Sackie's Wild World of FOREX

Hi Sackie,
I'm trying to self teach how to read charts and indicators with the free info available on www.tradingview.com (I noticed you are using same in your above post).
Have you got any good suggestions for learning material, books, websites etc. for a beginner (not trading yet, still just learning).

Cheers

 

AUDUSD and AUDJPY side by side, I'm shorting both presently. been in this for a few hours already.

Reason to enter: Entered short due to approaching retail supply zone where large institutions will offload (higher probability of this, not a certainty. Bearish candle pattern formation was the catalyst. Also volume distribution pattern evident and low volume on peak indicating exhaustion before collapse.
Capital invested: Altogether i need to count it but about $600.
Exit trade condition: No trend line guidance yet. Use approaching demand zone to tighten SL.

 

Hey Erica,
Ill post some stuff when I'm out of active trades.

 

Watching with interest, keep posting

 

Hi @Erica,

There are literally hundreds of ways to approach the markets with with a zillion different strategies. You need to find what resonates with you. Some folks use TA and some use FA and others use both. I am purely a TA trader because I believe most fundamental analysis is already incorporated into the chart. Anyway do some research on youtube and see what resonates with you. For me, this is what resonates with me and works well for me and I've spent most of my time studying these areas (I'm still a newbie).

1. Technical analysis of zones, supply and demand zones. Where retail and wholesale buying and selling takes place by the major banks, institutions etc. We as retail traders cant move nothing. We need to trade on the side of the big boys to stand a chance. They use the news both good and bad as opportunities to accumulate stock then distribute when they have pushed price as high as they can go and offload it to the retail suckers before it crashes. Then they buy again at the bottom at wholesale prices It look me a long time to believe this really happens but now i see it clearly. (key concept).
2. Key candlestick formations for bullish or bearish indications.
3. Key high probability price patterns of (patterns of human emotions) bullish and bearish indications.
4. Concept of regular and hidden divergences.
5. Risk management and position sizing as well as trade management.
6. Trading psychology. (imho this is a killer. It probably takes its biggest toll on most traders, even experienced professional traders). Youtube Trading in the Zone. Audio book. Its fantastic.
7. Some understanding of volume analysis and Wycoff theory.

I'm not into indicators because they al lag and i prefer to learn chart structure and price action. I feel so far this really reveals everything and is not lagging.


Do some research and youtube and google. Everything is out there. See what works for you.

Hope this helps.

 

Hi Erica.

Nearly everything you will need is out there for free. Lots and lots of different strategies, ideas, theories exist in Fx. And all this is reasonable, because the Fx market is not one market, as I have posted earlier. If you download any platform, you will see heaps of different time frames. You could compare two different brokers and their 4H charts could look different, their pivots could be different, same indicator on the same type of chart could be different. This is because there is no "fixed open/close" for fx, each broker does what they see fit for them, some operate on NY time, some on GMT, some on UK etc. Hence three brokers could have entirely different looking 4H charts for the same instrument.

Reason I put this out here is to ask you a simple question - " what do you think Fx can give you that your current investment strategy (be it equities, property, and anything else) can't give you?

I re-iterate - Fx is the Hardest Easy money you can make. The psychology of trading Fx is so harsh, it can literally break you, esp just as you thought you had it down packed!!!!

Now, if you think you would like to go ahead, then it is the same as trading anything - reading people... The price is just someone making a decision to either buy or sell at that price point. Price moves up not because someone is buying, but usually because no one is selling at that price. Vice versa for the move down.

Get any book on technical analysis, and pick a pattern, any pattern. Usually the best pattern for beginners is a pin bar. Lots of them around on any chart you pick.

Next, you got to decide how much time you have up your sleeve to spend looking at a chart at the times the market is active. Being in Australia, trading fx manually is PITA. esp if you are a family person. EU and UK open are when kids are coming back from school, US open is when you are starting to yawn like you haven't slept for weeks!!! I would recomment the 4H chart if you can spend about 4 hours a day. This gives you 1 hour to do your analysis, draw your lines and write your notes. Then you only have to check the charts every 4 hours 3 times in a day to decide if you are going to make a trade or not.

Cheers,
K.

 

Hi Sackie.

Yeah, I didn't think there would have been much traction on an fx thread. It is not an instrument that most ppl understand or know much about. And from my experience, most ppl prefer to put their money towards something they can understand (and fair enough too).

You mentioned you have a mentor, so it would be a fair assumption this person is extremely successful in the fx game. Very rare and hard to find such people and esp ones who are willing to help guide you in person. Not sure how much value I can add since you are already in very good hands.

Cheers,
K.

 

Hi @kermut yeah had a feeling that would be the case before starting the thread. A lot more interest in the stock market than FX, fair enough.
.

Yes he is very successful trading the markets for i think more than 4 decades. Long story short I assisted him with some RE issues and one thing led to another and i ended up asking him if he would mentor me in FX as I have always been passionate about it. He is mentoring me for 6 months (after some convincing) but at the end of the day he says my success or not will totally be dependent on how i deal with two things. Risk management and trading psychology. TBH im finding the risk management side of it fine and the psychological aspect a little more challenging.

Im certain you have a lot of value to add Can i ask, What kind of trader are you? Any general trading philosophies/approaches you have found very useful?

Cheers

 

Wow, thank you @Sackie and @kermut , lots of tips and wisdom in in your posts. I appreciate the time you took to write these out.

Hmm, hard question, I guess I got physically tired of Property Investing to some extent, I threw myself into it whole heartedly for 8 years but became exhausted by the constant renovations/developments/self management along with a full time job and family, so I've just become a really passive investor (holding Ip's/ commercial ip/shares in Super/ shares out of super). I guess it's just that I want to keep my mind occupied, I'm bored, I like a challenge and learning new things, plus I've got a heap of free time.

I've been floating around TradingView for a couple of years trying to absorb info, and I can't seem to shake the interest off (I think I floated around on Property Chat for 4 years before I felt confident enough to dive head first into property investment and development), so I think I'm at the same stage with trading. It might not suit my personality, (and I might not be any good at it ) but i think I'd quite like to give it a try, and I can do it from home on my computer (I'm too old now to get up a ladder getting a sore back/ scratches & bruises) .

 

@Sackie this is all very foreign to me. Happy trading.

 

lets keep this thread classy!

 

At least it is drinkable, not like that VB manure

 

Hi Sackie.

Apologies in advance, I do not know how to quote different parts of your post to post specific answers, so this post might seem a bit wishy washy LOL

Is your mentor teaching you a method/system, or only guiding you on understanding what fx is, and the psychology of it?

He is absolutely correct, pick any method on the internet. It will work, for a certain amount of time and for a certain type of market. But what makes any good strategy fail is the trader, ie psychology. This is one of the main reasons the people I learnt from never had their profit column show $$, only pips. See when you are trading std lot size ($10/pip) seeing a $500 or $1000 might not affect you emotionally. Lets say further down the track, you are trading 10 lots, or even 100lots ($100 to $1000/pip), that same profit will be represented as $5,000 to $10,000. The temptation to take profit pre-maturely when you see $10k in profit is very very high. The resolve to keep it running into profit is very hard. But you what is even harder, when you see a negative $10K in your profit column. It is not for the faint hearted. Hence, building the mindset and your psychological resolve is so impt. More impt than the trading strategy imho.

The only way to build your mind is to trade live, backtest, forward test your method, have a very strong data set on the capacity of your strategy. eg. lets say your method has a r:r of 1:3, that is you only need to be right once out of 3 times to breakeven (33% only). If you have two big losses, you got to have faith. If you win 2 times, then you also got to have faith, that you will lose 4 trades in the future. Never look at the figures on a daily/weekly basis (well actually depends on the type of trader you are). Always monthly, better still quarterly. Treat it as a business. Just because you open the shop today and no customers come in, doesn't mean you don't open tomorrow.

Risk management is also very important. There are some really interesting strategies that apply very complicated size allocation methods. But I believe in keeping it simple. Have a sl, and never feel married to a trade. Most trading experts will tell you cut your losses fast and let your profits run. While I don't subscribe to that theory, it is a very valid point with the caveat - if it fits with your trading method.

I'll outline about my trading method in the next post and a the valuable bits I have been taught over the time.

 

HI @kermut, thanks for your detailed post. Some answers to your questions.

My mentor is teaching me from the ground up. There are 3 main areas I am focusing on. Briefly, 1. a trading methodology, 2, Risk management and 3, Trading psychology.

With regards to the methodology, its based 100% on price action, specifically, identifying the footprints if the institutional movers, buying in their demand zones and shorting in their supply zones. No indicators used whatsoever. I have been trading this way now for over a month and it is quite remarkable what you can see when you look at a chart in a certain light. Its completely counter intuitive to what most retail traders do which is why most lose money.

With regards to the risk parameters, its based on an asymmetrical reward to risk set up. My average RR is 1 to 7 but as much as 1 to 15 on many trades. No one particular trade will stress my balance as I'm generally trading less then 0.8% of my total balance. I have come to realize that risk management is the most important component, probably trumping the psychological aspects in many ways. If you can manage the risk efficiently and consistently in a non emotional manner, your 90% there.

Its an interesting journey thus far

 

Looking forward to it mate.

 

sackie, i noticed that you always spotted macd divergences, do you have any tools/algorithm to spot it ? or just have to keep looking for it patiently every interval of time (you are using hourly chart).

 

I don't use indicators as a method to enter my trades. All my trades are taken purely based on price action. I will say though that sometimes I do put up an RSI to see if there are any divergences when my price action dictates to take a position, just for extra confluence. But its not necessary as I only care about taking positions in supply and demand zones. Most, if not all indicators will greatly lag my entries, many to the point where its time to reverse.

With regards to charts, i mostly use the daily, 4h and 1h, always looking for positions in the bias of the greater timeframe.

 

Now, the first thing I told every newbie that came to me a long long time ago was this:

"know thyself" - I didn't make this up, but I do remember reading it somewhere in relation to something else. This is the most important bit I can say, can't stress the importance of it. If you are a trigger happy person, then a 4h trading method isn't going to work for you. If you are someone who can't handle fast paced decision making, then trading the 1M chart won't work for you. If you are someone who can't sleep at night if there is a trade running, then a longer term trade isn't going to work for you. You got to work out what you can handle, and then start to develop/learn a method of trading from there, and build your psychology around this. Imaging how much of an uphill psychological battle it will be for a trigger happy person to sit and wait for a 4hour candle to finish before they can start to think about it!!! it would drive them crazy and most likely loosing all their money because they would not be able to follow the rules.

Due to personality and family time commitments, I could never handle trading the longer time frames. Hence, I have always traded very short term. In and out. Most of the time, I have closed my trades before going to sleep AEST.

A few snipets I feel that are very useful( none of my own making, so no credit on my end) -

"it is far better to be wishing you were in a trade, rather than wishing you weren't"

"it is impossible to spot a trend until it is a trend. By the time this happens, you are usually 1 third of the way into the wave. It is just as impossible to tell when the trend has finished. By the time you realize, another 1/3 of the wave is finished. So you only have 1/3 of the entire wave to make a trade. focus on that"

"big money buys on a down bar and sells on an up bar"

Cheers,
K.

 

Aha. very very good. Give me a chart with just volume indicator, and that is all I need to make a trade. He is teaching you what I was taught as a fade. That is excellent. You are in good hands then. Most systems loose their edge over time, as the market is quite efficient and will look to close any edge a system has. But the fade is something that will always work...

May I ask what time frame do you look at to study this price action, and do you look at another time frame for entry?

Cheers,
K.

 

Hi there.
If I may. You can make an indicator say anything you want, just have to plug in different parameters for it. All indicators are based on what price is and what price was over your input time interval. However, this can also be seen on the charts.

Even though I use stochastic, I more rely on volume. In my opinion though, the maths behind the the stochastic indicator is the most reliable and close to market action. But then again, I am biased. I use the stochastic more for when not to enter the trade, when volume is telling me to enter. But I would still encourage to use no indicators if you are starting out. Only volume.

Cheers,
K.