Fail Better

Here:

you mean you want it resistance last for it to act as fresh support.

Right! Just like Wizard states in his early posts.

Hi Mez,

Thank you for your post and I completely understand. I have seen the same thing happen to many. Traders often start out successful with it and then become a little too overconfident at how well things are working and then the equity curve starts seeing a dip or, worse, a downtrend.

I think this is natural because at first traders are often dubious as they dip their toe in the water so they wait for the high probability setups but as they take those setups and they work, they try to increase the trade frequency (and theoretically the return) and then the quality of the setup diminishes.

At this point, many shift away from the original theory and start to look for other ways of making money or may stay with it in its general form but look to add other elements to it to qualify setups such as EMA's, indicators etc.

What you really want to do at this stage is rather than looking elsewhere; go back through your trades carefully and ask yourself questions;

- How many of the trades clearly fit the rules on entry, stop, target and trade management? (If you don't have rules, why not?)

You should have a clearly defined set of rules. For a new trader, it is very hard to guage what is making you win or lose if you are doing a different thing every time.

- What links your losers?

You can look at this generally; e.g. Perhaps most of the trades went in your favour initially but you tried to over run them and it is only with hindsight that you see clear FTA's? In that case, maybe there is something wrong with your drawing of levels?

You can also look at them specifically: If you traded SFP's was it the SFP's of smaller swings that lost versus larger swings?

Maybe it's trades that are held overnight that lose because you cannot manage them properly?

If trades go against you, is there something that happens in the vast majority of them that could get you out early? E.g. If you buy a level, how many times when it closes through that level on the H1 does it go to your stop?

Maybe your losses are confined to particular pairs? If you eliminated the crosses, would this make a difference?

Maybe you even have an edge (a positive expectancy) but risk is letting you down? This is VERY common that people lose money whilst having a positive long term expectancy because they vary risk. Maybe you started out risking 2% per trade and had a great run but then went to 10% and therefore very quickly undid all your gains. Maybe you vary your risk based on the strength of the setup but you are either grading the setup wrong or have just been very unlucky in having your higher risk trades become losers?

- What links your winners?

Are there particular markets you never seem to lose on?

Are there particular setups that are way more high probability than others? As an example, when I take a trade where the market has gapped, continued on in the direction of the gap and then SFP's I almost NEVER lose.

This is just a brief overview and the list goes on as you come up with ideas of areas to look at. But I absolutely promise you the answer is in your journal and an intensive trade review. You should look over about 30 trades at an absolute minimum and the process can take a day or more depending on the number you have in your sample but it is well worth it.

What many people don't realise is that the answer is always in your trade history.

It has to be because even if you lost money you should have had a good sample of winners; you simply have to do more of what clearly works and the opposite of what doesn't.

It's like if you setup a shop tomorrow selling something and you had no customers and it went bankrupt you would ask yourself questions;

- Am I in doing business in the right location? (think of levels in the market)

- Am I selling the right product? (are there other markets that perform better / am I always trying to buy the weakest or sell the strongest?)

- Is it something to do with me as a person? Perhaps I am moody/abrasive etc (think of trading psychology and how it impacts trades)

To answer your original question; yes I am still holding webinars. They are free to attend and are currently on a Wednesday evening (6.30PM GMT) rather than a Sunday though for the month of November. Signup can be found by clicking on the link in my signature.

Wow great reply,

I've been digging through my trades and here's what I've come up with.

1. I stopped looking for setups for proper entry/exit and just began trading with the trend and arbitrary points (and stoploss) that didn't line up with confluence or price action.

2. I started trading the news (I realized that my first news trade was a large winner subsequently/psychologically making me think the market follows the news. EURUSD particularly burned me here, good news was bad for the euro, bad news was worse for the euro.

3. Which led to emotional trading. And we know how dangerous that is.

4. I began to feel I couldn't pick winners so I started relying on indicators which only had a 26% success rate and the gains were much smaller than the losses.

Since then I've redone my chart to what my above attachment looks like, clean with as little indicators as possible, I'm now looking for proper setups again, and I'm wary of the news, setting up pending orders around significant events with very tight stops.

You're absolutely right that my journal let me know what I was doing wrong.

@ rust - great spot on the support, I misjudged it and the price bounced right there at where you marked for quite a high spike.

Thanks again to all who support this thread.

some levels I am looking at.

The USDJPY chart, I'd like to point out that the SFP also has a decent pinbar for additional confluence. However it was over the weekend, will it still hold the same power? I've never traded a pinbar from the friday close.

Edit: just saw you had +pin on there.

USDCAD

I remember Tom's killer trades - when price gaps, is not filled, continues in direction of gap and then creates H1 SFP. Watch for SFP @0.9982. One thing I don't like is D1 SFP bearish so it would be traded against daily bias. Anyway, I prefer B/O & RRT but possible [email protected] could be interesting also.

So, I was looking through my journal, and I noticed I have a 70+% winning trade percentage. However my losses are heavy ones which outweigh my profits. Obviously I am not practicing proper risk management when I look at it like this. (I'm doing better since coming back here. I am just mulling over my data to find my weaknesses.)

So what can I deduce from this? I can pick winners. But on the other hand I don't know when to cut losers. So what else is between the lines? My lot sizes and pip calculations are probably bad.

With a 10k account @ 50:1 leverage I should risk no more than 2% which = 200.00
If my understanding is correct, 1 (edit: mini) lot = 1$ per pip. Trading 4 lots at a time it would take 50pips to hit my stop. So for a 2:1 RR it would take 100pips to hit my tp. I've rarely had that target been hit.

Most of my trades average 20-40 pip gains, then usually reverse on me. Which could mean I'm entering too late. Or overestimating market movement. Or both.

Lets say that I want to play to my strengths of picking short term movement with a high success rate. That would mean I should use 8 lots with a 25pip SL and 50pip TP. Or even risk less for less reward, 20:40 which is more likely to fall within my picking success than just missing it by 10 pips.

Another side thought: I'm over trading. Why? Probably because I know I can pick winners. Which is causing me to miss quality winners, since my avg wins are only 20-40 pips.

Thanks all for your support, It's amazing how helpful putting your thoughts down can be.
Everyone's comments/criticism's/corrections are welcome, I have thick skin and am dedicated to improving myself.

-Mez

Edit: Excellent post by Wizard summarizing my feelings right now.
http://www.forexfactory.com/showthre...21#post1432221

Hi Mezzy,

1 lot is $10 a pip not $1. If you are trading on a live account STOP right now and go back to demo before you blow it up.

Flash1, hehe not to worry, I understand how it works, I just got my terminology mixed up. In MT4 open an order with a volume of 1.00 (which is why I said 1 lot, however 10 of these make a lot.) I believe they are called mini lots, which is 10,000$ trading power.

I'm trading mini lots. I'm going to go ahead and edit that now, thanks for pointing it out.

Mez,

There are two things that determine whether you have an edge:

i) Win percentage
ii) Average Win Versus Average Loss (This can be expressed as a ratio)

If you are winning 70% of the time (which is excellent) and still losing money then your AW VS AL ratio must be pretty low.

Infact, let's get mathematical.

Even if your average winner was $86 and your average loser was $200 you would STILL be just about making money on a 70% strike rate.

0.70 x $86 = $60.20 - 0.30 x $200 = $60.

$60.20 - $60.00 = $0.20c

It's not much of an edge but it would still be an edge.

(Note: This is only valid if you are assuming the same risk in each trade. e.g. you are always risking 2% of your account on each trade etc.
If you are not doing that, I would suggest you do until you are more experienced)

In the meantime, let us address something: this has NOTHING to do with risk management. Risk management can affect trades in a whole variety of other ways. We won't even touch that for now.

The problem you express is to do with your edge.

You can risk way more in terms of number of pips than you make in return and still have a long term edge but the figure has to be balanced with your strike rate.

When you talk about your stops and targets, you are going about things entirely back to front in my opinion.

I quote this line to emphasise:

"Trading 4 lots at a time it would take 50pips to hit my stop. So for a 2:1 RR it would take 100pips to hit my tp. I've rarely had that target been hit."

Everything in that line above is wrong.

You are using an arbitrary stop to define your risk. Why a 50 pip stop? Where did you pluck that number from? Is that based on something statistical like average drawdown? Or is that just because you feel comfortable with that number for a stop?

And why does the target have to then be 100 pips or double? Is that because that is what you have a heard a decent Risk/Rewarrd is? To me, it sounds like the nonsense that you will usually find in trading books.

If you make money 70% of the time you could have a 50 pip stop and a 50 pip target and make money hand over fist. If you are going to use a target of double, base it on statistics. If you find the market will usually travel 50 pips in your favour - fine.

You need to look carefully at your stats. It's not good enough to say "most of my trades go 20 - 40 pips in my favour".

Based on that; where on earth does your target go?

If you target 40 pips how often does it hit +40?

If you go at the low end of targetting +20 to make sure it always hits target, how is that then going to affect your Avg W VS Avg L?

You can't just say "OK, I'm going to target +20 so I need a stop of half that so I will just go with 10". That is ridiculous because it is imposing what you need on the market and the market doesn't care what you need. It has no idea what you are doing. You need to base your stop on an area that technically the market shouldn't hit. Those might be chart technicals or they might be technicals from your record e.g. you know that the market never goes more than 10 pips against you when you trade is a winner etc.

P.S. Sorry if I sound a bit grumpy - I'm quitting smoking and you're not getting the worst of it! :-)

-Tom

And again today in the FTSE 100.

You won't find this setup fail very often.

Tom,

best wishes on quitting smoking, it's killed a few of my family members, I know it takes a lot of determination to quit.

Let me see if I'm tracking what you meant.
(Preface: I was using RR figures from what I read that don't risk more than 2% of your capital.)

The problem does not lie with my RR, the problem lies with what my target is when I enter a trade.
Why was I selecting my SL/TP to 20/40 in the previous post? Because I haven't been setting correct targets.
Because 20/40 @ 8 mini lots is approx 160$ for me = < 2% capital risk = what I've read all over the place.

My logic was that if I hit avg 40 pip wins 70% of the time that I should go with that strength and set 40 pip targets example below of my thoughts:

.70 *320= 224 .30 *160=48 Peak Performance (40 pip target) 176$
.70 *160= 112 .30 *160=48 Avg Performance (20 pip target) 64$
Avg 120$

Punchline* What your saying is it doesn't matter if I set 40:40 or even 40:20 etc as long as my AW is higher than my AL.
And by doing that I need to know where to set my targets to have a good strike rate? Then after I can set my SL according to my comfort within that trade.

-or-

Set proper levels of lot size/sl/tp based on the trade and my target. Sorry I think I'm a little confused.

Do you know the concept of "position sizing" ? From this, I don't think you do:
You are going at it backwards. Try reading this http://www.babypips.com/school/under...sition-sizing/

And btw, all calculations are kind of pointless.

Expected_Value = (Average_Win * Winrate) - [ Average_Loss * (1-Winrate) ]

You only need this equation to be positive to be a LONGTERM winner.

Position sizing is determining your stop and set your lot amount based on your stop according to your risk appetite.

I've been through the whole babypips course. (doesn't mean it would hurt to do it again now that I have hands on practice)

Basically set your stop to the trade, then determine the rest off of that.

What I was trying to do is set my stop based on my target, not the trade. Yeah?

Thanks again.

http://www.babypips.com/school/top-usage-mistakes.html

^ Sums what you guys are telling me. It appears the last things you learn are the first you forget. Time to do some re-reading.

rounded retest? The round part is a little well, not really round.

I didn't take it because I thought price action was moving to strong to the support line. I thought it would break.

Same here. I had my level marked slightly lower and there was also immediate retest of that level after break. Better seen on lower timeframe. I thought that kiss-butt consumed some of supply so i skipped this. We had sth similar to this on AUDJPY last week but there was very clean cut of support level.

It's good to compare setups which are tempting but have some flaws (like this kiss-butt on USDJPY) to very similar but flawless ones which worked in the past.

Hello Tom, and everybody!

First of all, sorry for my english, that's not my mother tongue, and I could speak it better.
This thread is amazing...I just started to read it 2 days before, and I can not stop it. I'm on the 30th page, so i have some homework for the next week. I'll post charts in the future, but now i just would like to ask if the webinars still avaliable for free of charge on each sunday? And each months on the last sunday, there is a special webinar for 15Gbp, right?
Thank you for this thread Tom!

Regards

Maybe a pullback to the former resistance-last will be better