You need to gain an understanding of how the markets move. You will only be able to devise a strategy once you get this understanding.
If you were tasked with creating a strategy for a computer game, let’s say for Pacman, and if you had never played Pacman, what’s the first thing you would do? You play the game, understand the rules, observe how Packman moves and what it does under various circumstances. Once you have a handle on these things then you can go about devising your strategy to win the game.
The same applies to the fx market. Gain a deep understanding of how the fx market moves. Note, it is not important to know why it moves. That is not essential to the task of creating your strategy. Knowing what to learn and what to ignore is a big part of learning anything new quickly and effectively.
If I were you, I would learn to trade naked charts, without any indicators; not even a moving average. Concentrate on observing and learning price action (PA) and market structure. By PA, I don’t mean the analysis of candlesticks. Rather, observe the up and down impulses that price makes, the micro and macro movements, volatility, efficiency, etc. I’ve posted several YouTube resources to learn market structure. A quick search of the forums will reveal these to you.
I also strongly urge you to you keep away from Fundamental Analysis for now. You can pick up that thread at a later time if you believe it will be useful.
Exactly this. After you trade for 3-6 months, you’ll start to get an idea of what type of trades you prefer. It’s going to be completely subjective and unique to who you are as an individual.
I see no value in FA, at least not for short term traders. One needs to build a model to apply it to the currency markets, since no single variable is sufficient to gauge market proclivity. That’s where you get into trouble. See the following article which explains the folly of attempting this better than I can.
I’d be very cautious sticking with that mindset, especially if you are a short term trader…very.
Fundamental analysis not only accounts for non-chart inputs, but also includes being aware of economic releases.
If someone new to trading is trying to daytrade on low timeframes and is unware of a major central bank decision, or, something like NFP (or really any event risk) they can easily be whipped out of their position in seconds.
The value in FA is being prepared to manage event risk.
Can you tell me how you might manage a news event risk, other than keeping out of the markets?
Here we diverge. As an avid student of PA, I’ve searched the short term charts of several pairs to see if I could spot a news event reflected in the charts. I found nothing that diverged from normal PA. What I did find on certain occasions is that price moved in an accelerated manner. However, there were other instances where price moved equally quickly even when no significant news was released. Just recently the GBP went on a 300 pip range rampage for several seconds. And this was just after the end of a daily NY session. This anomaly too respected PA.
Given this, I firmly believe that news plays no role in the markets, other than, on occasion accelerating price movement. And, if you were trading using PA, this would be in your favor if your analysis was correct.
The claim was never made that economic modelling or news events can gauge market proclivity. The claim is that a news event can whip a position pretty easily due to the increase in volatility (market orders) and decrease in liquidity (air pockets between limit orders)
Sure…Simply by being aware of the event risk is the first step. If you’re about to put a position on the night before NFP drops you’ll want to take this into account. Either you wait for a better price during the news event, or, widen/tighten your stops, or widen/tighten your limits. It’s all going to be contextual so there isn’t a simple answer.
It’s role is not = 0. It plays a role by accelerating price movement, which is exactly what my original claim was? If you’re not aware that a key news event is about to occur and you have entry/exit limit orders in the market, you can enter a position and be stopped out before having a chance to even react…
Contextual to what? You say that there isn’t a simple answer but I’m claiming that there is really no answer since it seems that we both agree (unless I misunderstand you) that, at best, news merely accelerates price on occasion. However, no one knows before hand whether or not it will accelerate price. So, there is really nothing you can do to prepare since price acceleration can occur without a news event and indeed such acceleration can be readily observed in the charts.
I state the same thing regarding acceleration. Please read my comments again. However I qualify it by saying that such acceleration is not confined to news events and one never really knows whether or not a particular news event will cause an acceleration of price movement. Other than occasional price acceleration, news in fact plays no role.
If you’re trading using PA then news really is a non-event. Once again, my observations are that news does not change PA. Therefore, your entry, stop and exit have already been calculated using PA and all orders should be in place. That should not change because of a news event. Hopefully, you’re not hitting the “Buy” or “Sell” button to enter or exit the market.
If you’re a scalper or a day trader then, once again, as stated earlier, you may want to stay out of the market on big news days only because of the occasional acceleration. If you’re a swing trader, news should not worry you in the least bit, even if you are entering the market or exiting the market on a news day.
I’m still not clear on what you would do differently on a big news day, other than stay out of the market. Once again, I submit to you that there is really nothing that you can do to mitigate your risk.
The topic is on finding your strategy and I doubt anyone has ever found theirs from CNBC.
That’s for one but it’s here is my issue with it …
Lets say your new to trading and are long here is a scenario that I’m sure has played out - maybe even many times
Your long the EUR intraday (it could be any timeframe or style though) and then you get Ray Dalio, Paul Tudor Jones, Jim Rogers hell even Maria Baritomo saying they are short the same market - well now the beginner thinks
‘Well heh Baritomo thinks the EUR is going down I’m obviously wrong I need to close it. No I need to get short. If they are saying it on CNBC they must know something I dont’.
Consequently you go short and the EUR rallies hard that day setting off a whole load of emotional responses in the new trader.
I like watching CNBC but it’s been a long time since I let talking heads influence my trading position …
I see your logic and I agree beginners need to soak up as much as possible - maybe I’m being harsh on CNBC I do like watching Kramer for a laugh
100% for real.
Trying to become a professional trader.
Listening to nothing but professional traders and analysts talk for 12+ hours a day. CEOs, CIOs, individuals managing literally billions of dollars, investors with 20 and 30 year trading histories…etc?
We both know this is impossible and that if it were that black and white, we’d all be on yachts right now. It’s the mere exposure to professionals and observing how they think through market conditions, events, and manage billions of dollars of other people’s money.
I think this and exactly what you lay out are part of the process for some people. You need to actually get burned, and whipped in/out of a position to learn the ultimate lesson- you should never rely on someone else’s opinion for a trade you want to take. It takes a buyer and a seller, so, regardless of who believes what someone has to be “less wrong” than the other.
I selectively listen- but, I don’t wholly discount a professional shining a light on a trade I may have taken in which I overlooked something glaringly obvious. It’s not an all or nothing clause, and I think we’re on the same page in terms of mere exposure being beneficial in the long run.
Yes I agree that you have to get burned to realise the talking heads are no better at short term predictions than anyone else.
Im a bit of a contrarian by nature so it didn’t take me long before I took their advice with a pinch of salt but we are all different and I think many will have an undue respect for their opinion - over their own
I did used to find Rick Santelli worth watching - his opinion and predictions on the jobs numbers was always interesting but I have not watched in a long time - I hope he’s still on there
As an avid student of PA, I’ve searched the short term charts of several pairs to see if I could spot a news event reflected in the charts. I found nothing that diverged from normal PA. What I did find on certain occasions is that price moved in an accelerated manner. However, there were other instances where price moved equally quickly even when no significant news was released. Just recently the GBP went on a 300 pip range rampage for several seconds. And this was just after the end of a daily NY session. This anomaly too respected PA.