Would like some advice if I may about my approach

Beginner Questions
1

Hi All,

I am a newbie trader with 3 months+ experience. I read with interest the discussion in this forum on the use of bollinger bands and SMA on 1 hour and 15 min charts.

When I started learning I gave a bit of thoughts on candles and price action and what they mean. I value the candlestick pattern analysis. I still think they are great. Although it appears that some people just don’t care about them. Indeed they mostly follow indicators mechanically without understanding, say what RSI mean. I make an effort to extract daily chart data for GBP/USD on a weekly basis. Import it into my own database system and plot various indicators like RSI, BB etc using my own formulae. Not that matters but it gives me the ability to make sense out of things.

I have tried to learn few indicators well. RSI, Bollinger bands and Ichimoku are my favourites. I like ichimoku because it tries to be a comprehensive tool on its own. Many people are put off by its complexity. So in summary candles, RSI, BB and Ichimoku are enough. I also look at volume indicators for sign of activity in the markets

My approach

I tend to be a intra-day trader. I start observing around 10:00PM London time when Asia-PACIFIC markets open. At that time it is a thin market so I just watch the drift. I watch GBP/USD,EUR/USD, USD/JPY to give me a clue of day start. Unless one is adamant that he is buying cheap, then there is little point of opening any position as it is a thin market and will be probably difficult to cover the spread never mind making money. If oil start shooting up then that may indicate weaker dollar so it is worthwhile getting in with small lot with 20 stop pips and getting out after say 50 pips.

The active time for me is around 6:30-8:30 London time. Then one can catch both European and London opening. I check Nikkei, oil and Hang Seng Net Change plus GBP/USD etc and those give me an indication for rest of the day. I also care about major news like UK QE etc. On such days I tend to be cautious with positions. News is very speculative and designed to force people like me to panic or sell short. I will then make a decision to stay in or get out. I don�t like to be locked in as it leaves you in a bad situation hoping to recover and in the meantime you cannot use that margin to trade.

I tend to finish by 5-6PM UK time. After that it is thin market, consolidation and one can risk exposing himself and losing a fair bit of gains.

For timeframe, I use 10-15 min for high volume time, consider the graph for hourly as well and 30 minutes for thin markets. Now if I see my 10min chart showing starling going down on a buy but I have had three hours of marabuzo on an hourly chart, I tend to stay put. It turns out in most cases (at least for me) that hourly chart seems to be more reliable. For example I may long for a target of few hours but in the meantime open a short position to take advantage of sterling going down within half hour or so. I make few pips and close the position. They all add up. I can do this because my dealer allows me to open either an fx position or cfd position. I can go long with fx and short with cfd.

At the end of the day I rely on my own common sense and there are occasions that indicators may say it is a sell time but I decide to buy. I start by opening 2 mini lots (50%, with a target of 4 mini lots in all). If I see a trend I wait until 40 pips gain and then I open another mini lot (25%). The final lot I open after 62 pips. This roughly works out to be Fib ratios (38.2, 61.8 etc). However, during any stage if I see momentum is lost and few wicks and dojies then I just close the position and take the money away.

I am not that knowlegeable to know exactly when to go in on overbought/oversold RSI etc although I do take them into account. In my view if I take 65-70% advantage of a monentum for a trend that is good enough for me.

I seldom do ranging unless the ichi cloud shows the depth of the range. If the band/envelop can provide fair bit of pips > 30-40 then it may be worthwhile otherwise I live that to skilled traders.

Appreciate any comments/views.

Regards,

Mich

2

Mich,

It really doesn’t matter what you do as a strategy as long as you control your risk and your leverage. If you can get a hold of just those two things, then the rest doesn’t make a difference.

So if your doing these things, then thats great… otherwise, I would say its just a matter of time before you become like so many others…

I say this from experience and from hearing how friends have mentioned this very statement over the past few years based on some of my knowledge dumping…

chrish

ps. Surprisingly enough, most traders can’t handle those two things because they are so fucused on the other things like entry points.

3

Hi Chrish,

Thanks for the advice. I agree that risk management is a must, however, I also believe a sound trading strategy is equally important.

I have a simple view on trading. I am not that clever so I have to work hard for my money. Therefore I cannot afford to splash it around. As the saying goes it is far easier to throw than catch. I know of people who have been trading for years and every week they still come up with yet another set of magic graphs or set of new RSI periods etc that is going to do the trick. Inevitably these have lost a lot. I guess they are hanging on because they have deeper pocket than others. Every fool can spend money but it is far more difficult to make it.

Anyway I keep around �1000 as my risk capital. The max minilots I go for is 3 or 4 so every pip I should gain or lose 3-4 dollars depending on the number of open positions. I only deal with one instrument like GBP/USD so I don’t have two open positions on two different instruments at any time. If I gain �500 or more from trading over a period of time, I move it out of my trading account. At this stage, I do not subscribe to the idea of building up my risk capital by adding profits to base. I tend to trade wiser (read think twice before opening a position), when I have limited money so every penny matters.

Cheers

4

Ever heard of those who weight trades on how heavy the flag is blowing outside their window, or the guy who based his trades off migration paths of African elephants? They all very much succeeded because of their risk management plan… they were very good at losing… very good. And thats what got them to where they were… or another good example is the black swan author Nassim Nicholas who I believe losses 90% of the time… thats fine his losses are very tiny, but when his profits run, they are HUGE…

Anyways I only say this because too many people ignore the most important thing in trading, a stop… but if you understand risk management and I can skip that, then you want to focus on entry positions that give you the highest probability. Look at any chart, and say to your self… where do I have the greatest risk… to the upside, or the downside. IF you can’t answer that in 3 seconds, your probably stuck in the middle of something, so move onto the next chart. That would be a start for entry for me… I base all my stuff around probability.

Just wanted to give you another view… :slight_smile:

5

A sound entry strategy is important, but it’s nowhere near as important as risk management.

You could enter trades on a coin flip and still be profitable if you cut your losers short and let your winners run. :slight_smile:

Of course having a good trading system will make you a whole lot more profitable, but it’s the least important thing, not the most important. :smiley:

6

Phil,

refreshing to hear someone say that … I was beginning to wonder when I might get a comment where someone isn’t drooling over a MA cross :wink: