At the moment, I'm basically using demo accounts to learn about manual trading and to really get an idea for how the market moves. I'm looking to move to a real (but very small) account soon as I feel putting real money into the market makes you obviously think a lot different to if you are demo trading.
I'm not very happy with my results so far, and I think this is mostly due not finding a system that really works for me. I'm using mostly weekly and daily pivot point lines on a MTF analysis and trying to spot opportunities using these.
I don't believe too strongly in the plethora of indicators which are available as these are all lagging indicators and only mathematically show you what has happened up until the point you are looking at. Really, the value of a 50 ema vs 25 ema in my opinion doesn't tell you much more than you can actually surmise looking at the chart over the last 50 periods with your own eyes. Which direction is the trend? Is it speeding up or slowing down? (Or converging or diverging on a MACD?). That's it really. Typically I've found that the 25 ema diverges furthest from the 50 as the market races towards a level of support or resistance, then sits at this level waiting for the 50 to 'catch up' before either breaking, faking or reversing at very often a PP line. I'm also guessing that those who have tried automating any sort of system based on MA lines will undoubtedly have found this out quite severely as I have.
So really, what I'm looking for is input from the successful traders out there, and maybe to help other traders who are in the same position as I am. Here is the plan / position I am in at the moment with my trading.
1) I need to find the trade 'time-frame' which best suits me. I personally much rather have trades run for max of an hour. I like to see results straight away and I believe that the longer a trade runs for, the more variables and chaos is added to the system, meaning that your original reason for entering a trade are minimised as time progresses. In saying this, shorter timeframe trades are 'more expensive' as the movement compared to spread is lower, meaning that beating the broker becomes a larger part of the trade. I'm still to find a happy medium.
2) Continue investigating ways of judging isolated currencies. The reason the EURJPY pair is moving up is because the EUR economy has a higher demand for their currency, or the future looks rosier than the JPY economy. At the same time though, both economies may be much weaker than every other FX traded economy/currency, meaning that the probability of trading any other currency against the JPY would be a better option as there should be a larger divergence in the two currencies.
3) Continue to utilize multi-time-frame analysis. MTFA sure helps to paint a 3D picture of how a pair is behaving much better than in one time-frame. I'm not sure if it would even be possible for a manual trader to be successful long-term without MTFA.
4) Find a much better Entry and Exit strategy. At the moment, I've tried only a few manual strategies, but am mixing them up and not performing them in any proper manner. I feel I really need to spend more time focusing on one strategy at a time (obviously with the view of improving and modifying each slowly as I go) and finding the one that really works for me. I've found pivots to be mildly successful, and the small amount of Elliott Wave trading I have attempted has been dismal, more of a negatively loaded coin toss really.
5) Find the right time to trade. At the moment, I am focusing on the start of the London session due to the increased volatility, and therefore better value entries compared to spread. This works out well for me as it is around the 5-6pm mark here in Australia. It means that after work I can spend a few hours working at the best time of the FX day. The issue is, I'm assuming that this is a good thing. Perhaps the volatility also makes the markets more erratic, maybe between the London and NY opening the markets perform in a more volatile but 'better behaved' manner. I'd really like to hear peoples ideas on this with respect to their trading system.
6) Learn to actively deal with the emotions of this beast! It appears that 3 of my 4 trades I've entered today are all going to come back winners and that fills me with hope that I'm actually getting somewhere in this Forex game. In an hours time, I have lost two of these and I'm feeling terrible about losing another 2% on my 'imaginary' account. I really need to distance myself from the task at hand and stop letting it affect my emotions. This especially goes for the times when I start 'searching' for trades, as opposed to judging the possibilities which are currently apparent within the confines of my current trading system.
7) I need to continue to focus solely on each trade as 1% risk to my account. I still don't understand this fascination with pips! Unless you are entering into every trade with a fixed lot size, which goes against EVERY money management guideline (and logic for that matter), then pips are totally irrelevant. Really, it's possible (though an extreme example) to be up 50,000 pips at the end of a month, but still blow your account. There should be a new convention where people discuss the units of risk they have returned on their account, or what is commonly called in business an ROI, Return On Investment. For all intents, if you go into the market with your stop-loss X distance away from the market, and you hit your take-profit which is X/3 distance from entry then you're return should be discussed as 0.33. Your investment is X. Your return is X/3. Who cares how far the market moved? You risked 3 times more than you gained. In this scenario, it doesn't matter if the distance X was 1% of your account or 50%. It is a figure that takes into account your RISK, which is the most important factor you should be focusing on.
I have developed a few scripts which allow me to easily place orders based on the lines I put on the current chart I am working on. These automatically calculate lot size based on a set risk when placing an order. I've found one of the hardest things about manual trading is proper lot size calculations. By the time you've made the calculation, the opportunity or entry you where calculation has move and your calculations are out the window. If anyone is interested I can make these available. They've helped me quite considerably.
My long term target is 1% per day / 20% per month. I've read and seen other's doing more than this and I believe it is just finding the right combination of the above factors which will bring this to fruition. Simply put, this is the same as having a 60% success rate and placing 5 trades a day which (without taking the spread into consideration) is only 10% higher success rate than placing random 1:1 trades. At 60% success, 5 trades per day, compounded weekly, this is the equivalent yearly return of about 1200%.
Would like to hear others thoughts regarding the above, especially those who might not normally get involved in discussion on myfxbook as it's my first time and I feel that discussing your ideas with people helps a lot! (In Australia, you mention Forex and people think you're talking about the beer 'XXXX')
A mans riches can be judged by the decisions he is available to make.