A 34% return would be good if the system required very little work. Right now I work allot at forex and I am at breakeven. I am learning about trading and myself. I expect soon I will get to a point where I am making some money. Honestly its harder than I expected. Trading fascinates me more the more I learn. Your returns will be directly related to the amount of work you put into your trading.
Cas talks about an “edge” I think he is right. but I don’t know if its true when he says if you had an edge you wouldn’t share it. I see smart experienced traders sharing what they do right here on Baby Pips, Cas included (thanks by the way:)) The thing is Cas’s edge that he has found won’t necessarily work for me or anyone else, we will all trade a system differently and get different returns. I think the only way you will develop an edge that works for you is screen time and experience.
As for loosing your money keep in mind its entirely up to you how much to risk. That is an aspect of trading even a new trader has complete control over. They just don’t know it.
HI Shr1k, this is one other thing that concerns me. This idea that using stop losses controls loss. But a stop loss is just a self-imposed margin call from what I can tell. So even if I use stop losses, I still can not control my losses assuming that I take another position after the stop loss is triggered. What it does is cut up my losses into several pieces rather than one larger piece. But it does not mitigate the aggregated losses if my positions are bad due to poor trading. One could argue that with the gyrations of price even within a trend, a stop loss is a good way to lose all your money if it’s repeated and placed too close to your opening position. Death by a thousand cuts. Of course, the further away the stop loss is placed, the less likely it is to be triggered, but the more you lose if it is. Alternatively, the closer the stop loss is placed, the less you lose, but the more likely the self-imposed margin call is to be activated. Then once activated, you have to place another bet with another self-imposed margin call and the process begins again. If this process is repeated a few times, the aggregate loss could easily equal the loss due to a broker-initiated stop loss - aka the margin call. Upon casual observation, it would appear to me that the only thing that protects my from losing all my money is to make better trades.
Not quite
You could also not trade;) I am serious. If you keep your risk small you have time to decide if what you are doing is working long before your money is gone.
You never mention position size in your reply You can place your stop 10 pips or 100 pips and risk the same amount of $$. The only aspect of trading you have no control over is what price does after you open a trade every other aspect of a trade is up to you.
I think the only way you will develop an edge that works for you is screen time and experience.
Understanding that markets are moved by the factor supply and demand fundamentals and the factor news flows.
Those are the most [B][U]important[/U][/B] factors you have to understand. If you have mastered these factors you can then find and develop your edge through screen time and the experience you are gaining as a result.
You and I can look at the same candles on the same TFs. But we don’t see the same. There lies the difference.
I understand supply and demand. Had all the economics classes in college, but tell me, whats the best way to get a handle on supply and demand (SD) for a particular pair? Is there large scale and small scale SD ? So the health of national economies would effect large scale supply and demand and have an effect on longer time frame moves in a currency? But what about smaller time frames like 1h, 15m, 5m? Is it just as important at those small time scales ? I read the news on babypips tools and the ff forum too, to know what news items are coming up day by day, but what other things should a trader be looking at? Surely not television news channels? Aren’t those kind of like after the fact? Big traders have already taken news into account before it ever hits commercial news outlets I would think. Obviously if price is in an uptrend then there is more demand than supply and vice versa. But what other sorts of things should a good trader be looking at to get a finger on the pulse of the market?
Actually that wasn’t a cheeky answer at all. An investor is a different animal than a day trader and even a swing trader. Most traders on this forum fall into the catagory of swing or day trader.
Investors are looking to make positive, EXTREMELY PREDICTABLE, annual returns over many years or even many decades. The usual goal is to have enough money to retire on and not have to work, but not nessacarily be rich.
Day traders are usually looking to take x sum of money and compound it much, much quicker and make it into a fortune.
So, 34% a year, compounding, for investing is actually quite good.
34% a year for a day trader is quite poor. I usually do more than that in a month of trading, and I don’t even consider myself that great of a day trader and still a noob.
It’s not a method of trading or an indicator. Those are just little parts of an edge.
An edge is defined as simply this: You know out of a sample size of trades that you win x trades more than you lose. AND, the sum of the winners beats the sum of the losers.
Same as a casino, they know over time they will come out on top, despite any losses.
The critical part here is the sample size AND consistenly trading the same way. Not just willy nilly trading on emotion or gut feeling or sudden price action spikes.
So, a reasonable sample size is 20 trades, a more scientific proven sample is 100 trades. Over that sample, to actually make it a sample and prove that your edge works well, you have to trade the same way every trade.
Yes, you can have more than one edge for different circumstances and market behaviors. But, define one at a time.
This is where demo comes in. First define and develop an edg in demo. If it works great there, most likely you can expext it to work half as well live.
What I do when I’m working on something new is to test it on demo, then go live with very small lots, even one cent per pip. I’ll do this for the same amount of sample size live. If it keeps working well I’ll slowly increase the lot size, even though it’s doubly proven, just to build my own confidence in it.
I mean supply and demand in regards to buyer/sellers in a pair you are trading and how that drives PA.
but tell me, whats the best way to get a handle on supply and demand (SD) for a particular pair?
Information.
And being able to interprete this information. You also need to know aboiut bias of the large movers.
Is there large scale and small scale SD ?
Yes. There is.
Large buyers for instance have a clear idea where and at what price they are going to enter the market.
So the health of national economies would effect large scale supply and demand and have an effect on longer time frame moves in a currency?
That’s theory. Look @reality. What is happening…? QE…money for nothing through low interest rates. Loads of liquidity slushing about and the USD is a carry trade currency.
But what other sorts of things should a good trader be looking at to get a finger on the pulse of the market?
It’s like everything in life…quality is not free. Pro’s pay for quality news services.
[I]Do you understand what an, “edge,” is?
[/I]
I understand what “edge” meant to CAS. He said he has a trading system that most other traders don’t have, something proprietary to him of his own creation.
His answer was quite specific. I asked him if that is what he meant by his using of the term “edge”, and he answered Yes.
A probability based statistical edge is one type of edge, perhaps not what she was referring to though. The point is I think, you have to find what works for you, and not follow the lemmings off the cliff
If you would permit me to enter into this discussion as my first post, I have an observation or two which might keep things moving:
If we assume Pippy’s start in the game to be $5K and a fairly standard 2% risk at a 20 pip stop loss and, for the sake of the example, a 20 pip take profit then we begin. If we also assume that Pippy is able to make a net of one profitable trade per day for 20 pips then he is making return 2% per day. Six months of trading would increase his balance 10 fold to $50K.
Oh yes, I forgot that. So assuming that he maintains 2% risk as the account grows and adjusts his lot size appropriately.
I know that there are scalpers out there netting 100-300 pips per day(claimed). So, is it reasonable to shoot for a consistent 20 pips per day? It looks attainable to me from what I’ve seen of the available strategies even posted here on the BP forum. As long as we can maintain the necessary disciplines.
Hey Pippy, I’m going for it as well. Good luck to you.
Assuming that he doesn’t get hit by a losing streak from the start.
3-5 loser = -6% to -10%
So how is he gonna deal with that one…?
Adjust his risk…? Upwards…? To make up for the loss…? Get’s nervous…? Panicks…? Blows his account…?
I know that there are scalpers out there netting 100-300 pips per day(claimed). So, is it reasonable to shoot for a consistent 20 pips per day?
I know that there are people out there who have burnt their $5’000 account balance in 2.5 days. So it is reasonable to assume that you might be another candidate judging by your 2 posts.
As long as we can maintain the necessary disciplines.
Any real life experience in maintaining necessary discipline under immense psychological stress…?
Well, the odds are definitely against me aren’t they? Would you send me your bank account info so that I can just wire my account balance directly to you for being such a helpful fellow?
Ok, so it is unreasonable to expect big numbers. I just want to be profitable over the long haul. I don’t have the experience yet so I only have numbers to play with. I guess I will know in a very short time if I will make it or not. Right? I’m committed to learning, I’m reading and watching charts.
