I've been around for a while...
This thread is my impulse to help a lot of you who don't know YET a few basic things about Systems.
1. be careful about %
- "90% of trades fail". What? Where? Why 90%? Why not 89.9? Remember common sense in a dangerous place.
- "always risk 2% of you account." WRONG! Always risk 2% of your INITIAL account Balance! Big difference. Do the maths.
- "this system works for me 80%." What does this means? 8 out of 10? 80 out 100? 800 out of 1000? What? Pips? Money? What? For how long? What kind of statistics are these?!
2. Heikin Ashi
- find a low and a high. Get the pips distance. Change to candles. Confirm. Got i?
- the top of an Heikin Ashi candle is NOT the opening price. Check with candles.
- if you open a position on a new Heikin Ashi candle it will NOT (most certain) be on the top or the bottom of that candle. Confirm with candles. Confirm with lowest time frames.
3. Candles
- they represent an open price, close price, max and min price during a period of time. What happens during that period of time needs to be confirmed with ticks (less error)
- so, if you think price began on (ex[IMG]chrome://tacache/content/images/smilies/yim/happy.gif[/IMG] top of de candle (open price) and came down to bottom of the candle just like that, we are probably wrong. Price fluctuated from top to bottom a few times. That movement made the candle.
4. Horizontal lines
- remember last point? (3.) Well, if you place an horizontal line in the middle of a candle (ex: 5m time frame) you can't know (unless use tick chart) how many times price touched that horizontal line during that time frame (ex: 5m)
5. Probabilities
- study well the "tossing coin theory" (Google it). If your system makes a straight 10 wins and 1 loss it doesn't mean it's better than the toss of a coin, OK? But if your system makes 10.000 wins and 1.000 loss... well, your on to something great.
6. High Probability Trades
- what's that? Is it about the past? How do you know they have high probability? They happen a lot? Are you sure? Is it scientific or just a feeling? Ignore it...
7. Indicators
- maths that makes graphs about the past.
- when something crosses anything... is a way to put you in a trade aka open a position and close a position
8. Filters
- a way to make you trade less
9. Money manager
- it's your money. Do the math.
----
Things to understand/study:
- High speed trading (yes, it's been said they are make 70% of all market trades)
- Market makers
- Your brain. It's just like mine. Emotions, coincidences, hope, fear, ... Study how your brain works (Google it)
- A business. If you don't own a business know what is to own your business. It's risky. It's all about fighting every day... (Google it). Why? Trading is not a salary maker.
----
Interesting stuff:
- if you test your system for the last 2 years... what do you know? Nothing really. What you should know is that markets follow politics. Every 4 years (more or less), you have elections. Economy are concern about elections. So, market cycles? 3 to 5 years.
- demo trading is not like live trading. Why? It's not just because of your fear... It's because of spread, of news, of brokers, ... Demo trading is a game and it's really very easy to be "pip rich" on demo.
I'll post some more "alerts" in time.
Feel free put help me put out this "HOW-TO not waste your time like we all did once" so that all can study with more success and don't make basic errors of systems evaluation.
Regards to all.
This thread is my impulse to help a lot of you who don't know YET a few basic things about Systems.
1. be careful about %
- "90% of trades fail". What? Where? Why 90%? Why not 89.9? Remember common sense in a dangerous place.
- "always risk 2% of you account." WRONG! Always risk 2% of your INITIAL account Balance! Big difference. Do the maths.
- "this system works for me 80%." What does this means? 8 out of 10? 80 out 100? 800 out of 1000? What? Pips? Money? What? For how long? What kind of statistics are these?!
2. Heikin Ashi
- find a low and a high. Get the pips distance. Change to candles. Confirm. Got i?
- the top of an Heikin Ashi candle is NOT the opening price. Check with candles.
- if you open a position on a new Heikin Ashi candle it will NOT (most certain) be on the top or the bottom of that candle. Confirm with candles. Confirm with lowest time frames.
3. Candles
- they represent an open price, close price, max and min price during a period of time. What happens during that period of time needs to be confirmed with ticks (less error)
- so, if you think price began on (ex[IMG]chrome://tacache/content/images/smilies/yim/happy.gif[/IMG] top of de candle (open price) and came down to bottom of the candle just like that, we are probably wrong. Price fluctuated from top to bottom a few times. That movement made the candle.
4. Horizontal lines
- remember last point? (3.) Well, if you place an horizontal line in the middle of a candle (ex: 5m time frame) you can't know (unless use tick chart) how many times price touched that horizontal line during that time frame (ex: 5m)
5. Probabilities
- study well the "tossing coin theory" (Google it). If your system makes a straight 10 wins and 1 loss it doesn't mean it's better than the toss of a coin, OK? But if your system makes 10.000 wins and 1.000 loss... well, your on to something great.
6. High Probability Trades
- what's that? Is it about the past? How do you know they have high probability? They happen a lot? Are you sure? Is it scientific or just a feeling? Ignore it...
7. Indicators
- maths that makes graphs about the past.
- when something crosses anything... is a way to put you in a trade aka open a position and close a position
8. Filters
- a way to make you trade less
9. Money manager
- it's your money. Do the math.
----
Things to understand/study:
- High speed trading (yes, it's been said they are make 70% of all market trades)
- Market makers
- Your brain. It's just like mine. Emotions, coincidences, hope, fear, ... Study how your brain works (Google it)
- A business. If you don't own a business know what is to own your business. It's risky. It's all about fighting every day... (Google it). Why? Trading is not a salary maker.
----
Interesting stuff:
- if you test your system for the last 2 years... what do you know? Nothing really. What you should know is that markets follow politics. Every 4 years (more or less), you have elections. Economy are concern about elections. So, market cycles? 3 to 5 years.
- demo trading is not like live trading. Why? It's not just because of your fear... It's because of spread, of news, of brokers, ... Demo trading is a game and it's really very easy to be "pip rich" on demo.
I'll post some more "alerts" in time.
Feel free put help me put out this "HOW-TO not waste your time like we all did once" so that all can study with more success and don't make basic errors of systems evaluation.
Regards to all.
