test 2

New trade placed.


Hi, as you can see i am back.
I have been trading the whole period that i have not been blogging, but chose not to post as the platform to post with just wasnt simple enough, and i need simplicity.

Anyway, a new platform has been provided now that google have bought out blogger.com and its a lot better, so i might as well carry on.

Todays trade. I am now a big fan of price action trading, and basically getting rid of all the crap on my screen and trying to dtermine what the current price is telling me.
On cable we have a 4hr Pinbar forming, right on a major resistance level.
i have gone short looking for a target of 120 pips, back to the 25EMA.

11th October 2006

So how am i doing so far with only two days under my new rules.
The first thing i have to say is that ... sticking to the rules is damn hard, and i feel is possibly preventative to good profit making - i will explain why in a minute.

The USD/CAD trade

well, i have to admit that one thing i must remember to look into is all the possible effects that come into play in FX. I did not realise that Monday the 9th October was both a US and Canadian holiday. This had to have some effect on the market that day, as volumes were low and no real movement was made overall.
Looking at my potential CAD trade the market actually went down and closed below both the fib lines and the trend line drawn. This was the first time it had closed below these strong support lines in 3 days and so i decided to remove my order entry as suggested in the prior blog, and wait and see.
Sods law, the next day the market was back in full force, holidays were over, the thanksgiving turkey stuffed and eaten and off the market ran!!
it broke through my previouse order entry as you can see and would be 60 pips in the black if i had been playing.
Now we have a new close high above the support and trend line as well as right on the next fib lines drawn (the original targets) and i am unsure what to do now.



Heres what i am thinking.

Theres strong support on the 1hr chart at 1.1337 which is also round about the 6EMA level on the 1hr. I am considering waiting to see if the price returns to this line, tests it and then look to trade on the bounce. Looking at the price action around that level to see if there are pin bars etc to confirm this thinking.
Commetns would be welcome.

Other trades
If you have not yet read my "trading system" listed on the left here can i suggest you do to understand what i am trying to do.
In my quest to take 1.5% profit per day i have managed to do exactly that both days so far this week, though i could have done much more, but my new rules prevented me.

On monday i was looking at the GBP/USD and considering the NFP news the previous trading day (friday). I was expecting the continuation of the dollar strength that came through after the news, and decided that i would place an entry order if the price broke the recent lows and the fib line strength at 1.8600.
I set my target at the 150 EMA at 1.8500 - looking for 100 pips.



well, price did break and my entry order was triggered and went into profit. Once the trade was at 30 piups profit i moved my stop loss up and locked in 10 pips - therefore leaving a 20 pip stop loss, which was then triggered on a minor rebound before the price continued down.
This is fustrating for me, as i must find ways to lock in profits whilst i have such a low cash balance to trade with, yet i will continue to miss larger moves if i make stops too tight.
i really dont know whow to move on with this other than to wait until i have made enough cash to have the larger stops. As we know the opposite side of this is when trades are profitable and then turn bad, and its those that i fear the most.
The 10 pips gained did make me my 1.5% profit for the day, so i left the market alone from then on.

Then on tuesday 10th october i looked at the usd/jpy and decided that i would go long.
Basically the exact same thing happend, but i also panicked a little personally as i was unable to watch the trade due to work demands and as the price action was at an extreme i decided to close out at only 6 pips profit. In actual fact it was good i did as the maket has turned slightly, though i expect is to be a breather only. I did once again make my 1.5% and i left the market.

Balance now stands today on day three of the new rules at £280.58 up 46% from inception.


what am i looking for today?
Basically i am considering the suggestion above on the USD/CAD or possibly a continuation of the cable drop. i have the chance today to watch both and see if i can get in on manual basis.
But.......

I am now watching keenly the USD/CHF.



I really do think that the market is coming out of its long term down trend having made its bounce several months ago and slowly traded sideways since, but is now starting to turn north.
You can see that price has managed to break through the 150 and the 365 EMA and close above them now for three days. If i can look for a retracement to the blue 25 EMA or even the orange 150 EMA then i will definatley take a long order on this currency i think.
Comments welcome.

Matt

First trade made.

Lets look at my first trade made under the new method and rules decided upon. (if you've not read them , look at the links to the left)

I have decided to trade the USD/CAD on monday 9th october, looking for a "buy/long" order to be filled at 1.1305 with a target of 1.1350.



Let me explain the thinking.

1. Last friday we had the US jobs report come out, that whilst the numbers were low, the revision on the prior period was up, which overall gave a reasonable outlook for US jobs. This means USD should GAIN overall.
2. The market has begun to trade within the two yellow trend lines and narrow into a triangle formation. The overall longer term trend has been down for some time, but we have had abounce several months ago that has remained, and friday's market closed right on the upper trend line.
3. This level also is the same point to several fibonacci reversal levels as well. 3 in fact all from the three decending down waves starting in march this year.
4. Those decending waves have lost strength each time, giving me the thought that the trend is likely to change.
5. The market try'd to drop on friday, but didnt have the power to sustain it. This has given a pin bar formation with a long nose. This formation tends to suggest a move in the opposite direction generally.
6. The market has tryd before to break the 150 day MA (thin orange line on chart) 2 days ago as well as the fib and trend lines. It has then retraced some and is now back, this suggests to me that it will have further strength this time to rally..
7. If the market can move above the high made 2 days ago, it will be the highest level in 2 months and above another fib level.

Thats it.

Matt

My Trading System

In my last post i stated i was to explain my personal method for interpreting FX charts.
Before i do so i want to explain a little about how i have come to make this decison.

As you have read, i have spent years looking at charts, and have try'd so many different approaches that i find myself confused and cluttered with data that all contradict themselves.

For example, does anybody relate to this :-


Whilst this chart is not too bad in itself and i am sure you have seen many worse, I have learned is that you can very easily put too many indicators on a chart and wind up with "analysis paralysis". You can clutter the screen with moving averages, different types of channels & bands, macd's, stochastics, RSI, CCI, Money Flow, trend lines, support and resistance lines, Fibonacci levels, and even Elliot Wave counts.

NONE of these indicators that i have used, and especially the proprietry ones i have bought have ever proved to be succesful enough to genuinley earn a living from. And i challenge ANYONE to prove me wrong on that, i really do.

The one real genuine piece of information i have learned over my time is that "the price NOW is the right price for the market" and that is what you must listen to.
Let me explain as best i can. All those miriad of indicators we have try'd to use are all lagging the market, i.e they can only tell you what has already happened. Whilst this is not totally wrong as any history is useful, it cannot determine what the current thinking of the market is. The ONLY thing that can do that is the current price.

So, by that very default set of thinking, the most current price becomes the leading indicator. The most recent price behind that is a lagging but strong indicator. Put the information from those two together and you can base a decision around that information.
The only element we need to add to this thinking is the time frame we are looking at, i.e the bar/candle chart frame we are set to.
I will only look at either daily or 4hr charts from now on, as i have try'd and burned myself so many times trying to look smaller than this and just cannot get my head around it enough.
This thinking will allow me the time frame to breath and not have to be too concerned with smaller movements.

So this type of chart interpretation is very simple and is called Price Action trading. I will use a few additional simple indicators on the charts to help me determine what OTHER traders are thinking and use this mentality to support the current price action. These are :-

• Simple moving averages
• Price pivots, support and resistance
• Trend lines
• Fibonacci retracemenets and projections
  

The idea behind using these additions is that virtually all other traders will be considering these as major support and resistance levels on their charts, and by that very fact will tend to cause the market to stall, or bounce through or off such levels. This is valuable to help understand the potential future of the price action and should be considered. ALL of these indicators though are used as FUTURE refrence for my decision making, and are not to be used as the actual trading decision.
In other words, i am not waiting for a Moving Average cross to make a trading decision to enter the market, however if i see the price moving towards a strong MA level i will consider this fact into my decision as i may be expecting a bounce off it for example.
Fibonacci levels are good considerations for future movement as well, and i will use them a lot. If your not sure what that is, then click the link i have provided above.

So, we know i am looking at price action only, either daily on down to 4 hr bars.
But what am i looking for?
Very simply put i am going to look for certain price action formations that indicate to me the market thinking.
What you may expect now is for me to explain what these formations are, and in effect tell you my trading system. Well, if you have read all the posts prior you will know that i am very much a novice, and would not dream of pretending that i have anything that would prompt you into believing i have a working method you could follow. Thats not why i am posting this blog.

There are many many different web pages that can tell you all about price action chart formations, and i am considering them all - simply put.
here are a few for you to consider :-

• Candlestick patterns
• Bottoms/tops
• Flags/consolidations
• Price Channel
• Others ..... many to learn

... or just type chart patterns into google and see what you get!!
All of these are to be considered, but i hope if you continue to return to this blog you will soon see what i am looking for.

Rules

All systems have to have some rules if we are to ensure that we dont fail.
The best one that must be adhered to, but is often overlooked is a good money management strategy. I admit that i have not ever done this before, and am not too sure the very best way of ensuring i dont get it wrong.
Maths has never been my best subject, and every time i try to read up on this element of my trading i get confused.
There..... thats honest isnt it?
So, heres what i have decided so far.

1. I am going to divide my trading balance by 3, therefore i can have a maximum of 33.3 losing trades before i go bust.
2. Each trade will have a maximum of a 50 pip/point stop loss.
3. Those 50 pips/points will represent a maximum of 3% of my total balance.
4. Once i double my balance i will reduce the risk % of each trade to 2% of balance.
5. The calculation i will use to determine the cash level of each trade will be - balance/33.3/50
   

i also have decided for the first time ever that i am going to set targets.
One area i have always struggled with is the trade exit. So many times i have watched profits turn to losses, because i was hoping for increased profits and let the trade run.
Well, no more.

My goal from now on is to aim to achieve a 1.5% increase on balance every day. This would give a 7.6% increase over the week. Or i will accept a minimum of a 5% increase on balance over the 5 day trading week should i fail the 1.5% a day.
If i only get the minimum 5% a week, that would mean a 21.5% increase on balance over a 4 week month.
If i could start with a £10,000 account (which i cant yet), that would be a £2,150 profit per month - i could live on that profit each month.

So, those are my rules. If you have any suggestions on the money management element, and can help with the explanation and support me in trying to understand it then i welcome your advice.
I will try to let trades run if possible, but only AFTER locking in the 1.5% profit per day via the stop-loss. If i hit my target for the day i MUST cease all trading for the day. This is the one cardinal rule i have failed on every occasion to adhere to.

Now i have a basic system, and some defined rules to follow. Its time to look to trading.

Demo vs live
I know i am going to get people reeling in shock here, and will no doubt be falling for the most obvious of mistakes, but i am going to trade live. I know, i know... but the truth is, every time i demo trade i lose interest and simply point and shoot. Its time wasting for me it really is. I know myself and know that no matter how focused i am right now, it still will not be effective to demo trade.
I treat my 10 years experience to date as the demo and have to be prepared to stand up for what i am doing and put some real risk and emotion into this.
Now i am going to be realistic and start small. In fact, i am going to start spreadbetting the FX here in the UK, and with a small £250 opening balance.
For the last 4 weeks i have been preparing for this and looking at my naval and trying to see if all the above can be put into practise. So i actually already started trading 4 weeks ago under "some" of the rules listed and have turned £200 into £265.08 as of today 6th October 2006.
I say some, because i have developed them as i have gone along during those 4 weeks.

So, i have actually exceeded my target for the month and made a 32.5% increase.
I just need to ensure it continues. I did at one point this week have the account to £366 (84% increase) but made some stupid mistakes in overtrading yesterday. This is why i have set the rules above in stone !!


Thats it, i have no more to add.
Watch this space as i progress from now on, please leave comments and i hope that it will be of interest.

Matt

OK, so what am i trading and how ?

Right. Well i hope you've read the first post all about me and my trials to date that have driven me to start this blog.

I have made the firm decision that i am to focus on ONE major market instead of trying to understand several. And my choice is probably one of the most volatile markets out there, but its one i feel suits my mentality - FOREX.

I am sure many of you know all about trading foreign exchange so i wont bore you with the basics about what it is. If you do need some basic information as to the market size and function then can i sugest you look here for some ideas :-

• Wikipedia
• FXCM - (major broker)
• Investopedia
  

I will explain why i have chosen this market over all the others i have try'd in a few simple bullet points :-

• Huge volumes of trading made every single day
• 24 hour hour market, so i can trade in the evening potentially (though probably wont)
• Tends to trend more that individual stocks or indices
• Cannot be easily manipulated as its de-centralised, though not impossible
• Trading decisions can be made entirely with chart data
  
• Charting software is free, unlike individual stocks
• Has over 50 differing currencies to watch, though i will focus on just 6-8
• Smaller spread sizes

FX (as i will call it from now on) really does suit my trading style. I really cant be bothered with detailed analysis on the fundementals of why certian stocks are moving and why there not. I much prefer the technical approach and FX does this best.

So, now i know what i am looking "at", i need to set out what i am looking "for" and need to set my trading system in place.
And anyone who's been around knows that system hunting is a minefield of scams, frauds, cheats, failures, losers and general time wasters. In fact, truth be told i have bought many of these and learned the hard way.
So, i am stepping back, and have come to a decison on how i intend to trade the FX market :-

Price Action ONLY

Let me explain, in the next installment - My trading system.

Matt

Right, this is it then.......... the beginning !!

Good day to one and all.
Whats this blog all about then?
Well, my name is Matthew and for years now i have been on a journey trying to teach myself how to trade various markets in order to achieve the financial freedom we all aspire to.
Just like you, i am sick of my 9-5 job, (well, more like 8-8 really) and am determined to find ways to get away from it. The lure of working from home, and spending time with the family is just what has kept me going through those long years.

But..... this has not been a very easy road for me. It has basically been over 10 years so far, attempting to trade the UK stock market, the US market, the European Market, options, CFD's, bonds, FX, spreadbetting, HYIPS, autosurfs, arbitrage trading..... basically everything you can think of.

I have bought countless systems, black boxes, proven trading methods, tip services, gambling sheets etc ... many costing over well over £5,000. I have been to seminars, paid for private mentors, logged onto webinars and must have read hundreds of e-books on various trading methods and physcologies. I have poured over company statements for hours on end trying to understand fundemental analysis, staterd at charts for days trying to "see" the next move, attempted to comprehend Fibonacci, Elliot wave, Reynolds etc etc..... the list goes on.
And i bet you can tell what the net result is cant you?

Yes, i can only show a net loss of many thousands of pounds. In fact, currently it stands at over £20,000 spent in total on all the above.
Trading losses actually only amount to a further £5,000 as i have never managed to get a working system that has convinced me enough to commit larger balances to.
Its ironic really that i have spent more on learning how to lose money, than i have actually losing it!!

Anyway, i have recently come to some decisions on what i need to do now if i am to continue with this dream. And thats a big IF as well.

I cannot continue to treat trading in the cavalier manner that i have to-date. Money is not easy to get, yet i have learnt to "forget" it once i have put it into a trading account, and then find myself being too easy with accepting the losses.
I never seem to stick at any one method for too long, allowing myself to flit from one way of looking at the market to another, one system to another.
I have been known to enter trades on a whim, or "gut feeling" rather than any form of sound practice and it just has to stop before i implode and bankrupt me and my family.

What i need is to buckle down and actually really, really learn something and know how it works 100%. This is the part i have never managed to do properly. I have been too busy over those years looking for something or somebody, to provide some kind of all encompassing black box to do the trading for me and make me pots of cash!!
Well, it just isnt going to happen, and it has taken a lot of time and money for me to learn that.
So now i am making a determined decision to move away from that mentality and genuinely teach myself to trade. Not rely on anyone else, not to be dependent on new fangled indicators splashed all over a trading screen, not to wait for some cryptic signal that i blindly follow not knowing why.... just me attempting to understand completley why i made the trade and having 100% faith in that decision.

And i am going to post everything i do right here.

Now, in doing this i am not actually wanting your input. In fact, if i am to do this i dont want any confusion and noise from others reacting to what i have done and making me doubt my initial decision.
In fact, if i post here then its too late becuase i will already have made the trade and theres nothing you can say to change that.

No. The real reason why i am doing this is so i can document exactly what i did, why i did it, and what the net result was. This is something i have never done before. I have made trades and then basically forgot about them (well after the worry period whilst it was active).
I have never documented the lessons that should have been learned. So i find myself repeating mistakes i have already made before and should have learnt from.
This has to change, and in doing this blog i hope to streamline this process of logging my thoughts at the time i clicked the trigger finger.

Let me give an example. In fact the very trades i made today that have prompted me to begin this process.
After having a good week upto Wednesday with one major winning trade netting over 140 points on "GOLD" i was quite chuffed. I decided not to trade thursday as i found myself reluctant to "risk" my new found profits... and actually got a little paralysed over this.
Shaking myself out of this on friday i made two further trades (i will explain which ones later and why). Both felt sound to me in the thinking behind them, yet both hit my stops. So ... 50% of my new profits are now gone and i am finding myself desperate almost to recoup the losses. I find myself making 7 further rather rash, stupid, idiotic trades in the space of only 5 hours in this desperate thinking that i have got myself into. Some win, most lose and i find i have lost the whole net profit i had 2 days ago and more.
Every one of those last 7 trades was done out of desperation. Yet, i should have known better. The worst thing is, I have fallen foul of this very same problem before and just didnt learn.

So. i have had enough of this and have made a few firm decisions that i will explain in a minute.
Your welcome to watch and feel the agony as i go along by all means. I welcome constructive comments and especially any links to online resources i may not be aware of that you feel would be of benefit. However, i ask that you understand i am not looking for your advise on the trading decisions made here. I want and must learn to rely totally on my own judgement if i am to improve and hopefully prosper from full time trading.

Wish me luck, todays a new day for me .....

Matt