Pips in wheelbarrow - Trading FX profitably

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Galts Gulch

Well-Known Member
#1
This thread is for those traders who want to trade FX on a long term ... Consistently and profitably ....
Few advice's flow from what I have read ... Most from my 7 years of trading experience ...
Will publish all the indicators that I follow over a period of time ...
Questions ... Doubts ... are always all ways appreciated ...
Let us make pips in wheelbarrow ...
:clap::clap::clap:
 
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Galts Gulch

Well-Known Member
#2
As most of us know, FX market is The Biggest market, daily TO touching almost 4.4 Trillion USD.
As much as The sheer size gives maximum opportunity to make Mulla, it can also be very confusing ... Complex and mind blowing to analyse it ...
FX has major markets in Sydney (opens 3.30 am IST), Tokyo (opens 4.30 am IST), Europe (opens 12.30 pm IST), London (1.30 pm IST) and New York (around 5.30 pm IST). That way, FX market works 24/5.
One can trade both Currencies and commodities in FX Market.
Currency market has major pairs as well as cross pairs.
Most traded major pairs are EuroUsd, GbpUsd, UsdJpy, AudUsd, UsdCad, UsdChf etc.
Crude Oil, Gold and Silver constitute the major junk of Commodities market.
The major difference between any other business and Currency market is .. In all other business ... we buy a product / commodity / service and pay in currency ... Where as in Currency market ... we buy and sell currency itself.
That is the reason, every time it is always Pairs that we talk about. For example, in EuroUsd, when I say that I bought / LONG EuroUsd ... what it means is I Bought Euro, simultaneously sold USD ... So I bought a currency and in return sold a corresponding Currency as well.
As in any other trading market, the difference between the buying and selling (closing) price constitutes either The Profit or The Loss.
 

Galts Gulch

Well-Known Member
#3
As in any other trading market, in FX trading also, one can either do fundamental analysis or technical analysis to understand / analyse .. to trade.
There is a vast difference in Fundamentally analyzing ....say a share /stock / script and a currency. When we fundamentally analyse a stock / company, we look at balance sheet, profit before and after tax, present and future orders, management team, recruitment scenario etc and that might be more than enough as there will be very few other factors that will impact the script value. Yes, if the company is in to exports and the currency of a country of a country that the company exports to, weakens against local currency, the profit will take a hit. But, that is it.
But, in Currency Market, because of IMPEX factor and various other international influential factors, each currency affects other currencies in a highly diversified way. There is an old joke that "If President of USA sneezes hard, EURO gets cold". Jokes apart, in present scenario itself, if EURO goes ahead with its threatened Sanctions against Russia, if at all they do impose sanctions, apart from hurting Ruble, the sanctions will hit EURO as well, irrespective of the strength of EURO economy. And if USA attacks Iraq, whatever might be the reasons, Crude Oil prices, worldwide, will head North, though Crude Oil does not have anything to do with USA as they do not produce any Crude at all. Because of this kind of highly diversified and complex situations, Fundamental Analysis will not help a Retail FX trader to analyse FX market and laugh all the way to the bank.
Technical Analysis in next installment ...


"Contradictions doe not exist if life. Whenever you face Contradiction, check your Premises. You will find one of them to be wrong"
 

Galts Gulch

Well-Known Member
#4
What is Technical Analysis?
Technical Analysis, in simplest words, ... is to see, understand and try analyzing the Historical movement / behavior of the Market and the relation between this History and the Present Stance / Situation of The Market. And to Gauge / Judge the Immediate / Future reaction of the market. As of now, we are just talking about The Trend, not the (immediate) effect of different NEWS on the market. We will cover that later, though.
When we have, say heart ailment, and go to the Doctor, what does he do? He asks us to go through series of tests, compare the tests with old reports, which had same kind of heart ailment and come to some kind of conclusion. If they are wrong, in say about 10 days, we have to again go through some tests, get reports and again the doctor will compare, diagnose and advice. This is Technical Analysis, comparing old market behavior with present situation and judge the immediate future movement. We might, like the doctor, do a mistake ... again study the old pattern and conclude the Immediate future and little distant future and be with the trend ... Price always comes back to its original value ...

Rules to Trade ... NEXT

"If you can not be a Capitalist to earn and Create WEALTH ... you can not be a Socialist to Distribute The WEALTH"
 

Galts Gulch

Well-Known Member
#5
FX Trading Rules ... FOUNDATION SKILLS
1. Demo trading ... To be familiarize yourself the terminal, lot sizes, currency pairs etc, demo trade between 1 month and two months, depending upon how much time you can dedicate every day. Lots of people will advice to demo trade for minimum 6 months. Irrespective of the end result of a demo trade, the emotional, financial and psychological aspects (Greed to earn more / Fear of losing) will be missing on demo accounts. Therefore, I do not advice demo trading more than absolutely necessary. But, till the time you demo trade, treat it like a Live account. Apply same strategies / Money Management rules, emotional discipline etc just like the way you will treat a Live / Real account. Once you open a real / live account, treat it like a demo account, without any attachment. Remember that Trading is just like any other source of income. DO NOT BE ADDICTED TO IT. Do not trade because you have a live account. Trade because you have Trade-able set up and you have high chances of making profit.
2. Choosing a Broker ... There are two types of brokers ... Market makers (infamously known as bucket shops) trade directly trade against you and therefore all you losses will be their profits. And they will use all Technological tools at their disposal to make you loose. They will have slippages, their terminal will hang more, they will use spikes to hunt your stop loss levels and they will stoop to any level to make you loose. ECN / STP brokers will just provide the trading terminal and all the trades will be executed directly with a bank, which quotes the least for a particular pair. They should be The Chosen One.
3. Trading Strategy ... There is nothing called as Holy Grail system / strategy / indicator. Stop searching for ONE. Practice and stick to one strategy for a minimum one year. Changing strategies will never ever take you anywhere. Do not just Google / read / listen. Practice on your charts. Learn hands on with your strategies. Remember what famous Bruce Lee said "I never worry about an opponent who knows 100 kicks, but I always worry about an opponent who has practiced one kick, 100 times. If something is good for Great Lee, it could be better for us also. Do not run behind automated strategies / Robot’s / EA’s. Any Robot can work like a magic in a trending market, but will fail miserably in range bound market. Remember that a Robot can understand only “0 and 1” and they are coded and programmed to work under few circumstances. That is Static, where as market is always dynamic.
4. Trading is not gambling. Though it is a speculative market, there are Art and Science attached to it. Treat it that way. Respect it that way. The more you learn, the more surprises, it will spring on you. Be prepared. Remember "Better equipped is half battle won". Do not just Google / read / listen. Practice on your charts. Learn hands on with your strategies.
5. Account size ... While demo trading, start and learn with the smallest account size possible. Lots of difference between the practice and real battle ca leave you high and dry. While most of the strategies that work wonders on a big account, fail miserably on a small account. But if you can make consistent profit on a small account, handling a bigger account will be easier one.

Advanced Trading Rules will follow soon …

Haazir hote hai break ke baad …

“Creating wealth is the product of a Man’s ability to THINK”
 

Galts Gulch

Well-Known Member
#6
1. Money management … In simplest words, MM is the way you use your account size / equity / equity allocation etc. As a Risk Management Strategy, you should NEVER EVER expose more than 20% of your equity … at any point of time .. with all open positions put together (prevailing Profit / Loss) included … How to allocate this 20% on one pair / couple of pairs / different few pairs is very individualistic and also depends on the market conditions. If you have 65% winning strategy and use MM properly, there is no way, you can go under hammer. For example, you use same lot size (say .1 lot size) on all your trades. At the end of 100 trades, you could have made 65$, lost 35$ (on a 65% winning strategy) … but still you end up make 35$. But as it happens, as soon as one wins 50% of the trades on a stretch, GREED takes over and one tends to increase the lot size to .25, to make more profit. This is when market reverses on you. NOW, At the end of 100 trades, you made 50$ on the 1st 50 trades, but lost 125$ (because of increase in the lot size), ultimately losing 75$. This is why water tight MM is imperative for long term Trading success. To make more profit, one should always use Scale In / Add Positions or Scale Out strategy.

2. Emotional discipline … Scalper / Positional trader / intraday trader etc are just terminologies. Trading is actually about The Psyche of The Trader than anything else. Lots of traders are addicted to real account that they jump in to a trade because of having a real account and the pressure of making profit. Having a real account should never be the reason to enter a trade. We should have a Trade-able set up, with higher chances of winning than losing to take a position. As Sai Baba (I’m not bringing any philosophy or Godly aspect here) used to say … Love with detachment. Trading is just one more source of income, nothing more, nothing less as well. Treat it, respect it that way. Remember, if most of the newbie’s lose because they tend to close loss making trades too late, few traders also lose because they close the profit making trades, too early. Give enough time and space to the market to turn in your way. Define your Risk appetite and expected ROI for each of your trade, before you take a position.

Practical.. Real Time Trading rules start from next post … Drinks Break NOW

"To achieve, you need thought. You have to know what you are doing and that's real power"
 

Galts Gulch

Well-Known Member
#7
Real time ... Practical FX trading rules ....

1. As we discussed, a Currency will always have a pair and the First currency is called as Base Currency. When we have a Pair, it will have two markets / economies. For example, EU (EuroUsd) has Euro and US markets. AJ (AudYen) has Australian and Japanese markets. We should always trade a pair, if at least 1 market of the concerned pair is open. For example, to trade AJ, either of Australian or Japanese markets should be open and to trade EU, either Euro or US markets should be open. The reason is ... Then the currency will have more liquidity / momentum / opportunities ... As no one can run a 5 * hotel in a smaller city / village due to lack of funds / liquidity, we should also not trade when the pair does not have sufficient liquidity / momentum. By the same law, as USD is the Biggest influential factor on Gold, we should not trade Gold before US market opens.

2. Now that we know when to trade a pair, we should decide on the quantity / lot size to trade. Lot size on a pair is directly influenced by the account / equity size. Other things being equal, on a leverage of 100, .1 lot size will be worth 100$ margin on a currency pair. Note that this goes up by 50% for Gold and 100% to trade Crude Oil. As we discussed in an earlier post, as RMS, we should not expose more than 20% of the total account size, with all the open positions and the loss thereof. Keeping this mind and other things like momentum in other pairs, time frame and the rules of that particular trade, one should decide on the lot size of a trade.

3. Stop Loss ... Do not use SL for the sake of using it. Be flexible with it. Know your trade's entry rules, risk appetite for that trade before deciding SL. But, we should not have a SL which will erode the total margin on that trade itself. For example, margin on .1 lot sized trade will be 100$ on a currency pair. If the SL is set for 100 pips and SL gets HIT, you lose all the 100$ margin on that trade ... Does it make any sense? NO NEVER ... Here even the leverage has a say. WHY? As I said 100$ margin on .1 lot size is on 100 leverage. If you have 200 leverage, margin will come down to 50$ and if you have 500 leverage, margin will come down to 20$. Can you see the relation NOW between the leverage and SL. Higher the leverage, lesser the margin, tighter should be the SL, higher chances of SL being hit. Even time frame should ideally help you for SL. Higher TF’s will give you more breathing space to have wider SL and shorter TF’s should always have tighter SL. Will cover that more on Time Frames …

Enough to munch with early morning coffee / tea I guess ….

"People create their own questions because they are afraid to look straight. All you have to do is look straight and see the road, and when you see it, don't sit looking at it - walk."
 

Galts Gulch

Well-Known Member
#8
As FX market is 24/5, it is always advantageous to use higher Time Frames (TF’s). If someone is not comfortable to trade 4H and above TF’s, they can use 30M and 1H TF’s. If anyone uses lesser than 30M TF over a long period of time, they will either be mentally retarded or sexually deprived. Jokes apart, smaller TF’s will have lots of noise, disturbances and one has to be glued to the Comp round the clock. What is the use of earning if we cannot enjoy it? Right? To take a Trade, make very sure that the immediate smaller and higher TF candles agrees with the trend on the TF that you want to trade on. For example, if you want to trade on 1H TF, make sure that same trend is running on both 30M and 4H TF’s. if you do not have that clarity, give that set up, a miss and move on. Fx market gives so much options / opportunities, missing a (wrong) set up will never hurt at all. Few times not a taking a decision can be a Right decision. In the same way, not taking a trade can be a blessing in disguise.

On Monday’s, do not trade before EURO market opens as any set up before that will be just a week end effect and will not provide the actual trend. Even the liquidity will be very less. In the same way, avoid trading after 3 pm IST on Friday’s. we will have enormous opportunities in between 12.30 am IST on Monday to 3 pm IST on Friday.

DO NOT EVER DO MARTINGALE TRADING. Though it might have its advantages, albeit small one, disadvantages weigh heavily against Martingale trading strategy. On the other hand, scaling is always better trading strategy. One can also use co related pairs for better leverage. For example, majors like EU, GU and AU head same direction, more than not. So, if you get a proper set up in one, more often than not, will have same directional set up in other two as well.

Always wait to take a trade (emotional discipline), rather than taking a trade and waiting, praying and hoping for the trade to generate profits.

Enough with boring Just Theories? Will start with indicators that I use for all other important aspects …

“A creative man is motivated by the desire to achieve, not by the desire to beat others”
 
#9
@ Galts Gulch....thanks a lot for starting such an informative thread...really helpful for forex beginners like me....the small details and points that you have included is something that you don't easily find elsewhere...
 

DSM

Well-Known Member
#10
Thanks GG, Very informative.

As FX market is 24/5, it is always advantageous to use higher Time Frames (TF’s). If someone is not comfortable to trade 4H and above TF’s, they can use 30M and 1H TF’s. If anyone uses lesser than 30M TF over a long period of time, they will either be mentally retarded or sexually deprived. Jokes apart, smaller TF’s will have lots of noise, disturbances and one has to be glued to the Comp round the clock. What is the use of earning if we cannot enjoy it? Right? To take a Trade, make very sure that the immediate smaller and higher TF candles agrees with the trend on the TF that you want to trade on. For example, if you want to trade on 1H TF, make sure that same trend is running on both 30M and 4H TF’s. if you do not have that clarity, give that set up, a miss and move on. Fx market gives so much options / opportunities, missing a (wrong) set up will never hurt at all. Few times not a taking a decision can be a Right decision. In the same way, not taking a trade can be a blessing in disguise.

On Monday’s, do not trade before EURO market opens as any set up before that will be just a week end effect and will not provide the actual trend. Even the liquidity will be very less. In the same way, avoid trading after 3 pm IST on Friday’s. we will have enormous opportunities in between 12.30 am IST on Monday to 3 pm IST on Friday.

DO NOT EVER DO MARTINGALE TRADING. Though it might have its advantages, albeit small one, disadvantages weigh heavily against Martingale trading strategy. On the other hand, scaling is always better trading strategy. One can also use co related pairs for better leverage. For example, majors like EU, GU and AU head same direction, more than not. So, if you get a proper set up in one, more often than not, will have same directional set up in other two as well.

Always wait to take a trade (emotional discipline), rather than taking a trade and waiting, praying and hoping for the trade to generate profits.

Enough with boring Just Theories? Will start with indicators that I use for all other important aspects …

“A creative man is motivated by the desire to achieve, not by the desire to beat others”
 

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