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Learn to trade NOT trade to learn

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  • Learn to trade NOT trade to learn

    Nick, I hope I am not overstepping here by posting my ideas and styles. I love to help and give back and I have a great knowledge in business and starting with nothing and making something. Think on this quote-- "Rome wasn't built in a day" Now relate that to forex then you should think on that quote for your growth of your account and don't expect instant money.

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    Long post here but I hope some valuable information from TucsonTDR.

    Learn to trade NOT trade to learn
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    That is what demo accounts are for if you are not sure how forex works. As many of us know in forex all that needs to happen is the smallest rumor or event and a substantial price action could occur and for the ones with high leverage are the first to lose. I have been a part of this room for only 2 weeks now and I have seen it with too many players that are great people but just risk too much. When you risk low % your mind is not playing against you that much so you can usually get out of a bad scenario relatively unharmed. I am saddened when I hear a person loses 10%+ on a single trade in a single day. Unfortunately with this part of the year and low volumes people have lost 50% in just this room over the past week. If this is pure gambling money then that is fine but if you are playing with money that you need a return on then this is just plan sad.

    Here are some of my styles:
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    Buy at lows and place SL under previous lows – best way to catch a bottom with limited risk. Put in a buy at % ( yes that is a half percent) as a first buy. If it goes against you but you still feel the trend or trade is what you originally planned then add that second position at lower costs to give you that 1% trade. If you are correct in the trade and it goes as planned then you should be in profit on both of those trades soon. When that happens you should place your SL at or close to break even. At that point you are playing with house money and adding additional positions is with very limited risk as now you get back to trading with your money until it moves more in your direction. Rinse and repeat with the SL so you are using house money and not yours if it turns against you then the losses will be zero or very limited. If you don’t want the added risk of adding to your original position then keep a trailing SL so you will always make a profit or keep the SL at BE so you can handle the larger swings until you are ready to close the position.

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    They key to trading small is you wont have that greed come in to make you TP too early. Then come back and see it went another 50 pips in your favor but you sold due to having too much leverage and worried.
    When shorting place Sl above previous highs and hope for a reversal.

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    To trade you should not use more than 1% per trade max = 100 pip SL on average- if you have a $10,000 account then you should be trading no more than 1$ per pip, if you trade at $3 per pip then at 30 pips you are at 1%.... so that dpends on your style and risk. At $1 per pip if the trade goes against you 300 pips then you are only 3% in DD for this trade. That is not the end of the world and if you are a good trader you should be able to trade out of this unless the trend is completely reversed and you should just exit once that is determined. Use simple math based on your account size and trade accordingly. Even if its .10 per pip trades then so be it. People need to think in % and not $. Gaining 5% per month is amazing and the top traders of the world don’t usually achieve this. So why is your goal so much higher.

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    When you are in heavy DD then you need to slow trading down or stop completely until it reverses. Don’t risk a margin call due to over trading with large DD. While in heavy DD just trade demo to learn more while you wait.
    Another idea if you can afford it is to start off by adding 1 to 5% a month into your account as a “drip” to keep increasing funds so your DD wont get out of control or you grow it that much faster. That way you can not worry about trades going temporarily against you and you can keep trading the same original %.
    For my style of trading, I find that when I am in a losing trade I trade so much better on that pair as I get to know it much more than originally planned as now I want to either get out or find out why it went against me. When you are in a losing trade you learn the trading patterns much more intensely on a day to day basis and learning that really helps you profit or get out with limited risk or loss. having too much leverage will make you exit much faster.

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    Positive swap trades, long term up trend, get SL to BE and use positive swap as an incentive not to sell. If the position is in an uptrend and you don’t need that money then let it ride.

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    Position trading – buying lows( or selling highs), buying more if it drops every 2 to 300 pips against you. So your positions needs to be small, .5% per buy and hold long term for those 500 to 1000 pip gains. Again its best to position trade on swap positive pairs. Sort of like buying stock, if you don’t need the money why not make 1% to 10% ++ while you trade other pairs. Exotic pairs are great for this as some are very high yielding. I like swap pairs where I can invest $1000 and buy 1 mini lot and get pip a day for free or more in swap. It would have to go 1000 pips against me before I get a margin call ( if that was my only trade in the account or money) if it doesn’t go down that far and eventually gets back into profit I will be earning swap the entire time. Again this is for traders that can set aside money for this style while still trading in another account.

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    If you are trading forex to double your money every month then you are just being ignorant to how money is made in this world. Trade reasonably and earn growth as one normally should.
    Not trade when you have large DD, wait for those trades to come back. It might take a week, it might take a few months add funds if you can while you have large DD.
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    Not understanding the pip to $ ratio can be devastating, especially when trading exotic pairs.

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    Scalping doesn’t usually work for me but I love to jump in knowing I can easily make 10 pips but the fun part is once you get 10 pips ahead, then set your SL to BE and let it ride. What’s the harm. Now you are using their money and not yours. Increase positions as it moves up if you wish and keep moving that SL up. Now you are playing with more money but again its not yours anymore, its all free with zero risk.
    On the above watch out for news as SL sometimes are not taken when very volatile.

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    What I see in this trading room and have seen this in the years I have been trading is the risk reward ratio is a$$ backwards. If your style is to scalp for 1 to 5 pips then you need to set your Sl to about the same. Why on earth are people taking 100 pip drawdowns to only scalp 5 pips.
    Reverse trend trading, now this is not for the unskilled but can equate to easy scalping if done properly but not one I would hold for any length of time, like 1 hour or 1 day max. If you are successful in a reverse trend trade then you could take that trade again on the flip and use those profits you just made as your SL on the second trade and ride it up to the next level if possible.

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    Trade pairs you know about or have traded frequently. When you know the pair and countries economics and policies and potential news you can trade so much more profitable. Taking in DD can sometimes be to your advantage if you start with a small trade first.
    I have been trading for over 15 years but most of those years have been in equities and stock options. I have been buying currency for about 10 years but always through my full service broker so I was always a position trader for long term buying swap positive pairs and just holding them for a long time or until the rates were not in favor any longer and I could exit with decent profit.
    I started trading forex online about 4 years ago and when I first started I blown two accounts due to having bad money management skills and over leveraging. My main business took off so I stepped back from online trading and about a year ago I opened an account online to do it again.
    I am using a great ECN broker with some of the lowest spreads and rates but I will soon open up a meta trader type account with them so I can sign up with some signal services here as there are some great traders in this room and I am learning many of their styles before I just jump in to pick one or 2. also this myfxbook is really nice and I will get set up with that too so I can show my figures in real time like many of you do already. Unfortunately with my current platform I can’t link it to myfxbook.

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    I have no special talents and I am a lousy chart reader so I am not great at calling signals except on the pairs I know but I have the trading skills and knowhow to not get in a massive drawdown position or I know how to handle it. for me if I was 1000 pips down on a position it would mean I am only down 10% but that is a huge amount if its only 1 trade. I have never been down that much except on my carry trades but for me I am not one to stress on being down several hundred pips for a month or two unless I am losing on swap, then it bothers me. Unfortunately for me having a US broker I cant hedge with the same account.
    I hope people respond and correct any ideas I have or make suggestions. I have so much to learn but as many here I love the vibe of the forex over equities any day.

    “Lets be careful out there”

    TucsonTDR
    Last edited by TucsonTDR; 01-04-2014, 11:15 PM.

  • #2
    Thanks Tucson,

    Very interesting post and I agree with almost everything you've said.

    I appreciate you making the effort to help out, you have hopefully stopped a few traders from damaging their accounts
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    • #3
      My outlook for this coming week or two. January 13---->>
      My trade set ups for this week will be to buy USD on any dips. Also to short the Pound on any surges in price. I had about a 4% gain last week so I am placing that gain of 4% into these trades to hopefully double it or more. I hate to lose all what I gained but I feel the trades below are a good risk/reward.
      All items mentioned below are just my ideas and strategies. When I position trade for short term I will also trade these intraday with other positions to scalp or make a few pips here and there but I will keep the initial positions or trades intact unless there is a reason to exit prematurely. The hard part for me to trade the Pound and Euro and that because those markets are open when I am sleeping so I normally avoid these pairs around news times but I am feeling these trade set ups will go as planned and I am using limited risks.
      I like trading anything against USD and YEN and AUD are my 3 favorite pairs and since Canada is just north of me it’s a top favorite in my book as well. The ideas below are just my ideas and one should trade based on their styles and due diligence.

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      1- I think the USD data last week was obviously poor in many ways but for the unemployment to hit below the major psychological level of 7% is a major positive and will be the savior of the USD until next NFP. I truly feel and hope the next NFP will easily beat the numbers from last Fridays report and as long as unemployment stays under the level of 7% we will be in great shape to continue dollar strength. USD/JPY I feel is an incredible buy under 104. USD/CAD is one of my favorite pairs and I did get caught in a short when it hit the price of 108 but sold it when it crossed 10850 for a loss and shorted it again at 10940 and I still hold it but will cover at open today with the hopes to re-short it again at the 1.10 level as I feel this pair will rise but I think it’s a risky trade to go long unless oil keeps dropping and I am unsure if that will happen in a short time frame. I will also buy UCAD if it drops under 108 again in the short term.

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      2- EUR/USD – SHORT, SHORT AND SHORT AGAIN…. Is my plan. I do feel this pair will hit 13500 area as that is major support. I feel shorting EU up to 138 is a no brainer and if it breaks that resistance and holds above that even on an hourly candle then its time to take that loss and wait. I am hoping for a Monday small gap up in price to short it with a .5% (1/2 percent) short and short again if it goes against me at the 13750 level and cover those shorts if we break 13800 but I do feel this pair will hit 135 before 138 and hopefully 13550 area before next major USD news.

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      3- Shorting the GBP – my trade set up will be to short the Pound against its weakest enemies and that is the Aussie Dollar and the Yen. I hope for a gap up on Monday to short at the opening. GBP has some very substantial news coming out next week and my prediction is that the data will come out weak or weak enough to stop the growth against those pairs and come down a great deal. Also I plan to short GBP against USD as I don’t see much upside potential for the pound against USD and I can set SL just above 16620 and short every 100 pips up from my original buy if it goes against me up until it breaks 10620 then I will be stopped out for a loss of around 2%.

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      4- The potential downside for the Pound- I see a price for GU to hit support around the 163 area where I hope to close these shorts for a 150 pip gain. If I feel more downside is possible I will cover half or of my short position and let the rest ride. On GY I can easily see this one dropping to 170 and I would sell half and hope for the rest of the pair to drop to my prediction of 167 area. If anyone has traded this pair you know the massive swings this one has and can drop or rise substantially so this trade is very risky or will have some wild swings so regardless of what side you are on please trade this one with a small position. On GBPAUD basically the same and I hope to short this at open for my first initial position and place my SL around the 18550 area but this one has dropped almost 300 pips so far last week so it might see some strength going into news.

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      5- On any of these trades above I take an initial position of percent of equity and if I still feel this position trade is going as planned ( even if it goes against me ) I will continue to buy small positions to average in or until I am stopped out. If this trade goes as planned I will place TPs and possibly some trailing SL so I can add positions with limited risks and keep adding small positions as it goes in my favor.
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      6- If good data comes out for GBP then I will possibly close out these trades but I will be sleeping so I might get stopped but I predict I will be OK.
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      7- I don’t feel the Pound is weaker than the Yen but a pull back is needed and I hope a big one. All In my opinions…..

      Happy trading.

      Please post any comments regarding this or any trade set ups you might have for next week.

      May the force be with me 

      TucsonTDR
      Last edited by TucsonTDR; 01-12-2014, 05:27 PM.

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      • #4
        Good advice. Thanx.

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        • #5
          Sad to say that for me its the other way around and i know its wrong. I just cant trade demo accounts. I need to practice with real money even if its $10.
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