[Simple Trading System] Trendline Break (The Only System You Need)

[desifxtrader]

Money Management (Overview)

Understanding the Retail FX Market (Stop Hunting)​

In FX its different. You decide to buy X amount of GBP (i.e. you go long Cable), so you need to sell US Dollars (i.e. you go short US Dollar). To do this someone has to be prepared to sell you X amount of GBP (i.e. he goes short Cable) and buy your US Dollars (i.e. he goes long USD). At our level of trading, this someone will normally be your broker. At the higher levels it will be either another professional, or an institutional trader.

Now heres the rub. Well imagine you went long 100 lots GBP/USD at 1.700. Ill ignore the spread, we know it exists, but I want to keep this simple. Your broker is sitting there having sold you 100 lots at 1.700, and three days later price has moved up to 1.800 and hes short the market. Remember, to complete this transaction he has to simultaneously buy your USDs, while at the same time selling you your GBPs. At the present time (last quarter of 2007) the Dollar is in decline, and most retail traders wouldnt consider buying the US dollar.

At this point a couple of situations will have occurred. The broker will have made a decision on where the market is going and, if he concurs with general market sentiment, will pass the risk to a higher level (i.e. he will also buy X amount of GBP thereby selling his Dollar risk). If, through a superior knowledge of the market, he knows, or suspects, that a change of sentiment is about to occur he may well hold your trade in-house.

The retail market, by which I mean your average micro and mini account trader, although huge, is generally a follower of the market. The volumes simply arent large enough to make a trend change direction.

At the top end of the retail market, where a trader is placing substantial amounts through an ECN, the situation is different. Although, in themselves, they may not be able to force a major reversal in a trend, these traders are serious exponents of market analysis; and, more to the point, they understand how the minnows think. They, along with institutional traders, can go hunting your stops in order to enter a position at a more favorable rate.

 

[desifxtrader]

Pit Traders and us

Understanding the Retail FX Market (Pit Traders and us)​

As very few of us have any experience of how pit traders (also known as a locals) work, we can have no idea of the ways that price can be manipulated to a professionals advantage.

Consider this, however. All around the world there are 1000s of traders, of all different skill levels, trying to make money on the movements of various currency pairs. You need to understand where you are in the great scheme of things, and adapt your way of trading to suit.

I can best describe this mass of traders in simple terms; one of the worlds toughest contact sports Rugby. For those of you not familiar with this sport, its similar to American (Gridiron) Football, but without all the padding. A Rugby team will have 15 players on the field at any one time, and a limited number of substitutes. In Gridiron Football youll have a bunch of guys sitting on the bench tooled up and ready purely for either offensive, or defensive plays. In Rugby every player has to have a combination of offensive and defensive skills. The rules governing Rugby are more complex, and to the layman can seem impenetrable.

So how can we relate this to FX trading? Well I look at it this way; you have a team of mixed skills; some, called the backs, are speedy and can move fast if an opening presents itself. What they can do is easy to see, if theres a gap theyll go for it. If theyre running into trouble theyll off-load as soon as they can. These are your typical intraday scalpers, and shorter-term traders. They need to be fleet of foot, and have a highly developed sense of self-preservation. Very occasionally, theyll get the chance to go for a long run and make big yards for a try (touchdown).

In front of them are our forwards; heavyweight hitters who dictate field position, setting up opportunities for the backs to exploit. Without their expertise the team has nowhere to go. The real stuff that goes on amongst the forwards, at times, is beyond even the referees ability to apply the rules. When the two sets of forwards get into a scrum, only those in the front-row really know whats happening. To be honest, even their own backs have little knowledge, or desire, to get involved. All theyre concerned about is will they get a chance to run with the ball?

Pit traders are like the forwards; we dont understand what theyre up to, and its unlikely well ever get the chance. Even if we did, we would be trampled underfoot in no time at all.

So how can we apply this to our trading? If you remember that during normal trading times, when liquidity is low, your local is looking to gain his profit on very small moves in the market. Our forwards are like this, always trying to gain a few yards here, a few yards there. Imagine a situation where a local, or group of locals, are short the market, but the market gives every indication of rising. These guys are looking to get out with any sort of profit, to break-even or, at worst, a small loss. At times of low liquidity it may be possible for them to bid the price enough to shake the confidence of the weaker traders, causing them to cover themselves by selling their long positions. Other weak traders, seeing the market starting to head down, jump in to climb on the sell-off bandwagon.

Now that the locals have moved price enough, they get out of their short positions with whatever theyre happy with and start snapping up (buying) all the sell orders that are sitting around. Price can now do what it wanted to do and head up. This is why its hard for newcomers to make money trading the short time-frames. Youre up against people that understand the rules better than you, and they can trade position sizes big enough to affect the market, and so confound your systems.

A classic example of this is the Overbought/Oversold type of indicator. We all make the mistake, as newbies, of poor analysis of the indicators we choose for our trading; falling into the trap of only seeing the points where a trade would have won. Its human nature to look for the upside, and skip over those same scenarios where we would have had a losing trade. We want to win, so we blank out the negatives.

All I would ask is that you go back over your charts and really look at them. See how long an oversold, or overbought, situation can last. Look at your losing trades and see how you could have been more selective before entering. Just because the indicator is crossing some arbitrary boundary doesnt mean that the world and his mother has suddenly changed their outlook on where price is heading overall. Balance what you see with what is happening in the next higher time frames. Missing a few pips at the start of a move is immaterial, if it keeps you out of a losing trade.

Just remember, you dont know what the forwards are doing, and neither does the rest of the on-line trading community, the small-time parts of it, anyway. Let them do their stuff, wait till the move looks set, pick up the ball and run for all you're worth.

But off-load your trade as soon as trouble appears!!!

 

[desifxtrader]

Retail Brokers and us

Understanding the Retail FX Market (Retail Brokers and us)​

It's a fact of life that when we first start trading, we feel there is nothing to learn other than price goes up, and price goes down, and as long as we are on the right side we'll make money. We may demo for a while, if we're lucky, and find out that things aren't as simple as we first thought. Nevertheless, at some point we enter the arena with our cash, expecting to keep making the same sort of gains we did on demo, or, at worst, minimize our losses while we fine-tune the latest strategy that we've found somewhere.

Along with the early frustrations, when we feel the market itself is out to get us, we now discover that what appeared to work on during our demo trading is, in our eyes, being undermined by broker trickery. A quick stroll around Forex Factory will highlight the many ways that traders feel that they are being cheated out of their dues.

First, and foremost, the single biggest problem is a simple lack of understanding of how the market works. To function effectively the market needs liquidity; i.e. it needs money flowing in and out on a regular basis. This liquidity, for example, enables companies to do business by purchasing the currencies of the countries they're trading with, or selling currencies to hedge against movements that could impact on bottom-line profits. The range of participants is wide, and all are in the market for particular reasons. It's the demand, or lack of demand, that keeps currencies moving. It's this movement that speculative traders seek to make money on.

Whilst being crucial to our attempts to profit from these movements, a lack of understanding of how to place your orders is one of the most common reasons for many of the complaints regarding brokers. Whilst I realize that different platforms have variations on this theme, I want to cover the most common misconceptions about the standard order types we use. In essence there are only two basic types of order:

1. Market orders
2. Limit orders

Let's look at these in more detail, and how they impact on our trading.

1. Market orders: a market order is an instruction to your broker to buy or sell a currency at the best price available at that time. Now here's the problem. At a certain point you see the price rising, you decide to go long and you click the button. By the time the order is processed, and hits the floor, that price may not be available. Your broker will re-quote you, in effect he's saying 'sorry no can do, but I can offer you this price, do you still want it?’. You then have a choice; to accept, or decline.

Our greed comes into play then, plus our fear of missing out on the move. Your first instinct will be to say yes, simply because you've decided that price is going to rise and you want a part of the action. At times of high volatility (i.e. lots of money and orders flying around) this may happen more than once. It's not your broker keeping you out of the market; it's a simple case of his inability to find someone to match up your order with. Think about it; you're looking to buy X at 1.6000, but everyone else is selling X at 1.6010. Why should another trader take a 10-pip hit just to fill your order? Life doesn't work that way, and it certainly doesn't in FX trading. If you keep saying yes, and you keep getting requotes, get out of the market. Let the dust settle and re-think your approach. If you thought 1.6000 represented good value for X, don't pay more than you have to. This is a business, and you won't survive if you keep paying more for your goods than you think they're worth.

So, what's the next option? Let's try Buy/Sell Stops, they must be better, mustn't they? This way we can wait for price to hit our order, get filled, and carry on moving on up/down. Fine in principle, and I used them regularly at one time, but what I failed to realize is that a Buy/Sell Stop becomes a Market Order, when your Stop Order is hit. This means, of course, that you are back to the same situation as above, you're fighting to get into the market along with everyone else. No doubt that at our level it's easier to get filled on a Buy/Sell Stop, at least I've never had a re-quote on one, and that can lull us into a false sense of security. When the time comes, and you've a Buy Stop for several million dollars waiting to go, things may not be so cut and dried.

I'm not a news trader, nor likely to be, but all the complaints I read seem to stem from this one simple fact; at times of high volatility, like a major news announcement, orders get filled with large amounts of slippage. Even I can understand why this happens. Your broker is reflecting the width of the market (spread), so if he has to widen his spread, and it hits your Buy Stop (now a Market Order), how on earth can he take the time to offer you a re-quote? With millions of dollars being traded wildly every second, while everyone tries to make sense of the news itself, is he really going to bother to ask if you still want your $500 order to be accepted at a price which may not last more than a couple of seconds? The outcome is that you'll get the only price that he can get taken up by someone on the other side, and, unfortunately, it's probably not the price you wanted,

2. Limit orders: there is one major difference between a stop (market) order and a limit order; with a limit order you have control over the maximum or minimum price you are prepared to sell at or buy at.

For example, you would place a limit-buy order when you expect price to fall to a certain support level. Behind this thinking is the expectation that price will rise from this level, assuming you are in an uptrend, and continue its way up. It follows then, you would place a limit-sell order when you expect price to rise to a certain resistance level and then return to continue its previous downtrend.

So, just to make this point clear; to place a pending limit-buy order you must position this below current price; to place a pending limit-sell order you must position this above current price.

You may be asking yourselves why I prefer to use these types of orders. The simple answer is discipline. In the bad old days, before I fully understood what was happening, I would do as most of you starting out tend to do and that is buy or sell whenever I thought the market was going up or down. Even when I started using stop orders I didn't fully realize why, sometimes, my fill did not reflect the actual order I'd placed. In addition, mainly because I was working on short-term charts, occasional spikes would trigger a trade and then price would fall back causing me to suffer unnecessary drawdowns.

Nowadays, I sit back and take time to study the daily and weekly charts; look carefully for solid areas of support and resistance; aim to assess if the current move is a retracement or a possible trend change. Having made my decision based on the points above I then consider whether to simply place a limit order or wait for further price action around my selected area.

As with all things in Forex, nothing is cast in stone. Just because price rejected a support area three weeks ago it doesn't mean to say it will be rejected again. A quick check in most charts would lead you to think that the first time back to support and resistance areas as high probability opportunities producing profitable trades simply by playing the bounce.
Yes, it does happen and quite often price will bounce two or three times and each time you could have made substantial pips and at the same time working with relatively tight stops. But look carefully at any chart, and you'll see price, being price, will sometimes blast straight through these areas.

Nevertheless, if applied with common sense and good risk control it can be a good way to trade. Needless to say, when I take these trades I do them using a limit orders. Depending upon the sort of price action that is occurring around these areas, and the particular pair I'm dealing with, I will typically set my order 10-15 pips plus spread above a support area or below a resistance area.

To better understand how this can work for you I'll go over three trading terms that need to be understood in order to apply these techniques. First, I'll reiterate a golden rule that all newcomers should follow:-

• Trade with the trend: it's every trader's favorite catchphrase, but I think it's true to say if you can't learn to spot and trade with the trend you will always struggle in this business.

Okay, let's study three different situations:-

• Range bound:

There is a well-known saying that the market is only trending 30 percent of the time and it is vital that you learn to spot those times when it's in a period of consolidation. This is when you look for signs of a breakout and look to ride the next trend. Breakout trading is a skill all of its own but once mastered is a typical situation where a limit order comes into its own.
Let's assume we are looking at a pair that is in an uptrend, and, for whatever reason, price has stalled and entered an area of consolidation. At some point price will breakout, and more often than not will come back to retest the breakout point. This is where we would set our limit-buy just above the previous resistance zone, which should now provide support.

• Retracement:

Again we're talking about a trending currency pair, but this time instead of entering consolidation price simply retraces back below its last high. Retracements can occur due to several factors; profit-taking, indecision, concern about upcoming news to name but a few. But it is a fact of life in Forex that retracements will occur somewhere, sometime. So, how do we exploit this? Initially, by looking at previous areas of support or resistance we may be able to estimate where this retracement might stall. It might be enough to simply set your limit order close to this previous support or resistance area. Better yet, certainly if you have not done this before, you wait to see some sort of price action around this area. If there appear to be reasonable signs that support is holding then a limit order could be placed somewhere close to that support area. As price comes back again your order is triggered and you've achieved what all new traders love, a bargain!

• Fade:

This is one of those expressions you hear in the early days but never quite understand. Essentially, it means trading against the current short-term trend. It's typical use, certainly by experience traders, is to take advantage of small-scale retail traders who are jumping, excitedly, onto what they think is the current dominant trend. Once you fully understand trend trading and retracements, you'll see exactly how this works. Because many new traders tend to work off short-term charts and are zoomed in on the very latest action they tend to miss the bigger picture. Consequently, they are riding an upward moving retracement that is just about to hit a resistance area. The professionals, meanwhile, are happily sitting there with their limit sells filling your positions, satisfying your buy orders knowing full well that shortly the market is likely to turn. The closer the new trader gets to that unseen resistance area the keener they will be to buy, simply because price appears to be going ever upward. The moment price turns and heads south the professionals can wait until the next support area and buy back their shorts. Simple really, but this is why many new traders do not become old traders.
Further information on the different types of orders can be found on many sites on the web, but here's one to get you started - Investopedia

 

[desifxtrader]

Stop Hunting and Slippage

Understanding the Retail FX Market (Stop Hunting and Slippage)​

The final parts of this jigsaw are what we mean by Stop Hunting and Slippage. To many of us Stop Hunting is signified by those times when we’ve placed an order and price immediately turns the wrong way, takes out our stop and then moves swiftly in the direction we had wanted it to – but with us on the sidelines.

As a new trader, it appears that someone is watching your every move and deliberately targeting you at a personal level. Trust me, no one is watching you or me, individually; it’s simply that there are certain areas on a chart that seem to be ideal places to put your stops. If they seem ideal to you, you can bet your last dollar they will also seem ideal to thousands of other small retail traders so, over time, a large number of orders will build up to a point where large traders have an easy target to aim for when looking to get in at a better price.

Bear in mind here that I’m talking about those of you trading short-term charts with stops in the 10 – 20 pip range close to current price action. Unless you have taken a really good look at your chart and picked an area that has been tested before (and failed to break through) then you are at risk of stop hunting.

Traders looking to place large orders can use part of their fund to edge price towards a certain point knowing that retail traders will continue the push for them as excitement takes over and the herd try to jump on the bandwagon. If small traders feel that their trades are in jeopardy they may close early, allowing the bigger boys to snap up those offers and still sit back as prices moves inexorably down to the mass of stops sitting just above or below an apparent S/R area. You will often see the final spike down as these players make the final thrust and pick up all those orders waiting for them.

So, how can you deal with it? All you can do is remember that it’s not personal. It’s part of the mechanics of the market and a price you must pay for trading short-term charts. Even someone like me, who trades based on the Daily charts, has to remember that 100 – 150 pip stops can be at risk at certain times. If an Interest Rate statement is coming out on one of the three major currencies then anything can, and often does, happen. I rarely instigate trades when these types of announcements are due and I can sit back and watch the turmoil settle before deciding if there are any signs that my directional bias has changed before considering closing any open trades.

Slippage:

Slippage is what happens when you go in, typically, with a market order and the broker keeps sending you re-quotes. Oftentimes this will occur in periods of high volatility – news announcements etc. – when the market is frantically trying to find some common ground for price to settle at. Most of the time it will be described as a widening of the spread and is, again, part of the mechanics of the market. News trading was the big thing a few years ago when I first found this Forum but over time brokers have found ways to discourage this style of short-term trading and spread widening is one way for them to make life harder for news traders. I have to be honest and confess to news trading on the odd occasion but I only do it with limit orders that are designed to fade the spikes and are usually done to trade me back in the direction of the core trend that I’ve already determined beforehand. I don’t do this on a regular basis as I consider that, for me, the risks are too great but sometimes I get a feel for where the market is trying position itself before the announcement is released and then I’ll go in with a small order to keep my brain active.

As I am no expert in either of these areas, I’ll leave you with a couple of links to study. These are probably the best threads around to get a better understanding of market mechanics and I recommend you read them.

 

[desifxtrader]

What is STOP HUNTING in Forex?

STOP HUNTING​

You've probably seen it mentioned in various trading forums. It may have even happened to you a few times. It's enough to make your head explode. What is it? It's called Stop Hunting.

Here's a typical trading situation. You're convinced that the USD/JPY is heading up. You've entered a long position at 123.40 and you've set your stop at 123.05, slightly below an obvious double bottom. You set your initial target at 124.50, giving you more than a 3:1 ratio of reward to risk. Unfortunately, the trade begins to go against you and breaks down through the support. Your stop is hit and you're out of the trade. You're sure glad you had that stop in place! Who knows how far it could drop now that it's broken that support, right?

Wrong. Guess what happens next. You got it...after taking out your stop, the price turns right back around and heads north, just as you originally thought it would. As you watch from the sidelines, the pair moves up past 124.00, then 125.00, and never looks back. Just maddening. You start to think, "If only I had set the stop just a little lower. What lousy luck!" But is this really just a case of bad luck?

Let me relate one of my own recent trading experiences. Based on a statistical trading tool that I use, I went short the AUD/USD at around 0.7530 and placed a stop up at 0.7570 which was above a local top. I was looking for the price to decline to below 0.7300 over the next few weeks. Within a day or so the price spiked up, took out my stop and then moved back down into the consolidation area at around 0.7540.

Now, because of this last spike, there were two local highs on the chart near 0.7570. Not to be deterred from my trade, I re-entered my short position in the 0.7530 area, and this time I put my stop at 0.7580, just above the last spike. After all, what were the chances that the price would break through that resistance again? Well as it turned out, that's exactly what happened! The price spiked up and hit my stop again, knocking me out of the trade for a second time. And even more frustrating, as soon as my stop was hit, the price turned right back down again in the direction I had originally anticipated!

Ian Fleming's character, Goldfinger, once said:

"Once is happenstance, twice is coincidence, three times is enemy action." (Play James Bond music here...)

However, I wasn't actually paranoid enough to think that someone was specifically picking off only my stop orders of course. First of all, my trades were so small that no one would bother trying to pick them off, and secondly I was doing these trades in a practice demo account! But I bet I wasn't the only dunderhead that was putting my stops in that obvious position just above the recent highs. There were probably quite a few buy-stop orders in that price area, and it certainly looked to me like someone was gunning for those stops. This hypothetical someone may have been a stop hunter.

So what's a stop hunter and what's all this stuff about picking off stop orders? A stop hunter is a market player that attempts to trigger the stop orders of other traders for their own benefit. They generally have the capability to move the market by a small degree for a short period. The stop hunter may be a FOREX broker's dealing desk which is trading in competition with its customers or it may simply be a large player in the market; a bank, a hedge fund or whatever.

Stop hunters operate best in an environment where most traders believe that the market is about to move in a certain direction. As traders take positions, the inexperienced ones (like me in the trade above) will place their stops at obvious places in order to cut losses if the price moves in the other direction. The stop hunters know where the amateurs are probably placing these stops, so they try to move the market enough to trigger them. This may allow a stop hunter to enter a trade at a good price before the market begins its move in the direction that everyone expects.

For example in my short trade above, there were a lot of indications that the market was headed down. Stop hunters knew that a lot of traders had taken short positions, and had probably positioned their buy-stops up at the 0.7570 area. So why should these savvy stop hunters enter a short position at 0.7530 when so many willing amateurs were willing to buy from them at 0.7570? So they proceeded to push the price up to 0.7570, and when my buy-stop order was triggered up there, guess who I was buying from? Exactly...the stop hunters who were selling to me at a great price (for them). Now I was out of the market, and they had taken over my short position at a price 40 pips above where I entered it. I had a 40 pip loss, while they entered at a price that was 40 pips better than they otherwise could have. Then, when the market headed down as we all expected it would, the stop hunters were laughing all the way to the bank while I was sitting on the sidelines pulling out what little hair I have left!

Note that a situation in which everyone expected the market to move up would work in just the opposite fashion. The amateurs would have their sell-stops at some obvious point below the market, and the stop hunters would push the market down in order to trigger those sell-stop orders. Then the amateurs would be selling out of their long positions in a panic while the stop hunters were buying from them at great prices in expectation of the coming move north.

The type of stop hunting that I've just described is used in situations where most market participants expect the price to move in a certain direction. In this situation, both the savvy stop hunters and the amateurs have the same market opinion; they are not battling each other in a contest of bulls vs. bears. The stop hunters are just trying to take over the positions of the amateurs at a good price.

There is another situation in which stop hunters try to move the market toward a group of stops in the hope that triggering the stops will push the market further in the same direction, thus triggering even more stops and so forth in a snowball effect. This is how some short term panics and rallies are created. In this case, the stop hunters have taken positions in the opposite direction from the amateurs, and are simply trying to trigger the stops to get the amateurs to panic and keep the ball rolling in that direction. My guess is that this tactic is more prevalent in less liquid markets like stocks and futures as opposed to FOREX.

Courtesy: Scott Percival​

 

[desifxtrader]

random thoughts ...

Couple of random thoughts ...

They say that 95 percent of traders lose and give up. For new traders, that trade anything less than 4 hour charts, its almost 100 percent. They lose everything within a year, and most of the time much sooner. Any new trader that wants to treat this like a business, and take future success seriously, should do the following as a minimum:

1. Whatever/however you trade, it should be done on daily charts or higher, and certainly not under 4-hour
2. To start it should be a demo account. It should stay a demo account until you show a profit three months in a row
3. After demoing open a small practice account with pocket change. You do this also for a minimum of three profitable months in a row
4. You open a normal account and never trade more than 1 to 2 percent of your account per trade. If after three months you have a combined loss you go back to steps 2 & 3.
5. If you get past step 4 you continue to refine what you are doing by never stopping the demo process. You continue to bring up/in refinements/additions to your normal account after they have proven themselves on demo and practice first.

After you have found solid success following this progression you then go back to step two and start all over with your intraday trading. This is how you treat it as a business with long-term goals and success in mind. Now lets be honest, almost no one does this and there you have the 95% of traders that never accomplish what they set out to do in this business, that give their money to the 5% that do. I have been trading for almost 22 years and demoing is as big a part of my trading business as live trading.

Most new traders dont want to trade, they want to gamble. There is the difference. The single biggest reason new traders blow out their accounts is thinking they have to day trade to be a real trader.

Professional traders dont have a degree, they don't have more brains, they are not luckier, nor do they have some secret formula everyone else is trying to find. A professional trader is simply someone who takes money out of the market on a consistent basis. Consistent does not mean every day or even every week for that matter.

I don't know of one single good trader who doesnt lick his chops over a new trader looking and trading off an intra-day chart (i.e. any time frame under daily). Even the very best trader has difficulty making consistent money trading under a 4-hour chart. There are a ton of reasons that I wont go into.

I have noticed more and more people posting that have come out of the futures markets, many from the Mini SP and Dow. The quickest way for a futures trader to get killed in the Forex market is to be ignorant of, or not aware of, the difference between an 8-hour market and a 24-hour market. The biggest obstacle I have faced in trading Forex is continuing to think like a futures trader.

A one-day move in Forex will take 2 or 3 days for a similar move in say the mini Dow. For years I have played the SP with great success. The day lasts 8 hours and I know to take my profit because,

1. The day does not last long and
2. With the way the world is I am not staying in overnight.

With Forex you dont have to worry about overnight moves, and if you monitor your positions you can stay in any length of time you want. My problem has been that where I naturally would take a profit I now hang on looking for more.

The result has been the 24-hour problem. I get stopped out at Breakeven or at a loss. This is an ongoing learning process for me. Any trader just coming out of the futures markets would be well served to take what I am saying here seriously. For those of you who have never traded anything but Forex I think you have an advantage over futures traders. You are not programmed to think like they do. You already know that these markets can move fast and hard at anytime. You know that a 30 or 40 pip profit can disappear in 2 or 3 minutes overnight. Anyway I just wanted to bring it up, perhaps more for my own contemplation than anything else.

 

[desifxtrader]

Trying to figure this business out !

Discipline, hard work, and patience​

If youre not willing to give this at least two years of study and practice then youre just playing around. Doctors and lawyers etc spend 6 to 10+ years mastering something that can make them rich. Why would anyone think that this business, which can make you much wealthier than most any other profession, is any different?

If youre not going to treat this as a business then quit and go to Vegas where your odds are better. Going into the trading game blind with no plan is financial suicide.

1. State your goals
2. Make your plan
3. Execute your strategy

Ok so youre brand new to this business. Get the worthless crap off of your charts. Stochastics, MACD, etc. There is a place for them but not with new traders. When its time, use them to spot divergence, which is all they are good for anyway. Get the stupid MA cross systems off your charts also,

They can work but thats another story. There are only two things you need on your chart. Price and the 365 EMA. Nothing else. Daily, weekly and monthly charts only.

The bottom line

New traders starting off on intraday are already in the coffin. The nails are usually hammered in within two months.

Discipline, Hard Work And Patience

Yes, thats exactly what it takes. There is no holy grail; there is no free lunch. There will always be fresh blood for those that have figured it out and paid the price. Without exception they were once the fresh blood and almost all of them found themselves on numerous occasions in the foetal position. Angry, frustrated and disappointed. This business can ruin you. It can steal your future, your family, and your sanity. Dont put yourself through that. The only way to avoid it is put nothing of value on the line until you have proven you can do it.

Dont open a $5000 account with money that is going to break your heart if you lose without proving first you can do it on demo.

Its really just common sense.

I would just say that the 95 percent who never make it (and I say 95 is low) are the day traders. Put a calculator in the hands of any person just taking a look at this business and within ten minutes the leverage combined with a decent daily move will have their head spinning with the possibilities. The mindset of got to trade-got to trade sets in and so does disaster a great majority of the time.

Trying to figure this business out.

When I first started it was about the same time I was starting my contracting business. I was young, stupid and no way I was going to find any worthwhile help. No Internet, no nothing. All I had was a ruler, a piece of graph paper, a newspaper, and a phone to my broker. There was no one to convince me to paper trade until I knew what I was doing. I knew it in the back of my mind but fat chance I was going to give up all that easy money doing it on Demo. What an idiot, what a complete and utter fool I was. Worse yet I did it over and over and over again. Worked my ass off to fund yet another account. Honey this is it. I got it figured out. That last 20 grand I blew was worth it, were gonna be rich.

It makes me sick to my stomach, I swear to God it does. 8 years of it. Sure I had some great wins. I rode sugar from 2 to nearly 6, pyramiding up.

Made six figures only to lose it all trying to day trade before I had a clue. I cant tell you how many times I cried myself to sleep slumped over my office desk. I couldnt quit. I could see the reward if I could only figure it out. Maybe just a case of enough time trying, I dont know. What I do know is, I started to realise this isnt a game. Doctors spend 10-12 years killing themselves for a shot at a six-figure income. It took me more than that. What happened? What changed? I quit funding accounts with 1 or 2 grand and betting the farm. I flat quit period, with real money that is. The Internet came along at the right time and I flat said no more until I can prove it on demo. Period.

The key is this. The goal is to fund/build an account that it is large enough that it produces a staggering income off of a couple, or several, trades per month while only risking one or two percent on each trade. The pressure lets up and trading gets much, much easier. You dont need every trade that looks promising. You know you dont need but one or two and you know if youre patient your damn sure going to get at least several in a months time.

Its not hard to move your stop to breakeven or take some profit when your showing $2000 on the plus side after a small move. Its damn near impossible when that same move shows a 50-dollar profit. Think about it. Very few people can fund a $50,000 or larger account and even fewer can build one to that point starting from 500 bucks. Its not that it cant be done its just people dont have the patience. So, my question is this. If it takes you ten years trading smart to build an account to that staggering point starting with very little, is it worth it? I cant answer that for you.

I day trade the mini-Dow. Im good at it. After so many years trading it and the mini SP its almost easy when I have even a little volatility. I position trade Forex. Why? Because I have proven on demo I can. When I can prove to myself I can day trade Forex for 6 months profitably on demo then I will. Not until.

Im in no hurry, as I love the Dow. I wont go back to finding myself in the foetal position after blowing all my money being a fool. There is no reason in the world to go through hell risking your rent money, or, worse yet, money that took you a year or two to save. If you cant do it on demo, you cant do it live, I promise. So dont do it.

 

[desifxtrader]

End of Document ...



Hello friends,

I hope this information briefly concludes all the Jizz, Jazz & Jingles of Forex trading. And readers finds this information helpful in understanding things.

Some smarty came up and was showing his level of intelligence, and I wondered why he didn't do it in the first instance.

However, I'll be waiting to see if he is worth his salt. For rest of us, ....

peace and cheers :clapping:

 

[desifxtrader]

A True Story:-

This is true story of a Forex newbie in foreign country ....

My life is Finished !!​

Well it was three and half years ago. I was accepted to one of the finest universities in America and everything looked going well. My family immigrated to America when I was 13. I was not an American citizen, my family was not rich and I didn't have any special talents, so I thought the only way I could succeed was to study hard and achieve my goal. I really wanted to be an aerospace engineer. I have loved airplanes since I was a little kid. I wanted to see an air plane taking off that I designed. So I studied so hard when I was in high school. As an immigrant, my English was not as good as other American kids, so I had to study much harder. I worked and studied so hard and I finally got accepted to a school I really wanted to go. My parents were proud of me and I thought my American dream was becoming true.

But it was a month before my first semester started. I just moved from Seattle to Boston to go to university. It was a beautiful city. The city was classic. I like the Red Sox and Fenway Park. I was a little bit excited and nervous about going to college so I couldn't sleep that night. I was watching TV until late and I finally watched a FOREX commercial on TV. It was about an computer program that can produce a lot of profit. People in the commercial said that they all make $3000 a week, $300 a day, and they all looked very happy. You all know that those TV commercials are scams but I don't know. I don't know why. Maybe that was because I had no money at the time. But I was lucky that I didn't have money to buy the program that costs several thousand dollars. So I just researched about FOREX that day.


After knowing about what FOREX is , I got really surprised. It sounded so sweet. Markets open 24 hrs, high leverages, you can even make profits when the market is going down.

I really thought I could make money very easily. I really thought I could be a millionaire. So I decided to withdraw from the university and started FOREX trading with my tuition. I really thought I could make lots of money in a year and could go back to the school or go to another fine university. But it was the dumbest decision I have ever made in my life and that is when the nightmare began.

I blew up some commission fees but I got $30000 back from the school. I got so excited and wired $10000 to my broker. But the problem is that I knew nothing about FOREX. You know what would happen next. I always watched 1 min charts and sold when it went down a little bit and bought when it went up little. I used to buy 10 lots at a time and I sometimes I lost $400 in just hours. I was really amazing that the market always went against me. I blew up $10000 in just two weeks. I got so depressed and disappointed. But I never gave up. I wired $12000 again. Because I learned some lessons, I traded less amount of volume at a time used some tricks that I learned.... Well it lasted a little bit longer.... Three months.... I was only 19 and I lost $22000 in just four months.... It was just huge for me.

Well.... I had to stop it at the time. But I couldn't. My parents still believed that I was going to college. My family is not rich. My father was a teacher and my mother was a housewife before my family immigrated to the States. They opened a small convenience store in Seattle after they landed in the country. My college tuition was what my parents have saved for their entire life. They even told me that they wouldn't have enough money for the second year so they would lend some money. They just devoted everything for me.

I just couldn't say them that I dropped out of school. I think the best thing I had to do was to stop trading with really money and go to college next year. If I really wanted to do FOREX, I had to start with a demo account and study it for a long time. But I was dumb. I really wanted to be rich. I wanted to buy a car like my friends. I really wanted to buy my own house. And I thought FOREX would make my dream come true. I was so dumb.

I kept trading with my real money and I blew up the rest of the money I had in another couple of months. I had no money. I had no food. I had no money to pay my bills. But I couldn't say it to my parents. I just went outside and started looking for a job. I finally found a job and I started working at a restaurant.

A couple of months after I got a job, my parents sent me the tuition for the second year. And I wired 15000 of it to my FOREX broker and I started trading again. But it always went against me. I lost money again and again. I tried to find a trick or a holy grail. I tried to find it so hard. I did everything I could to find it. But no. It didn't exist. After seven months of bad trading, I lost most of the money again.

I don't know. It always went bad. I got so depressed. I didn't want to live. I even thought about suicide. I became alcoholic. After a while, I met my old friend on the internet and I found out that he moved to Canada. So I decided to go to Canada with the rest of money I had.

But it became worse. At least I was eligible to work in the US but I couldn’t even work in Canada. You need a social insurance number to work in Canada. But I don't have it. I am neither a Canadian citizen nor an immigrant in Canada. So I just had to survive with the money that I brought from America. So I moved back to Boston in a month.

Another year was passed again. My parents called me that they would send me a tuition again. I felt so sorry. And I couldn't receive that money. But I couldn't say that I was not going to the university neither. So I just told them that I would transfer to a cheaper university. I lied that it would be just $5000 a year.

I thought about going back to college but it had been more than two and half years since I graduated from high school. I forgot everything I studied in high school. I couldn’t study everything and take SAT again. I was just busy to survive.

And I decided to go to Canada because their universities don't require your SAT score. So I went to a university in Canada. The tuition was twice more expensive than what Canadians pay because I was an international student in Canada. Anyways I started taking a computer science program. But after taking one semester, I decided to take a year off and think about what I really have to do because it was not really what I wanted to study. I always wanted to be an aerospace engineer.

After a while, I started FOREX trading again. I started with $3000 this time. I learned some skills that I learned from online forums. I didn't lose money for a long time but I didn't make much money neither. I made $3000 to $3200 in a couple of months. But when CAD/USD was 1.10, I thought it was a nice chance to buy USD/CAD. So I bought massive amount of USD/CAD. But it dropped to 0.91. I lost a lot of money but I thought it would go down more. I wired more money and sold massive amount of CAD/USD this time. But it went up to 1.01 this time and I got a margin call and lost lots of money. You know I learned how to use a stop lose but I couldn't control myself.

I'm completely broken now. I only have $500 in my bank account. They don't even allow me to work in Canada. I don't know how to survive.

I don't know what to do now. I have been trading FOREX for more than three years but I haven't learn much. It is hard. And I don't really want to risk my money again. It was harsh. I can study FOREX but it just makes me crazy and depressed every time I see it because it reminds me all the money that I lost and everything that I went through. I am just busy to survive now.

And I got a call from my father two weeks ago. He told me that my mother got a cancer. It is just harsh.

I don't know. Maybe she could die. And she would never know that I did this and I can't even say it. I just feel so sorry.

I feel like I am a bad guy and I am a loser. I blew up the money that my parents have saved for a long time. I blew up my dream.

I don't know what to do now. It is just harsh. I'm so depressed. It is Christmas today and I'm just crying alone. I want to drink some whiskey but I have save money to survive.

______________________________________________________
When I buy it, it moves down.

When I sell it, it moves up.​

Suggestion ...

Your problem with forex is very similar to a gambling addiction problem. Just because its forex trading it doesn't mean you don't have gambling tendencies as when you are at a casino betting on red or black. The scenario is similar of someone going to the roulette table, putting in money, losing it all, and then going back to the ATM to get more money to bet more, and its money the person can’t afford to lose. So you have to realize that you may have a gambling or addiction problem. Throwing in a bunch of colorful indicators to predict price doesn't preclude forex trading from being a vehicle for gambling.

Also know, there are countless people that have tread the same path as you have and had similar results because they couldn’t control their impulses and gambled their money in the markets, and yes a lot of people committed suicides because of the eventual outcome of their gambling impulses.


Stop screwing up and take responsibility. Go be with your family and tell them everything. Money comes and goes and in the greater scheme it means very, very little. Losing your family, both figuratively and literally is the most painful thing in the world.


Or you can just continue to screw up.

It's your choice.

 

[desifxtrader]

Forex Terms

Standard Forex Terms​

Base currency: The base currency is the first currency in a currency pair, and the currency that remains constant when determining a currency pair's price. The United States Dollar (USD) and the European Union Euro(EUR) are the dominant base currencies in terms of daily traded volume in the foreign exchange market. The British Pound (GBP), also called sterling or cable, is the third ranking base currency. The USD based pairs are USD/JPY, USD/CHF and USD/CAD; the Euro based pairs are EUR/USD, EUR/JPY, EUR/GBP, and EUR/CHF. The GBP is the base for GBP/USD and GBP/JPY. The Australian Dollar (AUD) is its own base against the USD (AUD/USD).

Basis: The difference between the spot price and the futures price.

Basis point: One hundredth of a percentage point.

Bid /Ask Spread: The difference between the bid and offer (ask) prices; also known as a two-way price.

Cable: Trader term for the British Pound Sterling referring to the Sterling/US Dollar exchange rate. Term began due to the fact that the rate was originally transmitted via a transatlantic cable starting in the mid 1800's.

Central Bank: The principal monetary authority of a nation, controlled by the national government. It is responsible for issuing currency, setting monetary policy, interest rates, exchange rate policy and the regulation and supervision of the private banking sector. The Federal Reserve is the central bank of the United States. Others include the European Central Bank, Bank of England, and the Bank of Japan.

Conversion: The process by which an asset or liability denominated in one currency is exchanged for an asset or liability denominated in another currency.

Cross Rates: An exchange rate between two currencies. The cross rate is said to be non-standard in the country where the currency pair is quoted. For example, in the US , a GBP/CHF quote would be considered a cross rate, whereas in the UK or Switzerland it would be one of the primary currency pairs traded.

Currency: A country's unit of exchange issued by their government or central bank whose value is the basis for trade.

Currency (exchange rate) Risk: The risk of incurring losses resulting from an adverse change in exchange rates.

Devaluation: Lowering of the value of a country's currency relative to the currencies of other nations. When a nation devalues its currency, the goods it imports become more expensive, while its exports become less expensive abroad and thus more competitive.

Drawdown: The magnitude of a decline in account value, either in percentage or dollar terms, as measured from peak to subsequent trough. For example, if a trader's account increased in value from $10,000 to $20,000, then dropped to $15,000, then increased again to $25,000, that trader would have had a maximum drawdown of $5000 (incurred when the account declined from $20,000 to $15,000) even though that trader's account was never in a loss position from inception.

End of day (mark to market): Mark-to-market values a trader's open position at the end of each working day using the closing market rates or revaluation rates. Generally the revaluation rates are market rates at 5pm EST time. Any profit or loss is booked and the trader will start the next day with the position valued at the prior day's closing rate.

Euro: The currency of the European Monetary Union (EMU), which replaced the European Currency Unit (ECU). The countries currently participating in the EMU are Germany, France, Belgium, Luxembourg, Austria, Finland, Ireland, the Netherlands, Greece, Italy, and Spain.

Exchange Rate: The price of one currency stated in terms of another currency. Example: $1 Canadian Dollar (CDN) = $0.7700 US Dollar (USD)

Fixed Exchange Rate: A country's decision to tie the value of its currency to another country's currency, gold (or another commodity) , or a basket of currencies . In practice, even fixed exchange rates fluctuate between definite upper and lower bands, leading to intervention.

FOReign EXchange (Forex): The simultaneous buying of one currency and selling of another in an over-the-counter market.

G-7: The seven leading industrial countries, being the United States, Germany, Japan, France, Britain, Canada, and Italy.

G-10: G7 plus Belgium , Netherlands and Sweden , a group associated with the IMF discussions. Switzerland is sometimes involved.

G-20: A group composed of the Finance Ministers and central bankers of the following 20 countries: Argentina , Australia , Brazil , Canada , China , France , Germany , India , Indonesia , Italy , Japan , Mexico , Russia , Saudi Arabia , South Africa , South Korea , Turkey , the United Kingdom , the United States and the European Union. The IMF and the World Bank also participate. The G-20 was set up to respond to the financial turmoil of 1997-99 through the development of policies that promote international financial stability.

Hedge Fund: A private, unregulated investment fund for wealthy investors (minimum investments typically begin at US$1 million) specializing in high risk, short-term speculation on bonds, currencies, stock options and derivatives.

Hedging: A strategy designed to reduce investment risk. Its purpose is to reduce the volatility of a portfolio by investing in alternative instruments that offset the risk in the primary portfolio.

London Inter-Bank Offer Rate or LIBOR: The standard for the interest rate that banks charge each other for loans (usually in Eurodollars ). This rate is applicable to the short-term international interbank deposit market, and applies to very large loans borrowed from one day to five years. This market allows banks with liquidity requirements to borrow quickly from other banks with surpluses, enabling banks to avoid holding excessively large amounts of their asset base as liquid assets. The LIBOR is officially fixed once a day by a small group of large London banks, but the rate changes throughout the day.

Leverage: The degree to which an investor or business is utilizing borrowed money. The amount, expressed as a multiple, by which the notional amount traded exceeds the margin required to trade. For example, if the notional amount traded is $100,000 dollars and the required margin is $2000, the trader can trade with 50 times leverage ($100,000/$2000). For investors, leverage means buying on margin to enhance return on value without increasing investment. Leveraged investing can be extremely risky because you can lose not only your money, but the money you borrowed as well.

Liquidity: The ability of a market to accept large transactions. A function of volume and activity in a market. It is the efficiency and cost effectiveness with which positions can be traded and orders executed. A more liquid market will provide more frequent price quotes at a smaller bid/ask spread.

Long: A position purchasing a particular currency against another currency, anticipating that the value of the purchased currency will appreciate against the second currency.

Margin: Funds that customers must deposit as collateral to cover any potential losses from adverse movements in prices.

Margin Call: A requirement for additional funds or other collateral, from a broker or dealer, to increase margin to a necessary level to guarantee performance on a position that has moved against the customer.

Market Maker: A dealer that supplies prices, and is prepared to buy and sell at those bid and ask prices. All CFTC registered FCMs are market makers.

Pip (tick): The term used in currency markets to represent the smallest incremental move an exchange rate can make. Depending on context, normally one basis point (0.0001 in the case of EUR/USD, GBD/USD, USD/CHF and .01 in the case of USD/JPY).

Position: A view expressed by a trader through the buying or selling of currencies, and can also refer to the amount of currency either owned or owed by an investor.

Premium (cost of carry): The cost or benefit associated with carrying an open position from one day to the next calculated by using the differential in short-term interest rates between the two currencies in the currency pair.

Revaluation: An increase in the foreign exchange value of a currency that is pegged to other currencies or gold.

Revaluation Rates: The rate for any period or currency, which is used to revalue a position or book. The revaluation rates are the market rates used when a trader runs an end-of-day to establish profit and loss for the day.

Rollover: The settlement of a deal is rolled forward to another value date with the cost of this process based on the interest rate differential of the two currencies. An overnight swap, specifically the next business day against the following business day.

Short: To sell a currency without actually owning it, and to hold a short position with expectations that the price will decrease so that it can be bought back at a later time at a profit.

Spread: The difference between the bid and offer (ask) prices of a currency; used to measure market liquidity. Narrower spreads usually signify high liquidity.

Spot Price: Current market price. Settlement of spot transactions normally occurs within two business days.

Swaps: A foreign exchange swap is a trade that combines both a spot and a forward transaction into one deal, or two forward trades with different maturity dates.

Uptick: A new price quote that is higher than the preceding quote for the same currency.

Types of Foreign Exchange Orders​

Entry Orders: An order, stop or limit, initiating an open position and executed when a specific price level is reached and/or broken. The execution is handled by the dealing desk and the order is in effect until cancelled by the client.

Entry Limit Orders: An order initiating an open position to sell as the market rises, or buy as the market falls. The client believes the market will reverse direction at the level of the order.

Entry Stop Orders: An order initiating an open position to sell as the market falls, or buy as the market rises. The client placing the order believes that prices will continue to move in the same direction as the previous momentum after hitting the order level.

Limit Orders: A limit order is an order tied to a specific position for the purpose of locking in the gains from that position. A limit entry order placed on a buy position is an order to sell. A limit order placed on a sell position is an order to buy. A limit order remains in effect until the position is liquidated or cancelled by the client.

Market Order: An order to buy or sell which is to be filled immediately at the prevailing currency price.

OCO (One Cancels the Other): A stop-loss order and a limit order linked to a specific position. One order, the stop, is to prevent additional loss on the position, and one order, the limit is to take profit on the position. When either order is executed, closing the position, the other is automatically cancelled.

Stop-Loss Orders: An order linked to a specific position to close that position and prevent additional losses. A stop-loss order placed on a buy position is an order to sell that position. A stop-loss order on a sell position is an order to buy that position. A stop-loss order remains in effect until the position is liquidated or canceled by the client.