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The Big secret to trading success

  • Post #1
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  • First Post: Apr 20, 2016 2:00pm Apr 20, 2016 2:00pm
Hundreds of books have been dedicated to this question, hundreds more threads have discussed it and analyzed it, everybody knows what it is, and yet, the majority of traders still lose. The answer boils down to just one thing around which everything else will, given time, fall into place. The reason we lose is that we ignore it, and we ignore it because it runs counter to human nature, for we humans are especially prone to over-complicating things and failing to see the wood for the trees. Such an approach to the markets is usually fatal. As Einstein famously quoted - " Out of complexity, find simplicity "

And now I must go and do some gardening before the wife kills me, so whilst I'm gone, perhaps one or two of you can posit some proposals.
  • Post #2
  • Quote
  • Edited at 3:47pm Apr 20, 2016 3:34pm | Edited at 3:47pm
With that little bit of gardening done, here it is , the secret to trading success, and you guessed it, it's trading with the trend in your favour. No secret right? But how many people actually do it? More to the point, how many people actually know how to do it? Very few. The reason - because it's far easier to try and pick a top or a bottom, or counter-trend trade, than it is to wait patiently for a pullback, identify the point at which the price is about to rejoin the overall momentum, and pull the trigger. I know for a fact that more people attempt to out think the market than go with it - it is human nature to succumb to this tendency to believe we are somehow cleverer than the market, and it is the graveyard for the majority of traders.

Yes there are many other facets to becoming a successful trader, experience and mileage being the main ones, but unless we learn to trade with momentum on our side, or, with the trend, it is impossible for the rookie trader to become successful. It is the very first thing that should be learnt.

Ranging markets are different, for with these, a secure knowledge of the S&R levels are critically important, but I'll leave these for another time.

My next post will be a strategy for determining the trend, if there is one, which will help to ensure that you at least know which direction you should be trading in, and prevent you taking those costly trades against market momentum.

ps - I'll welcome any input into this thread, so if anyone has their own ideas about this, then feel free to communicate. I don't intend for it to be a long lasting thread, for once I've posted what I wanted to post, that'll be it, though hopefully it'll help out those who for one reason or another, keep finding themselves on the wrong side of the market.
Hi,
it seems like you have made some sounds statements which clear indicate you have done your research, and i agree with you on most points. maybe if you have some free time you would like to view my thread and answer the questionnaire i have set up, your view will be much appreciated.
Hallo Cat,

You are right. I think some of our friends here agree with you. But, why still many traders loss. I think they dont follow their rule CONSISTENTLY. This is just my opinion.

thanks,
Quoting cat
" Out of complexity, find simplicity "
I like that quote, out of complexity find simplicity. It kind of describes what I've been trying to do in trading for a long time - boiling down a lot of information and techniques into their most simple common denominators.

'Trade with the trend' is one of those simple rules that has been around forever, that traders hear on day one and then keep hearing again and again .... along with things like "Protect your capital" ..... "Buy dips, sell rallies" .... "Don't bet against the big players" .... "Ride your winners, cut your losers" .... "Be patient, pick the best trades".

The reason most traders lose, is they convince themselves it can't be that easy, and instead of devoting themselves to a thorough study of those basic principles they immediately start seeking complex solutions to problems that either aren't there or don't need solved. It's an ego thing - nobody wants the simple solution that gets handed to them, everybody wants to be the genius that solves the unsolvable problem.
si hoc legere scis nimium eruditionis habes
Quoting numbnuts
{quote} The reason most traders lose, is they convince themselves it can't be that easy, and instead of devoting themselves to a thorough study of those basic principles they immediately start seeking complex solutions to problems that either aren't there or don't need solved. It's an ego thing - nobody wants the simple solution that gets handed to them, everybody wants to be the genius that solves the unsolvable problem.
That sums it up. Once a Self realized soul told that more intelligent you are, farther you are from the Truth. Intelligence is only useful to know that it's not of much use.
"Put all your efforts in becoming effortless"
OK, I'ii bite.

I love secrets.

I promise not to tell anybody, cross my heart and hope to die.

Where do I sign!

Valla ma goolis


Roy
Polishing my crystal ball
Quoting numbnuts
{quote} I like that quote, out of complexity find simplicity. It kind of describes what I've been trying to do in trading for a long time - boiling down a lot of information and techniques into their most simple common denominators. 'Trade with the trend' is one of those simple rules that has been around forever, that traders hear on day one and then keep hearing again and again .... along with things like "Protect your capital" ..... "Buy dips, sell rallies" .... "Don't bet against the big players" .... "Ride your winners, cut your losers" .......
That is it numbnuts, you've hit the nail squarely on the head.
Quoting antonsatu
Hallo Cat, You are right. I think some of our friends here agree with you. But, why still many traders loss. I think they dont follow their rule CONSISTENTLY. This is just my opinion. thanks,
You are right, many traders don't, but far more don't even have rules in the first place. They may be aware of the things they are supposed to do and not do, but they haven't done the work necessary to really understand the difference. You can tell someone to trade with the trend until you're blue in the face, but unless they hardwire that information into their brains and act on it as a way of habit, they'll most likely do the opposite because they'll think they're smarter than that.

Revenge trading is also a big issue, because when a trader has missed the opportunity to short the market following a pullback to a level of resistance, most will then attempt to catch the bottom by going long when had they been in the trade they should have been in, such a trade would have been unthinkable.
I'll post the strategy I was talking about this coming weekend when I'll have the time to hopefully put something decent together. It won't be a full trading strategy, but it should help keep traders on the right side of the market by only taking trades with the main momentum of the market, on any time frame. Yes, counter trend trades can be profitable, but they are much more difficult and so I won't be concentrating on them on this thread.
In advance I apologize for not being word-perfect in English as it is not my native language =)

I have studied all the basic information few years ago and grew a 2k demo account into 80k in about six months. Of course this was possible by using high leverage and taking stupid risks (things I would never do with real money). I was underaged so I never started to trade with real money and forgot the whole thing.

Last week I started to study forex again and got a thought that is this really as hard as everyone says it to be? I mean if you flip a coin you would be 50% of the time right. Now if you look up for support and resistance levels, odds should go above that 50%? In addition to all this, if your RR is (let's say) 1:3, it would mean you only have to win 1 trade of 3 to break even.

So I'm asking what is wrong in my way of thinking?
Arthos, the best way to prove to yourself what is wrong with that kind of thinking is to trade with real money and discover it yourself. There are far more variables to be accounted for than what you've described. I, too, once thought of the market in such ways, but years of pain beat those notions right out of me. Good luck.
There's always money in the banana stand.
Quoting Arthos
In advance I apologize for not being word-perfect in English as it is not my native language =) I have studied all the basic information few years ago and grew a 2k demo account into 80k in about six months. Of course this was possible by using high leverage and taking stupid risks (things I would never do with real money). I was underaged so I never started to trade with real money and forgot the whole thing. Last week I started to study forex again and got a thought that is this really as hard as everyone says it to be? I mean if you flip a coin...
Nice point you raise Arthos, and in theory you are right. Unfortunately for all of us though is that we are not mechanical robots, and what you may deem possible from calculations with pen and paper will be very different when put into practice because we are complex human beings and are always prone to irrationality, which is of course just as well, because there wouldn't be any markets to trade if we were all androids!

The best any of us can do is to learn our craft and at the same time try and reduce the emotional component of our trading to a level whereby it does not interfere with out trading to the extent to which we lose more money than we win. The best way to do this is to learn as much as we can about the markets, study them tirelessly for years, trade, win, lose, win again then lose again, all the while improving and ALWAYS maintaining emotional discipline and strict money management. Focusing on the long term, ie, our monthly pay package, rather than the results of any one trade is also extremely important, though even that, is too difficult for most, hence, the large % of losers in this business.
Quoting swissyking
Hi, it seems like you have made some sounds statements which clear indicate you have done your research, and i agree with you on most points. maybe if you have some free time you would like to view my thread and answer the questionnaire i have set up, your view will be much appreciated.
Hi Swissking. I've looked at your thread, and you raise very good questions. To answer them briefly however is not really possible, and I have addressed many of them myself in my other threads.As much as I'd like to answer each question individually, it would take me more time than I can spare, as each one needs answering in detail to do it justice. As I mentioned before, have a look at my previous threads because you will find many of the Qs addressed by myself and other people. I wish you well with your project.
  • Post #15
  • Quote
  • Edited at 8:41am Apr 22, 2016 8:30am | Edited at 8:41am
An impromptu post, one connected in a way with the ' secret to success' title of this thread. I'm reading a book at the moment about a Canadian RAF Spitfire pilot during WW2, and one single sentence sparked a reality with trading, so I'm sharing it here -

" Mind you, there were always a few new green pilots who didn't know how to scan a bit of sky and know absolutely that there were no aircraft there. One hoped that they would learn before they got clobbered, or before they allowed a Hun ( German ) to clobber ( shoot down ) the Spitfire next to them, whose tail they were supposed to be guarding....."

As someone who has traded now for 9 years, not long compared to some, but long enough to know what I am doing, I know just how much I ' didn't see ', when I was inexperienced. Like the new pilots, I just didn't see the dangers that lurked when I took a trade because I didn't know they were there, and I'm not talking about indicators as such, I'm talking about the ever changing dynamics of price movement, recognizing certain patterns forming, candlestick formations, decreasing or increasing volume and volatility, and many many more factors. All this comes to us by way of one thing and one thing only - experience. With trading, we can never have enough of it.

By the way, if anyone is looking for a book to read for trading inspiration, you will find nothing more suitable than WW2 fighter pilots books, because in many ways psychologically, there are many similarities between the mindset required to be successful, with the obvious difference that our life isn't on the line if we get it wrong!
Quoting cat
{quote} Hi Swissking. I've looked at your thread, and you raise very good questions. To answer them briefly however is not really possible, and I have addressed many of them myself in my other threads.As much as I'd like to answer each question individually, it would take me more time than I can spare, as each one needs answering in detail to do it justice. As I mentioned before, have a look at my previous threads because you will find many of the Qs addressed by myself and other people. I wish you well with your project.
Hi
thanks for letting me know, and yes i have read your thread, i was able to gain some information which was helpful, thanks for the reply.
good day
Hi Cat,

Knowing and doing are 2 distinctly different things! What you are letting the masses know is that there is no insiders club or special secret. The path to success lies squarely within the same 6 inch space between everyones own ears.

I am in total agreement that most do not even have a set of rules.
WRITE them down!
FOLLOW them without fail.
MANAGE risk

I would go so far as to say that for beginners they should develop a set of rules or copy someones rules.
Analyze the daily charts, initiate the trades and TURN OFF the computer. Let the trades work on their own without interference.

Many Pips
Plan, Prepare, Execute, Repeat
Quoting swissyking
{quote} Hi thanks for letting me know, and yes i have read your thread, i was able to gain some information which was helpful, thanks for the reply. good day
Quoting swingtrade65
Hi Cat, Knowing and doing are 2 distinctly different things! What you are letting the masses know is that there is no insiders club or special secret. The path to success lies squarely within the same 6 inch space between everyones own ears. I am in total agreement that most do not even have a set of rules. WRITE them down! FOLLOW them without fail. MANAGE risk I would go so far as to say that for beginners they should develop a set of rules or copy someones rules. Analyze the daily charts, initiate the trades and TURN OFF the computer. Let...
Not entirely, because if that were true I wouldn't have bothered with this thread. You are right, there is no secret or inside club, but what there is is something so fundamental to trading success that even if you do everything else perfectly, no one can succeed unless they learn to do it routinely, and that, as I stated above, is to trade with the momentum of the market instead of against it. To be able to firstly identify which way the main move of the market is going to run, and then either get into it before it leaves the station or to wait patiently for a pullback on which to enter, IS the secret to profitability, above everything else, including psychology, because that takes care of itself if you are winning. Trades with the trend are less risky, easier to enter, and offer the fastest moves with the greatest amount of pips in the least amount of time.

But most people don't trade this way, they rather try and pick tops and bottoms, and the reasons why they do this are discussed above.

Identify the trend, trade with it, and you are more than half way there. as I said, I'll be posting a few charts this weekend to help people with this.
Trading with the trend will not put the odds in your favour!
If it was so simple.....everyone will do it and we will see a lot more successful people. But we all know that's not the case and its a little bit more complicated.
First of all, from all markets forex has the strongest tendency to revert to the mean. (this is a fact, proven mathematically and there are many studies on the subject)
This means that classic trend following is pretty much the worst strategy you can apply. Especially if you trade short term or intraday like 99% of the people.

The other thing is that mechanical systems by default do not work. No matter what type of indicators or combinations of techniques you apply, if you use system with fixed rules - you will fail in the long run. ( for example "always trade with trend" is not a good idea)

Adaptivity and proper discretion is the name of the game. It's not about systems, or rules. It's about understanding of the game, understanding of fundamentals and human/crowd psychology, market manipulations.. and so on...
To think that you can beat the market just by following the trend especialy in fx.......this is naive. Trend following is one of the biggest myths.

The usual story - People think that if they can just follow the trend, cut the losses, and let the profits run they can beat the market. And the only problem is that they don't have enough discipline to follow the strategy and the rules......... and you know what?? This is absolute bullshit and i can prove it to you!

Any strategy, and I mean ANY systematic strategy with fixed rules will produce negative expectancy per trade in the long run. (zero sum game). In 99% of the cases the transaction cost (spreads, commissions, slippage) will kill you in the long run.

If you think that discipline is the only problem, I challenge anyone, to show me a strategy (mechanical system with fixed rules) that is constantly profitable in the long run. I will automate the strategy 1:1 and you will see that it doesnt work, even if you follow the rules perfectly! When the trade sample is large enough, the law of large numbers will bring the expectation per trade to zero minus the transaction cost.

We can do backtesting for the last 10 years, we can do forward testing, live trading, we can do monte carlo simulations.....whatever you want. The result is always the same!
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