Forex trading and action

If you want to trade forex yourself, then you need to get terminology right first. It's not investing, it's a dayjob(depending on your timeframe) with emotional swings and irregular hours(depending on your timeframe). Obviously you already spent quite some time at it, and since you ask about techniques, you'll probably need a year or so to 'get it'.

If you are a person who has enough patience and time to do it right, then maybe do it, but please please consider what you might be missing because of it and what else you could be doing. Trading is really not the easiest way to do it: you have to straighten your head out, then you have to find your trading style, timeframe and technique, and then there's another huuuge huuuge part of it - money management.

Sure you might be the next solomon brothers, but please consider if you want to spend your time doing this and pursuing something that only a few suceed at.

Institutional trading

So, we are learning from forums and whatnot. What if you could learn from a real institutional trader who takes your money all day long? Here's a neat system I found: here.

Learning to trade

from here:

Txtrader,

There is a concept in learning called scaffolding. It functions just like the actual scaffolds used in construction. You can read lots of things about trading in a relatively short period of time, but you won't learn them when you read them. You may think that because you can remember them that you have learned them. Not true. I've seen it in language learning over and over again. Something you read today won't be of any use to you until you have a better foundation under it. It may be two years from now, but you'll say, "aha", now I understand what that means. So, you need to put the pieces in place, one by one. Each piece needs to be securely in place, or in actuality, truly learned and assimilated. This takes a long time.

In trading there are two components. The first is the technical side. It's probably the easiest of the two, but it takes a lot of practice and that practice takes time. It can be indefinitely prolonged by jumping from system to system. The best thing to do is to learn one system (or a set of systems emanating from the same basic principles of a larger system) thoroughly. However, just getting to the point where one realizes the necessity of this takes time.

The second component is the learning about yourself. There is no guarantee that this will ever be learned. I suspect a lot of folks go broke before they do so. It takes a long time to come to grips with how one really thinks, what one believes and values, and how they act upon those things. It's a grueling process with many detours and delays.

Putting the two together takes much longer than one can imagine. Now, I'd venture to say that the vast majority of people who try trading think that they are above average. They've had success in their life doing other things they deem to have been difficult. They figure they can just apply those qualities that brought them success in the past onto trading. It's just not that simple.

For starters, half the people in the world are below average. Yet, if you were to poll a thousand people at random, how many people would rate themselves as such? Now this is not a knock at those people. It's simply to point out the mind games we play with ourselves. Humans tend to delude themselves regularly. I'm the first to agree that there are benefits to doing so. But that same type of thinking doesn't work in trading.

There are very few professions in the world that require one to strive for self-actualization in order to achieve success in said profession. Trading is certainly one of them.

I'm also sure that many of us here have believed that we also could jump ahead of the learning curve. I'm certainly guilty of that. Yet, I've found that it's taking longer than I anticipated, but not longer than what everyone who has done it has said it would take.

Now, this is not to say that you won't be a trading wunderkind. It just very well may happen. But seeing as trading is all about probabilities, I'd say the probability of you beating the learning curve is not a bet I would want to take.

Finally, think of it this way. If you do succeed at trading and it does take you 4-7 years, so what? Any thing worth doing takes time. I spent 10 years going to college to get the job I wanted. Think of any profession you want and point out how many of them can be learned in 1 or 2 years. Once I finished my education it took me years to work up the position I wanted, just like any profession requires. But, just like my profession now, I can do it for the rest of my life. The same is true for trading. If you succeed at it, it's yours for the rest of your life. You'll be able to make a living at it for 20-30 years. But you're going to have do it the old-fashioned way....earn it. That takes time.

Nat

yet another quote.

A quote from this pdf:
The difference between M1 chart and the multiple time
frame charts can be compared to two weathermen. One
has to prepare the five-day forecast by trying to harness
the number-crunching power of millions of dollars
of computer equipment and pour over decades of
charts and data. In the end, the public scolds him (or
her) because something is usually wrong…especially
that fourth and fifth day. The farther out the forecast,
the worse it gets. The other weatherman, however, is
praised daily because he’s almost always right. You
see, his job is to prepare the weather forecast for just
the next five to ten minutes. Put a thermometer in your
hand and you could do his job just as well! That’s
because, by predicting the weather for just the next few
minutes, you don’t have to deal with all the random
variables that the other weatherman does.

quote

Awesome post by USDtrader. Taken from here.
All i can say is find your own trading method, and KEEP IT SIMPLE. mastering your method means you're the star. You're in total control of your trades and your financial destiny.

What works for some people may not work for others. this is what works for me.
I am a Day Trader. I use a 1 minute chart of the EUR/USD, because of the tight spread.
2 moving averages. and some times a stochastic. Most traditional methods of trading use multiple time frame charts. the 5-, 10-, and 30 minute charts are all supposed to somehow give us some magical power and accuracy when these charts confirm a certain price movement. The biggest disadvantage of those methods, general, is missing a lot of opportunities.

Take a look at a one-minute chart of the EUR/USD, and you'll notice something. The vast majority of the time, the EUR/USD moves up and down at least 10 points or more every 5 to 20 minutes. For instance, if we have a total 10 point move on a 1 minute chart. I can get in and outof that move and make a 10 points with ease. But,if i wait for a 5 minute chart, etc., by the time it shows the confirmation, guess what? the 10 point move is over! Even if i use a single, five-minute chart, 90% of our signals are never seen.

With multiple time frames, I miss a lot of opportunities to catch the small movements, that could mean a substantial gain, depending on how many pips are being traded.
A single, one-minute chart and two tuned indicators combine forces seek out even the slightest moves in the market and lets me turn them into quick, in-and-out trades.

I don't use pattern recognition methods. candlesticks. I don't try to predict trends or the future, or resistance and support levels, or pivots, when the market moves i move with it.

The best trading hours for me are the first and last two hours of the market. (the london session and New York session).
===
I guess I like it because I want to read these kind of posts, but I still like it, and it makes sense too. If you can catch 10s of those little waves for at least 5 pips each, then it means 5*those tens! + big moves after news. Whew, a lot of posting today, I wonder if I'll ever read this. Maybe when I'm 90 or so..

Yet another update

I think I'm really interested now. Can't really justify it yet if it is profitable or not, but some guys seem to be making a lot of money doing scalping instead of taking the bigger moves. It is true that when trying to catch the bigger moves it involves more risk, because you have to give more room ro the market, on the other hand, when scalping, it can be pretty tight, depending on the market range. On different forums, a lot of different ideas, a lot against scalping, a couple for, I guess I'll have to figure it out for myself. Well, since market moves in little waves (if on 1min chart) it might make sense to catch both those little downs and ups, thus increasing overall profit (or loss). But if I chose to wait for the big set-ups I might have to wait whole day and see nothing.
This evening I entered a position on 1min chart set SL for 10 or so pips and went a way from PC for a while. When I came back, it was past 9pm, right after Federal Open Market Committee's meeting, and it was +40-50p. Well, as a saying goes, to a good general luck is important, hehe. Did a couple more scalps after that. So, overall stats: +44 +5 +2 -9 +2 +3 -7 = +40. (-4 from scalping). It's still better than doing 15min charts with WCCI, for some reason. All this little trading was done in one hour, so it seems that it has potential. Market hours were very bad too. Only NY was open, London closed. But the news were big, and the move was substantial too.
About indicators when scalping - cci might give me a bit too many signals, but I'm yet to test in market hours. Dana-type ghosts come into my mind, though there might be a bit too many signals. A lot of people seem to be using only moving averages for scalping trades. I wish I had better access to day trading hours, though..

edit: Seems that brokers make money by trading against you. Makes sense, doesn't it? Statistically 90-95% traders fail so it's smart to do that. Scalping on their side, heh. Brokers seem to be against scalping, but if you keep the trades for at least a couple of minutes, then it's ok. One guy defined scalping as trading against price differences between broker chart data and holding for just a couple of seconds. For my blog, I call it something that's primary goal is <10 pips.
Happy trading.

Scalps and indians

Well, I think scalping got me hooked. So far after reading a lot in forums, seems like it might be better than waiting for the big trades to come. And the market, at least, should be more likely to move according to cci, since it's moving on it's own, without news. The chart is roughly 4 hours. 1 minute chart. When doing it live, it's most likely impossible to take them all, and maybe focusing on 5-10pip profit might be the key. Right money management comes into play too. What I like about this idea, isi that you would take trades on the little swings, instead of waiting for the big ones to set up. If following 4 or so instruments, it might result in 100 or so trades per day. Very interesting and tempting. Considering 100 trades at 6 pip profit, 4 pip loss, and 60% accuracy, would turn out a winner, and not a bad one. 60*6-4*40=200pip profit. Imaginary numbers, but anyway. Will be updating.

Scalping

Just a thought - in Oanda's forums at least 2 rich people (with acc over 100k) were talking about scalping. Generally, it makes sense, intraminute bars are about 4-5 pips wide, and with oanda's 1.5 pips spread on EUR/USD, it might be profitable, or not. Generally MM comes into play as there are literally hunderds of signals during the day. I probably have to investigate this further. I wonder if CCI shows signals just as well on small timeframe charts. Maybe a small tick chart would do (up to 20 or so).

I probably have to look at that coin flip trade video on woodiescciclub. This might work well where you enter on green bars, and exit on red, considering the mini-trends are significant enough.

Isn't this grid trading, though? One reference in OANDA talks about 1000 trades per month, which is.. around 30 trades per day. Roughly a trade/6min. Managable. I wonder if it's possible to couple this all with trading news. Doing it with limit orders and otherwise going grid scalping? Definitely worth investing.


Notice the chart. The small swings are around 10 pips, each bar around 4 or so pips wide. If taken in account the 1.5 pip spread, so that would be around 5-8 pip target. Not bad if done 30 times a day. Ultimately, 150 pips per day? Just ultimately, of course. Maybe this 30 trades per day is even too little of a number. This one swing is 15min, for 10 pips. You can always couple that normal news trading which results in huuge moves. Well, this might be really worth investigating further. Suppose a 20-30 pip swing in a market. During that, the price usually bounces up and down many times, and if scalping, one could take advantage of those little moves, and then go up the timeframe for news trading. However it even works fine with new tradings where you generally would use 1min timferame.

Oanda's 1.5 pip spread one EUR/USD might make it possible. Gnerally, it won't differ from futures in that respect where you have to make at least +1 pip to make for the commisions.

Another good thing about this would be not-so-wasted time. Generally I can go mad waiting for set-ups to form, even on a lot of pairs.

update

Today it's going to be a couple of charts. On the left a choppy market, CCI mainly between 100s. Ignore the pivot lines, bugs.
Middle chart: entered on this ghost long here. It went for +19pips and I moved my stop to BE+2. Then it turned back, and then turned back again leaving me behind. Need to keep this in mind. This is already the second time something like this happening to me. I probably need to re-think my targets and how I move to B/E.

A nice ghost there, symetrical and all. Worked well, butnoticed it too late. With the trend, too. It's damned true that trading live is different than watching static charts. I really need some soft to do tick-replay. Not affordable currently, though.
Another thing to re-consider is my main stop-loss. Currently it's at 15 pips, maybe moving it to 10 might be smarter. Most of the obesrvable trades are ~20pips. But then again, not. Today the leading indicator news in USA resulted around ~80-100 pip movements on most major charts.
Maybe I should putting in buy limit and sell limit orders as per that ebook where you put a limit order just a few ticks above and below the last few minutes' bars highs and lows. After it gets opened, possibly manage with CCI. Yet to think about the small ups and downs right after the news. On EUR/USD there was no CCI signal, at least which I could have noticed before a 80 pip movement.

Entries and S/L

I should probably put a S/L just a few ticks above the last bars, seems like it usually doesn't retrace back up more than that. I have yet to figure out what to do with entries, on a 15 min charts, I usually get in too late.

Money Management

Having read several articles on money management, it really seems to be _the_ answer. Even though statistically professional traders experience more losing traders than winning trades, in the end, they come out as a winners.

Expectancy.

Suppose we have a system which works 40% of the time. On a 10k account, with an average loss of 2% and an average win of 4% means:
(0.4 * 400) - (0.6 * 200) = 40 net profit.
This can be done with percents too.
(40% * 4%) - (60% * 2%) = 40/100 = 0.4% = 40;

The formula:
(Win% * Win_average) - (Loss% * Loss_average)

However the trades go, if you follow your system, at the end of each day you should have a positive change in your account. This makes sense and follows nicely the casino analogy from "Trading in the zone".

From www.arbtrading.com:

Say you had $100,000 for stock purchases, and your expectancy was only 1.2% per trade but you turned over your stocks 250 times in the same year. This method ends up generating $300,000 for the year, and that assumes you never increase the position size as the equity grows. You just had a better year. And it is easier to get 1.2% per trade than 50%.

The bottom line for a great bottom line is:
A positive expectancy
A good number of trades
A short holding period

==

Well, I suppose WCCI just does that, it has positive expectancy, well at least woodie has. Quite a numer of trades generated over a day, couple that with more than 1 currency pair and you have a lot. And holding period around 1 or so hour.

Trading in the zone

This blog is probably not going to be read by anyone (except for one forced person), but if it is, here are some reasons why I do it: this is primarily for my main reference and a way to summarize my findings. It's been said that when you have to teach something, you learn it better, so I'm using it to summarize and structure my thoughts better.

I've read Mark Douglas' book "Trading in the zone". It's a pretty neat book about trading psychology. A big book with a lot of talk, but here is what I got out of it:

The market itself doesn't do anything else than provide information. It's neither good or bad. In any single moment, market tells us what the prices are, but never tells us what the next move will be. We are not responsible for what the market does or doesn't do, but we are responsible for everything else that results from our trading activities, so there is no point in trying to beat the market. We have to embrace the responsibility and stop expecting the market to do or give anything to us.

Our minds work by associating things and sometimes we might see the same patterns forming and think that the situation is the same, but it isn't. Each and every moment in the market is unique and should be taken so. We must be in the "now moment" and possibly pay for the information (take loss), or take profits by the market movement. You are never 100% sure.

It is important to develop the right state of mind. A state of mind that perceives the opportunity flow of the market without the threat of pain or the problems caused by overconfidence.

If, before entering a trade, you define your risk and keep in mind that the market can move up or down, there is should be any stress because you have defined your risk. If you had to bet on how a game where you flip a coin, and it has been 10 numbers in a row, how do you know that the next flip is going to turn into heads, if there is 50% of turning into numbers?

Before entering a trade you need keep in mind: 1) if odds are in your favour 2) how much will it cost you to know if it works or not 3) that you don't need to know if it will go with or against you 4) that anything can happen.

Trading is a numbers game. You have to think in probablities. Be the casino. The casino knows that even if it has to pay out some winners, in the end it is going to have profits. Each loss puts you closer to a winner. If your system gives you a legitimate entry signal, don't bother thinking - determine the risk and enter the trade.

Because each trade is unique and trading is a possibilites game, you have to take each trade independently and don't be biased with whatever your last trades were. Even if your last trades were losers, it doesn't mean the next ones are going to be losers too.

Things to develop as a trader: 1) self trust 2) flawless system execution 3) thinking in probablities 4) being consistent.

Belief: I am a consistently successful trader.
Belief: I am a consistent winner.
Beliefs:
1. I objectively identify my edges.
2. I predefine the risk of every trade.
3. I accept risk or am willing to let go of the trade.
4. I act on my edges without hesitation or reservation.
5. I pay myself as the market makes money available to me.
6. I continue to monitor my susceptibility for making errors.
7. I understand the absolute necessity of these principles of consistent success and therefore I never violate them.

4th is very important when dealing with a system such as woodie's cci. I've missed many trades by hesitating. On 5th: Douglas talks about taking partial profits. I.e. starting with 3 contracts, 18 ticks overall risk(6/contract), market moves up 4 ticks, you take out one contract, leaving with max risk of 8 ticks. Then market moves additional 6 ticks, you take out the second contract. Now you are in a risk free zone, with 2 ticks profit.

The fundamental truth about the market:

- Anything can happen at any moment.
- You don't need to know what is going to happen at any moment. (= statistics)
- There is a random distribution between wins & losses for any given set of bariables that define your edge (approx 50-50% when flipping a coin).
- Your edge (entry signal) means that the odds of market's movement are in your favour.
- Every moment is unique.

Belief: I objectively identnify my edges.

What is necessary:
1. To have an edge that puts the odds of success in your favour (WCCI definitely does that).
2. To have the right mindset (in progress..).
3. To be able to do everything you need to do over a series of trades (execution).

===
Well, that's basically how I would summarize it. I probably missed out a lot of concepts and ideas, but I'll probably be re-reading it any time soon and post accordingly. What I'm definitely taking out of it, is that I must react to the signals, without hesitation. Also define my risk and be willing to pay it, since I ca n not be 100% sure. To be consistent in my trades and to not bother myself over how a trade goes - I have my risk defined, the CCI tells me so, and it's still flipping a coin with odds with me.

Well, we'll see how soon I'll enter the zone!

Something to avoid

The major pairs seem to go flat at 20:00 local time (GMT: 18). Bad time to take trades. NZ opens 23:00, and Australia 01:00, Japan before 02:00, guess it's good to star trading around 01:00 to 02:00 for Asian open.
Another thing to consider is taking major pairs including the same currency, i.e. USD/CHF, GBP/CHF. I guess GBP/CHF isn't major, but well, both went against me, so probably one is enough.
Putting two cci panels on my charts, one 14CCI and another 34CCI. Haven't yet decided which to follow for 15min forex charts. I think it might be interesting to see how entering on 14 and managing on 34 would go. CJ from woodiescciclub uses 14 on everything <1h, while Costa uses 34 <1h and 20>=1h. Since trends and minitrades last longer, 34 might be a good indicator to stay in the trades. I'd really prefer one cci chart, though. Maybe when I have the capital I'll move to the futures, who knows, the faster pace they have there kind of appeals to me more, but we'll see.

CCI

It's pretty amazing how well cci works. Check out the ghost up there, and then how well it followed the trendline down. It hit it during the bar prints at least 2 times, and then bounced off of it. Got stopped during the first such hit because of too tight SL. Great market move of around 100pips.

Dana's ghosts

Listened to my first Dana's tick replay today. (in a HotComm room. If you don't have a subscription, you can get one week trial there)Was totally amazing. She sees ghost pretty much everywhere on cci. In two hours paper trading she made ~1.2k with 2 contracts on futures. Amazing. In the tick replay, somehow, there always there some ghosts to trade on, no waiting! Ghosts can be used for both entries and exists. If we enter short with a ghost and then we see an inverted ghost forming, it might be a confirmation. However, if it starts forming a counter-trade ghost, that might be our exit. There are pretty much no rules as to how to draw the neckline, it can be long, it can start on one side of the ZL, whatever, and they work! After the replay, I'm seeing them everywhere. a great example below. Triggers entry just before a huge up bar. Note the big shadow, probably a tick chart would have helped. But then, maybe not.

Some ideas

Well, even though today seemed quite slow on market moves (well, at least to me..), I figured that one absolutely must wai for a pattern to develop. And they do develop over the day, and there are so many instruments you can find them on!
Vegas trade:

Great ZLR with 34EMA above and LSMA red:

And a very nice ghost followed by famir:

Entry

I found out about forex just a couple of weeks ago. I had considered the possibility of making money on stock market, but for some reason decided to choose forex. This blog is going to be the place where I'll monitor my progress, notes on any interesting/useful findings, methods, etc. Currently demo trading, learning wcci.