An Introduction – and a challenge!

October 16, 2009

Uncategorized

 Hello there fellow trader!

Well here’s another blog about adventures in FX Trading……..oh how exciting…..yawn!

So what’s the difference here? Well unlike most other trader/educators my colleagues and I actually trade!  So much of what you read on sites, forums and blogs is done using the wonders of hindsight by sales and marketers as opposed to actual traders.  We want this site to be different.

You see after years of trading financial markets and working in trading education I have come to the conclusion that less is more.  Courses offering you wads and wads of pointless paper and slides on indicator after indicator are just waffle.  It just confuses you. And the last thing you need to be in a moving market is confused! Believe me it’s a quick way for you to be separated from your hard earned cash!  I read somewhere that human beings can focus on somewhere between 5-9 (let’s make it easy and say 7) pieces of data at once….after that we just go ‘tilt’ and lose it.

When it comes to trading I’ve seen so many would-be traders with charts that are full of indicators. They have 6 moving averages, Bollinger bands, Pivots, Parabolic SAR etc, etc.  Then they add MACD, RSI, Stochastic, CCI etc etc. The list goes on.  It just confuses people. I have a personal theory that they are hoping that all these indicators will somehow shield them from taking a losing trade, because then they’d have to admit they were wrong. Which is painful and as human beings we will do anything to avoid pain.  But I shall return to this topic in another post.

Simply put price action is King and all other indicators are just lagging….telling you about what’s happened as opposed to what’s going to happen.  But we all (including me) get drawn in by exotic ‘secret’ indicators that promise to provide easy unlimited profits.  Once again…yawn. 

I shall let you all into a little secret about Trading. Ready? Want to know what it is?

THERE IS NO SECRET!

Spending time, energy and money trying to find the ‘Holy Grail’ of Trading is a futile gesture. 

 Actually no, I take that back.  There is a Holy Grail of Trading. 

 It’s you!

 You are the Holy Grail.  You are the key to unlocking profits in the financial markets. You are a leading indicator!  You are your over-bought and over-sold zone.  You are the moving average that tells you when the trend is up and when the trend is down.  You are your stop-loss and your profit target. (Now the newbie reading this is thinking that the author has been sniffing glue……whilst the old heads nod sagely)

Unfortunately most people will never realise this until it’s too late.  They’ll try and trade FX markets whilst undercapitalised, with little or no risk management principles and unrealistic expectations of what they can achieve.  This will invariably be a painful experience for ohhh say 99.9% of traders who start out this way.

I will explain more on my views of this situation more as we progress along our journey.  For this post I just wanted to say hello and explain the challenge we’ve laid down.

So here’s the challenge.  The ‘Less is More’ Challenge you could call it.  Let’s strip away all the rubbish and get back to engaging with the market from as pure and simple a position as we can.  Let’s call it a Trading Detox!

Quite simply you have one chart upon which to trade the instrument of your choice with no more than 3 indicators.  (If you already trade with even less then you go to the head of the class).

You’re allowed Price, Trendlines, S&R levels and higher highs, higher lows to define a trend.

Here are my 3 indicators:

1. Daily Pivot points

2.  1 x Moving Average (each one counts for one of your choices)

3.  MACD – for divergence.

Not very exciting eh?  Did you think I’d have some wondrous indicator that assures me of easy untold wealth within the markets?  Oh and were you hoping I’d sell it you? Sorry. I’m afraid not.

Think it’s unfeasible to make money with such a paucity of trading crutches?  Well I know one chap who uses no indicators whatsoever and just a 5 min chart to trade currencies and he does it very well.  I know another chap who simply uses a 10 period moving average and nothing else.  It can be done.

Remember less is more.  You need to be able to make a decision and act quickly.  If you’re looking for 30 things to line up for you to take a trade then you’re going to be waiting a very long time. And do you know what?  Waiting for all those things to line up is not likely to make the probability of that trade being successful any more attractive.

If there is a secret its managing your risk and building a winning attitude that will allow you to focus on execution of your trade.

“The secret behind success is to embrace risk, not to avoid it.” Do you know who said that?  George Soros, from what I hear and read he’s done alright at this trading game.  And he’s right, get comfortable with risk.

And if you needed any more confirmation here’s something John Carter said in Mastering the Trade,

“Amateur traders turn into professional traders once they stop looking for the ‘next great technical indicator’ and start controlling risk on each trade.’ 

So there’s the challenge.  I shall be looking to add my trades to this blog.  The Good, The Bad and The Ugly!  I will also add my own two euro cents (they’ll be worth more than US cents and Sterling pennies…I am a currency trader after all;-) ).

I’d be delighted to hear from you with your thoughts and feedback.  I’d be even more delighted to see some of you be bold enough to step up to the plate and offer up your own trades.  It quite cathartic!

Well this was far too long a blog post….my first (but not my last I suspect) rant.  Future posts I promise will be shorter!

Trade well and prosper!

Paul

About FXTraderPaul

A professional Trader and Coach, FXTraderPaul blogs about his adventures from the front-lines of FX Trading. A Trader and educator who can walk the walk as opposed to merely talk the talk!

View all posts by FXTraderPaul

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One Comment on “An Introduction – and a challenge!”

  1. melissamehta Says:

    Very good Wallace. I like the idea of trading detox, and I love the style of your blog.

    I’m also very glad you’ve found a benevolent outlet for your ‘rants’ (passionate entreaties is how I see them). Great work.

    Like

    Reply

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