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My little Forex thread

AlwaysCurious

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Jan 16, 2008
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I, too, am facinated of the possibilities the Forex market offers. As I said in my introduction thread, I see it as a possibility to get a second income stream without risking my current J.O.B. With this income stream, switching to an own business (whatever that will be) should be a lot easier. To get a feeling for this kind of trading and to determine what reasonable goals I should set, I started demo trading on Oanda. I read a lot of Forex trading the last two months and am quite active in two related forums. Out of that I´ve chosen three strategies, that I'd like to test because they do sound quite promising. Next thing I did is I dug out the old demo account I abandoned long ago after few unfortunate tries. That´s why the account started with 77K$. (At that time I didn´t realize how to reset the account *sigh*). Leverage is 20:1 which I rate quite reasonable. In the graph below you see my proceeding for the last 6 weeks.



At first I traded with no money management at all. The risk per trade has been 20% and more. But accidently and unfortunately it succeded, giving a completely false impression as any serious trader will assure you. The next days I adjusted the risk per trade down to 4% which is still a little high, but hey, I wanted to learn, I wanted to trade. Because signals form the chosen systems showed up quite seldom, I my decisions were determined by hope or interpreting things into the graphs. I failed, but I failed with good stop losses and good money management :cool:. For the last 8 days, things stabilized. I managed to keep a 1,3% win each day. Doesn't sound impressive? Well compounding it's 11000% a year even with a low leverage... Of course this will not be constant all of the time with changing market conditions. The toughest thing to learn is to keep emotions out and trade mechanically. The other condition for me going live is the ammount of time, I put into this style of trading. It has to decrease signifficantly. Until I haven't prooved myself those prerequisites I am able to do this, I won't go live. Otherwise it would be lottery.


Lessons I´ve learned:
  • Choose a strategy. The more strategies you allow for yourself the more complicated are the following advices.
  • Only trade on clear signals of your chosen strategy. Don't trade out of a mood.
  • Always question you decision to enter a trade. Play advocatus diaboli with yourself.
  • Accept that there are days with no signals and no trades for you.
  • Take notes on every trade, why you've entered it. Track down which signals prooved to be right, so you can evaluate your strategy later on.
  • Accept losses and stick to your stop loss levels. Do not hope for things to turn out well by adjusting them and therefore taking a higher risk.
  • Accept your wins and don't get greedy. Stick to your TP you set at the beginning of each trade.
  • Accept bad days and carry on. Stick to your strategy until it is prooven to be wrong (not out of a mood!)
  • Accept good days as nothing special. Don't let your positive emotions lead you to take more risk than before. Don't change strategies to get even more.
  • Everyone has to learn this lessons by doing. There is absolutely no way in avoiding these traps without a thorough demo trading period. I have the strong feeling that another learning phase will start once it's about real money.
I intend to demo trade for at least another two months. The following prerequisites have to be met before I go live:
  1. Visible constant growth. Drawbacks are allowed, but I still have to determine to what degree.
  2. Necessary time for trading has to be reduced to 15min, three times a day.
  3. From an emotional point of view trading has nothing to do with gambling or adventure of some sort any more (as it is today, it's plain fun). It has to be mechanically.
That´s it for now. Feedback and encouraging comments welcome. Every once in a while, I'll update this thread.

Cheers :cheers:

(PS: Just to be clear: This is NOT my entire PLAN for fastlane. This is just one little aspect. The PLAN includes tracking of spendings, saving plans, simplifing my life, setting up own values and principles and deriving my future path from that. I intend to post on that once I succeed on my way there.)
 

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Sparky

New Contributor
Aug 28, 2007
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Hi

I'll be curiously watching how things turn out for you. From my own experience I think the paper trading is only useful in teaching you to work your system but not anything about the return. The big learning for me was live trading and how to keep your emotions in check while still sticking to the system ("just hold on a little longer, its gonna turn around soon and then I'll make a bucketload").

All the best.

Sparks
 

CarrieW

Gold Contributor
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Nov 12, 2007
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I have been paper trading for a few days and I have a few of my own tips/insights to share.

1. just because its a demo account you really can get a feel for it. I was at one point yesterday up over 230 dollars on a 250 dollar account. had the urge to exit the trade but didnt and stuck to my rules. I ended up closing out my day with a $41.39 profit. when I saw all those profits dropping I actually felt sick to my stomach lmao.
2. dont read fltm while trading.
3. sometimes when you have a very nice profit it can pay to break your rules and bank it instead of letting the gains ride.
 

CarrieW

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there is one. I just decided to follow the wrong one lol.

if you have great profits take it off the table or theres the let your wins ride. it seems I need more experience to figure out which rule to follow when...
 
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AlwaysCurious

AlwaysCurious

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Jan 16, 2008
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Update

During the last weeks I traded a lot with my demo account and as a result of that I can state, that I accomplished nearly none of my goals. It takes too much time, the strategies I chose are not performing well, but most of all, I haven't learned to trade purely mechanically by signals. I haven't learned NOT to trade. Conclusion: Forex trading is hard work and needs a lot of practice and an awful lot of discipline.

No, I won't give up, but I'll have to adjust my learning phase. On April 1st, I start another demo session more strict than ever. Until then I'll enjoy my easter holidays.
 
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AlwaysCurious

AlwaysCurious

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Jan 16, 2008
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Update

Forex is not an easy way, but it is even harder than I thought before. Anyway still my goals seem only to be just a little out of reach so I'm still trying. I admit it's highly addictive.

I didn't blow my demo accounts and I manage to get real good trades. Unfortunately the bad ones are the majoritiy, so I still have to learn not to trade if setups are not really 100% fitting...
 

cmartin371

New Contributor
Apr 14, 2008
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Keep Plugging away you will get it. One of the things I am learning the hard way, is to plan each trade then trade that plan. Too many people focus on the entry (it is important) but what are you going to do with it once you enter the market? This could depend on the system you are trading whether it be a weekly breakout, intra day, scalping.....etc. I feel that keeping your systems simple will benefit in the long run. Also, once you have a plan, stick to it and keep trading it. If you don't, you will never know if you have developed an edge with the system.
 
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AlwaysCurious

AlwaysCurious

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Jan 16, 2008
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You are absolutely right. The only thing is that it takes a lot of time to evaluate a strategy. And there are many promising strategies.
 
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AlwaysCurious

AlwaysCurious

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Jan 16, 2008
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Next update:

I think I finally decided on my future trading strategy. I threw away all fancy indicators I stumbled upon the last months and just concentrate on very few things:

1. long term trends - First I draw simple support and resistance lines on daily charts to get a grip where the market is most likely going to
2. daily pivot lines - just to take other traders into account that rely on that. These lines mark self fulfilling prophecies and are therefore good for exit points.
3. Moving averages as my only indicator to give me the entries based on short term price action.

That's it. My charts are not cluttered any more and my success rate increased. Now I'm concentrating on that little discipline issue I still have.
 

cmartin371

New Contributor
Apr 14, 2008
142
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Nashua, NH
Next update:

I think I finally decided on my future trading strategy. I threw away all fancy indicators I stumbled upon the last months and just concentrate on very few things:

1. long term trends - First I draw simple support and resistance lines on daily charts to get a grip where the market is most likely going to
2. daily pivot lines - just to take other traders into account that rely on that. These lines mark self fulfilling prophecies and are therefore good for exit points.
3. Moving averages as my only indicator to give me the entries based on short term price action.

That's it. My charts are not cluttered any more and my success rate increased. Now I'm concentrating on that little discipline issue I still have.
Now you are on to something! The only thing I want to mention is your Daily Pivot points. In forex many of the brokers have different feeds and many different open and close times. The Weekly and Monthly Pivots tend to give more of an accurate picture. I think you are going to find your charts will tell you more about price now. Happy Trading!
 

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AlwaysCurious

AlwaysCurious

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Jan 16, 2008
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You are right, I will consider that. For the very same reason I don't care for candle patterns in shorter time frames any longer.
 

Sparky

New Contributor
Aug 28, 2007
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"and my success rate increased."
Hi

From the above quote it sounds like you want to have more 'successful' trades than 'unsuccessful' trades. If this is the case (and if it is not, I apologise), you might want to consider roulette - just bet on all the black squares and about half of the red squares and I can guarantee that you will win the majority of the time. What you have to consider is the expected payoff from wins and losses.

E.g. I'd rather lose $1 ninety nine times and stand to gain $1000 once (with a chance of 1/100), than bet $1000 and win $1 ninety nine times, but risk losing the whole $1000 with a 1/100 chance. This is even though the second option gives you a 99% 'success rate'. What I am therefore trying to say is 'What is the expected cost of a loss? And the probability of losing?' and 'What is the expected gain of a win? And the probability of winning?'. (A) Multiply the probability of winning with the gain. (B) Multiply the probability of losing with the loss. Add A and B together and if that is positive (an overall gain), then you have a good system.

So don't go play roulette - the house will always win, even if your 'success rate' is higher than the houses' :)

Regards
Sparky
 
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AlwaysCurious

AlwaysCurious

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Jan 16, 2008
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Of course there has to be right money management in place so that I cut losses and maximize wins. And you are right, the only measurement of success is the ammount of money you get out of it, not the loss win ratio on it's own.

If chances were 50:50 then it would be indeed easier to go gambling. However, what I do want to accieve is that I learn more about those patterns that always reoccur in Forex. If I don't get better in recognizing risky patterns and avoiding losses to some reasonable degree, the best money management won't help me reaching my goals.
 

CarrieW

Gold Contributor
Read Millionaire Fastlane
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Nov 12, 2007
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i disagree. even if you lost most of the time with proper money managment you can still have gains in your account.

I trade with a 50 pip sl. the way im geared its = to bout $12.50

most of my winning trades are between 20-50dollars. i would say I am about 60-40 so far. this makes my gains higher then my losses.

its all about money managment.

if you go to the great forex info thread theres alot of resources on stratigies and money managment. they have helped me immensley.
 
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AlwaysCurious

AlwaysCurious

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Jan 16, 2008
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Granted, money management can really do a lot, even with completely random entries. But you have to admit that entries with a little higher chance for succes do make a difference. Yes, without proper money management you won't get far, so it is simply a must, a prerequisite. But to be really profitable you should have a system with higher chances than just 50:50 so that the money management has something to work with.
 

CarrieW

Gold Contributor
Read Millionaire Fastlane
Speedway Pass
Nov 12, 2007
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suburbs of savannah in Ga
even at 50/50 u can still make money as long as the managment is in place.

yes the ideal is to have more wins then losses but if the mm is in place you can even lose more then you win and still gain,

its obvious the more winning trades the higher your gains become.
 

MJ DeMarco

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In my study of trading paper assets (stocks, options, currency) the real pros maximize gains and minimize losses. Meaning, their loss ratio typically out numbers their wins. Their key is they have multiple, tiny losses as trades are stopped out immediately indicating their analysis of the signal was wrong. The winning trades are held. Traders that employ this might only win 40% of their trades, yet their winners see big % gains.

Trade LOSS 1.2%
Trade LOSS .5%
Trade LOSS .9%
Trade GAIN 7.1%
Trade LOSS .8%
Trade GAIN 4.6%

I day trade actively and currently have a win ratio in the neighborhood of 75%. When I lose, I try to make it 1/2 of my average win. Example: Losing trade -$1100. Winning trade +$2,200.
 
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AlwaysCurious

AlwaysCurious

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Jan 16, 2008
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Ok, think it's time for an update again.

My demo account is nearly blown, but that's because I trade any signal I get and to get signifcant statistical data out of it. I know now, that nearly every day I am able to reach 60% winning trades and a 1% increase, which is just great if there weren't severe drawbacks. Due to my attitude to trade as much as I can, I lose all of this nearly all of the time.

I've set up a sophisticated spreadsheet analyzing all of my trades by time of day, session, currency pair and much more. Things I'velearned are:

  • When I reach 1% increase a day, I have to stop all trading immediatly, it can only get worse. Maybe it's got to do with lack of concentration or whatever...
  • My trading style works well with the following pairs GBP/JPY, GBP/CHF, GBP/USD, EUR/JPY, EUR/AUD but not with EUR/GBP and EUR/USD. For me this is a surprise because I almost felt familiar with the latter ones...
  • I seem to like the time before London opening and the 2 hours before New York opens. Most of my winning trades are placed there.
  • My trendlines based on daily charts are almost every time accurate.
  • I do anticipate trend continuation patterns on short timeframes
Finding the right StopLoss and TakeProfit levels still is an issue, as well as the right attitude to stay out of trades I am not 100% convinced of. This is a real tough one, and I think I can only tackle it by going life. Without the pain of real losses I don't seem to learn enough. Now, I continue demo trading this month, then I take my vacation with my famiy in July and after that I'll definitely open a real account.

Stay tuned...
 
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AlwaysCurious

AlwaysCurious

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Jan 16, 2008
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...in July and after that I'll definitely open a real account
Done. Unfortunately Oanda takes a lot of time for confirming my id...

In the meantime I continue demo trading, and I'm pleased to see, that I get better. One notable change: I added one oscillating indicator again, the RSI 14, because the search for divergences adds benefit to my short timeframe trading style.
 

^eagle^

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Mar 17, 2008
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Hows it going always?

Catch any ofthe USD run?

I rebuilding my losses that my EA gave me. I'll only let it go short now.

Waiting for the bottom and scalping pips here and there. Not enough in my account to go for those longer trends yet.
 
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AlwaysCurious

AlwaysCurious

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Jan 16, 2008
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Hows it going always?
Catch any ofthe USD run?
Yes, made 12% on my demo account in just 4 hours. So far so good, but then I became greedy (again) and lost even more. Argggh! So I'm glad that I didn't use the live one. But it's been a hit to my self-esteem and I didn't recover, yet.
 

cmartin371

New Contributor
Apr 14, 2008
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Yes, made 12% on my demo account in just 4 hours. So far so good, but then I became greedy (again) and lost even more. Argggh! So I'm glad that I didn't use the live one. But it's been a hit to my self-esteem and I didn't recover, yet.


Hmmmmm You need to get rid of self esteem. You wrote down your plan and some rules in this thread. Have you printed them out or at least have them in front of you in another format? If you trade your plan and stick to it greed should not be a factor.


I know easier said than done.......but you can do it!
 
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AlwaysCurious

AlwaysCurious

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Jan 16, 2008
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You are right, I have to print it out to follow it more accurately.

Btw my self-esteem was not hit because I realized some losses, but because I didn't follow my trading plan.
 

g-dogg

New Contributor
Aug 24, 2008
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Great thread, im interested in your progress AlwaysCurious, did you happen to catch the massive amount of pips in the market for the past two months? GBP/USD sank, EUR/USD sank, GBP/JPY sank, AUD/USD sank, USD/NZD sank, USD/CHF rallied. personally i pulled in about an 80% increase in my account (unfortunately my account is kinda small).

btw i think i will try to put together a thread about how i trade, ive been in the forex for a while and only recently have i started to be consistently profitable.
 
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AlwaysCurious

AlwaysCurious

Contributor
Jan 16, 2008
274
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GMT +1
Ok, time for an update and sorry that it is such a late one.

I started live trading effectively on Sept 22 and didn't perform well at all. The first week was a disaster with 10% loss, then I was able to stabilize until yesterday's crash helped me to climb nearly to break even again. This is how it looks in my dashboard (which by itself is a side project of mine and still in alpha status):




I trade with as little indicators as possible. 200SMA, 50SMA and RSI 14 for divergences. The rest is price action and support/resistance levels, sometimes fibonacci retracements. That's it. If the graphs looks too cluttered, I delete all lines and start from scratch again. Simplifying is the key.

Lessons learned so far:
Trading with real money - and even though it is just 1000€ - is a huge difference compared to trading in a demo account. The emotions of fear and greed are much much stronger, in my case to the negative. Without going live I would have never been able to learn about this, and maybe I can eventually be consistently profitable, soon. Luckily I was riding the latest wave of financial crisis. Without that it would have looked really bad. So I'm not too enthusiastic about further proceedings. But still my goals stay the same as you can see in the dashboard.
It seems, that nothing beats experience. You can learn as much as you want, read all the books you can get a grip on, but in the end you need to experience the trading live with lots and lots of screen time. I wish there was a better and less time consuming way.

Another thing, all statistics from my demo account are not valid for the live one, so I have to start from zero there. Which is a pity, because my demo account grew by 10% in the same timeframe...

Edit: Talking about things to learn - Forget todays wins, those are gone again.
 
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MJ DeMarco

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Speed for the the update ... please keep us posted. I love reading these stories!!
 

cmartin371

New Contributor
Apr 14, 2008
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Always,


Good to see you go live to get a true feel what live trading is all about. I know I say this after each update, but only because it seems to be a re occuring theme. Where is your trading plan and rules? Are you following them? If so greed should not be a factor. How do you know if your plan has an edge if you don't stick to it? This is a business not a hobby. You will have profitable days and losing days. Like a business you should measure your self in months and quarters, not days. Just a thought. I am excited to hear more.....keep us posted.


PS...I am not bashing you, just want you to have success.
 

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