Believe me..........the last thing I have a desire to do anymore is stare intensively at charts. The big problem is I don't have a process. That's why I'm only trading in a sim account right now. I refuse to trade for real again until I have a well thought out plan/process, rules, money management, and confidence to know it will work.
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There is a difference*between "knowing" and "doing", and you can be proud of yourself making*that choice*NOT to trade real money until you are "fit".
Consider this: My 4 year old sun, Alexander, comes into my office (at open door times), looks at the screen and says "oh, up and down". Yep. My daughter, Yvonne (15)*comes in a few minutes later, looking for Alexander and says: "oh, are you buying?". Yep - it's all green. The MACD, the HMA, the bars; all on the H4,*then I close the positions at OP (objective point). Good day.
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Now. Up/Down, Sell, Buy, Close.* Making coffee is far more complex! Still, why is trading so hard and difficult?
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The manual operated coffeemaker:
What would you get, when you put the water into the coffee grounds, and then pour it right into the boiler? What would happen, if you prepare the coffeemaker, then shake it and turn it up-side-down?
Why would you ever look at the coffeemaker to your left and just pour water on the plain table to your right. Would you? Ever?
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Preparing the coffeemaker at 8 but turning on the power at 12 does not deliver any coffee at 8:15. Turning on the power without any preparation, well, wastes energy for nothing and you still don't get that coffee.
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There is one and only one procedure that works and delivers the expected results. It requires the correct procedure (sequence) and timing.
The funny thing about trading is, that your charts and your thinking do not influence the market at all. You have control over the coffeemaker and your actions. In trading, you have only control over your own actions. Hopefully.
Engrain this in your mind:
"It really does not matter, what the market is doing. All that matters are your own actions."
Actions are "timely choices", and as long as you are watching the current candle, you are watching the wrong thing and thus can't make good choices nor respond in a timely fashion.
Did you ever wonder where those candle shadows, high/low values and spikes are coming from?
Do it! Start wondering!
Here is a free setup for you to begin with:
- Remove ALL indicators from your chart, set the chart to H4, candle sticks
- Add a simple moving average with period 3 AND Shift=3. This holds some power: you know 3 bars earlier, where to get out! Furthermore, MA does not forecast, but tells you what goes on RIGHT NOW. It shows defined reality(*) within the confines of your current view.
- Look at the chart for a while to get familiar. Zoom in mentally and look at every single candle from left to right.
- Look how each candle compares to the previous one, where it opened, where the previous bar opened and closed and where the highs and lows have been. That's important.
- At this time start learning to ignore the current candle! Picture, that every red candle looked like a green candle and mentally follow the shadow. Picture that a red candle in the middle started at the opening, was green for some time and then suddenly became red. Other scenarios apply, the closing is what counts.
- Next: picture the above the other way around, when green candles with lower lows looked like a down candle but finally became green. Hmm. Keep wondering.
- Now it's time to take a look at the current candle. On a 4 hour chart you click ONCE every 4 hours at max. Start observing. Just looking. If you feel you have to trade right away for whatever reason, turn off your computer a watch a movie, get some ice cream or do something else.
IF YOU FAIL TO COMPLY WITH YOUR OWN RULES, TAKE ONE DAY OFF FOR EVERY MISTAKE!
Losing a trade is not a mistake as long as it was part of the plan, same for getting stopped out. The plan can be revised and improved over time- not sticking to your plan is the big mistake. Nothing new, but worth reiterating 100 times per year.
- To make money in the market, you need to be in phase with the market. You need a sense of rythm. Indicators tell what already happened, but many people are looking at the same or similar setup. To succeed you need to be on top - just a tiny little bit.
Let's continue: observe the current candle for the first hour. No, not staring at the screen all time - I have a "side screen" that allows me to monitor the market while working on the internet sites or doing other fun stuff, like writing posts, books and more genuine indicators
. I just take a brief look 3-4 times an hour to see, what's going on. (well, does not apply to my core trading hours, when other techniques are used), but it is vital to calm down and relax. That's what the larger timeframe is for. Getting out of the immediate danger zone- and still being 6 times faster than once a day trader.
- How is your candle doing? First hour is over, small movement, big movement, shadow, reversal?
Rule: uptrend is defined, as bars closing above the DMA (displaced moving average), downtrend is the opposite, when candles keep closing below the DMA. When they cross several times and the DMA appears to be flat, choose another instrument, stick to the timeframe. Once you get a feeling of how this works, you improve upon it step-by-step.
Let's say we have a (local) down trend, indicated by closing candles below the DMA and a nice turning point (see the chart below, the blue line is a 3x3, the red line is an additional 7x5 setting n H4), that gives you even more room (slower is easier), but also requires wider stops and more experience. You stick to the blue line. The red line is my barrier. Hit == out, no matter what. I use the 3x3 to enter and exit within this "context".
There are seveal simple options to enter the market, that I'd like to mention:
1) Closed bars: simply open and close at the end of every period based on the above/below rule. You can take profit per candle or stay in as long as the bars don't close above the DMA and simply adjust your stop; set it right behind the DMA + 10 pips or the last candle.
2) Line break: open whenever the price moves back in direction of the trend again and crosses it's open. Meaning, in a downtrend when the green bar just turns red. Do set a stop loss behind the DMA or, if too far away, behind the last candle plus a little bit. Adjust your position size accordingly, don't spend more than 5%.
3) Pull back: you want to SELL when the current price is UP but not closing above the DMA
The above is just a VERY BRIEF outline to get you started. I don't want to put 8000 trading hours experince into this post (too much typing for now) nor zoom into every aspect and detail. And I can't do the learning for you.
Your job is to take this still "fuzzy" concept, start experimenting, playing the mental game and make it your own to see what works and what doesn't.
Add more rules of your own: like when you get stopped out twice, stop for 4 hours and just watch. You will need to come up with your own, personal trading plan. Just like any other business plan.
Bottom line:
- Traders fail frequently, because they act on imagination, of what "should happen", "could happen", is "supposed to" etc. Instead of just watching what actually happens. Stick to the above/below rule to filter what's going on right now. And don't turn your coffeemaker upside-down.
The current candle is not closed; anything can happen - and usually does.
Trade with your eyes wide open!
