mp6140

originally posted by "the rumpled one" (aka avery) over at stockfetcher, its great information for ALL to read, use and then re-read !

ORIGINAL WRITER is Jimmy Young.

1) Knowledge Deficiency – Most new FOREX traders don't take the time
to learn what drives currency rates (primarily fundamentals). When
news or a statement is due out they must close out their positions
and sit out the best trading opportunities. They are taught to only
trade after the market calms down. So essentially they miss the whole
move and then trade the random noise that follows a fundamental price
move. Just think for a moment about technically trading the aftermath
of a price move; there is no potential.

2) Overtrading - Trading often with tight stops and tiny profit
targets will only make the broker rich. The desire to "just" make a
few hundred dollars a day by locking in tiny profits whenever
possible is a losing strategy.

3) Over leveraged - Leverage is a two way street. The brokers want
you to use high leverage because that means more spread income
because your position size determines the amount of spread income;
the bigger the position the more spread income the broker earns.

4) Relying on Others – Real traders play a lone hand; they make their
own decisions and don't rely on others to make their trading
decisions for them; there is no halfway; either trade for yourself or
have someone else trade for you.

5) Stop Losses – Putting tight stop losses with retail brokers is a
recipe for disaster. When you put on a trade commit to a reasonable
stop loss limit that allows your trade a fair chance to develop.

6) Demo Accounts – Broker demo accounts are a shill game of sorts;
they're not as time sensitive as real accounts and therefore give the
impression that time sensitive trading systems, such as short-term
moving average crossovers can be consistently profitably traded; once
you start dealing with real money reality is quick to set in.

7) Trading During Off Hours – Bank FX traders, option traders, and
hedge funds have a huge advantage during off hours; they can push the
currencies around when no volume is going through and the end game is
new traders get fleeced trying to trade signals. There is only one
signal during off hours – stay out.

8) Trading a Currency, Not a Pair – Being right about a currency is
half a trade; success or failure depends upon being right about the
second currency that makes up the pair.

9) No Trading Plan - Make money is not a trading plan. A trading plan
is a blueprint for trading success; it spells out what you see your
edge as being; if you don't have an edge, you don't have a plan, and
likely you'll wind up a statistic (part of the 95% of new traders
that lose and quit).

10) Trading Against Prevailing Trend – There is a huge difference
between buying cheaply on the way down and buying cheaply. What was a
low price quickly becomes a high price when you're trading against
the trend.

11) Exiting Trades Poorly – If you put on a trade and it's not
working make sure you exit properly; don't compound the damage. If
you're in a winning trade don't talk yourself out of the position
because you're bored or want to relieve stress; stress is a natural
part of trading; get use to it.

12) Trading Too Short-term – If you're profit target is less than 20
points don't do the trade; the spread you pay to enter the trade
makes the odds way against you when you go for these tiny profits.

13) Picking Tops and Bottoms - Looking for bargains works well at the
supermarket but not trading foreign exchange; try to trade in the
direction the price is going and you're results will improve.

14) Being Too Smart – The most successful traders I know are high
school graduates. They keep it simple and don't look beyond the
obvious; their results are excellent.

15) Not Trading Around News Time – Most of the big moves occur around
news time. The volume is high and the moves are real; there is no
better time to trade fundamentally or technically than when news is
released; this is when the real money adjusts their positions and as
a result the prices changes reflect serious currency flow (compared
to quiet times when Bank traders rule the market with their customer
order flow.

16) Ignore Technical Condition – Determining whether the market is
over-extended long or over-extended short is a key determinant of
near time price action. Spike moves often occur when the market is
all one way.

17) Emotional Trading – When you don't pre-plan you're trades
essentially it's a thought and not an idea; thoughts are emotions and
a very poor basis for doing trades. Do people generally say
intelligent things when they are upset and emotional; I don't think
so.

18) Lack of Confidence – Confidence only comes from successful
trading. If you lose money early in your trading career it's very
difficult to gain true confidence; the trick is don't go off half-
cocked; learn the business before you trade.

19) Lack of Courage to Take a Loss – There is nothing macho or gutsy
about riding a loss, just stupidity and cowardice. It takes guts to
accept your loss and wait for tomorrow to try again. Getting married
to a bad position ruins lots of traders. The thing to remember is the
market does crazy things often so don't get married to any one trade;
it's just a trade. One good trade will not make you a trading
success; rather it's monthly and annual performance that defines a
good trader.

20) Not Focusing on the Trade at Hand – There is no room for
fantasizing in successful trading. Counting up and mentally spending
profits you haven't made yet is mental masturbation and does you no
good. Same with worrying about a loss that hasn't happened yet. Focus
on your position and have a reasonable stop loss in place at the time
you do the trade. Then be like an astronaut – sit back and enjoy the
ride; no sense worrying because you have no real control; the market
will do what it wants to do.

21) Interpreting FOREX News Incorrectly – Fact is the press only has
a very superficial understanding of the news they are reporting and
tend to focus on one element and miss the point. Learn to read the
source documents and understand it for real.

22) Lucky or Good – Your account balance changes don't tell you the
whole story about your trading; fact is if your taking a lot of risk
and making money you will eventually crash and burn. Look at the
individual trade details; focus on your big loses and losing streaks.
Ask yourself this; if I had a couple of consecutive losing streaks or
a couple of consecutive big loses, how would my account balance look.
Generally, traders making money without big daily loses have the best
chance of sustaining positive performance. The others are accidents
waiting to happen.

23) Too Many Charity Trades – When you make money on a well thought
out trade don't give back half on a whim; invest your profits from
good trades on the next good trade.

24) Courage Under Fire – When a policeman breaks down the door to a
drug dealers apartment he is scared but he does it anyway. When a
fireman climbs onto the roof of a burning building he is scared but
does it anyway; and gets the job done. Same with trading; it's ok to
be scared but you have to pull the trigger; no trigger – no trades –
no profits – no trader.

25) Quality Trading Time – I suggest 3 hours a day of quality,
focused trading time; that's about all your brain allows. When your
trading being 100% focused; half way is bull****' it doesn't work.
Don't even think that time spent in front of the computer watching
the rates has any correlation to profitability; it doesn't. Spend
less time but when your trading be 100% focused on trading.

26) Rationalizing – Killer. Absolute Killer. Put your trade on and
let it run. If it hits your reasonable pre-determined stop your out.
Think of yourself as a prizefighter; you just got knocked out. Moving
your stop is like getting up after being crushed with a knockout
blow; it's pointless; things will only get worse. Don't ignore the
obvious; your wrong – get out. Come back the next day and try again.
A small loss will not hurt you; a catastrophic loss will.

27) Mixing Apples and Oranges – Have you ever done this; you see the
EURUSD trading higher so you buy GBPUSD because it "hasn't moved
yet". That's a mistake. Most of the time the reason the GBPUSD hasn't
moved yet is because its already overbought or some 4:30am UK news
was bearish. Don't mix apples and oranges; if EURUSD looks bid buy
EURUSD.

28) Avoiding the Hard Trades – Bank FX traders have an axiom; the
harder the trade is to do the better the trade. This I learned from
experience; when I needed to buy EURUSD and it was hard to get them
that's when it's necessary to pay up and get the business done. When
it's easy to get them then sit back and wait for better levels. So if
your trying to get into a trade or more importantly get out of a
trade don't putz around for a few points; get your business done.

29) Too Much Detail – If your trading more than 2 indicators then you
need to clean house. Having many indicators stifles trading and finds
reasons not to trade. A setup and a trigger is all you need.

30) Giving Up Too Easy – Your first trade of the day may not be your
best but certainly it's no reason to quit. I have a preset daily
trading limit and I use it; you can't make money by making excuses;
getting trades wrong is natural and should be expected.

31) Jumping the Gun – Don't be penny wise and dollar foolish; wait
for your trade signal to be clear; put on your trade and give it a
decent size stop loss so that you don't get knocked out by random
noise. Do trades don't' buy lottery tickets (extremely tight stops).

32) Afraid to Take a Loss - trading is not personal; it's business.
Don't think that a poor trade is a reflection on you. It could be
your just ahead of your time or a commercial order hits the market
and temporarily creates a small unexpected move. Again, place your
stop beforehand and NEVER increase your pre-determined risk; if it's
going bad it will probably get worse; I think that's Einstein "in
motion stays in motion…"

33) Over-Relying on Risk Reward – There is zero advantage in risk
reward; if you put a 20 point stop and a 60 point profit your chances
are probably 3-1 that you will lose; actually with the spread its
more like 4 to 1 (from entry point if it goes down 17 points you lose
or up 63 you win; 17/63 is close to 4-1).

34) Trading for Wrong Reasons – Because the EURUSD is going up is not
in itself a reason to buy. Buying EURUSD because its not moving so
little risk is even worse; you're paying the toll (spread) without
even a hint that you will get a directional move. If your bored don't
trade; the reason your bored is there is no trade to do in the first
place.

35) Rumors – Rumors are rumors almost 100% of the time; think about
where in the motion you heard the rumor; if EURUSD is up 50 points in
last 15 minutes and the rumor is dollar negative, well then you
missed it. Whenever you trades determine where in the motion you are
entering.

36) Trading Short-term Moving Average Crossovers – This is the money
sucker of the century. When the shorter term moving average cross the
longer term moving average it only means that the average price in
the short run is equal to the average price in the longer run. For
the life of me I cannot understand why this is bullish or bearish.
Easy to set up on software, complete with lights, bells and whistles,
and good for the seller getting thousands for the software but in
terms of creating profit it's a zero.

37) Stochastic – Another money sucker. Personally I think this
indicator is used backwards; when it first signals an overdone
condition that's when I think the big spike in the "overdone"
currency pair occurs. To be overbought means strong and oversold
means weak. Try buying on the first sign of overbought and selling on
the first sign of oversold; you'll be with the trend and likely have
identified a move with plenty of juice left. So if %k and %d are both
crossing 80; buy! (Same on sell side; sell at 20)

38) Wrong Broker – A lot of FOREX brokers are horrible; get a good
one. Read forums and chats in several different places to get an
unbiased opinion.

39) Simulated Results – Watch out for "black box" systems; these are
trading systems that don't divulge how the trade signals are
generated. Great majority of them are absolute garbage. They show you
a track record of extraordinary results but think about it; if you
could build a trading system with half a dozen filters using the
benefit of hindsight, couldn't you too come up with a great system.
Of course going forward is an entirely different story. High-speed
number crunching capabilities allows for building great hindsight
trading systems; BEWARE.

40) Inconsistency – Every business (FOREX trading included) requires
a business plan (trading plan). Unless you have taken the time to
write down a set of rules that you can and will follow, it's likely
your trading will remain unfocused and directionless. Make a plan,
have rules, follow them set goals that are realistic and you will
achieve them.

41) Master of None – Focus on one currency for technical trading;
each currency has a unique way of trading and unless you get intimate
with it you will never truly understand its underlying
idiosyncrasies. Don't spread yourself too thin – focus – master one
currency at a time.

42) Thinking Long Term – Don't do it. Stay in the moment. Especially
if you're a day trader. It doesn't matter what happens next week or
next month, if your trading with 30 to 50 point stops restrict your
thought process to what's happening right now. That is not to stay
the long-term trend is not important; it is to say the long-term
trend will not always help you when your trading a significantly
shorter time frame.

43) Overconfidence – Trading is not easy; statistics show 95% failure
rate. If your doing well don't take your success for granted; always
be on the lookout for ways to improve what you're doing.

44) Getting Pumped Up – The trick is to maintain an even keel; when
you are in a trade you want to think exactly as you would if you
didn't have a trade on. To do this requires a relaxed disposition;
this is not a football game; don't get psyched up; relax and try to
enjoy it.

45) Staying in the Game – I don't recommend demo trading because
traders learn bad habits when trading with play money. I also don't
think "letting it all hang out" right away is wise either. Start off
doing trades and taking risk that is relatively small but still makes
a difference to you if you win or lose; about a quarter to a third of
what you expect to reach as your trading matures is reasonable.

__________________
Within the great hall at Elfinore stands a wondrous coffer, precisely four cubits square and securely latched against the outside world. Inside that repository, shut away from impertinent eyes, abides many an intriquing trading secret garnered from around the world and over the ages !

As a child, i used to watch from the darkness as the secrets were debated and annotated by the elders. No one there held a single thought of my presence -- BUT I KNOW WHERE THEY HID THE KEY !!

Homestudy

MP,

Just to make sure I'm doing this correctly could you please post a chart showing an example of this please. Perhaps on the EURUSD showing the two LRC's.

Thank you

__________________
At all times, I protect my principal!

mp6140

===========================================

i would love to, but posting charts is beyond my scope of abilities with a computer and this site -- it just doesnt seem to work for me.

BUT, i shall try yet again -- who knows, some great and happy accident might just happen !

mp

Homestudy

Something like this?

__________________
At all times, I protect my principal!

mp6140

golly you peeps use such big charts

my charts are long and thin, showing me movement (imo) much better, BUT i cannot upload the chart because sho only allows 640X640 and mine are much longer than wide

when i try to send part of a chart, the file is 100 X too big for what they will accept, so once again we are chartless.

BUT, if you draw your first channel from the TOP of the 8/21 candle (highest candle on the chart prior to the present candle), your second channel from the BOTTOM of the 10/16 candle (lowest candle on the chart) AND, just for kicks, draw another channel from the TOP of the 11/10 candle (just for way of example) you will see that ALL THREE MEET TOMORROW !

there is a high candle two days prior to fridays candle, but that would be a silly place to plot the lrc from, resulting in something going almost straight up !

now you can answer me a question --- what generated your trading range line, your support and resistance lines ?

OH, im thinking of a number from 1 to 2 ---- think my guess is 1.3211 and a pullback to 1.3156.

try that !

mp

permanentjaun

mp,

I've come to the conclusion that success in forex really only relies on good money management. Finding a system that is only 30-40% correct can still be successful so long as those 30-40% wins are big. Right now I'm trying to find an efficient middle ground such as 2-1 wins. I think it rings true though. Most systems fail when traders dont have the balls to follow them even in losses. They exit before the system would and then it reverses which would have led to a profitable trade. Just find something that is right a little more often then not, get a good TP and SL and let it ride. Compound those profits!

mp6140

==================================================

MONEY MANAGEMENT is a strong criteria in ANY trading -- not enough can be said for it !

SYSTEM ?? Yeah, people usually screw up, not the system. As ive said before, i dont really have a "system" per se, but i run with what my technicals tell me (which, for lack of a better word, is probably as good a system as any !)

What i love about forex is (besides outrageous news, which will change ANYTHING, stock, dollars or a good relationship !) that it tends to follow its nose and the indicators follow it (although there are some "leading indicators i place a tremendous trust in) making forex a real "techie geek" trading experience, at least for me. In other words, a currency in motion tends to remain in motion --- so if it is going up, find the resistance and ride to at least that point -- the indicators will tell you if its gonna break thru, as long AS YOU KNOW WHERE TO LOOK for that point !

i am thinking about making a black box system and selling it for a few thou a pop --- would have some blinking lights, and things that go "bump" in the night and should make anyone a small fortune -- good idea, huh ?

enjoy

mp


Now news changes everything, and the big let down in the dollar was sort of a no brainer --- dont go long on anything that had USD at the front ! But this will soon end as the news is old and theres an awful lot of currency waiting to reverse, be it to the up or downside !

but it isnt a system telling me that, just some common sense and some leading indicators on my quotetracker !

mp6140

===============================================

one hears these words, "money management" constantly and amongst us who have been caught, its two of the most important words ever stated, but to the newbs its sort of like "buy low and sell high" ---- GREAT advice, but how do you do it ?

lets continue this topic, because its of UTMOST importance when one is holding for a position or swing play in forex --- more so than equities because of the tremendous leverage (margin) you can be in !

for the people i know, who tend to be a bit more riskier than most, a general rule is to NEVER hold more than half your actual cash in the account and works well, BUT these people are also constantly monitoring their accounts, flipping intraday and watching their margin percentages like a hawk ! Far less of your cash placed on a trade is MUCH better for the newb, perhaps, in the beginning, as low as 20% of available cash --- this will prevent overextending your margin as you learn to trade and allow you to remain in the game !

there are, of course, tricks to keep you safe, including hedging positions both long and short which actually increase your margin percentage, but they require care and experience and are often used as defensive situations when one is already in trouble ! (well, normally, one should know what direction the symbol is moving, shouldnt they ?)

SO LETS SHARE SOME EXPERIENCES OR WISDOM WITH THE NEWER TRADERS AND TRY TO KEEP THEM FROM MAKING (at least) MAJOR MISTAKES !!!!

enjoy and trade well,

if you do, the money follows

mp

__________________
Within the great hall at Elfinore stands a wondrous coffer, precisely four cubits square and securely latched against the outside world. Inside that repository, shut away from impertinent eyes, abides many an intriquing trading secret garnered from around the world and over the ages !

As a child, i used to watch from the darkness as the secrets were debated and annotated by the elders. No one there held a single thought of my presence -- BUT I KNOW WHERE THEY HID THE KEY !!

Homestudy

This is a chart I found on another forum charting correlations between currency pairs and is very usefull in hedging. I am finding that rather then placing a stop I will place a buy of a different pair to protect my account. The strongest correlation is between the USD-CHF and the EUR-USD.

__________________
At all times, I protect my principal!