SO You’ve tried all the Forex Trading systems and nothing works?
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Here is why I prefer to think in terms of a Forex trading method.
Have You stopped to consider why is it, that after all these months, years, or whatever, You fill in the blanks, You haven’t yet found a system that works? Has it occurred to you, that the answer is already in the question. A system is a well defined set of laws or components that act together to create a particular outcome or result. A system is usually set, fixed, like the cooling system in your car, it’s easy to predict how it will behave under any given circumstances. Even biological systems are easy to predict and changes made to them will trigger expected results. The forex broker oanda has a new deal for you.
So you see what the problem is with any kind of attempt to systematize trading, the number of parameters and variables is enormous, plus unexpected events, like geo political changes, a Tsunami etc. That is why I prefer the term “Forex trading methods” because that gives more flexibility and allows some discretion and immediate changes to the “system” when something unexpected happens, and one thing is always certain, that the unexpected will happen.
For these reason I do not use trading robots, or any other Forex autopilot systems, they are on the whole unadaptive to climatic market turbulence and if the winds blow hard enough, they will blow your stops and slip you, so that a calculated risk has now become a landslide. Look, on the whole trading systems that work are few and far between, the market is evolving, changing, reacting to the madness of crowds and extraordinary popular delusions. (Read the book, it’s another trader’s must read.)
So, how to trade Forex? the million Dollar question.
Want to learn Forex? Then put in the hours and the effort to gain a good understanding. If you find it boring and are only looking for some quick money, they stay away, to become a good trader you must love it. If you think that a decent Forex education is a waste of time, then you are barking up the wrong tree. You can always go for a managed account and let someone else handle your trades.
So can you use a forex trading system to trade a method?
OK, here is what I mean, I always trade the pivot points, it’s a system that I use (see my Pivot Point trading system) but I use discretion and I will not always enter a trade even if it looks ok. There could be many reasons such as, a news announcement is due, some talking head (ECB or other) is on the news, I have a headache, the price has moved to support or resistance at an alarming pace etc. All these are difficult to systematize, quantify and program a robot (let alone a human) to cope with. Let’s face it, if you networked all the computers in the world, they wouldn’t come anywhere near the human brain capacity.
So why am I going on about the word ‘system’, simple when your mind considers a system, it perceives certainty and predictability, thus it becomes asleep to reality, i.e. if the trading system or robot says enter, you ask how much (money management tools hopefully), but if you saw the system as a method that requires adding some nebulous parameters you would not enter blindly. Look, to be a good day trader or scalper you need to use discernment, You literally need to develop a feel, to live the market, just now as I am writing this at 15:42 UK time on April 07 my squawk box announced a large scale earth quake in Japan, so I immediately sold the Dow, the S&P and bought the Swissie, living the mood swings of Mr Market is a way of life.
This is also the case with these paid for trading signals, the signals are issued based on some algorithm or a set up dreamed up by someone else, sometimes it works, sometimes it doesn’t. To have success with using someone else calls you must see that they fit into your overall Forex strategy. On the right side of this blog you will find the signal issued by mataf.net via Twitter, they are free and I often use them if they satisfy my other criteria. In any event mataf,net is an awesome site with loads of free trading tool and utilities, including various Pivot point calculators.
So this brings me nicely to my main trading activity. (Forex Trading systems)
To get into a scalping mindset, you need to be present, what I mean is that you must be solidly plonked in the here and now. (Yep, like Wayne Dyer or Guy Finley type of now). Nothing exists outside of the moment, the past is a concept, the future is a concept, all that is, is You and the market as it is now. This is why I love Forex scalping, nothing is livelier than watching your own reactions to the beast that can never be tamed. Is this a Forex Trading System for You?
There are numerous articles on this site about my trading methodology, both for Forex Scalping and for the Dax scalping method ,both open in separate windows, so you can just bookmark them and read them later. However, I will list all resources and links at the bottom of this page, so you can either read the rest and get there naturally or simply jump to the bottom.
One of the problems with intraday trading or scalping is that often the indicators sold or developed to cater for scalping get you into the trade too late, and some get you in too early. Most indicators are lagging, that is they are based on historical data (yes, even 10 seconds is history for all intents and purposes). Now, I am not saying that you shouldn’t buy and use them, but you need to combine them with the reality of the market, all indicators are suggestions only, it’s your mind that assimilates all the data and reacts. This brings us to the subject of habits, the mind gets into the habit of responding in a certain way to a certain pattern or event. So, breakout traders may have a Pavlovian response to a new high or low being broken, and counter trend traders may have the opposite reaction. Of course it’s clear that support and resistance points attract both types of traders, and that a true break will occur when numerous stop orders are blown at these points.
Swing trading Forex
In some ways Forex is a naturally swinging market, or rather it runs is ranges, sometimes ascending and sometime descending, which means that for long term traders it’s not an ideal market. See, You can buy an equity for technical and fundamental reasons and it can continue to rise for quite some time. With currencies that is rarely the case unless there is some seriously course changing news. This does happen from time to time but is not the rule. For example we had the sovereign debt issues in Europe which brought the Euro down swiftly, but then counter forces (US issues) forced it back up again.
So, I prefer to let my scalps become swings and even them I am only looking for a move to support or resistance as I have no intention of getting into the stop order war. However, sometimes the stops get triggered ahead as savvy traders will not wait to see their position decimated, so sometimes you get into a big move. In any event, I tend to close half or a third of the position when 1/3 of my target is made and move stops to breakeven. Capital is king in this game and capital preservation is the numero uno for any savvy trader.
If You want to take a longer term position based on fundamentals and your market perception then it is often better to set up credit spreads using options, as the time element works for you then. Options are a separate topic and I have had some very good trades, mostly based on fundamentals, but this is off topic.
What we define as a scalp, a swing or position depends on the time frames that we trade, for me scalping is based on 1 minute charts, and swings on 15 minute charts usually. Although these time frames are the basis for entry and exit, I always keep an eye on the higher time frames. That’s why when I scalp the 1 minute charts I have a 15 minute chart alongside it usually using Russ Horn’s Forex Rebellion as, it’s a good indicator to show if we have some continuation and if a scalp can become a swing.
What has trading psychology got to do with making money?
This is a fairly complex subject and I highly recommend you get hold of Mark Douglas’s book ‘Trading in the Zone‘ as a good starter. The main problem is that we have these habits and beliefs which often cause us to self sabotage what we are doing. This is true for all areas of life, not just trading, but as trading is what concerns us here, we’ll stick with it. We all have opinions about the world, politics and the economy, now, in trading these opinions can be very costly. All you need to do it look at the current situation in Europe (this was written during the big sovereign debt crisis in Europe), most commentators were expecting the Euro to drop sharply as Greece, Portugal and Ireland almost went to the wall, however, the Euro rose, higher and higher. So, if your beliefs happened to coincide with the general consensus, you may have tried shorting the Euro and found it hard to take a long position.
Another issue, is that our mind tends to see what it wants to see as opposed to reality as it is, in day trading this is a killer. You enter a position that falls withing your trading method or the trading system you happen to be using. The trade goes against you from the start, so you start moving your stop further away, against your better judgment. Your mind goes into revenge mode, you start averaging in, crazy, get out and look for a better trade.
Another example, you enter a trade, it moves very close to your stop, you start sweating (your money management is lacking, your position is too big if you’re sweating), then it starts consolidating for what seems like hours (in reality it’s only say 45 minutes), then it moves 5 pips your way, you close the position, sigh a sigh of relief and then watch it move 50 pips your way. Doh. We are greedy in a losing position, so we lose more, we are fearful in a winning position, so we win less, ouch, why me?
So, what to do, well, a clear and unbiased mind helps, sticking to your trading plan, and executing your method helps, but where do you get the discipline to not jump on those ‘oh so promising’ looking trades. Personally, I’m into meditation and I find that a 45-60 minute meditation before I start my trading day help me stay focused. Also, I have set times of the day that I trade, usually the London and New York opens. Not interested in the choppy times, unless I have a risk free position in place, one, where half the profit’s already been taken and the rest is at breakeven.
Once again, read Mark Douglas’s book, read the Tao Te Ching by Lao-Tzu, and the Art of war by Sun-Tzu.
Finally define your targets and stops meticulously, I have a daily target and if I make it in 10 minutes, I will only trade more if it’s news flow related and not technical. Doesn’t matter what your target is, if you make 2 pips a day that could be $2000 or $20,000 and 100 pips could be $100 a day, know your targets, know your sizes, best of all know You.
Putting it all together, what now?
OK, the purpose of this blog is to share my experience, good and bad, winning and losing and to help You make informed decisions. This post is now the home page, on the top right hand side you will find a list of the most recent posts. They will include rants, stories, new methods and systems that I’m playing with and tools I’m using. If you have not subscribed to this blog, please do so here, some of the posts are password protected and have members only videos, it’s completely free, (unless You want the ability to consult with me for 2 45 minutes sessions a month).
You will receive a copy of a sample trading plan that I have been using for years and which you can tailor to your own needs and personality. You will also receive an email whenever a new post is made, which is usually about once a week, more or less.
Trading is a journey of self discovery and You will be amazed at what you find out about yourself, this is in my view as valuable or more than the financial rewards, treat yourself well and trading will treat you well too.
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So here are the steps I recommend You take now (if you haven’t already of course):
1. Get hold of Mark Douglas’s book ‘Trading in the Zone‘.
2. Get Hold of Kathy Liens book ‘Day Trading the Currency Market‘.
3. Follow me on Twitter (@tcforex) as I often call my trades and Forex analysis
4. Join my Facebook trading page for frequent updates.
5. Download a free Metatrader 4 charting package (data feed included) and apply pivots
6. Get upto £300 cashback by opening spreadbetting account ==> Here
7. Read The currency meter article and get the free meter
8. Get a copy of Forex Rebellion and/or the recommend systems below:
9. Get a guided meditation tape from the list here.
10. If you’re into News trading (spike trading) watch this video and see if SNW (forex software that analyzes news and clicks the buy/sell buttons for you) is for you. NOTE: I no longer use this software as I can never get a fill during the news, so I simply trade reactions to news either way.
Good trading to you, and feel free to email me at firstname.lastname@example.org or leave a comment here.
This How to Trade Forex Guide further illustrates the information provided on this page – (Resources from alpari.co.uk)
- Forex Trade: Blowout Top or Bottom? (thestreet.com)
- Best Forex Trading System (tradeconscious.com)