currency trading

I briefly read this journal and would like to state some points.

a) LOG - probably he most critical part of trading is a log.  Regardless of what you trade and how you must log the numbers.
Critical to this is your costs and your profits.  So .. what are your
costs and parameters that make a difference ? 

Trading risk, trading profit / loss , Spread paid , Commissions, instrument traded,
time ,comments ,win/loss count , expectancy

Calculating Expectancy -  We need to know we are in a winning
trading system .  With the above you should calculate your ( PROFIT /
LOSS not including commissions and spread and another including commissions and
spread ) / RISK  for each trade . Then average all these numbers . If
the figure including SPREAD and commissions is < 0 STOP trading .

I
have found most of my reasons for NOT TRADING in this log.  You must
have a very positive system or suffer massive drawdowns or even blow
up ( which few stomach. )  

b) I have seen many good systems not
work because the spread or commission erodes the profits. You say 5% of
traders consistently make profits.  My call on this is the "brokers"
almost always make profits and are the real majority of money makers.
To profit you must take seriously the read cost. In 4 point spread you
must make 4 points before even getting a look at the profit. Not to
mention the spread closing the order.  For a 4 point spread, for instance .7500,
the market maker will buy from the real market at BID = .7498  OFFER
.7502 .

If you sell, market maker buys at discount off you ( .7498
) and sells to market at .7500 making a 2 pip profit . If you buy he makes
2 pips the other way.  He/she cannot loose ( or rarely ) on a single
trade .

However, your situation is quite different - let's say
you buy when real market is 0.7500. You had to pay  0.7502 and sell
0.7498. If the position hasn't moved, you just lost 4 pips.  Let's say you
have a win/loss of 50%.  The statistical probability means you
are likely to experience a 10 loss streak = 40 pips ( spread ) + the
real loss. Simply stating your wins must be huge to give yourself a
chance at consistently profiting. At the very least you are limited to
1hr + time frame . If you trade less you are asking for trouble.

If
you wish to trade < 1hr time frames ( and you better be good ) you
at least need to trade the real platform and a 0.2 pip commission.

c) BACKTESTING - you must be able to back test your theories. 

d)
LARGE FUNDS - If you were a large fund and you wanted to buy, what would
you do?  Pay more or less for your currency?  Think about the human
nature for a moment. You would do your best to create a cheaper
currency to buy.  Big money know that a lot of traders live off 50 pips
and usually a tight stop.  They can create a SELL mentality for periods and buy up any new
SELLERS and hold onto the curency without fear of margin calls because
the funds are so large.

e) So in the end you must be able to
buy and sell cheaply especially if you trade small time frames.  Know
that the direction of the market isn't necessarily where the market is
about to go (in currency) but it may.  It depends if you are with the
funds or against.  Your trade log is critical in telling you if you
are in fact statistically going to fair ok.

In my opinion,
unless you have a large amount of capital you can give up trading for a
living unless you have other sources of income or capital to support
you during the poor phases of your trading .

If you do want to trade for a living I think currency is about the most difficult , suicidal place to start .

Good luck

regards

DAS

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a) LOG - probably he most critical part of trading is a log .
regardless of what you trade and how you must log the numbers .
Critical to this is you costs and your profits. So .. wat are your
costs and paramaters that make a difference ? 

trade RISK  ,
TRADE profit / lOSS , SPread paid , Commisions ,  instrument traded ,
time , comments ,win/LOSS count , expectancy

Calulating Expectancy -  We need to know we are in a winning
trading system .  With the above you should calculate your ( PROFIT /
LOSS inc not inc commmisions and spread and another INc commissions and
spread ) / RISK  for each trade . Then average all these numbers . If
the figure inc SPREAD and commissions is < 0 STOP trading .

I
have found most of my reasons for NOT TRADING in this LOG . You must
have a very positive system or suffer massive drawdowns or even blow
up  ( which few stomach )  

 b) I have seen many good systems not
work because theSPREAD or commision ERODES the profits. You say 5% of
traders consistemtly makeprofits ..my call on this is the "brokers "
almost always make profits and  are the real majority of money MAKERS.
To profit you must take seriously the REAL cOST. Ina 4 point spread you
must make 4 points before even getting a look at the profit. Not to
mention the spread closing the order. For a 4 point SPREAD say .7500
the market maker will buy from  the REAL market at BID = .7498  OFFER
.7502 .

If you sell market maker buys at discount off you ( .7498
) and sells tomarket at .75 making a 2 pip profit . IF you buy he  make
2 pips the other way . He/she  cannot loose ( or rarely ) on a single
trade .

However your situation is quite different - lets say
you buy when real market is 0.7500. You had to pay  0.7502 and sell
0.7498 . If the position hast moved you just lost 4 pips . Lets say you
have a Win / loss of 50%.

The statistacal probability means you
are likely to experience a 10 loss streak = 40 pips ( spread ) + the
real loss. Simply stating your wins must be huge to give yourself a
chance at consistently profiting. At the very least  you are limited to
1hr + time frame . If you trade less you are asking for trouble.

If
you wish to trade < 1hr time frames ( and you better be good ) you
at least need to trade the real platform and a 0.2 pip commission .

c) BACKTESTING - you must bne able to back test yre theories . 

d)
LARGE FUNDS - If you were a large fund and you wanted to buy what would
you do  , pay more or less for yre currency ?  Think about the human
nature for a moment. You would do your best to create a cheaper
currency to buy . Big money know that alot of traders live off 50 pips
and usually a tight stop . By clearing out the stosp ( they have to
sell they effectively create a vacuum for them  to buy bec ause alot of
people would want to sell ( need to sell ) . They can create a SELL
mentality and buy up all the "SELLERS" once they convince you that the
market is now BEAR by simply pushing hard for a few time frames in
opposite direction. This is really the business end of town doing
business . You will never see or hear about this happening but use your
logic. They can create a SELL mentality for periods and buy up any new
SELLERS and hold onto the curency without fear of margin calls because
the funds are so large .

e) SO in the end you must be able to
buy and sell cheaply especially if you trade small time frames . Know
that the direction of the market isnt neccesarily where the market is
about to go ( in currency ) but it may ..it depends if you are with the
funds or against .  Your trtade log is critical in telling you IF you
are in fact statistically going to fair ok .

In my opiniion
unless you have a large amount of capital you can give up trading for a
living unless you have other sources of income or capital to support
you during the poor phases of your trading .

If you do want to trade for a living I think currency  is about the most difficult , suicidal place to start .

Good luck

regards

DAS

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