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Money Management is everything

  • #21
  • Jun 20, 2012 12:22pm Jun 20, 2012 12:22pm
Quoting duyk20
I toss a coin everytime I trade too, well, for extra confirmation. It's the final piece of puzzle. Head for buy, tail for sell basically.
I am glad to see that like myself you are at the very forefront of modern technical analysis in forex trading.

I won't ask you what settings you use.

You mention the concept of confirmation. I hate to admit my ignorance but I am not sure what confirmation is. I have heard it mentioned on hundreds of other threads. I think that I need to study the concept of " confirmation". I will look it up in the "Gullible Traders Dictionary".

In the meantime if anyone else understands the concept of "confirmation" in trading then please enlighten us. After all there is only so much research that one guy can perform whilst trying to save his account.
  • #22
  • Edited 6:13pm Jun 21, 2012 4:50pm | Edited 6:13pm
I have looked up the definition of “Confirmation” in “The Gullible Traders Dictionary”.

Many students of Technical Analysis have discovered that their best indicator ( e.g MACD) doesn’t work. So they try another one ( e.g RSI ) but they still lose. They then have another go, maybe its CCI this time – same result.
The traders now have three world famous indicators, but they don’t have much faith in any of them. Faced with the problem of three dysfunctional indicators - what do they do ?
It’s easy - they wait until all three of these failing indicators provide the same dodgy signal. Now that they have their “confirmation” they pull the trigger.

So the basic principle of “Confirmation” is:
“Two wrongs don’t make a right – but three or more do.”

Obviously I need to jump on the bandwagon here. As you know I have my own world class indicator – my two pence coin. The two pence coin ( 2000 setting) has performed reasonably well this week on my live account. However I need more indicators to confirm the original heads / tails reading. I now propose to “forward test” ( I believe that is the correct jargon ) a second and third indicator. My two new indicators will be a ten pence coin and a fifty pence coin. When all three “line up” with a sell signal I will take the plunge.

If these signals do not work I will use all three coins in a multi time frame scenario. We T.A. people call this MTF. Basically it means that I have to flip the coins every 15 minutes , every hour and every four hours. In the event that all of these flips produce a “heads” I have my heads up for a short.

Quite frankly being at the cutting edge of modern technical analysis is getting complicated.
  • #23
  • Jun 25, 2012 9:21am Jun 25, 2012 9:21am
As you know I have my own world class indicator – my two pence coin. The two pence coin ( 2000 setting) has been performing quite well.

However today it has put me in three trades that I really don't like the look of.

O.K. Mr Two pence coin - show me the money on these ones - or else.

I have spoken sternly to the coin in question and have advised him / her that if I have any trouble with these risky trades he/she will be handed over to the milkman as part of a deal for some white stuff.
  • #24
  • Jun 25, 2012 10:31am Jun 25, 2012 10:31am
When I am not working away at the cutting edge of modern Technical Analysis I like to relax and browse through the other ( less cutting edge) threads on Forex Factory.

My current favourite is hilarious.

The thread starter has invited posts from “ consistently profitable” traders.

Many of the worlds best forex traders have taken time out from their busy schedule in order to make their modest replies.
Their replies do of course make any normal person’s attempt at satire seem pathetic.

Possibly the highlight of the truly great thread is a reader’s poll.
I have carefully studied the poll results so far- and they are amazing !!!
It seems that 43% of the respondents are consistently profitable.

Unbiased reports suggest that 95% of normal traders consistently lose. So clearly this thread is only attracting the world’s elite forex traders.
As the starter of a cutting edge thread- I am now considering starting my own reader’s poll.
I have not finalised the questions yet but here are the contenders:

Please select one answer from the following:
1. I lie about my trading results to my wife /girlfriend.
2. I don’t have a wife or girlfriend but I would lie to them about my trading results if I had one.
3. I lie to my mates about my trading results.
4. I don’t have any mates but I would lie to them about my trading results if I had any mates.
5. I only lie to people on Forex Factory about my trading results.
  • #25
  • Jun 25, 2012 11:07am Jun 25, 2012 11:07am
Quoting Paddy9
I have looked up the definition of “Confirmation” in “The Gullible Traders Dictionary”.

Many students of Technical Analysis have discovered that their best indicator ( e.g MACD) doesn’t work. So they try another one ( e.g RSI ) but they still lose. They then have another go, maybe its CCI this time – same result.
[font=Calibri][size=3]The traders now have three world famous indicators, but they don’t have much faith in any of them. Faced with the problem of three dysfunctional...

Allow me to share my experience here. Indicator is lagging indicator indeed. However traders find it as a way to predict the market trend in chart. Unfortunately this doesn't fully help traders to earn money. So more indicators come into play to provide the "Confirmation" signal. From my opinion that this is just gambling because when trades is earning, his/her would say this indicator works. Inversely, traders seem like looking some indicators for them to believe that it works and so stick to the plan ,until they find it not useful or not doing much in the end.

So i do not say that indicator guarantee won't work but at least must understand some facts behind. Why it does works and doesn't work sometimes? In fact, market trend is repeating itself over and over again in chart as "historical price repeats itself". So the indicator could only capture and detect for this trend pattern/behavior sometimes.

In order to have such kinds of indicator to predict most of the time correctly, combination of many indicators is needed. However, if traders understand the scenarios of how market trend reacts or works. He/she could look for chuck of indicators that support the behavior/pattern instead of dealing with his/her emotion and doubt about the functionality of indicators and strategy.
  • #26
  • Jun 25, 2012 12:09pm Jun 25, 2012 12:09pm
Quoting Fx2ProTrader
Allow me to share my experience here. Indicator is lagging indicator indeed. However traders find it as a way to predict the market trend in chart. Unfortunately this doesn't fully help traders to earn money. So more indicators come into play to provide the "Confirmation" signal. From my opinion that this is just gambling because when trades is earning, his/her would say this indicator works. Inversely, traders seem like looking some indicators for them to believe that it works and so stick to the plan ,until they find it not useful or not doing...
Obviously you are a wonderful human being - because not only have you read my cutting edge thread - you have made a reply !

Could I ask you to clarify your position ?

As you may have surmised - many of my statements (all of which are serious ) are hoping to provoke an important debate. Are indicators any better than flipping a coin ? Can you flip a coin and use clever Money Management and still beat a cluster of so called "indicators" ?


Are you really saying that the more indicators you have the better the signal ??
  • #27
  • Jun 25, 2012 3:27pm Jun 25, 2012 3:27pm
Quoting Paddy9
Obviously you are a wonderful human being - because not only have you read my cutting edge thread - you have made a reply !
Though sharing information and techniques in FF would only make a different in trading !


Quoting Paddy9
Could I ask you to clarify your position ?
I'm a logical/rational trader and only trade the fact ,so called "historical price repeats itself". Technically saying trade trending and ranging pattern based on statistical analysis.


Quoting Paddy9
As you may have surmised - many of my statements (all of which are serious ) are hoping to provoke an important debate. Are indicators any better than flipping a coin ? Can you flip a coin and use clever Money Management and still beat a cluster of so called "indicators" ?
Are you really saying that the more indicators you have the better the signal ??
Don't make confusion about indicator could predict the market trend ! It is not the prediction but suppose to analyst and explain the past movement. Since i mentioned market trend is repeating itself, so a basket of indicators is required to debrief the market behavior with the best probability outcome at most of the time. In fact, it is impossible for one indicator to dominate the whole explanation and i do not explain that many indicators are applied into game is the best. Only appropriate set of indicators with their respective functions is enough such as trend, strength , volume and cycle for the underlying market. Although it may not precisely provide the guidance for traders to make decision, but traders have done good jobs because he/she apply the right method by using the "lagging" indicator rather than he/she doubt about himself/herself.


However, money management(MM) is crucial in part of the game. As you know that we could manage to manipulate our trading position by using some techniques, rather than giving up the game for massive losing if trading is in inferior position. Who knows what is the next moves in market? Although indicators come into play that market trend is going to behave like this and that. And maybe some of time market is being crazy especially in economy crisis. However, indicator doesn't tell how to entry and exit the market with MM. Trend could easily up and down, and you might earn initially but still lose the game in the end without the proper MM.

A lot of techniques or tools is must for the game ,not just only indicators and MM. Multiple time frame analysis and correlation are also your friends as well. The most important points is probability of the game.
  • #28
  • Jun 25, 2012 5:45pm Jun 25, 2012 5:45pm
Quoting Fx2ProTrader


I'm a logical/rational trader and only trade the fact ,so called "historical price repeats itself"....
Thanks for your reply.

You have obviously done your homework. You make the classic text book case for indicators. I am sure that the vast majority of forex traders would agree with you. Presumably they are the forty odd percent of people from Forex Factory that consistently make a profit.

I take note of your point of view. I of course, will continue with my experiment. I want to know if indicators are significantly better than the toss of a coin.

I am hoping that I can find an answer to my question by actually trading a live account. By flipping a coin, and then trying to manage the resultant trade.

Good luck with your trading. Let's hope we can both make some money.http://www.forexfactory.com/images/icons/icon7.gif.
  • #29
  • Jun 27, 2012 2:08pm Jun 27, 2012 2:08pm
Quoting Paddy9
As you know I have my own world class indicator – my two pence coin. The two pence coin ( 2000 setting) has been performing quite well.

However today it has put me in three trades that I really don't like the look of.

O.K. Mr Two pence coin - show me the money on these ones - or else.

[font=Calibri]I have spoken sternly to the coin in question and have advised him / her that if I have any trouble with these risky trades he/she will be handed over to the milkman as part of a...
You keep tossing.....you are making me pmsl here!!
  • #30
  • Jun 28, 2012 1:27pm Jun 28, 2012 1:27pm
Here is a quick update on the recent performance of the live trading account:

Today + 117 pips
This week +275
This month + 736
  • #31
  • Edited 12:35pm Jun 30, 2012 11:34am | Edited 12:35pm
As I have mentioned before - being at the cutting edge of modern technical analysis can get complicated. Regular readers will know that I have my own world class indicator – my Two Pence Coin. The Two Pence Coin ( 2000 setting) continues to perform reasonably well on my live account.

However, using the Two Pence Coin is not always easy.

My wife ( known to me as “Mission Control”) is repeatedly tidying up my desk . “Tidying up” seems to involve removing my precious world class indicator and placing it in an old jam jar full of dirty old coins.

I have a problem. Obviously I can’t tell my wife how important the coin is to my cutting edge technical analysis.
If I told “Mission Control” that I was playing with real money using a lagging indicator she wouldn’t be very happy. On the other hand If I told her that the main strand of my cutting edge strategy involved tossing an old coin she would probably stop my pocket money!

And the moral of the story is:

I wonder if other traders at the forefront of modern technical analysis tell their loved ones that they are using daft, embarrassingly silly indicators – you know the ones I mean – Bollinger Bands, Fractals, Gator Oscillator and the legendary “Relative Vigor” index......etc etc.

There is even a real Japanese indicator which sounds as if it measures how sexually deviant the trader is. It’s called The Ichimoku Kinko Index.

The more I think about it , the less ashamed I am at admitting to being a tosser when trading. If I had to admit to losing money with useless lagging/repainting indicators with very silly names - then I really would feel that I have something to hide.

Obviously no offence intended.
  • #32
  • Jun 30, 2012 11:48am Jun 30, 2012 11:48am
Quoting Paddy9
As I have mentioned before - being at the cutting edge of modern technical analysis can get complicated.
Love it! Keep up the great work.
  • #33
  • Jun 30, 2012 12:43pm Jun 30, 2012 12:43pm
Quoting Verto
Love it! Keep up the great work.
yh me too,think its great you having a sense of humour.....a rare commodity on ff
  • #34
  • Jun 30, 2012 5:12pm Jun 30, 2012 5:12pm
Quoting Paddy9
As you know by now I think that "The buy or sell decision is less important than the point of the exit."

I agree the statement but it depend on personal view and objective. Because exit position could be at anytime, it might be 10 years later or just next minutes for in profit scenarios. Imagine buying a stock at the roughly bottom price, price still moves further downward. So decide to hold the stock until exit point is arrived then sell it with the profit, and this trade takes about 1 year. In order to protect the temporary of losing money, this might requires massive capital to sustain the case. So i am not sure what is your conditions of exit actually. This is just my view.
  • #35
  • Jun 30, 2012 7:19pm Jun 30, 2012 7:19pm
Quoting Fx2ProTrader
In order to protect the temporary of losing money, this might requires massive capital to sustain the case.


Thanks for your comments.


I note that you boldly describe yourself as "Trader/Strategist/Analyst".


I am not claiming to be any of those things. I am certainly no Forex Guru. I am just a rude little boy, who is pointing out that the King has no clothes on. So anything that I say can safely be ignored.

If you want my two cents:

1. I note that you agree with my statement that the exit is more important than the entry. This is not a point of view that I hear expressed on Forex Factory very often. Maybe I have been reading the wrong threads.

2. Clearly you are right - if you wait for ever for a losing trade to come good - for ever may be too late.

3. I agree with you that if you are risking more on a trade than your account can comfortably stand - it's all going to end in tears.

4. I am not yet convinced that looking at the Macd on nine different charts will tell me if the Euro is going up or down today.

5. I am not yet convinced that tossing a coin will tell me if the Euro is going up or down today. But I am having a bit of fun while I test the idea.

6. I think people ( like me ) who have spent years studying the use of lagging indicators are a bit like young children. They don’t want to hear that there is no Santa.
  • #36
  • Jul 1, 2012 3:06pm Jul 1, 2012 3:06pm
Quoting Paddy9

My wife ( known to me as “Mission Control”) is repeatedly tidying up my desk . “Tidying up” seems to involve removing my precious world class indicator and placing it in an old jam jar full of dirty old coins.

I don’t believe it !!!

Whilst diligently performing the weekly forensic vetting of my web browsing history my wife ( known to me as “Mission Control”) discovered my thread on Forex Factory. It gets worse - she actually read it.

So the secret behind my recent trading profits is out in the open. I refer of course to my world class technical indicator – a Two Pence Coin ( 2000 setting).

Mrs Mission Control (who doesn’t miss a trick) noticed that in a recent post I referred to my Two Pence Coin as “my precious world class indicator”.

So what did she do ?

SHE DRILLED A HOLE IN MY COIN AND HAS HUNG IT ON THE SORT OF CHAIN THAT YOU WEAR AROUND YOUR NECK.

She then handed me back the chain complete with a coin dangling .

“There you go” ( she said sarcastically) “at least Frodo won’t steal it now.”

I thought to myself that she probably meant Gollum - but it didn’t seem like a good time to be splitting hairs with the management. I was already regretting the joke about having my pocket money stopped.

I don’t know if I have mentioned it before, but being at the cutting edge of modern technical analysis can get very complicated.

And the moral of the story is:

Traders like you( possibly ) and me ( definitely ) are prone to getting too attached to an indicator. We pretend that it has magical powers, and when it fails it’s all our fault.

In my opinion it doesn't matter how much "screen time" you put in. If you are using a chocolate teapot you are gonna get found out - hopefully not by mission control. http://www.forexfactory.com/images/icons/icon9.gif
  • #37
  • Sep 4, 2012 4:15pm Sep 4, 2012 4:15pm
Well - I'm still plugging away at the cutting edge of modern technical analysis.

I continue to make trading decisions based on the signals provided by my world class indicator - I mean of course, a Two Pence Coin ( 2000 setting ).

In recent weeks the coin has been unfairly accused of being "low tech" .

This would seem to imply that "high tech" is desirable.

So I have looked up "high tech" in the Gullible Traders Dictionary. The definition is:

" a phrase used to describe lagging or repainting indicators that do not work. In order to maximise their profits most Forex Brokers provide free training videos intended to promote the widespread use of such indicators."

Of course my indicator doesn't repaint or provide lagging signals - ah well , you can't have everything.
  • #38
  • Sep 20, 2012 12:54pm Sep 20, 2012 12:54pm
I needed to know if eurusd is going to drop to 1.2818.

Naturally, I consulted my world class indicator.

It came up tails ( tails means short ) - so thats that question sorted.

The funny thing is - I always thought that trading was going to be difficult.

http://www.forexfactory.com/images/icons/icon12.gif
  • #39
  • Sep 26, 2012 11:27am Sep 26, 2012 11:27am
Well - I'm still here still plugging away at the cutting edge of modern technical analysis.

Actually that isn't quite true.

I am still using my world class technical indicator and making pips - but it's proving quite boring. It certainly doesn't involve any "plugging away" or "brain type work".

I remember the good old days !

I fondly remember getting up early to study the:

1 eurusd Monthly Chart
2 eurusd Weekly Chart
3 eurusd Daily Chart
4 eurusd Hourly Chart
5 eurusd Fifteen Minute Chart
6 eurusd Five Minute Chart

No one could accuse me of not "drilling down" and using a "top - down " methodology. I've read the books and bought the courses , after all.

After a well earned coffee - I would study cutting edge forex sites to steal ideas from proper FX Analysts ( web journalists ). If they said that the good old euro was heading into "resistance" (presumably from the French) I would obviously ignore my own analysis and short the euro.

If the real analysts ( who get paid per word ) said that the good old euro was easing down into strong support I would obviously ignore my own assessment and go long.

Obviously I lost day after day, after after day, after............

Having discovered my own world class technical indicator, I cannot lose - even if I try - and I promise you- I have have taken some pretty stupid trades in the last few months.

P.S. The Euro still falling towards my previously stated target. Obviously I should get out before I lose my shirt.
  • #40
  • Oct 14, 2012 10:53am Oct 14, 2012 10:53am
I am still plugging away at the cutting edge of Technical Analysis- and so is Orlando the cat.

The Guardian Newspaper are running an investment competition and one of the competitors is a ginger cat called Orlando.

Here is a quote from the newspaper:

"Orlando has been taking part in the Observer portfolio challenge, competing against a team of investment professionals and a group of students from John Warner School in Hoddesdon, Hertfordshire. Each team selected five companies from the FTSE All-Share index at the start of the year. After every three months the teams can exchange any of the stocks, replacing them with others from the index.
While the cat selected stocks by throwing his favourite toy mouse on a grid of numbers allocated to the different companies, the students and professionals used more traditional methods. "


It seems that Orlando is actually beating some of the professionals !
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