Friday, October 19, 2007
Tuesday, October 16, 2007
What's the trick though? The thing is that leverage kills and people who invented the retail FX business knew it - thus there are so many retail platforms all over the place - this is a great way to make huge profits as 99% retail accounts get margined out in the first year..
This is not a true statistic measure since I don't have one but it is knowledge I have collected thorugh my experience in the FX market in the last 5 years (I started back in the Fall of 2002...). And yes - most books state that every 9 of 10 retail traders give up in the first year.
Why I am still in the market? This is a question I ask myself everyday. And some of the answers are that market is a pure extrapolation of human mind - a clear representation of the true self and I try to gethold of my own emotions and thoughts through mastering the trading practice...
And Leverage I think is one of the key elements... while in the beginning it was Technical and Fundamental analyses - now when most things are quite clear Leverage becomes the key to trading success as it measures the emotional bias and the level of GREED one puts into his trading.
See this as a vicious circle:
Greed makes you use higher leverage ->
Higher Leverage derails your emotional balance and inreases the FEAR factor ->
FEAR makes you think irrelevant and make wrong trading decisions ->
you kill your self (your account is margined out... in trading terms)
So I have set myself now to a test - trading 1 lot only - thus trying to implement some basic set of Money Management rules...
Wednesday, October 10, 2007
I wat to highlight the idea I got from the Interview with McKay in Market Wizards:
>>> Susccessful traders always trade a system that MATCHES their own PERSONALITY.
Buying event the best system doesn't guarantee you will be profitable. Only developing a system that matches your style and a trading style that matches the personality of the traders is Essential!
I believe my recent experinces and losses just amassed due to my attempts to duplicate other persons' systems. Well either it was not fully understanding the system on overleveraging on a given siganl that didn't go right or not taking profits and turning gainers into losers -- these are all terrible mistakes...
Yes certainly they are... but I beleive it is just a tiring lesson that I don't need somebody to tell me how to trade since I got enough evidence I have a right view already and my chart reading has improved in yhe recent months....
I think I just have to believe in my own analysis and trade with respect to my own personality type.
Monday, October 8, 2007
Sunday, October 7, 2007
I believe there are several factors that affect our daily performance and also the long term outcome of our operations - no matter which sphere of human activity we are talking about:
2. Attention to detail
3. Intent / Effort
4. Visualise the successful outcome / Believe in your ability to succeed
5. Constant desire to improve the skills, knowledge and experience
Then there is other thing that will always come into your way - this is the basic natural cycle. Life is not a straight line -- so are the markets as they are a basic representation of Human Emotions - Greed & Fear.
Once you have a big gain - one has to retreat and remain calm, not go for even more as the odds are starting to go against him. On the other hand - every loss improves the possibility that next trade willbe profitable...
However the Fundamental Truth that rules life, nature and markets is BALANCE.
One has always to seek balance. Meditation helps to get over the periods when things don't turn in your own direction --- but you need to calm the mind also when you are on the winning track cuz the excess in Emotions - either positive or negative will always ruin the Balance and thus will bring down the Long Term foundation of Sustainablility.
Basically it's not new and nothing really clever is written here - it is just a reminder of all the things I have been thinking and discovering time over time -- just a mark in time of what I beleive today and how I think things can be done better.
Everyday and every moment is a fight for balance -- one can never really rest on his prior success because life and nature (and markets as a pure representation of life cycles) move constantly... SO yo have to move with the flow. This calls for constant effort, intent and attention.
As Vladimir (my Taijiquan teacher) says our own body is flowing but our mind can't identify this flow (the body is a complex structure of atoms and molecules that are in constant movement). Even if are standing still we just don't have the proper ability, the subtle sensitivity to feel the movement inside - and also to be calm, unperturbed and still in the movement.
This is the TaiJi principle in its true representation: The opposites attract each other - everything has both opposites in its foundation.
We just have to improve ourselves and discern the natural cycle - act in accordance with the prevailing trend and never fight the flow.
Friday, October 5, 2007
We are talking FX speculation here, right?
Once we set the goal - speculation - it implies a certain positive outcome of the whole exercise, correct?
So since it is speculation, it also implies a great amount of risk - so the money on the table are not for basic needs so we can look at the Trading as an Art not just a means to raise cash...
This way you start trading for the purpose of making the best of your knowledge, skill and experience in the market. Just like Soros says: "You develop a scenario and test it in the market."
So once I'm in the market again we will approach the dealing in a more subtle way. Other thing Soros said was: "At the end only the Trend followers survive." I have been truly convinced you don't have to hang in the market for 14 - 16 hours to make a positive balance - you actually need:
1. A good setup / timing
2. Reasonable leverage
3. Patience to wait for the right conditions align so you have the best R/R ratio on your side.
Other thing Soros said: "You don't have to be in the market all the time - but when I come to the office I really do something."
This is certainly perephrased but the idea is that one or two trades a week can help you earn a living - all the other time you just need to monitor and wait for the right setup - no need to overtrade.
No matter the bottom line facts... it was a time when so many mistakes were done, so much tension has been exerted and the fight was really fierce. Suffice it to say it was quite a terrific real-time educational course which now just pushes the trader's mentality transformation further even at a faster pace...
Every loss and gain; every time I got scared on a spike; every time I overleveraged and position size made me petrified - not able to make a sensible decision; every time I got faked out on a false breakout or got margined out trying to average out of a position I took against a major trend ---> well that's all the Old School of Hard Knocks...
I now beleive even far deeper that I don't need any magical other peoples' system. Nor that I can use a system developed by somebody cuz I just have to make my own set of rules designed by my own account size and risk profile... LoL..
Well, to cut the crap -- I have had enough evidence my market analysis is not worse thatn those of the analysts that appear on the Newsfeed -- their charts show exactly the same price as mine show and basically the reading of the chart is important and mine at the present point has got far closer to that of the professionals' point of view.
So what now is important is to focus on Money Management and Capital protection so we can build sustainable results.
On technical side of the problem - let's focus now more on how to differentiate the Range / Trend market modes - here are some suggestions to dig deeper into:
1. Bollinger bands - measure of volatility.
2. Trading breakouts VS. averagin out.
3. Average True Range - how to use daily ranges to find if the market has potential for a move or the market is exhausted.
Thursday, October 4, 2007
As we stressed hard on the need to strip away Impatience and Anxiety this can be achived through a set of rules that will construct a certain framework - a psychological structure of rules to abide by.
Let's take a simple rule of trading only 1 to 3 lots per position.
Say you enter 3 lots - if it goes your way -> Take profit on first 1 lot at the first 20 pips / Set a SL on the remainder at Entry -> Take profit on the 2nd lot at the next 10 pips & leave the last lot to run its course.
I figure this way it will be much wiser than watching every minute the position and getting scared on every spike.
LEVERAGE is actually the Paramaount issue to deal with as it's actually the Measure of one's GREED/IMPATIENCE...
> Remember -> Rome was not built in 1 day!
Tight leverage rules will constrain you from large gains, BUT it will save you from blowing the account in 2 trades! At the end it's a game of Survival.... and it's not funny to feed them brokers all those years....
At the end it's a mind game since I figure it out quite clearly all those years I been blowing the account every time cuz I was Impatient and wanted to do it alright in 1 day... and if I had a greatday I thougth next will be just as great and possibly everyday a true holiday.
However you see everyday poses a challenge -- a true challenge for yourself and your mentality - it makes you face yourself and once you see you make mistakes one after the other you are quite clearly exposed to the HARD FACT of being unable to retain a sustainable pattern of following the Natural rythm of life.
Just tell me how many times a day one can seize himself into an obsessive thought bound with achiveing a certain goal or aquiring a certain subject of desire.... Thus it all makes you feel Impatient - you exert tension upon yourself.
A friend reminded me the Chinese proverb about Attainment:
"Slowly, Gradually and Naturally!"
Please take a good note of all these things and next time you load your accounts follow the rules and be patient!
Once you start Not wanting it will be open to success - only then when all HOPE is gone will the real process get started... It's the Daoist idea of Non-Doing in its most natural way cuz whethter its Trading or any other practice or part of life - there are Fundamental laws of Nature that rule and one have to abide by. That's the natural way and you can't change it nor fight it - Just follow it.
Dealing with anxiety is dealing with yourself and your emotions. Anxiety is pushing you to the limit and once you feel on the edge it's all going wrong. Anxiety makes you impatient and brings forth the desire to make things fast, to achive what you think is necessary.
But in the end what is that important that it always makes you want more? Is it the GREED in you? Why you just can't have enough of what you already have? Why want more?
I believe that it will be only then when you actually want none that you will be able to value what you already have and things will start working cuz right now the pressure I exert on myself is making things very tense...
Once anxiety and impatience are lost and left behind then the calm will regain ground and the natural ruthm will be ruling over. One must not fight but go with the flow as it is the natural way of life.
No it was not! So what's the use in trying to build it one day or one hour?
So far there was no reason of doing it - but I felt pushing myself to the limit and thus exerting enormous pressure over myself. It all comes back crushing all the time, experience, money and knowledge I have invested I have beeen investing in my attempt to become a successful FX speculator.
Not that I didn't have spectacular wins - but more that I have been sustainably blowing my account due to overleveraging each and every time.
> Remember!!! Leverage is there to kill little retail account like yours! And it is the intrinsic trait of every human being of being both GREEDY and IMPATIENT!
So this is how brokerages profit from the 99% group (the retails that always get fooled and always chase the tail of it...). They give you 200 to 400% leverage then go shoot yourself.
Not that it's not fantastic! No, actually it's pretty nice going on a ride with a 100k position for 100-200 pips... but how often it happens? How often one can succeed to hold onto the winning position? And how many times one runs the losing positions for much longer or gets scared for 10 pips spike - just to see it going in your dircetion afterwards...
So how you go on from here?
Must be patient! And I got to formulate a certain set of rules to trade by from here on.
Just for the record let's say that on Last Friday I had one of my best trades ever - hanged in a 151 pip ride in GBPUSD on the break of 2.0325 to the high 2.04 - actually from 2.0229 to 2.0440 - with a 120k position - well pretty nice - then on Monday got a great short GBPJPY trade for like 80 pips with a perfect trade management -taking profit on half and then letting the other half to catch the whole move...
And the crash afterwards: Monday till today (Thursday) was arange market and I just blew the account to 0!
So you see - it just doesn't work like that!
Had a great gain - then had to lay low, take a break, lower leverage, trade less, wait for the right setup ---- what else?
Inretrospective I can see all the big mistakes. I made every possible mistake that could be made. So from now on I have all the knowledge, skills and experience to make this thing work.
Only thing is IMPATIENCE I have to fight with... Trading little gives no great profits but for the time being it can protect from losing big until the right setups come and until the rules start to kick in...
That's how it must work!
Wednesday, October 3, 2007
2. Consolidation / Range
Well, we know first that it depends on the timeframe, however we can easily discern those 2 modes in which market operates based on Hourlies.
Yes - one can easily look at the Daily chart for a direction - then watching the Hourly helps as a guide to what is the market really going to do. If Daily chart has a signal - one always needs the Hourly to precise the Entry and Exit strategy.
> TREND --- Remember! The market moves in TREND like 10-20 % of the time - and that's whenthe big moves materialize... then you have the other say 80% of the time for Accumulation / Distribution phaze.
> RANGE --- Remember! Once there was a big move the market will need time to digest and the new Accumulation/Distribution cycle begins - Big players unload their inventories on tops where retail accounts buy the Highs - - once there are no more buyers the market retraces 50% and you have another A/D cycle...
So basically range market takes most of the time since players need to make their minds - weak hands must give in and Big Players need to Accumulate/Distribute new inventory...
RANGE / Consolidation phaze can also be attributed as a Search & Destroy campaign for floor specialists, big Investment firms and especially Large Interbank players which have better info on stops and positions in the market and they try to gun the stops and always move in the direction that is most vulnerable...
E.g. if retail accounts are like 80% long the EURUSD - it is easy for Big players to move through the 99% crowd as this the direction of Least Resistance as most already are Long and there is no more cash to Support that campaign.
TREND / RANGE - Distinguishing the market Modus Operandi is not easy but Bollinger Bands which are designed to measure the Volatility can be of great use!
Some remarks from my Great Friend Oil Man:
> Most break happen on Friday as players square positons.
> Range days are mostly Monday and Thursday as Friday positons are in the process of Accumulation/Distribution.
> Wednesday to Friday are when most trends materialise - - also due to the carry interest swap points players long the High yielders against the YEN as Wednesday is a 3-day rollover.
Tuesday, August 7, 2007
EMOTIONS -- for sure!
For example I had problems with my girlfriend, didn't go to training and felt sorry about that - well, too many things one can think of...
The idea however is not to categorize those emotions but to get rid of them. Successful and most importantly SUSTAINABLE trading will only be possible if one achieves to be DETACHED from emotions.
Because emotions stir the mind and this leads to WRONG trading DECISIONS or to UNABILITY TO ACT when in a losing position!
REMEMBER: Even if my trading analysis is wrong - I would have better chances for success if I act upon a set of reasonable Money Management rules which are in accordance with the Equity size. Then if you are right but you OVERLEVERAGE due to emotions (greed is one I can think of..) then the first wrong decision will wipe you out!!!
=> Trading is Business. Business never personal.
One major goal is standing in front of the trader (and every man in general) -- it is the goal to be SUSTAINABLY SUCCESSFUL.
Saying that let's see how we can minimise the adverse factors that would hamper this mission:
LEVERAGE - in common language it's called GREED. I can frankly say that this is the single most important problem I have been facing all these years.
I got stopped out because of unreasonably over-leveraged positions so many times that I can't even remember the number. That's funny but what I'm trying to say is that nothing can happen in a week or two!!! At least not to me!
So the way is to trade following a basic set of rules first of which is to trade according to your Account size... this certainly means NOT to put 75% of the EQUITY on a single trade...
The problem is of course PSYCHOLOGICAL - the size of the position makes you feel petrified in the face of the adversely going position. What is worse - even when in profit I start to think it can easily go much more and don't take profits - until I take a loss or square for a meager profit..
So one has to enter the market only with positions that don't affect his analytical potential.
Another thing is other peoples' systems and the information flow.
One has to develop a system or a set ot rules that work for him becasue until one is distracted and acts upon other's signals or systems it will always lead to loss..
Even the best trader gives you signals - they might work just great for him but I for example can't take advantage because I don't have an understanding of the inner workings of the system - so I can't really discern when the system gives stronger signal and when not..
This easily is transferred to mis-managing the position sizes -- one starts to weight different sizes according to his view and that might not be in tune with the original model..
So - find what works for you and start taking advantage of it.
Enough for now.
Monday, August 6, 2007
as pointed 2.0288 provides good support (0.618 of the move 2.0460 -- 20.181)
> so I'm long heavily at 2.0314 for a retest of the highs - first target 2.0530..
-> other details to note is the Directional Movement Indicator ready to give a Up signal as the +DI is ready to cross the -Di from below..
-> RSI (9 period) is slowly going above the center line.
-> Momentum is in its lows which might suggest a low is in place or in the making..
Friday, August 3, 2007
Saturday, June 23, 2007
very interesting picture here on Daily EURJPY - some points that I observe:
1. the bigger formation (blue lines) implies a Rising Wedge - which usually leads to reversal , at least in the book examples
2. the recent consolidation (within the red lines) has a breakout around 165.05/15 where Resistance immediately turned into Support..
3. most interesting though is the Orange line which comes from the Jan - Feb Highs - it is like a central line of rotation within the recent consolidation -- I think a Central Pivot would be more appropriate to name it..
>> so if the consolidation was within an approximate 400 pips range - then a breakout at 165 would target 169 figure in EURJPY..
Thursday, June 21, 2007
Tuesday, May 29, 2007
Daily EURCHF chart - several things to keep the attention to the downside:
> the original trendline was already broken and upward momentum is slowing -- price is near the Channel bottom around 1.6485 - will wait to see a confirmed break of the line (close under the line and a lower open)
> we have a Shooting star pattern signalling the recent reversal
> RSI is showing Bearish divergence and looking down
> Directional Movement (9 period) is the last indicator to confirm the slide here
> 20 day MA & 34 day EMA are almost flat- prone to turn downwards..
>>> Most obvious Target is the 1.6300 level - - 50% Fibonacci retracement of the recent upmove (1.5930 - 1.65..) & also a previous Top
Hello! This is Daily EURJPY chart - hard to decide here as indicators are not in their extreme values and also the price is in the middle of the upward channel..
Trendline analysis tells me the steeper uptrend was broken - now we have a consolidation channel where the direction is still on the upside but the momentum is slightly waning...
MACD is coming down but notice the red line (MACD) is closing on the Signal line as if it wants to cross it back to the upside.. Historigram is supporting this scenario.
Directional Movement (9) is however still looking for the downside with the +DI pointing lower and the spread increasing... I assume if we have a close and open higher than 163.80 it might signal a move above the 164 psychological line..
Wednesday, May 23, 2007
short term trade (2 hour chart) - long EURJPY at 163.63 - - rationale:
> bounced off Trend line support
> +DI is about to cross -DI from below
> MACD has crossed from below and is close to the crossing the central line
> 20; 40; 65 MAs are all tightly clustered and I guess this points that they are all pointing at a pivot zone/level where the price is rotaing around in the present consolidation
in the same time USDJPY is very bullish - breaking the Feb 23 high at 121.61...