My Trading Secrets Revealed

Been trading now for many years and have tried trading off all time frames but have finally found the secret of making real money trading the forex markets. This little journal will record my journey of success (or failure) to all who would care to share it. I will only post when the mood takes me and when I have the time so if anyone is interested keep coming back.

So why is it so hard to make money trading the forex markets?

For heavens sake the market can only move up or down and with all the tools at our disposal how can we possibly fail?

My personal experience is that the number one reason for failure is an inability to understand the meaning of an edge and how to use it.

What is an edge? In roulette the casino's edge is the zero slot. Without the zero, if punters just gambled on the red and black the casino would only break even over time.

With the zero it's pay day every day. The casino probably loses 49 % of the time. They don't care. One percent is enough!

And that is why most traders fail. They can't stand losing. They don't understand that trading is a game of probabilities. They are constantly searching for a system that wins all the time. It doesn't exist.

Other traders understand that losing is part of the game but do not understand probability theory. They don't understand that any strategy will, at some time, have a long losing streak. When it happens they either abandon a good system (usually just before it goes on an even longer winning streak) or they go bust.

So without any further ado here is the number one component of the holy grail.

Surviving the long losing streak when it happens. (Sorry to all you guys who are anxiously waiting for my system. I will reveal it soon)

I did say when it happens - not if.

So money management is the first secret.

You have a $10,000 account. You risk 2%.

That's $200 per trade. That means if your stop loss is hit you lose $200

Disaster! You lose. Your bank now stands at $9,800. Your new risk is now $196

OR you win. Lest say you win $600. Your bank now stands at $10600 Your new risk is now $212

So when you hit your losing streak your stake size progressively decreases- you survive

But when you hit a winning streak? You thrive.

sign me up !

salaam

The next component of the holy grail?

You have to be there to win.

What do I mean by that?

You do not know when your system will produce a winner or a loser.

If your system trades off a one minute chart between the hours of 9.am until 1.pm you must be there, watching for your entry signal, from 9.am - 1.pm. You will need a suitably sized bottle to piss in because you will not have time to go to the rest room!

Why? Because if you are unable to give your system your undivided attention. If you have distractions that take you away from your monitor, I can guarantee that you will be present for the losers and miss the winners. You will lose your edge.

So be honest with yourself. Choose a time frame to trade off where you can give your analysis 100% of your attention. Personally, I trade off end of day charts because I am lazy and want to spend my day doing things I enjoy.

I'm still here ,dude
while smoking
it's bad for my health

This is my last entry today. Other things to do.

The third component of the holy grail

Get you stop loss in the right place

I hope everyone agrees that stop losses are essential to protect your assets.

Those who say they do not use stop losses are kidding themselves. Their stop loss is the margin call from their broker or the bailiff banging on the door.

Yet stop losses must be used intelligently. One of the main enemies of successful trading is placing stop losses too close and getting bounced out of winning trades by the stop hunters or by a news release that temporarily moves the market.

The best advice I can give is to put your stop loss at a level where you know your strategy has failed according to the rules of your system. I will expand on this further in a future posting.

I also HATE automatically trailing stops. Trailing stops are a device invented by brokers to get you out of winning trades. You use them if you are scared that the 'paper profits' on your screen could be eroded. Sometimes they may get you out of a trade that turns against you but more often they will bounce you out of a potentially highly lucrative trade by a temporary retrace. I am not saying you should not move you stops to lock in profit but move them intelligently and well away from market noise.

you have interesting aspects here . Count me in

I'm in ...

Hello gautama,
I hope you can explain the (intelligent or right) way with more details to put the stop loss.
Thank you.

PS: In your topic is missing one "L"

I trade the end of day charts and I am a trend trader i.e. I trade with the trend.

I have looked at trading the lower time frames but I find them unpredictable and watching a computer screen for hours on end bores me shitless.

So when I talk about stop loss positioning I am referring to the higher time frames. My strategy is to look for a pair that is trending and wait for price to make a significant counter-trend move. When my system indicates that price has resumed in the direction of the main trend I enter the market.

Incorrect stop loss positioning, moving stops too soon and moving stops too close to obvious levels are all trade killers.

I know many experienced traders who repeat the mantra " never let a winning trade turn into a losing one". I take the opposite view, unless you are prepared to keep your stops at a respectable distance, (which may mean letting 'winning' trades turn into 'losers', or giving pips back to the market),you risk choking out the 'long runners' before they begin. And that is what I am looking for, the long runner. Sure, sometimes I will be stopped out for losses but when I get a runner I want to let it breathe. To give it every opportunity to run. And not

So my initial stop loss will be placed below/above my predicted swing low/high.

If price moves in my favour I refrain from moving my stops until the move is well established. More on this later but I will not move my stop to break even until I am sure it is not within range of normal market movements -and well away from where the herd will place their stops- where the predators hunt.