This is my story

Beginner Questions
1

Hi folks,

Where do I start? If I was to look back as to when it all started, I would have to say it all started back when I first hit the $50k pa salary package and I already wanted to get out of the rat race quickly.

I got introduced to CFDs by my cousin back in 2005 and have now been doing it on again/off again for the past 6 years (kind of a bad relationship I can’t shake off). I started trading in equities, then went to commodity (mainly gold), then indices and finally landed in FOREX (mainly AUD/USD).

During uni I had developed a gambling habit so when I first got introduced to it, the thrill & potential of wins & losses were similar to that of being at the casino.

For the past 6 years I couldn’t differentiate between whether it was my gambling habit that was the driving factor behind my decisions or whether I just didn’t know what I was doing.

It finally dawned upon me recently that it was the former and not the latter. I didn’t know how to manage my equity, in other words, I was gambling more than what I could afford to lose.

So it goes without saying that I have yet to record a profitable year, hence I have put down CFDs as a hobby in my profile (according to the ATO (australian tax office) – that is all it is for me… Waiting for the day I can convert my hobby to a profitable business and in doing so I can offset my losses for the last 6 years. Mwahahahah. As you can imagine I have racked up quite a bill – let’s just say the amount left owing on my house could have been substantially less…

Luckily, I have progressed in my day job, so I have still managed to maintain my debt repayments. As the saying goes – don’t give up your day job…

My number 1 mistake has been – RISK MANAGEMENT. I have never protected my equity. I should know better considering what I now do for a living - ie managing risk on construction projects!

I know I have the necessary analytical skills and the potential to succeed… I have seen my live account balances go from $5,000 to $100,000 (within 2 months)… I have also had live account balances go from $10,000 to $30,000 overnight… I have obviously only told you about my successes – it goes without saying that I have had more failures otherwise I wouldn’t be writing such a long post.

When people ask me how trading is going for me, I have always blamed my work for coming in the way of my successes (ie. “I can’t be in front of the computer every single second of the day”, blah blah blah – I am sure you have heard it all or have used it all).

The reason why I am in the position I am at the moment can be contributed to the following things:-

Greed – unrealistic expectation of where the price will go and not having trailing stop losses to lock in profits…
Unrealistic stop losses or no stop losses at all.

In the end, it all boiled down to risk management.

Although I started doing CFDs almost 6 years ago, I would have to say that out of the 6, I have really probably really spent less than half of that trading (that would be the “on again/off again” time).

Anyways, I am hoping to continue learning and hopefully one day be living off the profits I generate through trading – but I have realised that this is a long way away and not a get rich quick scheme.

I HAVE JUST FORCED MYSELF TO OPEN A DEMO ACCOUNT FOR THE FIRST TIME IN 6 YEARS!!! $10,000 of Monopoly money – yay!!!

My first goal was to set up a business plan. Essentially this was basically a statement which identified what my goals were and how I was going to go about achieving them.

Secondly, I created a risk management plan for each trade. I used some ideas from other pages (eg. Pipwoof’s Triple Threat Exit Strategies). I think Pipwoof’s Daybreak and TTE strategies are quite nice…

My demo account has almost doubled from $10k to about $20k this past week… Out of 17 trades, I had 1 breakeven, 6 losses & 10 wins. Mind you the 6 losses were at some point profits but the markets turned. The breakeven was a trade I accidently opened but closed quickly as soon as it hit my BE point.

I have my closing trades below with the Amount column showing (profit/loss) for that trade… Just remember this is a demo account, so I don’t know whether I would still have been this composed… All of my entries were limit orders except for 3.

demo_trades.JPG693×353 66.7 KB

You will note that, my earlier trades were small as I was testing the waters… Combined pipwoof’s DB and TTE strategies… I probably could have closed those losses when they were miles ahead in the black but hadn’t reached the first TP point as per pipwoof’s TTE strat… perhaps I should have made a discretionary call on those – oh well…

The later trades you will find risked a substantially higher amount… The margins for the higher trades were $5,000 and the risk was $2,500. The reason for the higher margin call and risking 25% of my equity was due to the following reasons:-

  1. Weekly chart showed a morning star with the subsequent bar being a long red… Even though on the Monday morning (over here in Aussie land) prices started moving up, the rest of the world were still sleeping and thinking about how awesome and quickly their weekend went…
  2. I then turned to the daily chart, which showed the AUD/USD in an ascending wedge/channel (bearish signal) and had just broken and closed below …
  3. There was no news scheduled to be announced overnight… Unless something drastic happened in the US, chances were that it was only going to confirm the break by reversing once it got to the resistance around 1.0520
  4. Hourly MACD/Stochastic showed the pair was overbought…
  5. Trade direction @ open – short…
  6. Entry price was set based on resistance level in the hourly chart at 1.0520, which also happened to be around the previous support of the daily rising wedge (as per note 2)…
  7. Initial stop loss was at 1.0572 which was over 50 pips away which was perfect for me to risk $2,500 (I didn’t want to close prematurely) and it was also near the price range of the morning star from the weekly chart…

Result:- I woke up in the morning to find my trade setup was spot on +/- 2pips… The pair at the time was over 25 pips away from my BE point so I moved my SL to BE.

I then trailed my SL by 25pips every time the pair was over 50pips away from my previous SL… The rest is history… I went to sleep that night and woke up to find that the market had reversed but my SL had managed to lock in almost $10k in profits… Happy days…

NOW, I am sure most of you are wondering, how I could risk that much after writing all the other stuff before it… “Aren’t you going back to your old tricks???”

On the contrary, you will note I considered a lot of things before I set up the trade… I basically called a spade a spade…

Alternative scenarios:-

  1. What if the limit order failed to execute? I would have cancelled my order as it was basically intended for an overnight execution, any longer and a lot of things could have changed, eg. Fundamentals, Sentiment or Technical, especially knowing there was some Aussie RBA news coming out the following day… So I would have been on to the next trade…
  2. What if it went the other way? Like I said previously, something drastic needed to happen to the US overnight where no news was expected to be released on Monday over there… There were some other stronger resistance points below my initial SL.

But why risk such a big amount?

FYI, my goal is to start trading full time by the age of 35, so I have about 32 months to go… I should have over $100,000 saved up by then… So risking $2,500 is equivalent to 2.5% of total equity, which is what the recommended amount is… I am trying to see what I would be comfortable with at the moment…

So I am going to continue to demo it up until I feel comfortable and then probably start on a $10,000 live account risking $250.

This is my first of hopefully many posts… I intend to share my ideas as well as learn from other traders… A network of brains are always better than one… :22: In the future I will not be posting my transaction history details, I was just very proud for the first time in having a system that protected my equity and was also profitable…

Happy trading & good luck…
ppolra

PS. This would have to be the first time I have ever written anything down about my trading… It is such a relief to get it out there rather than keeping it to myself…

2

Well… Welcome. You have a long journey ahead of you to becoming a profitable full time forex trader… I would suggest reducing your 10k amount to 1k and trade minilots… Move up to 10k after 6 months of actually being profitable… Then another increase after another 6 months… More then likely your first 6 months will end in a bright shade of red, so you will be saving a lot of money.

Also pipwoofs daybreak/triple threat strategy would have wiped out your entire account if you started in the beginning of this august… Was down 2000 pips this month at it’s worst. So just something to think about.

3

Thanks for the tip mate.

4

Geeze after reading all that I was expecting the story to end like this:

Now, this is the story all about how,
My account got flipped-turned upside down
And I liked to take a trade
Just sit right there,
I’ll tell you how I became the prince of pip-air

In west Australia born and raised
On the university grounds where I spent most of my days
CFD’n out maxin’ trades all cool
And all short some gold outside of school
When a couple of trades
Who’s stoplosses were no good
Started taking all the equity in my Accounthood
I got in one bad trade and my MM got scared
It said “You got some gambling problemz young pip-aird”

I waited for my trades to take gear and when it came near
The T/P warning said it was really close and it had alerted me it was near
If anything I said this trade was rare
But I thought “nah forget it” - “Lets take profit here”

You then waited 7 -8 minutes later
and you yelled at the market OH **** IT CHANGED GEARS
I looked at my balance with cheer
Then I thought it wouldn’t veer
Then I sat on the throne wondering if I was the prince of pip-air.

5

hahaha… classic… love it! the story has only just started…

6

G’day folks,

In my original post I was for some reason thinking that my risk was $2,500 (don’t ask me why), when in fact it was $5,000, which was in fact just over 50% of my equity at the time… In saying that however, please note that I didn’t base my initial SL on value of risk, but rather a strong resistance level as the basis of the principle to determine my initial SL[/I]

What I forgot to mention in my original post was, when I was observing the weekly charts, I noticed that if one drew a line and connected the peak in July last year to the peak in Feb this year (using line chart of course), then the evening star (candlestick chart) we had early August in the AUD/USD pair kissed this line and was the 2nd lower peak after the July peak last year… As we may be aware, trendlines in longterm charts are stronger resistance/support levels…

While we are looking at the weekly chart, if one was to draw a horizontal line around the peak just prior to the GFC, then one would notice that the lows from last year and this year hit the support and bounced back up… This along with the previous line has created a descending triangle, which suggests a bearish signal regardless of prior trend…

I have sat on the side line since my trade closed on the evening of the 22.8.12 (AEST), as I wanted to see how the week was going to pan out… It appears as if the candlestick (in the weekly chart) has formed a gravestone doji – which is generally a neutral pattern – indecision…

If one was to take the last 5 weekly bars and merged them into one, the candlestick formed would be a spinning top with long wicks and a tight body… this would confirm the indecision in the market for the past month…

If my descending triangle theory is correct, then one would imagine further downside movements in the AUD/USD…

You know what they say, the trend is your friend until it turns…

So for the time being. I am going to examine the daily/4hour/hourly charts, watching out for shorting opportunities…

Have a good weekend…

7

I looked atMy number 1 mistake has been – RISK MANAGEMENT. I have never protected my equity. I should know better considering what I now do for a living - ie managing risk on construction projects!

Read more: 301 Moved Permanently first few sentences and a thought went thru my head then you said it.
I come from a gambling background and know the mind set.I beleive one thing you will have to iron out is discretionary behaviour.For my trading i have to be as mechanical as possible one way i did this is to only make decisions and close of candles on timeframe iam using and always i mean always did i say always, have a stop!One thing you said would be a no no for me is the comment you made:On the contrary, you will note I considered a lot of things before I set up the trade… I basically called a spade a spade…

To me thats sounds like you made a decision based on no set of rules ?Would you have felt differently on a different day or just after you had a bad or a good trade earlier?The battle your going to have is stopping the behaviour thats as haunted you the last 6 years and IMO is getting all discreationary behaviour out of way.With that said you sound sharp and know a lot of your weaknesses i wish you the best!Read more: 301 Moved Permanently

8

That statement right there show me you really haven’t learned anything just yet. If a +4 trade ratio was enough to almost double your account, your risk is WAY too high.

Kudos for realizing you were doing something wrong, and switching to demo for the time being, but it’s still wrong.
Risk management is just that. Limiting potential down side. Something tells me that downside still has mighty big teeth.

And personally I think you should still be trading live. Even if it’s only a $100 nano account for the time being. Nothing will be gained by demo trading. There’s no penalty for failure, and no sting when that balance goes down to make you realize, that yes, in fact, you HAVE lost real money.

A demo will only serve to support that inner gambler by letting you ratchet up lot sizes (like you already have), and cheat on things a bit by letting trades run further than they should against you.

You have the right attitude, and obviously the drive, keep it real.

9

Firstly, thanks for your observations… And yes, you are right I have a lot of baggage to clear up…

“To me thats sounds like you made a decision based on no set of rules ?Would you have felt differently on a different day or just after you had a bad or a good trade earlier?The battle your going to have is stopping the behaviour thats as haunted you the last 6 years and IMO is getting all discreationary behaviour out of way.”

In reference to your comment above, I would like to point out that I have been in that position before when I was trading live…

There were times, just after a run of good days in the week whereby I followed my rules ad then my gambling habit kicked in and on the next trade I threw my rules out the window and I lost all of the profits of the last few days and then some and then some again (because more than likely, I decided to average down – which isn’t part of my rulebook)…

Even worse, I used to punish myself by letting the losses run its toll… I know right??? Funnily enough I never did the same for my profits…

I came out kicking myself, slapped myself around, and shouted to myself “never ever to do again”.

I then emptied my mind clean of what had happened, calmed myself down and reset myself… Later on the same day, saw the chart tick all the boxes and entered a trade and took a small profit – not the same to recover what had happened prior to it, but a profit nonetheless…

However I have also been in the position where the chart ticked all the boxes, but didn’t decide to enter the trade because I wasn’t able to get the reset myself… Only to find out the next day, had I followed the rule, I would have at least recovered some of the loss… So I kicked myself some more…

Yes it has been a viscous cycle… Because of my gambling habits, I have done more of that in the past than anything else… As an example, Mon +$1, tues +$2, wed +$3, thur -$10, fri +$1 – in effect slowly chewing away on my equity… Perhaps I should have never traded Thursdays, lol…

Going back to my original post, I know this trade was on a demo account, but I have been treating it as if it was live – because I know what it feels like for it to be live… When I put the limit sell order that night, even though I was down about $500 that day, my mindset was neutral (so I had none of that emotion)…

In terms of the rule on risk, it has always been dependent on the trade… When I say “I called a spade a spade”, all signs in the weekly/daily were pointing down… As such, my risk (SL level) was based on a worst case scenario… The hourly chart suggested that there was still some upward movement to be had, so when I set up my trade, my limit sell order level was still way above the current price, at another resistance level (I can’t recall now, but I believe it was based on a Fibonacci level)… In fact, the price would have had to move over 75 pips to go from where it was, to hitting my entry and then to hitting my initial SL, which is quite a lot for the AUD/USD pair to move within 4 hours overnight…

At the end of the day, you are right; I need to be stringent on my rules, which I haven’t been in the past… I believe I followed my rule book when I made the decision.

What I need to work on is a simpler set of rules, because I do take a lot of things into consideration. Perhaps that and my gambling habit have clouded my judgement in the past?

With that said you sound sharp and know a lot of your weaknesses i wish you the best!

To be honest, this is the first time I have ever written anything down about my trades, history… I always read about keeping a diary, but always gave up after my first entry… But having written this thread and reading back on it, I think to myself, I wish I had done something similar ages ago… I wish I knew about babypips.com when I first started… Things may have been different… Oh well… I am still young…

Thank you again for your post and good luck to you too…

10

@Letseethepips Thank you for your observation…

In reference to your comment above, I would like to point out that I have been in that position before when I was trading live…

There were times, just after a run of good days in the week whereby I followed my rules and then my gambling habit kicked in and on the next trade I threw my rules out the window and I lost all of the profits of the last few days and then some and then some again (because more than likely, I decided to average down – which isn’t part of my rulebook)…

Even worse, I used to punish myself by letting the losses run its toll… I know right??? Funnily enough I never did the same for my profits…

I came out kicking myself, slapped myself around, and shouted to myself “never ever to do again”.

I then emptied my mind clean of what had happened, calmed myself down and reset myself… Later on the same day, saw the chart tick all the boxes and entered a trade (risked way less), it then moved the same number of pips for a small profit – not the same to recover what had happened prior to it, but a profit nonetheless…

However there have also been times where the chart ticked all the boxes, but didn’t decide to enter the trade because I wasn’t able to reset myself from what had happened before… Only to find out the next day, had I followed the rule, I would have at least recovered some of the loss… So I kicked myself some more…

Yes it has been a viscous cycle… Because of my gambling habits, I have done more of that in the past than anything else… As an example, Mon +$1, tues +$2, wed +$3, thur -$10, fri +$1 – in effect slowly chewing away on my equity… Perhaps I should have never traded Thursdays, lol…

Going back to my original post, I know this trade was on a demo account, but I have been treating it as if it was live – because I know what it feels like for it to be live… When I put the limit sell order that night, even though I was down about $500 that day, my mindset was neutral (so I had none of that emotion)…

In terms of the rule on risk, it has always been dependent on the trade… When I say “I called a spade a spade”, all signs in the weekly/daily were pointing down… As such, my risk (SL level) was based on a worst case scenario… The hourly chart suggested that there was still some upward movement to be had, so when I set up my trade, my limit sell order level was still way above the current price, at another resistance level (I can’t recall now, but I believe it was based on a Fibonacci level)… In fact, the price would have had to move over 75 pips to go from where it was, to hitting my entry and then to hitting my initial SL, which is quite a lot for the AUD/USD pair to move within 4 hours overnight on a Monday night (AEST)…

At the end of the day, you are right; I need to be stringent on my rules, which I haven’t been in the past… I believe I followed my rule book when I made the decision.

What I need to work on is a simpler set of rules, because I do take a lot of things into consideration. Perhaps that and my gambling habit have clouded my judgement in the past…

@MasterTang - Thank you for your observations and you are correct… I need to settle down on my risk… Even though the call was the right one, perhaps because it was a demo, the gamber inside me, saw the monopoly $$$$ and decided to risk more…

Since starting the demo, one of my rules is that the initial SL never moves in the negative direction only in the positive, to either lock in the profits or reduce the loss I was previously prepared to risk…

11

Yes, you are quite right, I probably read about his strat late last week… I just wanted to trial his strat… I usually prefer to read charts for trends, candlestick patterns, etc…

I was going through NikitaFX’s Pure Price Action for Dummies - keep it simple!

12

Yea his is a pretty decent place to get a good basis, only thing is remember patterns sometimes are discretionary what you see may not be what he sees

13

You are on the spot. That thread teaches an awesome strategy. I’m following what she teaches. There is similarities in pipwoof’s Day Break system. But didn’t read Triple Treat Exit strategy.

Good luck on your endeavour