The following webinar discusses support and resistance from the point of view of supply and demand (i.e., market psychology). Extremely insightful and highly recommended to all traders, both noobs and pros.
http://transcripts.fxstreet.com/2008/01/multiple-low-ri.html
Thanks. They are good videos.
I don't trade in that way although the foundation is there.
I think the best thing he says is when he advises to just
put your stop in, your target in and just walk away.
Too many people screw up their trades by trying to mess around with them with the worst sin in my eyes being that of trying to get to breakeven.
I think people should spend more time on seeing whether their analysis is right or wrong.
Did it hit your limit or your stop when
you left it alone?
But instead, everyone seems out to try and get a risk free trade all the time and then moans when it hits their target without them.
I've said this before and I know inevitably people will come back and argue the case but I talk with lots of traders - new and experienced ones and this is one thing I just hear all day long.
Even with the last gap trade I posted (Eur/Usd and Gbp/Usd), I saw one person take a breakeven on both and then got incredibly disheartened because when they compared with me I had got two sizable winners.
How did I manage it?
I went to bed with two stops and two limits.
But then I hear someone say: "But Dante, I did that and it came 10 pips from filling the gap and then stopped me out and I was asleep so I couldn't do anything about it and now it's a loser and I could have made X"
Welcome to trading. Do it 30 times and tell me what happens.
I think what makes it even harder for everyone is that one time they do it and having a breakeven order keeps them from getting the big move. So next time they refuse to move to breakeven, then the market comes back and they take a sizable loser and realise the breakeven stop would have at least saved them from a loss.
You can't keep switching what you are doing based on the last one or two trades.
You don't get anywhere!
Sorry for the rant but honestly sometimes I honestly wonder why so many people lose money when the concepts are not rocket science.
- Pick what you feel comfortable with and do the EXACT same thing
30 times on demo. If it works, keep repeating.
- If it works but you think you can do better, keep doing it (after all it makes money) whilst setting up another demo account to try a new, different arrangement.
- If it doesn't work at all look at why and then you can tweak.
How many is a statistically valid number of trades? For me and the way I trade I think it is about 30 since I only trade about once per day and that gives me a nice sample.
If you do 30 trades in a day, obviously you might want a whole lot more in case it is just the market on that day.
Next question: I think something is going wrong and I can't afford to sit there like a mug and lose on 30 trades.
Answer: That's what demo or micro accounts are for then. It's not a race its a marathon. If you have to take 2 weeks off earning to try something out, put it down to the cost of training.
This is how I made progress in this game. I keep repeating the same thing and then I tweak if it the results over many trades start to convince me something is wrong.
As a rough idea of this path here is just
some of the steps I remember taking on my journey:
1) Started trading pins and IB's at levels. Used a fixed stop but had not much idea of where to take profits. So profit taking was somewhat arbitrary and based on how far it had travelled. Had phenomenal success at first. After a period of a few months I started making money more slowly. I was a winner on balance over a nice sample of trades but realised that almost all my trades went nicely into profit and yet I was only winning about 50% of the time. Clearly upon observation, I was giving profit back sometimes in the hope it would go further.
2) Realised I needed a way to protect profit but try to capture the bigger move. So came up with a simple strategy of placing my stop behind the low of the last candle that closed significantly above/below a level.
3) This worked very, very well for a long time until some time in 2008 I started realising my account was treading water again. Upon observation I can see that the market volatility has picked up dramatically and that now a huge number of trades are getting to the first level and then reversing and taking me out for a loss.
4) I then adapted a strategy whereby I take 50% off at the first level and move the stop on the other half as outlined above.
5) In 2009, things were still working well but I realised that a lot of the time I was marking the level where I would anticipate the turn but I saw two things happening. Firstly, more and more pins were triggering and then getting the stop side faked out by a few ticks and then going the way one would have traded them. Secondly and more importantly, price was often making huge moves off of key levels without signifying its direction with a pin or inside bar. So I started playing blind touches of key levels and recording the results.
6) This worked extremely well and got me in at the turning point the large majority of times. However, occassionally I would take a large loss which would take me a while to make up (from time to time it would be weeks). I realised that the pins and IBs had provided me with fixed stops as one of their major advantages where now I had no idea of where to put a stop and thus was prone to second guessing if levels were being faked out and lacking discipline if it wasn't a fake but a break against me. So then I started testing the idea of using an initial stop based on the last candle that had closed above/below the level I was playing off. This was really just an idea based on the original trailing stop strategy I outlined above and this then solved that problem.
etc, etc, etc
And I've many other moves since then.
What do I do now?
Right now, I :
- Identify a level and put a limit in at it if I like the way price is approaching it. My stop goes
below the last thrust candle to close above the level (if I am going long). If I am going short, it goes
above the last thrust candle to close below the level I am playing.
- Look at the D1 timeframe and work out how far I think price can go,
- Count how many clear and obvious problem areas or levels there are between my entry and that price.
- Divide my stake (which is already based on where my stop will be) into that number.
- Put a limit order in to scale out of some at each area.
- Go to Costa.
- Sit drinking coffee and reading. From time to time I can check FX360 on the iPhone. If my first level has been hit for profit, all I need to do is change the number of lots /pounds per tick, at my stop.
* I don't f*ck about changing my stop to lock anything in unless when I come back there is another level between my stop and the current price that I am convinced won't break *
Is it perfect? No. Why? Because sometimes you only get 1/3rd out and the market comes back and takes out 2/3rds.
What else happens? Sometimes I get out 3 increments in the course of a day and the market keeps going in the anticipated direction for three weeks.
And sure it f*cks me off sometimes when that happens a few times in a row.
But only when this happens constantly and only when my equity curve stops going up but instead just tracks sideways or down then is it time to start demoing a new way of doing things.
