Brett Steenbarger, author of "The Psychology of Trading" has a new post on his blog today titled, "Why Your Trading Isn't Working Out."
He identifies 4 possible reasons why your trading may be unprofitable from a market knowledge and psychological perspective.
- Problems of training and experience or lack there of
- Problems with changing markets or the identification of change
- Situational emotional problems or immediate psychological issues such as the stress of successive losses
- Ongoing emotional problems such as depression or substance abuse
I've gone through #1, #2, and #3 and probably will continue to intermittently do so as I'm sure a lot of traders have. The important thing is to identify this and then try to overcome it.
Check out the entire post at http://traderfeed.blogspot.com/
Soul Trader, a trader I mentioned last month in a post about how he was quitting the day trader game has a new post on his site.
Here is an excerpt from my previous post:
I've been following Soul Trader's blog for some time now. He is a
forex trader from England and announced on his blog today that he is
quitting the day trading game. One of the big reasons for him quitting
is that he just cannot take the frustration and pain of discretionary
trading. He states that he will continue to trade his mechanical
system but will give up on being an "active" day trader.
It seems that his mechanical system has been working out quite well for him. The gain on his account this month was over 45% and from his previous posts, it seems to have consistently produced profit.
His new post mentions the story of the Turtoise and the Hare, and how slow but steady wins the race. He states that, "Just an average of 9 pips a day is going to make me super rich." Now this comment may be the product of the euphoria of yet another profitable month for him but for some time now, I am agreement with this. I was just thinking about this today at the gym and wondering which is more realistic, my 60 pip target a week or a 240 pip target a month. These 2 targets are basically the same but how I go about trading to reach these targets would be different. To make 60 pips a week, I think about making over 10 trades a week using 15 minute charts. On the other hand, to make 240 pips a month, I think more along the lines of a making a couple of trades a month trading longer term charts.
I'm at a period right now where I'm definately not consistently profitable (far from it) and I'm unsure of whether trading short term charts is the way to go. I just don't know what to do right now.
I have to accept all of this as a continuing journey, one in which all of this frustration is teaching me something. Trading is certainly one of the toughest things to be successful doing in my experience.
Does anyone channel trade the US Session? I've been doing so here and there but have been keeping track of any and all channel breaks during the past 3 weeks in the following currency pairs:
I think that I can say that from my limited observations over 3 weeks, these pairs definately move more consistently in the morning US session than others.
Another observation I've made is that the AUD/USD seems to be a great pair to trade. I never would have thought this was the case but I've found it to be very steady once the price breaks a channel line. If anyone has traded the GBP, you know the wild swings that occur frequently but it doesn't happen in the AUD/USD. Once the channel breaks, it takes its time to reach a bit of profit but it eventually does. Over the last 3 weeks, this pair has 7 wins and 1 loss. Run-ups have ranged from 30 pips to 90 pips with the average around 30-40 pips. The drawdowns have been very good with a maximum of -18 pips. This is assuming that your using a 20-30 pip stop. This pair actually was good for 30 pips today for me and helped me bring my losses down to around -50 pips.
Let's assume that your risk/reward is 1:1 for simplicity. If you have a 30 pip stop and a 30 pip limit, here was the performance of these 4 pairs over the last 3 weeks. I should note that the runups on some of these trades were substantial so if you rode it out for longer, the risk/reward would have been much greater.
GBP/USD – 4 Wins, 3 Losses (+30 p)
USD/JPY - 6 Wins, 3 Losses (+90 p)
AUD/USD – 7 Wins, 1 Loss (+180 p)
USD/CAD – 8 Wins, 4 Losses (+120 p)
I pick and choose my channel break trades and therefore it is discretionary. I find that I don't pick the right one though but if I was to take every channel trade over the last 3 weeks, I would be up 420 pips and this is with a 1:1 Risk to Reward.
Just like that…. my gains from weeks 3 and 4 are gone and I'm sitting at -79 pips for this week. It is quite frustrating that I worked so hard for a little pippage over the previous 2 weeks only to see them disappear in 4 days. 1 step forward, 2 steps back.
WARNING: The additional commentary below is very scattered and I'm just spewing it out of my head so it may be contridictory.
I have not been overly impulsive, stupid, or emotional with the trades I've made this week. There were some trades where I exited early only to see the price continue in my direction but there were also trades that I exited early and then saw them turn against me.
This leaves me at another important juncture in my forex trading career. When I reach this point, I always ask the question, IS IT EVEN POSSIBLE FOR THERE TO BE LONG-TERM SUCCESS FOREX TRADING? I wish I could answer this question now but the longer I do this, the longer I fear what the answer may be. Just thinking about working for Corporate America the rest of my life is depressing. This fact alone can motivate me to continue because I know that in this world of trading, even though I've been trading for almost a year, this is still considered very beginner.
It's times like these when risk/reward seems like the most important thing in the world.
I've put so much time into learning how to trade Forex that I really think I'm at the point of no return.
The highs and lows of trading is something that is not easy to take sometimes. What I have to ask myself and what you have to ask yourself is if it is getting harder or easier to take as you do this longer. For me, it seems to be getting a bit easier but not enough to quantify.
Look at my true risk/reward over the last 3 weeks of trading:
|Week||P/L||Gross P/L||Avg Winning Pips||Avg Losing Pips|
Look at the Average Winning column and Average Losing column. If I average this weeks 3,4,5 my average winning pips are 14.18 and my average losing pips are 19.76. This risk/reward isn't going to cut it. Why is this happening?
- I'm scared. I'm scared to give up tiny gains. I exit my positions too early.
- Rob Booker does not encourage great risk/reward for his trade strategies. They are essentially 1:1 which means you have to have more winning trades than losing trades.
- I'm trading the smaller time frame charts
Either way, it sucks that no progress has been made in my forex trading on paper. I have learned a lot over the last year but until this is realized in money, I cannot consider this "project" successful.
I can see why there are so many damn mentors, training websites, and signal services. If only 10% are successful trading, then you have the other 90% saturating the market with services that they provide because they couldn't cut it.
So what is the point of this post. It is a venting session that everyone needs and all of you need to try. I feel much better now. Feel free to click on the Submit Content link on the left menu to post your vent. I will happily post it on the front page of the site alongside mine.
The week isn't over yet and I'm making it sound like it is so things may be different tomorrow, maybe better, maybe worse.
I may be a little late to this story but Deutsche Bank has recently launched online forex trading for retail investors. Most of you may know that Deutsche Bank is one of the larger financial institutions. They believe that they can help develop the market furthur. I don't know if this is good or bad. You can open a demo account if you're interested or open a real account with a $25,000 minimum.
It has been a pretty uneventful trading week for me so far. The lack of any major economic announcements this week will mean a lot more waiting during the US session.
I have managed to squeeze out 11 pips so far on 3 trades but I remain on the sidelines with no longer term trades. I've been looking at the charts the past couple of evenings but they seem totally foreign to me right now. I cannot seem to make sense of anything and I'm not going to jump into anything until they do make sense.
The poll from last week asked the question, "How many pips did you make or lose last week?" It garnered 14 responses which showed that most of us did pretty well last week:
8 respondents were profitable, 5 unprofitable with 1 losing 100+ pips, and 1 respondent broke even.
I carefully reached my profit goal in Week 4:
|Week #||Pip P/L||Gross P/L||Total # of Trades||Total Winning Trades||Total Losing Trades||Total Even Trades||Avg. Winning pips||Avg. Losing pips|
This week, I profited 61 p. If anyone remembers, my goal when I started Rob Booker training was to make a total of 60 p each week. Trading 1 lot at a time isn't going to allow me to do this for a living but increasing this to 3 or 4 lots will. I personally feel that a lot of people go into trading forex (myself included) with the thought that they need to profit many many pips each week. When I say many pips, I'm thinking over 200 or so pips a week. I hear how many traders not unlike myself profiting over 400 p for a given week which is absolutely possible but you also have to be honest with yourself. Can you consistently make 400 p a week? I don't think it is possible! Imagine the additional pressure you're putting on yourself when you're expecting even 200 p a week. I find that keeping a pip target low and then raising your lot count is a more realistic expectation.
The above trades were all day trades. I do not have any position trades open and really haven't in a long time. My goal is to continue day trading and then find position trades on longer term charts.
Making 61 p isn't easy. I made 18 trades, profiting on exactly half. I was very careful today and hesitated to make a short AUD trade which would have hit my target (30 p had I made the trade) because I was at +51 p and was satisfied with ending the week here. I did see another trade this morning though and took the chance of going long on the USD/CAD. I was still very careful placing a tight stop and only looking to stay in the trade if it went a little my way I got out of the trade quickly for a 10 pip profit bringing my total for the week at +61.
To be totally up front, I really haven't sent Rob Booker email in weeks nor have I been following his "Chart School" all that closely. I've been discretionary trading all week just like last and I don't know if it is a coincidence or not that I have been profitable both weeks. I'm not trying to apply any new techniques but just trying to become more intimate with the techniques and indicators that I already have. I haven't stopped learning or exploring new techniques or indicators but it really is just for exposure and because I feel the need to learn new things regularly.
I'm away until Sunday and will be back then to get ready for next week. I hope everyone caught some good trades this week. Take care.
I stumbled upon yet another useful website if you're looking for a mentor or just want to know which were reviewed well or poorly. Reviews are provided by users who post comments and a rating of SCAM, 1, 2, 3, 4 or 5.
Scam sites that I've seen in the past either via advertisement or Google Search:
WinningTradersAssociation.com – The one thing I can say about this site is that if you look like this guy, don't post your picture all over your website
Take user comments with a grain of salt. Some of the comments are really good though. They range from really ANGRY users who had their accounts blown up in a matter of days to users that are extremely grateful.
My mentor, Rob Booker was reviewed so-so. Here are some comments about Rob that I found interesting:
THIS ONE I CAN RELATE TO.
"He was busy with too many
clients, with his own trading, and with some
"Apparently Rob also
started a managed accounts service, which is a
nice proof that he actually trades himself.
His results from January 2006 to March 2006,
haven't been too impressive at only 3% gain for
three months, but what's encouraging is that Rob
is honest about it."
"…This is a very
expensive program for offering not much more
than rehashed information from so many trading
You can check out the reviews and comments for yourself. If anything, it opens your eyes even wider to the fact that you have to be responsible for your own account and analysis. If you have had enough experience and have learned what works for you, it's much more beneficial working on your own or with friends than ever signing up with a mentor. Would you be more angry if someone else told you to make a trade and you lost big money or if you told yourself to make a trade and lost big money?
Personally, I'd be a lot more steamed if I listened to someone else and lost.
I have 2 totally different subjects I want to talk about today. The first relates to the question, "When are the best times to trade forex?" Now I can tell you that I used to trade whenever I felt like it. "I'm bored, let me trade during the Asian session. I'm bored, I want to trade in the afternoon, 3 pm EST." As an absolute beginner, you're told that Forex is a 24 hour market. YES, that may be true but a lot of you that have been doing this for a while know that just because it's a 24 hour market doesn't mean you actually should place a trade at any time around the clock. A lot of what I'm talking about relates to the shorter time frames and also if you want the best entry on longer term charts. Most of the time, if you trade outside of the European and US sessions (2 a.m. EST – 11 p.m. EST) your chances of getting stopped out definately increase from my experience. Of course you have a great chance of getting stopped out during the 2-11 time frame but you also have a greater chance of hitting your target. I've found the Asian session almost untradeable. There is absolutely no volatility or direction and the time it takes to watch the market isn't worth what you may get out of it. CORRECT ME if I'm wrong but if any of you have found a successful way of trading the Asian session, let me know. You could stick to higher volatility pairs like the GBP/JPY but with a 9-11 point spread, your already in the hole if you place smaller stop losses. After 11:30 a.m., there are times when you can catch some volatility but I generally exit my positions around lunchtime because a lot of the time you just get consolidation.
The second thing I want to talk about are my entry mistakes.
I think it is important to mention the numerous times that I have been burned when I've entered a position a bit too early. Generally I have 2 rules when channel trading during higher volatility sessions especially when I'm trading the 15 minute charts:
- Entering before the candle closes is a big NO-NO unless #2
- Allow the price to push at least 10 pips past your channel line
Today wasn't a bad trading day, I made $320 but should have made twice that amount. I entered long on the GBP/USD when it closed above the upper channel by 1 pip. The problem with this is that I'm putting too much faith in my charting software and not taking into consideration that momentum may have waned and this is just the tailend of the upward move. For example, forex quotes are not the same amongst brokers and software providers. An upper channel line drawn on Esignal chart may be different from an upper channel line drawn on a Tradestation chart. So just because the GBP broke the upper channel line on my Esignal chart today doesn't mean that it broke the upper channel line elsewhere! So I could have increased my chances of profiting if I would have given the price a little more breathing room. I'm learning from experience that not giving the price a little breathing room or not waiting for the candle to close can cost me money.
I put in 3 trades today during the US session after the Housing Report release that were Anti-dollar but all of them failed to push towards my target. I managed to recoup some of the losses with another trade placed when the price fell back into the channel so I'm not too disappointed. It could have been much worst but I wound up losing about 45 pips today. I'm even for the week.
On another note, I was reading about fibonacci and stumbled upon a site that includes some fibonacci tricks. Some of these tricks really only apply to stocks because they relate to gap trading but I found the parabola hunt interesting.