Logical Stop Placement

Since I have deemed this week, "Money Management Week", I felt like I should mention a new Investopedia article titled, "A Logical Method of Stop Placement." I'm not overly impressed by the article but you might find it more useful than I did.   The author gives a brief overview of 5 different types of stop methods:

1. Hard stop - placing a stop a predefined number of pips away from the entry price
2. ATR % stop - stop calculated by taking a percentage of the current ATR
3. Multiple day high/low - placing stops at predetermined day's low or high
4. Closes above/below price levels - placing stops above or below specific price levels (ie: double zeros)
5. Indicator stop - stopping out a position based on the value of a certain indicator (RSI, ROC, CCI, etc)

You can read the article in its entirety.

Popularity: 2%

Trading in La La Land

I've said this before but there is no easier way to take the emotion out of a trade by placing the trade, setting your stops and limits and going to bed.  I made a decent trade last night going short on the EUR/JPY and woke up to a nice surprise, +42 pips (limit reached, trade closed.)  I'll post the journal entry for this one later.  I still see a favorable trade lower but I'm waiting for certain levels to hit.  

Today should be quite a crazy day to trade.  I already missed a trade at 7 this morning on the AUD/USD that I was going to go long on but thought twice because of a resistance line up above.  I'm trying to show some discipline by not going into the trade 2 candles late.  By then the risk/reward isn't what it was and it's a good way to lose money.   

Have a good trading day and be safe.   

Popularity: 3%

Week 2 Performance

After my 2nd full week of Rob Booker 1 on 1 training, my results have improved from last week, I only lost 153 pips! I'm being sarcastic and once again don't blame anyone for my results this week but myself.  I made 17 trades this week, only profitable on 5.  My average profit per winning trade was 18.8 pips and my average loss per losing trade was 20.58.  Now it isn't unusual for traders to only "win" 5 out of 17 trades but when your risk/reward is only 1:1 like mine, it is difficult.  That is why I find myself questioning Booker's channel trading strategies where most trades only give you the 1:1 risk/reward.  

On an upbeat note, I ended the week on a 2 trade winning streak, my 1st was contrarian and my 2nd was during the jobs report on Friday.  I actually have been quite successful trading the jobs report in the past and it was no exception on Friday.  As I have done in the past, I drew channel lines for the high and low for the previous 12 hours or so.  I placed a buy order 6 pips above the upper channel line with a 20 pip trailing stop.  I placed a sell order 6 pips below the lower channel line with a 20 pip trailing stop.  On Friday, the price broke the upper channel, my buy order was initiated and 15 minutes later was automatically closed when my trailing stop was hit with a profit of 30 pips.  I could have made more if I didn't place a limit but I've never been greedy when it comes to taking profit.  I'm a lot more stupid when placing stops.

Popularity: 6%

Steve Shenker’s Trading Corner

It's actually Sam Shenker's Trading Corner and it can be found here:

http://www.forexproject.com/Blog/Investing_and_Trading/Original_Traders_Corner/

Popularity: 2%

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: 4%

A Forex Trader Speaks His Mind

I’m posting an email I received from a fellow participant of Raghee Horner’s webinars today.  He has been utilizing Raghee’s methods for the last year and goes into the successes and failures he has had with them.  Keep in mind that he is a beaten down trader who started out with $30,000 and now has $3000 left.  I don’t necessarily agree with everything he says.  I don’t think because 1 person is unsuccessful at something that no one else has a shot.  One of his final sentences is "Do not think you’re going to realize your dreams by day trading."  I don’t believe this and won’t believe this.  I feel like his story will be beneficial:

I would say her setups happen quite a bit if you scan all the pairs. I am not good at position trading or sitting on trades, so I found it really hard to utilize the large time frames. I like to be in and out, a day trader. Her system is like any system, it gives you a method for entries and exits. Each entry has 50% chance of moving in your direction and her method gives you a slight edge or helps you gain a higher probability of being on the winning side. No trading system is consistently profitable, your either on the winning side or your not. The key is to get in when your system tells you to, act on your systems signals, utilize stops or get out as soon as the trade tells you it’s not going in your direction.

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Popularity: 4%