Important Message to Newbie

Beginner Questions
1

I will consider myself still a newbie, having only started forex trading 7 months ago in April 08. It took me this long to devise my own system that seems to work pretty consistently…finally.

I started out demo-ing in april and made S$15,000 [B]virtual[/B] money within 2 weeks. It tempted me to start trading immediately with real money. There’s so much money to be earned, why waste time on demo, right?

Anyway, somehow or rather, i started losing. I thought…hmmm, i should be diligent in educating myself. So i started reading forum threads and found the “holy grails”. I was so excited and tried the “most popular” ones. Once again, i lost money. No matter how hard i adhere to the instructions, it just doesn’t work consistently enough for me.

Then i jumped to another holy grail. And i thought “Luckily, there’s so many holy grails”. Well, as you’ve guessed, they all churned out the same negative results. I’m not saying that they don’t work. Maybe they do. But since you’re not the one devising this system, it’s hard to know when to enter. Timing is very important. Market is known to deceive…ALL THE TIME. If you don’t have a system you believe in or understand well enough, you will be either too greedy/fearful to stay on the track.

All in all, i just like to say that [B]demo-ing is very important. [/B]After demo-ing, you can try mini or micro accounts to experience trading with real money (it makes a big difference). Then jump to standard account later on.

It is also very [B]important to continue reading[/B]…go library to borrow books and make sure you read 1-2 books a month. The knowledge is very important. Knowing abit here and there…abit about candlesticks, abit about elliot wave, pivot, resistance, patterns etc. But when you are experimenting the techniques taught by the book, pls use a demo account.

After reading so many books, i finally found one good one. And to think that i was on the verge of giving up. Forex is really not easy. But once you get it, it’s pretty straight forward.

2

thirstypip heres what i think maybe happened to you and could easily happen to most people.

They experience the euphoria of being correct in a number of winning trades to the point where they think they can’t lose and so they approach the market with a certain degree of fearlessness in the form of confidence. They ride this wave all the way till there first major loss

then…

they blame there system, they blame the market, they blame there analysis and what do they do…

they analyse some more, they find another system, they change there style

but…

this will never work!!!

Repeat none of these things will make you successful until you address your own trader psychology.

You must confront this reality and not ignore it. Trader psychology is thee most important aspect of trading period. Your technique your money management all that comes second.

You must always realize the market is not only neutral but is always capable of doing anything at any given time. It is a core belief that if you cleave onto it, it will make you a better trader. Even when you think your analysis is perfect and the market has no choice but to go one way or another, you must be willing to say I’m Wrong. My analysis says long the market but the market is dropping and I’m wrong so I will close this trade.

Sounds simple I know but you will be suprised how many people fall into the trap of having to be right and feeling negative about the markets to the point that it is a personal war. When you think you are definatly right you will find reasons to be right and you can analyse and reanalyse yourself into a losing position when to a neutral person the answer is obvious and they would have closed that positon for a loss.

Bottom line adopt the belief that the markets can do anything at any given time and that the markets always remain neutral and not against you. This is an excellent starting point for a successfull trader. Therefore your mind will always be willing to take new data and help shape analysis even when it is against you :slight_smile:

3

I would have to agree with Johhny,

I decided that if I were to trade forex I would not use a pre-built system because I would never be able to blame myself, if I lost I would always blame the system and if gained I would always have the feeling that I was just going through the motions that another person previously wrote down. I want to learn the fundamentals of tech analysis and apply it in a way that makes me feel comfortable.

4

Thirtyspip - Hey Now!
I’d be interested in knowing exactly which of the holy grails you found difficult to implement as a newbie. I’m sure it would help other newbies new to forex which systems are likely to be “above thier paygrade” without having a lot of experience.

Thanks Bro.
RBCOE

5

Hi Johnnykanoo,

I so agree with you on your statement. That was exactly what happened to me a few months back, and can really happen to all the newbies. You just think that making money is easy, well…how difficult can it be when you are given $50,000 of virtual money. You can play 5 standard lots and scalp through the way. But in a live account, you can’t be trading the way you traded on demo. Per trade, one [B]should not risk more than 3% of capital[/B]. So if i have S$10k, i should not risk $300/trade.

The moving on from system to system is so through, and it is very detrimental to the pocket.

Another thing about Pschology that i find hard to abide to in the past was [B]DISCIPLINE.[/B] I had a checklist of signals and i waited for it to happen. But seriously, i wasn’t waiting, i was assuming that it will happen. And before they happen for me, i was already in the market. Hence, it is important to be [B]DISCIPLINE and PATIENT. Don’t play based on hunches.[/B] They are wrong most often than not.

I also agree with you that the market can do anything at anytime. [B]It is a living thing[/B]. Therefore, i have to say that in my opinion, many of the technical indicators can be misleading. Lagging indicators such as MA, Stochastics, MACD should never be used the primary indicator. I only use them for secondary confirmation.

6

Hi DixieWrecked,

That is a very good advice for newbies. How i wished i had that advice 7 months ago.

On top of learning tech analysis, i like to add on that it is important to learn [B]in depth[/B] on the techniques. For all newbies including myself, it is critical to know how to use the indicators correctly. For example, i knew Fibonacci long time ago, and was drawing it on my chart. But was i drawing it correctly? Probably not good enough. Where should i draw it from, and to where? And how many should i draw? And draw on which chart? All these are important info you can easily find in books.

7

Hi thebcoe,

Sorry. But i [B]do not recommend [/B]any Holy Grails to any newbies.

I will however recommend them to build up their system with the following indicators. 1) Fibonacci, 2) Gann Fan, 3) One laggin indicator as confirmation, e.g. Stochastics.

The first two indicators are leading indicators. They have been widely used by the public and hence seems to work wonders for me. Since everyone believe in them, it’s kinda like doing a self-fulfilling prophecy. It also works well because everyone using them will be using the same variables, unlike Moving Average or MACD or even Stoch where different people use different variables.

I will also recommend all newbies to [B]follow the trend [/B]as much as possible. Example if 1H chart shows downtrend, and 15m chart also shows downtrend, then you will want to enter a short trade all the time. The probability of winning is higher.

Once again, i like to emphasise that it is important to learn in depth on whichever indicators you have chosen. Practice for a few months to see how it normally reacts to market conditions. That’s all for today. :slight_smile:

8

One can NEVER disagree with “follow the trend” (in the equities world, the statement is “the trend is your friend”) because of its absolute truth, BUT there is something you should notice that has changed a lot of fib studies recently and that is the market is now sticking to strict support and resistance figures and not the fibs (UNLESS the fibs happen to line up with the S+R figures, which they often do not !

when looking at current charts as opposed to the way things “used” to be before the current $ hoopla and doom, you will see that prices are settling “around” the fibs, BUT looking more carefully, you will find them settling DIRECTLY on the s+r figures.

btw, the lagging indicators are not always so lagging, such as when scalping the one and 5 min charts using modified indicator values, and the lagging indicators are still one of the best methods to evaluate the next weeks action, given the time to relax, sip a pint o bitters and go over the charts for your research times !

just my couple cents

enjoy and trade well

mp

9

I use the convergence of Fibonacci Lines, (i.e. Clusters formed by projection, retracement, expansion, symmetry) + Gann Lines + S/R (if any), to increase the probabality of a win. With this, we can focus on Fibonacci that has higher level of significance than the other Fibo lines. Actually, the price does stall exactly at my Fibon Line/s. Maybe because we trade differently, e.g. diff time frame, which is very common in Forex.

That is the precise reason why i encourage all newbies to develop their own system. You will probably hear varying opinions or things that work or don’t work for different people. So it’s important to demo and to find the one that works for your style. :slight_smile:

10

thirsty pip,
can you help, I’m trying to learn how to use Gann Tools.
i started a thread here:
http://forums.babypips.com/newbie-island/18142-gann-tools.html
Thank you
Jado

11

I�m figuring it out. The way to trade is different for each trader. You advice people to use some indicators but I know people even in this forum who find indicator not practical because they don�t have any information about the movement of the market and instead of them they try price change strategy. There are also people who use a mix of fundamentals and pattern recognition. I just write this to bring here others perspectives, that�s all. For me I like indicators, W%R and Bollinger bands, trying Fibonacci as well.

13

the people in this forumn who advise price movement trading are (hopefully) versed in that, and ask them how they do in this strange and wonderful market where price movement is just a bit strange at times !

using indicators allows you to set your tp to the pip, which I doubt any price movement trader can do.

but yes, the bols are VERY important as price always seeks them, just not always when you think it should.

if you put support and resistance on your charts, you then have a point in reality to shoot for, instead of some nebulous “somewhere over the rainbow” point to take profit.

the williams is excellent – try teaming it with the stoch and the accumulation/distribution indicator (you cant always tell in the middle of a move what the a/d is telling you, but you cant miss it when its coming to a tp point !

different strokes for different folks, but without support and resistance on your charts you’re whistling in the dark, so go seek it and try it as the fibs are (with this new market) only reasonably correct (unless s+r agrees)

newbs havent the experience to work with price movement unless they are blessed with a right brain mentality, and then they have to practice the art !

enjoy and trade well

mp

14

Hi all, i’ve tried a few [B]pivot indicator[/B]. However, i think this is the best and proved very useful in forex trading. It lets you know all the important S/R (Daily, Weekly, Monthly). The best thing is…it calculates automatically.

I downloaded this earlier, but can’t remember from where. Here you go.

15

Knowing these points is of course helpful, but you will find that the pivots rarely come into play except for the FINAL move of any currency — if youre scalping, trading the 15 or 30 minute, you may find they dont work very well.

at least in my experience, but take a look and decide for yourself.

Simply stated, there is NOTHING that will beat a computed or drawn support and resistance chart !

IMHO

mp