What should you be doing?

So if the last post was a little boring I hope you can wait for "the juice". In other words, what made me change from a hopeful, hard working loser into a consistent profit maker.

I stopped using indicators. As usual, a simple phrase like that hides a multitude of details. Sometimes you will find a successful trader who uses indicators. They will know how the indicator works, what it relies on and, therefore, when it is not reliable. In other words, they are using it as a tool. In an ever changing market there is no real substitute for the human brain. After all, the market is human brains. What chance does a trading robot, so called "expert advisor" have, really, with a set of rules limited by the time and intelligence of a human programmer, using information from the past?

So you can use indicators as a tool. Here's an analogy. Give a circular saw to someone who has no concept of tools. You tell them it is a cutting tool and leave them to it. If they don't cut their fingers off they will likely damage it cutting metal, stone or whatever it wasn't designed for. So I think that is quite a good analogy.

Some indicators just tell you if the market is going up or going down. Some even have an arrow to tell you it's going quite fast now and it's time to buy or sell. Let me tell you, that's often the time when you should be doing the opposite. But they can work, like an hour later, when you have already closed the trades, disappointed that the market did not immediately give you a profit and that's when you look at the chart and slap your forehead and say well, the indicator was right that time but I chickened out because I couldn't endure the draw down. Steer clear of these indicators:



Above is the "Golden Madro". Just "Mad" would have done for the name, really. It's a combination of ma crossovers, strength and what have you. How could it be so wrong? Well, the market wasn't right for it, that's obvious. So the answer to the sum is that we have to know when the market is maybe going to be right. Then, when we know that, we take our chances with an indicator, or even better, our brains.

I have a few indicators which I wouldn't be without. I'll let you know what they are for in the following posts. You must realise that these suit my style of trading and may not suit yours but hopefully these will give an insight into what we should be looking for in the market and what probability to aim for.

Here's a good resource (apart from the home page of Forex factory, of course). http://news.forexlive.com/!/the-econ...ahead-20150327

This kind of matter of fact reporting is what I look out for. It's the end of the month, it's NFP week - just be careful. It's still opinion, but it is based on fact and not prejudice.

Thanks for the tips.

I stopped pretending I knew what was going to happen. Self belief is important but a trader must never try to impose his/her sentiment on the market. Never. Let's look at a new day. Here in the UK, where London moves about 40% of the world's money (New York comes a close second), the day starts at midnight. The session starts at 8 am but guess what? It's just like any other office. Sure, people roll in at 7:30 am or 8:30 am but by the time people have rolled up their sleeves and drunk their first cup of coffee, looked at the news and so on, it is 9 am. That's when orders start to roll in.

So, if the day starts at midnight the first thing 5,000 traders are going to do is look at which direction a pair is going. Up, or down. We need to do the same.

My first essential indicator is the "Daily Open Line". If I'm trading London session I set it to midnight London. If I'm trading New York I set it to midnight New York. You'll be surprised how often the price stays one side or the other of this line. Sometimes price will come back, test the line and bounce off it. Check it out, but make sure you use the "London pairs" eg Eur/Usd, Gbp/Usd, Usd/Chf and so on. Don't expect this rule to work so well on stuff like Aud/Nzd or Usd/Cad.

As a rule, I never trade against this. I didn't learn this myself. I read it in a post by a respected trader. He learned from someone else.

The other essential indicator to study is Average True Range (ATR). For example, the daily ATR for Eur/Gbp is around 68 for a 24 day period. For Gbp/Jpy it is around 150. This kind of information is going to define your stop loss and take profit numbers for whatever time frame you choose. For example, in intra day trading, it would be unrealistic to set a stop loss of say 20 pips on Gbp/Jpy but more appropriate for Eur/Gbp.

This is an information indicator. It doesn't tell us to open or close a trade but it gives us a clue about how to trade.

Coming up to ADP news time all weak trades should be closed.

OK the data from the USA came out poor. The market knee jerk reaction was to short the dollar. But wait a minute. Is the USA in a worse state than Europe? None of Europe's financial administration problems have been properly addressed yet. There is a good chance this 15 minute candle will tell us what the market is going to do for the rest of the day. Spreads have settled down and we have a chance of a low risk trade with some direction. Certainly not guaranteed, but usually tradeable.

And there is a worthwhile resource here from the great and Godly PeterFM

A couple of things are on my mind today. I won't be doing much (if any) trading because tomorrow is NFP day. The Non Farm Payrolls release overshadows the day before and often the whole week before. Trends can stop, even reverse as weak trades are closed, in the run up. It's usually not a good idea to have trades open during the news release, unless they are days or weeks old and looking like holds. This week there is an added element - Friday is a Bank Holiday in Europe including the UK and Canada. I'm guessing it won't make a lot of difference to the market as the big players will still be there.

I may be at my desk for the Cad and Usd trade balance release later today as this pair has been consolidating for the past 2+ months and I don't want to miss any move if there is a big contrast in the releases.

In the meantime I'll be back testing Train Tracks, a simple but effective system which has a few rough edges but shows promise.

Hi Smikester, would you please recommend about other Threads too. I know you have enough experience in forex.
I noticed that you have had 33 thread which one is better for study. sorry for my bad English.

None of my threads are worth studying except this one here. This is my first attempt to collate something useful for learners. (I am also learning). If I were you I would have a look at James 16 and No Brainer . Just the first few pages and you should get the idea. Then I might study chart patterns. I would definitely study 123 patterns. Search engines like Google are a good way of getting free information but we have to be selective.

I hope this helps and don't worry your English is fine. Sorry I can't speak your language.

Oh, here's an idea I use. If you want to close a trade for any reason, whether it is a failure or if you want to take profit, consider this. Move your stop loss close to the price, and put a small trailing stop there. Typically I will use 10 pips. That way, if the trade turns or continues in your favour, you will reap the benefit.

It's Tuesday. The beginning of the week, effectively. Yesterday was full of holidays so prices were just "flapping about".

I want to direct you to an interesting article which eloquently describes a phenomenon which has always interested me here. Particularly, I would direct you to the last paragraph or two. I have spent a lot of time studying break out trading and this led me to write a thread about it here. It's a great opportunity and typically the component of inside bars, especially double inside bars (look this up if you are not familiar) and volatility break outs after news releases and during market opening after holidays. Well worth studying.

So last weeks's NFP figures came out not so good. Does that mean we short the US dollar? I'm not sure, and if you look around, not many others are sure either. On Friday, traders said yes. Yesterday New York said no. It might be a good opportunity to rejoin the main trend. Wait for a pull back, set an order a few pips from the price, so that you are picked up by a moving vehicle and set your stop loss and first target.

Now would be a good time to re read this thread and study those areas which are of interest. Use search engines to study. You've got brain and it's fairly obvious which resources are the best.

Study, study... and what was the third thing?

No. It's have a break and have fun. Thanks for reading.

FOMC day. Another good day for closing weak trades with Usd as a component. It started early this time, during the Asian session, possibly indicating a weakness in the Usd trend.

At the moment I am reading this and wanting to know how property prices and interest rates affect currency values.

If we look for the simplest patterns, and trade them correctly, we will always make a consistent profit. There will be losses, believe me, so we need to have a consistent professional approach, so that we can withstand the failures. Otherwise, we won't reap the benefits of the successes.

Here's a chart:



We can see a double inside bar and a useful trade off this is called a straddle. This assumes we don't know which way the market will go. Well, the market doesn't know which way to go, does it? So there is no shame in us not knowing either. The advantage of trading this formation is that once the market decides which way to go, we often experience volatility and a good move.

In this case the ATR(24) is over 70 and the first inside bar is about 60 pips. So we set a couple of buys about 5 pips above and a couple of sells about 5 pips below. Stop losses are set in the opposite positions. We set our first take profit at about 60 pips ( 1 : 1 ) and when that hits our second trade stop loss is set to break even plus 1. Now we have a free trade. When the free trade gets to about 3 : 1 we could consider moving our stop loss again, but why not wait for 100 : 1 or more? Even with a small account and 0.01 lots this can be possible.

By the way. The chart is Aud/Nzd

Great thread, SM

subscribed!

MT

Wow. So many subjects to cover and so little time. I want to talk about psychology today. Don't get hurt. That's all. Work hard, find something that works and milk it for all your worth, and you should be OK. But don't ever lie to yourself because that will hurt the most.

What I'm trying to say is that trying and failing can be psychologically damaging. Not only that but failure, so called failure, can ruin lives and families. Therefore, it is well worthwhile making a plan. Are you in this long term? Are you part time? How much capital can you risk? Is your plan realistic? Can you afford to fail and more importantly, can forgive yourself if you fail?

That's a neat idea, usually I stagger my entries and exits..and trailing stops, yup, makes more sense to use it especially as the market moves in the right direction. Additionally had read James thread a while back and I second the same, as a great place for newbies and even adv traders..

It makes it easier on the mind.