I just finished Van K. Tharps “Trade Your Way to Financial Freedom.”
A very good book for anyone new and old to forex, or any trading platform for that matter. I’m new, but plan on reading it again after I’ve received a few years under my belt. It was that good.
Anyways one point that struck me more than any was this:
A few studies were conducted in which the trader would enter a trade at a completely random entrance (ie no indicators, trends, nothing. Just completely random).
Just by simply using sound Money Management techniques and the “cut your losses, let your profits run” principle, they always made money in the long run. Without fail.
I’m seeing alot of new people (including myself) getting caught up in indicators, charts, etc. I could spend hours reading about the latest and greatest system with such and such indicator telling them which way the market is going. It’s getting overwhelming, and I think I’m just going to stick with a KISS (keep it stupid simple) system and focus more on proper money management and see where it takes me.
It’s a great concept! In practice it takes time and expereience to be successful. Try it, enter a trade with real money and note how you feel as price moves against you, but you know it will come back. Or you have a profit and then price moves against you and your profit begins to evaporate do you cut you loss or let your profit run?
This business is more about controlling your emotions than what you know.
My self and the wife employed the same strategy. Simple.
just look at the charts to see exactly where the current status is/was in relation to minutes, hours, days, weeks and months and gues what we made good money every day.
Then I went to this school, paid FXCM for their classes and started to get very technical with my brain swooning. Guess what, although we are getting ny, nothing like when we kept it simple.
The maddening thing is, now, I seem unable to think simple anymore.
Thanks for sharing the book. Will have to check it out. Very interesting study. I am a newbie so probably not very qualified to say what method is the best but I read an interesting book called Naked Trading by Alex Nekritin and Walter Peters. Which focuses solely on the charts. No indicators or fancy tools. It does follow your “simple” philosophy in that the charts will give you 4-5 different types of tells. It has worked pretty well for me so far but this is not a get rich method. It takes time and patience and you can go days without getting a good set up.
The way to profit in forex is making sure that your loses are small compared to your winners on average. It won’t happen trade by trade as the market is dynamic, I will also take small profits when I see some indications that the price is going to hit my stops.
As you will notice in my account in Myfxbook, my win ratio is just 41%, but if you look at my average win, it is almost twice my average lose. Look at my 20 last trades, you will notice that I had small loses and 3 big winners. You may ask, why I took my profits at that level, for GA, I took it at the recent high, for GJ, I took at the recent 4HR high and GU is due to the declining trendline.
It takes a while to get used to the concept of letting your profits run, but if you practice it diligently, you will get the hang of it.
Good to see someone trading profitably & consistently Turtle, I wish some of these Gurus on here had the guts to show a fxbook account, sort of suspect that they hide away so I applaud you on your transparency!
I’m trying to let my good trades run but last week I had a profitable long fiber trade (50 pips I think from memory) run back to breakeven where I ditched it fortunately as the Fiber sold off on Friday…
I find the " letting your profits run" mantra a bit frustrating, it’s a bit ike saying “Buy low / sell high” & “cut you losers” & “give your trade breathing space” All a bit contradictory & meaningless in themselves :56:
I wanted to close out my long fiber trade, but told myself not to get scared out of a profitable position, only to see it dissapear a few hours later… I’ll get there one day I hope.
Thanks. I know about Cable, and the history behind the name too, its cool and I like it. But why come up with new names for a very new currency. I think fiber is such a horribly stupid name. What’s USDJPY? Ninja ?
I was playing poker the first time someone talked to me about the forex. Told him not interested, none, notta, get lost. He asked why such a strong stance. I told him that I was approached once before and lost all my retirement savings to the stock market. After I told him my storey, he said I don’t think you lost your money cause of the stock market I think you lost cause you made some decisions without gathering the facts, looking at your options and picking the least of the evils, like you tell everyone else to do. I said you’re probably right but I’m still not interested.
I was approached again by someone who said, you’re a guy that bets on just about anything, but you don’t want to bet on currencies? Again I said not interested in stock market, to which he said currencies are different. Think of it as you’re a dealer in a card game. You don’t really care who wins or loses, you care about tips. So you look around the table and guess based on facts, options and evils, whose going to tip you. Currency trading is similar. Stocks are like someone is going to the track and you give him your money and tell him bet it anyway you want.
Based on that I looked at a chart, and thought this is insane, lines going up, down angles, different colors everyone telling me follow me, to make a fortune etc. I’m thinking this is too complicated, and my friend said lets look at a blank chart which we did and he said what do you see? I said I see red and green. He said more red more green? The green going towards the top or the bottom? I said top, he said right that means up. The red going the opposite means down. More green generally means up, more red means down. I said well what about here where there not going either way, he said that means the people who are trading these two are not sure whether in the future there will be more green, or more red, so they are sitting back waiting for a sign or a signal.
I said what about all these lines, arc’s, triangles, numbers, and 1 person says in future buy green and 1 says no buy red . All these things are made up to help you work smart not only hard. You can use them or you don’t have to. If you start with them, after a while you’ll probably need less of them once you get a little experience. But it all starts with more green or red, up, down or sideways.
If you had a gambling bankroll of $50,000 how much you would you take to the race track for the day? I said I don’t know a couple of thousand, to wit he said but you wouldn’t take your whole bankroll right? I said of course not. He said same principle applies to currencies. Use good money management, never put all your eggs in one basket.
This is not part of my story, this is my thoughts. With regard to guru’s. (Maybe someday the people who refer to them will tell us their names. I have heard three of them who are regular contributors to this site and none of them call themselves guru’s.
Last thing is let’s say you walked into the casino looking to sit down and play poker at the game in front of you. There’s a very well know poker pro standing by a bartender observing the game. You don’t know the pro, personally but you have seen him around the casino’s, on tv and he has a book or some tapes, other people have said he’s a great player. The bartender you have never seen before and don’t know anything about him. Based on that information you have two options. 1. you can ask either one but only one about the current game in front of you, 2. You can sit in the game and learn as you go. Which one would you choose. To me I would say depends on what, I’m trying to achieve and how long do I have to achieve it.
Well the EUR is a newer currency then the Cable pair, & the Cable gets its name from the trans Atlantic copper wire cable they laid for commerce, the Fiber turned up in the Fiber optic era… That’s my take on it
Allow me to shed some light on that old saying “cut your losses,Let your profits run”.What is actually being said is make sure you predefined your risk before entering a trade and don’t exactly wait until the market reaches that point before realizing your wrong to get out with a smaller loss. Letting profits run means knowing when to take profits and sit on the sidelines and enjoy your win before getting tempted by greed or fear into jumping right back into the fire and giving all your gains back. Both require discipline and both are psychological factors.
For me ‘letting your winners run’ is a fallacy put out there by cleverer people than me who want you to leave your profit in the market so that they have a chance of taking it back.
Trading is a zero sum game. Always remember that. Someone out there wants your cash.
I have tried to rid my mind of everything I have learned about forex because as Descartes famously asserts, if something can deceive you once then it can do so again. My success has to come from what I see, not what someone else says or worse, an indicator.
It is a good strategy to cut losses quick and let profits run so that your risk is limited but upside is bigger so u have a better risk to reward ratio. It usually works well from swing trading when you want to hold your winners
I can say from my experience that i always believe in that statement and everyone should follow it. But it’s hard (at least for me) because we humans have emotion and i’m pretty emotional when it comes to trading. I am good at finding entry points but my problems are i exit too quick and if i am in a losing trade, i would stay in the trade until it hit BE+1. Stupid right? Yet so many do it. Recipe for hell.
If you’re in a trade with a risk reward of 1:5 (or anything over 1:1) and then price goes in your favour over the 1:1 threshold, the risk reward is no longer 1:5.
Let’s say that price goes 4:1 in your favour. This means you are risking 4 to make the final one.
We are in forex to make money. We can only make money from forex if there are trends. By trading a strategy with a risk reward of 1:1 it will be more likely to be successful in the long run because one only requires short trends. Low risk high reward strategies can only be profitable during high volatility on the higher time frames.
