Drowning in a sea of systems and indicators...!

Beginner Questions
1

Hello everyone!

I’m starting my second month of trading now. And I feel that I have to put a big STOP at all my trading. Although I almost regularly make my 10 pips a day, I watch so much systems and indicators to make it that after a few hours of trading I have to go sleep… There also seems to be systems appearing everyday in the forums on the net… Which is making me think that this might not be actually the way to go…

Now, I’m saying to myself: Should I scrap all these systems because they just don’t simply matter and go with something simpler, or should I continue the way I do it cause I have some success with it??

Here are the systems I am using:

  • Belkhayate Baycenter + Timing (center of gravity) ← [U]Actually my favourite[/U]
  • Kathy Lien Double Bollinger Bands
  • Gururaj System 2012
  • Peter Fader’s Mad Scalper
  • One chart with Moving average, RSI, stochastic and Volume
  • 8and8 System

BTW, I trade on 5min and use 30min chart for confirmation. It actually fits very well my personality…

Now, I’m asking myself: Should I forget everything and go only with Price Action and Volume Spread Analysis?? It seems to be what the pro’s are doing and It would actually make thing much simpler!

Should I stop reading everything I’m reading right now and read Tom William’s Master the Markets?? Or any other books on VSA and PA?

Thanks!!

2

You really have to find what system works for you. Sure try all the different systems and time frames around and see what works for you. On demo of course. But not all at once. You really have to find a system or method and stick to it. There are going to be a lot of nuances that will have to be discovered to really get it working well. There will always be new systems popping up. Don’t worry about those just keep enhancing your personal edge.

Trading is a very personal thing，sure you found those systems. They may have rules but no two traders even using the same system are going to trade the exact same way. Find what you like and works for you. Once you find that system it’s like putting on your favorite underwear straight out of the dryer. Just right.

3

Trading all those systems is going to drive you nuts. Work with one, see how it fits in YOUR life, and make changes to it as needed. If the system doesnt fit for you then move on to the next one. One thing I suggest is keeping tan emotional journal of how your feeling about the different indicators, your trades, and the system as a whole. Create a pro and con bucket.

Once you move on to try system you will have some tools in your “pro” bucket already. After you have tested each system individually you should have a decent amount of tools to start to develope what works for you.

4

There are too many tools! The thing about indicators is that they tell how this moment’s chart picture looks in comparison to the chart pictures of the past. But what really matters is what the chart picture will look like in the future, and unfortunately there is no indicator for that. I suggest that you study Price Action trading techniques, and there are threads here by ICT and Nikitafx which are focused on Price Action trading.

There is no crystal ball when it comes to looking into the forex future, but Price Action trading comes close.

5

The question asks for an economic answer. Easy one: If you can get a system what makes more money than those now for less work and it still fits your personal style, use it. If not, keep what you have. At least it makes money. :slight_smile:

6

OK. What I believe is following your gut. If you feel uncomfortable you need to bring yourself back to being grounded. Take a break from the Forex until you feel back to a normal state and not overwhelmed. I will not suggest a strategy but I will suggest working on emotional fitness. Let your gut tell you where you need to be and how much you will need to look at. Your energy needs to be focused on learning not on overcoming your feeling of being overwhelmed by the insane mass of information. Focus up, make a cup of coffee, and coast.

7

Do you know why all those systems work? I mean, do you understand clearly oscillators, regression(linear, quad, parabolic, etc), volume, volatility, PA, S/R??

If you do then I see no reason to remove any of the strategies but try to keep it simple.

Now in my personal experience you should be an expert first in PA and S/R

8

Even those who are doing ok trading usually dont have more than one basic indicator as a sort of confirmation tool.

I use to do what u did.

Got rid of it all.

9

It took me 4 years to develop my system which is very hard to trade manually (4 time frames and 6 indicators per symbol. Stops are fixed at 20, profit targets are set algorithmically based on evolving state of indicators once in a trade. Exit signals are also dynamic and usually cut the trade long before the stop which is there for potential catastrophic price movements).

I have never studied anyone’s trading system but spent a lot of time observing the markets, asking questions then finding my own answers and solutions. I also spent a lot of time understanding indicators and what each of them is designed to tell me. This approach was more due to my personality than anything else - I like doing my own ground work and attaining complete understanding. I’ve looked at over 400 print outs of charts full of indicators looking for patterns of cause and effect across multiple timeframes.

You need to settle for your own system which may be one you find, tweak or throw together. OR if u feel u have an effective way of using that collection of systems, get them written into a robot and let it do the hard work.

A little insight into how I came to develop my own system:

http://forums.babypips.com/free-forex-trading-systems/41165-beginning-new-trading-system-real-people.html#post297997
(Post Removed: legal reasons)

http://forums.babypips.com/forextown/30464-i-want-learn-everything-about-price-action-4.html#post299228

If it wasn’t for the fact that I programmed computers, I would be a price action guy as without a logical and systematic approach to evaluating and testing indicators, it’s easy to fall for the myth that indicators only lag and are useless and that chart patterns rule. If this is so, are Quants on six figure salaries paid to extract “head and shoulder” patterns and Support/Resistance levels all day? I mean, a PhD in statistics to do that?.

If I wasn’t aiming to manage other people’s money from day one (u simply cannot make 50000 a year after trading expenses if u start with 10000 - 500% - its more u need a balance of 500000 at first to do it - 10%) I would be tempted to buy a robot I didn’t understand and connect my money up to it. I can’t do that with other people’s money as I need to convey to them the kind of risk their capital is exposed to.

Ultimately, whatever works for you is what is right for you.

Slow down and take your time though. It takes time and patience.

I started with no background in finance expecting to be making millions within a year - it’s been four. Many still don’t have consistency or a rules-based approach even after ten.

Some have it, then completely lose it:

If you are in Forex to have it make a positive impact to your financial profile, relax, structure ur exploration of the huge body of knowledge out there (e.g. give each system at least a solid month or three where u focus on it, study it and try ti improve it), believe in your own gut feeling (85%+ of the people around you are being battered by the markets), don’t cut corners - the markets will expose any weaknesses in your defences and be honest with yourself at all stages.

11

Hello Everyone!!

Thanks for clearing things up. So if I understand all this well, there is no really one way to trade. You either use or dont use indicators. It’s really a matter of personal preference.

MeiHua --> When building my own system, do you think I shoud go by a set of rules and not breaking them or bending them is necessary from time to time??

Rjmiller421 --> Thanks for your input! I am actually going nuts right now… :stuck_out_tongue:

Pip Grip --> According to your opinion, I should start by learning PA and S/R. I guess this is where I am heading right now. I have a gut feeling that this is the way to go. The only thing is that when I look a chart right now trying to figure out patterns my brain goes “DUH?!?”. I dont see anything. I guess it’s like starting to learn a foreign language. You dont understand at first but after practicing things must become clearer… That is why us Newbies tend to use indicators first. They are more easier to see what is going on. But like you said, they dont say anything about where everything might be going.

yunny1 --> Yes. I guess PA is the way I’m gonna be going right now. I have to master this before anything else. I think that it is the basic for all things.

Nikitafx --> Glad to hear that I am not the only one that went thru the indicator madness… :wink: Pip Grip said that you have a thread on PA?? Can you point me to it? Can’t seem to find it… Thanks!!

modernmystery --> Thanks for your reply!! Will look into your links!!

Thanks again everyone!!

Simon.

12

http://forums.babypips.com/newbie-island/39634-pure-price-action-dummies.html

Advice should be taken at your own peril Simon. :stuck_out_tongue:

Been real tough this week due to price ranging.

13

I can see by your comments that you are an intelligent person, and that you have the capacity to succeed. Consider that Price Action can do only one of three things, that price can go up, down or sideways (nowhere). Obviously, sideways Price Action earns NO pips, and so that leaves price up and price down as being potentially profitable. It is true that indicators only show this moment’s chart price as relative to previous chart prices, and that there is no indicator to show future chart prices, which is where the pips to be won are! So, what are we talking about, maybe some kind of magic, the ability to see into the future? Well, there is no crystal ball, no magic, but Price Action trading is about as close as it gets. Of course, EVERY form of careful money management MUST be brought into play, but Price Action trading is all about developing a sensitivity as to which way future price will go, up, down, or sideways. That CAN be done, but that sensitivity must be EARNED, by you.

14

Most people will say to get rid of all the systems and stick with just one, or something along the lines of “indicators suck”. To a point I agree, but that’s my trading style and everyoe’s trading style is different.

But in all honesty, you seem to be doing well if you’re taking a consistent 10 pips. It may be tiring, but it’s working.

I mean, if you want to increase efficiency and approaches that are less time consuming and tedious, that’s always a way to go. But, once again, it’s not like that you’re doing now isn’t working for you.

There are many different styles of trading as there are different types of people. Do what works for you, there are successful mechanical traders out there. Some employ 30+ EA’s and random systems, and you know what? It works and they are easily regarded as successful. Although it’s against popular belief some people can get it to work, and work well.

Basically, do whatever is working for you. Just because your methodology consists of “too many lights and indicators and no discretion” to others, doesn’t mean it is a failed system, especially if you are currently profiting from it.

On the other hand, if you are finding it to be too much work, then perhaps a new approach may be needed, as you suggested Price Action and VSA are both viable approaches. But, by no means will it mean you will not have to put any effort into it. Nothing is easy, and all approaches require equal amount of work and practise.

Hope that helps.

Regards,
Clark

15

Agreed, finally someone who can make a post with some decent spelling, punctuation and grammar. And they say it’s the teenagers that write like crap. I beg to differ, some of the older guys can’t write a proper sentence. :slight_smile:

16

Hello everyone!!

Thank you again for your kind replies! They are very well appreciated. Please excuse the construction of my sentences as some syntax mistakes I may make while writing those posts. English is not my first language. Although I am a french Canadian, I have a good basis in common English. But living in a french world I tend to loose a little bit of it sometimes.

Well, it’s been pretty useful reading all your replies here yesterday, I waited before answering for I wanted to check some things on my trading style, systems and indicators before writing back.

If I want to get in the Big Leagues someday, I have to stop acting like a newbie and start thinking like a pro. Ok, I might not be a pro and far from it, but I believe in creative visualisation. So, I had a good talk with my brain this morning and cleared something up with it…

Here we go:

  • Learn PA and VSA.

  • Stop trading on the 5 min charts… Stopping staring at the 5 min charts will help me to get rid of the sore eyes, will stop spending all my earnings on bottles of artificial tears and get my life back…

  • Stop wanting to enter trades and make pips each and every single day. Stop thinking of gains on daily term and start thinking on monthly terms.

  • Trade on 4 hours and Daily charts only. I found that that’s actually a neat trick! Did that this morning! Placed some orders and left the house. Went out, dusted and walked the dog… I had actually forgotten that I had one… :-S

  • Start the SIWT (systems and indicators withdrawal therapy).

Nikitafx → I read your thread and liked it a lot. But for now, I don’t intend of getting rid of all my indicators… Little by little I will as I learn and get better at PA… I swear… :wink: In your thread you said that using indicators with your method would actually make you loose pips. Both method could not live together in harmony somehow? What is your opinion on VSA?

Here are a few more questions:

ClarkFX → I’m happy to see that an indicator trader like I actually am joined the discussion. As you know, there are thousands of indicators for MT4 today. I read in forex-indicators.net that the two most used indicators were the moving averages and the stochastics. MACD came third. I wonder if all those mysterious, colorized, bells and whistled indicators are actually worth using and if I should stick to the most basic ones. Could the perfect mix of indicators come as close to giving the same clues as PA as to where the market could be going next?

Do you all believe that there are as much successful indicators traders as there are successful PA traders? And that the way you trade just don’t matter? What matter is that you are comfortable in the way you trade? Like someone here said on this thread: Like putting on underwear that you have just taken out of the dryer…? Would all of you agree on this?

Thank you all again for your inputs!! They are very well appreciated and are helping me a lot at building my Forex personality.

17

Yes, stop staring at the 5 min charts, but do use the smaller time frames to judge WHEN to enter a trade.

True, only enter a trade WHEN a good setup appears, but there are advantages to day trading. I am not talking about scalping, moment by moment, but entering a trade and then closing that same trade ON THE SAME DAY avoids market changes which could happen overnight, when you are not there to monitor your trade. The gains of day trading are smaller, but the losses can be smaller, too. Small gains for small risk whenever you can get them are much more reliable than going for big gains at big risk. Forex is a LONG TERM game!

Yes, but do keep an eye on longer term trends, and on short time frames for entering trades, as above.

Overall, it looks like you are off to a great start!

18

Actually, to clear that up, myself use no indicators at all. I trade using price action as well. But am simply stating the fact that I do know traders who use indicators and mechnical systems as their main method of trading.

Like you stated, I’m sure anyone can trade comfortably with indicators and achieve the same amount of success that a trader who uses price action, it’s all a matter of preferences and what your personality and tastes tell you.

And this is coming from a price action trader, giving credit to mechanical traders and indicators. :stuck_out_tongue:

1 Like
19

Hello everyone!!

Thanks again for your replies!!!

Pip Grip → The concept of looking at smaller time frames to know when to enter is a concept I have a little difficulty to grasp. I was always wondering why I should have to look at smaller time frames to know when to enter a trade. Should I just look at that time frame all the time instead?? Shouldn’t both time frames give the same signal then??

I intend on trading daily charts now. Since I have a 40 hours day job, it will be the most convenient for me since I will have time to look at charts only 2 times a day. Should I look then at the 4 hours charts for proper entry?

You say that it is better to day trade than to swing trade because it gives you the chance to monitor your trade and close it before going to bed to avoid pitfalls. That is a great idea. But I was actually wondering if swing trading would be better choice for me since I am not there either during the day to monitor and also sleep at night so I am not there also to monitor?

ClarkFX → Thanks for your insight on the subject. There are so many people talking about and using indicators on the net that I just can’t seem to accept that these are totally useless and that PA is the only way you can be successful… There must be something to do with them. I wonder why nobody has yet created something that use both PA and indicators.

Thanks again for your replies!!

20

Smaller time frames magnify the price action of any given moment on the charts. A day trader might use 1-hour charts to decide when to enter a trade, but then use even smaller time frames to monitor their position, in case price suddenly moves away from them, so that they can exit a trade quickly.

In recognizing that you have a full time job and are not in a position to monitor your trades all day long, you have just made an excellent discovery, a discovery which will be of great benefit to you and which will cost you NOTHING. Bravo, good for you!

Swing trading is right up your alley, just right for you, but ALWAYS keep your leverage LOW, so that the inevitable drawdowns will not wipe you out, and keep focused on days and weeks. Do not plan on making big profits on a short term basis, but swing trading for a few days or maybe a few weeks at a time can be very profitable over the long term. Just remember to keep your leverage low, so that you can comfortably absorb the drawdowns. DO set an affordable Stop Loss, but drawdowns will happen.