Beginner Foray with Stochastic Oscillator

[Scottish Mike]

Hi, this is my first post. I have been reading about FOREX for a couple of months now, but too busy with work to do anything. I opened an account with $600 and lost the lot very quickly, trading with no knowledge whatsoever.
I opened the account so I could have first hand experience of trading, as I knew absolutely nothing, so even the lessons seemed irrelevant at that time.
Now I have watched tutorials from among others, fxknight, and I have completed the school on this site and read other lessons and tutorials around the internet.
I have opened a demo account. Since I knew nothing about how all of those indicators worked or moved, I thought I would focus purely on learning to begin with, the stochastic oscillator.
I have been trading on this demo account, Friday, Monday and Tuesday for 12 hours each day.
I started using just one chart, but found that the SO doesn't actuallt indicate when to buy, and also that if for example, the blue and red line move into the >80 zone, then even if they cross it doesnt mean a down turn is imminent.

I found that by watching 4 charts, i could get a more accurate idea of the market behaviour. I did then see some interesting arrangements between the indicators on the different charts. After watching them a while, it seems they do, together, give a much better picture of what is going on.

I managed to get 8 good trades in a row, then a loss then 5 good trades in a row. I dont really have a money management policy at the moment, but Im not sure how to account for noise. Also, I did cut the successful trades short as all I wanted to know was if I was making a good decision, and not really for "profit" at the moment. I can see how using a small percentage of the pot is good thing, and I can see that implementing stop loss would be handy too.
I can see I have a LOT more :-) learning and practicing to do, as well as trying out developments as my strategy is put together. Im a bit burnt out now, so im going for a bike ride in the park while the sun is out.

Any advice / reminiscence / hints would be great

Thank you

Michael

[Albinas]

Well, Michael, as I understud you were trading only by looking at one indicator and also not using any money management nor stop loss. That's what true traders call gambling.

No wonder you lost so much money, most of new traders do with a lack of knowlige, but don't take it as a very bad thing, maybe better would be to look at it as to an important lesson.

You said you finished the school of pipsology, well then you should know how important stop-loss, demo trading and money management is. As I remember at the start of school of pipsology it even asks to promise for yourself that you will start real account after atleast 6 months demo trading. Well, believe me, that is more than nessecary.

What would I offer you now, is not to try inventing your own system (I am sure you will do that later) but learn systems that were invented by other. Learn them, and test them on demo account. It's a great way to learn and see how everything works. That quite enough for a start.

I can also recomend you to try Tymens candlestick system, you will see it Newbie Island. It's quite simple and profitable.

Well, I think thats enought for now.

Thank you,
Albinas

[Scottish Mike]

Hi Albinas

yes, you are absolutely right. I can see now I was gambling. I have been making lots of mistakes, trading based on what "I" think the market will do next. Those lessons on fear and greed are so right. I think the discipline is in responding to the information available and not trading based on what I think will happen.

I have had a look at the candle lesson, it seems a lot so I will learn it over the coming week.

I didn't mind losing the money. To be honest, it came from the sale of something I had kept in the shed for a long time. I had not worked for it, so I didn't mind putting it up as risk money to get started. I was prepared to lose it, and looked on it as payment for a good lesson :-)
I remember some tribe in Africa, when at war and facing the enemy, would send forward a small group of fighters, so the commander could get an idea of how the opponent faught.

Anyway, I am going to have a look at those patterns. There seems to be a lot. I have added a 5 and 10 period EMA to my 15 minute chart (from the school) to watch that now along with the stochastic oscillator.

Yours for now

Michael

[forexsmith]

nice thred

[Scottish Mike]

OK,
so I have been watching the 5 EMA and 10 EMA MA's for a day now, and I can see that while the Stochastic indicator responds much quicker to price movement, the two MA's dont respond nearly as sensitive as that. But when the two MA's cross, it seems to be an indicator of an almost definite change in price direction. I have read in a few different places now that many strategies are based on, or contain Moving Averages. I can see why. They seem to work on all timescales, from this newbie perspective anyway.

I also added bollinger bands, but they seem to move with the price, although there is a pattern of the price moving from line to line, it doesnt really indicate when and where this will happen

are there any historical studies online where i could see price against news releases ? and maybe learn what news releases have what effect on the price ?

Originally Posted by Scottish Mike

I can see why. They seem to work on all timescales, from this newbie perspective anyway.

You are running down dark alleys.

From one to the other...turning around and running...just running...getting nowhere...wasting alot of your time...because in those alleys there is no light.

Trading is about structure. Every component of trading fits into this structure. Regardless what this component is.

First of all you need to know the basic structure and fully understand it as a whole and not as fragmentation.

Then you take your tools of trading and build on your basic structure.

What you are trying to do here is taking the tools of trading and trying to build something without the basic structure and it's understanding of it.

You find that the BabyPips school is an alley with plenty of light

[Scottish Mike]

Originally Posted by cas

You are running down dark alleys.

From one to the other...turning around and running...just running...getting nowhere...wasting alot of your time...because in those alleys there is no light.

Trading is about structure. Every component of trading fits into this structure. Regardless what this component is.

First of all you need to know the basic structure and fully understand it as a whole and not as fragmentation.

Then you take your tools of trading and build on your basic structure.

What you are trying to do here is taking the tools of trading and trying to build something without the basic structure and it's understanding of it.

You find that the BabyPips school is an alley with plenty of light

Hi, thanks for reply.
Im not running, Im walking, and yes it will look a bit like that to you as I am just starting out, and learning as I go along. Im looking for a structure, and in the absence of a learned instructor sitting beside me and teaching me, I am reading books, researching the internet and joining forums to talk with other people.
I am not trying to take tools and build without a basic structure, I am taking tools and trying to learn what they do, how and why. As I gain understanding, I will build a basic structure and I will succeed.
thanks for your advice anyway

Michael

ps in an earlier post I mentioned I had completed the school

Originally Posted by Scottish Mike

ps in an earlier post I mentioned I had completed the school

Well, do the school again I would say.

[forexpeters]

hehehe got thread mate

[tymen1]

Originally Posted by Scottish Mike

...............
while the Stochastic indicator responds much quicker to price movement,

The Stochastic only works best when there is virtually no trend.

As soon as there is some trend, the Stochastic quickly becomes saturated and is of no use.
The MACD is then called in to do the job - until it too becomes saturated when the price action trends very strongly.

But when the two MA's cross, it seems to be an indicator of an almost definite change in price direction. I have read in a few different places now that many strategies are based on, or contain Moving Averages.

DO NOT use the crossover of 2 moving averages as a trading system!!