Is it possible to develop any trading strategy to become profitable? - page 5
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When I decided about 26 months ago to start trading I read about 12 books. Technical Analysis for Dummies, Day trading for Dummies, Japanese Candle sticks for Dummies and a few other technical analysis books. I did not know about the 10 000 hours theory at that time. I then practiced on the Demo platform for about two months and went live on my real account. I lost 42% of my initial deposit in 2 and 1/2 days. Then I stopped. I realised I was going to lose my total deposit if I were to carry on. one thing that might have accounted for your loss was lack of direction (trading plan). the question then is, were you using a particular system to trade? and did you understand the system into the detail. that is, your RR, winrate, MM, among other things, not to even talk of your psychological level in executing trades.
While reading the literature for day trading I came across an internet article that very clearly states that you have to be profitable on the Demo before you go live. I think I also saw that advice or rule in other articles too. Yes you have to be profitable on the demo. That doesnt guarantee your success on the real account but at least it brings some certainty to your trading and helps with the psychological part of trading.
So, I realized I have to do that.
About a year into demo trading (Demo trading which specific trading plan. Did you have specific rules that told you when to buy, how much to buy or sell, among other things?) If not, then i think you were not trading. \you were just gambling with your money.
The main reason for demo trading is in my understanding;
1. To forward test the profitability of a particular trading strategy.
2. To help in the developing a trading strategy.
3. To keep an eye on a broker to compare to your own broker
4. To test the conditions of a broker to decide if you would like to trade with them at the end or not.
The list can be endless. Looking at your statement i am assuming that you didnt really have a specific thing you were forward testing and you werent trying to develop a strategy too.
(I demo trade 16 and 1/2 hours per day - I basically sleep and trade during the week), a friend of mine told me about the 10 000 hours theory. So, I googled it. The 10 000 hours is an average. It is obviously not a magical number. It could be less, it could be more. I am now on 8600 hours. I personally think the 10 000 hours theory has merit. The 10000 hours might be helpful only if you are using it to test a strategy you already have. \if you have no sense of guidance and are just trading hoping to find a way to become profitable without any plan, then i think the 10000 hours will be useless (for lack of a better word)
I want to be profitable every single day. That is my aim. Being profitable every single day entails a lot. does that mean you will continue to trade even if you are in serious drawdown? How many trades will you take in a day? What timeframe will you trade? How many hours will you trade? What currency pair will you trade. In fact, the list is endless and all bores down to having a well developed trading plan that will guide you. There are a lot of thing that comes into play to make you profitable in every day.
I decided that I will only go back to live trading when I can at least succeed in trading 5 days in a row and make a good profit every day. The literature states 3 to 6 months profitable on the Demo before going live. A good profit for me is minimum 15 basic pips per day. 200 Pips being the basic number of pips needed to double your money on 50 leverage trading the EuroDollar, means I am looking for 7.5 % profit per day. 200 pips in a day is realisable but very difficult especially when you will be using so low a timeframe and will have to be monitoring so many pairs (since the ATR of most pairs is not up to 200pips a day) and will have to also live through the numerous fake trends that exist on the smaller timeframes and still have to decide which trend to trade on. \in fact, this too is very complex.
I believe I can do that. I can clearly see that it is possible with my indicators. I just have to get to the right time frame - which is a longer time frame than the M3 I start with currently. At the moment I am on break-even. I hope to be positive at least 15 basic pips per day in the next three to four weeks. I know very well and I am quite prepared that it could turn out to be three to four months. I am confident that I will eventually get to be positive every day - even 10 basic pips (5%) positive every day will be fine with me. Eventually is not three to four years in my estimation - at the moment. I hope I am not compelled to change that in the near future. I am not going to spend more time trying to improve the accuracy of the indicators I use. They are accurate enough for 15 basic pips (7.5%) profit per day. I suggest you develop a clearly laid down plan to guide your trading because i assume from your statements that you do not really have a clear rule for trading. You are just moving with the tide in a wrong way. Your dream is realisable but not with the current rules and conditions you have set for yourself.
I know by now that the 5 profitable days on the Demo is not a valid threshold for going back to live trading. If one or two or three of those five consecutive days are straight UP or straight Down days( no intra-day reversals), then that period should not count as the 5 valid days. It should be 5 days all with at least 2 or three intra-day reversals in each of them. I think this dream of yours is too complex to be made into reality.
I feel I will know after 5 profitable days on the Demo whether those days were valid days with at least 2 reversals per day. Then I will go live.
I disagree with a number of items in trading. How can you only risk 2% of your capital in a single trade? You limit your risk by always having a stop loss. I risk 100% of my own capital all the time. We are here for risk. If we were very risk averse, we would go to passive investing.
When I have a trading plan with which I aim to be profitable every day, then I have good indicators. When I enter, I am certainly with the trend most of the time. My stop loss is thus adequate to limit my risk. I trade starting on the M3 chart - at the moment. When I see I am wrong, I get out immediately. An 8 pip (4%) loss is a big loss for me. (then you have to trade a pair that has very tight spread and not so choppy (no clear trend in the timeframe) I only work in basic (200) pips. No matter how big the real values would get, I will only work with the basic 200 pip cycle. I dont understand what you mean by 200pip cycle. It keeps things simple and manageable. I only use 50 leverage - to keep things simple and more or less understandable all the time.
At the moment I start on the M3 time frame. I am thinking of jumping to the M10 tomorrow morning. I think the best time frame for my trading plan may even be the M7, M8 or M9. Why do you thing those timeframes will be best for you? It is impossible for me to know that at the moment because those time frames are not available on the MT5. I am thinking of getting those time frames done for me here on MQL5 - paying for it.
I think your main problem is that you dont really have a plan, and to me, you dont really understand the markets and trading (Sorry though)
Sit down and think your conditions and expectations through properly.
Please go ahead and answer my statements the one after the other.
No, I do not lose all my capital when my stop loss is hit. I lose the number of pips between my entry price and my negative stop loss. It happens to me several times every trading day. It is going to happen a few times tomorrow. For me to lose all my capital in one stop loss hit I had to have set my stop loss at minus 200 basic Pips. I never ever do that. Remember my leverage is never more than 50. So, very generally, two basic pips are more or less one USD or more or less one Euro for me. You have to understand the 200 basic pip aspect. Trading the EuroDollar, at current levels, with leverage of never more than 50 times, means that more or less 200 basic pips equal 100%. 2 pips equal +- I USD or +- 1 Euro, very generally. If you do not understand this point, then we are not singing from the same hymn book. :-)
I use the term Risk to mean trade. I trade 100% of my own capital every time. When I enter and then set a 10 pip Stop Loss, then I have risked an absolute total of 5% of all my capital. Not a penny more and not a penny less - in very, very, very general terms. It is impossible for me to lose more than that 5% in that trade - unless the price moves so fast past my stop loss that my broker only gets me out of the market at say 2 or 3 or 4 pips further away - because of the speed of the price move and the massive volume. This never happens in normal trade.
Remember a fundamental aspect of my trading is that I only look at my screen and all movements in terms of the fact that 200 pips on the EuroDollar screen equal more or less 100% at my never changing 50 times leverage - very generally at current EuroDollar levels. Because it is the EuroDollar at current levels and I never leverage more than 50. That is the beauty/advantage of never leveraging more than 50 when trading the EuroDollar at current levels. If the Euro were to go to 3 Dollars to the Euro, the 200 basic pip equaling 100% at 50 leverage aspect would be untrue.
If you were to do the sums long hand for any trade in the EuroDollar with 50 leverage you will see that, very generally, 2 pips equal +- 1 USD and very generally +- 1 Euro. Forget the Euro. Just work on 1 USD.
I think i now understand what you mean by risking all your capital. But does that mean your positin size is always 100% of your account? (and does that 100% take into consideration your leverage? that is, is that 100% you are talking of the open margin or the Lot size?
and i thing a 200pip range means you have set your screen to be fixed at a 200pip range on the eurodollar. But this alone shows that your dream of the 7.5% isnt possible because the atr of eurodollar now is even below 100pips
You can do this by closing the trade when it does not move the way you had imagined.
Do you think that the few who win, win a lot ?
I mean how many times out of lets say 10 trades do you think is a winning trade ?
How many trades do you think they place on a daily basis ?
I rarely see people talking about this yet those answers can contain key elements.
Very true. Those questions have underlying questions and can go on and on and on.
The answers too can be very broad. I guess it all comes down to the subjectivity of trading.
The answers are not broad.
They are just numbers and are quite narrow actually.
For example: How many positions did you open/close last week ?
This will be a fixed number, not broad, no underlying questions.
And if you are able to answer them correctly, you must be a profitable trader.
I think your main problem is that you dont really have a plan, and to me, you dont really understand the markets and trading (Sorry though)
Sit down and think your conditions and expectations through properly.
Dear Micael, You are a very kind hearted and generous person. You really want to help me. Thank you for showing your kind heart and generosity here on this public forum.
You state: "I think your main problem is that you don´t really have a plan."
I always had a trading plan and I always have a trading plan. It was based on MACD and Stochasitic BUY and SELL signals on the M1 for 24 of the 26 months I have been on the Demo platform. Now I don´t even set up the M1. I think it should be banned. I will never set it up again for any financial instrument. I may soon condemn the M2 to that fate too.
I only trade the EuroDollar.
I keep a daily journal. I refine my trading plan almost every day. This morning was no exception. Here is the shortest version of my plan as I wrote it this morning:
TRADING PLAN BUY ON M3 STOCH X BLUE UP PLUS M3 MACD Signal Line Trend UP REVERSAL.
SELL ON M3 STOCH X GOLD DOWN PLUS M3 MACD Signal Line Trend DOWN REVERSAL.
I do not use the default or standard parameters for the MACD and the Stochastic. I have my own parameters for them as well as my own coloured BUY/SELL levels on the Stoch, not the 20% BUY line or the 80% Sell line.
My trading plan additionally includes the 10 crossing the 50 Exponential Moving Average and Trend Channels on all charts, but, only as background confirmation information. I don´t make BUY and SELL decisions based on them. I look at the following charts and update them all the time when I trade: EuroDollar M3, M4, M5, M6, M10, M12, M15, M20, M30, H1, H2, H3, H4 and the Daily chart. Their thumbnails all fit along the bottom of my screen.
You have to accept that you know very little about my trading.
I do understand only the EuroDollar market and I understand a reasonable amount about trading.
No, I think I have to rephrase that: I don´t understand a great deal about how other traders trade. Nonetheless, I am completely mercenary: I just want to make some money, even if I never come to understand how other traders trade. :-) All I am interested in is refining my trading plan till I can consistently make money with it. And I am getting there.
My signature quality is that I think for myself. The reason for that is a long story. Not for now. Basically, since a 19 year economic research project from 1995 to 2014, I approach all economic activities from first principles. I don´t believe any textbook on anything economic. Including trading.
This is my trading history for this morning: In percentages.
+ 2.56%
- 3.78%
-1.215%
-1.345%
+16.6% Total as at 13.31 my time = +12.82%
I stated before I am now at break-even, more or less.
I make profits every day. I have had 28% profit in one deal. I am not looking for profits here and there. I am looking to make at least 5% per day. I am looking for a profitable trading plan.
I am confident I will get there.
In the past I would almost every day be down by 20% loss 45 minutes after the London open. Now that does not happen any more.
I will reply to the rest of your comments later.
I will write down an example EuroDollar trade to explain the 200 basic pip concept to you.
Thank you for the time you spent on my account. You are a very kind person.
The answers are not broad.
They are just numbers and are quite narrow actually.
For example: How many positions did you open/close last week ?
This will be a fixed number, not broad, no underlying questions.
And if you are able to answer them correctly, you must be a profitable trader.
Okay from trades already taken then i think they arent broad. I was thinking you meant planning how many positions to open a day.
That is when the answers will have been broad because you would have to first decide on your plan. The answers will become narrow when you already have rules governing how many trades to take.
The variations are neglect able.
If you have a winning system then why should you ?
It's not that you jump from for example 10 trades a week to 1000 and back.
I think i now understand what you mean by risking all your capital. But does that mean your positin size is always 100% of your account? (and does that 100% take into consideration your leverage? that is, is that 100% you are talking of the open margin or the Lot size?
and i thing a 200pip range means you have set your screen to be fixed at a 200pip range on the eurodollar. But this alone shows that your dream of the 7.5% isnt possible because the atr of eurodollar now is even below 100pips
One absolute truth I learnt from my participation on this forum over the last few days is that we all trade in our own, very, very, very, very different ways ..... and then we try to converse about it. It is one massive, ginormous mega-misunderstanding-fest. Some-one who actually knows all our very different, very unique trading styles would laugh himself sick seeing us trying to communicate in a meaningful way. We will all at least get high marks for really trying hard to make ourselves understood to other people who all trade completely differently to each one of us.
I don´t think anyone can make any sense out of all of what was stated here over the last few days. On top of that, each trader reading these comments has his or her own unique trading style and will be quite confused. That at least helps to keep the market dynamic.
I think i now understand what you mean by risking all your capital. But does that mean your positin size is always 100% of your account? (and does that 100% take into consideration your leverage? that is, is that 100% you are talking of the open margin or the Lot size?
and i thing a 200pip range means you have set your screen to be fixed at a 200pip range on the eurodollar. But this alone shows that your dream of the 7.5% isnt possible because the atr of eurodollar now is even below 100pips
Michael, I have made 21% today on the EuroDollar - on the Demo platform. OK, so it was going down all day, and it is still going down. And I was trading badly. I should have made double that had I simply followed my trading plan.
I had nine trades - in one day. That is very bad. I should have had one - had I followed my trading plan for Long Moves. See, making 7 1/2 % per day is feasible. 21% today - trading badly. 3 profitable trades and 6 losses. Quite bad, isn´t it? And I had the right plan. I made the mistake of jumping the gun, acting before the actual signals were given - and then the signals never came. Then I had to immediately take the losses and get back in the other way, going down. I got in on the M3 this morning, going down. Now I am still in an active trade. Now I follow it on the M15. It is still going down. It may go down all through the Asian session and all day tomorrow too. We will have to wait and see. There is also a head and shoulders formation at the top. On the Daily chart the Euro has broken down through the long up trend line that started in April. It may signal a major Selling point for the Euro. All of this is, of course, just speculation now. Only the actual signals on the shorter time frames have to be followed. It is wrong to make that SEll assumption as I just did on the Daily Chart. Valid shorter time frame signals will give the first signals about what is going to happen next. We can only act on signals, never on assumptions. I don´t trade the Daily chart. So that break down through the long up trend is just background information for me.
So, Michael, I do know a bit about trading, but, only about my way of trading which is different from all other trading styles. I now believe most private traders are like I am. They all have their own, unique trading styles.
I just like to make 1 thing clear:
there are infinite holy grails in technical analysis
how can i prove it?
1- coca-cola is a holy grail and procedural, anyone with the formula can become mega rich and fast
2- It is possible to discover infinite drinks even better than coca-cola
3- to disprove it, you should not test "all" possibilities, but test infinite possibilities, so its really impossible to disprove it