Trading winning in today forex marke_8 pdf

FIGURE 15.2 Biofeedback Form − − 5 − 4 − 3 − 2 − 1012345 Session Date Session Time Beginning of Session End of Session Comment Session Date Session Time Beginning of Session End of Session Comment Session Date Session Time Beginning of Session End of Session Comment Session Date Session Time Beginning of Session End of Session Comment Session Date Session Time Beginning of Session End of Session Comment Biofeedback Form 197 Chapter 15_[191-210].qxd 2/24/10 10:13 PM Page 197 THE COMPLETE FOREX TRADER 198 My primary trading approach is Goodman Wave Theory and Market Environments. My primary time is spent projecting waves and waiting to see if they develop as I anticipated. I basically arrange the charts from least promising to most promising, in accordance with the snowflake idea. I have a number of Trade Setup templates that I am looking for to find a candidate; the closer I get to seeing one of them, the more promising the chart is for me. Your trading method will no doubt differ from mine. But the idea should be the same. Gradually zero in from interesting charts to promising charts to candidate charts. The goal is to Find A Trade (FAT). Presession Planning Sit down; gather your materials. Open your trading platform. Do the Biofeedback Form. I draw green Session Lines on all my charts right away, denoting when I started that session. This is all about finding a groove. See Figure 15.4. www.tradeviewforex.com and www.metaquotes.com In this example the Beginning Session Lines are thick vertical lines; the Ending Session Lines are thin verticals. I actually use green and red for session Presession Mission-Critical Information Fill in Biofeedback Form Enter Green Session Lines Note Pending News and Announcements Review Continuation Charts from Previous Session Session Review all Charts on Trend Time Frame Review all Charts on Watch Time Frame Candidates - FAT Form Chart Formation Indicator Battery Confirming Tools Complementary Tools Money Management Parameters Reality Check Go to Entry Time-Frame Chart Entry Signal Place Order, S/L and T/P Monitor on Watch Time Frame Postsession Annotate Continuation Charts Fill in 30 Campaign Worksheet Annotate Log Charts and Attach to Campaign Worksheet Fill in Biofeedback Form Enter Red Session Lines TRADE HEURISTIC WORKSHEET AND CHECKLIST FIGURE 15.3 Trade Heuristic Worksheet Chapter 15_[191-210].qxd 2/24/10 10:13 PM Page 198 The Plan! The Plan! lines with the same thickness. These lines help you quickly see what has tran- spired since you last traded. Finally, note any pending news, announcements, or economic indicator statistics that will come out while you are trading—for the pairs you have in your Watch, Candidates, and Open list. You may get this information from any of the calendars I mention in Chapter 13, “The FOREX Marketplace.” My favorites are the Global-View calendar, www.global-view.com, and the Forex Economic Calendar, www.forexeconomiccalendar.com. Scan a few charts as a finger exercise. Now review your continuation charts and see what the markets have done since you were away—the areas from the last red Session Lines to the green one you just entered. Did you miss any important moves? What hasn’t changed and what has changed? All of this, of course, is asked based on your trading method. Session Planning Identify Trade Candidates The Hopper Watch Candidates 199 FIGURE 15.4 Session Lines Source: TradeviewForex www.tradeviewforex.com and www.metaquotes.net Chapter 15_[191-210].qxd 2/24/10 10:13 PM Page 199 THE COMPLETE FOREX TRADER 200 I keep charts in three NinjaTrader Workspaces or MetaTrader Profiles. Hopper charts are typically 1-Day charts, which look interesting. I project price points for them into the future and wait to see if those points get hit or approached. Watch charts are 1-Hour charts. These are pairs, which for one reason or the other, have looked good enough to move to a higher status. My normal chart view is 1-Hour. When and if a Watch chart completes a Goodman template, I move it to the 15-Minute Candidate chart, periodically check the market against my FAT form, and wait for a specific buy or sell signal. Determine Money Management Parameters: Stop-Loss (S/L) and Take-Profit (T/P). While I am waiting for my candidates to generate a buy or sell signal I make a quick risk-reward calculation. Where does my stop go; my take-profit? If they are not at least 3:1 in favor of take-profit, the trade is going to need to be excep- tionally good for me to take it, even if I get an entry signal. Conversely, if the ratio is very high (5:1 or better) I might take the trade even if it has a few warts. Reality Check Close your eyes; meditate on something else a minute or two. Then look at the chart one last time. Did you miss something? Did you see something that is not there? Wishful thinking involved? Enter the Trade I use the Dagger entry principle to enter markets. See Chapter 18, “Improving Your Trading Skills,” for details. Once my trade is confirmed (or often with the buy or sell order) I also enter a stop-loss (S/L) and take-profit (T/P). Monitor the Trade What I am mostly looking for here is a price point where I can raise my S/L to break even or close. Then, I sit on my hands. Once a stop has been placed I never move it back down or back up. Instead of watching over the trade—I made my decision and now I must live with it—I spend my time looking for more candidate trades. Exit the Trade Either my Stop-Loss (S/L) or Take-Profit (T/P) is elected. TIP: Spend you time finding solid trade candidates. Once you enter the trade place your S/L and T/P and sit on your hands. If your S/L is not hit you Chapter 15_[191-210].qxd 2/24/10 10:13 PM Page 200 The Plan! The Plan! are simply waiting for prices to move in your direction enough to move the stop-loss to breakeven. A successful trade should be thought of as two steps, breaking even and then making money. In between there is not much to do but wait. Use your time to explore other candidates. Worksheet and Log Chart Once the trade is over, I do a Log Chart and enter the details into my 30 Trade Campaign worksheet and attach the log chart showing the trade and perhaps a note to refresh my memory when I do a performance review. See Figure 15.5. Needless to say, I have glossed over many details. For example, using a trailing stop and taking a profit early if I get a windfall. When I enter a trade I draw an imaginary line from my entry to where I think my T/P may be hit esti- mating how long the trade will take. If at any time prices greatly move away from the line on the direction of my T/P, I will take a windfall profit. See Figure 15.6. The area roughly between the two lines is the windfall area. I am more likely to take a windfall early in a trade (50 percent of my expected gain in 10 percent of the time) rather than late in a trade (80 percent of my expected gain in 60 percent of the time). 201 FIGURE 15.5 Log Chart Source: TradeviewForex www.tradeviewforex.com and www.metaquotes.net Chapter 15_[191-210].qxd 2/24/10 10:13 PM Page 201 THE COMPLETE FOREX TRADER 202 Postsession Planning At the end of the trading session, I place vertical red Session Lines on all my Hopper, Watch, and Candidate charts. When I come back next time, I know exactly where I left. In conjunction with the Continuation charts, I can find my groove in five minutes. If I do not feel comfortable after 30 minutes I may well just pass the session. Last, I annotate my Continuation charts and once more fill in the Biofeedback chart. The session is over. I confess I take my work home with me, but that is a personal decision to make for each trader. 30 Trade Campaign Worksheet This is where you log your trades and supplemental material. Log whatever information is available, as soon as it is available. This, obviously, is a continu- ously updated document. But at the end of every 10 trades you will use it for diagnostics, self-evaluation. I like to print hard copies and attach charts showing each of my trades. I call it a Log Chart. You may want to add a few brief annotations to that chart. Take Profit Buy FIGURE 15.6 Windfall Profit Chapter 15_[191-210].qxd 2/24/10 10:13 PM Page 202 The Plan! The Plan! Those might include your entry and exit, where you raised or lowered stops (if you did), and perhaps a brief text note to help you recall the trade days or weeks later. Figure 15.7 is my 30 Trade Worksheet. It is downloadable in the Getting Started section of www.goodmanworks.com. Continuation Charts This is a method I developed for my own trading—to bridge the gap between the continuous process market and discrete trading sessions. It is also your loop from the end of one session to the beginning of the next. It will allow you to smoothly catch up on markets where you left off. Before I used it, I found I spent 15 to 30 minutes of each new session just catching up and getting back in the groove. See Figure 15.8 for an example of such a chart. Again, how you annotate it is going to be based on your own trading method and tools you use to trade. Mine had tended to get a bit complex. Start with just some basic 203 Lot Size A1 Date Pair In S/L T/P Out P/L Pips P/L $$$ TemplatePosition A2 Comment A3 Comment A4 Comment A5 Comment A6 Comment A7 Comment A8 Comment A9 Comment A10 Comment Evaluation Comment Compaign # 30 TRADE CAMPAIGN WORKSHEET FIGURE 15.7 30 Trade Campaign Worksheet Chapter 15_[191-210].qxd 2/24/10 10:13 PM Page 203 THE COMPLETE FOREX TRADER 204 annotations to jog your memory. You may wish to add the Log information at the end of each trade to the continuation chart. I have also developed an extensive syntax for my annotations, based on the Goodman trading methods. Yours do not need to be so complete, but be con- sistent about their use. See Figure 15.9. The primary idea is to have a set of symbols to annotate a chart quickly and consistently. TIP: If you trade small time-frame charts—anything less than 1-hour— and you are away for more than a few hours between sessions, too much price activity will have disappeared when you next trade. If so, either compress your continuation chart, making the space between bars smaller, or go to the next higher time frame for your continuation chart. SnagIt The scheme here is to annotate the markets you are following at the end of each session. When you next trade, referring to those visual notes will, if done prop- erly, get you back in the trading groove quickly and efficiently. FIGURE 15.8 A Continuation Chart Source: TradeviewForex www.tradeviewforex.com and www.metaquotes.net Chapter 15_[191-210].qxd 2/24/10 10:13 PM Page 204 The Plan! The Plan! 205 Matrices are colored Black, Red, Green, and Purple – from largest to smallest. TE = 50% Point, Total Equilibrium ATE = Adjusted Total Equilibrium on Carryovers O = Over measurement, U = Under measurement. Brackets [ ] R = Return (Swing or Point) DI = Double Intersection TI = Triple Intersection X = Goodman Knot, XX = Double Knot B = Breakaway 3C = 3–C Rule SK – Stick TTT – Spread Triples Matrix by Swings P1 = Primary Swing One P1A, P1B, P1C S1 = Secondary Swing S1A, S1B, S1C P2 = Primary Swing Two P2A, P2B, P2C Matrix by Points or Swings - from largest to smallest 1-2-3-(4), A-B-C-(D), W-X-Y-(Z) Points of a Swing P1 = Beginning Point P2 = 50% Point / TE P3 = End Point P4 = Primary Measured Move Point (‘P1’ is a Primary Swing) P5 = Secondary Measured Move Point (‘P1’ is a Secondary Swing) FIGURE 15.9 The Goodman Syntax for GSCS I use a tool from TechSmith, www.techsmith.com, named SnagIt for my annotations. It is somewhat feature-rich but you can learn the basics in one or two hours and be up-to-speed. If you prefer, you can print the charts and anno- tate them by hand. In fact, even though I annotate with SnagIt I still print my charts and refer to them between sessions. Sometimes you will see something important between sessions because your mind is fresher, so you do not miss the forest for the trees. See Figure 15.10. Performance Diagnostics For this part of the Plan you can refer to the 30 Trade Campaign Worksheet and Log charts. Do not try to draw grandiose conclusions from the results of a single trade—good or bad. The human mind loves to generalize, even if it has a small sample of data. Avoid the temptation. With the Campaign Trade Method Chapter 15_[191-210].qxd 2/24/10 10:13 PM Page 205 THE COMPLETE FOREX TRADER 206 (CTM) 30 Trade idea, you analyze your performance every 10 trades. At the end of 30 trades, you dig deep. The CTM is designed to break your grubstake into 30 trades, all of which can be losers, though I sincerely hope that is not the case! I have mentored quite a few traders over the years. I know of many who threw in the towel too early, without bothering to look for areas where they could improve performance. Figure 15.11 are the questions you should ask and the items to look for after every 10 trades and again, in more detail, after a full campaign of 30 trades. TIP: Small, evolutionary adjustments may make a big difference to the bottom line. Record Keeping Beyond the 30 Trade Campaign Worksheet there are a number of records you should keep. Please remember your Uncle Sam or Uncle Vladimir or Uncle Chang has opted in as your partner in the event of your success. While your broker will send you everything you need for taxes, you should from time to time print the account summary from your trading platform. Records of deposits and withdrawals should also be made into hard copies. Ditto all account forms and correspondence with your broker. When in doubt—print it. Expenses incurred as a result of trading may be tax deductible. But please do not take my word for it; ask your accountant. In any case, keep copies of your expenses right down to the paper clips that keep your log charts attached to your campaign worksheet! FIGURE 15.10 SnagIt Courtesy of TechSmith, Inc. www.techsmith.com Chapter 15_[191-210].qxd 2/24/10 10:13 PM Page 206 [...]... has set in for an hour or two • Trading exotic and obscure pairs: Were you tempted to trade exotic pairs? The liquidity in these markets is poor and fills on orders can be dreadful • Pyramiding: Did you add to a losing position in hopes of breaking even on a bounce? This is a common new trader error and can result in a large loss Pyramiding a winning trade is risky business; pyramiding a losing trade... Most traders do well in certain ME clusters, worse in others Did you have one or two large losses or large winners? Can you see a way to change your trading method or money management to eliminate the former, find more of the latter? Did you do well in certain pairs; poorly in certain pairs? If these fail to achieve results, you may need to consider saying “uncle” to FOREX trading Never trade with... your trading platform; the demarcation is by time frame A Continuation chart is one you make at the end of each trading session to assist you in getting up to speed quickly for the next session A Log chart is made after each completed trade to attach to your campaign worksheet You may combine the continuation and log charts into a single chart to simplify things All the forms in this chapter are in the... money that drops to the bottom line at the end of the year Stop-Loss Orders—Physical or Mental? As indicated earlier you can either set stops using my campaign method or you can set them in accordance with your trading method Some trading methods generate stop-loss prices, some do not In the later instance I continue to advise that you pass a trade if the stop-loss your trading method requires is excessive... amounts for stops and taking profits Once you have some experience trading, you may wish to discontinue this approach or meld it with a method of stop-loss and take-profits inherent in your trading method There are three stop-loss methods: (1) The System Stop where and when a trading system also generates stops internally; (2) a Mechanical Stop; and (3) the Fixed Dollar Stop In Figure 16.1 the A is... Stop is crossing the 13-Unit Moving Average line to the upside The System Stop is based on the GSCS double Intersection failing The Fixed Dollar Stop is based on a 3:1 S/L to T/P ratio Calculating CTM Profit and Loss Step One What is your trading capital or grubstake? If you are in the midsection of the bell curve, it is probably between $1,000 and $10,000 You can trade with less (in a mini- or micro-account),... were not? How did the winning trades differ from the losing trades? What can you do to eliminate the worst losing trade on the next 10 trades? Protecting Profits No trader likes to see a tidy profit turn back into a break-even trade What to do? The most common technique is called a trailing stop This means that in some manner you raise (or lower) your stop-loss as the trade moves in your favor You may... the game It is about thinking in terms of capital preservation and waiting for good trades to present themselves My mentor, Charles B Goodman, said it over and over: “You’ll make most of your money sitting on your hands If you lose your grubstake, the game is over.” 211 THE COMPLETE FOREX TRADER 212 Think of making a trade in two steps: Step 1 Get to a point where you can bring your stop to breakeven... trading as a scalper, do not take a trade requiring a 75-pip stop-loss When in doubt, stay out; do not let your trading method overrule common sense TIP: Once entered, do not pull your stop-loss order or move it against the direction of your trade Live with it, good, bad, or ugly Manipulating stoplosses is for the expert, and even for experts, it is a dicey business A trade is a process and tinkering... smart thing to do is to trade less—or not at all until you can sort things out rationally Here is a list of common errors new traders make Peruse your 30 trades using this list You may find one or two or three errors—all easily correctable— that will turn things around for you • Trading without a stop-loss order: Neglecting to set a stop-loss order, placed in the market and not a mental stop, is asking . about finding a groove. See Figure 15.4. www.tradeviewforex.com and www.metaquotes.com In this example the Beginning Session Lines are thick vertical lines; the Ending Session Lines are thin verticals Primary Swing Two P2A, P2B, P2C Matrix by Points or Swings - from largest to smallest 1-2-3-(4), A-B-C-(D), W-X-Y-(Z) Points of a Swing P1 = Beginning Point P2 = 50% Point / TE P3 = End Point P4. minutes of each new session just catching up and getting back in the groove. See Figure 15 .8 for an example of such a chart. Again, how you annotate it is going to be based on your own trading