A "hello", and a couple of questions...

Hello

Yes, yet another newbie, doing some practice & research. I've been running a demo account with Alpari for just over a month and after a horrendous first week (for some reason I thought I would just "know" which way the market was heading ) I'm now back in the black and making steady growth. I'm thinking that if I can stay consistently profitable for another month then I'll stick my toe in the water and put £1k into a live account. I guess I have a few questions...

1) My trading style so far has been day trading, looking for 10-20 pips per trade, each trade typically lasting between a few minutes and a few hours. As long as it takes to reach my target, or for me to get cold feet ! I've stuck to the GBP/USD market so far. No point confusing myself at this stage. I have the luxury of a day job that lets me keep an eye on things pretty much constantly. Does any of that count as scalping ? I understand some brokers get upset about scalping.

2) Is live trading going to be different to pretend trading ? I have some slight paranoia that suddenly markets will move completely differently even though the demo account does (apparently) run on the same data as the live accounts.

3) Who should I lodge my money with ? I've been using Alpari's demo server succesfully and perhaps feel a little brand loyalty, but I've seen a few scare stories about them and about manipulation of MT4 data in general so would there be less risk with an ECN or NDD ?

Oh, and reading I've done - babypips was the website that got me interested in all this, and I'm just getting started on Tharp's excellent "Trade your way to financial freedom".

TIA,

Steve.

Alpari aren't that bad. If you're in and out in seconds, they won't like it, but they do delay orders by 5 seconds+ to stop scalping (they openly state this in the small print). I usually have Oanda demo open and sometimes IG Index graphs open and haven't noticed any suspicious behaviour.

One question: how big in pips is "cold feet"?

You sound like your on the right track and saying the right things. Well done so far in your research, logic and understanding of what needs to be done.

Shadow ninja has raised a good question which I'll second here:
how big in pips is 'cold feet'.?

shadowninja said:

One question: how big in pips is "cold feet"?

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Well, this probably highlights how new I am, but it's not a fixed number. I know it's widely recommended but I've not been putting fixed stop-losses on my trades. I can't get comfortable with the idea that a fixed number of pips can be the right thing to do. I see the risk of spikes triggering the stop-loss when in reality the trade is going perfectly well, or setting a stop loss a long way out to avoid spikes and possibly losing more than you were comfortable with.

I get cold feet when a trade either is in profit but doesn't look like it'll quite reach my target (so I close slightly early taking a smaller profit than intended rather than risking a loss), or it's gone the wrong way and doesn't look like it's coming back soon. I do realise this is the opposite of "let your profits run / cut your losses short" !

My biggest single loss was 81 pips when I unwittingly opened a position just before a news event. Very silly. I check the calendar first thing every day now and keep away from news times. After that, the next biggest was 49 pips. I guess I'm getting uncomfortable at 50 pips but I've had a few trades go well outside that (100+) and then swing back to be more in line with my expectations, ending when I accept a small-ish loss or hang in for breakeven. Is that just luck ??

Steve.

Sunday jumper,

If you know its wrong then stop doing it before it becomes habit, just like smoking...anyone fancy a ciggy.

One rule of thumb is to not trade around the news, it can go wither way, this is for quick decisive bodies working with a huge array of fundamentals to position themsleves with, not for day trading or scalps ect.

You know what your doing and you know what is right, what you now have to do is correct the brain that say's 'I dont want to lose any money', or 'I dont want to be wrong', ect.

Targets are there for a reason, stops also the same. These are called rules and you must obide by them otherwise you get random results. Even now after many years full time trading (check out my blog) I will still obide by targets and stops. If targets are not reached then reasons (not excuses) are attached.

If you place a trade based on risk/reward you know what you need to justify the trade, granted that sometimes it pans out the other way and you close out early, this is trader intervention but of course comes with experience. Not a bad thing, but can be extremely dangerous to your balance if your closing out because your sh1tting it. This also works the same when taking profits early.

If it's falling 50-100 pips below your entry before heading in the right direction for just 10-20 pips, I'd suggest your entry is bad. I'd rather take the hit with 10-20pips stop in case it never comes back and place another entry when it returns to your original entry to take the 10-20 pips you expected. As it's a game of numbers, what would you do if you got three 100 pip losses in a row? That's 15 to 30 wins you need in a row just to get you back to breakeven.

Sundayjumper said:

Is live trading going to be different to pretend trading ? I have some slight paranoia that suddenly markets will move completely differently even though the demo account does (apparently) run on the same data as the live accounts.

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It will be completely different! Not because of any different data sources, but because you will be playing with YOUR money! Take a few hours to scan these boards, you should be able to find quite a few threads where people ran a successful demo account for a month, took it live and lost all of their stake. The more the money means to you, the tougher it will be.

If you're successful on your demo for a month, spend another month demoing whilst reading up on ALL of the trading-related psychology you can get your hands on, then give live a go. Good luck anyways!

Hi Sundayjumper,

Some points to help you.

1. If you are exiting after a few minutes then many brokers would describe that as scalping.
2. Demo trading is completely different. With live trading you are risking your own money. Risking your money comes with the psychology of hope, fear and greed.
3. I don't use Alpari so can't comment.

Please make sure you know about:
1. Being adequately capitalised;
2. Risk of Ruin;
3. Fixed (% or £) Risk and varying position size;
4. Varying (% or £) Risk within lower and upper limits;
5. Expectancy;
6. Scaling In and Out of Positions;
7. Pyramiding; and
8. Your strengths and weaknesses.

Also:
Do you have a written trading plan? Does it have clear entry, stop and take profit rules?
Have you backtested your method over a sufficient sample? If not, have you observed a sufficient sample?

Finally, please stay away from high impact news announcements.

Good luck.

F

Lee Shepherd said:

...anyone fancy a ciggy.

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No, but I'll take a pint of gin of there's one going :cheesy:

Loads of feedback from folks here - thank you.

Tharp's book (and I'm only a couple of chapters in) really emphasises the psychology, and that's already had an impact on me. Making some simple models in Excel drove the point home, "the gambler's fallacy" especially, as that also crosses into position sizing. I originally come from a science background and the maths behind all of this is quite intriguing for me. I like playing with stuff in Excel.

Shadowninja - I'm not routinely going 50-100 pips out, but it has happened a couple of times and I've managed to luck out and not lose my shirt on it. Fully agree that it points to a bad entry. I'll try putting stops at 50 pips and see how I get on.

Lee - I'll check out your blog.

Various - I can be quite dispassionate about stuff, so I'm not too worried about this aspect. If I put £1k into a live account and lose it all I'm sure the world will continue to turn. I'll just have a quiet Christmas.

Cheers,

Steve.

10 for 50 is still bad. Either aim for a higher target or a lower stop.

Righty, after all the good advice on Wednesday I decided to have one more day on my old routine and guess what ? It completely blew up in my face. I lost all the profit I'd built up on my account (and more) when some trades went bad and I failed to control them. Thanks goodness it's a demo account !

So I did some reading & thinking over the weekend to get comfortable with the idea of stops and revised my plan a little. I'm now proposing:

Continuing to use the RSI for entry/exit suggestions, combined with the general trend, i.e. in a downward trend if RSI peaks to 70+ consider a short position, and vice-versa.

New trades open with a fixed 20 pip stop-loss
If the trade goes my way I'll move the stop to breakeven when I'm ten pips up

Soft target of 20 pips - adjust the trailing stop fairly close once we're there to lock in the 20 pip profit
Hard target of 50 pips - that's my initial target for a whole week's work, so if I manage it with a single trade I will give myself a pat on the back and a large G&T
Also consider an exit if RSI has swung fully from 30 to 70 (or vice-versa) regardless of actual pips.

Two losses in a row - halve the lot size until trades are reliable again
Two more (i.e. four in a row) - turn the computer off and come back tomorrow.

I started the new regime yesterday morning and so far it's OK. Two trades have stopped out at the full 20 pip loss but eight have made a profit. Net gain 100 pips. It's obviously far too small a sample to draw any conclusions from but feeling that I have a handle on dealing with losses is making me more comfortable when letting good trades run. Best trade today was +40 pips, in my old routine I probably would have got nervous and bailed out at +20 for fear of losing it.

Steve.