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Trading Discussion
1

Hey Guys,

Been gone for a bit now. For good cause. I studied to become a financial adviser here in the US. I had to close up my forex trading for the time being because it posed a conflict of interest to the company I signed my contract to work with as I build my practice.

Couple points to take note on:

  1. Please don’t ask who I’m contracted with. I cannot reveal that as by doing so would violate the conditions of my contract. It is assumed that the knowledge I possess is the knowledge of the company, so they are extremely careful on what information gets passed onto the public.

  2. Please do not ask for any advice. I will not provide it, as relating to the latter commentary of point one. I’m in communication with an attorney to see if even describing trades would be in any type of violation of my contract.

However, through my training and education, I’ve learned quite a bit a lot on risk management. Knowing what I know now, would have put me at an incredible advantage in this forex marketplace.

I was far to aggressive in trading. As are many of you, and despite any warning from anyone will continue to do so. My trading should have far more balanced. Taking conservative long term approaches with a large portion of my investment, while using a small portion of my investment to take a couple cracks at a home run.

I was afraid to take loses. I hated them a lot. Now I understand that it’s purely a numbers game. And if one can eliminate the emotions from the numbers, they would realize that a losing trade is one step closer to a winning trade, provided that they actually have an edge in the market place.

Scalping is stupid. It’s far to costly in relation to the amount of spread paid vs the amount invested into the market.

Most systems are profitable. However, they are over traded and dominated by fear and greed. Most traders will take a swing at anything that looks good. However, patience is far more important in this industry. Waiting for a high probable pattern is far better than taking a swing at 5 marginal patterns.

You won’t get rich quick. For every story you hear of a guy that turned millions fast, it was either because he was extremely lucky, or that he was a liar. Your 100 bucks won’t make you 20,000 in a year. Sorry. But keep trying if you like. People can only win the Powerball lottery by buying a ticket. Just know that it’s luck you’re hoping for, and not skill and knowledge to dominate the market.

Overall, I was initially a losing trader that eventually learned to turn profits, however, I believe that perhaps those profits may have been short lived based on the fact that I still allowed my emotions to manipulate my trading and I was thinking short term and not long term. And I traded way to many pairs. Master one. Move on and then master another. I had no patience for any of that. I would rather take an entire year to master one pair before moving on to the next.

I’m humored by the fact that I once considered myself an extremely conservative trader, when I know see myself as wild and aggressive.

I know my commentary will be largely ignored by the mindset of many traders. For the most part I just wanted to let folks around here know why I disappeared and what I’ve been up to.

2

First I want to say congrats on your endeavors and welcome back. I know what you posted is true in many ways however many people (myself included) just cant grasp it and when we do thats when we will be where we want to be in this game. I wish the best for you.

4

So many traders, myself included, looked at Forex as the meal ticket out of the rat race. Cheap to enter. Potential to earn millions in a short amount of time. And we bought into it. Yet, we balk at the Amway pitchman who touts the same thing.

Forex is a risky venture, so it should only be a very minimal amount of your capital. If a client came to me and said, “I have $50,000, what should I do with it?”

My immediate answer would not be Forex. Quite honestly, I would never recommend it to anyone at all. We Forex traders are odd. Most folks aren’t. They don’t buy into the hype that we fell for. And we all at least started with Forex for the same similar reasons of making a ton of cash as fast as we can. Granted, there are those that were able to get a better understanding of this beastly industry and take a more sound approach to it.

Now let’s say that same client approached me and said, “I have $50,000 that I want to trade Forex with. Should I?”

I’d first need to know several things about his scenario. Does he have 6 months income saved up? If not, he shouldn’t be putting it into Forex with that money. Is he putting enough away a month to realize his retirement goals? If not, he shouldn’t be trading Forex with that money. Does he have enough insurance protecting his assets and his income? If not, then again he shouldn’t be trading Forex with that money. If those three cash buckets are taken care of, then I’d suggest he still sock most of that away into a safe investment, until he can prove that he can turn a profit with the money. If he states that he’s bored and just wants to have fun with it, then great, open a demo account and go nuts. If he states that he needs to have real money to play, and he’s not educated enough or skilled enough to turn a profit, then he’s a gambler and quite frankly I wouldn’t accept him as a client.

Forex is just one investment vehicle. But before money should be invested into it, then you should first make sure to have enough chips off the table to secure a lifestyle both now and for the future. If Forex is just a hobby, then great. Take $50 a week, or whatever nominal budget one has for a standard hobby and go nuts with it. If you lose it all, no harsh feelings, for it’s just a hobby.

But if you want to start putting some serious money into it, then you need to sit back and evalute your entire financial picture. What good is it to lose money you really can’t afford when it comes time to fix the muffler, replace the water heater, send the kids to college, or have enough savings to enjoy a nice condo in a golf coursed retirement community filled with a bunch of other old farts that played the game right way.

Rule of thumb. Live off 80% of your income. The remaining 20% should be split between different investment vehicles that are safer with 10% going towards short term savings and 10% going into long term vehicles. After that if you can shave off 1% or more to dabble with Forex and still afford to maintain a decent lifestyle, then more power to you.

5

Sorry to take this thread into a siding and I am NOT reopening the old ‘structured education vs self-tuition’ Forex debate but one thought occurs to me: it is true that there is enough information available for free or very cheaply to learn how to trade Forex without any structured education. However, if this is assimilated from a number of sources by an individual new to Forex trading then there is no quality control, no context and no weighting.

You have gone away, got a formal education in a related field, and have come back with a structured view of where you went wrong previously and how you might do better in the future. I took a Forex training course at the outset, when I knew nothing, and that drilled into me that risk management, compounding of small profits, high probability trades, that all of that was the soundest way to make money long term. I do not dispute that one can learn to trade Forex alone, and many do, and that one can be successful at it. I do, however, believe that teaching oneself to do this without some form of context and guidance will lead some people to adopt bad habits and unrealistic expectations, both of which often lead to busted accounts etc.

Anyway, sincere apologies for hijacking the thread briefly, but I saw parallels that might be of interest to some.

I would finish with ‘welcome back’, but as I did not know you before your Babypips hiatus and am a relative noob around here it would seem a little odd, perhaps!

Please forgive the intrusion into anotherwise fascinating thread, in any case.

And, er, welcome back!

6

First of all, welcome back Mastergunner!

Knowledge is power and it is also the only thing that cannot be stolen, lost, taxed away or destroyed in some other way. Investing in proper education is always a good choice! Well done :slight_smile:

From what you write I see clearly that you’ve evolved in your understanding. You’ll find that many or even most of those that were active here when you went away, are gone now. A few are left, like Matt and myself.

I hope that you will find it meaningful to spend some time here in the future, if your contract allows it.

I agree with most of what you wrote, but I have to ask on something:

Really? Everything else you wrote I agree with and/or it makes sense. But from everything I’ve learned, I come to the conclusion that more or less all purely mechanical systems are long term non profitable. Am I wrong?

I imagine that perhaps you use the term “system” to include well defined rule based trading, such as a clearly defined approach using supply/demand?

If your contract allows, I’d look forward to your response.

8

Yes, my objection was to systems like when X crosses Y enter short with a 50 pip SL and a 100 pip TP. These systems in all their variations seem not to work.

But sure, at some point after entry most of them will be in profit… but the system as a whole is not profitable. There’s no edge, none that I could ever find at least. Only edge I’ve been able to identify is learning to identify supply/demand on a chart.

10

In other words, most systems are not profitable “out of the box”… :slight_smile:

I think we’re saying the same thing with different words.

11

You should not make claims like that, people like me need to trust their systems, all worth talking about systems have some discretion, if you add a rule like that “don’t trade around the news”,(which all systems should have), don’t trade when the market is choppy, don’t trade when the market is trending, don’t trade when the MA is flat, don’t trade when the volume is low, etc unless you have an EA there is discretion.

Trust is very important for a system, you don’t need emotions in trading, as honorary men you should not make claims like that.

Also what defines long term? If a system is 6 moths profitable it wont be anymore in one year? Why? The market conditions will change so drastically? There will be no more trends? No more ranging?

12

Ditto,s on the welcome back Mastergunner.I still have your blog on my drop down list.I think you stated the obvious on i would not refer somebody to Forex as a investment of the first order.This is a difficult endeavor, i know the independence`of this endeavor is a big draw to most of us.Building wealth is best done in a slow deliberate manner with as little risk and as much diversity as one can allow.

I think the hopes and dreams of forex traders is too acomplish a task that could take a lifetime for a small investor and do it in a much shorter time with compounding of are original investment.Most of us will fail for various reasons systems,emotions moneymanagement.I hope your able to post your observations and good luck in your new career!

13

I’m really sorry about saying something you didn’t like… now you’ve managed to join my ever growing ignore list. :35:

14

Childish reaction, I don’t care, never tried to contact you.

15

You are looking at Forex trading from another point of view now, like a pro. Knowing all the risks and other things hidden from common traders. It must be very interesting for you to communicate at traders’ forums, right?

As far as I understand your job is to advise a client where he can invest funds after you examine his experience, financial background etc.? Do you participate in trading after that?

17

an interesting article about mechanical trading The Rule-Governed Trader: A Psychological Perspective @ Forex Factory