Useful things I've found on the Net.

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Old Feb 29, 2008, 8:17am   #1
 
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Useful things I've found on the Net.

Over the years of gradually getting better I've run into lots of useful stuff on the internet. So I thought I'd start a thread and put some of it in here along with a link to where it came from to avoid offending the original authors:

My best advice:

1. Do not trade all day. Trade the first 90 minutes or so. Many of the best opportunities happen in the morning while price discovery is taking place. If you must trade to the close, come back for the last hour! I personally find that after making a number of good trades in the early part of the am, if I continue to trade its often a case of getting stuck in the chop and giving back the easy money made earlier. Its just not worth it.

2. Limit the number of trades you do. Teresa Lo limits herself to 3 and rarely breaks that rule. She has a ton of discipline. I wish I had inherited her discipline much earlier in my trading career. That one step improved my trading tremendously. If you know you only have three stabs and then you are out, you aren't going to waste them. Trust me on this.

3. Know what you are trading. No one, in real time, can be master of all setups and trading styles. Until you can be consistently profitable day trading, I would pick one or two setups and only trade them. You may go all day without having a single setup appear (unlikely) but if thats the case, don't do it. Even now I have only two primary setups - test

4. Get your mind around why overtrading is happening. If you can quash that "problem" (I believe it to be, been there done that) you will probably succeed in enforcing the discipline required.

Position and swing trading is much easier, in stocks, IMO. You have time to contemplate your moves and are not under the real time gun. You might even question why you want to day trade. Some people I think switch to day trading just to get an adrenaline kick, when in fact they might be far more successful as position traders.

There is something very appealing about getting all that time back. Using only end of day data, orders transmitted at the open, you then get the day to yourself to do something else.

I switched to day trading futures some time ago and do not day trade stocks at all, much to my (stock) brokers disappointment I am sure. I have never looked back - futures allowed me to focus on improving my trading, not trying to find 'the' best stock(s) to trade on a given day.

Just some musings. Oh, a final comment. I believe a person makes it as a trader when the act of trading becomes boring. I tell ya, sitting all day waiting for a setup to happen along is boring!

mw

http://www.dacharts.com/articles/MW_Best_Advice.htm
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Old Feb 29, 2008, 11:18am   #2
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Thanks for bringing that up nine, found two good articles from that site:

Price Action

and

The Myth of Tight Stops

KISS, all you'll ever need.

But then it's not the knowing what to do, it's the actually doing it.
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Old Feb 29, 2008, 2:12pm   #3
 
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But then it's not the knowing what to do, it's the actually doing it.
Haha, so true!

After last week's huge missed opps (talking about a 600pip profit, from memory), I now think, "F*** it!" and pull the trigger (obviously assuming signals and setup is there).
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Old Feb 29, 2008, 3:11pm   #4
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Ninja, yup.

Don't worry about what was, there'll always be loads and loads of new opportunities.

I closed out a trade way to early with a small profit in the Dax today because I was feeling grumpy, had to go to the dentist, and it's Friday afternoon, lol, none of which is even remotely a good reason to close the trade when I did.

I come back right now, check what happened then, and of course, what do you think, I took my profits way to early, and against ALL my rules, and the Dax just kept on going down down down.

Knowing what to do is easy.

Preventing brain farts from taking over is the hard part.
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Old Feb 29, 2008, 10:29pm   #5
 
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nine started this thread And one from Howard's Trading Tips Newsletter at Ensign Software:



Thoughts about Full Time Trading
by Jay West

If you are serious about trying to become a successful full time trader, I offer these comments. If not, stop reading. It will be a waste of your time.

It takes a special mental intelligence and ability, as well as a burning desire, and personal discipline to become a successful trader. You can have the best trading template, software, and platform in the world and still may not be successful. Why is that? It is almost always the temperament and control of your emotions that determines your destiny. Everyone needs to work on and improve/change this personal situation to eventually become what they want to be in trading. Trading discipline is born from emotional control. Usually traders are their own worst enemy. That, coupled with their trading environment that is. Trading environment is critical to success, but not as critical as the control of ones emotions. You must gain control to be successful. There is no substitute for this control. Nothing you can do to offset this deficiency will help. How do you know if you are out of control? Trading the money is probably the most universal tip off that you are out of emotional control. The lack of ability to stop trading when you are losing is also a good indicator.

How do you control emotions? Simply by trying to develop patience and making your focus the system and not the end results of your trading actions. Stay immersed in the present. In other words, stay immersed in the process of trading. Reading the charts, the indicators, the momentum or lack of it in the market. Thats the way you communicate with the market and overcome emotional urges. Do not try to outguess the market. Stay away from outcomes or as I call it what if thinking because that destroys your objectivity and focus on whats important and creates negative thought processes. If a golfer focuses on whether or not he will make a three foot putt and the consequences of missing it instead of the process involved in making the stroke required to have a successful outcome he will surely miss that putt. He places a huge monkey on his back by worrying about the consequences of making or missing that putt. Especially if there is pressure to make the putt such as a double or nothing bet, carrying his share of the load in a two man team event etc. The same thing happens in trading except that there is usually much more pressure associated with that activity. It can be almost a life and death situation if you allow it to become that. This outcomes or what if thinking causes you to lose your focus on the really important things that will help you be successful. Whats important is the step by step process of trading. It really is as simple as that. At least it was for me. Once I gained that perspective on approaching the market, I had the control I needed and things started to get better. Just remember the only thing you can control in trading the market is how you react to the things you are seeing. Control of your emotions is critical in reacting in the correct manner to what you are seeing.

Lets get personal here. I had a non supportive family (my wife hated me trading), a small account, and a lot of un-success to overcome when I started trading. Sound familiar? The only way I got out of it was to develop a resolve that I would be successful and disprove all the nay Sayers, no matter what. More importantly, I decided that I would gain a patient attitude and slow things down in my trading world. I adopted this concept of slowing things down from statements I saw from highly successful professional athletes and some teaching principles I used in teaching Leadership in Army service schools. When Pro golfers, Pro basketball players, and interestingly enough NASCAR drivers are being highly successful, it is like everything slows down and it becomes easy to see what to do and how to do it. Under the tremendous stress of combat, the same thing occurs when a leader is operating properly. It is like everything is in slow motion. With this concept in mind, I picked the AB to trade because it seemed to move slower than the NQ or ES. I tried to select methods and time frames (R100 and R75) that were slower paced in terms of signals. That would slow things down for me and allow me to gain control of my emotions and decision making processes. I got lucky. I found a great chat room where a man named Woodie showed me the way to remain calm in the face of adversity and that a better trade was surely coming. I also found a great software company called Ensign Software and was able to develop some fairly good templates that supported those goals. The main thing I did however was to make a conscious decision to grab my emotions by the throat and control them. I wanted to be in control of me. Simple as that. I would refuse to let anything or anyone deter me from that basic goal. It has worked, but every day is a new struggle to accomplish it. But once it has been done, the confidence is there that helps you do it over and over again. It never goes away, this quiet panic that most traders live with. You just learn how to control it. Do this one thing and it will be easier to gain the success you crave.


February 2005 Trading Tips Newsletter
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Old Mar 1, 2008, 3:22am   #6
 
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nine started this thread Something you see in a few variations. Worth thinking about where you are and how to move forward a few steps:

38 Steps To Becoming A Trader


The original article was published in 'CTCN' by "Anonymous Trader".

1. We accumulate information - buying books, going to seminars and researching.
2. We begin to trade with our 'new' knowledge.
3. We consistently 'donate' and then realize we may need more knowledge or information.
4. We accumulate more information.
5. We switch the commodities we are currently following.
6. We go back into the market and trade with our 'updated' knowledge.
7. We get 'beat up' again and begin to lose some of our confidence.

Fear starts setting in.

8. We start to listen to 'outside news' and to other traders.
9. We go back into the market and continue to 'donate'.
10. We switch commodities again.
11. We search for more information.
12. We go back into the market and start to see a little progress.
13. We get 'over-confident' and the market humbles us.
14. We start to understand that trading successfully is going to take more time and more knowledge than we anticipated.

Most people will give up at this point, as they realize work is involved.

15. We get serious and start concentrating on learning a 'real' methodology.
16. We trade our methodology with some success, but realize that something is missing.
17. We begin to understand the need for having rules to apply our methodology.
18. We take a sabbatical from trading to develop and research our trading rules.
19. We start trading again, this time with rules and find some success, but over all we still hesitate when it comes time to execute.
20. We add, subtract and modify rules as we see a need to be more proficient with our rules.
21. We feel we are very close to crossing that threshold of successful trading.
22. We start to take responsibility for our trading results as we understand that our success is in us, not the methodology.
23. We continue to trade and become more proficient with our methodology and our rules.
24. As we trade we still have a tendency to violate our rules and our results are still erratic.
25. We know we are close.

26. We go back and research our rules.
27. We build the confidence in our rules and go back into the market and trade.
28. Our trading results are getting better, but we are still hesitating in executing our rules.
29. We now see the importance of following our rules as we see the results of our trades when we don't follow the rules.
30. We begin to see that our lack of success is within us (a lack of discipline in following the rules because of some kind of fear), and we begin to work on knowing ourselves better.
31. We continue to trade and the market teaches us more and more about ourselves.
32. We master our methodology and our trading rules.
33. We begin to consistently make money.

34. We get a little over-confident and the market humbles us.
35. We continue to learn our lessons.
36. We stop thinking and allow our rules to trade for us (trading becomes boring, but successful) and our trading account continues to grow as we increase our contract size.
37. We are making more money than we ever dreamed possible.
38. We go on with our lives and accomplish many of the goals we had always dreamed of.

Trading Day by Day: 38 Steps To Becoming A Trader
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Old Mar 1, 2008, 8:35am   #7
 
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Quote:
Originally Posted by nine View Post
And one from Howard's Trading Tips Newsletter at Ensign Software:



Thoughts about Full Time Trading
by Jay West

If you are serious about trying to become a successful full time trader, I offer these comments. If not, stop reading. It will be a waste of your time.

It takes a special mental intelligence and ability, as well as a burning desire, and personal discipline to become a successful trader. You can have the best trading template, software, and platform in the world and still may not be successful. Why is that? It is almost always the temperament and control of your emotions that determines your destiny. Everyone needs to work on and improve/change this personal situation to eventually become what they want to be in trading. Trading discipline is born from emotional control. Usually traders are their own worst enemy. That, coupled with their trading environment that is. Trading environment is critical to success, but not as critical as the control of ones emotions. You must gain control to be successful. There is no substitute for this control. Nothing you can do to offset this deficiency will help. How do you know if you are out of control? Trading the money is probably the most universal tip off that you are out of emotional control. The lack of ability to stop trading when you are losing is also a good indicator.

How do you control emotions? Simply by trying to develop patience and making your focus the system and not the end results of your trading actions. Stay immersed in the present. In other words, stay immersed in the process of trading. Reading the charts, the indicators, the momentum or lack of it in the market. Thats the way you communicate with the market and overcome emotional urges. Do not try to outguess the market. Stay away from outcomes or as I call it what if thinking because that destroys your objectivity and focus on whats important and creates negative thought processes. If a golfer focuses on whether or not he will make a three foot putt and the consequences of missing it instead of the process involved in making the stroke required to have a successful outcome he will surely miss that putt. He places a huge monkey on his back by worrying about the consequences of making or missing that putt. Especially if there is pressure to make the putt such as a double or nothing bet, carrying his share of the load in a two man team event etc. The same thing happens in trading except that there is usually much more pressure associated with that activity. It can be almost a life and death situation if you allow it to become that. This outcomes or what if thinking causes you to lose your focus on the really important things that will help you be successful. Whats important is the step by step process of trading. It really is as simple as that. At least it was for me. Once I gained that perspective on approaching the market, I had the control I needed and things started to get better. Just remember the only thing you can control in trading the market is how you react to the things you are seeing. Control of your emotions is critical in reacting in the correct manner to what you are seeing.

Lets get personal here. I had a non supportive family (my wife hated me trading), a small account, and a lot of un-success to overcome when I started trading. Sound familiar? The only way I got out of it was to develop a resolve that I would be successful and disprove all the nay Sayers, no matter what. More importantly, I decided that I would gain a patient attitude and slow things down in my trading world. I adopted this concept of slowing things down from statements I saw from highly successful professional athletes and some teaching principles I used in teaching Leadership in Army service schools. When Pro golfers, Pro basketball players, and interestingly enough NASCAR drivers are being highly successful, it is like everything slows down and it becomes easy to see what to do and how to do it. Under the tremendous stress of combat, the same thing occurs when a leader is operating properly. It is like everything is in slow motion. With this concept in mind, I picked the AB to trade because it seemed to move slower than the NQ or ES. I tried to select methods and time frames (R100 and R75) that were slower paced in terms of signals. That would slow things down for me and allow me to gain control of my emotions and decision making processes. I got lucky. I found a great chat room where a man named Woodie showed me the way to remain calm in the face of adversity and that a better trade was surely coming. I also found a great software company called Ensign Software and was able to develop some fairly good templates that supported those goals. The main thing I did however was to make a conscious decision to grab my emotions by the throat and control them. I wanted to be in control of me. Simple as that. I would refuse to let anything or anyone deter me from that basic goal. It has worked, but every day is a new struggle to accomplish it. But once it has been done, the confidence is there that helps you do it over and over again. It never goes away, this quiet panic that most traders live with. You just learn how to control it. Do this one thing and it will be easier to gain the success you crave.


February 2005 Trading Tips Newsletter
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Old Mar 1, 2008, 9:54am   #8
Joined Aug 2003
Limit the number of trades you do. Teresa lolimits herself to 3 and rarely breaks that rule. She has a ton of discipline. I wish I had inherited her discipline much earlier in my trading career. That one step improved my trading tremendously. If you know you only have three stabs and then you are out, you aren't going to waste them. Trust me on this.
Who is this Teresa lo?

Last edited by gamma; Mar 1, 2008 at 9:55am. Reason: spelling
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Old Mar 1, 2008, 10:20am   #9
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Originally Posted by gamma View Post
Who is this Teresa lo?
Somebody who figured out quite awhile ago what net profitable trading is all about, as per her quotes of hedge fund manager William Eckhardt here:

"Anyone with average intelligence can learn to trade. This is not rocket science. However, it’s much easier to learn what you should do in trading than to do it. Good systems tend to violate normal human tendencies. Of the people who can learn the basics, only a small percentage will be successful traders. …

Decision theorists have performed experiments in which people are given various choices between sure things (amounts of money) and simple lotteries in order to see if the subjects’ preferences are rationally ordered. They find that people will generally choose a sure gain over a lottery with a higher expected gain but that they will shun a sure loss in favor of an even worse lottery (as long as the lottery gives them a chance of coming out ahead). These evidently instinctive human tendencies spell doom for the trader - take your profits, but play with your losses. — William Eckhardt interviewed by Jack Schwager, The New Market Wizards: Conversations with America’s Top Traders"

Chapter Three: Putting it Together : Teresa Lo | PowerSwings.com

"“One common adage on this subject that is completely wrongheaded is: You can’t go broke taking profits. That’s precisely how many traders do go broke. While amateurs go broke by taking large losses, professionals go broke by taking small profits. The problem in a nutshell is that human nature does not operate to maximize gain but rather to maximize the chance of a gain. The desire to maximize the number of winning trades (or minimize the number of losing trades) works against the trader. The success rate of trades is the least important performance statistic and may even be inversely related to performance. …

What really matters is the long-run distributions of outcomes from your trading techniques, systems, and procedures. But, psychologically, what seems of paramount importance is whether the positions that you have right now are going to work. Current positions seem to be crucial beyond any statistical justification. It’s quite tempting to bend your rules to make your current trades work, assuming that the favorability of your long-term statistics will take care of future profitability. Two of the cardinal sins of trading - giving losses too much rope and taking profits prematurely - are both attempts to make current positions more likely to succeed, to the severe detriment of long-term performance.” — William Eckhardt"

Chapter 7: Intraday Trading, Security, Time Frame Selection Redux : Teresa Lo | PowerSwings.com

Simple and true, the odd brainfart or so apart.

Quote:
Originally Posted by nine View Post
It is almost always the temperament and control of your emotions that determines your destiny.
Very true that nine, that's really all life or trading etc is about.

You know what they say, do not trade when getting a divorce, haha.

Well, haven't been through that to date, but must make note to self:

Do not trade when getting close to my checkup at the dentists, lol.
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Old Mar 1, 2008, 11:04am   #10
 
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Flirting with these three at the moment:
28. Our trading results are getting better, but we are still hesitating in executing our rules.
29. We now see the importance of following our rules as we see the results of our trades when we don't follow the rules.
30. We begin to see that our lack of success is within us (a lack of discipline in following the rules because of some kind of fear), and we begin to work on knowing ourselves better.

Looking forward to this:
34. We get a little over-confident and the market humbles us.

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Old Mar 1, 2008, 11:07am   #11
 
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Quote:
You know what they say, do not trade when getting a divorce, haha.
Very sound advice that I can personally recommend!. It could extend to any situation that knocks you off tilt emotionally. Grief would be a another fine example, can mess with you ways that are hard to pinpoint by yourself.
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Old Mar 2, 2008, 2:23am   #12
 
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nine started this thread I thought I might divert into trading methods for a bit. So, what do I do, and what of my secrets am I going to reveal? LOL ... No specific ones!

What I will do is tell you a bit about the basis of my trading and point you in the directions that provided value for me. With the required diligence almost anyone could figure it out if my style fitted their mental set.

But before I do, one more post I liked on psychology and stages"




Originally Posted by phorex_phreak:
Traders Prayer

Step One: Unconscious Incompetence.

This is the first step you take when starting to look into trading. you know that its a good way of making money because you've heard so many things about it and heard of so many millionaires.

Unfortunately, just like when you first desire to drive a car you think it will be easy - after all, how hard can it be?? - price either moves up or down - what's the big secret to that then - lets get cracking! Unfortunately, just as when you first take your place in front of a steering wheel you find very quickly that you haven't got the first clue about what you're trying to do. you take lots of trades and lots of risks. when you enter a trade it turns against you so you reverse and it turns again .. and again, and again. You try to turn around your losses by doubling up every time you trade - sometimes you'll get away with it but more often than not you will come away scathed and bruised Well this is stage one - you are totally oblivious to your incompetence at trading.Stage one can last for a week or two of trading but the market is usually swift and you move onto stage two.

Stage Two - Conscious Incompetence

Stage two is where you realize that there is more work involved in this and that you might actually have to work a few things out. You consciously realize that you are an incompetent trader - you don't have the skills or the insight to turn a regular profit. During this phase you will buy systems and e-books galore, read websites based everywhere from Russia to the Ukraine. and begin your search for the holy grail.

During this time you will be a system whore - you will flick from method to method day by day and week by week never sticking with one long enough to actually see if it does work. every time you came upon a new indicator you'll be ecstatic that this is the one that will make all the difference. You will test out automated systems on Meta-trader, you'll play with moving averages, Fibonacci lines, support & resistance, Pivots, Fractals, Divergence, DMI, ADX, and a hundred other things all in the vein hope that your 'magic system' starts today. you'll be a top and bottom picker, trying to find the exact point of reversal with your indicators and you'll find yourself chasing losing trades and even adding to them cos you are so sure you are right.

You'll go into the live chat room and see other traders making pips and you want to know why it's not you - you'll ask a million questions, some of which are so dumb that looking back you feel a bit silly. You'll then reach the point where you think all the ones who are calling pips after pips are liars - they cant be making that amount cos you've studied and you don't make that, you know as much as they do and they must be lying. but they're in there day after day and their account just grows whilst yours falls. You will be like a teenager - the traders that make money will freely give you advice but you're stubborn and think that you know best - you take no notice and over leverage your account even though everyone says you are mad to - but you know better. You'll consider following the calls that others make but even then it wont work so you try paying for signals from someone else - they don't work for you either.

This phase can last ages and ages - in fact in reality it can last well over a year - My own period lasted about 18 months. Eventually you do begin to come out of this phase. You've probably committed more time and money than you ever thought you would, lost 2 or 3 loaded accounts and all but given up maybe 3 or 4 times.



Then comes stage 3 Stage 3 -

The Eureka Moment Towards the end of stage two you begin to realize that it's not the system that is making the difference.

You realize that its actually possible to make money with a simple moving average and nothing else IF you can get your head and money management right You start to read books on the psychology of trading and identify with the characters portrayed in those books. Finally comes the eureka moment.

The eureka moment causes a new connection to be made in your brain. You suddenly realize that neither you, nor anyone else can accurately predict what the market will do in the next ten seconds, never mind the next 20 mins. You start to work just one system that you mould to your own way of trading, you're starting to get happy and you define your risk threshold. You start to take every trade that your 'edge' shows has a good probability of winning with.

When the trade turns bad you don't get angry or even because you know in your head that as you couldn't possibly predict it it isn't your fault - as soon as you realize that the trade is bad you close it .

The next trade will have higher odds of success cos you know your simple system works. You have realized in an instant that the trading game is about one thing - consistency of your 'edge' and your discipline to take all the trades no matter what. You learn about proper money management and leverage - risk of account etc etc - and this time it actually soaks in and you think back to those who advised the same thing a year ago with a smile

You weren't ready then, but you are now. The eureka moment came the moment that you truly accepted that you cannot predict the market.

Then comes stage four Stage 4 -

Conscious Competence Ok, now you are making trades whenever your system tells you to. You take losses just as easily as you take wins You now let your winners run to their conclusion fully accepting the risk and knowing that your system makes more money than it loses and when you're on a loser you close it swiftly with little pain to your account

You are now at a point where you break even most of the time - day in day out, you will have weeks where you make 100 pips a weeks where you lose 100 pips - generally you are breaking even and not losing money.

You are now conscious of the fact that you are making calls that are generally good and you are getting respect from other traders as you chat the day away. You still have to work at it and think about your trades but as this continues you begin to make more money than you lose consistently. You'll start the day on a 20 pip win, take a 35 pip loss and have no feelings that you've given those pips back because you know that it will come back again. You will now begin to make consistent pips week in and week out 25 pips one week, 50 the next and so on. This lasts about 6 months

Then comes Stage Five Stage Five - Unconscious Competence Now were cooking - just like driving a car, every day you get in your seat and trade - you do everything now on an unconscious level.

You are running on autopilot. You start to pick the really big trades and getting 100 pips in a day is becoming quite normal to you. This is trading utopia - you have mastered your emotions and you are now a trader with a rapidly growing account. You're a star in the trading chat room and people listen to what you say. you recognize yourself in their questions from about two years ago.

You pass on your advice but you know most of it is futile cos they're teenagers - some of them will get to where you are - some will do it fast and others will be slower - literally dozens and dozens will never get past stage two but a few will. Trading is no longer exciting - in fact it's probably boring you to bits - like everything in life when you get good at it or do it for your job - it gets boring - you're doing your job and that's that.

You can now say with your head held high "I'm a currency trader"
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Old Mar 2, 2008, 4:26am   #13
 
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nine started this thread By way of an introduction to trading methods I'm borrowing something from dbPhoenix, our resident expert in all things Support & Resistance and Wyckoff:

Therefore, focus on the setup. One setup. Determine its characteristics. Define it so specifically and so thoroughly that you can recognize it without any doubt whatsoever in real time. Decide provisionally where best to enter, what the target ought to be, where the stop should be placed, and so on. Only after the setup is defined and tested (and it can't, ipso facto, be tested until it's been defined) can one even begin to think about trading it with real money, much less trading multiple setups. Attempting to shortcut this process merely expands the amount of time it will take to develop the necessary skills. Nothing is gained by painting the house before scraping it, cleaning it, and priming it since you'll have to do it all over again sooner rather than later.

You are free to create your own based on whatever jingles your bells. You may, for example, focus on divergence. Or higher swing lows and lower swing highs. Or candlesticks of one sort or another. Or trendline breaks. Or base breakouts. Doesn't really matter. What matters is that you keep four concepts in mind: demand/supply, support/resistance, price/volume, and trend. In this way, you can create your own setups which hundreds of thousands of other traders won't be watching along with you. You must understand, however, that what determines the success of the trade is the trader, not the setup. If you're looking for something that "works", you may as well save yourself a lot of time and stop right here. What will work or wont, as the case may be will be you.

You can find more by following this link to Wasp's Journal
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Old Mar 2, 2008, 9:06am   #14
 
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re post 12

Well i dunno bout anyone else here, but stage one lasted at least a year for me!
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Me and you, we is largely the same bruv! We dont know sht! The difference is, I know I dont know sht!!
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Old Mar 2, 2008, 9:49am   #15
 
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nine started this thread If it was only a year you were lucky ... I keep slipping back in there.
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