Trading Laws

Beginner Questions
1

I only trade the following pairs: GBP/USD, EUR/USD, GBP/EURO,.

I only trade nano account.

I only trade sideways channel to trade when 2 tops and trade the bounce off 50% downwards TP, SL is 10 pips up. Trade 2 bottoms an dtrade bounce off 50% upwards TP, SL is 10 pips down. I know last trade will be a loss when channel ends, and want to take the 2-4 win trades in channel before channel ends.

Never trade with more than 10 pip stop loss.

Never get into the middle of a trade.

I always use a stop loss.

Never remove or push back a stop loss.

Never risk more than 1% of my balance.

  • re-calculate after any significant change in my account.

I only trade with a risk/reward ratio of 1:2 or better.

I never stay in trades over the weekend.

After some losses i stop trading for a while.

I never trade anything JPY,CAD,CHF,NZ,ETC. no matter how good it looks.

I never place a trade without studying the chart for at least 15 minutes.

I avoid impulse trades.

I don’t trade the first 20 minutes of big news announcements.

I always check the news before entering a trade.

I always have to have 3 good reasons to place any trade.

I always use money management even in a demo account.

I don’t add to losing trades.

I lock in some profit after i am up at least 10 pips.

I don’t make trading decisions when i am sleepy or otherwise impaired.

Trade on demo account before for confirmation before trading live.

No overnight trades on Thursday.

Don’t trade on Friday because of the weekend.

Journal each trade.

Reflect.

2

The combination of these three seems very remarkable, to me.

With all trades having a reward-to-risk ratio of 4+:1, there will clearly be regular periods of 20-25 consecutive losses and occasional instances of 30-35 consecutive losses. If trading like that, myself, I’d certainly want to risk no more than about 0.2% of my account, per trade. Then again, if stopping for a while after 4 consecutive losses, I’d hardly ever be trading anyway, because 4 consecutive losses would be completely normal, with 4+:1 R:R … :33:

My “best guess” is that there [I]must[/I] be typo somewhere, in the information above, Nick? Those parameters surely can’t really fit together?!

3

Thanks for reply.

Newbie so just starting on demo account and see what my written trading plan achieves in the next 30 days.

Then i learn, adjust plan if needed and switch to real account with $500.

i do not want to use demo account for more than 30 days as will not have the emotions etc that i have to deal with where real money concerned, come from a betangel sports trading background so have a couple of years sports trading experience with small stakes which i hope will help me trade the horizontal channels successfully.

4

Ooh, I see … ok. Sorry - hadn’t realised that! :8:

Very commendable, to be starting off with a written trading-plan. :cool:

Yes, often so (people vary enormously in the extent to which the emotional differences between demo and funded trading are significant to them, but you’ll know what’s right for yourself from your Betangel experience, anyway). I was at the other end of the scale, and on demo for much, much longer (for other reasons, too).

My guess is that it will help you [I]greatly[/I].

Hope you don’t my mentioning that I think starting off with trades with a 4+:1 R:R is supremely ambitious, will have some enormous losing runs and some even longer “losing patches”, and is going to call for tiny position-sizing.

We all decide for ourselves how risk-averse we are, of course.

The potential problem with a system/method with such a low strike-rate (which it will have, if it has a 4+:1 R:R - you appreciate, I’m sure, that this isn’t at all the same as backing only horses that are 4/1+ at SP on Betfair or at the bookies?) is that the further away the strike-rate is from 50/50, the greater is the number needed in the sample to determine whether or not the method has an edge. I mention it only because “not actually having a proven edge” is one of the very commonest errors among aspiring traders, and you presumably wouldn’t want to start playing with real money until you’re satisfied on that point? That’s going to take you [I]several hundred[/I] trades, to achieve statistical significance. I’m “just saying”!

I think something like a 1:1 R:R is far more convenient, when you’re starting off, partly because it [I]dramatically[/I] reduces the number of trades needed to deduce with realistic probability that you have a statistically significant edge, and partly because it makes position-sizing very much easier and more comfortable.

I know there are plenty of people in online forums advising people never to trade with their R:R below 2:1 (and I’ve even occasionally seen people saying 3:1!) but I think they’re giving shockingly bad advice, and making it really hard for those they’re “advising”, for both the reasons above and more.

I don’t mean it as a criticism, but be ready for [I]long[/I] losing runs, with this plan, Nick. I don’t quite see the logic of stopping after 4 losses: stopping for a while to refresh is generally something one aims to do if one might have been mistrading/overtrading, which one judges by losing heavily … but with a 4:1 R:R, 4 consecutive losers are inevitably going to come up “almost all the time”, without having done anything wrong at all, aren’t they? :wink:

Good luck, and we look forward to hearing how you get on. :slight_smile:

5

Hello nick11,
You follow a strategy and money management and this is very important for successful trading!

6

Thanks all comments

I will only be trading the channel bounces ( not breakouts ).

And be asking myself" where is the market going next"
upper trend: higher highs, lower lows, stopped having higher lows so where is market going next.

channel: mark top mark bottom on candlestick chart: mark candlestick not higher high, not lower low,not higher high, not lower low, so channel. So i plan to trade the bounces off these and know when channel breakout will lose last trade as it goes past my SL.

And wanted to know if any signals or software service to tell me when a channel is forming?

Or do i have to manually look for the forming channels?

thanks

7

Just always use stop loss feature. Always. That’s the key for long trading.

8

Thanks all for advice, i have changed risk reward ratio from 1:4 to 1:2, so will risk 10 pips to gain min 20 pips etc.

Quiz: There are three major clues that you can spot to determine when a trendline has changed direction?

What are your answers please , helps us all learn.

The online learning course of 10 hours i studied mentioned one trader who turned $500 into $1 million in 1 year. Not sure if i can post a link to my Udemy affiliate link here?

9

That sounds much more suitable, in principle, I’d think. (For myself, I’d want to know a lot of other parameters and to do a lot of testing before determining that, though: I’ve seen too many methods which make profits with lower targets than that, but lose overall with a 1:2 ratio.)

The fact that you’ve already decided there are 3 major clues suggests to me that you already have an answer of your own, and naturally I’m curious to know what it might be, and what you’ve been reading on the subject. (For myself, since I trade some reversals, I judge it from bar patterns because that’s how I define a “probable reversal” for my own trade entry purposes … that means that I voluntarily miss some, but at least the ones I trade are high probability … but I have a suspicion that that may not be a very helpful answer for you.)

No; as in any trading forum, I think, that would just create work for the moderators, removing it. :58:

(It would also remove credibility from the recommendation, wouldn’t it, by making it an incentivised one - if you think about it? :wink: ).

10

This is incredible indeed, having this down and looking at all the time will prevent many mistakes and other factors that can contribute to lose. But we don’t have to be mechanical in the market, but flexible. What i mean is this; we should be ready to adapt to situations in the market because things change!

11

I will trade no big news coming out, afternoon session in USA, nothing really happening then i will look for good channel trade.

stopped making new lows, stopped making new highs, we are in a channel even if the candle pops out a little bit from the channel.

tops and bottoms need to be similar then i can trade the tops and bottoms of the channel.

if keep trading the channel i know last trade will be a loser.

idea is to capture few trades beforehand.

2 similar tops 2 similar bottoms then i trade.

when market is at top i take the trade to the bottom of channel about 50-75% of the way down and similar on the bottom of channel i trade to the top of channel about 50-75% up.

small stop loss 10 pips outside channel top or bottom depends way market going up or down.

take 2 or 3 trades as channels bounce up or down support/ resistance levels

12

You need to be able to quantify all of your reasons - essentially they should provide you with the answer. Being able to quantify your entire trade plan (in my humble view) is essential…providing you are of course not a discretionary trader.

13

To be fair I say ‘quantify’ several times in my last answer - my last job was as a procurement analyst. We got drilled to quantify everything and anything. With that being said, please excuse my response.

14

This … exactly so. :slight_smile:

That’s doubtless part of the reason you’re a successful trader. I habitually say the same thing, here, albeit sometimes in slightly different words and without your “excuse” for it. :8: :slight_smile:

15

Quantify?

Do you mean $1 = 1 pip, trade 1 day charts look for 50% profit 50 pips of the 100 pips available in the bounce up of the channel or bounce down of channel?

Stop loss 10 pips $10, profit target to start off with tiny trades not risking more in the channel trades than $10?

Start with bank of $200 not risk more than 5% = $10 per trade with stop loss of 10 pip outside channel?

Can you give us examples of quantifying the trading plan?

Thanks

16

money_management_channel_bounce_$200.png632×566 12.6 KB

If i started with $200 would these figures be correct?

50 trades per week using 5 min chart trading usd/ pairs euro, gbp in the afternoon usa time when market quiet, no major news, so 10 trades per day, 5 days week, 50 trades x 4 weeks.

Thanks

17

risk_tolerance_start_with_$200.png647×541 19.5 KB

Risk tolerance starting with $200 and 40% monthly growth, would these figures be correct?

thanks

18

No that’s not what I meant, you’ve just discussed the risk to reward element of your trade plan.

You need to quantify your trade entries and exits - more importantly you need to be able to quantify price. It’s all very well saying your going to make 40% a month (on paper of course), but it’s the “how” question that matters here.

What qualifies a trade to take place, what are you looking for, what filters may you take into account, what voids a trade set-up. These are what need quantifying. Once you have done this, the acid test is that any other trader should be able to trade your same system by looking at your trade plan.

Complete this sentence… If ‘A’, ‘B’ and ‘C’ occur on a price chart I can open a short/long position.

It’s ‘A’, ‘B’ and ‘C’ (or multiples thereof) which should be your tried and tested quantified variables. Without this there is no possible way that you can say, as you are now what your expected risk to reward ratio will be, or your expected success rate.

It sounds like you’re trying to build a car before considering how to make the engine.

19

Thanks for the advice.

So I am only going to bounce trade in sideways channel to learn that strategy for first 30 days as newbie trader, if the following occurs I can open a short trade at top of channel or long trade at bottom of channel, knowing that my target is to capture 2-3 trade profits before the market hits my stop loss out of the channel and I lose that last trade with stop loss 10 pips $10 outside channel.

A - If a sideways channel occurs by being able to fit inside a rectangle,

B - Similar lows and similar highs occur in the sideways channel,

C - Must be USA session 12 noon - 3pm no big news coming out,

D - Market settled down and stopped making new lows and stopped making new highs,

E - Trade at each top and bottom risk 10 pips at $1 each for reward of at least 20 pips at $1 each.

F - Trade the USD major pairs in 5 min, 15 min, 30 min, 1 hour, 4 hour time charts.

G - Must be 3 similar points at least in channel where got 2 similar tops and 2 similar bottoms.

H - As market gets closer to top or bottom of channel I take trade to the opposite way 50% of available pips with minimum of 20 pips at $1 per pip.

I - Stop loss of 10 pips outside of channel at $1 per pip.

J - Risk to Reward Ratio at least 1-2 so risk 10 pips to win at least 20 pips.

Target is to win 2-3 channel bounce trades at 20 pips x $1 = $20 x say 2 wins = $40

Find 5 bounce channels per day between 12 noon - 3 pm USA time in USD major pairs = $40 x 5 channels = $200

Trade for Mon-Thurs so 20 bounce trades in 4 days x $200 = $800 per week gross profit.

Less the last losing trade each channel of 10 pips = $10 x 20 bounce trades per week = - ($200.)

Net profit $600 per week less spreads.

Use 50% of net profit per week to add to the bank to increase value of traded pips.

Am I on the right track or can you recommend a youtube video to learn how to quantify better?

I had a bit of experience scalping the ladders in horse racing at betfair and in play horse racing and + - 2.5 goals soccer but probabilities and quantify I still lots to learn in forex trading

20

You are getting closer - but not hitting the mark entirely. You need to try and answer all of these points you just made

A - If a sideways channel occurs by being able to fit inside a rectangle

How are you going to quantify a sideways channel - what is side ways and what is not sideways

B - Similar lows and similar highs occur in the sideways channel,

How are you going to quantify the term ‘similar’ - that’s a grey area. Similar cannot be quantified, you need to turn this into what IS and what ISN’T a side ways channel. Nothing in between.

C - Must be USA session 12 noon - 3pm no big news coming out,

What is big news - you need to turn this into what IS and what ISN’T. Find a clear definitive measure to test this historically and moving forward.

D - Market settled down and stopped making new lows and stopped making new highs,

What is a new low, what are you comparing a ‘new low to’. Are you comparing against a previous swing low (in which case quantify a swing low too).

E - Trade at each top and bottom risk 10 pips at $1 each for reward of at least 20 pips at $1 each.

Why 10 pips - what are you basing this SL on? What if the markets are more volatile. Quantify your SL decisin so that it is linked to a market metric.

F - Trade the USD major pairs in 5 min, 15 min, 30 min, 1 hour, 4 hour time charts.

Why? What is the benefit of this (I’m not saying there is not one either.)

G - Must be 3 similar points at least in channel where got 2 similar tops and 2 similar bottoms.

Again, How are you going to quantify the term ‘similar’ - that’s a grey area. Similar cannot be quantified, you need to turn this into what IS and what ISN’T a similar point. What is a point? Why does this point work in your analysis, what quantifies a valid point and an invalid point?

H - As market gets closer to top or bottom of channel I take trade to the opposite way 50% of available pips with minimum of 20 pips at $1 per pip.

I - Stop loss of 10 pips outside of channel at $1 per pip.

J - Risk to Reward Ratio at least 1-2 so risk 10 pips to win at least 20 pips.

So, the point of quantifying is so that you can repeat. Each decision is either a yes or no approach which can be calculated. Try and imagine your are turning your entire trading method into a flow chart so that it can be programmed into a piece of software. It’s this level or certainty and granularity that you need to get to.