How did you start your strategies?

Beginner Questions
41

I absolutely agree that money management and position sizing is life critical. I even have calculations I already made for percent risk, different stop losses, and account sizes with USD denominated pips. But I absolutely HATE Oanda’s web based interface. I’m sure you can make millions with it, but in the beginning I need fewer obstacles to doing a good job and I think Metatrader is really a great platform. I’m used to it, my workflow is already built around it, so I want to stay with that.

I don’t have any lack of confidence in that when it comes time for a bigger account, I will actively work on position sizing (and its really not so hard once your account/lot size is flexible).

Right now my main problem is developing the right strategy, and making sure that all the mechanics and workflow are well established. I don’t want to be bogged down with pip calculations for crosses, etc. One thing at a time. That is why I am focused on pip rewards, relative risk/reward, and number of successes/failures.

How much do you want in your account when you start trading for a living? I’d hope it would be more than $10,000 at least. Eventually you are going to have to get used to trading large sums of money, and if you can’t stomach losing a $1000 account you will NEVER be able to trade a 5-figure account.

I have a four figure sum saved up for my live stake, but I still anticipate working/studying during that period. If this does take off and do well for me, my idea is to move to a country with a low living expense and trade from there for a while. I can easily have a year’s expenses saved up and not have to worry.

As for strategy, my personal recommendation is to design something yourself. I might lose you here, but I would recommend never adding a single indicator to your charts. All the information you need and more is right there in the candlesticks and the dance they do 5 days a week. A couple of lines is more than enough to get yourself in on some very nice trading opportunities IF you understand what is happening that causes the price to move. Remember it’s about those longs/shorts (bulls/bears) always trying to position themselves for their beliefs to play out. The shorts are going to come out when they think price is too high and the longs are going to come out when they think price is too low.

You didn’t lose me at all. I’m very interested in price action centered trading, and I’d be glad to develop my strategy entirely around that if possible. I never got into the candlestick patterns, to be honest. There are like 40 of them, which one do you chose??

Also, any idea on how to integrate fundamentals outside of COT reports and the interest rate consensus figures?

I appreciate all of your contributions…

42

Which one do I choose? The candlesticks mean different things at different places on the chart and at different times of the day/week. It’s mostly about the support/resistance levels that I’m constantly drawing and removing. The price helps me determine where the levels are and what kind of potential they have for a high potential/low risk entry opportunity.

To be honest, there are a lot of subtle things that I’m watching for, that are purely based on the context of the market at that exact time. I could never explain them because it’s almost entirely based on the circumstance. To me it’s all about supply/demand and support/resistance, and looking for areas where I can join the flow of the market without having to place a very wide stop in case things don’t go as I thought.

I think every new trader wants to be able to just read “how to make money: step 1. do this, step 2. do that, step 3. collect your check” but you will actually have to spend some time looking at charts. I’ve given you the basics, I really can’t stress enough how much just looking at the price move over time (without trying to trade it, just observe!) can help you understand what is going on. Play around with it, draw a horz. support and watch how price reacts to it. Draw a trendline, see how price reacts to it. Watch a news release come out and see what happens.

I really believe you’re too interested in making money right now, and just don’t have the curiosity to want to understand what is actually happening, but hey prove me wrong :wink:

43

Well, you can’t blame anyone in trading for wanting to make money “now”, lol. As far as I’m concerned, not placing a cash trade because you haven’t got the right concept down yet is a way to make money [I]now[/I], saving yourself from a loss by avoiding high risk situations is making money too.

If the correct answer to the question of how to make money is “You need to watch the charts for a very long time before placing trades and draw S/R everywhere”, then that is the correct answer, as correct as saying “how to make money: step 1” :smiley:

So step one it is, be always looking at support/resistance, and noting them everywhere. I’ve been already doing this for some time, but I guess it is a good idea to do it constantly, every day, and keep watching.

44

Obviously you can’t see that.

The proof is here:

but unless we’re talking about the money flow technical indicator,

You haven’t grasped any of the concepts akeakamai & myself are trying to get across to you.

Did you read any of the stuff we posted in this thread?
Surely, you haven’t thought about it.

There is nothing wrong with that.
Just go back & read it again & think about it.

Lot’s of people want to trade but few have the brains to figure it out.
And even less have the stamina to put it into application.
A big majority of people just want it all served on a plate and have a whinge when it’s not done.

[B]No One[/B] and I mean [B]No One[/B] who is taking money out of the market consistenly will serve anyone!

And why should they?

People either have the brains or they don’t have the brains to figure it out for themselves.

45

Would that be you?

46

roflmao

47

Isn’t that what xtraction said about buyers looking for a bargain when the currency is “on sale”?

48

Basically the main takeaway I’m getting from you is that to get this right, you simply have to observe, make mistakes, learn from mistakes, and continue to observe to get a feel for the market.

I don’t know if I was misread here, but I never asked about any “holy grail” or magic indicator that’s going to unlock the big secret. I’ve been around long enough to understand that this is not the way things work, and that if someone did find a perfect system, it obviously wouldn’t be perfect for too long. I’m well aware that a trader needs to think on their toes and be ready for things to change, the trick is obtaining the right mindset and means of observation. It seems, from everything I’m getting, that this is basically something that simply comes from screen time. I’m fine with that answer.

I’m sure you have your quantitative methods for analyzing what is going on in the market, which you’ve developed over the years you’ve put in all of your hard work. I’m not asking you to reveal them, to tell me to buy when there’s a tweezer top, the price hits fibo 38, and COT indicates the shorts are diminishing, etc.

I’ve been in a certain creative field for a long time, and when I approach others I know that there is no substitute for experience. You can explain basic principles of how things operate from a technical and artistic standpoint, but you do need to practice, make mistakes, and learn from them. That is the process that any craftsman and professional has to go through. I certainly never expected it to be different in trading, and I don’t think I put that impression across here.

Those who are beginning are in a difficult position, they don’t have the experience or perspective that a professional like you has. I know that because I’ve helped teach others how to do things in my field, and yes, it can be frustrating because certain beliefs and understandings aren’t there yet. What is difficult to do sometimes is to quantify clearly what those things are to another person, and that definitely takes patience.

Anyway, thank you for your time.

49

Money flows --> moves the market

cash flows --> moves your own account; p/l

noobs neglect both because they are so concerned about strats, systems blahblahblah.

If you focus on the above all the rest will fall into place.
Look at the charts
Pick a direction and entry point (its up to you figure this out, its the easy part and will come with screen time)
Trade
Apply money management
Win or lose

Repeat
Repeat
Repeat…
:smiley:

50

TonyIommich,

Retail FX traders seem to use the term [B]Money Flow [/B]differently than the standard meaning of the term. I also was confused by the retail FX use of the term so maybe I can help clear up your confusion.

Typically the term [B]Money Flow [/B]is a measure of the ebb and flow of trading in a security by relating price action to volume. And typically measured with indicators such as “Accumulation & Distribution”, “On Balance Volume”, and even the [B]“Money Flow Indicator”. [/B]

ie:

A strong price move with [B]high volume [/B]= [B]increased “Money Flow” [/B]

A strong price move with [B]weak volume[/B] = [B]decreased “Money Flow”[/B]

Retail FX traders seem to use the term [B]“Money Flow” [/B]as a measure of price direction only, not volume and market breadth. When they say follow the [B]“Money Flow”[/B] all they mean is follow the [B]“Price Action”.[/B]

Hope that helps! :slight_smile:

51

There is no fool proof strategy in forex. If there is one, I am sure all hell will broke lose and everybody is gaining ground. But as you had mentioned that forex is interesting for you, that is because there is that challenge in it. The challenge to make it big and successful in trading. Forex Market is very volatile, you need to learn all the factors that affects it. I suggest you concentrate first on one pair. Monitor and trade on it. That will be your first step on having your own strategy.

52

Agreed. It’s what separates the successful from the unsuccessful. Golfers have link time, pro basketball players have hoop time. 99.999% of everyone that is successful in anything has spent a great deal of time learning the skill. There is no [B]Forex Shortcut[/B].

I mentioned in another post that Barbara Rockefeller said that any system can be successful, but most traders lack the discipline to trade by the rules of the system, or fail to spend the time learning the system through rigorous testing. (paraphrased)

54

Hey Tony,

if you find some price action hard to interpret, you could always post a picture of what you see with your interpretation. Then I could maybe point some things out that you missed or didn’t know existed. There’s really 2 parts to trading though, first the analysis to figure out what’s going on, then the second is figuring out how to profit from what’s going on. It is the ability to form a consistently profitable risk structure, based on your interpretation of price action, that you will have to spend a lot of time practicing and perfecting. Fear and greed will hinder you in your attempts to make clear interpretations and “smart” risk structure.

And yes, it does have a lot to do with how good you are at learning from your own mistakes, and picking yourself up from failures.

The trickiest part is that many terrible trading habits are really fun and exciting, especially when you pull it off and make some money. Things like overtrading, taking huge risks, ignoring the possibility of being wrong, all make trading thrilling and all drain your capital. The thrill is addictive to some people, not even joking! Takes time before you’re strong enough to say no to those impulses for instant excitement :wink:

55

Thank you very much for your offer, akeakamai, that’s exactly what I need! I’m going to do some work on the charts and post a few things with my analysis, this would be very helpful!

56

Okay, here is my attempt at some basic price analysis. Its Sunday evening, February 14th, and we’re looking at a weekly chart of the EUR/USD

This chart says one clear thing, there is a trend and it is a bearish one. Last week’s candle, however, does indicate indecision (today’s candle, the very short one, is still not valid). There was a tug of war between buyers and sellers, and even though it ended with the bears managing to pull the close lower, it was not a decisive bear victory.

Next, let’s move into a daily chart:

The daily chart goes along well with the weekly, in that the bears are winning the battle here. The price is below the 200 period moving average (dashed line). However, the last few days (we’ll ignore today’s candle, the shortest one), shows that there are a lot of bulls getting hungry as price approaches the lower end of the daily range, appetites are raging there.

Next, four hour chart…

As this chart makes clear, price is trying and trying go get to 1.3500, but the buyers are pushing it up (Feb 12th).

57

Let’s get even closer to the 1 hour chart…

Price here is hanging out between 1.3640 and the 1.3600 handle. Its probably going to either a) try to hit the 1.3500 handle again, or b) Run up to touch the daily trendline, then either reverse and head down to 1.3500 or breakout.

How is that for starters? :slight_smile:

Thanks for all criticism…

58

I like your analysis of the candle action, but you’re missing out on the bigger picture. Your charts are quite zoomed in, so it’s hard to get an idea of what levels are important. Sometimes seeing more at once can make things click more smoothly.

Also, I think you’d do yourself a huge favour by simplifying your analysis to 2 timeframes. The TF that you want to take trades in, and a higher TF for trend biases. If you start looking at TF’s too far up, they start to lose meaning in relation to your stops and risk structure. Also you run the risk of analysis paralysis, where you have too many conflicting signals to act, even though you might have an edge.

And be wary of always trying to figure out what “could happen”. That’s when you start to combine the analysis and the risk taking, and it gets too jumbled to make a good trade decision. The analysis tells you what has happened and what is happening, but only when you are ready to implement your risk structure plan should you think about what “might” happen.

the link is the fullsize image, but i just wanted to show you the wide view of the markets im getting, and just a simple template on there, outlining the high and low of last week’s price action on the Eur. the chart is a 3h chart so it covers a few months of data…

http://img268.imageshack.us/img268/5899/euroanda.jpg

59

Thank you akeakamai! I am off to the trader’s expo right now and will try again to post some charts tonight :slight_smile:

60

Good luck at the expo, I’m not sure what that is even haha.

I should’ve made this clear earlier, when I’m watching price action, I’m focusing a lot of attention on where price ISNT going. Because if you’re pretty sure price isn’t going to go past a certain point, that’s excellent ground for a stop. Once you have the idea of where you want your stop to be, then you wait for the market to start trending away from your stop area, and well then you have a nice trade opportunity :smiley:

Then the trade becomes about holding on thru the trend, or until you’ve hit some level you were targeting.

61

Trader’s expo is actually an interesting event, they have it once a year in New York, Las Vegas, and LA. Its free to attend. They have various workshops and lectures on trading. Some of it is pretty good, but of course they’re usually trying to sell you something. It all depends which events you attend.

I try to avoid anything that says “Make $1000 a day in just 15 minutes each day easily”, and anything that has that snake oil spin. There was one guy who promised that his options signal service would make you a millionaire with the ability for you to own your own jet, and boasted how one Romanian lady with no knowledge of English turned $300 into $19K in one day, lol. Boy was I out of that one fast…

On the plus side, Curtis Faith was there, Brian Dolan, and a few other interesting people that had good things to say. It was particularly interesting hearing the fundamental analysis of FX from a number of speakers. It helped give me a good framework for thinking the right away about fundamentals. They have live trading challenges tomorrow, it should be interesting.

I should’ve made this clear earlier, when I’m watching price action, I’m focusing a lot of attention on where price ISNT going. Because if you’re pretty sure price isn’t going to go past a certain point, that’s excellent ground for a stop. Once you have the idea of where you want your stop to be, then you wait for the market to start trending away from your stop area, and well then you have a nice trade opportunity :smiley:

Then the trade becomes about holding on thru the trend, or until you’ve hit some level you were targeting.

Interesting, thank you for that note. That reminds me of what Curtis Faith said today when he was looking at the S&P’s. He pointed out where he’d put his stop, thinking that we’d likely see a re-test of the highs, so once he saw the price move to re-test he’d put his stop just below the last swing low we just had.

Interestingly enough, I just saw the Euro move in the bullish scenario I suggested earlier (I must be such a genius now :rolleyes:). I see it is currently consolidating around the daily trendline, its spending about 2 hours doing that right now. Since the bias is generally bearish, I would probably short the Euro at the daily trendline, and put a stop just above the 50 handle.

I’ll give this another day and will come back and do another chart.

Thanks again for your assistance!