FX trading is crazy

[degurube]

Hi Guys,

First day on T2W and very impressed with the conversations. I've been trading FX for about 4 months now. Find it very interesting / challenging and I'm learning new things everyday. First started with EURUSD and used fundamentals on a demo account....now I'm using the Bollinger Bands and RSI across more pairs on a live account. Last month [my first month] was a good month...16% ROI. This month is not great as have already lost about 50% of cash invested, so I'm on a break....getting over the loss [not much but it still sucks], playing with the demo and increasing my technical knowledge till I'm ready to get back.

Would appreciate your thoughts on above picture of my experience and below questions that bother me...

1. Whats the criteria for determining your R/R ratio? Is this usually fixed or variable?
2. Can you diversify into new ccy pairs considering all are not alike and each have different driving forces / characteristics?
3. Nobody knows the market and the market can't be fully understood, what are your ways of understanding / predicting it to make right calls?

Thanks!
Daniel E.

 

[BeginnerJoe]

Counter_violent is setting up a 5k course to teach the basics. He once showed 10 winners in a row on demand. So I am quite sure he knows what he's talking about. Worth looking out for his course.

 

[Pferd]

1.- You can do the math yourself, but for me less than 2:1 (reward:risk) is not attractive. The higher your r:r ratio the lower your percentage of success needs to be. So better to wait for a good setup than trading left/right/center without any plan. The less you trade the less chances you have to lose money

2.- Again, better to concentrate in something than trying to know a little about everything. Unless you have any special knowledge or access to information due to your language skills/place you live, forget about exotic FX pairs. Concentrate in one major until you master it. Then you can think about something else.

3.- You need a long time to understand and learn how to trade the markets. For sure no less than one year in the best of cases. In my case I only use price action, try to learn about it in you are interested in that methodology. Certainly Bollinger Bands and RSIs (and any other indicators) are not going to bring you anywhere. They provide you with old information, but nothing about the future. If you understand price action, at least you can try to anticipate the market with a bit more chance of success. You will see that with Price Action you can say: "the RSI/MACD/Bollinger Bands must be looking like this now" And when you go and check them they are actually looking as you though. Therefore you could be faster than any indicator. They only serve the purpose of filling your screen with distractions.

As a general rule, and although I sometimes trade currencies, I would say that is a very hard way to learn. In today's world where all Western countries (I include Japan here) are broke, they are all in a race to devaluate, so the FX market is highly influenced by politics. So you have to fight not only yourself but the Central Bank political intentions and the tricks of the market makers/big participants.

To learn how to trade/recognize patterns is better with indexes in my opinion. They are madly manipulated, but at least you don't have nasty surprises for unknown reasons. Even better to learn with the graphics of actual shares, but this takes longer and not everybody has patience/time for this. Everybody seems to be after the fast buck this days.

Good luck!

 

[counter_violent]

Counter_violent is setting up a 5k course to teach the basics. He once showed 10 winners in a row on demand. So I am quite sure he knows what he's talking about. Worth looking out for his course.

No, he's not...and in any case he would never work so cheaply...but nice try !

 

[alphadude]

Sagbooby is looking for new students; he is the foremost expert in price action.

he can make 300% per trade; trading the left side of any chart.

5K for the course + 5K for software + 1K a month for trading from his office.

 

[bbmac]

Answers below in the order you raised the questions in your opening post;

1. Whats the criteria for determining your R/R ratio? Is this usually fixed or variable?
It depends on what works better with your edge, and indeed some edges have a fixed R:R as part of the edge without which their would be no edge. I came into trading thru the Horse Racing Systems route and in that arena the perceived wisdom was that if your edge needed a staking plan to make it profitable you didn't have an edge, ie whatever you do try and make sure that your edge has a positive expectancy whether you have a fixed or variable R:R ratio.

2. Can you diversify into new ccy pairs considering all are not alike and each have different driving forces / characteristics?
You can trade anything so long as you have an edge. Re Currency pairings - most volume is in the majors not the crosses and some pairings are more 'exotic' than others' All of them have their own character and observable idiosyncracies and some are related to each other - being either directly or inversely correlated, some having correlations too with other non Fx instruments. Whatever you do though make sure you have an edge and if that edge involves multiple set-ups you may find it easier to trade multiple set-ups on fewer pairings or less set-ups across more pairings. In my experience it can be counter productive to do both.

3. Nobody knows the market and the market can't be fully understood, what are your ways of understanding / predicting it to make right calls?
This is not entirely true but no analysis is predictive. All you can have is an edge that can tell you the greater probability of something happening over another thing based on historical precedent and if not the greater probability - that more gain is available when it succeeds than fails sufficient to realise an overal gain across any given sample. Mine is technically derived - yours may be different.

Good Luck in your quest/journey.

 

[kwickwool]

Have a look at the following link by BBMAC who just posted, very good Laman's terms perspective on a trading system for the newbie.

http://www.trade2win.com/boards/for...comprehensive-trading-system-methodology.html

It is a great starting point that you can modify and change specific to your style, trading and any edge you feel that you might gain by watching, watching and watching the markets, but ultimately it all lies in your own hands and ability.

 

[Enzzo]

Hi Degurube,

You got already some good points in the previous post....
my 2 cents would be like this:

1) The R:R ratio is not that important itself..... that is because it cannot be isolated, and treated as an individual data.... it totally depends on the win rate of your method, as there are for example nice strategies that works really really well with a 0.5 R:R, because the Strike rate is huge... some other strats need a 2, 3, or more R:R to be successful in the long haul.

2) you can diversify between many forex crosses, of course, but take a look to the correlations between the pairs you are trying to work on, as different forex pairs are very correlated (positive or negative) between then, so you will find you betting on "the same" move sometimes, even when you are opening the trades in different pairs (multiplying your risk in the same trade)...
Many times it is good to identify which pair is under performing the others correlated ones, in case you are betting for a short move, and vice verse in the long case... and go with it alone in that particular trade

3)

This is not entirely true but no analysis is predictive. All you can have is an edge that can tell you the greater probability of something happening over another thing based on historical precedent and if not the greater probability - that more gain is available when it succeeds than fails sufficient to realise an overal gain across any given sample. Mine is technically derived - yours may be different.

Master answer right here

Hope it helps you a little

 

[degurube]

many thanks to all for your feedback.....much to think about on my break

 

[montmorencyt2w]

It does seem crazy, and maybe it is crazy, and some people say you should never start with FX.

On the other hand, if it interests you, and you are prepared to put in the work, you can learn a bit about what moves it, and I see you've been studying the fundamentals, and I think that's a good thing. Not saying you can "predict", but at least, you can have some idea of what caused moves that already happened. And gradually get a better idea of what might happen.

It's always worth keeping an eye on gold, and the major stock market indices as well (note: I'm not saying trade them - just keep an eye on them).

EUR/USD is usually reckoned to be a good one to start with anyway, as it's liquid and the spread is usually low.

At some point, it might be worth trying to find a broker or SB company (if you live in a country where you are allowed to SB) which allows live trading for very small stakes. Should hopefully be more realistic than demo-ing.

The second worst thing is to lose your entire account in your first trade.
The worst thing is to make a big win on your first trade.
It can go to your head
Try not to let winning or losing get to your head.
Good luck

 

[degurube]

It does seem crazy, and maybe it is crazy, and some people say you should never start with FX.

On the other hand, if it interests you, and you are prepared to put in the work, you can learn a bit about what moves it, and I see you've been studying the fundamentals, and I think that's a good thing. Not saying you can "predict", but at least, you can have some idea of what caused moves that already happened. And gradually get a better idea of what might happen.

It's always worth keeping an eye on gold, and the major stock market indices as well (note: I'm not saying trade them - just keep an eye on them).

EUR/USD is usually reckoned to be a good one to start with anyway, as it's liquid and the spread is usually low.

At some point, it might be worth trying to find a broker or SB company (if you live in a country where you are allowed to SB) which allows live trading for very small stakes. Should hopefully be more realistic than demo-ing.

The second worst thing is to lose your entire account in your first trade.
The worst thing is to make a big win on your first trade.
It can go to your head
Try not to let winning or losing get to your head.
Good luck

indeed.....working on it on a daily; i.e not let winning or losing get to my head. cheers for your input!

 

[forker]

throw away the indicators and start studying horizontal support. you need to also have a grasp of economics and other markets because the fx market is not a pure trading vehicle and people don't realise this and get slaughtered. to be a good fx trader you have to understand 20% technicals, 40% other markets, and the rest is economics.

 

[degurube]

throw away the indicators and start studying horizontal support. you need to also have a grasp of economics and other markets because the fx market is not a pure trading vehicle and people don't realise this and get slaughtered. to be a good fx trader you have to understand 20% technicals, 40% other markets, and the rest is economics.

I'm actually more of a fundamental guy to be honest....appreciate understanding / reconciling the complex interconnected global economic web as reflected in price movements in different markets [equities / commodities & indices for now]. Stept into technical coz I figured that would give me more understanding of the charts....and the lingo lol. I'm now trying to balance both but i think the greatest development area would be emotional discipline. Thanks for your input

 

[forker]

the only way to remove emotional influence is to reduce your stake.