Hello world
I'm at a point after trading for approximately 2 years now that makes me want to take my trading more seriously and treat it as a legitimate business rather than a hobby. I think a journal may help with discipline but it the main reason for keeping this journal is to have a record for my own use later and if it also helps people in their trading then great.
I tried to ask and answer most of the obvious questions about myself and trading below
Q. Why do I want to be a trader?
A. There are a few reasons why I want to be a trader, in no particular order they are; To diversify my sources of income. To get a tax-free income. To have more freedom as to where I choose to work. To have a business that doesn't rely on the direct dealing with other people. To help me achieve my long-term goals. To enable me to help others more. The desire to achieve admirable success at something that is perceived by the majority as difficult. To look/sound cool when asked what I do for a living "... I also trade currency".
You'll notice the last two reasons in that list are ego driven. I make no apologies for that. Ego needn't be a negative thing and isn't inexorably linked to greed or fear.
I would hope that demonstrating a strict code of self-discipline, planning the trade and trading the plan and being able to accept losses when, not if, they occur, will be traits others will aspire to and I think that's a good thing.
Q. What sort of trader am I?
A. Right now I am a FOREX trader. I spread-bet the major FOREX pairs.I look at daily charts and on them I like to see a years worth of data, I also look at hourly charts and like to see a weeks worth of data. I have no particular time-limit on my trades, I will set-up a position with stops and limit orders and adjust them as the trade develops. I try not to make a habit of holding trades over a weekend but I sometimes do. I trade break-outs and channel/trend continuations. My trading set-ups have a 3:1 reward/risk ratio and not more than 1% of my account is at risk in any single trade. I use 34 EMA, 55 EMA and 200 SMA, price action, support, resistance and triangles. I don't use any indicators. I ensure I am aware of any upcoming news that may affect a trade I am in. I will delay placing a trade prior to any important news breaking that could have an effect and I will watch any open trades that likewise may be affected, sometimes I will make adjustments depending on the price action following news or even close a trade entirely.
I believe my trading style to be simple. I could probably trade with just the 200 SMA but I have grown accustomed to seeing the other two on my charts so they remain for now, I do sometimes use the 34 EMA to exit.
Q. What are my strengths and weaknesses?
A. I'm strong at; Resisting the urge to trade when there is no true set-up. Resisting the urge to over-trade. Concetrating. Being disciplined. Planning the trade and trading the plan.
I'm weak at; Taking time to go through the steps I've set for entering trades, I sometimes rush. I can watch trades too closely. I can get distracted by other things I have going on. I sometimes allow the battle between greed and fear to take place. I find taking losses difficult sometimes and want to recoup them too quickly, sometimes to my detriment. I beat myself up over silly mistakes. Patience.
Some of these might seem contradictory. And they are. The key difference in having the majority of these strengths and weaknesses for me, is in having a robust plan.
Q. Am I in the right frame of mind to trade?
A. Yes. If I place a trade then I am in the right frame of mind.
I will only attempt to find a trade when I am feeling 100% - I'd much rather not trade at all if I"m not feeling great - loss of opportunity is preferable to loss of capital. For me, the hard work is done prior to entering a trade. The management rules I have (moving the stop and limit) are taken care of by the trading plan.
Q. What are my income targets?
A. I don't actually know what my target(s) are right now but I do understand the importance of having targets. As I'll be trading with an account of just over 5,000.00GBP I'll set myself a monthly income target of 10%
Q. What are my goals?
A. I have one single overall goal. To consistently earn 20,000.00GBP per month from trading.
Q. What will I trade?
A. As mentioned before I will be trading FOREX exclusively. I'll trade the following pairs; GBPUSD, USDCAD, EURGBP, USDJPY, EURUSD, USDCHF, AUDUSD - All 6 majors plus EURGBP which I just have a personal interest in. Still, they're a liquid pair. The reason I'm trading FOREX exclusively at the moment is because I don't want to risk confusing different trading methods that I would use for other instruments such as stock and options with this. FOREX is one of, if not the largest liquid market and spread-betting it is tax-free currently for me which is another plus. I also believe that trends are stronger and price action/technicals plays more of a role long-term than fundamentals which will always have big effects on stocks.
Q. Which time-frames will I trade and why?
A. I'll enter and exit trades on a 1 hour price chart. Briefly what I do is look at a years worth of data for a currency pair on a daily price chart to identify the overall trend or position in a channel then once I think a set-up is forming I'll zoom in to the 1 hour price chart to take a closer look and (hopefully) more accurately call the top, bottom, bounce, break etc then place my trade and monitor it in the 1 hour price chart until it is closed.
Q. What software will I be using, which broker(s) and why?
A. I'll use the version of MetTrader 4 that I downloaded from my broker, Alpari. I use MetaTrader 4 because I have the most experience of this platform, I feel comfortable with it. I know how to do everything that I want to do in it. Plus I can trade directly from it. I use Alpari because of their tight spreads, quick fills/execution and special offers that they come out with from time to time. They also offer mini/micro accounts so when I'm sizing up a position that covers say 1,000 pips I can keep to my R/R ratio by using very small stakes, more on this later.
Q. How will I record my trades and analyse them later?
A. I'll use Camtasia to record my MetaTrader screen and provide a running audio commentary to explain any particular lines drawn and my thoughts etc. I'll try to do this just after entering a trade and then during the trade as it develops or if the trade turns out to be short I'll do a summing up video after closing the trade. I probably won't record until after the trade is placed because Camtasia slows my computer down somewhat and I don't want to risk a crash or anything.
Q. Aside from technical analysis what else will I do before and during a trade?
A. I'll go to calendar to see what Medium and High importance news will be released during the day and next day that may affect the pair that I'm considering a trade on. If there seems to be no obvious news over the next 48 hours I'll enter the trade but always keep a day ahead on the news to spot any potential problems coming up and take appropriate action if I deem it necessary i.e. raise stops, lower limits, exit all or part of the trade.
Q. What are my attitudes to risk and reward?
A. Simply, I always look for a 3:1 ratio, that is, if I'm going to risk losing 1 I want the chance to gain 3. That 1 currently equates to 1% of my trading bank. I pick my stop and limit based on technical indicators and use the price per point to make the raio fit. For instance I won't rigidly trade 1GPB/pip and only allow myself a 50 pip stop loss. This method means I sometimes have to wait for the market to move slightly in one direction before I can get in, or I'll set a Buy Stop or Sell Stop at the required level with no expiry although if the market has moved significantly away from me by the time the candle comes to a close I may delete the order and re-evaluate the trade. I certainly won't feel obliged to trade just because I've been close to a trade.
Q. What precautions do I have against physical risk?
A. I trade from a dedicated desktop computer that currently has no uninterruptable power supply. However I consider the amounts low enough and the probability of being struck with a power outage at a pivotal moment to be very rare. However I do have my brokers trading desk number on my mobile phone and have a backup internet source being a laptop and 3G connection so I should be able to manage my account during such an event.
Q. What will I do if I consistently lose money?
A. I will analyse my trades to try to identify why and change that.
Q. What will I do if I consistently gain money?
A. I plan to compound my wins to work towards my goal of earning 20,000.00GBP per month from trading. At this point I would like to withdraw 20,000.00GBP per month to spend as I wish, or not, leaving whatever bank necessary to generate 20,000.00GBP per month in my account to trade with.
Q. When will I move my stop?
A. When the trade has moved 25-33% of the way towards it's target I will move the stop to break-even or just above. I'll keep doing this until I either manually close the trade or it hits the limit.
Q. When will I move my limit?
A. If the market seems to encounter resistance prior to my limit I may revise it downwards or if the 200 SMA is near the limit target I may move the limit down to just inside the 200 SMA.
Q. When will I enter a trade?
A. When I see a clear break or bounce.
In Summary
Spread-betting all 6 FX majors and 1 other FX pair. Using technical set-ups of bounces and break-outs whilst being mindful of news. Not risking more than 1% of bank on any single trade. Always going for a 3:1 R/R ratio. Discretionary exits and adjustments based on price action and interaction with trend lines and moving averages.
Enough with the Q&A already! Let's see some examples and some live trades!
I'm at a point after trading for approximately 2 years now that makes me want to take my trading more seriously and treat it as a legitimate business rather than a hobby. I think a journal may help with discipline but it the main reason for keeping this journal is to have a record for my own use later and if it also helps people in their trading then great.
I tried to ask and answer most of the obvious questions about myself and trading below
Q. Why do I want to be a trader?
A. There are a few reasons why I want to be a trader, in no particular order they are; To diversify my sources of income. To get a tax-free income. To have more freedom as to where I choose to work. To have a business that doesn't rely on the direct dealing with other people. To help me achieve my long-term goals. To enable me to help others more. The desire to achieve admirable success at something that is perceived by the majority as difficult. To look/sound cool when asked what I do for a living "... I also trade currency".
You'll notice the last two reasons in that list are ego driven. I make no apologies for that. Ego needn't be a negative thing and isn't inexorably linked to greed or fear.
I would hope that demonstrating a strict code of self-discipline, planning the trade and trading the plan and being able to accept losses when, not if, they occur, will be traits others will aspire to and I think that's a good thing.
Q. What sort of trader am I?
A. Right now I am a FOREX trader. I spread-bet the major FOREX pairs.I look at daily charts and on them I like to see a years worth of data, I also look at hourly charts and like to see a weeks worth of data. I have no particular time-limit on my trades, I will set-up a position with stops and limit orders and adjust them as the trade develops. I try not to make a habit of holding trades over a weekend but I sometimes do. I trade break-outs and channel/trend continuations. My trading set-ups have a 3:1 reward/risk ratio and not more than 1% of my account is at risk in any single trade. I use 34 EMA, 55 EMA and 200 SMA, price action, support, resistance and triangles. I don't use any indicators. I ensure I am aware of any upcoming news that may affect a trade I am in. I will delay placing a trade prior to any important news breaking that could have an effect and I will watch any open trades that likewise may be affected, sometimes I will make adjustments depending on the price action following news or even close a trade entirely.
I believe my trading style to be simple. I could probably trade with just the 200 SMA but I have grown accustomed to seeing the other two on my charts so they remain for now, I do sometimes use the 34 EMA to exit.
Q. What are my strengths and weaknesses?
A. I'm strong at; Resisting the urge to trade when there is no true set-up. Resisting the urge to over-trade. Concetrating. Being disciplined. Planning the trade and trading the plan.
I'm weak at; Taking time to go through the steps I've set for entering trades, I sometimes rush. I can watch trades too closely. I can get distracted by other things I have going on. I sometimes allow the battle between greed and fear to take place. I find taking losses difficult sometimes and want to recoup them too quickly, sometimes to my detriment. I beat myself up over silly mistakes. Patience.
Some of these might seem contradictory. And they are. The key difference in having the majority of these strengths and weaknesses for me, is in having a robust plan.
Q. Am I in the right frame of mind to trade?
A. Yes. If I place a trade then I am in the right frame of mind.
I will only attempt to find a trade when I am feeling 100% - I'd much rather not trade at all if I"m not feeling great - loss of opportunity is preferable to loss of capital. For me, the hard work is done prior to entering a trade. The management rules I have (moving the stop and limit) are taken care of by the trading plan.
Q. What are my income targets?
A. I don't actually know what my target(s) are right now but I do understand the importance of having targets. As I'll be trading with an account of just over 5,000.00GBP I'll set myself a monthly income target of 10%
Q. What are my goals?
A. I have one single overall goal. To consistently earn 20,000.00GBP per month from trading.
Q. What will I trade?
A. As mentioned before I will be trading FOREX exclusively. I'll trade the following pairs; GBPUSD, USDCAD, EURGBP, USDJPY, EURUSD, USDCHF, AUDUSD - All 6 majors plus EURGBP which I just have a personal interest in. Still, they're a liquid pair. The reason I'm trading FOREX exclusively at the moment is because I don't want to risk confusing different trading methods that I would use for other instruments such as stock and options with this. FOREX is one of, if not the largest liquid market and spread-betting it is tax-free currently for me which is another plus. I also believe that trends are stronger and price action/technicals plays more of a role long-term than fundamentals which will always have big effects on stocks.
Q. Which time-frames will I trade and why?
A. I'll enter and exit trades on a 1 hour price chart. Briefly what I do is look at a years worth of data for a currency pair on a daily price chart to identify the overall trend or position in a channel then once I think a set-up is forming I'll zoom in to the 1 hour price chart to take a closer look and (hopefully) more accurately call the top, bottom, bounce, break etc then place my trade and monitor it in the 1 hour price chart until it is closed.
Q. What software will I be using, which broker(s) and why?
A. I'll use the version of MetTrader 4 that I downloaded from my broker, Alpari. I use MetaTrader 4 because I have the most experience of this platform, I feel comfortable with it. I know how to do everything that I want to do in it. Plus I can trade directly from it. I use Alpari because of their tight spreads, quick fills/execution and special offers that they come out with from time to time. They also offer mini/micro accounts so when I'm sizing up a position that covers say 1,000 pips I can keep to my R/R ratio by using very small stakes, more on this later.
Q. How will I record my trades and analyse them later?
A. I'll use Camtasia to record my MetaTrader screen and provide a running audio commentary to explain any particular lines drawn and my thoughts etc. I'll try to do this just after entering a trade and then during the trade as it develops or if the trade turns out to be short I'll do a summing up video after closing the trade. I probably won't record until after the trade is placed because Camtasia slows my computer down somewhat and I don't want to risk a crash or anything.
Q. Aside from technical analysis what else will I do before and during a trade?
A. I'll go to calendar to see what Medium and High importance news will be released during the day and next day that may affect the pair that I'm considering a trade on. If there seems to be no obvious news over the next 48 hours I'll enter the trade but always keep a day ahead on the news to spot any potential problems coming up and take appropriate action if I deem it necessary i.e. raise stops, lower limits, exit all or part of the trade.
Q. What are my attitudes to risk and reward?
A. Simply, I always look for a 3:1 ratio, that is, if I'm going to risk losing 1 I want the chance to gain 3. That 1 currently equates to 1% of my trading bank. I pick my stop and limit based on technical indicators and use the price per point to make the raio fit. For instance I won't rigidly trade 1GPB/pip and only allow myself a 50 pip stop loss. This method means I sometimes have to wait for the market to move slightly in one direction before I can get in, or I'll set a Buy Stop or Sell Stop at the required level with no expiry although if the market has moved significantly away from me by the time the candle comes to a close I may delete the order and re-evaluate the trade. I certainly won't feel obliged to trade just because I've been close to a trade.
Q. What precautions do I have against physical risk?
A. I trade from a dedicated desktop computer that currently has no uninterruptable power supply. However I consider the amounts low enough and the probability of being struck with a power outage at a pivotal moment to be very rare. However I do have my brokers trading desk number on my mobile phone and have a backup internet source being a laptop and 3G connection so I should be able to manage my account during such an event.
Q. What will I do if I consistently lose money?
A. I will analyse my trades to try to identify why and change that.
Q. What will I do if I consistently gain money?
A. I plan to compound my wins to work towards my goal of earning 20,000.00GBP per month from trading. At this point I would like to withdraw 20,000.00GBP per month to spend as I wish, or not, leaving whatever bank necessary to generate 20,000.00GBP per month in my account to trade with.
Q. When will I move my stop?
A. When the trade has moved 25-33% of the way towards it's target I will move the stop to break-even or just above. I'll keep doing this until I either manually close the trade or it hits the limit.
Q. When will I move my limit?
A. If the market seems to encounter resistance prior to my limit I may revise it downwards or if the 200 SMA is near the limit target I may move the limit down to just inside the 200 SMA.
Q. When will I enter a trade?
A. When I see a clear break or bounce.
In Summary
Spread-betting all 6 FX majors and 1 other FX pair. Using technical set-ups of bounces and break-outs whilst being mindful of news. Not risking more than 1% of bank on any single trade. Always going for a 3:1 R/R ratio. Discretionary exits and adjustments based on price action and interaction with trend lines and moving averages.
Enough with the Q&A already! Let's see some examples and some live trades!
