Insights from a 14+ year trading veteran

Trading Systems
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Sorry for not posting in quite a while. Life really picked up and I had a lot going on bad and good but I didn’t forget about the babypips community!

I am very happy to see that my earlier posts have continued to spark some conversation and that some more users have received a benefit from reading them.

While I was inactive here I spoke with one of my good friends and mentors about my posts on the forum and the information that I wanted to share. He very eloquently pointed out that a lot of the things we did on the trading desk, news trading tactics specifically, do not really apply to the average retail trader and I would most likely be doing more harm than good by sharing as it would simply cause confusion. I am however going to work on a post about trading the news that in my opinion will be more suitable to the average trader.

I am not looking to mentor anyone personally but I do have a heart for the struggling retail trader as I was once there and it was tough. Really though the markets present us with, to quote Mark Douglas, “An endless stream of opportunities to enrich ourselves.” This of course is never based on the outcome of any individual trade but by exercising our edge in the markets repeatedly over a series of trades.

Making money in the financial markets really can be as simple as “waiting until there is money in the corner of the room” and then picking it up. Those that try to discourage you simply do not understand how to engage with the financial markets and that is ok. The type of thinking required, the necessary patience in this microwave world of instant gratification does not lend itself to the majority of people being able to trade profitably long term. It is simply outside of the average persons mental scope.

For example Draw down which really seems to effect the average trader negatively, really isn’t your enemy. Every strategy will have draw down and that is fine. It doesn’t mean you need to change anything. Losses that can be attributed to the category I like to refer to as “normal losses that any trading strategy will incur” are just as good and necessary as the winners that ultimately bring you out of draw down. They are a part of your strategy and edge.

Thanks to everyone that has read my posts, and @HonestDon I’ve missed the whole babypips community and that most certainly includes you too! I hope to be able to make some more posts that will benefit those that are ready and continue to disappoint the others that aren’t as I continue to fail to be their signal service and do all of the work for them.

Developing your edge in the markets is YOUR work as a trader and can’t be handed to you as you will abandon that strategy as soon as you experience a small draw down because it really isn’t yours and you don’t truly have faith in it.

Once again, I will be working on a post about how the average retail trader in my opinion should trade the news very soon.

Safe trading to all!

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Thanks you

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Looking out to your next post !

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show proof not promises

are you walking your talking?

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I make no promises here. I am only sharing the concepts I would have liked to learn sooner that my various mentors shared with me.

The proof is in the pudding as they say, and unfortunately for you the pudding is a lot of screen time, a lot of stopped out trades, and just general hard work until you develop a trading plan that works for you. (If you have already done this I commend you!)

Or if you are lazy there are plenty of gurus just a google away that are selling a 90% win rate trading robot that will make you millions as you sleep… With pictures!!

My paid bills would say yes, but once again the unfortunate truth for you is that even if I am just talking it doesn’t do or not do the work of putting together a trading plan for you.

I believe we have already been over this a few times though, even other users who have benefited from combining ideas from my posts with their own hard work have responded to you.

So I trust you will forgive me if I fail to respond to any further posts from you until you offer something that will be beneficial to other users.

If you have experience that contradicts mine or disagree with one of my ideas that is fine with me!

Please, feel free to share! :slight_smile:

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As a “retail” trader or a trader on your own that doesn’t have a spot on a trading desk how can you trade the news?

Just so you know even many “prop” trader’s news feeds are delayed so much that they don’t have that much of an advantage over your average retail trader.

There are services out there that you can subscribe to that you will pay a monthly fee for to “show” you where bank orders are currently placed. An example of this would be a long trade planned by some traders from bank of america on the AUDJPY. Price had just made a daily close below “wedge support” on DEC 8 candle. This would have been largely considered a bearish signal and many traders saw this as an opportunity to sell short. I was made aware of the long idea by an ex colleague of mine, and not a service subscription as this information is truly not worth paying for if you have a trading plan with risk management rules in place.

Did their planned trade cause the market to go up instead of down? Who knows. Even at the institutional level we lose a risk managed amount often. Did I take a short trade here even knowing about their planned long trade? You bet I did. Why? Because it fit my trading plan. Did I get stopped out? Yes, I did. Did I still have money to go out and finish my holiday shopping after being stopped out? Of course I did. I’m not risking money I can’t afford to lose or that won’t easily be recouped by a winning trade.

Now I realize that by saying what I just said I have probably said too much, and will probably receive responses to prove that there was an order from a specific bank, and who knows what else from users that can’t get the bigger picture. I traded short even knowing there was a long order by a bank because there could have been an even bigger order short by some other traders that I didn’t know about. Ultimately my trading plan gave me a signal. I was stopped out. Oh well. It happens… Often.

Now you might be wondering why I am talking about bank orders when I said I would address news. It’s a sort of similar concept. Paying for a subscription to see where bank orders are placed is as useless as trying to speculate based off news for the average trader. So let’s dig in.

As a retail trader the only thing you really need to know about news is that the market’s reaction (price action) is what determines whether a result is positive or negative.

It’s not wether the numbers are green or red on the news release. It is determined by where price goes in the following hours/days. That’s it.

So as a retail trader you can trade the news by reading the price chart. I do it every time I trade.

So if you are currently constantly refreshing your screen waiting for the numbers to be released, numbers that will inevitably be delayed far too much for the average trader to even do anything with, so that you can place your market chasing trade based on the results or if you are concious of the delay and instead trying to “front run” the event and outsmart the market, as if outsmarting the market is truly possible consistently over time, my advice to you is to stop. That is a gambling mentality.

Instead, I would advise you to use the price action after the event to form your opinion.

Sit the news release itself out, let the market calm down and then make your decision. Your decision does not have to be to buy or sell. Your decision might just be to do nothing.

A lot of times after a news event there is a lot of wicking and price closes the day very near where it started or even in the opposite direction of the initial spike.

This is from my experience the best way for the average trader to trade the news. And you are trading the news.

A buy signal that forms according to your strategy after a news event, such as say a bullish engulfing bar from support (this may or may not be a buy signal according to your strategy) was formed due to the news. But this was not an impulsive gamble trade instead you traded your strategy and that is what will make you profitable in the end.

Markets are random, the results of news events are random, the outcome of a trade even knowing which way a particular institution is trading is random. The only thing that can be consistent is you following your own rules.

Trade safely!

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Thanks for sharing your wisdom here. Another example of what you’ve just stated is what has happened with GBP after the election news, a full retreat after hitting resistance. Merry Christmas.

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This is a great example. Thanks for adding.

Merry Christmas!

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TradingGod thanks alot for your insights , it helps us beginners alot as many people arent keen on helping or giving advice . Im trying to gain some knowledge about trading with trendlines on longer time charts, but i feel like im struggling to draw up a actual plan/strategy . Any advice on that will be highly appreciated thanks.

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Do u think one can simply trade following price action without any indicators
I am confused between mentors who say price action is enough and others who use technical indicators only…
This way I can’t make a proper mindset which way to settle…
Please advise some tips…
Thanks in advance !

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It is like eating with Chopsticks or eating with a Fork. There will be people extremely proficient in one way or another and to them using the other method makes no sense.

So focus on the fork and get good at that - and block out every other distraction that tries to sway you otherwise.

OR

Focus on the chopsticks and don’t be distracted by those that say a fork is better.

But if you eat for one month with chopsticks then try the fork, then go back to chopsticks, then the fork - you will go hungry and be useless at eating with either.

Find what suits you best and double down on understanding it like the back of your hand.

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@El-knit
This was a question i was asking myself a few months ago, and something i am still learning today. What i learned is that no one can tell me the right way to trade, it is a journey i must take myself to find out how i work. The same must be said for you. You will have to take the journey and find out what works for you.

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Devcat, I am not some expert in this kind of trading, but hope that I can help you. Try to look at longer scale of your chart. Eventually you will be able to spot some levels which frequently occur. These spots form long term trend lines, just draw the straight line which will connect them

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Holio thanks . Any input is appreciated . So now im drawing trendlines on weekly . But most trades are executed on daily and H4 , breakouts into the main long term trend . Sort of like a continuation. It has produced some good trades thus far . With a return of 5:1 and 4:1 so it looks good . Will keep testing . Thanks

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Can one trade profitably following only price action? Absolutely!

Can one trade profitably using indicators? Absolutely!

The post that @nguli made about forks and chopsticks is a great response.

I trade purely price these days. What I discovered over my career is that while indicators can be used successfully and you can put together a profitable algorithm or system of indicators, overtime as market conditions change you have to adjust your algorithm or system. Where as with price action at least for me the same signals have remained profitable since the beginning.

Ultimately all indicators are lagging and based on price action.

You will have to find what suits you though!

Best of luck!

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Very interesting approach, Thank you !!

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TradingGod im just waiting on some advice from you sir . Thanks

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TradingGod do you think one can become profitable with a trendline strategy only ?

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Sure.

You will need to practice your trend line drawing. Make sure you aren’t ever forcing trend lines to fit that do not. Then when an entry signal comes enter your trade and manage your risk everytime.

Get some data demo trading or at least trading with money you are okay with losing and don’t risk more than about 1.5% of your account on any one trade. After you prove you are profitable you can up your account size.

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Thanks for the feedback . Looking forward to more insights.