A little bit about me. I had no professional training in markets until I got my current job (with the aid of knowledge from FF, so I was a pure outsider before that). The only thing I had to get me started was a suggested reading list from Goldman Sachs University (its online somewhere) and ForexFactory. This is why I am writing this thread, to give back everything I took from this place and hopefully aid a couple of coming traders to become profitable. THERE WILL BE NO COMMERCIAL MATERIAL INVOLVED. MY SELFISH REASON FOR STARTING THIS THREAD WILL BE PAY BACK WHAT I OWN TO THIS PLACE, PERIOD.
This message goes to all struggling traders who are still in the stage of confusion.
What is the stage of confusion?? It is when you are still unclear of WHAT YOU ARE DOING, WHY YOU ARE DOING IT and maybe HOW YOU SHOULD DO IT. This stage of confusion gives a very bad habbit of switching methods from methods, trying to find that prefect entry with low risk and high reward, known as HOLY GRAIL. Yes, it does exist, but you will be disappointed at what it is. (Mainly because its not mystical, but very logical. Come back to that in a min)
In trading, there are only two elements. PROFIT, LOSSES. So what the deal? You just gotta make sure your profit is bigger then your losse, PERIOD. That really is all. So, how can you do that? There are a few ways in gerenal. (Not talking in strategy wise, but Numbers wise.)
1.) A lot of small profits and less small losses.
2.) Huge profits and higher frequency but smaller losses.
3.) Anything between the two.
Now, here's the part where most beginners are looking for. "HUGE PROFITS and very little or no small losses". I can say with 100% certainty that, yes, such a method does exist, but it has nothing, NOTHING to do with the magic MA CROSSES, SECRET PATTERNS, THE GRAIL INDICATOR etc... The method is called "foreign capital" and "Understanding of the market". I will say it again, "foreign capital" and "Understanding of the market". Do you get it yet? Will let you some time to think about that.
There is a tendency for traders to look for something which I called a "punch bag". The punch bag is used to shift their self guilt and pain from losses due to the lack of ability and understanding. The most popular punch bags? MA settings, Chart Patterns, Supports etc... Think about this. How many times have one said after a loss, "Oh, this Pattern is SH*T! Made me loss xx$!". THAT IS CALLED BLAMING. Whenever you made a loss, YOU ARE RESPONSIBLE FOR IT NO MATTER WHAT METHOD YOU USE OR WHICH PERSON YOU GOT UR SYSTEM FROM. This responsibility shifting behavior will continue as the person will find another possible target to blame on, i.e. a new system.
The truth is, the only thing you can blame on, is the lack of understanding of the market, which is within yourself and has nothing to do with the outside environment. What I mean by understanding? Understanding gets you away from GAMBLING. Knowing WHY you are doing it and not just do it blindly, or follow the signal till death of your account. If you cannot explain why your method works, YOU ARE GAMLBING. Even with a expectancy of 90%+ with 20yrs data backtested, you are still gambler, NOT A TRADER.
Let me give you an example:
You found a pattern that gives 80% win ratio from 20yrs back testing. You go ahead to trade it, makes you profits, no? But one day, everything changed. The signal begins to fail rapidly. You are taking 10 conservative losses. "HEY! I KNOW ITS EXPECTANCY IS 80%, I WILL JUST KEEP GOING AT IT, EVERYTHING WILL BE FINE!" You will be surprised how many so called traders blow their account by doing just that.
The main problem with that kind of trading? (I know I will get a lot of ppl going against me after I said this especially on FF.) EXPECTANCY GAMBLING without understanding the market. I can tell you, the market changes MUCH FASTER then most people think, especially with the introduction of electronic trading. You got to know what's behind the moves. Here, take some candy.
1.) Dealer money - Intra day kings
2.) Funds money - The elephants, why? Once they move, its hard to stop. TRENDS anyone??
2.) Hedgers or users - The boring business guys
Understanding their roles in the market. How they conduct their business. What changes will gives them incentives to act?
Do you still worship your lines? Does your line have meaning to it? More then a dealer's incentive and action? The line cross signal beating the dealers, in their own grounds? I dont think so...
Back to the foreign capital thing. I was talking about low risk, high return. How can you keep ur losses small??
1.) Small stop loss - Ask yourself are you god? Can you seriously PREDICT to the pip or 10pip range that price will bounce off and shoots right off the charts on ur entry? Maybe for a short time when you are exploring some market edges. But this requires a LOT of KNOWLEDGE about the market. Those who are doing it will know what I am talking about.
2.) Starting out small - A lot of room to breath, much higher sucess rate. But hey, smaller size means smaller profits!
Most focus on number 1. Surely it is much more comfortable to trade like that. It is the traders dream to become millionaire by a few trades like that. Come on, WAKE UP! You will not be able to predict flow to that precision unless you are doing something naughty called front running. You cannot predict flow, unless you are a dealer who SEES the ORDER coming in onto your book!!! (Maybe if you are a super hacker). You cannot know when a fund manager will make the call to purchase or sell a certain product. You will get better success at trying to predict when they will go to the toilet during the day.
So what now? Ever heard of something called scaling in??? Prymid??? Go do some research. You wanna know strategies of a top trader in Goldman Sachs? I just told you btw. Yes, i say that again "Ever heard of something called scaling in??? Prymid??".
The point I am trying to make? This guy who is really good with EA's from FF said it best, (I believe his name is RR, you will find him everywhere with EA's) flip a coin, heads for long/short, tails for short/long, trade till you are profitable. Entry! Does it matter? Yes it does, but it is not the main part of a trade, its only the beginning!
Take this as an example. Take any price from the market. ANY that price is currently at now. What will price do in the future? Do you know WHERE IT IS GOING TO GO?? Again, are you GOD? NO, you are not. But you KNOW, with 100% certainty that in the future, price is either ABOVE or BELOW the current price. DUHHH! But this is all you need to know! Why make it difficult, with all those lines flying around ur charts and 100+ readings below? You know, its either ABOVE or BELOW current price?
Brb, I need a rest, feel like a nice cold drink in these hot days. *Many mis-spelled words, but cannot be bothered to go back and correct.
This message goes to all struggling traders who are still in the stage of confusion.
What is the stage of confusion?? It is when you are still unclear of WHAT YOU ARE DOING, WHY YOU ARE DOING IT and maybe HOW YOU SHOULD DO IT. This stage of confusion gives a very bad habbit of switching methods from methods, trying to find that prefect entry with low risk and high reward, known as HOLY GRAIL. Yes, it does exist, but you will be disappointed at what it is. (Mainly because its not mystical, but very logical. Come back to that in a min)
In trading, there are only two elements. PROFIT, LOSSES. So what the deal? You just gotta make sure your profit is bigger then your losse, PERIOD. That really is all. So, how can you do that? There are a few ways in gerenal. (Not talking in strategy wise, but Numbers wise.)
1.) A lot of small profits and less small losses.
2.) Huge profits and higher frequency but smaller losses.
3.) Anything between the two.
Now, here's the part where most beginners are looking for. "HUGE PROFITS and very little or no small losses". I can say with 100% certainty that, yes, such a method does exist, but it has nothing, NOTHING to do with the magic MA CROSSES, SECRET PATTERNS, THE GRAIL INDICATOR etc... The method is called "foreign capital" and "Understanding of the market". I will say it again, "foreign capital" and "Understanding of the market". Do you get it yet? Will let you some time to think about that.
There is a tendency for traders to look for something which I called a "punch bag". The punch bag is used to shift their self guilt and pain from losses due to the lack of ability and understanding. The most popular punch bags? MA settings, Chart Patterns, Supports etc... Think about this. How many times have one said after a loss, "Oh, this Pattern is SH*T! Made me loss xx$!". THAT IS CALLED BLAMING. Whenever you made a loss, YOU ARE RESPONSIBLE FOR IT NO MATTER WHAT METHOD YOU USE OR WHICH PERSON YOU GOT UR SYSTEM FROM. This responsibility shifting behavior will continue as the person will find another possible target to blame on, i.e. a new system.
The truth is, the only thing you can blame on, is the lack of understanding of the market, which is within yourself and has nothing to do with the outside environment. What I mean by understanding? Understanding gets you away from GAMBLING. Knowing WHY you are doing it and not just do it blindly, or follow the signal till death of your account. If you cannot explain why your method works, YOU ARE GAMLBING. Even with a expectancy of 90%+ with 20yrs data backtested, you are still gambler, NOT A TRADER.
Let me give you an example:
You found a pattern that gives 80% win ratio from 20yrs back testing. You go ahead to trade it, makes you profits, no? But one day, everything changed. The signal begins to fail rapidly. You are taking 10 conservative losses. "HEY! I KNOW ITS EXPECTANCY IS 80%, I WILL JUST KEEP GOING AT IT, EVERYTHING WILL BE FINE!" You will be surprised how many so called traders blow their account by doing just that.
The main problem with that kind of trading? (I know I will get a lot of ppl going against me after I said this especially on FF.) EXPECTANCY GAMBLING without understanding the market. I can tell you, the market changes MUCH FASTER then most people think, especially with the introduction of electronic trading. You got to know what's behind the moves. Here, take some candy.
1.) Dealer money - Intra day kings
2.) Funds money - The elephants, why? Once they move, its hard to stop. TRENDS anyone??
2.) Hedgers or users - The boring business guys
Understanding their roles in the market. How they conduct their business. What changes will gives them incentives to act?
Do you still worship your lines? Does your line have meaning to it? More then a dealer's incentive and action? The line cross signal beating the dealers, in their own grounds? I dont think so...
Back to the foreign capital thing. I was talking about low risk, high return. How can you keep ur losses small??
1.) Small stop loss - Ask yourself are you god? Can you seriously PREDICT to the pip or 10pip range that price will bounce off and shoots right off the charts on ur entry? Maybe for a short time when you are exploring some market edges. But this requires a LOT of KNOWLEDGE about the market. Those who are doing it will know what I am talking about.
2.) Starting out small - A lot of room to breath, much higher sucess rate. But hey, smaller size means smaller profits!
Most focus on number 1. Surely it is much more comfortable to trade like that. It is the traders dream to become millionaire by a few trades like that. Come on, WAKE UP! You will not be able to predict flow to that precision unless you are doing something naughty called front running. You cannot predict flow, unless you are a dealer who SEES the ORDER coming in onto your book!!! (Maybe if you are a super hacker). You cannot know when a fund manager will make the call to purchase or sell a certain product. You will get better success at trying to predict when they will go to the toilet during the day.
So what now? Ever heard of something called scaling in??? Prymid??? Go do some research. You wanna know strategies of a top trader in Goldman Sachs? I just told you btw. Yes, i say that again "Ever heard of something called scaling in??? Prymid??".
The point I am trying to make? This guy who is really good with EA's from FF said it best, (I believe his name is RR, you will find him everywhere with EA's) flip a coin, heads for long/short, tails for short/long, trade till you are profitable. Entry! Does it matter? Yes it does, but it is not the main part of a trade, its only the beginning!
Take this as an example. Take any price from the market. ANY that price is currently at now. What will price do in the future? Do you know WHERE IT IS GOING TO GO?? Again, are you GOD? NO, you are not. But you KNOW, with 100% certainty that in the future, price is either ABOVE or BELOW the current price. DUHHH! But this is all you need to know! Why make it difficult, with all those lines flying around ur charts and 100+ readings below? You know, its either ABOVE or BELOW current price?
Brb, I need a rest, feel like a nice cold drink in these hot days. *Many mis-spelled words, but cannot be bothered to go back and correct.
Life is a school for the soul