designs)
- Build a customized Edge
- Secure profits with smart Money Management

Anything less at this point, would be a total waste of the seven (7) years you have already put into this. You can turn your Hobby into a Full-Time Career, if you want to. The choice is yours.

At some point, you will know the capabilities of your system so well, that turning it into a Bot, will be the next logical step. But, you really do need to know and understand your Edge inside and out, before a Bot can become successful long-term and under all market conditions.

Note: This applies to Inter-Day Traders and Intra-Day Traders (including Scalpers). Swing and Position Traders have an easier road to pave, because the profit dynamics of Swing and Position Traders allows for greater margins of error on Entry Logic. But, unless you already have sufficient capital to launch a successful Swing/Position Trading business, they you will have to Day Trade your way into that category of trader, wherein the rules (above) apply.

Thanks sKelly, I agree.
I once entered a whorehouse and engaged in intimate congress with a lady of the night. She appeared to be both good and healthy and promised to help me in the ebb and flow department.
I admit some of my pleasure was foolish (the swings... & particularly the cargo net was a bit silly) although not very worldly, still when it was over, I truly felt both peace and balance.
It is a feeling i find hard to recreate but continue to strive.

PS. When i first saw your signature i thought it said "love Gold and all men", Am i bad?

Nice post.

Just try to be good. And remember that mocking and trying to funny at the expense of others is not really that nice.
I do understand that we human beings all strive for attention. Truly, left to my own devices I am no different than you.
It is important for me to understand where you are and accept you as you are today.

Yes. It is extremely difficult for the retail trader to make it and for the reasons I outlined above.

Your post is a testament to the fact that you get it, whereas many will never get it. You are halfway there, but the second half is where the real work comes into play. You've done the necessary discovery on what does not work. Now, you need to do the discovery on what does work.

It all begins with learning how to research raw data to search for repeating patterns. This is where the trader develops their own Edge. If you notice, I capitalize the word "Edge." That's how important it is to the successful trader. It is also one of the reasons why I do not discuss the details of my personal Edge with anyone. But, I can tell you that without an Edge, the retail traders chances of reaching consistent profitability in all market conditions is relatively zero.

Most people are still using 40-60 year old indicators and then they wonder why they are in the bottom 97% percent. They will even tell you (convincingly) that they've tried every single parameter setting they could imagine with those 40-60 year old indicators and that nothing they try yields consistent profitability in all market conditions. These same people will ultimately convince you that:

- Trading Systems don't work
- There is no Holy Grail of Trading
- The Trend is your Friend, never trade against it
- Price Action is the superior way to trade

When I hear, or read someone engaging in the above, I know that I am watching someone who is still stuck between the research that others have done, and the research that they have yet to do on their own.

The average trader can't define the distinction between a Trading System, Trading Methodology, or a Trading Tactic. Each of which is defined and known by the degree of integration among the indicators uses to determine Entry and Exit Trade Logic. Therefore, people mistakenly will take 5 MAs, a MACD, an RSI, a CCI and some Bolinger Bands, set some "parameters" for each one (having not the slightest clue why), slap a label on it and then call it a "System."

That's no more a Trading System then I am Batman incarnate.

A Trading System is very well defined. It is intelligent and it must have the capability of learning from its past performance. If it cannot accomplish those minimum requirements, then at best you are dealing with a Trading Strategy. Most retail traders don't have the technical facility (experience and/or background) to produce a real System. That's not a knock on anyone, that's just a factual statement related to education, experience and skill sets. That also does not mean that Strategy Traders can't be highly successful. They can and some are in fact very successful Strategy Traders.

However, Systems, are a whole different world of design, because they require knowledge of the logical integration of specific inputs to derive and/or test for specific cause and effect. This is of course, typically the point where people with programing and/or software development skills often times make the mistake of thinking that software development skills automatically translate into trade logic development skills. The truth is that they are two completely different skills sets entirely, which is why you see so many FOR SALE signs plastered all over the internet by people with outstanding software development skills, but hardly any real knowledge about what it takes to research, design/architect and build a genuine Trading System.

To understand Trading Systems, one must first understand Dynamic Systems Theory, as well as the concepts and fundamental principles of Dynamic Systems Component Integration. I don't want to turn this into full blown DSCI course online, but I'll mention a few of the highlights as they might relate to building Trading Systems:

- Input/Output Sourcing, Identification & Classification
- Input/Output Aggregation & Filtering
- Input/Output Integration & Optimization
- Input/Output Componentization
- Signal Transformation
- Signal Optimization
- Signal Ranking & Sorting
- Prime Signal Selection
- Risk Mitigation & Target Optimization
- Trade Execution & Trade Management

There is no fine line between a Trading System and Trading Strategy. They are indeed worlds apart. So, finding out what type of trader you want to be, will no doubt include an understanding of what's possible.

The vast majority of retail traders fit into either the Trade Strategy, or the Trade Methodology category, with the remainder falling into the category of Trade Tactic, the closest thing to brute force guessing - which also involves the highest level of trader stress (emotional/psychological). You can place Price Action for example, into the category of Trade Tactic. You can raise Price Action to the level of Trade Methodology, if you consistently apply some kind of statistical based technical indicator. You cannot raise Price Action any higher up the tree, less it becomes too "technical" and thus defeats its own purpose.

Trend Traders are the prototypical Trade Methodology practitioners. Many of them add inputs from several other conventional technical indicators to their method and then call it a Trading System, without having a real understanding of the logically coordinated design effort that must go into the Systems Theory that contains their Trading Systems - not really a Trading System at all.

This is a huge subject and I have not even begun to scratch the surface. Bottom line - you can be successful on any of these levels of trading, as long as you adopt something very close to the outline I gave in my first post.

You need an Edge. That Edge is best when it comes from something that you have designed yourself and know intimately. And, you need to connect a Money Management System to the expectation of your empirically proven trading process (system, method, strategy or tactic).

One could title this post "An Introduction to Successful and Consistent Trading 101."

Your posts are well thought out and well written.

It is not necessary, but I would be interested in knowing something about your background.

Again, I really have enjoyed your posts so far. Keep up the good work.

Difficult for sure, but thinking it requires a complex solution isn't necessarily the answer, in fact quite the opposite!

I would disagree with you pipmutt.

it is not only difficult but you do need complex solutions.
brain storming.

risk management models etc

have you ever taken quantitative finance or market econ at ivy league universities.

Idouble summed it up pretty good.

Does anyone ever get the feeling they're reading posts from computer programmers. Then when you meet a truly successful trader (someone who is consistent) they used to sell ice-creams, or drive taxi's ????

Then you're forever told that you're only going to make 1-2% a day and win 60% of your trades if you're REALLY good... But you know people trading well over 80% of their trades and winning 5-10% a day...(strict rule based systems, with some analysis of trend and s/r)

The fact of the matter is, most people can't stick at anything long enough, most people don't bother with the basics, most people can't stomach the learning.... "how can i get a short cut?".. "if he would just show me his account then I would be successful"

the bollocks written on Forex factory really get's to me... there are plenty of traders making huge gains trading really basic systems with very little 'discretion'... you're gonna need some, but that just requires practice and the right information to look for.

before anyone asks "who are these traders then?"... have a little search, just not on this forum

are you saying you need an ivy-league education to trade forex? got any proof of that? I have found it to be the opposite..

lol, at one time that's what they used to say about the best traders in the City, 'barrow boys, not Harrow boys'! (barrow boys used to sell vegetables and fruit from a hand cart a stone's throw from the City. Harrow is a top public school)

While all the over-educated 'let's make this as complex as possible' were devising convoluted systems, strategies, and methodologies, the barrow boys were simply making deals and cleaning up!


-

Not at this level where liquidity isn't an issue. For retail traders the market isn't an adversary which needs to be beaten, it's a speculative vehicle to make some cash.


Hell no, that's my definition of terminal boredom! But what's more, I've never found any need to thank God!

I respect people who have the dedication and focus to seek higher education and a deeper understand about a subject, but it's not prerequisite to being a consistently profitable trader, in fact I'd go as far as to say some of the stupidest people would make good traders!