Don't Make Trading Harder than it is

Beginner Questions
144

There is only one way you can judge a strategy or any other process in life and that is
’Does it Work’? If it does use it, if it doesn’t, discard it.

I mentioned in my first post that I had lost 9 out of 10 trades. I was about to pack it in, I had myself down as a ‘born loser’ in trading.

Yesterday I placed 8 trades and made a handsome profit in every one of them (it is a demo but nevertheless I was delighted.)

So, getting back to the question, does it work? Nothing more to be said except 'Thanks’
Ken.

145

Hey Carraroe,

tell us, what’s you’re strategy? What times frames and indicator do you use?

Look at this chart I joint to this post. Does your strategy can avoid that kind of crap?

I’m back to demo too after I got a VERY UGE lost with real money.

I tought I was ready, and, apparently, I wasn’t.

So, Carraroe, Ken, everybody, how the hell do you deal with that kind of market?

Thanks!

chart1.jpg465×700 41.4 KB

146

Might want to re-read the section on swings, The first trade I don’t understand I can’t really see the problem other than you held it to long maybe, If your trading off the 5 min chart your scalping. quick little trades. in and out… Besides the candle you circled is a doji a turning candle you went long . at the top of that candle it pulled back, can’t tell from here but I bet the 1 min showed lots more detial … then you had 3 very indescsive red candles some doji this is a sign of a turn. If you were in profit take it or close at Break Even…

The second trade kinda of the same but now we know we have atrend reversal as you have lower highs and lower lows. re-read section you want to go down to go up. ( just in reverse 0 You wnted to go up to go down… But this could have been a good countertrend trade for few pips . I personally wouldn’t have entered off any of those candles as they have long bearish wicks . remember the rocket analogy ?

That is my take anyway… I look for trades on the 15 and then entries on the 1 min and 5 min… , you need to know some reversal candle stick patterns and such. Just google them .

Good Trading To All Ken :

147

My strategy was very simple Melisky, I started on the last page of this thread and read every post in sequence until I understood what Ken was saying.
Then I applied each suggestion to my trading and now I’m winning.
Ken’s strategy is what he has said so often. He trades with what he sees in front of him.
And from now on that is also mine.
Hope this helps.

148

I remember the rocket anology, I even draw some little rocket on paper thinking that make alot of sens actualy…

For the first trade, that long green candle was suppose to be confirmation the trend was changing direction. (long candle green after a doji…) So I went long. And the market went down… :eek:

The MACD and the stochastique was going up, I had my confirmation that the price was now going up too and it actuly went down… Sometime I swear I just can’t believe what I see and it seems to me it don’t make sens at all.

For the seond trade, you’re right. I didn’t consider those longs shadows. In my mind, the price was going up and… Those shadow was probably thousand of people closing their trade because the price was now going up…

Wrong… again… :mad:

I’ll google for the swing pattern for sure. It is, by far, the most important thing to know about trading just after money management.

If you can know when to get in and out and have a great money management… You can’t fail!

149

What you typed…

I’ll google for the swing pattern for sure.

What I said

Might want to re-read the section on swings

and

you need to know some reversal candle stick patterns and such. Just google them

Try again… Ken :confused:

150

Ken just want to say what a great job i think you are doing here, i am hooked on your thread please keep it up. Can i just check my understanding of how you trade Trendline Bounces & Brakes, sorry if you have covered it more than once i am probable just slow on the uptake.

You draw your trendlines on a larger time scale like 2 hours to get an idea of the trend in the bigger picture.

Then drop to your 15 min chart and wait for the price to approach your trendline.

You then drop to 1 min chart to fine tune your entry to the trade.

If you have a brake out wait for it to retest the line before carrying on out to be sure.

One question i have is how long do you leave it before you decide if the price will bounce or break through the trendline? If you are waiting for a candle to appear on a bounce would you look at this still on the 1 min chart or 15 min?

Also do you trade any currency pair?

Once again thank you for what i have learned so far i hope to start demo trading trendline Bounces / Brakeouts as soon as i can.

151

Any time Ken Lee :slight_smile:

152

Ken, you said in your previous post that you might trade the GBPJPY one day.
Do you study the movements of a pair before you trade it or is there a seperate strategy for this pair?

153

Ken, you said in your previous post that you might trade the GBPJPY one day. Do you study the movements of a pair before you trade it or is there a seperate strategy for this pair?

 No,The GBP/JPY  on even the small time frame charts has greater swings ( more pips) as this determines your stops. I would like to have a bit more equity in my trading account before trading it. This will allow for the bigger stops required at the $$ per pip level I like to trade.

 Good Trading To All       Ken Lee       :cool:
154

STOPS Friend Or Foe ?

 Before we discuss where we might  want to place our stops.. Let us look at the creature in general. There are many different ideas regarding the use and not use of stops..  

Stops are basiclly the point at which you call a trade a mistake on your part. Because if you think the trade is still good why would you let it get closed ? It can also be a fail safe to prevent your account from a major draw down or  possible margin call..

Take a look at Friday afternoons GBP/USD or EUR/USD. They both had a major run up without warning. If you had been short with a large enough position . you could have lost a lot of money or even received a margin call. ( Which is where your account does't have enough money in it to keep the position open and your broker closes it for you) if you had a stop placed it would have been activated closing your position saving you some big money.. and you could live to trade another day..

There are those who admittedlly don’t use stops for various reasons. They feel that the setting of stops was a major cause of loses or there trading style is such that the expected drawdown is already caculated into the trades… There are those that let positions run backward for a given amount of there total account ballance then close them. To me this are actually stops of a different style … No they aren’t preset stop orders but they are mental stop orders. The people using them have calculated their risk and what they are willing to except as loses and live by this rules,

Most newbies haven’t developed there trading strategy well enough to have done this kind of analysis. You need to trade your system for a good while to determine what you can expect for your largest draw down on multiple trades to be, before forgoing automatic stop limits. Plus the mental pschology required to close those trades going against you can be a formable task that you haven’t come across yet…

So before you decide where any stop should be placed you need to know a few things about your trading strategy and your level of risk that you can survive and not effect your future trading. People have gotten where they can’t enter a trade because of to many loses in a row or to large of even one lose. So if there is anything about trading that you could say is the most important it is the ability to properlly set a sensible lose order.

You first need to know what type of trading you are doing. 
    Is it Fib Retracements , Trendlines , Swings , S/R lines etc.

You need to know what time frame charts you are going to be
using to pick your trades and maintain them with.
The time of the charts you use will determine your stop
placement. As we discussed previouslly larger time frame
charts. Have bigger everything profits, loses, and waits.

You need to know what you can COMFORTABLY stand to lose
on any one trade then think about what if I have 2 or 3 trades in
a row could you take that emotionally ?

Lets think about that a bit and then we will start coming up with a plan that makes the most sense out of stop loses …

 Good Trading To All    Ken Lee            :eek:

high run up gbp friday.jpg700×418 33.1 KB

155

Let us assume your reading Babypips newbie section of this forum because that is true, your new to forex trading and searching for a system or strategy that fits your personality and trading style and time frame . With all those different areas to try and figure out what is going to work for you it is no wonder most people don’t make it in Forex. By the time they work through different ideas and systems, They are broke…

Because even if you demo trade every different strategy once you go live and the different emotions kick in or your platform goes to real time trading ( I can not confirm or deny that just here a lot said about demo accounts and real accounts not running excatlly the same) You stand a chance of losing a lot of the money you struggled to put together to trade with…

So let use look at using what we are given by the brokers to trade with to our advantage . Leverage . We get to use more money than we have with the different leverage amounts that the brokers provide they vary from broker to broker the highest being 400 to 1.

I am not getting into a math class here as that is not the issue. You will know or already do know that for the size of position you have open what your margin required is… So everyone uses this backwards, they jump into trading going "man look at This with 300 dollars I can trade a zillion bucks and get rich " More than likelly get poorer faster…

But let us look at using leverage to protect our trading funds or equity. You are given a great gift with leverage. Let us use a 1000.00 equity for ease of explainations. If you adhere to the normal money management ideas.
you should risk no more than 2% on any trade. So 1000.00 dollar acount that would be 20 Dollars and Then Money Management states . if you lose more than two or three times in a row stop for the day and reevaluate and figure out what is going on… Also it is a general phenomeunom that bad trades follow bad trades. This is mostlly due to emotions you have a loser and darn it your going to make it up right now…You then forget all the rules of your trading plan and make 1 bad trade after another…

So let use say you don’t want to have more than $100.00 loses in a day EVER and that is 10% of your account. or 5 bad trades. so $60.00 or $80.00 is probablly more than like it… Why do we have a $1,000.00 in our account. With the use of leverage we don’t need that much to trade. and a margin call could be the ultimate stop order, You can’t lose more than that ever. It will protect you from extrordinary fluctations in price , gaps on weekends ( if you ever get caught with a open trade then, I did the other weekend hit to close and broker says trading is closed, But it did what I thought and opened in my direction sunday)

So what I am suggesting is only keep enough in your Brokers account, a minnuim amount to trade with that would be required to open the amount of the most positions you might have at one time . Then keep the rest in a bank account devoted to trading with debit card access to refund your broker if EVER needed.  The idea is to protect your equity.. and if your new, why risk it all. If I had a million dollar trading account I wouldn't have it with a broker probablly less than 10%. Then let the rest work for me with interest ( bad now) or other investments you could draw from quicklly if needed.

We are in this to make money so think like a banker or maybe not, now days they haven’t done very well . Protect your capital and see this learning exprience through, then start building your account, Pulling profits away at regular intervals again securing your money… Use leverag for what it is a fantastic tool to help you save your money. I hope this helps you hold on to your trading funds.

  Good Trading To All   Ken Lee:)
156

Ken, this is a great thread. I’ve really learned a lot from it.

157

Is your stop getting hit to often ??

If your stop is constantly being hit and you can’t get ahead, Maybe it isn’t your stops fault. If you are adhering to money management rules and are only risking 2% per trade or $20 per $1,000. and your trading $1.00 a pip you can only have a 20 pip stop including your spread. But if your trading $.75 a pip your stop can now be 30 pips and so forth.

As we should already know but we will get to… Stops are placed at fairly common places. That is why stop running accrues. You think we are the only ones who know where to place stops…So to prevent getting taken out at these known levels. You have 2 choices you can have closer stops and get taken out sooner ( preserving your capital ) or you can have bigger stops in hopes it is away from everyone Else’s and you survive the odd run on stops.

The biggest question here is what is best for you… I know good traders who rarely get stopped out, They will close almost always before that happens , as they can see the impending stop being broken and why give away more than you have too… Holding on to what you have struggled to make is the key to succeeding in Forex. So if you see your stop is likely to be hit , why would we wait for it and lose more than we have too. The HOPE it won’t is not in our trading plan and there are really limited times we could survive a run on our stop better than if we closed the trade and reentered at a different level…

So think about that next time you see price turn on you what would happen if you closed the trade. Would it be cheaper to pay the spread again ?, If your stop gets hit your still going to have to pay the spread again. Has the price completely turned and is forming a new minor trend or major trend. If so how far would it have to go to convince you of that , and how much will you pay to see it… As you learn to read charts better you will know before it happens most times your stop is in jeopardy , also you should know this most times before taking the trade… and then weigh the risk and act accordingly.

This is part of your trading plan. Entering a trade is easy. Just hit a button… Entering a trade and knowing where it is headed some idea where it is going to turn back (profit taking) and when it is no longer a proper trade (stop lose)
are all parts of your plan… if you see it turn and you know it is going to have to hit another area prior to going in your direction again. Ask yourself what is the cheapest way to handle this close on my own or let stop get hit… ??

Good Trading To All   Ken Lee    :)
158

Hey Ken, I gotta say that its nice to see all the information layed out on a single thread. It makes it a lot easier to understand and follow. Ive been reading it for a bit now but finally just got up to speed.

Money Management is so important that it can totally make or break a person in a relatively short amount of time.

One thing i have learned in the past few months to avoid losses is to open another position. Let one run to your TP and then let the other go and see where it takes you. Worst case scenario is it loses steam and you exit, or have a SL at the same place you had TP from the first lot and you still had a positive trade.

159

thanks for the info about the stops Kenneth - retrospectively its so true and simple - Sometimes tho while trading u fail to see wood from trees and make such ridiculous errors - I’m talking about me here - I’ll start out with resonable stop, then it gets blasted a couple of times, only to thne turn in direction I anticipated initially, so 3rd time unlucky, I go for bigger stop or worse move it and end up completly hammered…I think I’ll spend a bit of time back on demo or observing till i can see wood from trees…or give up!!

160

Don’t give up yet let us get through the stop section first maybe it will help you… I haven’t quit yet just busy traidng my self… But maybe we can make some sense that can help us all out…

    Good Trading To All   Ken Lee       :rolleyes:
161

While i cannot suggest this to a newb who may not be able to ACCURATELY identify the trend, and what time of day the trend changes, I put forth that a number of us simply do not use STOP LOSSES, for the simple reason that they cause MORE losses than they stop !

IF one is aware of the trend, and IF one has the EXPERIENCE, and IF one is fully aware of the time of day that the market reverses on itself, THEN no sl or a VERY large sl is the only way to go.

when “scalping” the use of anything but a mental stop is silly (IMO) and while what i say runs COUNTER to what is normally taught, you will find many many winners who were once losers using it as a method.

ONCE again, DO NOT do this until you fully understand how the market moves and which direction it moves in because it is a TREND TRADING method and you have to KNOW where the price is heading.

BUT — it certainly eliminates your sl being hit, doesnt it ?

enjoy and trade well

mp

[I][B]Within the great hall at Elfinore stands a wondrous coffer, precisely four cubits square and securely latched against the outside world. Inside that repository, shut away from impertinent eyes, abides many an intriquing trading secret garnered from around the world and over the ages !

As a child, i used to watch from the darkness as the secrets were debated and annotated by the elders. No one there held a single thought of my presence – BUT I KNOW WHERE THEY HID THE KEY !!
[/B][/I]

162

Basics of Stops

Before we start on the charts , and since we have gone through everything thus far, Let’s just discuse the general ideas of where stops should be set for different strategies… If you really understand everything so far it should be clear where you should place your stops … and wher and how you can save yourself some money, which is what this game is about Money…

As we saw in the begining Trendlines are the porablly the fast thing a beginer can start trading and also it will give you the confidence of the strength of lines drawn on your chart, Having faith in Trendlines and Support and Resistance lines are very important in trading price action. You can trade without them but your for going a strong confirmation tool by not using them…

The stops used for trendline and S/R lines is based more on your tolerance for loses and your account ballance than other trading styles. The failure of a trendline or S/R trade is the break of or fake breakout of the line this is a variable as can be a changing amount and is harder than other trading to put a set figure on as we will see with the other styles of trading we can have a more knowledgable idea where it is going if it goes against us… As was stated by some Phoenix early on that they wait for the price to test and move in the correct direction before going with the trade.

ThePhoenix
Master Contributor and Member

You mentioned the stop loss issue, of everyone knows where it is because that is the logical spot.

What I do is (if going short) is to wait for price to go up past my entry AND past my stop loss, if I believe a bounce down is iminent. As it’s going up I’ll place my entry. This is after is passed both and still going up or stalled, not in front of them. So, my entry gets hit on the way down.

This potentially avoids me even entering the trade if their is breakout against my direction. Also, the SL and entry have already been touched by price on the way up and down. So, it becomes less likely it may go their again.

This seems like a viable solution to the stops for line trading… Let us confirm the trade and avoid the stop, At worst you give up a couple of pips but this is preverable to entering and having the trade go against you from the start… Even if it turns those first few moments messes with your confidence level. As you progress in learning how to trade, the best traders don’t go for every pip. If you constantlly try and get every pip off the table you will end up ( more than likelly) with less. Those who wait for confirmation may get in a bit later but there stops are rarelly in jeopardy and at the end of the day bank more $$$.

We haven’t said where your stop would be as we should know by now… If you are trading the bounce your trade is over when it breaks the line and continues on the other side. If you did as Phoenix stated you wouldn’t have even entered yet , But might be looking for a breakout trade. A breakout trade has failed when it becomes a fake out and returns to the otherside of the line, Which is when Phoenix was stating he places a entry order for a bounce trade as the stop area has been tested and it is now confirmed in his direction… A stop should still be place to prevent lose of capital but normally with this safe strategy it wouldn’t be in jeopardy… Unless something unexpected happens.

In a breakout trade the line is broken and we now wait for a retest of the line, it may accure in the next candle and then continue in the direction on the otherside. The stop would still be placed on the otherside of the line… after the test and you wouldn,t enter untill it test the line, if it doesn’t test the line the safest trade is not too. As at some point it WILL retest the line ( 9 out of 10 times) and if you enter it can comeback fast…

I went ahead did a chart just to keep it in order, This is the EUR/JPY 15 min from today…

Arrow A is a basic Line bounce trade… Price went a bove the Line Closed Above it The next candle Retraced back below the line ( so the break of the line failed) The red candle closed below the line it is important to let the candles close… As they can change rapidlly and go back to the otherside quick… Making it a breakout. After the red candle closed the entry is at the yellow arrow when green candle went up and started back down…Then I would have exited at the 2 red dojis at the bottom.

Arrow B The price came back to the line bounced off diid not retest it on the next candle. But 3 candles later at Arrow C it retested and closed above the next red candle closed back below another failed breakout.and then the next red candle retested the line and you could enter at the yellow arrow when price had started
back down. Closing at the pin bar at the bottom.

Arrow D Now it gets a bit tricky if you don’t pay attention to what you see… Green candle breaks the line, Then you have a red doji ( turning candle)Then the next red candle retest the line and CLOSES ABOVE IT… The next red candle opens GREEN ( The upward wick would be green at the open) Pulls back and goes below the line and closes below… The Warning signs here are the red Doji and the first red candle If You are looking for a long don’t take a bearish candle to get there. Wait for a green candle which didn’t happen , so we saved some pips. The next green candle retest the lline once again but closed below. The next red candle started down and we could have gone short, We would have been up about 25 pips at the bottom of that candle. I personally would not have let it go negative and would have closed before the retest of the line on the next green candle. But the next red retested and closed and you could have reentered, For another 40 or 60 pips.

Circle F Shows a basic Breakout trade. The Red candle goes threw the Support line and closes below the next green candle retest the Support line and close below the line We could enter at the yellow arrow short. Would close at the bottom espcially with the double bottoms.

Good Trading To All    Ken  Lee          :D

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163

[QUOTE=mp6140;91798]While i cannot suggest this to a newb who may not be able to ACCURATELY identify the trend, and what time of day the trend changes, I put forth that a number of us simply do not use STOP LOSSES, for the simple reason that they cause MORE losses than they stop !

IF one is aware of the trend, and IF one has the EXPERIENCE, and IF one is fully aware of the time of day that the market reverses on itself, THEN no sl or a VERY large sl is the only way to go.

when “scalping” the use of anything but a mental stop is silly (IMO) and while what i say runs COUNTER to what is normally taught, you will find many many winners who were once losers using it as a method.

ONCE again, DO NOT do this until you fully understand how the market moves and which direction it moves in because it is a TREND TRADING method and you have to KNOW where the price is heading.

BUT — it certainly eliminates your sl being hit, doesnt it ?

enjoy and trade well

mp

Thanks for repeating that for me, some don’t really read these threads… From my post #197

There are those who admittedlly don’t use stops for various reasons. They feel that the setting of stops was a major cause of loses or there trading style is such that the expected drawdown is already caculated into the trades… There are those that let positions run backward for a given amount of there total account ballance then close them. To me this are actually stops of a different style … No they aren’t preset stop orders but they are mental stop orders. The people using them have calculated their risk and what they are willing to except as loses and live by this rules,

Again thanks for the refresher… Ken Lee :cool: