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Some question and general thoughts

Discussion in 'Beginners Bootcamp' started by David Berenyi, May 18, 2017.

  1. alexmarian

    alexmarian Private

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    This thinking should be condemned about forex trading that It is easy as most of the people expect from it. If you are aiming high earning with low skills, then forex is not right for you. Forex will give you rewards only when you practice regularly with a strategy and money management.
     
  2. nahiyar

    nahiyar Private, 1st Class

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    Yes be realistic with forex , it is dreaming business because we set targets high having low trading skills this is not easy to achieve all you want. General thought about forex should be changes , not take it easy never invest all mount it is not a money factory nor it will double your amount in days. It is a risky business you can deal with it with efforts , hard work and proper plan.
     
  3. bigdolly

    bigdolly Master Sergeant

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    Live with dream, die in reality - this is our trading motto. Take it or leave it, haha. In fact, setting high targets works like a motivation for me to try and never give up.
     
  4. nahiyar

    nahiyar Private, 1st Class

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    You are risk taker if you manage it well do trading as you had your natural style.It will comfortable than adopting any other style. Some people like challenges , make high targets and feel good to achieve it .Actually they are motivated know they have to do this. They do much efforts to find their way to go to the milestone. Then general problems are nothing for them . They will overcome all difficulties.
     
  5. outofphase

    outofphase Private

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    1- David, the first thing you need to keep in mind, always, is: how do I lose as little as possible? Focus on preserving your capital. That should be priority #1. Not how much will I make today or this week. Not this is my goal amount of money for this trade. You take what the market gives you, not what you think the trade should be giving you because it is next to impossible to predict where a trend or an intraday move will stop and turn. This also means, if you are a perfectionist, then don't be. It is only going to be an obstacle if you focus on how the trade should go.

    The reason for saying this is that you, we, everybody, will lose some money. It is unavoidable. The key is to keep your losses small, and your wins bigger than all your losses. Of course, this seems obvious. But it's a mental trick, a mental habit to always have it present in your mind when trading. When I started, I would always forget this in the heat of the moment even though I knew it. But as long as this knowledge was not ever present in guiding my trading when in front of the screen, I would always make the mistake of letting my trade run longer than I should and give back profit or worse, let price come back and below break-even (in case of a long trade) and start losing money.

    I also say this because to this day success in trading depends on the strength of your psychology and ability to acquire (if it is not a natural gift of yours) the right mental habits, especially when it comes to emotion control. The first battle in trading is always with yourself and all the ignorance of what you don't know that you don't know but should know, and will know after years of experience. An example: In the early days, I started with a 5K account. Lost more than 50%, and from $2K in the account was able to recover by quadrupling it to 8K in 2 months. Guess what? Then I lost it all. I was taking too much risk and didn't know what I was doing.

    Your enemy #1: having early success, which gives you the false sense of knowing what you are doing. Perhaps you are just lucky? Many have a good run for 2 or 3 years and then manage to blow up. Even happens to professionals. Read about Ray Dalio's story and how he blew up before become the owner and manager of the largest hedge fund in the world. The point I am making is that you might have found a good way to make profits but there is still a piece missing that you don't know about because the early success strengthen some patterns of habit of thinking, habits that in fact you should not have because in certain market circumstances they will lead you to disaster. So always examine how you think, how you react to losses and profits, and make sure you are not lying to yourself. Listen to the market and when the market says you are wrong, accept it and get out of your positions as fast as possible.


    2- Do not start with less that 1,000/USD. This amount means you should only trade 1 micro-lot. Nothing more to achieve proper risk management. Ideally, a minimum of 10,000/USD to trade 1 mini-lot, and 100,000/USD to trade 1 standard lot. That's what Jarrat Davis recommends and I agree with him on that.


    3- You will not find any books that will teach how to trade properly. BUT, you should read everything that teaches you how markets work (even if it's not a book on Forex), how price is formed, the importance of flow in the depth of market. Look at how different the user interface is between Futures trading software and retail Forex software. Why is it important to have a DOM and volume profile when trading Futures? Why is this not available on retail platforms? Ask yourself these questions and try to understand the answers. To give you an idea, take a look at VeloxPro Bookmap's software and Jigswa Auction Vista. Jigsaw's creator has a very good series of videos where he teaches for free how to use Auction Vista and what it all means. This will help you greatly understand how a market works. Even though Forex is a decentralized market, ie not on exchange, the mechanics are the same.


    4- Now as regards books: I recommend you read the whole series of Market Wizards by Jack Schwager to learn to think like the pros from all the pros he interviewed.

    Another book that does not seem relevant to Forex, but still is: Options, futures, and other derivatives by John C. Hull.

    And all of Nicholas Nassim Taleb's books.

    Liar's Poker by Michael Lewis is also a good read.

    As is Professor Benoit Mandelbrot's The (Mis)behavior of Markets.

    And Scott Patterson's The Quants.


    5- Don't waste your time on any technical analysis book. I read Bollinger's book and Carney's book on harmonic patterns. All useless. Besides, all this info is available for free online where you can find all the main technical indicators explained in detail. Trying to gain an understanding of how these indicators are built will provide some insights about the flaws they all suffer from.

    Another thing to keep in mind is that strategies built on MAs (moving averages) and Bollinger Bands or RSI or MACD or Stochastic worked in the early days when they first came out (1970s and 1980s), but the market behavior has long since changed (thanks to the advent of algos who are responsible for the bulk of volume traded today) and they are not and should never be the first basis of any strategy you build. Listen to Linda Raschke and how she uses very simple indicators such as the 3-10 MA oscillator (which is nothing more than a faster MACD) and other simple indicators to trade Futures, but not just that to get an idea of what's possible but also of what's not. I replicated her 3-10 indicator to see how it does with Forex data and honestly, it generates as many false signals as good ones: so how do you decide which signal is not false?

    Here's a speech she gave--she's a pro, decades in the business and making money after losing tons of it too:

    Also, do not put too much faith in fib retracements, extensions, and projections. They do not show that price will reach for certain any of the fib levels. But they can show that if price does not retrace more than 38.2%, then it's a shallow retracement, which could mean a continuation in the original direction will follow, but not always if price ends up making a double top, for example (I am always using a long trade as an example, for ease of explanation).

    Instead, support and resistance levels are the most important thing to be able to identify. These levels, rather than just being horizontal lines, are better thought of as 'zones' (rectangles) inside which price has a higher probability of pausing and reversing if price does not take out the support/resistance zone. Some are stronger, and some are weaker. Stronger levels are usually where large options are due to expire and can act as magnets for price, until the New York at 10 AM EST is done.

    Trend lines are very important as well.

    Candle patterns as in price action behavior around these lines and support/resistance zone gives a strong clue as where price is headed next.

    But for me, when it comes to technical analysis, the most important thing to find (since I can't trade off naked charts only as some do), is: What is the invariant? If you can identify a universal invariant in price behavior that is valid on all timeframes and build an indicator around that, without forgetting the importance of trendlines and support/resistance levels, then you have something to make profits consistently, which brings me to my next point.

    6- Technical indicators alone are not sufficient. You will be a much more profitable trader is you are able to gauge accurately market sentiment. Many still say fundamentals and only fundamentals is what a trader should base his decisions on. I disagree. If you look at algo behavior, fundamentals very often do not determine where they enter and exit a trade. As a result, we get a volatile market with no clearly defined long term trend on many pairs. Another way to put it, many fundamental news releases barely move the market nowadays. That's not always true, but recently look at how many times some interest rate or CPI news didn't even cause the euro or pound to move 100 pips.

    So people say after the fact that the expectation of the news was already priced in. There are many, too many factors at play, and we don't know for sure how the professional players (the entities whose collective actions move a pair) will interpret all of this.

    Nonetheless, it is not hopeless and why I mentioned having a good idea of market sentiment rather than knowing the exact news release ahead of time. To do so, I recommend you use sites such as forexflow.live and forexlive.com to gain a feeling for market sentiment. Also getting access to where the biggest options are for the next day of trading.

    That being said, I am mostly a technical trader. But I use market sentiment to inform what I see on the charts. Fundamentals, I don't care about. Example: Wednesday at 1400 EST when the FOMC news was out, my technical setup showed EURUSD was a sell. So I sold before the news release. Now, of course, I could have been wrong. But that's ok. I define my risk to be 25, 50, or 100 pips, depending on the case. In this case, because it could go crazy wrong, I define risk with a tight stop loss, 20 pips. I am willing and able to afford to lose 20 pips in case I am right and the EURUSD tanks 50 or more pips. It's a good risk/reward. The EURUSD dropped 80 pips.

    My point: you always must define your risk before placing a trade. You decide what your account can afford to lose, but since you are new to this, never ever more than 2% in one day. If you reach 2% loss, you should stop trading immediately for the day and go take a break, relax, and then come back and perform some analysis on why the trade didn't work out. And start with a smaller position size the next day and keep size small until you made back this 2% loss.

    Another related point concerning the mechanics of trading the news: use OCO orders (One Cancels the Other). If you platform doesn't offer OCO, you are with the wrong broker (I will recommend a tool later since I suspect, like so many retail traders, you are using MT4/5, unfortunately for you, and fortunately for your broker). BUT if your OCO or bracket order is too close to market, then you could get whipsawed. One leg is triggered, then stopped out, then the other leg is triggered and stopped out. So you must have feeling for how the pair behaves usually at news time to decide how far to put your OCO. One thing I can tell you is that most trading activity at news time is algorithmic, and therefore tends nowadays to go straight in one direction (not always, but mostly) and that is a blessing for OCO orders. Unfortunately, MT4/5 does not have OCO functionality so with the tool I'll recommend shortly, you orders will be placed as market orders and will suffer significant slippage. If this were a Futures platform, your OCO orders would be resting comfortably as stop buy/sell orders on the order book and would be triggered with not slippage (as long as they are small enough and the market is liquid).


    7- Regarding the tools of the trade: If you want to play with a small account in the beginning, and get a feeling of what a semi-professional platform is, then you need to go with a broker that supports JForex (Dukascopy, Atom8) or cTrader. MT4/5 is a joke and mostly used by people who have too much faith in EAs and copy trading.

    But if you must use MT4/5, then purchase the following EA: StereoTrader from stereotrader.de. This is a MT4/5 plugin that adds a professional interface to Metatrader. The classic version gives you 4 modes to choose from (a Futures trading UI or a Hedge mode (you can open 2 opposite orders on the same pair)), aggregates multiple orders as one on the chart so you can close everything in one-click, shows all the relevant info you need in realtime on the chart and in a stats panel so you know exactly where your break even point is, provide 1-click order size buttons you can customize instead of having to enter order size manually, what your profit factor is, your drawdown, and much more. You can also click on a button on the stop loss widget (on the chart, looks like what you have in NinjaTrader or Investor/RT) and it will immediately bring your stop loss to your entry level or further if you customize it to do so. Futures mode lets you reverse a trade with one click on the REV button. It also provided you with OCO order capability, has chart customization settings, and also built-in auto-trading algos you can customize or add your own. It's an expensive tool, but it's the only one out there that will turn MT4/5 into a platform that will look and behave like a professional platform. Just read the manual and you'll know what I am talking about.

    FPA Forums Team Note: Some Commercial Content removed.

    Beginners Bootcamp is a non-commercial area of the forums. If you want to suggest specific companies, please do that in the Commerce Zone.


    Ok, this is long enough I think. Feel free to ask questions.
     
  6. EURUSD

    EURUSD Sergeant Major

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    Trading high risk taker is harmful account, indeed if obtained profit hence will big number, but for overall trading if always work with high risk taker, sooner or later the market will beat us and make blow account, safe trade will obtain a small profit but the risk also will lower, eventually depending with each trader will work and choose
     
  7. outofphase

    outofphase Private

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    David, I just noticed FPA removed some of my reply to you. I had a section there recommending getting the right education and was recommending a trading institute that has credibility. If you want to know more about it, then PM me and I will send you the URL as well as a link to a youtube video where you can see the founder explain what's going on in the FX retail market. The guy is legit and all his pro trader credentials verifiable (his is an ex-GS and JP Morgan trader, if i remember correctly.) His course is designed to teach everything FX traders need to know about fundamentals. Anyway.

    Or, start a thread on Education in the Forex Company Comparisons folder. It's in the Commerce Zone, so you can recommend companies.
     

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