valius:
soul, how do you manage with winning streaks. i mean, when there comes 20 winning trades in a row, how do you fight with the feeling that finally you found the holy grail? Thank You.
Hi Vallius, thanks for popping in.
Firstly the answer to your question lies in your testing.
Let me explain.
I dont know if you've ever seen the 'Firebird' strategy. Its an expert advisor for metatrader which takes small profits with hugh stops - in fact in some cases with no stops. Last time I checked this thing took 6 pips on winning trades and lost 300 pips on losing trades.
For that to make money you have to have something like a 99% win/loss ratio to make money - ie in 100 trades you make 99 X 6 pips but one loser X300 pips = 294 pips profit per 100 trades - just one trade less winning equals disaster - 98 X6 pips = 588 pips but 2 losers = 600 pips.
People are often drawn by these strategies because they hardly ever lose - however the real drawdown is in the open positions and people who trade these often just cannot face taking a loss. You can run with this whilstever you have money in your account but it's not a sustainable strategy in my opinion, however i could be wrong and often am.
So, back to your question.
If you come across something that has 20 wins on the trot then keep testing it till you have a good sample size - I tend to work on a sample size of around 600 to 1000 trades for 'one a day' trades - 400 for swing trades but nothing lower than that. if the figures look good after that then I would have initial confidence in the system. Just dont get excited by 20 trades :)
Hope this helps
Tuesday, March 13, 2007
continued ...
Ok, the last bit then.
Firstly let me say that some people (albeit a small number) can trade like that with s&r pivots etc and consistently make money, lots of it in fact.
But as it is gut feeling based and given that you can only develop gut feelings with experience - this method takes years and years to be good at. I can do it and it took me about 2 solid years of 12 hour days watching charts to get good enough. even when you are good enough your results are affected by outside influences like your health, mood, women etc.
There aren't many people who can do that and that's why they make the big bucks.
It's not how I personally choose to secure my future earnings. You have to understand something fundamental about me personally.
The way that i discovered trading in the first place was by asking myself a single question. and I still ask the same question every day.
"How can I make the most amount of money ... with the least effort"
To me trading s&r, Pivots, MA's etc etc is hard work and draining. what's more it's very hit and miss. This is why I do not choose to trade in this manner.
As for your question - is it really as simple as just testing ma's and money management - is that the holy grail?
My answer is yes it is. finding one that works is the hard bit, and believe me there is no moving average cross that works on any pair in any combination - how do i know that? - because i've tested them ...all.
But that does not mean you shouldn't test them - trading methods are like the notes in a song - despite the fact that every note has been used billions of times - every day someone comes up with a new song from the same seven notes. The same is true with methods of trading and you may just have the next winning system. But unless you have a way of measuring it then you won't know if you have a winning system or a bag of crap.
What I can tell you though is that systems that make little money are not super rare - there are many ways of making a little money in this game - however I can tell you that winning systems that consistently make money time after time after time with enough profit and consistency on which to place some serious money - are as rare as hens teeth.
My trading at the moment takes roughly 30 minutes a day - but i spend the other 10 hours doing nothing but research and testing. Testing a single system properly takes about 2 man months
Ive worked that way now day in day out for around 2 years , and it's not just me, there are several others in my team- 10 hours a day research and development for 2 years - lot of hours i think you will agree. How many systems do you think I've developed in that time that deserve real money placing on them - and I'm not talking a few thousand here ....
Well I'll tell you - two systems, that's all. and just one of them is plenty enough to make me millions and millions. see, - rare as hens teeth.
My team have tested hundreds of systems - but there are hundreds more that we have not even heard of yet. that's why we keep on testing and testing, day after day. When the systems we have have made us the money we want then we will probably stop but for now ... back to the grindstone I'm afraid :)
My advice to you for your next step? - learn to use Excel :)
Firstly let me say that some people (albeit a small number) can trade like that with s&r pivots etc and consistently make money, lots of it in fact.
But as it is gut feeling based and given that you can only develop gut feelings with experience - this method takes years and years to be good at. I can do it and it took me about 2 solid years of 12 hour days watching charts to get good enough. even when you are good enough your results are affected by outside influences like your health, mood, women etc.
There aren't many people who can do that and that's why they make the big bucks.
It's not how I personally choose to secure my future earnings. You have to understand something fundamental about me personally.
The way that i discovered trading in the first place was by asking myself a single question. and I still ask the same question every day.
"How can I make the most amount of money ... with the least effort"
To me trading s&r, Pivots, MA's etc etc is hard work and draining. what's more it's very hit and miss. This is why I do not choose to trade in this manner.
As for your question - is it really as simple as just testing ma's and money management - is that the holy grail?
My answer is yes it is. finding one that works is the hard bit, and believe me there is no moving average cross that works on any pair in any combination - how do i know that? - because i've tested them ...all.
But that does not mean you shouldn't test them - trading methods are like the notes in a song - despite the fact that every note has been used billions of times - every day someone comes up with a new song from the same seven notes. The same is true with methods of trading and you may just have the next winning system. But unless you have a way of measuring it then you won't know if you have a winning system or a bag of crap.
What I can tell you though is that systems that make little money are not super rare - there are many ways of making a little money in this game - however I can tell you that winning systems that consistently make money time after time after time with enough profit and consistency on which to place some serious money - are as rare as hens teeth.
My trading at the moment takes roughly 30 minutes a day - but i spend the other 10 hours doing nothing but research and testing. Testing a single system properly takes about 2 man months
Ive worked that way now day in day out for around 2 years , and it's not just me, there are several others in my team- 10 hours a day research and development for 2 years - lot of hours i think you will agree. How many systems do you think I've developed in that time that deserve real money placing on them - and I'm not talking a few thousand here ....
Well I'll tell you - two systems, that's all. and just one of them is plenty enough to make me millions and millions. see, - rare as hens teeth.
My team have tested hundreds of systems - but there are hundreds more that we have not even heard of yet. that's why we keep on testing and testing, day after day. When the systems we have have made us the money we want then we will probably stop but for now ... back to the grindstone I'm afraid :)
My advice to you for your next step? - learn to use Excel :)
Wednesday, March 07, 2007
Peter ...
Ok, nice first question then from Peter below - if you would like to ask anything then please use the comments link at the bottom of this post.
Hi Soul,
Ive had a real struggle with accepting that the forex is a neutral market and that anything can happen, in fact, so much so that i flip a coin every time before entering a trade to remind me i have as much control in predicting heads or tails as i do in getting the market to do what i want or predict. As tedious as that sounds it helps me to not take the loss personally and to keep my psychology in check.
Am interested in knowing what it took for you in your trading walk to switch your psychology to that of a winning mindset.
And yes i am a 1 year old trader trading $1 lots however sod it, I've learnt enough to realise that the key to being successful is by thinking probabilities and not searching for holy grails of signals and indicators.
Peter
Hi Peter, and thanks for the question, it's a very good one
Firstly if you are a year in and still at $1 a pip then well done, you are demonstrating that you have two of the most important things needed in a trader - Firstly determination in the fact that you've managed a year, and secondly discipline in the fact that you are still playing with minimum lot size.
Many traders would have a) given up by now and b) if they had not given up then they would have blown the account by trading higher and higher. You are probably already in a 20% minority so pat yourself on the back.
The lesson to be learned there is that if you cannot make money at $1 a pip that you will not make money at $10 or $100 a pip.
The revelation that you cannot control or predict the market is the most important one you will ever learn. and you can only learn it from the experience. No matter how many times you read it in books or articles makes no difference at all - to actually make it part of your belief system you have to prove it to yourself. It seems you are beginning to get there.
When you know for a fact that you cannot predict the market all sorts of wonderful connections begin to form in your head. How can you possibly beat yourself us for 'getting it wrong' if you had no control in the first place?
so, your question was how did i move into a winning mindset - the answer to this was in your next sentence - knowing the probabilities.
A winning trader can tell you exactly what the percentage of wins they have is. they can tell you exactly how many consecutive losers they expect, exactly how many pips per trade on average they expect and exactly what their average month has been for the past year.
Think about this - if you knew that you won say 60% of the time, that your winners were bigger than the losers combined - that even if you had a bad run that the method over time would bring you out a winner - how would your mindset be?
The important thing here are the words 'if you knew' - Most traders don't know. They don't do exhaustive testing and monitoring to find out these things. They have a feeling that they do OK and that their method works - but they don't actually know it for a fact because mostly they can't be bothered to do all the testing and logging stuff.
When things are going well it's fine not to have the tests that prove beyond doubt that you win - because you are winning anyway. But when a bad run comes along their belief is shattered and they start changing this and that, convinced now that their method does not work. Maybe it doesn't - but then maybe it does - but because they did not put in the testing they will never know.
These magic words 'winning mindset' bring up all sorts of pictures of the successful businessman in his suit, striding along without a care in the world. Traders aspire to be like that yet do not want to put in the work.
Having a winning mindset is akin to putting you feet out of the car after a journey - you know for a fact that there will be ground under your feet - you don't know if the ground will be muddy, quicksand or good solid ground - but you do know that if it is muddy and slippy that if you continue to move around you will get to solid ground. You know this for a fact because you learned as a child.
Of course there is always the chance that you will step out into a gaping chasm - but the probabilities are stacked way in your favor that ground will be there. even so, to make sure you aren't going into a chasm you always take a glance- and a check. winning traders do the same thing, constantly checking their perception is right.
When you take trades day after day unless you test those trades, log them, analyse them and explore them then you don't know that there is ground beneath your feet and you won't know if the ground is moving.
In the trading world you are a child and you have lessons to learn. but just like a child learning not all your lessons can be simple and some require work on paper.
A winning mindset comes from actually knowing that your method works and that the probabilities are in your favor. You have proved it by doing lots and lots of work.
A winning mindset comes from knowing that you can repeat your trades over and over again in a systematic way. This is why I've always tried to get away from discretionary trading - how can you repeat a gut feeling?
This is the real work of the trader. Being a trader is not about pressing buttons at the right time and watching charts - the real work of a trader is done way before those trades are placed. The real work of a trader is being hung over a spreadsheet for months on end and checking checking checking against a one minute chart. A trader with a winning mindset has done all this before trading and just has to go through the motions.
Once the work is done THEN comes the payback. The trading is easy - just button clicks without any emotions - repeatability again and again - then comes the rewards.
Forget learning to trade - trading is merely the process of clicking buttons.
Learn to test, log and analyse instead and the winning mindset you desire will automatically come.
Hope this helps
Hi Soul,
Ive had a real struggle with accepting that the forex is a neutral market and that anything can happen, in fact, so much so that i flip a coin every time before entering a trade to remind me i have as much control in predicting heads or tails as i do in getting the market to do what i want or predict. As tedious as that sounds it helps me to not take the loss personally and to keep my psychology in check.
Am interested in knowing what it took for you in your trading walk to switch your psychology to that of a winning mindset.
And yes i am a 1 year old trader trading $1 lots however sod it, I've learnt enough to realise that the key to being successful is by thinking probabilities and not searching for holy grails of signals and indicators.
Peter
Hi Peter, and thanks for the question, it's a very good one
Firstly if you are a year in and still at $1 a pip then well done, you are demonstrating that you have two of the most important things needed in a trader - Firstly determination in the fact that you've managed a year, and secondly discipline in the fact that you are still playing with minimum lot size.
Many traders would have a) given up by now and b) if they had not given up then they would have blown the account by trading higher and higher. You are probably already in a 20% minority so pat yourself on the back.
The lesson to be learned there is that if you cannot make money at $1 a pip that you will not make money at $10 or $100 a pip.
The revelation that you cannot control or predict the market is the most important one you will ever learn. and you can only learn it from the experience. No matter how many times you read it in books or articles makes no difference at all - to actually make it part of your belief system you have to prove it to yourself. It seems you are beginning to get there.
When you know for a fact that you cannot predict the market all sorts of wonderful connections begin to form in your head. How can you possibly beat yourself us for 'getting it wrong' if you had no control in the first place?
so, your question was how did i move into a winning mindset - the answer to this was in your next sentence - knowing the probabilities.
A winning trader can tell you exactly what the percentage of wins they have is. they can tell you exactly how many consecutive losers they expect, exactly how many pips per trade on average they expect and exactly what their average month has been for the past year.
Think about this - if you knew that you won say 60% of the time, that your winners were bigger than the losers combined - that even if you had a bad run that the method over time would bring you out a winner - how would your mindset be?
The important thing here are the words 'if you knew' - Most traders don't know. They don't do exhaustive testing and monitoring to find out these things. They have a feeling that they do OK and that their method works - but they don't actually know it for a fact because mostly they can't be bothered to do all the testing and logging stuff.
When things are going well it's fine not to have the tests that prove beyond doubt that you win - because you are winning anyway. But when a bad run comes along their belief is shattered and they start changing this and that, convinced now that their method does not work. Maybe it doesn't - but then maybe it does - but because they did not put in the testing they will never know.
These magic words 'winning mindset' bring up all sorts of pictures of the successful businessman in his suit, striding along without a care in the world. Traders aspire to be like that yet do not want to put in the work.
Having a winning mindset is akin to putting you feet out of the car after a journey - you know for a fact that there will be ground under your feet - you don't know if the ground will be muddy, quicksand or good solid ground - but you do know that if it is muddy and slippy that if you continue to move around you will get to solid ground. You know this for a fact because you learned as a child.
Of course there is always the chance that you will step out into a gaping chasm - but the probabilities are stacked way in your favor that ground will be there. even so, to make sure you aren't going into a chasm you always take a glance- and a check. winning traders do the same thing, constantly checking their perception is right.
When you take trades day after day unless you test those trades, log them, analyse them and explore them then you don't know that there is ground beneath your feet and you won't know if the ground is moving.
In the trading world you are a child and you have lessons to learn. but just like a child learning not all your lessons can be simple and some require work on paper.
A winning mindset comes from actually knowing that your method works and that the probabilities are in your favor. You have proved it by doing lots and lots of work.
A winning mindset comes from knowing that you can repeat your trades over and over again in a systematic way. This is why I've always tried to get away from discretionary trading - how can you repeat a gut feeling?
This is the real work of the trader. Being a trader is not about pressing buttons at the right time and watching charts - the real work of a trader is done way before those trades are placed. The real work of a trader is being hung over a spreadsheet for months on end and checking checking checking against a one minute chart. A trader with a winning mindset has done all this before trading and just has to go through the motions.
Once the work is done THEN comes the payback. The trading is easy - just button clicks without any emotions - repeatability again and again - then comes the rewards.
Forget learning to trade - trading is merely the process of clicking buttons.
Learn to test, log and analyse instead and the winning mindset you desire will automatically come.
Hope this helps
Sunday, March 04, 2007
New Blog Purpose
Hiya.
This blog is now changing it's tack. It's basically a place where you can ask your questions to me as an experienced trader or just share your views on market shit etc.
I have decided to totally abandon the forums around the Internet and now agree with Dirk De Troit - they are social clubs for losers. well, we cannot all be winners in this game can we.
every time i go into chat rooms or forums it seems like I'm regressing into a former life and going into the dungeon of hopelessness.
it also seems that those who cannot trade to save their life want like crazy to give me advice, like they have the pearls of wisdom that i lack.
I'm always open for some serious discussion, but come on, a one year trader telling me that i should be using trend lines ???? There he is with his poxy $1 a pip trade and I'm trading over $1000 a pip and he's giving me advice??? what a crazy world.
so anyway, Moneytec, Strategybuilder, Elite Trader, forex factory etc - I've left em all and won't be going back so this is the only place you will find me from now on.
Its an open discussion for Q&A so feel free to comment or use the chat bit on the right - please though don't start giving me advice - what i don't know now i'll have to learn by mistakes and not by some newbie with an ego bigger than mine was :)
bring it on.
This blog is now changing it's tack. It's basically a place where you can ask your questions to me as an experienced trader or just share your views on market shit etc.
I have decided to totally abandon the forums around the Internet and now agree with Dirk De Troit - they are social clubs for losers. well, we cannot all be winners in this game can we.
every time i go into chat rooms or forums it seems like I'm regressing into a former life and going into the dungeon of hopelessness.
it also seems that those who cannot trade to save their life want like crazy to give me advice, like they have the pearls of wisdom that i lack.
I'm always open for some serious discussion, but come on, a one year trader telling me that i should be using trend lines ???? There he is with his poxy $1 a pip trade and I'm trading over $1000 a pip and he's giving me advice??? what a crazy world.
so anyway, Moneytec, Strategybuilder, Elite Trader, forex factory etc - I've left em all and won't be going back so this is the only place you will find me from now on.
Its an open discussion for Q&A so feel free to comment or use the chat bit on the right - please though don't start giving me advice - what i don't know now i'll have to learn by mistakes and not by some newbie with an ego bigger than mine was :)
bring it on.
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Thanks for your reply, you have given me plenty of information to digest.
No worries :)
An issue I'm struggling with at the moment is finding a viable way of determining if my system does actually put the odds in my favour. My strategy is nothing flash, 34,55&200 MA for trend, S&R and reading candlesticks on 30min and 1hour. I either trade the breakout or trade the bounce. I use metatrader and have an account with IG index (who i hate but have yet to find better - recommendations of brokers would be greatly appreciated).
Because my system is largely based on identifying S&R and candlestick reversals etc it is hard to back test the data due to not having a clue how to actually transfer all this info into excel. As you say how can i repeat a gut feeling of where i deem a Support or Resistance line is identically correctly placed in a future scenario?
However you have presented me with an interesting theory, 1 that could definitely make my life easier and completely remove the discretion from my decision making process....
Theoretically, i should just scrap everything I've learnt this past year with S&R and candles etc, find a dumbass MA crossover strategy (which i always hated the thought of because of the sheer no brains simplicity of it), play with the MA's, stops and profit limits and backtest until i find the best probability and just trade away blindly to probability success.
Is it really that simple? Is that the holy grail? Am I talking gold dust or just crap?
Your time and thoughts into this are greatly appreciated.
Peter
thanks again