My completely idiotic trading system

Trading Systems Free Forex Trading Systems
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Hi,

I am trading forex for two years and I devoted almost all of my spare time over those two years to learn and experiment. Of course I lost more money than I should have lost due to not being patient, overtrading, risking way to much and not using a demo account. But I am finally at the point in my trading carreer where I am slightly profitable and was able to make around 3 to 4% each month for a few months now. I am not back at break even though…I lost to much for that.

But I wanted to show you what I do. It is really simple but I found that, at least for me, a lot of times when you try to come up with a lot of creative approaches it just overcomplicates things without really being helpful at all. In my experience, the more complicated the system was that I tried to create the worse I traded. So I stripped almost everything away, I don’t use indicators and barely even pay attention on candlesticks anymore. I really love candlesticks, but most of the time, they just did not make me money, so here goes:

  1. I trade the market structure. I go to the daily and 4h-charts to see if the pair is in a trend or if it is consolidating. If I see a candlepattern here it will give my analysis additional weight, but most of the time you can see pretty much what is happening without paying attention to individual candles. I just ask myself is this market going up, down, or neither of those? If the answer would be “can’t tell”, then you can pretty safely assume there is no trend. In my experience, trends are a little bit easier to spot and to trade, but your mileage may vary.
    ALL I DO is, in a consolidating market I buy support and sell resistance, and in a trend I use the retracements to find an opportunity to get on board in the direction of the trend. That’s it. Of course, if you find yourself having trouble to trade consolidating markets, try to trade only if there is an obvious trend.

  2. For the entries, I try to keep it simple as well. I go to the 1h- or 15m-chart and zoom out quite a bit, so that I can not even see individual candles. I found that it helps me to get rid of all those fancy patterns that my eyes want to see (which are not even there most of the time). If, for example, I feel like the support seems to hold and the market moves up a bit, then I will go long.

  3. The most important part of any trade you place is how you manage it. And this is the most complicated part of my trading approach. My stop loss placement is done more intuitively. For example, I try to get a stop loss which is half of the distance of a range when I am trading a consolidation.
    What is more important is, what do you do with your trade one you put it on? And now comes the part which made me actual money. If the trade is not in profit after 24 hours, I will analyze the situation again and if I do not think that the trade could still work out, I close it. There have been a few trades which I left open, but most of them just hit the stop loss anyway. Most of the trades you take which wont go into profit after a certain amount of time will look bad sooner or later, and I like to take the sooner. By actively closing trades which are not making me money, I take the full responsibility and control of my actions in the market. Instead of making the pair prove me wrong (because my stop loss gets triggered), I try to let the pair prove me right. You have to assume that your position is not correct until the market proves you otherwise (there is a free book about this topic called “Phantom of the pits”. You can find it via a google search and legally download it from various places).
    So far we have covered what to do with a position that does not seem to work out. But what IF the position actually works out? You have to find places where you want to add to your winning trade. Most of the time I try to double the size of my initial position along the way. And a good proportion of those winning trades go back to zero or even are small losses in the end. But if those trades work out, they tend to get really big. When and how you do the adding you have to figure out for yourself based on your approach. I add, for example, in consolidating markets based on the “price waves” I see on the 15m-chart.
    I have also added based on a fixed pip-amount, but I like to watch the price action more.
    The exit is another difficult topic. If I am in a range market, I try to exit on the opposite side of the range. I don’t use take profit orders, but instead I try to give the trade a little bit room to see if there could be a breakout. But most of the time, if your winner is already a big position, I would close.
    I a trend, it can be difficult to decide whether to close or to keep going. I find the answer more often than not in the past price action. Look at how far one single swing has gone in the past movement of the trend. If most swings don’t go further than 100 pips for example, I think it is not very likely that the swing you are in will go 150 pips or more. Again, I would close there but also look at the price action. A double top or bottom on the 15m-chart are also good indicators that you should get out.

That’s it. It is really simple from a technical standpoint, but the psychological part is a little bit more demanding I would argue. So far, my winrate is very low. I tend to lose about 75% of my trades. Those trades are mostly small losers or break-even trades, but of course there are bigger losers where my stop loss got hit very fast and I had to pay slippage on top of that.
My average winning trade is 4 times the size of my average losing trade, though. But not winning 75% of the time is not always easy to stomach, sometimes I have problems with it and try to find the holy grail again. But I was able to stay consistent in my approach for the past months and I think that is the key. Maybe there will be months where I lose more money again. But so far, I think I have an approach which is working for me. Trading, for me, is not about being right. I tried to be right for so long and that did not make me money. So I did some self-analysis and I think trading is not about being right. It is about taking the full responsibility and making good decisions once you are in a trade.

Thank you for reading and I hope this helps someone.

Edit: Just a few thoughts to add:

  1. Most of us have heard of Jesse Livermore. There is a nice book about him (Reminiscences of a stock operator) which I can recommend. There is a lot of wisdom in there and it is very fun to read. The point here is, this man started trading more than a hundred years ago. There was nothing fancy about chart analysis back then. They did not have indicators and I do believe they did not even have charts at all. They had only a tape which had price and volume on it. Yet, this man was able to be one of the richest people in the world by taking positions based on the tape reading and consistently adding to his positions when they were working out. So maybe there is some wisdom in there. Of course, this man lost his fortunes a few times in his live, but rumor has it that he had psychological issues and that his expensive lifestyle not always led to the best decisions. But he is proof what can actually be done.

  2. Learn what difference chart-reading can actually make for you and your own trading. By all means do your backtesting, and if you are done, do it again. Do you have trouble to decide if you are in a trend or not? Maybe try some other charts. Heikin-Ashi simplifies it a bit, but maybe you want to look into stuff like Renko-charts, which make it really easy to see if you are in a trend movement or not. Do your backtesting and decide what suits you the most. What works for me may not work for you and vice versa. cTrader Windows is a really good application for backtesting (way better than tradingview imo) and it is completely free.

  3. Try to analyze what problems there may be. Look back over your past trades. I am still at the point where I think that a good portion of my trades made no sense when I put them on. Find out what you are thinking when you put trades on which feel bad from the very start. Most of the time those trades just cost you money, and even if they make you money does not mean that they were good trades or that you did something right. You can make money with bad trades and this strenghtens some false beliefs about your own trading in my humble opinion.
    Do some introspection regularly and go over your broker statements from time to time to see what you should have done better or what you better should not have done at all.

  4. There is no such thing as being right. Maybe one person makes money with approach A, but in the meantime, there is another person with approach B, which is the complete opposite of approach A, but still both persons make money. This is due to the fact that you can not be right about the market or your own position. You have to be right about your trade-management and your own thinking while you are trading.This is what generates you money, nothing else.

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Show me your performance? FXBlue, MyFxBook or any other?

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I haven’t read all of that, but your system is sound and this is how many day traders operate. Concentrate on increasing your win rate by learning how the market moves and timing your entries better. Stay disciplined and when your win rate goes up, your profit will soar.

If you’re trading 15 minute charts, you should be able to get a high win rate trading structure in the direction of the trend.

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I am sorry but I do not have anything “official” to share. I maintain a spreadsheet for myself for review-purpose but that is it. And I think sharing this would not be helpful at all (how could you tell that the results are not cherry-picked or that they are even real trades I took…).

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Thank you, I still hope to improve. Of course, the win rate will also be influenced by the stop loss placement. In trending environments I try to keep my stop for the trade entry below the last swing low/high on the 15m or 1h chart.

Another thought which I forgot to mention in the initial post regarding adding to winners:
I will only add when the trade is in profit. But how do you decide when the proper time is to add? I initially wrote about adding when price action indicates it is time to add. But I realized that this is a little bit to unprecise.

Let’s create an example here:
Let’s say I took a long position and I risked 100 pips. Let us also say that I traded one standard lot (this is nowhere near my actual trading size…yet).
Obviously when the trade goes into drawdown, I would not add to it but looking for reasons to close the position again. But if the trade goes into profit and the chart indicates no reversal, then I will add.
Let’s say that we are 50 pips in profit and on the 15m chart we see a new higher low and expect the price to go further up. I would add half of my initial size here (so .5 lots).
What that does is, if we go further up now we would make one and a half times what we have made before per pip. But that also means, the market would not have to fall 50 pips to wipe out our profit, but instead we would be at break even when the market goes down 33 pips (because 16 pips profit from the initial standard lot would compensate the 33 pip loss from the .5 lot).

So for adding I will always try to look at the existing open profit to decide how much I want to add. Of course, if the position rises to 100 pips profit and I am still confident that the trade will continue to move in my favor, I will add another .5 lot if the price action indicates so. Now I have doubled up on my initial position. My goal is to at least double the initial size, some trades I took even way further than that, which lowers the probability of working out but increases your potential win by a lot. In the beginning of March I made 552€ in USDCHF while risking initially 50€ (I am based in Germany). Always keep track of your mind: I got overconfident because of this trade and lost over 500€ of this profit again the next week…so there is definitely much room for improvement in my behaviour.

This topic opens up some creative ideas which have at least worked in my own backtesting. Assume that you have high leverage (maybe 500), you can go pretty crazy with your lot size while adding. Let’s say you start with a micro lot, and you catch a pretty big move on the daily chart. By consistently adding to your trade or even doubling the size everytime you want to add you can end up with positions that are way above one lot. This would be a reverse pyramid. You have to keep in mind that a minor reversal will be pretty hurtful so I would never recommend to do this. But consider that you made maybe 0.05 lots out of your initial 0.01 lot size. And you watch your trade going further into profit. What you could do is, you take this open profit as a kind of cushion next time it is time to add. And then you add a really big position, maybe even ten times or more bigger. What this does is, you have a very small probability of working out, but IF this works out, you get a really big profit. And the small cushion you created with your initial position helps you not going into to much drawdown. Maybe you could even get out at break even.

I hope you understand what I am trying to say here because those ideas are very difficult for me to express since english is not my native language. You should never gamble with an approach like this, because that will hurt your equity. But keeping a probability in mind you can get very creative about your trade management. I would never trade with only one position anymore. I think it is limiting. You don’t have to get crazy about your adding but why not at least add a little bit when the market tells you you have a good position?

There will be many trades which go to zero again BECAUSE of adding to it, but I would argue that in the long run, it will increase your profits because you will get a few very large winners.

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Your English is great. Adding to winners is an interesting subject, as is adding to losers. If you’re in trend, one is great and the other sucks. If you’re in a range, vice versa.

I don’t know if you’re seen Tom Hougaard trade, but what you’re doing is very similar to his approach. You should watch his live trading videos from this year. Although he has a buying preference, which obviously has been bad this week, but you can still see the discipline in action that is needed.

I try to follow similar techniques, trade breakouts from ranges or retracements back into it. Also big retracement moves (FVG according to ICT). The key is the stop loss and when to exit, I try to put SL to break even when I’m 20 points up. I sometimes add if it retraces one structure level, but if it breaks that then close because I probably got it wrong. I sometimes add when price goes in my favour, then retraces to a structure level. Once this position goes 10 points into profit, move SL to break even.

From there it’s a matter of when to close. If there’s a market high/low that’s not been breached in a while (significant structure), top/bottom of the overnight range, market entering a range (5 minute candle not making a new high/low). I also close on psycholical numbers (1%, 1.5% from yesterday’s close).

This is all talking about indices, I don’t touch forex manually anymore, I don’t think it’s predictable enough.

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Thanks for the read fellas! :pray:

What did you mean by “manually” here @chesterjohn? You don’t mean to say only automate forex do you? Cuz you said its not predictable enough… or do you mean you keep stricter rules when trading forex?

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I have a bot that trades EURUSD, very profitably, but I don’t even look at the charts. I only look at gold and indices for trading myself.

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Interesting. So you’re automating the one you see as “less predictable” then. I would expect that automation requires more predictability…

Any hints on the counterintuitive nature of this?

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Mainly because I found a system that when backtested it worked incredibly well for EURUSD. It was an algorithm I made for the FTSE100, but it didn’t work so well on that, but I knew EURUSD had similar characteristics to what I was trying to trade and it worked brilliantly on that and has something like a 50% return so far this year (although it took a big hit this week thanks to tariff talk).

Funnily enough, this system which was made for the FTSE100 was so bad that I reversed the signals and use that to trade it.

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Thanks, I was not fishing for compliments here, haha, but rather wanted to state that I think I can not express on point what I am trying to convey here. But I am glad that my post seems to have made sense nonetheless :slight_smile:

Yes, I know about Tom Hougaard and also read his book. I do think that you can gain an actual edge from a technical standpoint, but I am convinced that this is not worth all that much if you can not act properly and manage your positions from a completely rational point of view.

I still have problems with managing my positions properly and, most importantly, jumping way to easily into a new trade because I lack the patience. But I also noticed that writing about these problems here is a tremendous help. I also keep a handwritten notebook as a trading journal - not as a statistic or anything alike, but rather to note some thoughts and observations about my trading behaviour. I think that you should never make the same mistake twice - that is, if you know about the first time and could prevent it on the second occasion. And these written observations are also a really good anchor to pull myself together again if I start making pointless trades.

Your system sounds also really solid and I think by adding to your winning trades you further strengthen your edge. I actually started trading with indices about three years back but somehow I just like forex. Maybe I will look into trading indices again at some point.

I think that the whole technical analysis concept is widely misunderstood. For me, technical analysis is something which helps me to outline some conditions for my trades, i.e. where to get out when xxx happens. But for most people, I think TA is a tool to be right about anything or even predict the future. This is not true in my book. I think you can only be right about yourself and act accordingly. I want to make money by my own behaviour and not by some perfect magical setup which occurs here and there - I admit that I would not be patient enough for this because even when this magical setup appears, you will lose a good amount of time.

I feel way more confidenct to look at the general price movement of the recent time period, in my case the last few weeks, and try to get a feel in what direction we may be headed. If I am wrong, well, maybe I will get a better entry soon after or I will find another opportunity in another pair. Sometimes it is really annoying, sometimes even hurtful (and that is when I wil start making really pointless trades…still my biggest enemy).
If I am right, well, the worst thing is that I will have a trade which looks good but turns itself into a small losing trade again. OR, the trade allows me to see how far I can ride it and how much I can add along the way.

By writing this I start to notice again how problematic the pain generated by losing still is for me. If I can further reduce this, I will trade better.

Turns out this thread is not so much about a system, but rather about psychology? Well, maybe that is also a trading system.

Edit: I realized to late that you made another really important mention. The psychological numbers are mentioned almost never anywhere and I think they are really helpful in decision making. I also think that the round numbers, another psychological number, could really be an edge in the forex market, and I guess in oil, too. An underrated concept which is really simple to understand.

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Do you mind giving me a ballpark of what you’re able to do per month with your automated strategy vs your manual trading?

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This post in the link is the start of the systems I’m currently using. The last one has profit from about 2 weeks ago. It’s a bit worse now, but I turned them off because Trump broke them all. When things settle down, they’ll go back on.

Manual is hard to quantify. I still struggle with discipline at times and that can cause big losses and big wins. This month has been the conditions I love, and I’ve done about 100% in 2 weeks, but last month was down a bit.

I’d say with me being disciplined and following my rules properly, 1% per day is pretty normal. My main problem has been using an account that’s too small so the money doesn’t mean much. Now it’s at a good amount and I want to prove if I’ve got what it takes, I’m hoping I can stick to my rules a bit better.

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Discretionary trading demands a very strict and rational way of managing and observing. I think I am really good at trade management (where automated systems are not that good in my opinion because, at least in my case, I don’t have strict rules, it is more or less intuitive in nature), but I still lack the patience of waiting for the right moment. This depends a lot on fear of missing out. The paradox here is, if you fear that you are missing out, you actually WILL miss out on the good opportunities in favour of some worse ones.

I did some more manual backtesting in cTrader, which I wanted to share with you in a screenshot to show you what difference the trade management actually can do. What you can see is that I simply traded USDCAD on a 1h-chart and zoomed out really far. That way you can not see candles, but the market structure and especially the medium term trends (meaning a few weeks) get very clear. I love trading like this, it makes it really easy on my eyes :slight_smile:

The outlines were this: I have 500$ account balance and I will risk around 25$ per trade (sometimes a few dollars less or more). As you can see on the bottom left, the account balance is 353.48$, which means that I was wrong about my trades a total of six times by risking 25$ on average. Six losing trades in a row! Do you know that this is really annoying on live trading? Anyway, there would have been a “cure”: If I would have closed those 6 trades after 24 hours, I would not sit on 150$ drawdown but barely 50$. Do you see that it makes a good difference if you just close trades which don’t do what you want after a set amount of time?

Anyway, trade #7 worked out. Keep in mind, the first position of 0.04 lots had a total risk of 25$ and went into profit after some time. So I added another position in equal size and hoped that both will go into profit. I would have closed both in a total drawdown of 25$, so my risk would have not changed, but I was lucky and didn’t have to deal with drawdown.
After I was around 80$ in total profit, I added a bigger position, and again, no drawdown here. I would probably have closed at break even here. As you can see, even though my total position size is now 4 times(!) of my initial position, there is not that much risk involved anymore, and the time horizon is big enough that you are mostly immune to sudden spikes in price.

So, why not double the total position? I add 0.16 to the exisiting 0.16. The price went against me and I would almost have closed everything at break even. This would have been annoying, but so what, I had the potential to get a big winning trade, there are worse things in the world to deal with.
But, as everything seemed to work out eventually, I added another 0.16. I feel like the market seems to come to a consolidation or even reverse due to an earlier support (not visible here), so for me this would be a good time to close everything.

Can you see that there is not that much of analysis involved here? I thought there will be a downtrend and I used the retracements to get on board with subsequent positions. That is everything. Of course, you need experience how the markets are able to move but that is easy to learn.

What is difficult with this approach is, first, you have to deal with six losing trades in a row without changing everything or losing trust in your system (which is the worst that can happen to your mind in my opinion) and second, you have to bet that the movement will continue to see how much profit you can press out of your position. And think about this: how would you feel if you would close everything here and the market drops another 150 points?

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Edit to clarify some thoughts:

Keep in mind that the initial risk was 25$, so we are sitting on an open profit which equates to 40 times your initial risk. Using a take profit order with this approach would never make sense because it is LIMITING!
The key here is that you wont be struggling with your analysis but it rather shows what trading (to me) really is: a game of mind which you play against your own psyche. At some point this fairly innocent initial trade which could only lose you 25$ will be fluctuating probably a couple 100$ per hour. That is extremely hard to stomach.
The best advice is this: do not look at your open profits too much! Rather look at the price action.

Keep in mind that this is no unrealistic long trend. The initial position is almost 600 pips in profit, which is not an extremely large movement over the course of six weeks.

Another thing: this works even if you dont have any money if you have high leverage. The end size of all positions would need only 96$ margin if you have 500:1 leverage. If you are in Europe and are limited to 30:1, you have to play this with a little bit more money on your account but still, you would at least double the account size with such trades.

I understand that the probability of working out with trades like these is not for the impatient and the winning-driven trading personalities.