Words of Wisdom for Newbies..........

[TheTS]

OK, so the title is a bit grand, but I thought I'd share some thoughts and try to help new traders.
My journey has been the same as most.........I'be been trading for 12 years, with varying degrees of success in the early days. For the last 5 years I've been profitable and I thought it might be useful to post some ideas and share some thoughts.

Firstly, a couple of big DON'T's!

Don't overtrade............it will kill you. Patience is the name of the game.
Don't try and trade too short a time frame. Start with hourly charts, or even more sensible 4 hourly charts.

As I see it there are 3 components to trading.....strategy, money management and psychology.

Most new traders will concentrate on only one of these. Namely strategy. This is understandable, but in my view it's wrong. Mastering your emotions, learning some discipline and managing your account properly will serve you far better than constantly searching for a "winning" strategy.

To that end, I'm going to take you through a very simple trading strategy in the hope that you will try it for long enough to put some thought into the other two parts of the jigsaw

 

[TheTS]

Something to think about..............most new traders will lurch from method of trading to another. A small losing run and the hunt for a new strategy starts again.

Think of it this way.

Your goal is to become consistently profitable. In order to have a consistent output, you must have a consistent input. Therefore, taking a simple trading strategy and learning it, mastering it, is the way forward. How can you possibly to hope to achieve a consistent result, if you keep changing the input.
You can't and you won't (not in the early days at least!)

 

[TheTS]

The easiest place to start (IMO) is to jump on a trend. The logic behind this is pretty simple. A trend is place the weight of money is predominantly in one direction. If the weight of money is sending prices higher, then you look for opportunities to buy into that trend.
Statistically a trend is more likely to continue than reverse and therefore I think its a pretty sensible for the new trader to start

 

[TheTS]

So..........a trending market will tend to moves in waves. The market will rise, and then pull back, and then rise again. In a rising market the market will rise, making a new short term high. It will then pull back (retrace). The pull back will then form a new low, which should be higher than the previous low formed in the previous pull back.
In other words in a rising market you should be able to see a series of higher highs and higher lows.

 

[TheTS]

The attached chart shows a downtrend on the hourly chart on the AUDNZD. This chart is hourly and is "live"

 

[TheTS]

The theory here is therefore pretty simple. Identify a trending market......wait for the market to retrace......then jump aboard hoping the existing trend will continue

 

[TheTS]

The first to do is to identify those markets that are trending.
I think differently to a lot of traders in that I'm not particularly interested in what market I trade. Many have there favourites and some only trade one market, hoping "to get to know it."
Me, I don't care. I'm only interested in seeking out those instruments that are most likely to produce a good set up.
Spotting a trending market is very easy given enough practice. Your are either looking for a series of higher highs and higher lows, or a series of lower highs and lower lows.
For newer traders here's a tip. Put a 50 MA and a 20 MA on a chart. If the 20 is above the 50, and price is above both, its an uptrend

 

[TheTS]

At this stage you should be looking to simply answer the question "is this market trending". If you don't know, it's not!
Add those markets that are trending to your watch list.

Next, we are simply going to wait until they retrace and then buy or sell back into the prevailing trend.

It's getting late her in Oz, so I'll call it a night for now.

Tomorrow I'll finish the rest of this simple strategy.

 

[Quinlan Hardy]

Hello

I also make my first steps in trading and sometimes need a support, hope you don't mind guys. I would like to learn how to trade .

 

[itspossible]

^^^^^^^^^^^^^^^^

 

[TheTS]

After you've gone through the above filtering process you should be left with a few markets that appear to be trending. We've cut out the ones where there is no obvious direction, favouring those where either the bulls or bears are in control.

In terms of markets to look at, as mentioned earlier I don't mind what I trade. I'm looking for the best set ups. I'll look at currencies, indices and commodities. It takes me a couple of seconds to scan each instrument to determine whether it goes onto my watch list, so I can cover a lot of markets.

For newer traders, I would stick to 5 or 6 currency pairs, maybe the Dow, and chuck in gold or oil.

The golden rule here is if you are unsure if a market is trending or not, it probably isn't! Don't spend long doing this filtering process. We are looking for the easiest opportunities and without the wind at your back you'll struggle.

Do this filtering once a day if you are using 1hr or 4 hr charts. This method would, and does, work on any time frame, but as this is aimed at new traders lets stick with these.

On a very practical level this way of trading is ideal for those who work full time. Scan the markets in the morning, or at night and compile your watch list. From there you only need to check the market once during your working day if you are using the 4hr.

 

[TheTS]

Once you have your watch list of trending markets, the next step is pretty logical. If the market is rising, what for the retracement and buy the dip.

I mentioned earlier that a rising market makes a series of higher highs and higher lows. So, after the market has made its new high, it will pause, and begin to retrace, hopefully to the go and continue its move upwards. Just make sure that the new low that is formed is higher than the previous low.

So, to repeat, the markets you have identified as trending upwards, wait for a sell off, and buy the continuation of the move upwards.

 

[TheTS]

So....thats the theory.

In practice it never that easy.

The next step is to add an 8 period moving average to those markets we have on our watch list.

I leave this off while filtering just to keep it as simple as possible.

What we are looking for is the market to retrace to cross below its 8ma in an up trend. A new low will hopefully be formed (that is higher than the previous low) and the market will begin to rise. As it continues it move upwards it will recross the 8ma from below. The candlestick that makes this cross become your signal candle. Once this candle has completed place a buy just above its peak. Your stop initially will be just below the low that has been formed.

So, you would be buying into a market that is rising. We haven't bought right at the bottom of the new low, we have waited until we have had confirmation that the low is formed and have then entered.

I'll post charts later to better illustrate the point.

There are various other steps that I use to filter trades, and I often will get in earlier than simply using the method above. However, as a place to start, as a simple methodology I think its a great place to start.