Hi weisdaclick and carlgreen,
Welcome to you both!
. . .I read the trading plan template and did learn some points from it. I have to say I do most of what is in there already as I am very disciplined with my money (that is I don't want to lose it!).
Spend any time on these boards and you'll read certain cliches time and time again. Right at the top of the cliche list is 'trading is simple, but it ain't easy'. Having a trading plan is your blueprint for taking money out of the market. If you've got one and it works, then you're ahead of most people. Unfortunatwely, that's the 'simple' part of the cliche. The hard part is following the plan to the letter. Once you can do that, you're laughing.
One thing I did read with interest in the trading plan: that many experienced traders have simple trading strategies with the minimum of indicators. I am taking time to learn all the indicators and working out which ones work for me. If it stops working then I'll change it.
It wouldn't be appropriate for me to advise against this as it
may work for you. However, it a path that's well trod by countless traders before you and almost all of them ended up chasing their own tails, me included. No sooner have you found that holy grail indicator and you've enjoyed a few days, weeks or months of excellent results than the damn thing stops working. The most obvious example of this is moving average crossovers. They're great in trending markets but totally useless in flat or choppy markets. Professional graphic designers restrict themselves to a select number of fonts: amateurs throw in everything they can lay their hands on and the result is a dog's dinner. I'd suggest you play with lots of indicators to start with and then take a leaf out of the designer's handbook and focus on just one or two (three at most) and become experts in them. Know how they're constructed, what they're telling you and, more importantly, what they're not telling you.
I started a simulation with Saxotrader. In the last week I have added $11,000 but I am simulating with larger amounts than I would use in real life.
Many traders will advise against this. The reason is that when you use real money you'll be bored by making a mere £50 a week after 'making' £50k on the sim' account. It'll mess with your head and you'll be inclined to take larger risks and deviate from your plan. If anything, I suggest you use less for sim' trading than you intend to use when you go live.
I was using market fundamentals as my main guide. Hit a problem doing that mid-week: the GBPUSD was strengthening due to the expectation of the Fed cutting US interest rates. When the rates were cut the GBPUSD fell, perhaps they were expecting a cut more than 0.5% ????
Perhaps someone can explain this. This trade was my biggest loser of the week. I do use technical analysis of charts as my main guide for short term trades and am getting pretty good results.
If you're strategy is based around predicting the news and how the market will react to it, then I'm afraid you won't be trading very long. Leave that game to the city professionals. Most peeps here will advise staying out of the market ahead of economic releases. If you're already in a trade and it's comfortably in profit, then it may be okay to stick with if so long as you watch it like a hawk and get out pronto if the market moves against you. The solution to this dilemma is to trade the
reaction to the news and
not the news itself. In the example you give, you'd have waited until the announcement was made, seen that the market wasn't overly impressed and started to fall. At that point you could grab its coat tails and see where it took you. As to why it fell? Who knows, who cares!
Tim.
