Trendlines, S&R, volume - is that enough?

[therooster]

hi all

I am a reasonably new trader having been 'investing' for a few years. I am trading minimum lot size in only 2 markets at the moment whilst i develop my trading plan and try to build up my skills.

I have set out a money management plan and have put together a trading diary, daily action plan etc. I am now trading min size whilst I try to develop a method I am confident in. I have paper traded for a while but found I made different decisions when I had cash on the line, albeit very small amounts.

I have tried various indicators/ systems etc but find I keep coming back to using trendlines and support/ resistance along side volume and a few specific chart patterns to make trading decisions. The only indicator I have been using to any degree are EMA-based channels to help me formulate price targets.

I am not profitable yet but my results are improving steadily.

In one sense this almost seems to easy - am I fooling myself to think I can build a profitable method using only these tools? If not, can I get some advice on what else to start thinking about?

I DONT want a finished system as I am trying to put together something I can stick with (I have tried 'off-the-shelf' systems but havent found any that I am comfortable with)

Any help for this newbie is much appreciated

regards





Roy

 

[normbeef]

Everyone is different... you could look at all the indicators under the sun and still lose money...

Ask yourself this... Why does a strategy have to be massively complex to be profitable ??

Not so... I have 4 simple rules...

1. make sure on every trade that you will not lose more money than you can potentially make.. (in fact your winners should be MASSIVE compared to your losers)

2. (rubber up) Always use a stop loss. (NEVER compromise it - smile when you take a small loss)

3. Before you get in... Always know when you are going to get out (profit) or when you want to move the trade (slide it up / down)

4. Work hard ...

The technical details can change within the framework as much as you like, i.e. you might only want to follow the trends over a particular Timeframe... personally I follow very long term trends...

I trade very slowly as I find its easier (and less stressful) ... short term trading is far to difficult for me... its not healthy to expose yourself to that level of randomness everyday...(but thats me some people love it)

Looks to me that you are already well on the way with your money management etc... most new traders lose money because they cannot control their emotions... (they get Married to positions i.e. they hang on to the losers)

Good luck...

 

[Chorlton]

hi all

I am a reasonably new trader having been 'investing' for a few years. I am trading minimum lot size in only 2 markets at the moment whilst i develop my trading plan and try to build up my skills.

I have set out a money management plan and have put together a trading diary, daily action plan etc. I am now trading min size whilst I try to develop a method I am confident in. I have paper traded for a while but found I made different decisions when I had cash on the line, albeit very small amounts.

I have tried various indicators/ systems etc but find I keep coming back to using trendlines and support/ resistance along side volume and a few specific chart patterns to make trading decisions. The only indicator I have been using to any degree are EMA-based channels to help me formulate price targets.

I am not profitable yet but my results are improving steadily.

In one sense this almost seems to easy - am I fooling myself to think I can build a profitable method using only these tools? If not, can I get some advice on what else to start thinking about?

I DONT want a finished system as I am trying to put together something I can stick with (I have tried 'off-the-shelf' systems but havent found any that I am comfortable with)

Any help for this newbie is much appreciated

regards


Roy

Hello Roy,

As Normbeef has pointed out why does a strategy have to be complicated to make money? We, as humans, have a tendancy to think that if its complicated it must be better... IMO this is the wrong mindset to have in Trading. In addition, the more complicated it is, the less likely it will perform equally well in the future IMO.

Think about how traders made money before the invention of the computer. They didn't have access to indicators...only the raw price and volume data and they still managed to succeed. As you have realised, Trendlines, S&R and some simple chart formations are enough to base a decision upon.

The key to improving your bottom-line now is how you then manage the trade. IMO, even though you have mentioned that you have a Money Management Plan I would continue to focus on your exit criteria & Position sizing as this is the area where you can help improve your returns.

Good Luck !!!

regards,

Chorlton

 

[TheBramble]

therooster, volume, trends, S&R, risk & money management are absolutely all you need to make money trading. Trading minimum size is fine as long as that minimum does equate to a potentially more than your max risk.

If you can't live without a trading plan, by all means, but ditch it as soon as you realise you no longer need it.

Use EMAs if you must for targets, but while you're looking at S&R and trend characterisitics, why not also take the time to notice how the price reacts around prior peaks/troughs and S&R levels (across mulitple TFs). You could also ladle in a Fib or two as many do.

Don't complicate things, you're one of the lucky ones who started off simple, which is where it's really at.

 

[therooster]

thanks for all the comments so far guys

i use weekly and daily charts to identify trendlines and S&R.

i definitely need to work on my exits which are a bit 'wooly' at the moment. i try to use obvious technical S&R points for my exits but i seem to hang on to more profit when i exit at my channel line (e.g. lower channel for shorts, upper for longs)

i could trade much larger in my account based on my stops and preferred max. risk of 1% per trade but i am trying to start slowly because i already know i have a lot of mistakes to make (have made some already )

I only take a trade if my risk/ reward is 3:1 so i dont get a lot of trades at the moment. i am trying to be cautious and not do too much at once!

please let me know if any of this sounds like amateur night, and feel free to be harsh as it will hurt less than losing money unneccesarily

 

[Chorlton]

thanks for all the comments so far guys

i use weekly and daily charts to identify trendlines and S&R.

I assume you are trading EOD then. If you are, then this is a sensible approach

i definitely need to work on my exits which are a bit 'wooly' at the moment. i try to use obvious technical S&R points for my exits but i seem to hang on to more profit when i exit at my channel line (e.g. lower channel for shorts, upper for longs)

i could trade much larger in my account based on my stops and preferred max. risk of 1% per trade but i am trying to start slowly because i already know i have a lot of mistakes to make (have made some already )

1% Risk per trade is again a sensible level. If you a trading a mechanical model (which can be backtested) I would play around with the % to see what the difference is if you modify it slightly (ie. 1 to 1.5% to 2%). Its an interesting exercise...

I only take a trade if my risk/ reward is 3:1 so i dont get a lot of trades at the moment. i am trying to be cautious and not do too much at once!

please let me know if any of this sounds like amateur night, and feel free to be harsh as it will hurt less than losing money unneccesarily

Again, this is a sensible ratio but whats impressive is that you are sticking to it!!!! Again, if you are able to backtest your strategy you can ascertain what your average R:R is, and work around that value instead. If, however, you are unable to do this, stick with your current ratio.

As a side note, I would say that if you can keep to the above over the long-term then you will be in a far better position than most new traders.....

Regards,

Chorlton

 

[nine]

Actually you could skip the volume unless its really helpful. I find it helpful at certain times but generally ignore it otherwise (I keep the zone closed).

Also, if you have an ma or two you don't need the trend lines either. I used to use lines and channels a lot but have gradually moved to primarily trade s&r with mas for support and a side serving of volume only for one situation when s&r and mas are in conflict.

 

[Splitlink]

hi all

I am a reasonably new trader having been 'investing' for a few years. I am trading minimum lot size in only 2 markets at the moment whilst i develop my trading plan and try to build up my skills.

I have set out a money management plan and have put together a trading diary, daily action plan etc. I am now trading min size whilst I try to develop a method I am confident in. I have paper traded for a while but found I made different decisions when I had cash on the line, albeit very small amounts.

I have tried various indicators/ systems etc but find I keep coming back to using trendlines and support/ resistance along side volume and a few specific chart patterns to make trading decisions. The only indicator I have been using to any degree are EMA-based channels to help me formulate price targets.

I am not profitable yet but my results are improving steadily.

In one sense this almost seems to easy - am I fooling myself to think I can build a profitable method using only these tools? If not, can I get some advice on what else to start thinking about?

I DONT want a finished system as I am trying to put together something I can stick with (I have tried 'off-the-shelf' systems but havent found any that I am comfortable with)

Any help for this newbie is much appreciated

regards

Roy

I agree with nine, volume to me is a mystery. I think that it has wasted more of my studying time than anything else.

A simple EOD bar chart will help you decide on (probable) trend direction for the next day. Get that right and you can sell into strength and vice versa with a lot of confidence.

Split

 

[hogfish]

Me too

Just like to add that this is a post I could have written as it's exactly what I am doing...one of the factors for me is evaluating the strengths and weaknesses of the web platform provided by my chosen SB co...Finspreads at the moment.
This week the platform kept timing out though my broadband is ok- I was only trying to move a stop and it wouldn't do it, then when I logged back on it had been actioned.
This is more than a little worrying when contemplating day-trading, or bigger position sizes, though it's the first time it's happened.

Would be happy to correspond with other trend traders.

Mike

 

[Splitlink]

Just like to add that this is a post I could have written as it's exactly what I am doing...one of the factors for me is evaluating the strengths and weaknesses of the web platform provided by my chosen SB co...Finspreads at the moment.
This week the platform kept timing out though my broadband is ok- I was only trying to move a stop and it wouldn't do it, then when I logged back on it had been actioned.
This is more than a little worrying when contemplating day-trading, or bigger position sizes, though it's the first time it's happened.

Would be happy to correspond with other trend traders.

Mike

I know what you mean. In fast moving markets I have been timed out, too, but my consolation is that I have just as often got a better price on repetition, as not, so have been unable to find an excuse to protest.

As far as stops are concerned, you must try to change them in good time. Once they have been triggered, you've had it. I often close manually, with a stop in place, and it always works. When I consider that I am too close, I don't bother, because I know that the software will not accept it.

 

[MarieDyer]

Hello. I'm trying to recognize the trend in the weekly and daily charts and am having a problem. It seems like there are times when it looks as if it is going in one particular direction and then if you look at it closer it looks like it may be reversing.?. Any advice on reading trends on the longer time frames. I also have the SAR plotted on it.....Thanks you guys!!