Howdy All!

Beginner Questions
1

Hi All,

My name is Anthony (you can call me amero…if you really want to…but Anthony would be great) and I have just finished my degree and looking at getting into Forex in a big way.

My initial venture into trading was a rocky one – being very naive, I took a course through knowledge to action in stock trading, figured id apply simple trend analysis (no idea about indicators at this point except a vague understanding of macd) and went for it … and lost £2000 in the course of 3months (which is PAINFUL for a student) but during which time I discovered forex.

I bided my time, completed my degree and developed my knowledge further, looking primarily at Bollinger Bands, Candlesticks (still a complete novice-but find trading on these a hella lot easier), MACD, RSI and Fibonacci Pivots as well as using 200 and 50 day moving averages.

Basically, I am still a complete novice in these! Ahem, anyway – started again at the end of last month and began haphazardly trading with no real strategy and then eventually began looking at developing a strategy.
But I suppose I should state a goal? Ok well nothing fantastic –[B][U] I am looking for 100% return each year[/U][/B] and am currently using £4,000 which I spread between 2 accounts (so that I can trade both directions without getting confused! And it is easy enough to transfer the money between).

The intention is to measure my gains by the original £4,000 (instead of the increasing pot amount) – I will then after 3-6 months increase my pot size if I am trading at suitable rate and maintaining profit (Each time I will also be increasing my target by 5-10%).

Anyway I currently employ a long term and short term set of strategies which are still basic and in their infancy (and I cringe when I mention my stop loss system to you all but I do REALLY need to learn and develop so I will take all the help I can get ;)) so please be aware I have only been trading for 5-6 weeks now.

S1 – Long Term strategy using RSI/MACD and Fibo levels usually from both 1H and Daily. I look for the 3 main macd indications: divergence, signal cross and 0 cross – I will then confirm with RSI level 30/70, however in strong short situations I look for confirmation at 20-60 and long 40-80. Now based on a trader (can’t remember whom – he did seminars in London which a family member went to) , he basically said the rule is not to come out until your positive – so massive stop losses and trading at a low stake. So…

  • Entry:
    [ul]
    [li] MACD Divergence or Cross over 0 line of histo/MACD line
    [/li][li] RSI 70+ for Short, 30 or less for Long
    [/li][li] Check for Fibonacci levels 1hr and daily
    [/li][li] Stop loss of 500 points
    [/li][li] Rate: £1
    [/li][li] I set targets of 50 points however, I rarely stay in this long and take much lower amounts – this is a huge problem
    [/li][/ul]
    for me.

S2: Shorter term Strategy based on RSI and Bollinger
Based on a trading strategy that I bought from Bread and butter trading – however, this is a slight modification on a number of Bollinger strategies (so a waste of money) , further to this I made more sensible modifications (in my opinion – amateur as it is) to the stop loss

Entry – based on 5min charts
[ul]
[li] Price closes outside Bollinger (main body not just wick)
[/li][li] Following candle closes inside the Bollinger (main body not just wick)
[/li][li] Entry is 10 points from the wick of the 2nd candle
[/li][li] Stop Loss is usually 10-25 (depending on volatility) of the 1st candle
[/li][li] Trading risk of 2.5-3% of your pot which usually entails 2-3 /point stake
[/li][li] Exit after 15-20 pips gained.
[/li][/ul]

However, these two tend to merge during the course of the day !

So me as a trader …

I am unfortunately a bit of a hot headed direct trader who relies solely on technical analysis. Whilst I’m happy to risk it big, I can’t seem to stomach leaving a positive position in for too long (i.e. once I get to 12-15 points positive I get twitchy) I’m hoping when I start working this will stop being such a problem.

I’m looking to develop my trading ability through practise and learning and to come up in the course of things an effective skimming system. The intention is that (bar over the next fortnight as Im doing a little bit of construction work) once I’ve settled into a graduate position, that I will trade for up to 1.5 hrs before work and up to 1 hr after.

Furthermore, I am a big believer in trading on the move and have been getting a little practise trading from (and rudimentary analysis) from my smart phone and have also set up Bollinger and RSI alerts through my trading platform (the only real benefit I personally found from purchasing information about forex trading siiigh)

What are my primary improvement aims:
[ul]
[li] Improve my entry and stop loss
[/li][li] Improve my target
[/li][li] Reduce my LT trading to reduce overnight fees.
[/li][li] Greater Knowledge.
[/li][li] Continue to enjoy trading as I have done over the last 5-6 weeks because TBH its probably the funnest “game” I have yet to play :smiley:
[/li][/ul]

Anyway! Thanks for looking :smiley: I will be trying to update once a week (especially if I have trades stuck in over the weekend!)
Let me know any of your thoughts 

2

Yes, that’s a serious problem. 10:1 Risk Reward is a recipe for disaster

3

HI Jezzode - I completely agree with you - especially considering Im not even collecting the full of my target. I am looking to move away from it and specialise in profit through RSI, Bollinger, Fibonacci and MACD but I am struggling to work out a system that works for me with tight stop losses.

just going to need time I guess :frowning: have you seen the daybreak strategy ? I was considering testing that.

4

how tight do you mean when you say tight stops?

I use two out of your list of four indicators, and manage to play trades at 1:2 Risk Reward on a day to day basis. Average stop in pips is floating around the 20 pip mark.

5

(blimey you respond quick - I was about to go gym!) And at the moment I am having difficulty placing trades with less than say 55 point stop losses? In fact my biggest stop loss was from 18 point stop loss at £2 a point. I suppose it all comes from experience - any advice?

6

Yes, your right, it does come down to experience, the more screen time you clock up the more ‘readable’ you will find the charts. It also comes down to your trading method too, and the currency pair that you are trading. The more volatile the pair the greater the stop you may decide to use and visa-versa. Then you can consider the length of time your are holding the trade for and the potential profit your are aiming for. A trade that you anticipate will last for less than one day does not warrant a 50 pip stop as much as say a trade that will be held for several days. We can assume the longer the holding period the greater the desired profit in pips.

At the end of the day, the measurement of pips in useless alone. Money management is equally important.

7

Hi Anthony,

I’m very new to all this also, and have spent the last few months pretty much doing nothing researching, reading charts, and more research, and more reading charts… I’ve only just begun paper trading to start honing my skills, and plan on doing that for the next 3-6 months before going live!! I agree this stuff is really cool, and has so much potential, but yet at the same time very dangerous!! So I wish you the best of luck in your journey.

One thing in your post that stuck out to me, you said you were “happy to risk big”. To me that seems like it could be a red flag. EVERYTHING and i mean EVERYTHING I’ve read from professional traders is they always risk the same, strict money management is a key element to successful trading. Any trade can go against you, no matter how good the setup looks! So maybe think twice before risking it too big :slight_smile:

8

I’ll be following. This looks entertaining as always. :smiley:

9

Hi,
Thanks for sharing the info, sure it is going to be valuable to all. Here’s a tip: you may want to control that impulse to risk it big, that’s never good when it comes to Fx trading…

10

Hi radicledog,

Just read your advice, thanks for helping the beginners im also new and trying to learn. Thanks, hope to hear from you soon. :slight_smile:

11

Hey all thanks for the advice, I definitely agree that I need to hone my skills - I wish I had the patience to do as Radicledog but unfortunately… erm… :’(.

Ill be posting my positions on sat or sunday then u can all come up with colourful (but polite) ways to call me silly when u see my £3 long position on GBP/USD (which currently trading at -£300).

I am curious how people are managing to cut their stop losses though.

My Biggest Gripe is that every time I’ve put narrow stop losses (25-50points) I seem to loose - this is obviously a question of my entry.

KirstenDavid and Radicledog - good luck to you both :slight_smile: what sort of strategies are you looking at ? have you seen the day trader strategy thats being looked at on babypips??

FXmall and Jezzode - thank you for your advice - its the reason I signed up in the first place and its giving me plenty to think about :slight_smile:

12

Hi kirsten,

Being so new to all this myself I’m not sure it counts as advice, or how much it’s worth :slight_smile: And for clarification of my post, the absolute risk itself isn’t necessarily the same, but the formula or method for calculating risk that is. It can be a simple % or account size, or something more complicated like Ralph Vince’s optimal F. There are lots of strategies out there, probably best to start simple and small!

Us newbies will have to keep tabs on each other! I spend most of my time in this price action thread…
http://forums.babypips.com/free-forex-trading-systems/42378-forex-price-action.html

There is also this thread, I’m not really active in, but the info presented in the first post is awesome
http://forums.babypips.com/newbie-island/36328-what-every-new-aspiring-forex-trader-still-wants-know.html

That is of course after I read through the entire school of pipsology!

I have to say when I started down this path I never realized how much this would suck me in!!

13

Hey Anthony,

After dabbling in various different strategies for a couple months, I stumbled onto pure price action trading, no indicators… very clean and simple. I like it a lot, and at this point my focus is on swing trading the D1 and H4 charts, nothing less than H4 at this point, not sure I ever will dip below that, I like the relaxed style of the higher time frames so much… we’ll see, too early at this point to rule anything out.

14

Hi there, when you say purely price action - do you mean simply looking for breaks of the previous day/H4 high/Low? I would be curious to have a look at your entry and stop loss system if you wouldn’t mind ?

Though I must admit, considering I have been doing around 3-5 hours per day for the last 5-6 weeks I might go dizzy not looking at indicators!

15

I look for certain high probability price action signals (very simple candle formations) off of previous ,strong, support and resistance. It’s actually all detailed in the Forex Price Action thread I mentioned in the previous post. I think at some point in the the future I may get back to looking at indicators, but I’ve decided I need to learn to read pure price first. Once I get good at that I think an indicator or 2 may help with confirmation of signals.

It involves a a fair amount of patience, and as I mentioned I’m very new at it. It is an acquired skill, but I’m learning fast with the help of the contributors to that thread.

16

Hey Radicledog, Thanks for the point to that thread, i have done a bit on price action in the past and will most likely look at that threads contents this weekend plus im also trying to formulate something on the daybreak thread - you might like it being based solely on price action.

Ill be putting up my summary of my weekly (and the monthly as its my first full month on trading) tomorrow - i havent specifically recorded any trades but ill be questioning the forum on some of my ideas for my monday trading

Thanks again all :slight_smile:

17

I’ll check out that daybreak thread, sounds interesting.

Thanks for the tip

Also I look forward to your summary

18

Hi Anthony,

First of all welcome to Babypips! There is a great community here and a great wealth of knowledge, don’t be shy ask questions and learn.

Now I don’t want to ‘rain on your parade’ but there are a number of points I would like to raise from your post above that I feel really need to be addressed. This is all meant in a constructive way so please take it as so.

I really want to talk to you about risk management and I can give you a 100% guarantee that unless you change your attitude towards risk you will more than likely have sunk £4k down the drain by Christmas (at the latest)

You said that you are using a 500pip stop and that you get itchy when you get 10 - 15 pips up. now if we do the math.

If you lose 1 trade you will end up £500 down. Say you manage to hold onto trades until they are 25pips up and then you cash them in it will take 20 trades for you to get back to where you were, but what if before you reach 20 succesful trades you lose again, you could be looking at needing 30 - 40 winning trades before you break even again. Do you see where I am getting at? the only direction your balance will go is down. At worst four losing trades in a row will wipe out one of your accounts. that is a whopping 25% risk per trade on that account or 12.5% of your overall balance.

You would actually last longer by tossing a coin each morning with a 100pip stop and 100pip profit level (I’m not suggesting that as a valid strategy by the way)

Whoever held this seminar that told you family member not to come out until you are positive is in my opinion an absolute idiot!. There are traders that have absolutely lost their shirts with that kind of strategy and they will continue to do it long into the future. Can I ask you what you think a stop loss is for? the clue is in the name! It is there to stop you from losing money. it should not be there as an area of last defense it should be one of your primary weapons in the conservation of your capital.

When you look at a chart and before you make a trade there should be easily identifiable areas where you can say to yourself that if price reaches that point then the trade I made is no longer valid and it is in those areas that a stop should be placed. this could be 10pips away or 100pips away but using a blanket 500pip stop loss is the sign of a novice trader and novices don’t last long.

With regards to your general attitude, you need to get that sorted straight away. Have you ever heard of the saying that “you need to cut your losses and run with your winners”. your strategy is exactly the opposite of this. I know the feeling of seeing something in profit and not wanting to lose it, I used to get itchy as well. But think about this. You are quite happy to see price go against you for up to 500pips in the hope that it will come back and yet you are scared that you are going to lose 15pips of profit? well let me tell you that you shouldn’t be worrying about those measley 15pips profit you should be worrying about the 500pips of loss you are incurring. Learn to let those winners run or again you won’t make the end of the year, or possibly the end of July.

I’m not going to comment on actual strategy I trade in a completely different way to outlined above but everyone does things differently and I am sure there will be others who will give advice on that point.

What else I will say is stop wasting your money on buying systems and education. You have now arrived at one of the premium sites for forex trading knowledge. there are threads and information in here that can is extremely valuable. read lots and soak things in but don’t be too quick to jump on the next trading band wagon that comes along demo trade test things out and learn.

It’s late for me so I’'m going now but I’ll keep an eye on this thread and chip in when I see something else. Welcome to babypips it’s good to have you here but please re-evaluate your plan before you even think about placing another trade or you won’t be here long.

All the best DT.

20

Hey DT, Ill clarify something straight away - thank you - do not be shy about telling me when something is wrong because that is why i am here in the first place.

Secondly, I completely agree with you - what has brought me to signing up to babypips is that I know that my current trading system is completely flawed and i am trying to improve it here - I will be posting my summaries at around 5pm-ish about the trades im looking at (will also be posting a few in the price action thread) as well as what my monthly return has been and what I intend to do over the next month.

If possible I would get your opinion on my trading strategy I am using as well if possible and maybe a few hints of your own if you dont mind?

anyway talk soon - and thanks again :smiley:

21

sorry about the double post not sure what happened :S

AAANnnyway, Hi everyone, this is my first, I suppose, informative posting on babypips where I will be recording my successes and failures on my journey to becoming an effective trader. The intention is to develop myself and my strategies and move away from my current trend of trading at 500 point stop losses!!

Basically , upon moving to a mixture of Bollinger Bands, RSI and MACD indicators I have noticed a huge improvement in my trading – unfortunately, I haven’t recorded any this time round (this was a new idea to me !)but bear in mind that I have only traded for 5 weeks (which I have assumed as my month 1) and 55% of my monthly income came from the last week (trading with a strategy).

Key performance:

Thus, my monthly return has been £436 + £48 (separated into months on my spreadsheet), from an account of £4,000 (please note that I will always base returns on this value as I withdraw all profits at the moment due to my situation of recently graduating from university.) – Which equates to about 12%.

Based on my spreadsheet, I lost 26.79% to losses and overnight fees.

I have however got a negative 300 ish position on GBP USD (@£3/point) that I am waiting on (and is the cause of all my overnight fees!)

Improvement aims for next month:

Ok, so basically, I am drawing inspiration from the daybreak thread and Price Action Thread. For the record I will be posting any trades based on P/A in the price action thread.

Thus, I will aim to reduce my stop losses to 250-300 (want to do this slowly but surely and gain some confidence).

I will also stipulate a minimum return of 20 points on my trades

I am also expecting a reduction in profits for next month as I have managed to attain some construction work to tide me over but it does mean I will be trading a little differently (as I have to be up at 5:30 am for work there’s little chance of me trading before I need to leave).

Before anyone points out the ridiculous risk, reward ratio – it is my intention to change this – but I am doing it slowly to gain confidence, the aim is to reduce my risk to 2% and trade at a minimum of 1:1, but I do need some help and advice, but more crucially – I need to gain experience.

Trades that I am looking at

AUDUSDH4.jpg700×387 45.9 KB

(ok really hoping the picture worked otherwise = AUDUSD,H4)

Looking at the graph, could you say that the upper Bollinger band has been breached and that there is a pin bar ? that touches on resistance around 1.02578 ?

Entry: 1.0220 (just below the low of the 2 pins)
Stop Loss 1.03 (bare minimum I am willing) which at £2/point is 4% of my account - however, I may increase it to 150points to stick with my target of SLOWLY reducing my stop losses… but we shall see - I’ll be waiting for your insights :slight_smile:
Target: 1.012 - Target of 100points or £200 at this stake

EURUSDDaily.jpg700×436 57.8 KB

Ok so eurusd, this looks like a bullish engulfing bar… a big one! any help on how to attack this?

However, I dont believe this is a viable trade becasue entry would have to be at the next short term resistance at 1.271 and the target would have to be reasonable so the next resistance at 1.283 - let me know if this is accurate

USDJPYH4.jpg700×433 31.3 KB

Finally USD JPY Daily this also looks like a bullish engulfing bar
but I have no idea how to trade it and even if to trade it as the next resistance could be at 80.554

Tell me what you think :smiley: - If I am compess enough to record any of my trades in the early morning 5min bar session Ill let you know :smiley: