Posted by: joetradingplace | July 9, 2012

Word of Advice

No setups today…so loads of time on my hands:

I have noticed that a lot of new traders and struggling traders are always looking for new systems or strategies. Most of them don’t want to do the hardwork, they always want the easy way out..but that doesn’t exist in life. Trading is the hardest way to make an easy living…don’t be fooled by forex adverts from some mentors…thats a way to market their services. And also don’t be fooled into buying some trading robots…most of them are developed by programmers not traders…If those robots where making the amount of money they claim to be making, I don’t think they will be selling them, instead they will trade them. I dont think that someone with a secret code to withdraw money from any ATM machine will go around selling that secret code to the public…he/she will use that code for his/her own good and maybe close family members. You wouldn’t see them advertising it on the internet “I have a secret code to withdraw mny from any ATM machine…buy the code for only £150 and you will never work for the rest of your life.” “Check out some testimonials of happy clients who bought the code…”

Nothing comes easy in life, we all have to work hard for what we have or wish to have. If you want to be successful in trading you have to work really hard because most people have to self train in trading and it’s not easy. I remember when I graduated and got my first job, the graduate programme lasted almost 3-4 years and I had a mentor throughout the process. But in the world of trading its different, you have to self train or if you are lucky you might find a good tutor, but they are rare to come by…you have to separate the wheat from the chaff.

Newtraders always want to pick the most complicated trading strategy, I don’t know if it’s for the purpose impressing a few friends or family members. The first thing most traders will know about is support and resistance…but they quickly dismiss this simple concept of trading and start looking for fancy stuff…they then start jumping from system to system, and then they read some books on physchology…learn about discipline and patience…later in their trading career…(if they are still in the business), they realise that keeping it simple is the way forward…they then go back to the simple support and resistance.

Most traders focus on entry and forget that exit is the most important…I have seen some traders who are really good at picking entries, but they end up losing because they can’t manage the trade properly. They let their losses run and take profits very quick…how do you expect to be successful. They can’t stay long in a winning trade because they fear that the market will take away their profits…but they stay long in a losing trade hoping and praying that the market will turn in their direction. Hoping and praying is not a strategy…its a recipe to disaster. If they win, they are the happiest person on earth and if they lose they are the saddest person on earth…dont let the market play you like that.

If the reason you have entered a trade has changed, WHY do you exit early? If you are position trading a market and you are, for example, buying a considerable distance above support, then that last support is the reason for entry. Until that is invalidated, your trade reason still stands. The “market” knows or cares nothing of where your break even point or fixed trailing stop is. These two latter terms, if based on monetary concerns (not wanting to lose, wanting to protect profits) rather than based on technicals (keeping a valid s/r level between you and the price) are useless.

I have also noticed that a lot of traders place their SL or targets in monetary value…that has no value in trading…a SL is either placed below/above a technical level and also a target is placed on a level of technical significance. Lets say you take a trade and you use 30 pip SL…if you bought at support and your 30 pip SL is above support…dont be surprised if price stops you out and then moves 500 pips in your direction. Why not place the SL below support or below the lower low. Same thing as targets as well…yu say you want a 3:1 ratio, so yu place your targets at 90 pips…but what if there is  resistance 40 pips away from your entry…you should be able to put that into consideration before you aim for your 90 pips gain….if market starts to stall at the resistance, you should reconsider your target.

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