I posted this piece in the news section in response to another poster who questioned the ability of a trader to make any money if they did not use the system he is using. So I thought I would share it here for those who would like a peek inside my technical trading techniques.
Comments are welcome.
I'm good with identifying levels, but I suck at timing. Therefore I stick to my levels and trade accordingly. Sometimes I identify levels right to the pip, but most times within a 15 pip range. Once that level is reached, be it some form of support or resistance derived from a fibo level, a trend line/channel, or what have you, as long as I am trading in the direction of the prevailing trend and there are no risk events messing with PA, I am set for a great trade. It may not work and I will get stopped out, but in such a case the loss is small and I wait for the next level to try again. If the trade goes my way, once first target (Next level of support or resistance) is reached, I take partial profits. Sometimes it's just 25% of my position but most times it is at least half. If I see an opportunity to scale in some more after a pullback, based on the same rules as above, I take it while leaving the remainder of the previous position to ride, trailing the stop up as we go along the trend. It's very simple and anybody can do it PROVIDED that they have the discipline to stick to the plan and the personality to support the trading style. This is just one of many trading styles that can produce consistent profits. With such a method, I could be wrong about direction (the trend) and still have a chance of exiting with a profit. A perfect example was last month when I was long AUD/NZD. Clearly a loser for anybody hanging on, but I took partial profits as it rose, and when it failed to reverse, I got stopped out, but still overall in the green.
The problem with most traders is that they lose because of greed and false hope. Greed comes in by not taking partial profits or by overleveraging right out of the gate. False hope comes from hanging on to losers. It is further exacerbated when (as you say) the trader works with insufficient capital. If one thinks that $500 per month is not enough profit, then obviously they should not be trading with a $500 account if they plan to survive this business in the long term.
My profit targets are non-existent. I take what the market gives me. If it's only $500, then so be it. If it's $5000, that's great also. At the end of the day, it's all profit and I would never complain. Losses are also part of the business. If one has an aversion to losses, then the tendency to fall into the false hope trap of hanging on to losers increases exponentially. There's a saying about "Attracting that which you fear the most". So a trader that fears losses, may not take a loss when it is prudent to do so and therefore hang on to a loser thereby attracting even more losses as it turns into a habit. I sometimes hang on to a loser and in some circumstances I may even add another position, but by that time, I would have already taken partial profits sufficient enough to cover the losses... or at least most of them. It happens. I accept it and move on. No biggie. At the end of the year, I've still made enough money to survive, be it just enough to support my lifestyle, or even more to put away for later.
Now, if you or anybody else can produce a system that is successful regardless of a lack of trader discipline or a trading psychology that is conducive to such discipline, then I think that would be as close to a holy grail as one can get. However, as long as it is the trader that clicks on the buy, sell or close buttons, success very much depends on the trader and not just the system.
Comments are welcome.
I'm good with identifying levels, but I suck at timing. Therefore I stick to my levels and trade accordingly. Sometimes I identify levels right to the pip, but most times within a 15 pip range. Once that level is reached, be it some form of support or resistance derived from a fibo level, a trend line/channel, or what have you, as long as I am trading in the direction of the prevailing trend and there are no risk events messing with PA, I am set for a great trade. It may not work and I will get stopped out, but in such a case the loss is small and I wait for the next level to try again. If the trade goes my way, once first target (Next level of support or resistance) is reached, I take partial profits. Sometimes it's just 25% of my position but most times it is at least half. If I see an opportunity to scale in some more after a pullback, based on the same rules as above, I take it while leaving the remainder of the previous position to ride, trailing the stop up as we go along the trend. It's very simple and anybody can do it PROVIDED that they have the discipline to stick to the plan and the personality to support the trading style. This is just one of many trading styles that can produce consistent profits. With such a method, I could be wrong about direction (the trend) and still have a chance of exiting with a profit. A perfect example was last month when I was long AUD/NZD. Clearly a loser for anybody hanging on, but I took partial profits as it rose, and when it failed to reverse, I got stopped out, but still overall in the green.
The problem with most traders is that they lose because of greed and false hope. Greed comes in by not taking partial profits or by overleveraging right out of the gate. False hope comes from hanging on to losers. It is further exacerbated when (as you say) the trader works with insufficient capital. If one thinks that $500 per month is not enough profit, then obviously they should not be trading with a $500 account if they plan to survive this business in the long term.
My profit targets are non-existent. I take what the market gives me. If it's only $500, then so be it. If it's $5000, that's great also. At the end of the day, it's all profit and I would never complain. Losses are also part of the business. If one has an aversion to losses, then the tendency to fall into the false hope trap of hanging on to losers increases exponentially. There's a saying about "Attracting that which you fear the most". So a trader that fears losses, may not take a loss when it is prudent to do so and therefore hang on to a loser thereby attracting even more losses as it turns into a habit. I sometimes hang on to a loser and in some circumstances I may even add another position, but by that time, I would have already taken partial profits sufficient enough to cover the losses... or at least most of them. It happens. I accept it and move on. No biggie. At the end of the year, I've still made enough money to survive, be it just enough to support my lifestyle, or even more to put away for later.
Now, if you or anybody else can produce a system that is successful regardless of a lack of trader discipline or a trading psychology that is conducive to such discipline, then I think that would be as close to a holy grail as one can get. However, as long as it is the trader that clicks on the buy, sell or close buttons, success very much depends on the trader and not just the system.
Those who say it cannot be done should not interrupt those who are doing it
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