Learn from Booker

More Booker Today:

The pair closed above the channel top.  I am very bullish on this pair right now.  The channel is about 500 pips wide, and that means that I am looking for a move above the channel of 500 pips, give or take 50.  The pair broke above the channel at 205.20-30 or so, and that means we are targeting 210.00 for the profit target.

 

 

 

 

I took the first part of this trade with a small lot size (a fraction of my regular trade size) so that I could safely place my stop back inside the channel at 203.60.  This means that I have plenty of room for the pair to bounce around.

This trade is not risk free!  Even though it seems to be on a trip upward, we could see a sudden reversal in this pair.  Do not ever risk a substantial portion of your account on 1 trade or set of trades.  Make sure you limit your risk on wide stopped trades by reducing your trade size.

Designing a Profitable System

Thanks to Greg for a great post.  Read this.

I believe anyone can design a profitable system, as long as one understands market principles, what goes up, must come down faster. Twice as long to go up and half as much time to come down. I believe that if I am short the market, I need to trail my stops tighter to lock in profit than when I am in a long position. As for as my original stop, all my systems risk the same amount — small. I use to believe that the 3% rule was nonsense with a $10k account. But in the S&P and currencies, I daytrade with less than 2%. I simply cannot get wiped out that way and my profits are at least twice as much the risk in the S&P when trading one contract.

How much am I going to make? I am asked that repeatedly. I can always tell how much experience a trader has by that question. It is not what you make that is important, but what one does not lose. After I have a profit of so many pips in a daytrade, the most important ingredient to my trading takes place, the break-even stop. I have not read any books giving much attention to this concept. What a stressless (for the most part) feeling it is after I am at break-even.

The best way to trade is to find something simple, that works most everywhere and then become very consistent in your approach. Develop your own system, test it, then stick with it. Other people’s systems may work well for them, but probably will not be compatible with your psychological make-up."

* * *
From Successful Anonymous Trader:

You simply cannot have any confidence if you do not have a method or way of identifying trades along with money management guidelines. You’re lost in the woods, so so speak. I was there for many years. What did I do? This may help a lot of you:

I threw out 99% of all the crap I learned about oscillators, divergences, Elliott Wave, cycles, timing, seasonals, Gann, pitchforks, volume, Fractals, RSI, stochastics, overbought/oversold (this is a good one–the stock indexes, currencies and cotton for example everyone said were overbought and topping in February and March this year). Look at what they did. Needless to say, I don’t pay any attention to this anymore either, etc., etc. The list goes on to infinity almost. I went back to the basics. I went back to simple chart patterns, (a simple moving average and trendline now and then for a visual aid.)

I came up with a low risk money management plan and put it together with trading with the trend and, presto, an effective and time tested trading plan. The plan is simple and has worked since trading began and will last me a lifetime. What a relief not to have to spend countless hours every night trying to find a ndw way to trade. I am sick and tired of that after 7-years.

I believe at becoming an expert at one market nd its behavior and then putting all your skills and energy to work in a concern(traded) manner. Get good at that market and trade the heck out of it. Increase your size over time and you’ll make more money with less effort. There are lots of professionals that do this. Look at some floor traders or locals that stay in the pit for many years trading one market exclusively.

One thing that I have learned this year, is that I am trying to cut back on the number of trades I take and be more selective and not trade in congestion as much as I did before. I miss some good trades out of congestion, but I save myself a lot of mental energy, buy myself some more free time during the day, and get better and more profitable trades.

My attitude is changing now to one or two good trades, and that is all I need to make my week ( a triple or a home run, so to speak). There are plenty of them during any given week.

Trading is fun. Once you have a method and money management in place, it allows you to concentrate on trading and not on searching and researching. That gets old and frustrating. Make it your goal to find a simple method for next year. One thing that you can hang your hat on will last you a lifetime. Trading is simple. Remember that it’s the Execution or Implementation of your trading plan that is the bigger challenge.

Most people make finding the method a big challenge. That is because there is so much junk thrown at traders. They feel like a child in a candy store and have to try every doodad in the place. When they are done, they are sick and never want to see another candy store (trading gizmo) again. They could have had the palin piece of milk chocolate at the front of the store (simple method price patterns) which would have done everything they desired and fulfilled all their needs.

I wish to all a great new year. I hope some will be able to end their journey in search of the holy grail or indicator that will turn their life around. Search for simplicity. You will be surprised what has been right under your nose all the time, right there in front of you on the chart or price bars. Pay attention to what they say they will will tell you everything. You need to listen and get to know them. It can be that simple.

Commodity Traders Club News (1997)

Week 14 Performance

As I mentioned a couple of days ago, this week was especially hard on me.  I lost $3000 to drop my 14 week earnings to +2500.  There are a couple of major adjustments I’m going to make going into week 15.

1.    Finish a preliminary test plan that at least details 1 trade setup

2.    Stop trading multiple currency pairs.  I’ve been trading and trying to study about 8 different currency pairs.  I feel like this is definately too much for me to handle and most would not recommend a beginner to do this.  I will try to study and trade the EUR/USD ONLY since it is considered to have the most volume.  I will slowly try to incorporate some more of the major pairs into my trading plan as I get more comfortable with the EUR/USD.

3.    Back test, back test, back test.  A couple of months ago I was really interested in back testing trading strategies but lost interest after several attempts proved to be very unprofitable.  I have since started using Metastock with esignal to backtest moving averages.  Metastock has an optimizer function that will go through all combinations of moving averages and return the most profitable combinations.  My goal will be to first to find the most profitable moving averages for the EUR/USD.  I will try to correlate the moving average pairs to produce the most profitable 3 moving averages. 

I’ve already started performing #3 and I currently have Metastock performing backtesting on over a years worth of 1 hour interval data.  It’s very CPU intensive and will take about 4 hours.  It’s currently half way done and so far the best EMA pair is the 7/75.  The 7/75 EMA’s actually have some impressive results over the last year on the 1 hour EUR/USD chart. 

Here is an exact description of the backtest:

Buys/sells when a moving average of 7 periods goes above/below a moving average of  75 periods. 

I also have it factoring in the broker fee and have set the results to buy/sell 1 lot.

Here are the results:

70 profitable trades with average profit of $355.86 per trade.
Highest profit was $1020 and the most consecutive profitable trades was 12 

15 unprofitable trades with average loss of $972.67 per trade.
Highest loss was $2180 and the most consecutive losing trades was only 2 

Over 1 year, if you followed this trading plan by buying or selling 1 lot each trade, you would have profited $10320.00. 

Another tough week

I had a pretty good CAD trade before my 3rd lot closed out this morning but I missed the bigger move upward.  No need to be greedy though.  Other than that, I’ve had a pretty bad week. 

I cannot say that there haven’t been traces of impulsiveness but generally I’ve been following my stop loss and limits.  This is a good thing.  1 mistake that I have made was making 2 trades because of the advice of others.  This is where I lost a majority of my money this week.  There is no problem with taking the advice of another if you also did the research and study.  But what I did was blindly go with what 1 other person recommended.  I’ve been receiving John Carter’s newsletter this week during a 2 week trial and his latest recommendations didn’t work out.  This isn’t a knock on him because you obviously have to expect losses.  What hurts more to me is that I was not in control enough of myself to make my own decisions.  The only decision I made was to read a newsletter and place a trade exactly as it was written.  If I didn’t want to do any thinking, I shouldn’t have been trading. 

What’s done is done.  I always preach to myself to make my own decisions and live by them.  You cannot expect to make money by listening to a newsletter here and a newsletter there.  That’s a good way to lose your money and fast.  If I subscribed to John Carter’s trading room or was an avid follower of his newsletter, I might expect better results. 

One exciting thing this week has been the development of my 4th custom indicator.  Just like every indicator, it is just a derivative of price but it is suited to my preferences.  I can’t say much more because I don’t know if this indicator will work out yet.  I’m still testing it but the results look promising so much so that it surprised me.  I have a firm belief that there is no holy grail.  I understand that.  But there is a system that you can create that will work in certain market conditions that will consistently make money.  With my programming experience, it is my thought that if I can create such an indicator, it can be totally automated.  This doesn’t mean that I don’t want to study charts.  Supplementing this with a steady money making system is like having another employee working next to you making trades and money for you.  You have to give it direction but generally it works primarily on its own.

Stick to your Trading Plan

Here’s a post by Lloyd on his blog at http://tradingforaliving-assess.blogspot.com 

American trader and hypnotherapist Robert Krausz argues that 75% of trading depends on your psychology and claims that hypnosis can be used to control your emotional state to maximise your trading performance.

However, he stresses on the importance of having a trading plan at the first place!

Here are the 5 basic tasks necessary to become a winning trader and my personal takes:

1. Develop an analytical methodology
– For myself, I read fundamental news and run technical analysis

2. Extract a trading plan from this methodology
– I set up short-term swing trades (1-3 days), always try to pick good entry and exit prices

3. Formulate rules for this plan including money management
– Take profits while ahead, find the best place to get out on bad trades, not relying on stop loss

4. Back-test the plan over a long period
– Start trading small positions and allow mistakes

5. Finally, stick to the plan
– Having confidence and keep practicing till perfect

Developing Confidence for Traders

Here’s a posting by Troy Peterson (private trader) titled, "Do you have confidence as a trader?."

Your level of confidence as a trader will have a huge positive impact on your success. The more confident you are the less time you will spend on second guessing your decisions. The more confident you are the more positive energy you will focus toward your desired outcome.

Confidence is based on two things; what you do and who you are. When a trade stops for a loss your confidence becomes rattled. This is because confidence is based on what you do. When confidence is based on who you are and your ability as a trader, one who is prepared for all outcomes whether a loss or a profit, then you are consistent with yourself no matter what the result. You will feel confident because you took the loss as intended or because you closed with a profit. You will choose correctly in either scenario! This is because confidence is based on you.

Each time you correctly make a decision in trading whether it is for a loss or gain, the more confident you will become with your ability to act accordingly to the current market situation in a manner that is appropriate. Your confidence is now based on your awareness as a trader (you) not on failures, mistakes or missed opportunities. Let me say that again . . . Your confidence is now based on your awareness as a trader, one who will make the correct decisions.

Help build confidence by reviewing your trades diligently to discover when, why and how you chose to act during the time of the trade. It will help your understanding of the markets and yourself. The more you choose to learn from each trade failure and success the stronger and more confident you will become. This confidence will increase your flexibility in your decisions and your behavior. This flexibility will help create comfort in your trading. This comfort will feed your confidence and the cycle continues.

Begin working on your confidence today. Believe in yourself and have faith in your abilities. Please don’t fall prey to falling someone else’s calls in the market blindly. Stick to your edge and realize that trading the markets is about you.

Yen Swing Trade Analysis

TRADE

Date: Friday, February 24th

Entry: Short USD/JPY at 117.05

Reason for trade/setup: With a downward trend in motion, I was looking for a swing trade to short the USD/JPY.  I was waiting for price to retrace back up where a minor Asian session breakdown occurred several hours prior at 117.10.  The DMI indicator was used as confirmation that the existing trend was still in place.

Initial Stop:  117.19; the high of previous bar

Initial Target:  116.40

RESULT 

Exit: 116.76

Reason for Exit:  End of day

Profit/loss:  +29 pips/ +$745.10 (3 lots)

Trade executed according to plan? yes

Outcome: This trade entry went exactly according to plan so much so that it surprised me.  The price didn’t reach my limit and that didn’t surprise me. 

Thoughts:  The market doesn’t generate trades like this everyday and this setup would only apply to trending markets.

 

 

 

 

 

12 Weeks Trading Forex

With 12 weeks of trading forex in the books, I currently have a balance of $17,346.74.  I started with exactly $10,000 12 weeks ago with the goal of quitting my job to trade full-time by October 1st of this year.  That would leave me with 218 days left.  After about 3 months of trading, I cannot make a determination if this is a realistic date or just plain crazy.  As I’ve stated before, I live in the New York city area where the cost of living is higher than most cities in the United States.  I realistically need to make at least $100,000 a year to support my lifestyle.  This includes food, a roof over my head, transportation, and a retirement plan not to mention student loans.  In 12 weeks, I’ve profited $7,346.74 which averages to $31835.87 for a year.  That is not going to cut it nor is it guaranteed that I will consistently make money each month.  If I look at my performance in 4 week increments, things tend to look a bit better.

Weeks 1-4   +1101
Weeks 5-8   +1779
Weeks 9-12  +4467 

This week I started out down similar to last week.  I rallyed back to end the week down only $300. This is the second straight week where I had to bite and scratch to get closer to the black.  I made some stupid impulsive trades but generally had a decent week sticking to my plan. 

I’ve come to the conclusion that I’m a lot more effective when I place an order that doesn’t fill at the current market price.  Instead of going to the price, I let the price come to me.  Last night, I placed an order to sell the USD/JPY at 117.05 when the price was trading at 116.70.  Eventually my order was filled and I ended the week making about $800 on this trade.  When you let price come to you, trading becomes a lot less impulsive.  There is no question that I’ve made a lot more money in my sleep than when I’m awake.  You can’t overtrade, change your strategy, or act impulsively when your fast asleep in the middle of the night. 

I haven’t had time to put all of my Trade Analysis down on "paper" yet but I will get to it this weekend.  Don’t forget that there are 2 Raghee Horner webinars this weekend.  They are free and I’m sure space is still available.  I went to her last 2 webinars and found them motivational and beneficial.  I hope to hear some of you there tomorrow.

My performance per Currency Pair

I decided to take a look at all of my trades since day one and find out which currency pair has been most profitable for me.  The results were interesting:

USD/JPY: +3720
EUR/JPY: +2400
GBP/JPY: +1370
USD/CAD: +890
NZD/USD: +470
USD/CHF: +420
EUR/GBP: -70
AUD/USD: -130
GBP/USD: -$410
CHF/JPY: -650
EUR/USD: -$1430

History says to stay away from the EUR/USD pair.  I had a feeling that the USD/JPY was my best friend.

« Previous Page