Tag Archives: strategies

Trade 090613

Yep, they’re coming thick and fast now – lol

This trade was based on a lack of large sell orders at this point of the day. Price basically bleeding up following a serious gap down over Sunday night. The logic goes like this…

If you have a large sell position to execute you’re simply not going to drop this into the market on the wee hours of Monday morning after the pair has already dumped 100+ points

(Usually)

If you read ‘Markets in Profile’ or anything on auction market theory this will make perfect sense. Price auctions up looking for sellers and after a drop like this there are no sellers down here 😉

So there’s a (qualified) good chance that price will get back up to somewhere close to the top of the gap before the buy liquidity is available to mean this type of size actually gets executed… right? Right!

M5 AUDUSD 090613

Apart from the error I made which I’ve pointed out on the chart (trailing my stop too aggressively on/around my first target) I also could have waited for a better entry price.

I actually remember thinking ‘I want 0.9396 to buy this’ but then I decided not to wait and plumped for 0.9403 instead. The reason I mention this is that waiting could have meant I’d have been less jumpy with my stop and held the trade for longer.

This is all highly speculative of course but before anyone asks this was a +24 winner although yes, there was another +20 in there which I missed at one/both ends.

Right, back to work as obviously I’m still not a genius 😉

All my best – Robert

Trade 160413

Only just posting this trade from April and it’s now June… which goes to show how much time I am not devoting to this endeavor at the moment.

Complete stagnation may be something of an understatement but as previously mentioned this is mainly due to working a ridiculous amount.

So… this is probably my least stellar effort recently due to me having completely missed a key aspect of this ‘setup’ (which it isn’t really) or rather a key component in taking these types of trades so you don’t get your ass handed to you…

M5 EURUSD 160413

There’s way too much uncertainty here at this point to be trying to fade this move.

  1. Move up is +70 which isn’t generally enough to start trying to fade
  2. Not enough space/inefficiency from where I got in to the area shown in the rectangle
  3. Lack of contextual understanding… which I’ll explain below.

My observation is that multi-day ranges break from the opposite side… or to explain this another way… by the time you notice it’s in a range it’s time to start looking to buy at the BASE or sell at the TOP. I was out by about the 30 points out this cost me.

In this case I wasn’t paying a blind but of attention to the context of what I was doing.

M30 EURUSD 160413 context

The smart move would have been to sell later.

The smarter move was to actually get an idea of context and buy the retest @ 1.3110

Genius move? Buy the test of the low at 1.3030

I’ll settle for smart/patient at this point 😉

New direction for 2013

Hi guys and gals it’s 2013 so well done for surviving the Mayan apocalypse 😀

I wanted to say thanks and outline what’s happening with this blog/platform going into the next year

I’ll put an example post up from last month so you can see where this is going trade-wise

Another post will go up with ‘people I really rate’ in FX/trading and so on but really it’s gonna all be about the trades and posting those to the exclusion of pretty much everything else 

Best wishes for 2013 – Rob

Major changes – part 1 of 2

So approximately 18 months into what was supposed to be a two year project I’ve reached a very interesting point in my journey that I’d like to share…

If you’re looking to become profitable and consistent in this endeavour I seriously suggest you pay attention.

In part 1 I’m going to argue that as much as we’d all like to deny it the following is true. Learning other people’s specific setups and copying their trading methods does not work.

In part 2 I’m going to try to explain what this means as far as learning to trade goes and some of the things I’m doing about it. Part 2 will take me a couple of days to put together so lets kick off part 1 first.

So 18 months in and having extended my timeframe for becoming profitable on a consistent basis I have been very much on the point of giving up. Well, not quite, but the most ‘giving up-est’ I’ve been so far.

This prompted me to look around for what the profitable traders I’ve ran into have said about their own path to success and whether there were any common points. Here are some very lose observations: –

  1. The average timespan seems to be 3-6yrs to get really good
  2. If you dig a little deeper it’s mostly nearer 6yrs
  3. Those that seem to be consistent threw out the rulebook and developed their own trading methodology from scratch based on personal observations
  4. The majority of these individuals use ‘price action’ rather than charts with loads of indicators and wavy lines
  5. Some only trade one or a very few number of markets with very simple setups/rules
  6. Most of these rules are entirely dependent on experience which reinforces their discretionary approach
  7. Anyone who is very heavily promoting or selling themselves/their approach probably isn’t actually trading at all

So what does this tell me – other than I’m possibly screwed?

It’s been written over and over and over (which I’ve also completely ignored) that you can’t really trade someone else’s system/approach.

Acknowledging this truth would mean that I’m going to have to do a lot of hard work so I’ve ignored this up till now and not understood the point being made.

This statement removes the possibility of all short-cuts and frankly that’s a bit of a bugger.

However I now know this to be true from the following experience.

In October last year I signed up with Jimmy Young and went through his excellent and extensive training. There’s absolutely nothing wrong with Jimmy’s approach and he is a completely genuine, honest and straight-forward guy with 20+ years of trading experience. The amount of effort he puts into educating his students is frankly un-paralleled. He’s got some extremely talented students and I can’t find any fault at all in how he conducts himself.

He genuinely wants everyone he’s teaching to succeed

When snow storms took out his local power/internet in the US Jimmy decamped himself to a motel for 3 days so his students could still get the information he provides every day. No really – Jimmy’s sending out a 10-15 minute webinar every day going though the previous day’s trades and what would have been the best approach as well as providing a huge amount of insight to the next day.

I know his approach completely works but I just am not able to enter the market and trade like he does. My personality with regards to trading just doesn’t work like his. Sad but true.

In order to not get emotionally steamrollered every time I look at what’s happening in the market I need to do what so many (now) successful traders have done and break everything down to something I can understand. Only then will this connect my personality, my unique view of the world and my psychology with how I trade.

Not only can I not trade like Jimmy, I can’t trade like @Trader_Dante, @FTSEDay, @50pips, @FT71 or any of the other great/supportive people I’ve run into on this mad arsed pursuit. To quote Monty Python…

Yes, we are all individuals!

So exactly where does this leave me, you or anyone else out there looking to become a consistently profitable trader?

You need to pull the market apart for yourself and see how it works with your own psychology/approach/creativity in mind. Then you can put it back together for yourself and objectively test what works. I’ve now come to the conclusion that this is the long, boring, slow and un-exciting process of becoming a trader. Just like working out and eating right is the long, painful, slow process of getting into really good shape.

There are so many people selling shortcuts, there’s the considerable challenge of self delusion and on top of that the impossibility of trying to change your personality to match someone else’s trading style… On this basis I’m un-surprised that few actually get there.

At this point you might think that I really should give up.

So why am I really excited now about moving forwards?

Well, think about it for a moment. What if the thing that’s holding you back isn’t that you’re not a good trader? What if it’s got a lot to do with the fact that you don’t take good trades like person ‘x’ because (surprisingly) you don’t see what they see ’cause you’re not them? Logically this makes complete sense to me. What a relief it is to put that burden down!

Perceptually the world I see isn’t what you or anyone else sees. You can get 100 different interpretations from the same chart. What follows from this is that you need to trade your own personality in the market.

How do you get to a point where this can happen? Well, you’ll have to wait for part 2 in order to find out and you’ll discover why I went all the way to Florida to really move things forward…

The real reason ‘retail’ traders fail

I’ve been spending a lot of mental ‘time’ looking at the approaches of Jimmy Young, Chris Lori and especially @Trader_Dante off the twitter in the last couple of weeks. This also comes back to a throw away comment that Anton Kreil made at his ‘Traders of the Future II’ seminar. Added to that a spell watching Mark Douglas on youtube and then a couple of other excerpts by Brett N. Steenbarger so my brain is well and truly cooked with respect to trading.

Sometimes all this marinating can produce questions and maybe a little insight.

We all know the statistic about ‘retail’ traders have this appalling 80% – 90% rate of failure and it takes so much time to get good etc. Now of course psychology plays a huge part but prompted by this question I think I’ve gotten some way to understanding why this is true.

Retail traders are told that charts are at cause in the market or to put it another way…

Retail traders think what happens on the chart causes further stuff to happen.

This is partly correct but if something is partly correct it’s also not right either 😉

A chart is an effect – it’s the visual representation of a bunch of transactions and is only slightly causal in the grand scheme of things. A chart is an outcome. Believing that what you see represents the market and attempting to use this as a means of gaining an edge is likely to be a challenge because you’re not thinking about the totality.

Here’s a suggestion of the whole system

Now you can see that charts represent about 10% of the actual information available. Lets break the other elements down.

News = Information coming in that will have either a short term or long term (macro) effect

Market = The sentiment of the majority of the market at the time(frame) you’re in

Traders = Making bids/offers as the conditions change across multiple time-frames

So while there is a feedback loop between traders (who can move the market) and what happens on a chart (price) this image does not have the same weight for traders as the poor retail guy believe it does. For a retail trader the chart is the market. This is a key difference and a mental trap for every retail trader. It definitely pays to think outside of the chart.

For a trader with multi-millions at stake the chart is a result of their actions based on market opinion, macro economics, news and very importantly what other traders are doing. Here’s another attempt at a diagram as it relates to the actual situation…

Retail traders think the chart lives at the top on it’s own and has way more influence than it does…

What’s at cause here moving the squiggly line on the chart?

Yes, it’s how the Trader with a capital T is reacting to events, the market and to a certain extent where the price is in relation to other points. Now, what are the consequences of this for all us retail guys out here in the wilderness? What can we do to level the playing field? Well it helps to be asking the right questions for a start.

Retail newbie question – What’s the price/indicator/chart doing?

Retail improved question – What’s the market doing and how can I join in with low risk?

However here’s the question I believe you really need to ask…

How are Traders viewing the market and where can I enter for minimum risk to ride on the back of their actions

The market doesn’t move at all until a bunch of traders decide ‘we’re going to go this way’ because you and I as retail traders are simply riding on the chart which is the result of the actions of others.

A clear ‘short-cut’ for retail players is to learn to look at charts like Traders and then trade just like them or more accurately off their actions. Seems obvious when you say it like that but this may actually be the only way to achieve an edge over the long haul.

If you don’t want to spend your time thinking this through then I’m sure there’s another guy waiting to sell you the latest ‘can’t loose robot’ or ‘holy grail’ system. Putting myself in someone else’s shoes actually sounds a whole lot more straight-forward. I can’t beat them so figuring out where a Trader would enter and then doing the same means they’re doing the heavy lifting and I’m simply along for the ride 😉

Now a simple question remains…

How can you understand what Traders with a capital ‘T’ are doing? You need to look and think about what’s actually happening from the perspective of a bunch of real people that are already in the market, already in a position, trying to get in or out depending on whether the price is going up or down, rising or falling sharply. Thanks to @Trader_Dante for mainly providing the mental kicks to get this out of my brain and onto this ‘ere blog.

Traders are competing with others buying and selling actual stuff and because the retail guys is not doing this then it’s actually very challenging to look at a chart while keeping this in mind. Who is getting a kicking and who is dancing round the office? It’s that simple but until you realise you need to look at what is occurring on a chart with a completely different mind-set I’d say you may still be in the 80-90% bracket.

Ask yourself a different question when you look at a chart (price) pattern, see some news or try to get a ‘feel’ for market sentiment over the long term. Ask yourself this: –

What are the buyers/sellers and other actual Traders going to do when the price gets to ‘x’ point?

In summary and for the last time today… You are making a ‘bet’ on the price move of something that is being bought and sold so it’d probably really help to put yourselves in the shoes of those actually doing ‘buying’ and ‘selling’. How you see the price is not how the people moving the price see what’s going on so you need to look at everything from their perspective for a chance to win.

Right. I am now officially sick of thinking about trading. Possibly until tomorrow anyway 😉

I’d really be interested for people to comment on this post so please don’t be shy in coming back with your thoughts. Thanks for reading.

Eating the elephant logically

Question: How do you eat an elephant?
Answer: One bite at a time…

I’ve been taking apart the problem of learning to trade because it finally hit me that my trading practice has totally lacked any sort of structure. All the books etc. talk about finding your own trading ‘style’.

BUT if you just launch into trading it will take you a LONG time to find this because you’re hoping to get lucky and find what works for you by accident

I’m not explaining this very well… OK, let’s try again. As a newbie trader you look at a chart. If you’ve got half a clue you’re also attempting to figure out what the market is doing and why. For FX you might look at other pairs to see which currency might be stronger/weaker versus the dollar. You place a trade based on a setup (1) and it may/may not work… What did you learn? Possibly precisely nothing.

You look at another chart/timeframe and decide you’re seeing another setup (2) that could be a low risk idea. You enter the trade, it does/doesn’t work and go on to use setup (3) but hey you’re trading so this means you’re focussed very much on the result (cash) and not the process of learning anything… By now you’ve forgotten about your experience with setup number 1 or any lessons learned from it. Probably.

Another challenge I have with teaching myself (which is effectively what I’m doing) is that I cannot sit in front of a price chart all day. Why? I’m actually employed full time. So… what is the plan?

Eat the elephant a bite at a time and do 20(+) trades based purely on bounces off support and resistance.

No, it’s not going to be exciting or ‘svexeh’ (see, I’m down with the youff)  but it will mean I will learn all there is (you know what I mean) about one way of entering a trade. When that’s fully internalised I will pick another setup.

I KNOW someone out there will think ‘BORING’ and yes, we’re back at the stage where pre-conceived ideas of what trading is are getting killed. Good. All pre-conceived ideas of what trading is/traders are are wrong anyway… That’s another post title in the making right there.

So here we go… breakdown as follows for learning to trade Setup 1

1. Set an alert for price breaking up/down to a previous level (free SMS price alerts on IG!)
2. IF get an alert go look at the chart.
3. Check that the spike isn’t completely parabolic due to some freak news event i.e. Germany has bought Greece or France has decided to leave the euro 😉 There was at least one of those last week, remember?
4. Enter with a sensible stop (and take a screenshot)
5. THE MOST IMPORTANT BIT… wait at least 25 minutes (my own rule) and manage the trade out
6. Concentrate on picking up as much information from trades that go right as ones that don’t
7. Repeat 20 times – record them all then review how I traded these.
8. Make improvements – do another 20 trades JUST ON THIS etc. etc. etc.

Now, I’m not going to be taking a lot of trades based on this but I sure am going to learn a lot about how price moves in these areas AND how to manage myself in relation to these circumstances.

Some pretty pictures to illustrate what I mean.

I appreciate this probably isn’t a revelation to anyone who’s currently trading profitably and consistently. However it should mean that this high probability, low (?) risk setup becomes properly part of how I trade. Forty of these later without getting distracted and learning from each one, being able to compare them and what happened in/around these trades seems like a logical approach.

Didn’t do this today though due to NFP 😉

A retrospective of the last 9 months

It’s been 9 months since I started blogging about learning spread-betting and in the last few weeks my posting rate has dropped off dramatically. Apologies for that.

The reason for this un-characteristic lapse is I’ve actually had a LOT of material to get through so I can actually achieve some level of profitability and consistency rather than blogging about making a bunch of errors, right?

So I’ve been looking back to the beginning of the year to break down the journey so far into manageable chunks that contain some pointers to anyone on a similar path.

Stage 1.

“I haven’t a clue what I’m doing but am going to trade anyway”

At this early stage, you have to consider that you’re very vulnerable… What do I mean by  that?

Well unless you’re living under a rock you’ll come across all sorts of people and organisations who will do their utmost to teach you to trade or sell you the secret to making money from the markets.

Let me be really clear. If you’re going to sign up at any time for a two day course that promises to be able to teach you to trade and it costs £2,000 then you’re about to get screwed. Whatever it is that they promise to be able to do in the time available, given there’s 40 people in the room, is going to be mainly basic and not useful. Just don’t do it.

The most you want to be paying for anything like this (2 days) is £250 and I’d only suggest this is ok after you’ve spent a few months trading. Why? Because otherwise you’ll have no idea whether what you’re seeing is crap advice or not.

If you want to check someone out then see www.forexpeacearmy.com – type in their name and hit ‘search’.

Also – While I ignored the following advice I really suggest you don’t make the same mistake. Start with a demo account and learn the mechanics of trading. No, it’s not exciting but really – it’ll save you money. If you can’t keep your hand off your wallet trade at 10p per point or something really low.

Depending on your tolerance for pain and how much you value being right this stage could last you quite a long time. At this point I read a lot of books about trading. Most of them didn’t help. It’s a funny point that I actually really thought that they were helping at the time but this turned out to be not true and some contained a bunch of total crap. The ones about psychology were actually very useful but in a general sense more than related to trading. I’ll have to revisit the pile of these and see what they actually contain in a few months.

Stage 2. 

“This is really hard and I keep losing”

I’m just coming out of this stage (lol). Previously I considered giving up a couple of times but I’m also quite stubborn so I’m still here. There’s a reason for this that I’ll get to near the end…

Everyone starts trading and thinks it’s all about the charts. If they can get the right combination of things on their charts and somehow deal with the emotional aspects associated with making decisions it’ll be ok. There aren’t that many people out there telling them anything otherwise either.

This reliance on charts (and that everyone sells/wries books from that perspective) is one of the big issues in the UK. My personal belief is that the pursuit of the right combination of lines on a screen is basically people searching for a shortcut. Nine months later I can tell you there aren’t any…

In another blog post I mentioned an audience member arguing with Richard Farleigh about technical analysis as being the be all and end all of trading. I’ve also seen a similar debate happen with Anton KreIl (hedge fund guy) and the same comments in various books. Sadly I didn’t pay enough attention at the time because like everyone else I was looking for a shortcut.

Stage 3. 

“Mostly what I thought was correct is wrong, let’s start again”

It would be crazy to spend another 9-12 months failing at this and not making any money. A few weeks ago this was what I was faced with… so I decided to roll the dice one last time and go to another FX seminar/event. Two days in London for less than £250 and the guy had lots of positive feedback online.

Before I write about this I have to say that I’ve encountered some great people on the road so far. I’m happy to report they’ve managed to ‘crack it’ and are making money at trading – they’re also extremely generous with their time. Special mention goes out to TraderSteve  who is a total diamond and I’d recommend people who want a winning longer term system check him out.

If you want to get a proper education as far as how a hedge fund works and the basis on which they’re making trades then go check out Anton Kreil’s site www.instutrade.com which I’m sure is going to have a big impact on the educational landscape in the UK where trading is concerned.

This is a ‘higher level’ approach to trading based on ideas not lines on charts… be very afraid as this requires you to think and involves a ‘next level’ approach to fundamentals which I’ve not seen anywhere else.

So back to me here… In one of those ‘serendipitous’ moments I ran across a guy called Jimmy Young who has 20 years of FX trading experience in banks and has spent the last 10 trading his own account. www.eurusdtrader.com

All I can say is that if you actually want to use your brain, learn to trade profitably and make money then at the very earliest opportunity get hold of this guy’s course and use it.

Seriously.

When you find that becoming successful requires you to think then ask yourself this question… ‘Do I really want to be a trader?’ If the answer is ‘Yes’ then be glad you’ve found possibly one of the best people on the planet right now to teach you.

For anyone of a cynical nature: – I do not personally benefit from any recommendations made in this blog. My intention is to become as really good trader, not to create some artificial passive income generation blowhole. Got that? Ok? Good.

Stage 4. 

“Even though I’ve now got the right tools, I still suck as a trader!”

Why? Because I’ve not had enough practice to actually become half decent. Difference now though is that 9 months later I’ve finally found the right tools. I can’t really express how relieved I am about that last sentence.

Because it’ll make you smile here’s a short list of my current trading issues: –

  • Not entering the trade when I should (talking myself out of pushing the button)
  • Closing the trade too early (think I’ve figured this one out)
  • Lack of mental flexibility (thinking too much)
  • Not understanding the implications of news that comes out (thinking too little)
  • Not having enough time to trade (work)
  • etc…

None of the issues above are about the tools, the market or the strategy. All the issues are my responsibility to solve ’cause they involve the bit between my ears. I’m still an idiot but now I’m an idiot with a flamethrower and not a teaspoon 😉

See, even with the right help this is still a very challenging activity… which is why I love it 🙂

Thanks for reading