10 Steps to Guarantee Failure

I found this on Digg today and it's certainly worth reading.  The 10 steps are targeted to a broad category of people and not necessarily towards traders but it might as well be.  All steps are relevent to trading:

1. Make your goals vague
2. Make your goals difficult to visualize
3. Think and speak negatively of your goals
4. Avoid planning incremental steps
5. Don't Do – Talk
6. Wait until you are motivated
7. Don't set a date
8. List why it's impossible
9. Don't research your goal
10. Think of anything but your goal

http://www.persistenceunlimited.com/2006/05/10-steps-you-can-take-to-guarantee-failure/

Money Blogs Lacking The Goods

I just read a review of TheMoneyBlogs which is a financial blog aggregator run by Trading Markets.  The review was done by Business Week and was not favorable.  I'm mentioning it now because I found myself in the same situation that Business Week found other financial blog authors. 

I was approached by Trading Markets asking me to allow them to pull the full feed from my site, essentially pulling all content, and having it displayed on Trading Markets and The Money Blogs.  What was in it for me?  I thought that it would give The Forex Project more exposure but after some technical issues they were having pulling my feed, I decided to abandon any attempts to have my posts displayed on their site.  I'm glad I did at this point seeing that Business Week sites that the link back to your blog that Trading Markets places on their site was hard to find and tucked away.  In addition, they plaster ads everywhere essentially making revenue off your hard work.  So I'm not really knocking their business model; if they can make money doing that fine, but I'm just glad I'm not contributing to it.  

http://www.businessweek.com/technology/content/oct2006/tc20061025_067653.htm

FOMC Day

I looked into the past at the price action 12-24 hours prior to an FOMC release and as expected, consolidation appears more times than not.  What this means is that I could very well be sidelined until Thursday because I won't attempt to trade the FOMC tomorrow.   Of course, I could change my mind if the GBP/USD continues its ascent.  

I'm feeling good about sticking to the H-system even with the loss today.  The first thing I did when I got home from work today was open up my charts to look for a possible filters that I may be able to incorporate.  One such filter that looks promising is divergence between price and MACD.  I've heard that in general divergence fails more than it succeeds but my experiences with it have shown that as long as you don't use it as a standalone system, it could be useful.  

H-system Comeback With a Loss

After some thinking and some helpful advice, I've decided to stick with the H-system.  It has proven so far to be profitable yet today I was stopped out on all 3 lots, -90 pips.  The GBP/USD pressed downward overnight but failed to press further hours prior to the US session open.   This loss does not phase me whatsoever.  If anything, I feel good just to be trading with it again.  It's basically the only system I have right now and the plan is to continue to trade it in the coming weeks and beyond. 

I just wanted to give a quick update on my state of trading and have nothing else to report at this time.  I've been busy at work all day today, mostly writing up documentation, so the carpal tunnel is really in force.

Before I go, click READ MORE to view the totally beneficial comments received from Bill, Adam, and FX T.D. I chewed on Craig's comments yesterday before the others came in and found that they started to sway me back towards my system… 

CRAIG 

Keep trading the H system, you know it works. While you are doing this
forward test your other system ideas (MT4 is good for this). Systems
will come and go as the market changes, sometimes this becomes
overwhelming so what I find is I need a system for my systems. e.g.

1. Trade the best you currently have
2. Forward test new ideas on test accounts
3. If new system is better, replace old system 

[Read more]

Confusion Setting In

I'm not going to lie to anyone here… the rollercoaster ride continues with me.  I'm so utterly confused and really don't know what to do at this point.  First I had a trading system, then I did furthur backtesting on this system and lost confidence in it due to the results.  Then I didn't have a trading system.  Then I decided to stick with the system.  I had a trading system again.   Then I decided to explore other systems and while doing so lost confidence in my initial system again.  Now I'm a man without any system….

So what am I going to do to fix this?  I'm still leaning toward going back to the H-system especially after missing the nice big profit it would have given me today.  The results would have been good last week too if I had traded it.  The only good thing I see from all of this is that the confusion has not led me to stupid losses making me realize that my discipline over the last couple of months has been good.  I haven't done anything that would have jeopardized the balance of my account and I haven't impulsively entered a trade just for the sake of doing so.  The disappointing thing about all of this is that just feels like square one again.

What Does Surfing Have To Do With Trading

Thank Bill for his comment and interested analogy on surfing and trading:

I share your apparent struggle with the 'I'm a trader so I need to
trade' impulse, as I'm sure all traders do. It's only recently that
I've become marginally comfortable with the idea that it's ok not to
surf every wave that comes my way.

Feeling 'in-sync' or 'out
of sync' with the market is analogous to catching a wave for a fat ride
or missing a wave that might have either given you a fat ride … or,
ground your face into the ocean floor.

As you know, trading for
trading's sake is dangerous … and so unnecessary. Yet, all traders
have to deal with what to do with their feelings of frustration. I
mean, how long can a surfer sit on his stupid board and watch waves
pass by?

The fact is, traders can't make the market send them
decent set-ups anymore than surfers can make Mother Nature send decent
waves.

Basically, it's an emotional battle. Traders want to make
something happen … but, the reality is, traders can only ride the
waves that are sent their way. The trader's real job is to be
sufficiently alert and aware to recognize a good wave when as it
approaches and to position himself to catch the ride before the swell
rolls past.

Then, of course, there's gratitude. Gratitude that
Mother Nature gave you 12 pips rather than grind your face into the
ocean floor.

Forex Trading Out of Sync

This week I squeaked by with a profit of 12 pips.   I felt totally out of sync with the market though.  My priorities shifted this week to more web development and I just didn't feel like I ever got focused.  I sat on the sidelines Thursday and Friday which was the wise thing to do.  There is nothing wrong with sitting it out for a couple of days especially if you cannot gain focus.  It's times like these where I may have forced it in the past.  I used to just get in the market just for the sake of being in it which is a good way to lose money.  

I have more things to say but I'm out of time.  I hope everyone had a productive week.  Stay tuned as there are a couple of posts that I should be getting out today and tomorrow.  Their in my head but I just have to put it down on "paper."   Take care.

Forex Project Is Now In 10 Languages

The Forex Project can now be translated to the following languages:

French, German, Italian, Spanish, Portuguese, Japanese, Korean, Chinese and Arabic.

I cannot read any of these languages with the minor exception of Spanish where I know words like Hola and Como Esta so there really is no way for me to know how well this site is being translated.  In one of my posts, the spanish translation for Rob Booker is Robo Booker.   For any multilingual visitors, please let me know if the translation is readable.   

To translate, click one of the nine flags on the right menu above the big FXCM advertisement.

Pivot Point Project

I've been trying to do so many things this week other than trading that I almost forgot that this was my #1 goal.  I've started to write some more scripts to start my pivot point project.  Basically I'm going to crunch lots of data to try to understand their usefulness.  I'm planning on starting small and expanding as I go forward.  For instance, last night I analyzed pivot point data for the GBP/USD over 4 years to theorize whether the opening price being above or below the pivot point has any affect on the price for the rest of the day.  This test just happened to pop into my head first plus I was curious to know the results.  The pseudocode for this procedure is below. Pseudocode is not real code and is more natural looking so most people can understand.  It's much easier to code for real once you have the pseudocode.

Here are some questions that the results theoretically attempt to answer for the GBP/USD over the last 4 years:

1. "If the opening price is greater than the pivot point for a given day, will the price for the remainder of the day remain above the pivot point?"
2. "If the opening price is  less than the pivot point for a given day, will the price for the remainder of the day remain below the pivot point?"
3. "Will I have more wins than losses by opening a long position at the beginning of the trading day if the open is above the pivot point?"
4. "Will I have more wins than losses by opening a short position at the beginning of the trading day if the open is below the pivot point?"

The simple answers to all 4 questions are……………

NO, NO, NO, and NO!

The results were basically 50/50 meaning that 50% of the time if the price opened above the pivot point, the price stayed above the pivot point.

This is very simplistic but a start.  I have to finish importing tick data for other currency pairs which is time consuming.

__________________________________________________________________ 

pivot_point;   # Pivot Point as calculated from the previous daily close
current_bid;   # The current bid price of the GBP/USD
opening_bid; # The opening bid price of the GBP/USD
closing_bid;   # The closing bid price of the GBP/USD
date = 2003-01-01;  # Starting date is January 1st, 2003 
true_counter; # A counter to keep track of true values
false_counter; # A counter to keep track of false values 

price_diff; # Difference between price a close to price at open.  If price is positive, long was profitable 

# Loop through all tic data from 
while (date <= 2006-09-30) { 

# Loop through all tic data for the day in order from open to close
while (open bid <= end bid ) {

    # If the open bid is above the pivot point 
    if (opening_bid > pivot_point) {

        # If long was profitable and price was up             
        If (price_diff > 0) { 

            # Increment the true counter
            true_counter ++;
        }

        # If short was profitable and price was down
        else if (price_diff < 0) {

           # Increment the false counter 
            false_counter ++;  
         }

…Repeat similar logic if the open bid is below the pivot point

The Only Seven Indicators You Will Ever Need

I was reading an article today that talks about the top 7 indicators that can be incorporated into your trading style.  I tend to agree with most of them.  I have gone through that stage of jumping from indicator to indicator with the illusion that the previous indicator I was using was broke.  There is no perfect indicator but I feel that if you stick to those that lag least, you will be getting out of positions when lagging indicator followers are just getting in.  And now for the list….

The Top 7 Indicators

1. Candlesticks - I use these the least, probably because the can vary so much depending on your broker or charting provider.  As you increase your time frame though, the variations are less of a factor and I believe the candlesticks can be more valuable. (Daily charts)
2. Trendlines - I use these often as do a lot of you, I'm sure.  Need I say more.
3. MACD – This is on every one of my charts.  I use it to spot divergences in price.  I'm constantly referencing http://www.forexproject.com/technical_analysis/divergence.html to do so.
4. 200 EMA – I have been through so many moving averages.  I always seem to have at least 3 on my chart though.  If anything, I glance at them to spot the trend.  The article states that this is an all time favorite for traders across the board.  Take note whether price is above or below to give you a sense of price direction.
5. Pivot Points – I use these often but mainly for exiting positions.  I'm still doing a lot of experimentation with data to understand them better.  All of this experimentation will be posted on the http://www.allpivotpoints.com site.
6. Fibonacci - I've used these many times in the past but currently I don't use them at all.  They are very subjective but can be quite powerful especially at the 62% retracement level.
7. PRICE - Probably the most important of indicators but the hardest to master.  It takes lots of experience to do so.  The articles makes a good point by stating that "let price prove to you where it wants to go by setting entry order rather than market orders when entering a trade."

Top 7 Indicators For Developing Your Own Trading Style

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