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Trading consistently for profits

  • #1
  • First Post: Edited 9:36am Jan 30, 2015 7:52am | Edited 9:36am
I thought on starting this thread after seeing over and over again the same threads on FF about different myths or misbeliefs on trading the markets. Maybe this is one of the facts that Forex trading is time consuming and misleading for the most of new as well as old traders. At this point I have to mention that this thread is mostly for those that are trying to make profits in forex (consistent profits) and even for some of those that would like to see a different approach to market trading from an experienced trader point of view.

Everything that will be presented here is information that I use in my trading, gathered in my first years of trading by reading forums, books, theories and trading many systems and indicators and trying to understand the logic behind them.

If anyone is interested or has any questions on the coming info, feel free to do so but try not to trash the thread too much.

WHAT is this thread all about:
Lot of traders are interested in glamorous indicators to make them rich - this thread is about truths in the market and how ANYONE can trade profitable on a constant basis.
This thread is not about colorful indicators and good looking systems.

WHO will benefit from this thread:
Those traders that are taking trading seriously and want to learn how to trade for a living.
Traders that want to fill their time with small profits and traders expecting me to share a secret and extraordinary squiggly line indicator are in for a big surprise and will not take interest in this thread.

This being said, let's proceed to what everyone is interested in by visiting this forum: trading for profits.
  • #2
  • Jan 30, 2015 7:58am Jan 30, 2015 7:58am
First of all: the markets ARE NOT RANDOM! This is not open for debates as it is not a question.

There has been a coin toss theory for some time now, roaming the forum and how the markets are random.
Markets are not random. Any good trader that trades for a living can confirm this fact. Some will have some arguments, other different ones but probably 100% of profitable traders will agree that markets are not random, including FOREX.
As a fellow member (Hanover) said: this comes from lack of knowledge.
Lack of knowledge also brings "the best" to trading: fear, loss, emotions, etc

I do not believe that a trader that considers the markets to be random can trade for a living.
  • #3
  • Jan 30, 2015 8:16am Jan 30, 2015 8:16am
As a response to one of my posts here (http://www.forexfactory.com/showthread.php?p=8035089#post8035089), I want to make an annotation for someone that PM'ed me earlier, because I started with the markets not being random so I believe it is a good time to address the following:

"I could say that there is indeed at least one similarity (or almost) between the markets and coin toss but probably just very few of the traders will know it."

A coin toss chart looks the same as a forex chart. True and false - more false. (but you could read hanover's post here (http://www.forexfactory.com/showthread.php?p=8033327#post8033327))

The one similarity between the coin toss and the markets is : equilibrium/balance.

I believe you read that forex is a zero sum game. Probably in your opinion, which is not false, is that what one trader losses, another trader wins (if I'm mistaken please correct me, I would love to see your opinion). In my opinion, is that the markets are always in equilibrium.

I will try and post a chart to better visually explain what this equilibrium is all about and how it's the key to very successful trading.
  • #4
  • Jan 30, 2015 8:45am Jan 30, 2015 8:45am
sounds like a great thread topic to me, i'd be interested in anything you are willing to share. i am trying to build my own set of rules and a strategy for trading. i actually started a thread about my trading plan, gotten some valuable feed back. basically i'm trying to work with a very basic strategy that only allows me to trade high probability set ups. so far my most successful pattern is the good old double top and the head and shoulders. for some reason i'm having better trades when i place an order at a predetermined level. of course this means i don't get to use candle signals to confirm my entry, but as i'm only taking these with a tight stop loss it's ok if some of them fail, as long as i stay in long enough to let the winners make up for the losers. but yeah the more i study and read, the more i realize there is a lot to learn, specially about the ego and about how the market moves.

at the beginning i was closing trades with 5 pips profits and stuff like that lol. or even worse closing them after they went 10 pips against me only to watch them come back and go to profit lol. it's an interesting subject for sure, as the technical know how is only 1 side of it, if you can not master your self, it will not work as far as i can tell with my low level of experience.

anyway thanks for a great and thought provoking thread.

WM
  • #5
  • Jan 30, 2015 8:55am Jan 30, 2015 8:55am
Quoting WeeMee
sounds like a great thread topic to me, i'd be interested in anything you are willing to share. i am trying to build my own set of rules and a strategy for trading. i actually started a thread about my trading plan, gotten some valuable feed back. basically i'm trying to work with a very basic strategy that only allows me to trade high probability set ups. so far my most successful pattern is the good old double top and the head and shoulders. for some reason i'm having better trades when i place an order at a predetermined level. of course this...
I remember your thread. You're one of the traders that are thinking and want to achieve profitability, not someone that thinks trading is about colored indicators.
High probability setups are good for some profits and if you can achieve a set of rules for trading based on high probability you will be fine. I have traded also different high probability systems, some of them quite complicated math calculations but in the end I have reached the style I am trading now and does not have anything to do with what I have traded in the past.
I never found candle patterns to be reliable. I don't like a large drawdown.
I like very small SL's - if it happens to get hit then so be it (rarely happens). - that's how I perfected my entries.
I never trade with the same TP. Every trade is different. - that;s how I perfected my exits.

Stick to this thread and maybe your trading will change ... who knows...
  • #6
  • Jan 30, 2015 9:16am Jan 30, 2015 9:16am
If a trader understands the equilibrium of a market, how is it achieved and determined, it almost immediately knows how to benefit from it.

The image below will show you (a random picked example) of what equilibrium is in the market.
This balanced moves are on the charts at all times. And for those that will eventually come to understand this, will be very clear how the markets are not random and can be traded very profitable.
Attached Image (click to enlarge)
Click to Enlarge Name: equilibrium.jpg Size: 244 KB
  • #7
  • Jan 30, 2015 9:25am Jan 30, 2015 9:25am
Probably some of you have read a lot of books as I did and a lot of forum threads. Maybe some of you heard the concept that a market is multi-dimensional one.
This is somewhat true...
The markets are very easy to trade as long as you know what to look for. The markets are not easy to trade if you expect a little green man to pop uot of your screen and yell: "BUY" or "SELL"

I'm not a genius...far from one. I was not a prodigy child...very far from that. I didn't knew how to trade in my first years.
My ego kept me from seeing the reality of the markets. I was getting upset and nervous when someone said to me : "You do not know how to trade!"
All I did was to stop from trying all kind of indicators and EA's and to put together everything I read and learned.
Of course, I was somewhat motivated by my life and family.

If you are a trader, look at your account 1 year back and say it out loud: "I won" or "I lose". Nobody cares about you or your account. YOU should be the one caring and wanting to see it in profit at the end of the month/year.
  • #8
  • Jan 30, 2015 9:34am Jan 30, 2015 9:34am
@Pinktrade

This looks set to be a great thread. I for one am in complete agreement with you, it is always trying to reach equilibrium but based on the current fundamental state of each economy. Which is why you have trending and ranging market conditions.

I trade based on fundamentals and sentiment, looking at central bank speeches and economic news events. This paired with simple supply and demand / support and resistance zones, is magical.

Looking forward to the growth of this thread.
  • #9
  • Jan 30, 2015 9:36am Jan 30, 2015 9:36am
What do you think of the image above?

I understand that is too soon to understand the balance of the markets but what is your opinion on how this particularity can be traded or what else should you know to trade very profitable?
  • #10
  • Jan 30, 2015 9:41am Jan 30, 2015 9:41am
Quoting jakeparkin
@Pinktrade This looks set to be a great thread. I for one am in complete agreement with you, it is always trying to reach equilibrium but based on the current fundamental state of each economy. Which is why you have trending and ranging market conditions. I trade based on fundamentals and sentiment, looking at central bank speeches and economic news events. This paired with simple supply and demand / support and resistance zones, is magical. Looking forward to the growth of this thread.
Hello Jake,
I am not a big fan of fundamental trading as it is not reliable in my opinion, unless you hear the news before everyone else. I am aware of certain systems that are trading only during news and try to 'hunt' pips but that is not my idea of a trader. If you manage to trade for a living based on fundamental very good for you, I for one am glad to hear it.

As for the supply and demand zones... this here is quite something that S/D S/R traders probably will hate me for it.

Do you know why certain S/D zones fail to hold the price?
  • #11
  • Jan 30, 2015 9:45am Jan 30, 2015 9:45am
Quoting pinktrade
{quote} Hello Jake, I am not a big fan of fundamental trading as it is not reliable in my opinion, unless you hear the news before everyone else. I am aware of certain systems that are trading only during news and try to 'hunt' pips but that is not my idea of a trader. If you manage to trade for a living based on fundamental very good for you, I for one am glad to hear it. As for the supply and demand zones... this here is quite something that S/D S/R traders probably will hate me for it. Do you know why certain S/D zones fail to hold the price?...

Not with Htf direction?
  • #12
  • Jan 30, 2015 9:50am Jan 30, 2015 9:50am
Quoting NaughtyPip
{quote} Not with Htf direction?
Hello NPip, glad to see you join the thread.

Not really. As you can see in my picture above, there is no TF mentioned. Could you say what TF the above picture represents? The price is the same: it goes UP or it goes DOWN (by the way-price never goes sideways )

P.S. Always thought strange when seeing those indicators or systems that only work for a certain time frame. Does it have any logic?
  • #13
  • Jan 30, 2015 9:54am Jan 30, 2015 9:54am
Quoting pinktrade
{quote} Hello Jake, I am not a big fan of fundamental trading as it is not reliable in my opinion, unless you hear the news before everyone else. I am aware of certain systems that are trading only during news and try to 'hunt' pips but that is not my idea of a trader. If you manage to trade for a living based on fundamental very good for you, I for one am glad to hear it. As for the supply and demand zones... this here is quite something that S/D S/R traders probably will hate me for it. Do you know why certain S/D zones fail to hold the price?...
Supply and demand zones fail to hold price because it's a market that isn't based purely off of supply and demand zones. If it were, the market would constantly range between one supply zone and one demand zone.

They don't hold because when price reaches a supply zone, there is still some high demand for that currency which will push the price past that zone.

As an example, let's take EUR/USD. Last year the Eurozone dropped interest rates, introduced quantitive easing, suffered from low growth and very bad inflation (deflation actually). The Fed on the other hand during the second half of the year talked about raising interest rates in the near future. So here we have investors with a lot of money moving it out of the Euro because interest rates are lower, growth and inflation is lowering, so the economy isn't appealing to them. They will make more money by holding it in a different currency.

The Fed is opposite, talking of raising rates because the economy is strengthening, so as investors look to move money out of the Euro, they look to put it in the Dollar, since it is a healthier economy, meaning they'll get more bang for their buck. That's why with currencies, supply and demand zones don't hold. If price comes into a demand zone but there is some negative data such as some bad inflation readings or the lowering of an interest rate, although we're in a demand zone, there obviously won't be any demand for the currency, therefore it breaks through.

It's economics, but this is why the pairs move as they do.
  • #14
  • Jan 30, 2015 9:55am Jan 30, 2015 9:55am
Quoting pinktrade
{quote} Hello NPip, glad to see you join the thread. Not really. As you can see in my picture above, there is no TF mentioned. Could you say what TF the above picture represents? The price is the same: it goes UP or it goes DOWN (by the way-price never goes sideways ) P.S. Always thought strange when seeing those indicators or systems that only work for a certain time frame. Does it have any logic?

Ok if we are going off 1 timeframe. The reason some s/d zones fail in my opinion would be because the participants that created the zone have taken profit and left the market, therefore will no longer defend that zone on revisit. This happens when price moves too far away from a zone... Just a theory of course..
  • #15
  • Jan 30, 2015 9:58am Jan 30, 2015 9:58am
Quoting jakeparkin
{quote} Supply and demand zones fail to hold price because it's a market that isn't based purely off of supply and demand zones. If it were, the market would constantly range between one supply zone and one demand zone. They don't hold because when price reaches a supply zone, there is still some high demand for that currency which will push the price past that zone. As an example, let's take EUR/USD. Last year the Eurozone dropped interest rates, introduced quantitive easing, suffered from low growth and very bad inflation (deflation actually)....
Some good answer...by the way, the E/U is my favorite. Actually most of the time is the only thing I am trading lately.
  • #16
  • Jan 30, 2015 10:02am Jan 30, 2015 10:02am
Quoting pinktrade
{quote} Some good answer...by the way, the E/U is my favorite. Actually most of the time is the only thing I am trading lately.
EUR/USD has been a steal recently, only thing is that QE was priced in WAY before it was actually announced, so I'm more cautious now. I think consistent weak data is still giving EUR/USD room to move to the downside.

The biggest move down should come as we get closer to the Fed hiking rates...
  • #17
  • Jan 30, 2015 10:02am Jan 30, 2015 10:02am
Quoting NaughtyPip
{quote} Ok if we are going off 1 timeframe. The reason some s/d zones fail in my opinion would be because the participants that created the zone have taken profit and left the market, therefore will no longer defend that zone on revisit. This happens when price moves too far away from a zone... Just a theory of course..
Great logic...

But, letting aside the human psychology that is somehow driving the markets, how could you determine a S/D zone (or a S/R zone) ?
Isn't kind of subjective for every trader to decide where to draw a line/zone of S/D?
Same for trend lines as for S/D, every trader might draw different lines. Isn't this subjective? How could you better determine the zones and the limits of a move?

Of course, I'm not implying that a trader should know every order in the market, so don't give me that answer
  • #18
  • Jan 30, 2015 10:04am Jan 30, 2015 10:04am
Quoting jakeparkin
{quote} They don't hold because when price reaches a supply zone, there is still some high demand for that currency which will push the price past that zone.

Fundamentals aside, when a supply zone doesn't hold on lets say, the hourly time frame supply is broken, the reason why it didn't hold can usually be found on the h4. Other clues that the hourly supply may not hold could be that it wasn't fresh and had been tested multiple times.
  • #19
  • Jan 30, 2015 10:09am Jan 30, 2015 10:09am
Quoting NaughtyPip
{quote} Fundamentals aside, when a supply zone doesn't hold on lets say, the hourly time frame supply is broken, the reason why it didn't hold can usually be found on the h4. Other clues that the hourly supply may not hold could be that it wasn't fresh and had been tested multiple times.
@NaughtyPip

Yes I definitely agree with you on that. Price never goes in one direction constantly, so eventually it will always reach another supply zone higher up.
  • #20
  • Jan 30, 2015 10:09am Jan 30, 2015 10:09am
Quoting NaughtyPip
{quote} Fundamentals aside, when a supply zone doesn't hold on lets say, the hourly time frame supply is broken, the reason why it didn't hold can usually be found on the h4. Other clues that the hourly supply may not hold could be that it wasn't fresh and had been tested multiple times.
I understand this logic, tried to apply it myself with different systems in the past and 2 things happened: I didn't like switching TF's and 2. Is as unreliable as any other indicator. There always is a higher TF until there isn;t one you see but is still there.
What if you are trading the last time frame that your broker has to offer? Monthly or Yearly?
What if your broker would only offer one TF?
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