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Do your risk analysis BEFORE you enter the trade. That is actually the more advanced mindset to transform your trading. You should not enter a trade if you don't know what you are risking relative to the rewards already.
I don't think there is any part of my ego involved in this. I'm merely sharing some of the old timer knowledge that I had extracted from successful traders in the Equity/Futures game. You don't have to agree with this. I've traded for over a decade, and it is evident to me now the errors of my ways, and that trading is an evolution of phases. I didn't always agree with what I had just posted either (I couldn't have), but the market is a relentless and unsympathetic teacher.
Stops are great tools if you know how to use it (most newbies don't). They can help you get out of a position when you are wrong (market dictated), and prevent a complete wipeout during an unforseen market disaster.
I don't use stops with fixed constant values (because most are over-optimized and derived from historical profitability) for every trade. I don't believe in these kinds of static stops, and most of the traders use these kind of static stops...most will just slowly bleed their account. I let the market tell me where my directional bias is incorrect, and where I need to get out or reverse my position. If I'm wrong, I'm out. I don't get attached to the trade. I'm constantly managing each trade for risk, mostly lowering my risk profile or increasing my risk slightly for much more rewards.
Again, I'm talking about trading concept, not system development. These are lessons I learned from manual traders, which should be the core of any traders knowledge base. Trust me, these bits of wisdom that I've extracted from the old timers were not given out to me, I had to read and really study what they were saying. They mostly talk in bits and pieces because they are also protecting their livelihood/edge, which is perfectly understandable. And it wasn't until I had to go through the trials by fire of the market before I can process what was said and finally understood what was actually being said. I've failed many times before, not sure I have any ego left actually. I traded like a new trader, cost averaging down, and picking tops/bottoms, trying to buy low and sell high. Now, I try to do exactly the opposite of a new trader because I understand exactly what I did wrong and all of my weaknesses that the market exploited. I had to completely change my whole mindset to "not be that", and I also realize that I would not have come to that conclusion without my failures.
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aka jbfx
Last edited by Kenny Rogers; 12-24-2008 at 10:04 PM.
I sure hope system developers kept a watchful eye on their entries because they were taken with 12-28 pips on the Pound, 10-22 pips on the Swissy, and etc etc. Don't blink, it could be 10 pips one second, and when you hit the order button, you got a requote to 20+ pips. A little Christmas present for all. LOL, they are running a clinic on how to raise capital 101.
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aka jbfx
Last edited by Kenny Rogers; 12-26-2008 at 08:29 PM.
Here is my advice to all traders, price action and a couple hand drawn lines are the only thing you need to trade successfully.
Although I want to add that indicators are useful to detect relative overbought and oversold conditions. I like it to find pullbacks in a trend with it.
I prefer to look at the CCI (not some mumbo jumbo Woodie garbage and shameless marketing fraud). CCI is just price action in a laggy form, but I use it to see when there are spikes and how that movement is relative to the current price range.
This is another method I learned from the old timers.
I'm looking for a histogram version of the simple CCI, I don't like the line version...if anyone sees one, let me know.
Every trader must learn some new trends or ways to trade this market. As we are seeing new softwares, charts etc coming day by day. The same way traders must develop some new trends of trading.
Market is always changing, so the trader must adapt. It is kind of like the theory of evolution.
However, there are a few staples of human behavior that we can always exploit. This is because it is very difficult to change human behavior. The greed and fear (fight of flight) has been scientifically proven to be ingrained in our DNA, ever since cavemen learned how to survive. We (as experienced traders) should exploit this weakness instead of being part of it.
So although some things change, some things stay the same.
I actually took a look at the 2008 Metatrader Championships because I was curious about the type of systems being used, and I was pleasantly surprised by the winner's system. His interview was also very thought provoking, and proves that a simple system is all that is necessary to be successful. Only 18% of the total number contestants were profitable.
He used a TP of 460 and a SL of 180 after optimization, which gave him a very good positive rewards to risk ratio. It also helped that he was profitable on about 60% of his trades. Simply amazing. And he only took trades on 00:00 of each day.
I'm inspired. I'm going to try to emulate his system on a much lower timeframe across multiple currencies. My system will be based on kinetic energy, so the underlying logic will be an original creation. The key is to filter out low % trades, and have a positive RR ratio. I'm shooting for greater than 2:1. This development will be a great departure of what I usually trade, this system will be countertrend instead of trend following.
I've blocked out the whole next week for systems development. I'll start work on my new 100% mechanical "scalper". I'm sure there will be many losers along the way, but hopefully the few winners will overcome the losers. Like always, if I can get to breakeven on my first try, I will be estatic.
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aka jbfx
Last edited by Kenny Rogers; 12-28-2008 at 11:27 AM.
I was pretty excited late last night, bordering on exuberance. Perhaps it was the Holiday spirit still lingering around.
So today, I put something together, and I started testing my kinetic energy theory. Here is my initial result. Maybe I can add a few filters for trends and time constraints. I know many will look at the chart, and say it is not good, but I feel very happy about it. It is exactly what was in my head, and I made it happen in code. The potential is there, and all I need to do know is refine it on paper. Then I can put it into an EA. Trading begins on colored candle itself. I had to double check it to see that it doesn't repaint.
Obviously, it does very poorly in trends, and there will be a series of painful losses as we are trying to pick tops and bottoms. That is countertrend trading. However, as I explore the idea, it is similar to trend following because you are always putting out feelers to find something good. The principle of cutting losers short and letting winners run still remains the same.
The real question is: Will you trade the signals that are on this chart? I know I will, and that is the difference.
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aka jbfx
Last edited by Kenny Rogers; 12-29-2008 at 01:15 AM.
Maybe I can add a few filters for trends and time constraints. I know many will look at the chart, and say it is not good, but I feel very happy about it. It is exactly what was in my head, and I made it happen in code. The potential is there, and all I need to do know is refine it on paper. Then I can put it into an EA. Trading begins on colored candle itself. I had to double check it to see that it doesn't repaint.
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