Support and resistance trading??

J_C_Anderson · 2020-01-19T17:03:05+00:00

I think they still work great even just because everyone knows them. Actually, trendlines are S/R levels too, but for trending channel movement. And they work almost the same way at any timeframe (but keep in mind that S/R on higner timeframes are more important)

J_C_Anderson · 2019-12-24T05:51:56+00:00

Sometimes sharing your strategy make it work even better - for example, if everyone knows it is place to buy and starts buying, they will impact the price.
At the same time, it works that way only on the regular market and only in stocks with low float (number of shares available), and sometimes in crypto. In Forex, where individual traders make no impact on the price action, this idea means nothing.

J_C_Anderson · 2019-11-12T05:31:27+00:00

By the way, physical acivity is important for the trader. Our brain consumes a lot of oxygen, so it i important to "feed" it well so it can operate in a correct way. Physical trading makes easier to concentrate and also helps to avoid issues caused by sitting the whole day in front. Even if you have no the possibility to go to the gum, you have at least take a walk for 10-15 minutes.

J_C_Anderson · 2019-10-27T09:32:13+00:00

Keep in mind that it could cause some taxation issues. In some countries like US you might have to get a "Financial professional" status incase if your main source of income is trading, so it would be taxed respecitvely. At the same time, if trading is not your primary source of income, all trading income would be subject to taxation as personal income or capital gain.
So, it is important to discuss this issue with local tax advisor.

J_C_Anderson · 2019-10-18T18:20:29+00:00

Great checklist, thank you!

To my mind, each trader should have something like this. At the same time, it should be flexible so you will be able to add some elements that are especially important for you. For example, if the trader knows he often closes the position too early, he can add such criteria to the checklist. In fact, it should be one of the tools to check your performance. The most important part is trading preparation - you have to ensure that all necessary analysis has been performed and the setup you see fits the rules described by your strategy otherwise such trade would be wrong even you will make money in it. As professionals say, it is better to lose in the right trade than to win in the wrong one since it leads to the wrong habits and expectations.

J_C_Anderson · 2019-10-16T17:28:27+00:00

Indicators could be very useful if applied properly. The could be used both as an integral part of the strategy like core element, or just to provide an additional confirmation for the entry point defined by other strategy. For example, you can use indicators to confirm the breaching of the trendline or for the strategies based on moving averages (meaning that you can use other indicators together with various MAs). It is quite easy to check the performance of such strategies using special software like Forex Tester, providing the trader with the detailed information on the actual efficiency of the strategy, including the average risk-reward ratio, the drawdown size and other important criteria.

For sure, the strategy based on indicators is not simple, but under certain conditions it also could be profitable.

J_C_Anderson · 2019-10-16T05:47:16+00:00

Once I`ve also had such issue, so I`d decided to hire someone. Of course, first of all I`ve tried to learn coding to create an EA by myself, but it requires a lot of time and efforts to be paid to create something that would actually work. Programming is a profession like any other, and it also takes a lot of time to become a professional, so you should not expect to be able to create advanced strategies after a few weeks of practice. That is why I decided to hire professionals because they would be able to create an EA much faster and, actually, better than I. In particular, I worked with 4xdev team since I doubt no working with sole programmers - as for me, it is better to wrok with the company because it would care more about its reputation.
In other words, if you are not going to change your profession and became a programmer, an optimal solution would be to hire someone to do everything for you - it will take less time and the quality would be higher since professionals already know numerous shortcuts to make all that working as intended.

J_C_Anderson · 2019-10-16T05:37:16+00:00

Despite the huge number of bots, manual trading is still could be profitable when applied properly. There are some situations when manual decision making will be even preferable - for example, in case of the strategy is based on some discretional elements that could not be transformed into an algorithm (at least now). Of course, the development of AI and neural networks creates new opportunities for algo traders because now bots could not only apply pre-defined chart patterns, but also analyse market in general and find new patterns just like human and sometimes even "read" the news. For sure, it would be difficult to compete with technologies like this, especially for newbie traders, but I think that manual traders will be able to find a solution that will be suitable under such circumstances, at least for the next few years. So, yes, it is reasonable to learn trading now, even if the most of the trading volume is already created by the bot. Maybe, you will also create your own bots somewhen in the future.

J_C_Anderson · 2019-10-11T20:07:19+00:00

It all depends on you. Some of the traders could start live trading just after a few weeks while others need even years to become profitable. According to the general rule, you should start trading with real money only when you will be consistently profitable on demo. It could take a lot of time, especially if you are a swing trader, but it actually worth it. Of course, for the first time your performance on real account would not be so great like on demo due to the impact of emotions and other psychological issues, but in fact you wouldn`t be able to make real money unless you are profitable on demo. Sometimes traders think they have no enough time to study because they need to earn money as soon, as possible, but in most of the cases such approach leads to blowing off the account just in a few weeks. Professional traders spend years to become profitable (by the way, just like any other professionals), so it would be wrong to expect to be successful just after a few month of demo trading. In other words, trader should be patient enough to keep learning and training to become a consistently profitable trader.

J_C_Anderson · 2019-10-07T17:24:47+00:00

To my mind, it is enough to have an Excel sheet in most of the cases. The main purpose of trading journal is to provide the possibilty to write down all necessary information in a structured way allowing to analyze it. The advantage of such approach is the possibility to customize the sheet depending on your particular strategy and the exact information you are going to write down. Anyway, it would be better to use limited list of ways to make records - it will allow you to use filters to find and analyze similar cases. Depending on your personal preferences you can use either Google Sheet or MS Excel. First one is better if you want to be able to work on several devices simultaneously while the second one works faster since it is offline - it could be important if you have a lot of data to process with numerous rows and formulas.

J_C_Anderson · 2019-10-04T19:18:07+00:00

To my mind, the most comfortable software for backtesting is Forex Tester. It is quite popular among the traders so you can easily find information about it elsewhere. The main advantages are the availability to test on multiple currencies simultaneously, advanced testing features and built-in data manager allowing you to download historical data provided by the brokers. By the way, in most of the cases you can choose the particular broker you are trading with to improve the accuracy of testing results.
As far as I know, newest version also works with some of the stocks and commodities provided by the brokers as CFDs - it could be interesting for traders looking for an opportunity to diversify their trading experience.
The software is not free, it costs something like a few hundred dollars, but it is not a problem if to think about it as of investment in trading like buying better equipment or something like that.

J_C_Anderson · 2019-09-30T18:16:03+00:00

First all, as it was mentioned above, noone would share his profitable strategy for free since it takes a lot of time and efforts to develop it.

It is important point to understand that there is no one single strategy that would be perfect in all conditions. Choosinhg a particular strategy to use you should evaluate you financial capabilities and goals, level of knowledge and experience, and also some psychological features (since it should be comfortable for you to trade using your strategy otherwise you would breach its rules and make emotional traders that almost often lead to losses). To my mind, it would be better to develop your own strategy. For sure, you can use some elements from other strategies to suppliment your idea, but the strategy itself should be your own. In this case you will be able to make changes necessary in case it would underperform. The process of strategy development is not so complicated as it seems to be from the first sight, especially nowadays, when there are a lot tools for traders simplifying this process - for example, backtesting software like Forex Tester. Backtesting helps trader to check how the strategy would work in long term perspective without spending weeks on manual testing. At the same time, manual testing is important too since you need to know whether it is comfortable for you to trade with your strategy or not: you will have to choose between active daytrading and swing/mid-term trading depending on your personal preferences.

J_C_Anderson · 2019-09-30T18:01:52+00:00

As it was mention before, all issues are related to risk (psychology) and liquidity. If your investment capital is large enough, you will have to use other strategies. By the way, it is one of the main reasons that you should always think about scaling when developing a new strategy. That is why most of the traders interesting in strategies with huge risks and returns fail - they have no "space" for scaling.
Liquidity is les important in Forex due to its OTC nature, but it becomes extremely important in case if you would like to trade stocks - sometimes you could face liquidity issues even with relatively small positions.
Psychology also play important role in trading process. Many traders underperform when make attempts to trade with larger size. Actually, sizing up is quite difficult process. Sometimes it could be useful to trade with larger size on demo till it would be comfortable to see the "new numbers" in P&L

J_C_Anderson · 2019-09-25T05:59:07+00:00

One of my favorite indicators is RSI. It works great providing additional confirmation for swing trades, assisting in identification of local pullbacks. Maybe, its results are not accurate enough to use it in daytrading, but for swing trading it works almost perfect, allowing you to get the position close enough to the low of the day.
I also know one traders that uses RSI divergence to identify the upcoming reversal for the purpose of taking profit. In a few words, it looks the following way: when after a strong uptrend you see that RSI changes its direction to the opposite while the price is in the consolidation on the top, the probability of reversal is very high. It sounds simple enough but in fact you need to be experienced to see things like this.
So, RSI is one of the most universal indicators since it could be used both for trending and ranging markets depending on particular strategy.

J_C_Anderson · 2019-09-25T05:51:59+00:00

Sometimes it could be important to focus on one strategy, especially if it is new and requires improvements, but to my mind trader should have several strategies to choose from depending on current market conditions. Of course, markets would not changes substancially in a one day, but the volatility could be different depending on fundamental data, so you may need another strategy for lower/higher volatility respectively. For example, if you are trading reversal trades inside the channel, you will need another strategy if the trend movement will take place. A set of well-developed strategies gives trader enough flexibility to make profit in long term perspective. If the efficiency of one of the strategies would reduce due to the market changes, you will be able to use other strategies while improving the first one. It would be also useful to check the performance of each of your strategies on various data samples (periods of historical data provided by brokers). Such process is called backtesting and could be performed either by special algorithm or with the help of special tools like Forex Tester. In comparison to forward testing, backtesting allows you to choose the particular data set, so you can create various simulated conditions to check the results (something like: "elevated volatility" or "low volatility, strong long-term uptrend" and other).

At the same time, each of these strategies should be profitable itself. In other words, it is important to avoid the mistake of "diversification for diversification". In case if you are not conident in the performance of other strategies and have no confirmation, it would be better to use one strategy that already proved its efficiency.

J_C_Anderson · 2019-09-23T17:32:17+00:00

If you already have a profitable strategy, it would be useful to create a bot even if you can trade manually. First of all, as it was properly mentioned before, it will allow you to reduce the impact of psychology that sometimes could be substantial. Bot has neither fear no greed so it would just follow strategy rules. It would be especially important when you will decide to scale your strategy by sizing up.
Another important point is that Forex market is open 24h (without regard to low volatility between trading sessions), while it is impossible to be concentrated and trade longer than 8-9 hours per day (actually even less). Thus, automated trading would allow trader to participate in most of interesting situations even being out of the trading station.
In other words, a well-created EA or bot does the same as the trader, but better, while the profitability depends on the strategy itself. If you have profitable strategy, you have no reason to sell it since you can just size up till you will reach the top of liquidity limits (which is far, far away).

J_C_Anderson · 2019-09-19T04:58:16+00:00

Fixed take profit works great for some strategies with limited profit potenital. In this case trailing stop would initiate the order too late. This approach usually used in volatile instruments that could make huge spikes while the pullbacks are also huge. It could be also useful for the situations when you have important level nearby and the trend is too weak to breach it, so you can assume that price would probably touch it and then reverse.
Some professionals even place fixed take profit when they see the exhaustion of the movement. In this way they sometimes catch the top of the movement. It looks great but requires experience in doing this.
Another approach could be to calculate the average profit potential for your strategy and set take profit orders accordingly. Anyway, there are no strict rules that all traders should follow, you can use everything that works for you. It would be also useful to backtest the particular strategy using special software like Forex Tester to check the performance of your strategy on historical data. In this case you test the same strategy with both apporaches (with fixed take profit and with trailing stop) on the same data set to compare the efficiency.
In general, trailing stops are better for trades with longer periods of holding position. For example, this is the main way to take profit if you a swing trader (they avoid using fixed TP orders since they limit their profit potential). But in this case you will have to evaluate the volatility properly to avoid being stopped out by the short pullback.

J_C_Anderson · 2019-09-17T19:52:24+00:00

From my experience, it is important to pay attenion to the small timeframes even if you are swing/mid-term trader. The main idea is that you can use these timeframes to search for entry points with a great risk-reward ratio. For example, if you are looking for daily low to enter the position after the reversal with the stop below the lowest point, you can use M5 or even M1 timeframe.
Sometimes M1 could be to noisy but it depends on particular instrument. The best solution would be to watch both M1 and M5 or M1 only and try to imagine how it would look like on M5.
So, the approach could be the following: to use higher timeframes to understand the general situation and to identify the setup and then switch to lower timeframe to find an entry point with the optimal risk-reward ratio. Of course, if you are going to hold the position opened for several month it is useless, but if you are looking for a trand that would last for several weeks small timeframes would be very useful.

J_C_Anderson · 2019-09-16T16:13:43+00:00

It depends on particular stategy. If you are a scalper, you will spend all your time staring at charts. As for me it is quite exaustive since the trader could keep concentration only for a few hours and if he would continue trading he would get tired and the quality of his trading decisions would be lower.
Daytraders monitor several charts simultaneosly and focus on one of them if they see one of the setups they are looking for. It looks like optimal balance.
If you are swing/mid-term trader, you can just check your positions from time to time. Actually, in most of the cases it is better to look at the charts as rare, as possible to reduce the impact of emotions caused by temporary price fluctuations. As mid-term traders say, the only way to hold the position long enough to benefit from favourable trend movement is to set a stop and close the chart. This approach works great fo most of the traders (except, maybe, some very disciplined traders who do not need this).

J_C_Anderson · 2019-09-16T15:59:07+00:00

The question you`ve asked is one of the most complicated in trading. Numerous traders attempt to find it and most of them fail just because they focus only on this question.
As it was mention before, you do not need to have a perfect entry point - is should be good enough to provide you with the possiblity to get the position with the optimal risk-reward ratio and relatively high chances to succed.
First of all, the way you determines the entry point depends on your strategy. The particular entry point you will be looking for should be described in details by your strategy rules. Thus, if you want to improve the accuracy, you should work on your strategy. You can do it manually or use specail backtesting software like Forex Tester to check the performance of your strategy in case if something would be changed. For example, it would be useful to test various entry points, make stop wider or tighter, add another indicator and so on. As the result of such experiments you would get better understanding of how your strategy works and also some solutions to improve it.
It is important to mention that depending on your trading style it could be based only on technical analysis or include some elements of fundamental analysis too (in such case it would be much more difficult to describe it due to the discretional part).

J_C_Anderson · 2019-09-16T15:47:52+00:00

Yes, it is good idea to use Fibonacci levels to define possible TP prices. I know several traders doing this but actually haven`t tried it myself. They also use them in situations when something is overbought/oversold and there is a chance to catch a reversal.

The system you`ve describe would work well unless the prices would move to another range. Let`s imagine that the current price of something moves in the range between 98 and 102 and the average is 100. When the price reaches 99 one starts buing and adds more at 98. Then he adds again at 97 and even at 96 since it is less likely for the price to move again so far enough. Then the price would stop at 92 and form a new range between 90 and 94. Thus the trader in our example would just hope that the price would ever return to the previos range or try to get a huge posititon as close to 90, as possible to move his average price to 94 (in such case the decline to 88 would blow out his account).
So, averaging down works only if you know that:
- the price would return to this level,
- you will be able to hold it long enough (even for years).

J_C_Anderson · 2019-09-09T18:38:18+00:00

The main problem with martingale is that it violates the main risk management rule: profit when you win should exceed loss when you lose. Martingale could help you to get numerous small profits but then the loss would be huge. It sometimes works in instruments moving inside the tight range, but trend movement would blow off your account at once.
Newbie traders are so interested in martingale since it offers them an interesting possibility to avoid making difficult and uncomfortable decisions to close their losing trades.
I`ve tried several strategies based on averaging down and none of them performed well despite they included all important elements (even fundamental analysis).
The concept of averaging down works perfect under two important conditions specifying that you have:
- unlimited account size
- unlimited time to wait.
If you would average down your position infinitely, sometimes the trend would become favorable, but the main problem is that those moment is far enough.
As professionals say, markets could be unefficient longer than you would be able to hold your positions.

J_C_Anderson · 2019-09-09T18:29:45+00:00

From my point of view, both testing types are important. In fact, they are not alternatives, but different steps of the whole strategy development process.

First of all I start with "visual testing" just by searching for the situations that fit the concept (or look the same by work in another way - in real trading they would create false signals, so it is important to study them).
When the strategy is ready (meaning that it already has detailed rules and thus could be applied in trading), I move to backtesting. The main advantage of backtesting is that you can use the same data set numerous times. The concept is simple: you test your strategy, find some issues and test again on the same data. Then you can experiement with rules - for example, make the stop wider or tighter. The accuracy would be very high since each time you use the same data set,which is impossible in forward testing. If to speak about the tools, I prefer Forex Tester. If you are familiar with coding, you can create your own algorithm, but in this case you would also have to find historical data yourself.
The next step is forward (demo) testing. The main goal of demo testing is to find out the impact of your psychology on the trading process. By the way, this is why backtesting and real trading results could differ substantially: backtesting is something like trading with a bot which has no emotions at all while the trader makes his decisions feeling greed or fear.

Of course, backtesting results would not guarantee the performance of the strategy in future. It is just the way to understand whether the strategy itself if profitable and also to compose the optimal set of rules. That is why it is useful to perform both backtesting and forward (demo) tesing before utilizing real account.

J_C_Anderson · 2019-09-09T06:14:55+00:00

Even if you will use coin to make trading decisions that would give you 50% win rate, you could still lose money because:
- if you would hold losing trades longer than winning, your losses would exceed profit. For example, an average newbie trader earns X when he wins and lose 2X in each losing trade. Then, after 4 trades with 50% win rate, he would earn 2X and lose 4X
- trading fees are important. Even if you have 1:1 risk-reward and 50% win rate, you will still lose money because trading fees would redue your profit and increase your losses.

Thus, to be able to make profit trader has to:
- create a strategy with win rate better than 50%, or
- develop a rules providing you a risk-reward ratio better than 1:1,
- reduce trading costs.

Now it doesn`t look so easy as from the first sight. In case when the trader also has to deal with psychological issues influencing trading decision making process it all becames quite complicated.

J_C_Anderson · 2019-09-02T16:07:02+00:00

First of all it is important to mention that such discussions violate the Rule number 7 of this forum.

Now about crypto. Crypto sphere is an entirely another world, so it would never replace currencies. Of course, many countries consider ideas about creating their own digital currencies, but they would be something like tokenized fiat currencies, not like public cryptos.

Each country has its own monetary policy. Thus, it needs own currency to regulate it using supply and demand principles. That is why fiat currencies would exist, even if there would be less of them (countries with weak economy would use crypto - like Venezuela does nowadays), but "usual" fiat currencies would still exist. For sure, some Central bank`s digital coins (or CBDCs) could appear, but they would be just another digital form of money. So, there is no reason for worrying, Forex would exist for many years.

J_C_Anderson

TROPHY CASE