It’s My Fault

A transcript between a couple of us today:

Wim Says:

Hi Rick,

Minus 180 pips on 3 days of trading seems not that
great. Wow, I would be pissed of, part of learning.. Are mentors really
that great..
Why would you coach someone if you make a ton of money?
I would not spend my time trying to learn somebody for $1000 if I can
make 50K/month with my personal trading.

Some time ago, I
took the FXCM euroshop ($169), well in my eyes, it is worth nothing. it
looks really nice on their website until you pay for it.
3 methods but none of them actually work in my eyes. Everybody can make a course or call himself a mentor.
Personally,
I won't spend a dime to education or learning anymore. Being in this
business for 3 years, I make money now but not the first 2 years.

I
think a combination of knowledge and market understanding is a lot more
worth then pulling up some indicators and following them blindly.

---

Magdalena Says:

Wim,
A couple of questions for you:
1) Are you saying you didnt make money in the first 2 years and are you trading full time?
2) What in your opinion is the best way to learn how to trade and gain the knowledge of the market, how did you do it?

Rich,

What
is the "touch of emotion" and how big of an impact it had on your
trading recently? Are you saying that Rob's methods work and you simply
didn't have enough discipline to stick to them, cuz that's exactly what
happened to me recently when using Raghee's setups.

---

Craig Says:

Hi Rich,

Bummer, I have been making a bunch of losing trades as
well. I was looking though your trade history and trying to figure out
why you made all those AUD/USD trades on the 25th, the pair was going
sideways. Is it possible to elaborate on your current stratergy?

P.S.
Have to say Wim's comment is pretty on the mark.

---

I Said: 

I'm getting my spreadsheet together to analyze these trades but before
I jump over Rob, I have made some mistakes with execution and did so
specifically with my lost GBP trade this morning. I entered incorrectly
and got stopped out by 5 pips before the 100 pip move up. This cost me
huge. Some of the other trades were also executing issues. I can
honestly say that without even analyzing and from the top of my head,
if I was more experienced with this system, I would probably be up. A
lot of his strategy utilized multiple lots so that you can let some
more profit run. I'll post more when I know more.

---

I Said again: 

Magdalena, I think Rob's strategies can work. I think they give you the
best shot at making money doing this. The touch of emotion happened 2
times to me:

The first was with my Aussie trade where I entered
before the candle closed. Rob says you can enter before the candle
closes but he waits and recommends you wait. After this trade, I would
definately wait also.

The second time was with my trade today. I
entered 2 candles late on the GBP/USD trade and set my stop without
reflecting the price 2 candles ago. If I would have set a stop based on
the price if I had entered 2 candles ago (when I should have) I would
have made MANY MANY pips today. Like I said before, I think I would be
in positive territory if I didn't make these mistakes.

Popularity: 8% [?]

Eliminating Five Basic Mistakes

There was a webinar titled, "Eliminating Five Basic Mistakes from your Analysis" this week presented by Ian Copsey.  I found this webinar and the corresponding Powerpoint presentation very useful because I have been guilty of these mistakes.  Before I summarize and attach the powerpoint presentation (I also converted it to PDF), who is Ian Copsey??

According to the moderator, Ian Copsey is one of the foremost FX technical analysts in the world,
with over 20 years experience in financial markets. He began his career
in Barclays Bank’s FX trading room in 1982 then moved to head their FX
sales desk in Hong Kong in 1988 where he spent almost 5 years.

Either way the guy has got experience and that's what counts.  

So what are the 5 basic mistakes and also the verdict of whether I'm guilty or not of making such a mistake? 

1. Trend Line Drawing Mistakes  Verdict: GUILTY
• Use 3 touch guideline.  By waiting for 3 touches, the trendline becomes stronger and more reliable 
2. Double Tops and Double Bottoms  Verdict: GUILTY
• WAIT FOR CONFIRMATION which comes on break of peak or trough
3. Head and Shoulders  Verdict: GUILTY
• Wait for Completion of pattern
4. Momentum Indicators  Verdict: mistrial
   
• Momentum studies are not meant to be used in trending markets
• Use ADX/DMI to determine trend then use 2 other methods to determine better trading opportunities
1. More sensitive version of RSI
2. Breaks of momentum trend lines
• After a trend, when should momentum indicators be used?
• When there is a divergence
• a divergence is not a reversal signal and trades should not be based on the fact the divergence has occurred.  Look for other signals such as:
1. A break of trend line
2. break of a pattern
3. break of sequence of high and lows
5. Confirm your analysis  Verdict: GUILTY
• What kind of complementary techniques are available?
1. momentum – used in consolidation and divergence after trends
2. trend line breaks
3. fibonacci projections from elliott wave
4. pattern breaks
5. time cycles

The PDF or powerpoint presentation is really worth the quick 15 minute read.

 eliminating 5 common trading mistakes 08/04/2006,11:23 952.99 Kb

 Eliminating Five Basic Mistakes 08/04/2006,11:31 1.17 Mb

Popularity: 3% [?]

Complete Trader’s Corner

I post Steve Shenker’s commentary now and again from his Trader’s Corner column because it’s pretty good.  His latest trader’s corner contains the entire series that has been appearing on the front page of DailyFX.com’s Daily Technicals report.  It’s 14 pages in length but is worth a full read or a skim.  Some subjects he touches upon are:

Don’t blame the market for your mistakes, blame yourself
Never trade without the stop loss
Never  trade just to be in the market
Never think that you are better than you actually are, nobody is that good, no one, not me, not you, no one

These are just a couple and it isn’t just a list.  He elaborates on everything he states.

Complete Trader’s Corner

Popularity: 2% [?]

Do Trading Systems Work?

I’m staying on the trading system subject today because I was reading a transcript of an interview performed yesterday between FXSTREET and Markus Heitkoetter, President of Rockwell Trading.   The subject was "Trading Systems: Do They Really Work?"

Markus’ most important comments follow:

• - Like all other ventures, "having a plan" will give you an edge
• - A trading system consists of a set of rules; in it’s simpliest form a trading plan (or system) has entry and exit rules.  More sophisticated trading plans include position sizing and money management
• - You MUST have a trading plan to succeed
• - At a minimum your trading plan should consist of entry and exit rules
• - The 2 types of exit rules are stops (to protect your capital) and profit targets to realize profits
• - The "lack of the trading plan" is the No. 1 reason why traders fail
• - The easiest way to follow a trading plan is to automate it
• - Trading with a system removes emotions from trading
• - If you’re looking for trading action, don’t choose a trend-following system.

Here are the top six reasons why traders fail:

1.    Lack of a Trading Plan
2.    Lack of Discipline to Follow the Plan
3.    Failure to Control Emotions
4.    Failure to Accept and Limit Losses
5.    Lack of Commitment or stop trading using your system after the first loss
6.    Over-Trading

Trading a system helps you overcome the top six mistakes

Popularity: 2% [?]

I took a beating today

I took quite a beating today knocking my profit/loss down into the red.  I’m down $1300 this week.  As my losses started piling, I started to let my emotions get the best of me.  Today has really made me scratch my head and wonder what I’m supposed to do now.  Yesterday I was stating how in the flow with the market I felt and how everything on the charts was making sense but today really knocked me for a loop.  I look at the charts and it’s almost like I’m looking at another language.  Now nothing seems to make sense. 

I have to say that I could kind of see this coming.  Do you want to know what my biggest mistake has been this week? It has been my inability to let my positions run their course.  I’ve been foolish on every trade this week.  I’ve found that I’m not even setting limits most of the time and when I do set limits, I totally disregard them.  I’m entering on a setup on the 240-minute chart and exiting on a 5 minute just for a little profit.  Today I gave up quite a lot in profit because I just wanted a little bit.  Then I was willing to let 1 trade go 50 pips lower before closing it out.  My money management has been poor and I’m paying for it literally.

I will have to learn from these mistakes and move on.  What’s gone is gone.  I should actually feel lucky that I’m not down more. 

No wonder I’m starting to salivate at the thought of paying $1000 for an online seminar.  They must reel you in when your most vulnerable.   Help. 

Popularity: 2% [?]

The Trend is my Friend

My profit so far this week is $883.  I have felt very comfortable with the flow of the market and when I look at the charts, everything just seems to make sense.  A big reason for this is because of my reluctance to trade a fade or go against the trend.  My trades have been with the trend therefore I’ve been trading the faster time frames.  It’s amazing how much easier a trade can start in your favor by simply trading with the trend.   Even so, my week has not gone without mistakes.

My biggest mistake is exiting positions too early.   I had a short position in the USD/JPY open overnight and through the GDP announcement this morning.  Shortly thereafter, I closed it out for a slight profit.  Afterwards, the pair declined over 40 pips.  The trade was going just fine before I decided to micro-manage it.  I must try to curb this bad habit. 

Popularity: 5% [?]

Don’t Move Your Stops

Here is a quick lesson from Sam Shenker about moving stops which I’m sure we have all been guilty of.

As a trader one of the lessons I learned the hard way is to never move my stops against the position. One of the most common mistakes made by the novice traders is to move the stop against the position once the trade start going against him or her. As the trade keeps going against the trader and once again approaches the stop, what do most of traders do, they move the stop again, thus increasing an unrealized loss, but unrealized loss is still a loss and a real one at that. In order to become successful, a trader must learn that the initial stop most of the time is a correct stop, because if the stop is triggered it usually means that the trader is on the wrong side of the market and by moving the stop he or she only increases the loss. The reason why traders move stops is hope that the market turns around and goes in the direction of the trade, but hope has no place in the market, protective stops do. Remember:  NEVER MOVE THE STOP AGAINST THE POSITION, BECAUSE BY MOVING STOPS AGAINST YOUR POSITION YOU ONLY INCREASE THE SIZE OF YOUR LOSS.

Popularity: 6% [?]