Extracted Thread (per thread starter's request)

Now to get to this post about trading psychology.

This method is not hard in the sense of being physically challenging to learn. All that is required from you is to get at the least 50% of your trades to breakeven at a 1:1 risk:breakeven. You can almost (not quite) achieve that by entering the market randomly. This is why I keep stressing the fact that you shouldn't be too worried about your entries. Let me give a quick example.

You have a 5 pip stop and are aiming for 1000 pips (Or any other huge r:r).

1000/5 = 200. If we believe the market is random then your take profit is 200 times less likely to hit than your stop.

So, we can say with some degree of confidence that 1 in 200 trades should hopefully go for 1,000 pips. Sound reasonable?

Now let us say that you managed to get just half of your trades to breakeven. Meaning you suffered 100 losses. 100*6 = 600 pips lost.

1000-600 = 400 pips net gain.

So, in theory, you can actually get even less than half of your trades to breakeven and you should still make money.

Now I am fully aware that setting your trade to breakeven will skew these probabilities, but I sat down with a trading friend who is more maths orientated than I and we managed to calculate that it doesn't cause a significant difference in the probabilities at all, though I forget the exact figure. If somebody could calculate this difference I'd be grateful.

Therefore the actual trading aspect isn't what makes this so hard. It's managing to take those 100 (or more) losses against you and keep going.

Make no mistake this is indeed very difficult. Trading for hours on end, perhaps for weeks at a time with every single one of your trades getting taken out at breakeven or for a loss, constantly thinking of all the money you could have made by taking small wins. And this is something that unfortunately not many people can cope with, which is why I suggest you try this on a demo, or even better a micro account. Try to take 100 trades without taking profit on a single one, and see if you can handle it psychologically.

The only thing that kept me going was knowing that when a trade sticks, it hits big. At one point I was risking 1% per trade (still too high - I'd recommend nothing more than 0.5% for those with a risk appetite and 0.1% for the conservative trader) and caught a 1,000 pip move. That's a 200% gain, in a single successful trade. Of course the effort that it took to get that trade to stick was depressing to say the least.

I think being in University also helped me with this method a great deal. I was always so busy that I never really had time to analyse my trades or see how they were doing, how far they had gone etc. I wasn't relying on trading for an income, so I'd just come home every night, enter some trades, get as many to breakeven as I could and then close the platform.

This is something that I would highly recommend as an excellent exercise to get you started. On a demo/micro account, just find setups and enter the market. As Graeme would perhaps say, participation in the market is the only way you can make money. If you stay on the sidelines you cannot win.

So just enter any setup you see valid. If it gets to 1:1 set it to breakeven, If not take the loss. Move on. Don't even look at your open trades. After perhaps a month of doing this, I can assure you that you will be pleasantly surprised when you take a look at your running trades. You might see something like 2,000 or more cumulative floating pips. At that point you can smile and know that you need only keep repeating that same procedure in order to have more money than you can shake a stick at. Once at that point you can then start thinking about when to close out trades.

Honestly, even if you find that this type of trading isn't for you, I cannot even begin to describe how much the above will help you in your trading career. After having entered the market hundreds of times you will be confident. You will no longer second guess your trades, or tremble when hitting the order button. You won't stare at your screen with a huge adrenaline spike in your blood, shaking as you watch the P/L fluctuate (we've all been there, believe me). You'll learn to take losers as easily as you take winners. You will learn to simply walk away from a trade and let it do it's thing.

Of course to the experienced traders among you this exercise may be rather cumbersome, but it will still give you a feel for what this method is about, and what it feels like to take 10,20 consecutive losses against you, and perhaps even hundreds of breakeven trades.

Sorry for rambling, if you have any questions don't be afraid to ask. I'll do my best to answer.

Next post I hope to cover a trade's life cycle. I planned to have that as this post but I figured the mental aspect is probably was 99% of traders first attempting this will struggle with.

Stay safe, Fez

I'm afraid you would only see disappointment. It would be up for perhaps 2 months and be in a large drawdown with not a single thing to show for it. And when a large trade finally sticks people will scream luck! Let me see you do that again! And so the cycle would begin once more.

I'm here to lay out the principles of how I trade. I've actually received an overwhelming number of pm's from traders asking to pay me fees to copy my trades. I have respectfully declined all offers. I'm not on this forum to make money, I do this through my trading.I'm not asking you to put any money on the line at all. If you find what I say makes sense, try it out on a demo. See if it works for you. If it does, fantastic, come back here and give feedback. If it doesn't, I'd still love for you to report here and explain exactly what went wrong. If you do not have the time nor effort to spare in trying it out, then I can assure you that the patience required for this method wouldn't allow you to trade it even if I did post some kind of amazing results.

Hope I haven't offended you.

Fez

I actually only enter using support and resistance, so I will never buy into resistance. I also stick with the trend. But this is all on the lower timeframes. I ignore what the longer timeframes are telling me, and enter both long and short trades. Should the monthly trend prevail, I will make money. Should it turn and reverse, I will be among the first to have trades lined up to take advantage of it.

Fez

you'd better start looking at free-of-charges info, with a different mentality .... jmho.

Fezmar

You talk about entering 100's of trades and using 1hr to 5m charts. I was wondering how you manage to do this with such a busy schedule. How long might it take you to enter 100 trades?

Not sure if I missed this in the thread but I didn't see any comments about how you determine if your going to enter long or short. Maybe an example on an entry set up might help us understand better.

There's no such thing here. We are discussing about trade management ... not entries. That's not a trading system. You must have your own entry setup.

Would it make sense to have entry levels based on, say MACD with a ridiculously large period, and short shorter period in order to enter longer term trends?
This method was argued by a guy named dkrock (http://www.forexfactory.com/dkrock) on his blog (http://lydiaforextrading.blogspot.de/2014/09/making-macd-useful.html) and I found it to be quite useful for pullback trading.

k

Why mate? Does it matter? Imagine he is looser offering you a great idea. Would you refuse it just because he couldn't manage it well and lost money? Even if he would sell something, knowledge is the most important you can substract from this (or any other) thread. I don't see any logic behind showing up real results (demo neither).

I'd like to see his results if I invest money to his trading. I'd be for hiding results of everyone. It makes an ilussion that high return are made by great skills while it is question of big risks and good luck.

He offers money management technique. Take it as a good idea. Maybe not convenient for you. Maybe yes.

Do his results make you better trader?

...

Believe or leave.....I like that! I'm going to steal that the next time I must address a troll.

Thanks FerruFx

One question Sir. Let's say you enter a nice down going swing. Not one big enough to take profit but sizable nonetheless. You will continuously add. All the longs die and a bunch of the shorts survive. At the bottom when the market start turning you are net short with perhaps a dozen of positions. You accumulated losses on the way. Now the new coming longs survive and the new shorts die. The old shorts on the way die at BE. The market is rising and despite you're adding to the long side you lose money (floating profit resorbs very quickly) because for now you're still net short in a rising market. The downward pyramid is still in place even if it is collapsing (huu how do you say collapse to the upside??). Do you consider closing minor short positions (50-100 pips) to re-balance? That's a problem I faced with the millipede: the time needed to accumulate enough long to be net long and the market was turning down again... and you get to sacrifice some runners to avoid this. (This doesn't only happens during the ranges but also in volatile trends)

thats exactly the main crux with such an approach... guess one has to live with it.. till a clear trend evolves.. in the mean time maintain the inventory ie. MM/risk
to the point wehre u dont get wiped out during such a phase...

I understand your point but it can and does happen during clear trends made of nice HH and HL.

Great question! I have to deal with that even to this very day.

I've always wondered what is the best strategy to adopt?
1- Stay zen as a shaolin monk at watch your card castle fall down. That's the plan!
2- Close the counter trend swing because "you predict" the market will continue for a next HH (seriously you can know?)
3- Close all but the 2 best performers because in the end so few survive anyway.


BTW: Don't feed the trolls!

go with nr 1..


even a volatile trend will somewhen settle down .. or reverse.. and goes smooth from there ??
aswell as all ranges will disolve anytime in the future


the question is .. are you still there participating when that happens ? (got bullets left ? )