My philosophy of Trading

[Jemook]

Yup I'm in Sydney so in the afternoon my Wednesday the Tuesday morning European session opens. I was never good at explaining time differences..

[nanningbob]

I feel like start of Euro session on Wednesday is where the big move of the week happens. Don't forget I'm talking about Australian Wednesday. So it would be Tuesday in Europe when the Euro markets open.

It's just an observation and a 'gut feel' so take it with a grain of salt

I was going to get around to that but Wed. Thurs. and Fri. are the most volatile days and Mon., Tues., are the least volatile. I like playing the opening gaps when the market opens at the beginning of the week. and then enlarge my TP positions later in the week. I will often go for 15-30 pips early in the week and 40-70 or more later in the week. Also if you want multiple positions you do those later in the week and single positions early in the week. I will get into more of this when I start talking about individual currencies.

[nanningbob]

For example many people will use volatility indicators in their trading. I have found them useless on a 4H chart because by the time they show volatility the move is pretty much over on a high end chart. They can be useful on lower TF charts. If price shows a possible entrance and the volatility changes quickly on a 5M, 15M chart you then know a move is in the works and you may find volatility useful. Personally I dont use Volatility indicators because I know volatility is almost always in the first 2-4 hours of a trading session. So that is when the banks open and businesses exchange currencies for the day.

[matt_32]

Hey Bob

Here's a tip I'd like to share:

One thing I've noticed in my H1/H4 trend trading strategies targeting moves of ~45 pips is that the moves for the week usually happen on Wednesday and Thursday. Those are always my most profitable days. I've stopped looking for moves on Mondays, Tuesdays and Fridays and my win ratio is much higher.

Cheers,
Jeremy

It seems that Jeremy has a point.....

http://www.babypips.com/school/preschoo ... trade.html



Matt

[James Roscoe]

Some people think, if I just found the right system I could be a successful trader. Well, the problem with that thinking is a system is only as good as the person who can read the market. In other words, if you cant read or understand what the markets are doing then you wont be able to fit your system into the market. How can I prove that? Just look at all the EA systems out on the market. They work great under certain circumstances but when the market is not doing what the EA fits, its crapola time.

Markets have 4 major types:
1. Trending market: where price heads in one basic direction for a period of time. The trend is your friend, buy and hold, let your winners run, add to you winnings with multiple entrances: are some of the favorite phrases. Works great when the market is trending. EAs designed and written for trending markets work great when the market is trending.

2. Ranging market: this is where price bounces up and down between two points of support and resistance. Things are stable, currencies and economies are happy with the status quo, price becomes very predictable until ......................... bang. Ranging indicators do very well in these markets, bollinger bands, TMA, Vegas systems, Martingales, etc. EAs written to trade ranging markets are the rage. Then the market breaks out into a big trend and there go all your winnings. Trend trading heres a trend, reverse, SL. No, there it is, reverse, SL. On and on it goes.

3. Off hours, dead days, in the last 24 hours the usd/cad moved 3 pips from yesterday's price, nzd/usd 7 pips, eur/jpy 0 (yup same price as 24 hours ago) eur/usd -22. There are days where the market just aint going anywhere. gbp/jpy +97 I was in that one and it was my entire day. It is why I trade 24 pairs so I can catch the exception on a dead day. EAs kill themselves on days like this especially the ones with tight SL. Enter SL, enter SL, enter SL or enter ZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZ.

4. Crazy days/big news days. Price moves up 50, goes down 100, up 75, down 200, up 75, down 50, up 150. etc. etc. etc. You just have days like that. EAs get blasted when these happen. I have seen days where price went up 300 down 500 and back up 200 and be at 0 again. Meanwhile every SL was hit and guys are cursing up a storm. You can write EAs until you are blue in the face but I have never seen one that can cover these 4 events when they happen.

The only EA I think that is truly feasible is a long term trend EA that follows weekly/monthly trends. That is why my systems follow weekly/monthly reads and trends. Price action is long term trend-able, short term--anything goes. Until this basic concept is burned into your psyche you will have a very up and down frustrating trading career.

Does that mean you cant be a successful short term trader, no, it doesnt. SlowKey is showing us how to scalp on lower TF using higher TF trends. I think he will be long term successful, I think he has got it.

My point is this. No system really fits all 4 market scenarios. However, learning to recognize what is happening will save you a lot of headaches. Beginner traders make one big mistake. They find a system, it works for a while, the market changes and they dont understand WHY?? ITS NOT THE SYSTEM. No system works in every market. When the market changes you have to change.

(This is just a diversion guys so dont get too excited) OR and this is where some people really get mad at me but this is the one time I find hedging helpful. I call it a time out until the market returns to what you want it to do. Instead of taking a bunch of losses you just freeze the action, wait for the market to change back to what you like to trade and move on. (end of my diversion comment, this is not a defense of hedge trading just the one time I can see it is useful).

So what is my point. Learn a system. Learn it inside out. Learn it so you can do it in your sleep. Learn it so well you recognize when market conditions dont fit your system and you either change or sit it out until it happens again. Learn a system. Learn it until you know nothing else. I dont care if its 10.4 (some are still using it) 10.7 (designed to fit other systems) Capt. Jack's Naked trading (great system by the way) Gann ribbon system, MACD systems, Bollinger Band Systems, James systems, WHATEVER, LEARN it, take the time to know the strengths and weaknesses of a system and then trade it. My 10.0 systems have been one quest, to define the market, to define when it is changing, and then to trade accordingly. That has always been my goal and this has been my results. To those that have learned it and its nuances are reporting that they are making money. I dont care if you like 10.7, 10.6 Edsel, 10.2, there are guys still trading 10.0. Once you learn a system and can adjust it to the market. You are ready to become a successful trader. END of SERMON.

Preach on! Tell it, brother bob, speak the gospel!

[Pedigree]

Preach on! Tell it, brother bob, speak the gospel!

Ha ha!!! And please don't leave out the candles, incense and holy water!!!

[nanningbob]

Placing of a SL is a highly debated matter. Here are some of my thoughts and they usually cause a controversy.

Depends what you mean by using a SL. Mine is the long term trend so I dont place one on my chart. If the long term trend changes then I close out and go the other way. If you mean the fraction of a penny SL commonly used and taught then there is no such thing as placing your SL in the right position. Forex is NOT about traders. It is about business and money exchange between govt. businesses and individuals. That is why trillions flow every day. If you think you know when Toyota, GM, Volkswagen are cashing their checks for business based on some chart indicator or formation, you are high. Exxon, Mobil, British Petroleum, due tons of transactions every day. USA sends aid over seas to other countries and they cash their checks, on and on it goes. France, China, USA, Russia make military sales. You dont know when these transactions are going to clear nor does anyone else. Your SL placement to a fraction of penny with these things going on IS the major reason people fail in this business. High leverage, large lot size to account size, the one in one out philosophy of trading, kills your chances of being a long term consistent winner. It doesnt mean you can be successful doing this it means you make it difficult on yourself.

People throw around stats but brokers are suppose to file quarterly their percentages of winners to losers. Their stats show 25-35% that people made money. Most of them the wins are not that big and most of the rest are not winners again from quarter to quarter. Very few traders can consistently win from year to year. The ones who do, the ones who run the big accounts. They will trade low leverage, often use multiple entrances, use smal lots to account size, and generally trade long term or follow a trend direction over weeks and months.

If you dont believe me study the COT reports. These are the really big boys. You will notice they are usually between 45-55% range in their buys and sells. You mean to tell me 45% of them are on the wrong side of a trade with a 30 pip SL. Your a fool to believe such a thing. OR do they use a strategy that gives them room for their trades to run. I choose the 2nd. Compare how you trade with how they trade. It is an eye opener and seldom talked about or discussed here or at any other forum. Good luck with your study.

[nanningbob]

Why you can be successful with what you are doing using a wide range SL, trend change SL, etc.
1. The market ranges over 70% of the time. Just this one stat guarantees your trade to be profitable or BE over 70% of the time.
2. Of the trades that trend, most trends are short lived and only run for a short period of time. The may run for a couple of weeks before a retracement that gets you out of trouble.
3. Of the ones that run and run, most of those will be positive swap trades like the aud, nzd, and sometimes the chf. You dont want to be on the wrong end of one of their runs. I very seldom trade against the aud, nzd swap and have a quick trigger in closing the trade when I do.
4. What is left is a very small amount of trades that can just run on you and cause long term trouble or damage to your account. Most of those the news lets you know a big story has happened and you can get out anyway knowing this. OR you can see the trend change on a high end chart.

So, if you know this stuff and can close out a bad set of trades when you recognize you just made a bad trade in the wrong direction. Then you can confidently trade like this without a SL or a wide SL. Sure you take a bad set once in a while but I found that the 70%+ win ratio more than covers my really bad mistakes. So if you can discipline yourself to close out a trend change direction (that really should be your SL area) then you arent worried about a trade or a set of trades if your entrance is not picture perfect.

[James Roscoe]

Placing of a SL is a highly debated matter. Here are some of my thoughts and they usually cause a controversy.

Depends what you mean by using a SL. Mine is the long term trend so I dont place one on my chart. If the long term trend changes then I close out and go the other way. If you mean the fraction of a penny SL commonly used and taught then there is no such thing as placing your SL in the right position. Forex is NOT about traders. It is about business and money exchange between govt. businesses and individuals. That is why trillions flow every day. If you think you know when Toyota, GM, Volkswagen are cashing their checks for business based on some chart indicator or formation, you are high. Exxon, Mobil, British Petroleum, due tons of transactions every day. USA sends aid over seas to other countries and they cash their checks, on and on it goes. France, China, USA, Russia make military sales. You dont know when these transactions are going to clear nor does anyone else. Your SL placement to a fraction of penny with these things going on IS the major reason people fail in this business. High leverage, large lot size to account size, the one in one out philosophy of trading, kills your chances of being a long term consistent winner. It doesnt mean you can be successful doing this it means you make it difficult on yourself.

People throw around stats but brokers are suppose to file quarterly their percentages of winners to losers. Their stats show 25-35% that people made money. Most of them the wins are not that big and most of the rest are not winners again from quarter to quarter. Very few traders can consistently win from year to year. The ones who do, the ones who run the big accounts. They will trade low leverage, often use multiple entrances, use smal lots to account size, and generally trade long term or follow a trend direction over weeks and months.

If you dont believe me study the COT reports. These are the really big boys. You will notice they are usually between 45-55% range in their buys and sells. You mean to tell me 45% of them are on the wrong side of a trade with a 30 pip SL. Your a fool to believe such a thing. OR do they use a strategy that gives them room for their trades to run. I choose the 2nd. Compare how you trade with how they trade. It is an eye opener and seldom talked about or discussed here or at any other forum. Good luck with your study.

Hi bob, here is thread going on at FF where a couple of former institutional guys are doing a tell all. Your philosophy about stops is dead on, and I now believe that a large part of trading education is in collusion with the brokers.

http://www.forexfactory.com/showthread. ... ost7493497

[zimezoom]

Bob, I totally agree with your thoughts on SL.

But how to realize the change of the long-term trend? I know you say that price crossing the MA240 is trend changing, but it is not so rare event than I expected, causing my SL hit many times. In these cases the trades were opened according to EDSEL rules, but while the hit-rate is quite good, the few big losers (SLed) overweight the small winners. And many times the trend continued in the direction of the original trade, after stopped at MA240...

Do you have a good strategy to recognize trend changes early?