Learning to trade from scratch.

[seven9ine]

Well first off my name is Greg and I have been trading foreign exchange for 2 years. I wouldn't say those two years have been successful, in fact, my first year in forex was probably the most difficult thing I have ever done.

I started out like everyone else. Going to babypips.com and learning about the basics of Forex and then moving on to actually making some trades. I started with Demo using Metatrader but I had really no clue what I was doing. So I went to forexfactory and downloaded some other peoples systems, some very popular ones. I must have tried literally 20 or 30 different systems over a period of several months. A few times, when I thought I finally got this trading this down, the "system" would fail and I would again question if I knew anything at all.

So 6 months in. I know what FX is... I know how to make trades. I know how to use metatrader and put in different indicators and such. But do I really know how to trade?
The answer was simple. No.

The next 6 months I had decided I was going to go "naked". Meaning I am taking away all the indicators and learn how to trade on my own, from scratch. It was incredibly difficult and a few times I even thought that I was going to quit because I had made so many mistakes. But after awhile I started to get the hang of it. I would start making great trades, then all of a sudden I would do poorly. I couldn't figure out why. So I would learn more about technicals and study, study, study. And I would find that the same thing would plague me. I would have my winning streaks, then I would have my losing streaks. Something didn't seem right. It was a vicious circle.
What was I doing wrong?

The answer was because of psychology.

My emotions were plainly out of control when I was trading. When I thought the market was moving against my trade I would close. Damn. Even though I made the right call I panicked. My heart was going.
Then the complete opposite would happen. I would be in a losing trade and I would say to myself "its going to come back, just watch" and I would lose more and more and more.
There had to be something you can do for this. There is.
You have to train yourself to think in probabilities. To be willing to accept that you will never be 100% right. In fact, willing to accept the fact that every trade you make could be a losing trade. I know this sounds backwards but you have to be willing to accept that you can win or lose every single trade. If you win fine. If you lose fine. And that my friends takes practice. That is probably 75% of trading right there. You could almost say that trading is psychology (Greed, fear, etc) Why does the market move? Because people want to make money.

Why am I here?

I know there are many people out there that were in the same boat as me. Starting from scratch and really having no where to go. Honestly, from what I can remember, there was not one person that showed me how to trade properly. I had to learn it on my own. If I can help people find some answers then that is excellent. That is my goal.

Learning doesn't come easy. If you really want to be successful in this business, and yes I mean business, then you have to take it seriously. You have to put time into it. Time into the technicals and time into the mental.

I am not here to make money or anything like that. I have a full-time day job (non trading related) and I trade part-time currently and am planning on taking this full time in probably a year or two. And until that happens I would like to join a community of traders to maybe shed some insight on how I trade, perhaps even teaching a thing or two, and maybe learning a thing or two myself. After all, the moment you stop learning is the moment you will fail.

I am not necessarily saying how I trade will work for everyone but at the minimum it will give you the insight to find what works for you. In my opinion, there is no holy grail, but if there was one, it would be finding a system that works for you. And by system I mean something that you created for yourself.

Personally, I trade off of the 5m, 15m and 1hr timeframes. I aim for 30-60 pips a day. Sometimes I make more, sometimes less. There are no guarantees in this business.



Anyway, if there is interest in this thread then I would be happy to start sharing my strategies.



Regards,


Greg

 

[seven9ine]

More...

I try to keep my trading simple. The strategies I use are as follows:

-trendlines
-S/R
-50% fib
-candlestick formations
-time


I know that some people use indicators to help them make a decision to enter a trade, or even to completely make the decision for them. But for me I like to be in total control and decide for myself when to trade. Trading like this will help you learn how the market moves and will keep you making money even when the market is in a different stage (i.e trending, lateral, etc)

For an example of my trade. I sold GBP/JPY at 142.09 and took it for 120 pips last night (you can check out the trade at my blog). This was a limit sell that had been sitting there for about 3 days that finally triggered last night. This was based off a simple trend line that I had been following for awhile.

Most importantly when I finally enter the trade I keep emotions at bay. If you get that feeling in your stomach then it means that you probably are emotionally connected to the trade and therefore might not follow through with your original plan or you might stop out early if the market moves against you a bit.


I find an important part of trendlines or channels is what they are used for. They are used for "guiding" the price to reach a certain point and then it either creates a new channel or it enters back into a higher timeframe trendline. This could be on the 5m, 1hr, 4hr, etc.


I will write more shortly... time for breakfast!

 

[seven9ine]

...

Ok so what actually moves prices? People's belief that the price should be worth x amount and the fact that they are trying to make money.
So what you are looking at when you are looking at any sort of technical chart is the emotion of the market, so to speak. Well how can you use this to your advantage? First, by controlling your emotions when you are in a trade. Second, by having an edge.
How do you get an edge? You have to buy cheap or sell high. How do you determine what is cheap and what is not? Well you have to short the market when the prices are either at a resistance area or at the top of a trendline and vice versa for buying. It's pretty much as simple as that but obviously the execution is much more difficult. Mainly because of the emotions involved in trading.

You have to treat trading like being a professional poker player or blackjack player. You have to realize that you have an edge. Even though you may lose 2, 3 or even 4 trades in a row, if you have discipline, you know that your edge in the long run is what will make you money.

For example, let's say you are playing poker, and you have pocket aces. If played properly you have a very good chance to win, but not guaranteed. If you went all in and somebody called you with an 89 offsuit and he rivers a straight, well thats just how the game is played. If you keep playing pocket aces properly you will come out on top more than you would lose. You have to think in probabilities.

Having an edge in the markets isn't really that hard. It just takes some practice and screen time. I have put thousands of hours into watching the markets live. I really don't believe in back testing because you dont really know what you would have done if it were live because you don't take into account your emotions. I know this may work for some people but what do you do when your indicator stops working? Are you able to read the market? Probably not because you haven't put the time into learning how it moves. I would rather learn how the market moves then having an indicator or system that works for 3 months and then all of a sudden it stops working and i am screwed.

In the above image I purchased the EUR at 4737 and took profit at 38 pips. I could have taken more but I wanted to get in on a short (which I did at 4810 and made another 30)

The point to the above image is that you don't buy on peaks, and you don't sell on dips. You buy on dips and sell on peaks. You find clues to where the price is going from where it has been.

You commit to the trade whether you win or lose. If the price happened to come back against me and I take my 20 pips loss then thats fine. I look for another opportunity somewhere else. I don't think about that trade on my next trade, it ends there. I just know that there are endless opportunities in the market so why linger about one that could have worked for you but didn't. It's not that you made the wrong move, it just so happens that the market went somewhere else. It could have easily went in the direction you chose.

Probabilities.

From my style of trading I could always take more, but I am never greedy and take what I can.

This week I made 250 pips and I am happy with that. From my trades I probably could have made 500 or more but conserving capital is one of the hardest things in forex to do.

Anyways, I hope someone is reading this information and it's not just going into cyberspace!

More later!

 

[seven9ine]

Hi Greg

ye I have had a quick read and glance at your blog

"I have put thousands of hours into watching the markets live."

will put that sentence down to being an enthusiastic thread starter

all the best with it

have a good weekend

Andy

Thanks Andy.

You have a nice weekend too.

 

[Pip Chaser]

what a fantastic, hoest and thorough post, i have definately been where you are but i am probably half way to where you are now, the largest taker of my money is greed, when i see a good trade i go mad and over leverage myself and thus on a retracement my money gets eaten up and along comes the margin calls.
For me i need to control the greed and stick to money management

Regards

David

 

[JDTRADER]

Well first off my name is Greg and I have been trading foreign exchange for 2 years. I wouldn't say those two years have been successful, in fact, my first year in forex was probably the most difficult thing I have ever done.

I started out like everyone else. Going to babypips.com and learning about the basics of Forex and then moving on to actually making some trades. I started with Demo using Metatrader but I had really no clue what I was doing. So I went to forexfactory and downloaded some other peoples systems, some very popular ones. I must have tried literally 20 or 30 different systems over a period of several months. A few times, when I thought I finally got this trading this down, the "system" would fail and I would again question if I knew anything at all.

So 6 months in. I know what FX is... I know how to make trades. I know how to use metatrader and put in different indicators and such. But do I really know how to trade?
The answer was simple. No.

The next 6 months I had decided I was going to go "naked". Meaning I am taking away all the indicators and learn how to trade on my own, from scratch. It was incredibly difficult and a few times I even thought that I was going to quit because I had made so many mistakes. But after awhile I started to get the hang of it. I would start making great trades, then all of a sudden I would do poorly. I couldn't figure out why. So I would learn more about technicals and study, study, study. And I would find that the same thing would plague me. I would have my winning streaks, then I would have my losing streaks. Something didn't seem right. It was a vicious circle.
What was I doing wrong?

The answer was because of psychology.

My emotions were plainly out of control when I was trading. When I thought the market was moving against my trade I would close. Damn. Even though I made the right call I panicked. My heart was going.
Then the complete opposite would happen. I would be in a losing trade and I would say to myself "its going to come back, just watch" and I would lose more and more and more.
There had to be something you can do for this. There is.
You have to train yourself to think in probabilities. To be willing to accept that you will never be 100% right. In fact, willing to accept the fact that every trade you make could be a losing trade. I know this sounds backwards but you have to be willing to accept that you can win or lose every single trade. If you win fine. If you lose fine. And that my friends takes practice. That is probably 75% of trading right there. You could almost say that trading is psychology (Greed, fear, etc) Why does the market move? Because people want to make money.

Why am I here?

I know there are many people out there that were in the same boat as me. Starting from scratch and really having no where to go. Honestly, from what I can remember, there was not one person that showed me how to trade properly. I had to learn it on my own. If I can help people find some answers then that is excellent. That is my goal.

Learning doesn't come easy. If you really want to be successful in this business, and yes I mean business, then you have to take it seriously. You have to put time into it. Time into the technicals and time into the mental.

I am not here to make money or anything like that. I have a full-time day job (non trading related) and I trade part-time currently and am planning on taking this full time in probably a year or two. And until that happens I would like to join a community of traders to maybe shed some insight on how I trade, perhaps even teaching a thing or two, and maybe learning a thing or two myself. After all, the moment you stop learning is the moment you will fail.

I am not necessarily saying how I trade will work for everyone but at the minimum it will give you the insight to find what works for you. In my opinion, there is no holy grail, but if there was one, it would be finding a system that works for you. And by system I mean something that you created for yourself.

Personally, I trade off of the 5m, 15m and 1hr timeframes. I aim for 30-60 pips a day. Sometimes I make more, sometimes less. There are no guarantees in this business.



Anyway, if there is interest in this thread then I would be happy to start sharing my strategies.



Regards,


Greg

Hi Greg

Great post !
Its like looking in the mirror, I could not of put it better into words. Well done and good trading.


:|

:-0






:|
:smart:

 

[seven9ine]

Good weekend!

Thanks for the kind words David. As well to JDtrader.

I am hoping to build this thread into a meaningful one.

I will be adding more content after the weekend. There is lots to talk about.

Until then, have a great weekend!

 

[Pip Chaser]

i will be looking at your blog regularly

Have a great one

Keep it up, with words like that you have yourself a large following

 

[seven9ine]

tools...

Tools you need to be a successful long term trader


1. An Edge

This is a very important tool to have because without it you would not be able to make any profitable trades. It's basically being able to determine a good price point that has a good risk reward ratio. Thankfully, learning to have an edge in this market just takes time and practice. This is the pure technical side of trading. This can be as simple as buying on dips and shorting on peaks. You will get a feel for the market when you spend time in front of it, watching it, and practicing it. If you are serious about trading then this will come standard.


2. Rules

Once you find yourself having an edge you need the ability to define yourself a ruleset. This would be something along the lines of:

- Am I trading with the trend?
- Where are the support and resistances? Am I am trading at them or in between them?
- Are there any news announcements that will affect my trade?
- What is my PREDEFINED stop loss and take profit set at?
- etc.

3. Discipline

Once you have yourself rules in place you absolutely need the ability to follow them without question. After all without discipline you might as well take your money to the casino. This is a business so all businesses must practice discipline.
This can be hard to master if you do not have control over your emotions. You will feel the need to break one of your rules because of so and so. You must resist the urge to do so because in the long run, breaking your predefined rules will end up costing you. After continued success, practicing your discipline will become second nature.


4. Persistence and a desire to learn

This is a very important tool because you need to continue to be motivated in times when you will question yourself. Because there will be times when you will want to give up and move on to something else. If this is something you really want to to you must have the strength to push forward. Even if you are several years into trading you cannot ever think you know whats going to happen next, you must keep your mind open to learning new things. You must always learn and learn in this business. Be persistent.



5. Controlling your emotions

This is probably the hardest thing that you will have to conquer. You must spend as much time working on this as you will with your technical side of trading, perhaps more. Many people forgo this and as a result they never make it as long term traders. In fact, if you don't control this, trading would be equivalent to gambling.
You have to work on taking out the fear and the feeling of excitement when you trade. I know when you first start trading this will be natural because its your brain's natural response, but you must realize that there is no place for these kind of emotions for the professional trader. If you trade with emotions then all of your hard work and training will be worth nothing.




These are the 5 basic tools that traders must have in order to be a successful, long-term trader. When you first start learning about forex or the markets, the first step will be tool #1, learning to have an edge. After this you should take into account all the other tools you will need and work on them at the same time.

Keep a journal with you. Write down your trades and why you took them and how you felt mentally when you entered. And write down afterwards why you closed out and how you felt. You will then begin to put together a map of how your mind is working when you are trading. You will then be able to determine your strengths and weaknesses as a trader and work on them.


I am slowly putting together some things that I feel traders can learn but if you have any questions feel free to let me know. I will continue to add things that I feel will benefit you.


Greg

 

[seven9ine]

timeframes...

What kind of trader are you? Are you a longer term trader? Meaning that you don't like to watch trades too often and maybe trade once a few days or once a week? If so you are probably more inclined to trade the 4 HR charts or even the daily charts. Here you will able to determine your entry and exit on a larger timeframe, therefore already allowing yourself a larger stoploss and larger take profit.

If you are somewhere like me, where I like to trade once a day or even a few times a day I look at the hourly chart, all the way down to the 5 minute chart. I keep my stoplosses at around 20 and my take profits at around 40 or more. I always like to have a risk reward ratio of around 2:1. That way, even if I am right 50% of the time ( which is unlikely) then I will still be at a breakeven point (minus the spread).

If you are a scalper and like to make 10 or more trades a day then you are probably looking at the 5 minute charts, 1 minute charts, and even the 30 seconds or less charts. You like to take profits of around 5-10 per trade with tighter stop losses.

There is nothing wrong with trading in any of the above mentioned techniques. You just have to figure out which mindset best suits you. Every single person is going to have a different preference in regards to trading. That is why I highly recommend developing your own trading style to suit your personality.


When I first started I really had no clue what I was doing. So I copied off other traders to see if I could make consistent profits from their "systems". After one failed I would try the next. And so on and so forth. Until 6 months later I still didn't have a system that was profiting consistently. At that point I knew I had to create a "system" that worked for me. I liked the idea of being in a trade at least once a day so I knew which timeframe actually worked for me. I also knew that I rarely like to hold overnight positions, especially on the weekends. So my time frames are the 5min - 1hr, but always keeping in mind the larger ones.

Some say scalpers cannot be profitable and I disagree. Scalping works for the right mindset. And I know of some scapers where they make a lot of pips, but for most people their minds aren't capable of handling that kind of mental stress. I would be one.

If you are starting out try the hourly charts. Allow yourself at least a 20 pip stop loss making one or even two trades a day.
If you have less time and still want to participate then try the daily charts. You could allow yourself a 50-100 pip stop loss and allow your trade to go through the week. You would then aim for 100-200 pips (remember the 2:1 ratio)


Once you realize what time frame your mind is capable of that's when the work begins. If you have a full-time job print yourself out some daily or hourly charts to take with you to work so that you can study them there. Also take with you a ruler and a pen and draw some trendlines, support and resistance lines. Once you begin to have a feel for how these prices moves, open up a demo account and then make demo trades. Remember to mark down in a journal (offline or online) how you felt when you made the trade, why you made it, and how you feel when you exit the trade and why you exited it.


Trading isn't necessarily about knowing what's going to happen next. It's how well prepared you are when you are actually in a trade. Are you mentally up for the challenge? Do you have your stop losses and take profits set?

If you don't really have a clue where the price is going, then you wait for a trade to come to you. Just because you feel that you should be in a trade doesn't mean that you have to. Patience is a huge virtue in this business and it will pay off time and time again if you have some.


Looking at the EUR today, October 12, I only see 2 points where I would have entered a trade and those are 12 hours apart! Sometimes there will be days where I will get 5 signals to enter a trade but I never count on that. I only look at what the price is telling me. If it gives me 1 trade, great. If it gives me 0 trades, fine. There is always tomorrow. Never ever feel that you have to be in the market because there is money to be made. There are endless opportunities and you can't forget that.




More tomorrow...

 

[seven9ine]

more tools...

The technical tools you use on a daily basis



News

You can either use this to your advantage (if you are an experienced trader) or you can completely stay away from it. If you are a newbie I would recommend 100% staying away from major news releases as it will cause your emotions to go out of control.
If you are experienced or in control of your emotions you can make good pips by knowing when to take advantage of major news releases. For example, if the Fed rate is cut by .25% at 8am EST then watch where the price is going. I would recommend that if you are new to trading news then stay away from the breakout, but once you see resistance, or a place where the price is congested, feel free to get in on the way back. The price will MOST likely get back to where it was because of one major reason: Banks/Institutions don't want to lose money.
As a individual trader you never really know what these major players will know, so use that to your advantage. Hop on to trades that they are making money on.



Trendlines


Trendlines are lines drawn at 2 or more peaks or dips that connect in a straight line. You can even go further than this and find that there is another trendline that coincides with a lower or higher trendline. This is called a channel or trading channel. This is used to guide the price to a certain level.


FIB

The only fib I use is the 50% retracement. You can use the others but this is the most common.


Time

Time is an interesting concept in trading. There are two levels to the concept of time. One being what is the actual time, i.e 8:00 EST (who is controlling the market). The other being the distance or time between movements. Afterall, you will never see a price move continually. You will always wait until time has passed. This is a interesting concept but if you actually look at the charts you can easily apply this tool to it.


S/R

The age old tool for the trader. Support and Resistance. Where has the price bounce from or to. Where are traders willing to purchase the price at or not? Where do they tend to sell? This is incredibly important and thus this should be the staple for all traders out there.

Candlestick Formations

This is a tool used to confirm trades, never to actually base off of. For example, if I like a trade at the 1.4700 mark (EUR/USD) I will look for a support or resistance line AS well as a morning star formation ( one example of a reversal ) to confirm a buy at that level. It is an excellent support tool. I would recommend reading the book Candlestick Techniques by Steve Nison for more advanced topics or you can find basic examples on the web.


Longer term direction

Pull back your timeframe to either Daily or weekly. Where has the price consistently gone? Up or Down? Has the price made new highs or lows? This is your long term trading direction. Always keep this in mind.




There are MANY, Many more tools to be used but these are the ones that I use. Trading is already built off of emotion, why complicate it further?

 

[Da.DesiTrader]

Greg, every word you said in first post was like taking the words out of my mouth. This is exactly the phase I am going through. I will be watching your thread with great interest.

Keep it up.

 

[seven9ine]

...

Trading itself, at a technical standpoint, is not really that hard as many make it out to be. For example, let's say that we just guessed the movement and 50% of the time we were right. And at the same time we had a decent risk reward ratio(2:1). Without even knowing that much about trading you could really go on a roll and start making money right off the bat, but then again on the other hand you could start losing. But the point is anyone can get lucky. It's like flipping a coin. Still better than the casino since the odds are against you.

But once you start to have an edge of even 5% then you could actually theoretically start making money ever so slowly as long as you could afford those drawdowns.
Now let's say that you become a decent analyst and gain an edge of 20%, meaning that you are right 70% of the time which means 7 out of 10 times. So roughly 1 out of every 3 trades will be wrong. And that can happen in any order because the odds reset themselves everytime you enter in a new trade. Each trade is unique. So even if the setups look exactly the same it doesn't mean you are guaranteed to be right. Again, just because you have an edge or see a setup that looks like the last one doesn't mean that you will be correct. That's where you have to have mental control over your emotions and realize that trading is a probability game. It's just like being a professional poker player.

The key is knowing that trading is a probability game. Knowing money management. Controlling your emotions. If even one of these skills are off then you will realize that the market can take your money very easily. It's traded by professionals day in and day out. What makes you think you can take some of their money? In order to compete you have to think like they do. You cannot be greedy on your trades. You cannot think that the market is going to come around when you are in a losing trade. You have to think objectively meaning that you should see the market as it really is. An information tool. You will never really know 100% where the market is going. You can say that you are entering in a trade because the odds are in your favor but those are odds, not a guarantee. If you can program your mind to think this way then you are on your way to becoming a successful trader.

 

[seven9ine]

Actual trade

Here is an actual trade I took earlier. I set my stop loss so that I will take +20 as I got in at a good price.

Now I don't like to trade the GBP/JPY too often since it's sometimes too volatile for my liking, but when the market tells me there is an edge I simply trade it and accept it.

Keep your trades fairly simple. Don't over complicate things.

 

[pleaper]

Educational and informative Greg - thanks

Good post Greg:
I watched your videos too (hopefully there will be an update ? It is good to see some one
who practises what they preach).

For me I do like the your style - at first sight simplistic but it has pointed out to me
a big hole in my strategies - drawing trends, something I knew about of course but I managed to get caught up in looking at technical indicators and forgetting to draw the trends.

Will be following your posts

thanks
Peter

 

[seven9ine]

Thanks Peter.

I plan on adding video lessons once a week and hope to do a EUR/USD video analysis daily once my schedule slows down.


Regards,


Greg

 

[TopIQ]

I cannot believe that after all these years, you lot are still trying to work out how to trade.
I cracked the code a few years ago after extensive research and haven't looked back since.
I've watched in horror as the guru's fix their trend lines, fib, macd's and anything else that will avoid looking at the real issue...THE PRICE.

 

[seven9ine]

Some people don't have the time to do extensive research because of full-time jobs, families, etc.

There is nothing wrong with that. Some people take longer than others, though I hope that this thread can help speed things up

But I am glad to hear you are doing well! Keep it up!

Good luck.

 

[TopIQ]

Some people don't have the time to do extensive research because of full-time jobs, families, etc.

Sunday night for 2 hours is all the research time a beginner trader needs to do research and find an edge....most traders never keep a DIARY OF THEIR TRADES...so they keep making the same mistakes and SABOTAGE their trading.

Most traders are really looking for EXCITEMENT...GO VISIT ROLLERCOASTER.

Forex is super competitive...stick to trading VODAFONE or GE

 

[GumRai]

I see that you have posted 2 charts ( for some reason they are bigger than my browser window) and I cannot see what you are doing to determine support and resistance. You are not connecting candle close or candle extremes, so how do you determine S/R lines.
In your last chart you add text that price broke through this support line, do you mean resistance?