Online, there is loads of information available for people who, like me, want to try their hand at trading FOREX, but know nothing about what to look for. Unfortunately, most sites talk only about different indicators and TA tools. In truth, this only seems like one piece of the overall puzzle to me; I can’t imagine anyone being successful purely through their knowledge of TA tools and indicators…
So can you guys please explain to me exactly what you do (and in what order) when you trade? Do you start by checking the news and economic calendar? Do you only trade certain pairs? Why only trade those pairs? What timeframe do you trade and why? What indicators do you rely on most? What do you do AFTER entering a trade…? You get the idea.
Thanks to anyone who replies to this, I really do think that knowing what exactly it is you guys do will really help me!!
Find a market that is trending (up or down). Wait for a pullback. Enter when it appears price is reversing back in the direction of the trend. Look for a minimum of 2:1 reward to risk before trailing stops.
Be prepared for lots of stop outs. Expect a few runners to make up the difference for the losers and then some.
Repeat as often as necessary or desired. I keep things simple now.
An hour before NY open I go to the calender to see what currencies have announcements and what time they will happen. From the 8 or so currencies I look at, I remove anyone from the list who have announcements going on between NY open and London close. Next I check overnight emails for anyone I’m following who talks about the currencies left on my list. After that I open my platform and look at remaining currencies on my list. I’m a short term momentum trader so I’m looking for ANY obvious trends, volume and volatility. If I find something I want to trade, I confirm it on the next lowest time frame. If I see the confirmation, next I look for entry, exit stop loss and take profit spots and confirm with Fibonacci expansion, and pivot lines. Once that’s done, I drop down to the next lowest time frame and look for a entry. Once I finish that, I double check eveything and make my entry. When trading is done, I review all my trades to see how accurate my entries were and make notes in my journal.
I aim to analyze sentiment across the different currencies and find those that are clear. I hate trading into mixed sentiment as the moves are much less predictable and reliable. Preferably, there’s a currency with distinct negative sentiment and another with distinct strong sentiment. At that point, pairing the two together makes for a very solid trade.
After I’ve identified that, I check across the majors for any notable stop levels or significant barrier options to see the influence they’ll have on my trade. They also make for good spots to exit after I’m in the trade. Keeping an eye out for economic events is helpful, but I’m more of short-term swing trader (trades lasting a few hours to a few days on average) so those blips that data releases can cause are opportunities to trade into again, if anything.
I do, however, watch out for MAJOR events like Central Bank meetings, NFP, or anything that’s heavily anticipated and could potentially impact overall sentiment. I reduce my exposure beforehand as best as possible or just stay out altogether.
As the trade gets managed, sometimes it’s best to just walk away/turn off the screen/close my trading platform. Again, this is a short-term swing perspective (not quick intra-day scalps or even longer month+ type trades) so keep that in mind. Once I’ve gotten in, my focus is on if stop levels in the majors get triggered or sentiment shifts; otherwise it’s just a matter of sitting back.
Finally, on the side I also like to watch the futures, equities, and bond markets because they can give me some clues here and there.
Thanks! Would you mind telling me how exactly you try to gauge market sentiment for different currencies? Also, how much do you rely on technical indicators, or do you trade purely based on fundamentals and sentiment?
Well, determining sentiment is no walk in the park since it’s kind of a ‘touchy feely, think what others are thinking’ soft science rather than the analytical comfort and hard science feeling we get from TA types of stuff. But that being said, I first and foremost just keep an eye on major newswires like CNBC,CNN,Bloomberg,etc. If a general, broad-covering network like one of those is covering a topic in the financial markets specific (like some economic data release), then you know it’s more likely to be important to people in general. Even subtle stuff like if they’re doing dull pieces on some Hannah Montana **** or something, there’s probably not much going on in the markets and is probably one of the days where you should just stay out and wait for better activity. Stuff like that.
More specifically, I’m in love with bank reports like this one. Those help show me what the big boys are thinking about specific currencies and what events are imporatnt, what they expect, how they’ll react, etc. Definitely a great jumping off point. Sometimes Reuters IFR or even the stuff you see on this site can help. The little blogs from all the fun characters here can give an idea of what might be getting attention and is cared about.
Hopefully that helps give a starting point. I know it’s not a perfectly clear guideline, but if it were that easy then we’d all be able to do it without any problems and it wouldn’t be such a valuable thing to be doing haha. In the end, nothing beats experience with the proper focus
What information you look for, depends on how you trade in my opinion. I trade short term momentum, so I’m interested in pairs that range more than a pairs long term trend. If you were a swing or position trader I would think you would be more interested in a pairs trend or a pairs pull back. Again since I’m looking for momentum volume and volatility, I want to trade during London and NY sessions. I usually done trading before London close. But all trades would be closed by the NY end. Win lose or draw. Thankfully it hasn’t happened for a while.
As far as indicators and fundamentals, again depends on how you trade. I use indicators that address momentum, cycle, volume and volatility. As far as Fundamentals go, because I’m in and out, a pairs economic factors don’t enter into my analysis and as far as economic announcements go, I don’t trade around high or medium impact events. For example tomorrow at 8:30am, CAD Building Permits m/m is coming out, and it is listed as high impact. So I would not trade any CAD pairs tomorrow. I trade the pairs I trade because they fall into my criteria. Again everyone is different.
You’re wrong when you say most sites talk about indicators and TA tools. They also talk about money management and mental aspects of trading. I know that because when I was starting out, I went through them as well as the indicator, trading systems etc.
What you need to do is to take the info that’s available, figure out what kind of trader you are. That would be based on your situation and prejudices For example: the money you can trade with, the time you have to trade, your emotional level, your experience and knowledge, if you have a family and your obligations. That will be different for everyone. For example I’ve been in business for over 35 years. I have played poker and bet sports for over 40 years, and in the last 6 years I played and bet full time. So in my life experience I have a lot of experience dealing with pressure, and had to be very disciplined and patient. Now some one who is just coming out of university my not have that experience so they probably deal with pressure different than me.
Once you figure out what kind of trader you are, next you take that info and put together a system that suits you and you work on it until you get it right. For example you have answers from traders who have different approaches, you take what you can from each that applies to your situation and use it in your plan. It’s an on going process. I work every day before and after actual trading, trying to learn and get information that will help me be a better trader the next day.
^^^ Great stuff there. Mental/emotional aspects play a HUUUUUUGE role, so it’s good that GP here pointed that out so you didn’t get too caught up on the purely trading specifics side of things.
To me, I’m finding learning to trade rather difficult and the trouble is that it’s not down to a specific reason. It seems a bit like learning to swim; whilst the majority of it comes down to simply ‘waving your arms and kicking your legs’, knowing this will not enable to you swim. I suppose what I’m saying is that I understand the technique in theory (Nothing on the babypips school seems in anyway complicated), but being successful in practice is a completely different thing. The responses I’ve received have really helped me start to understand where to begin in practice Please keep them coming!
I like to treat the whole thing like one big experiment. Ricardo Iznaola said in his pamphlet “On Practicing” (which has nothing to do with trading) that we must practice like scientists in a lab, dispassionately observing the outcomes of our inductions. The scientific method makes things more clear;
Form a question - “Will pair x do y?”
Hypothesis - “I think pair x will do y, based on the information I used to form my question”
Prediction - “If pair x does y then v,w, and z must be true”
Testing - This is where the orders are placed to test your system or method! Since it is testing, we would be using a demo account or some sort of back testing to confirm or deny our predictions.
Analysis - This is where the true beauty of science comes through - if the analysis proves the hypothesis false, you need to reform the hypothesis and step back through the method. If it proves that your hypothesis was true then you get to form new questions!
I am sure that this is loosely adapted, but it is the way I view trading. We are scientists experimenting with financial markets. My trading journal is the most boring thing you will ever read
As far as individual trades go, as long as I am not risking more than 2% of my equity I don’t have much of a problem sitting my and watching SL’s get taken out. They key to staying alive in this chaos seems to be minimizing risk while being right at least 51% of the time.
I am also still trading demo… so we will find out how that holds up in the months to come.
I would be happy if I was you :35:, you just learned the most important information you could when it comes to being a successful trader long term, in my opinion. . .there is no skill, information, circumstance or teacher you can have or buy that can make you be a long term successful trader if you don’t understand a basic principle that in trading there is very little that’s black and white that will lead you to long term success; but there’s a whole lot of grey area that has to be addressed for your long term success.
I think once you understand that, it’s a lot easier to evaluate and use the information that is out there that applies to you. For example if you go on a brokers website deposit money and open a live account. will you have a trading account. Answer Black and White; yes. Do you definitely need a written plan to be successful trading? Answer depends; could be yes, could be no; depends on you and your situation. (grey) If it was me, the answer would be a definite yes; for other people it might be definitively no. I have a disability which prevents me from retaining short term memory information, so I have to constantly review notes. What’s the best analysis to use for currency trading: tech, fundie, combination of both,; answer is Yes; No; Depends?
So to me it’s exactly like your swimming reference. In trading you have to look at all the info available access it, test it and see if it applies to your situation. I think the more you do it, the easier it gets. But that’s a big problem logical traders have to overcome. What do you mean the numbers show the US economy is growing, but the people are not spending cause they don’t buy it? How can the tech analysis say go long and the currency reversed? How could I blow my account when I followed 2% of my account money management rule.
Good Luck
Yes, this is very much like learning any other skill (like swimming). You move from a rank novice to a new intermediate to an intermediate, to advanced, to highly proficient and eventually to mastery/expertise… It’s a very long process, it takes time and focused/guided learning, and oftentimes certain predispositions to give an advantage (think tall basketball player).
Most find that it takes 2-3 years of active learning to become generally profitable, and like most other pursuits it will then take 7-10 years to have hit the level of expertise/mastery. The hardest part of this, too, is that the markets always change in that the market participants are trading based on different things for different reasons. Their trades move the market and is what you’re trying to play off of, so if they’re changing then your approach must too.
As far as predispositions, if you find yourself indulgent but quickly bored, you’ll probably find that this could work out well for you. The indulgent nature will help keep you around as you hit roadbumps (and many roadbumps you will hit), meanwhile the fact that it will be ever-changing will keep you from EVER hitting that boredom/saturation point.
So, to reiterate what GP is saying: You’ve got the right mindset. There is no holy grail. There is no smoking gun. There is no secret key. It’s a highly complicated combination of various factors that are all very context-dependent. Time is your friend and uncontrolled emotions are your enemy.
We have to trade with proper plan and strategy so that we will be able to get the positive results from our trading. We have to trade with proper discipline and make and follow the strategy after proper analyse on the market.
As part of this discussion, my issue is getting nervous when I get up 20-50 pips and then getting out at that point instead of staying in even if my initial take profit level is much further out based on the chart patterns.
I am always afraid to lose those profits and then some. Occasionally I will move up my stop to break even but then you can be stopped out quicker with no gain even though you were correct on the trade overall so again I usually just close the trade. Since I can’t watch my computer constantly, I tend to jump in and out like that. I prefer the daily charts, I just have more solid trades there. 4 hour sometimes as well. Any suggestions? Maybe use a higher pip value when taking those smaller pip gains?
You may also want to simply partially close your trade when you start to get nervous. This may not be ideal in the long run, but for now it can give you some mental calm while still leaving some of the position open for the longer targets. Usually this is combined with setting a breakeven stop on the remaining position left open.
Now, you do have a problem you have to be aware of, here. Let’s assume things don’t go very well and you close half of your position, set breakeven on the rest, and then get stopped out at breakeven on the remainder. Let’s say that was for 40 pips, but only half of your position.
So if your normal stop loss is about 40 pips, your risk:reward there is actually bad…every 1 loser will take 2 winners (when it happens like I mentioned above) to compensate for it…generally not a good thing. Not sure what your specifics are, but make sure that if you take this approach, you be mindful of the consequences of shedding your position like that
I’m also a newbie, but have spent hundreds of hours reading and practicing. I’ve come to conclude that one major obstacle for newbies is the massive amount of information on the net, which most of it turns out to be BS. Indeed, all the information needed is out there for free, but most people get confused and some turn to the hundreds of scams, EAs and self called “gurus” for guidance. As I see it, this is a process that you have to figure out yourself. A process that is extremely time consuming and since most people don’t see this as a serious business but some “fun way to make easy money” not wonder the why the failure rate is so high. Don’t ever pay mentors/gurus nor buy EAs. As some previous poster put it, you have to approach the business in a discretionary fashion seeing things in many shades of gray. Educate yourself on the matter, practice and conclude what fits yourself (time, expectations, effort wise) as there is no precise routine that guaranties success on this business.
Please keep them coming!