Hello

[Risk it fora Biscuit]

Hi everybody, I just wanted to introduce myself as a new member to the forum. It didn't take too much lurking around to realise that this site is a pretty safe haven in the shark infested waters of individual online trading. So I've come to a desire to trade after developing a real interest in the financial side to the news. I've nearly been scammed before in the 'online education' field before so, thinking along the lines that, if successful traders charge thousands of pounds for their 'fool proof' systems they either can't be making their claimed millions, or they are and are just super greedy.
So, I know I've got a lot to learn, and realistically I'm probably 6 months away from being in a position where I can afford to put a couple of grand on the line (should've done it with student loans!) but by that time hopefully I'll have a workable trading plan.
I do have one question at the moment - I understand that most accounts fail because they are undercapitalised and that you need sufficient capital in your account so that you can absorb pip fluctuations within an (hopefully) otherwise favorable trend and avoid stop loss or margin call. BUT, most brokers seem to require much more capital to set up a day trading account than longer term ones...Why is this - Or even, is it this way, have I got it wrong???
Anyway, many thanks and I look forward to talking to and learning from all of you,
Mike

 

[William Waller]

Hi Risk,

Sufficient capital is indeed vital if you are to exercise correct money management, which is every bit as important to your long term success as your chosen method is.

I'm not sure if I have understood you - the requirements for capital do not vary. You open an account and trade it as you wish.

Try Oanda or IG - they will allow you to trade with very small position sizes.

If you're starting out, be sure to have a look at Forex Factory as well as this site - The James16 Chart Thread is an excellent place to begin.

One final thing - be careful, there are plenty of sharks on this site.

Sir William

 

[Black Swan]

I do have one question at the moment - I understand that most accounts fail because they are undercapitalised and that you need sufficient capital in your account so that you can absorb pip fluctuations within an (hopefully) otherwise favorable trend and avoid stop loss or margin call.

Hmmm...this under capitalisation argument crops up often, it's (this game) all about risk/position size relevant to account size etc..etc.....You can open a trading account with fxcm with 2 grand, with dbfx 3,300, Alpari 500 and *go micro*..you don't need anymore cash than this early days.

If you intend to swing trade the money listed above is not enough (by a long, long way) even on a minimum lot size (roughly a quid a pip) as you'd have to be risking in the region of at least 5% per trade.

However, if you want to try your hand at day trading; taking trades offa ten-fifteen minute TF then you should be risking no more than 2% per trade. Roughly 40pip stop loss. However, if you're on your game you should be keeping your average loss down to less than this, if it was me I reckon losses would average in at 28-30 pips. Once you figure out how and why to follow price you'll have every reason to close and perhaps reverse your position...

Keep it small and simple, fly low, just one pair EUR/USD. Let's see, based on my edge I'd have taken 5 trades offa 10min TF since approx. 8:20 this morning; 2 wins 3 losses.. the long since approx 15:40 has yielded the majority of the profit for the day...(closed at limit of 50 pips... )

 

[William Waller]

Hmmm...this under capitalisation argument crops up often, it's (this game) all about risk/position size relevant to account size etc..etc.....You can open a trading account with fxcm with 2 grand, with dbfx 3,300, Alpari 500 and *go micro*..you don't need anymore cash than this early days.

If you intend to swing trade the money listed above is not enough (by a long, long way) even on a minimum lot size (roughly a quid a pip) as you'd have to be risking in the region of at least 5% per trade.

However, if you want to try your hand at day trading; taking trades offa ten-fifteen minute TF then you should be risking no more than 2% per trade. Roughly 40pip stop loss. However, if you're on your game you should be keeping your average loss down to less than this, if it was me I reckon losses would average in at 28-30 pips. Once you figure out how and why to follow price you'll have every reason to close and perhaps reverse your position...

Keep it small and simple, fly low, just one pair EUR/USD. Let's see, based on my edge I'd have taken 5 trades offa 10min TF since approx. 8:20 this morning; 2 wins 3 losses.. the long since approx 15:40 has yielded the majority of the profit for the day...(closed at limit of 50 pips... )

I wouldn't disagree with you Black Swan, as there are as many ways to succeed as there are traders, but my approach would be different.

Certainly daily time frames will tend to require a larger stop, but dropping to 15 minutes is unlikely to be the answer. Most traders will get crucified on shorter TFs - especially new traders. I would personally not drop below 1 hour.

If you can't afford to trade on higher timeframes, in my opinion you would be better off not trading and saving up until you can afford to do so.

My approach would also to be watch as many charts as possible and concentrate on finding good set ups. To a large extent I think a chart is a chart, and focussing on just one pair might lead to forced trading, a recipe for disaster.

Finally, it might be helpful for a new trader to think in terms of %R (% of account risked on any one trade) rather than pips. After all, what is 40 or 50 pips? A significant amount on EUR/GBP, but less than the spread on USD/MXN. Your risk should be the same regardless of what pair your trading, for reasons of both MM and correct stop placement.

Just my opinion, feel free to disagree.

Sir William

 

[William Waller]

Incidentally Black Swan, I notice that you (and others) have objected to my use of my proper title. This wounds me Black Swan - the others are low, mean-spirited individuals, but of you I would have expected better.

Nonetheless, in the interests of making myself more approachable, I will henceforth go by my nickname.

Regards,

William The Conqueror

 

[Risk it fora Biscuit]

Thanks for replies chaps.

William - I respect your decision to use your real moniker online. It makes one more accountable. I chose mine in case I failed miserably at this venture and needed to switch to selling EA's or courses...!

I have heard about the james16 thread - think I read about it on the thread where kimosabby 'spunked 5k up the wall'. :|. That was a good lesson.

Finally, it might be helpful for a new trader to think in terms of %R (% of account risked on any one trade) rather than pips. After all, what is 40 or 50 pips? A significant amount on EUR/GBP, but less than the spread on USD/MXN. Your risk should be the same regardless of what pair your trading, for reasons of both MM and correct stop placement.

This is exactly what I was thinking. I'm under no illusions (anymore) about this business. So far the only part of my trading plan I know for sure is the limit of exposure to risk of my account.

Black Swan - nice name, I would have gone for the fourth quadrant, but he doesn't need my endorsement!

However, if you want to try your hand at day trading; taking trades offa ten-fifteen minute TF then you should be risking no more than 2% per trade. Roughly 40pip stop loss. However, if you're on your game you should be keeping your average loss down to less than this, if it was me I reckon losses would average in at 28-30 pips. Once you figure out how and why to follow price you'll have every reason to close and perhaps reverse your position...

This sounds ideal - I can't go lower than 10 minutes, can't read the charts very well. And I can't afford to be anything other than intra-day anyway. At the moment I'm working off a mac (without windows running parallel) so I just got a demo account with forex.com. I have taken taleb's advice to heart and consequently am not bothering with any overly complex or academic finance, though I did find some relevant books at my uni library. I've been hacking through Fractal Market Analysis (I was interested in fractals in a hippyish - woooah everythings the same but yet totally different dude - as a teenager: right up my street) by Peters, Technical Analysis (Gifford), A Foreign Exchange Primer (shamah) and the Electronic Day Trader (friedfertig, west). These books are mainly aimed at people going to trade in institutions but I've learned a fair bit from them already.

I've heard this a few times:

Certainly daily time frames will tend to require a larger stop, but dropping to 15 minutes is unlikely to be the answer. Most traders will get crucified on shorter TFs - especially new traders. I would personally not drop below 1 hour.

Do you mean that under one hour the markets are more erratic? I don't doubt the fact of what you say, just want to know why shorter charts are harder...
Many thanks. Mike

 

[William Waller]

Hey Mike,

It's not really that the signals on lower timeframes are less reliable as such, although you obviously do have much less information per bar / candle. .

It's more that your thought process has to be extremely quick, to the extent that a lot of what you do must be instinctive, ie, you just very quickly see and process the significant information on the chart. This to my mind only really comes with experience and chart time.

Now, on the 1 hour or 4 hour usually you have a lot more time to make your decisions. This is just better for me - you might be completely different. Trading is highly personal; we could disagree and both be right, or both be wrong. That's why I don't pay much attention to the people who say "this is crap, that is crap, etc" - it comes down to what works for you.

As an analogy, is it more dangerous to drive when conditions are dry or wet? Well, if you've just passed your test, probably wet. But if you're experienced and knowledgeable and much of your driving is instinctive, neither - you adapt your driving as appropriate and you can progress safely under any conditions.

James16 is good - I'm a lifetime member of the private forum and I can't praise it highly enough. However, it might not suit your approach to trading, but there is a ton of free information on the FF thread. The biggest things in my opinion are to focus on big round numbers (have a look at every 500 pips on forex) and be very selective.

I trade pretty much just on 1 hour and 4 hour and it suits me for a number of reasons, you might be exactly the same. Just bear in mind that as a general rule it might be a good idea to be extra picky as you're dropping down the time scales.

Hope this helps, feel free to ask if there's anything else. Just remember that there are lots of ways to achieve success, all you have to do is find which one works for you.

William

 

[Risk it fora Biscuit]

Re. the 'sharks'. This site is pretty good for a laugh. It's brilliant when somebody opens with 'I'm usually skeptical about these sorts of things, BUT....' and then proceeds to verbally open their legs, wantonly beckoning you to reach inside your wallet and promising total spiritual creaminess.

 

[Risk it fora Biscuit]

Has anybody read Harmonic trading by.....Scott Carey? Any good?

I might consider joining the james16 private group if I am still as keen at the end of the summer. That thread is hard on the eyes. Searching the FT press site, I came across some article (of which I could only read like 6 lines without paying) which said something like 'fundamental analysis is the same as technical analysis' which is a thought I had had before. What do people think of that? I mean, they're both ways of trying to do the same thing - to forecast future events by looking at and interpreting past ones.
Just thinking about your name Black Swan - how do you incorporate the implications of taleb's books into your trading? Do you buy heaps and heaps of out of the money options like Empirica? I would like to know as I'm fairly sure that looking at heaps of charts and trying to get TA to fit is bound to make you less able to see the wood for the trees.
Mike

 

[alan5616]

Hi Mike,

Welcome to T2W. As you will have found out by now, there is a lot of information on forex trading, both here and on other sites. Some of the blogs contain some excellent stuff as well.

If you decide to make forex trading your full time career, it's going to require a lot of dedication. You will get conflicting advice along the way. There are those who will tell you that you cannot make money off anything less than a 1 hr or 4 hr time frame. Don't pay too much attention to them; It is possible to make a very good living taking trades off a 15 min or 5 min tf. Almost every day, there will be a good move in one of the major pairs. I refer to this as the trend of the day, which, when you catch, will make you plenty of pips.

If I was asked to offer advice to somebody starting out to trade forex, the top of my list would be to use a naked chart. No indicators (the exception being the FX Correlator which isn't strictly an indicator anyway). Learn to read price action and where the supply and demand areas are - support & resistance.

A final tip. When you enter a trade, don't think how much can I make if it goes the right way. Think how much will I lose if the market goes against me. Losses are inevitable and an expense of trading full time. Sorry; one more thing-let your winning trades run until they run out of steam. Don't be tempted to grab a few pips and run.

Good luck