Trading Using Support and Resistance
I have created a blog about how to trade forex using support and resistance along with using price action at support and resistance.
Click Here Trading Using Support and Resistance to visit my support and resistance trading blog
I will also add new pages here containing useful information to help you trade using support and resistance.
I trade support and resistance using daily charts
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Why trade support and resistance on the daily timeframeThere’s nothing inherently wrong in trading short time frames – I’m talking anything less than 1 hour in my book – but it requires skills that many newbies lack, especially in the areas of Money Management and the Psychology of trading. If you don’t know how to control your risk, coupled with the tendency to panic as soon as trade goes 20 or 30-pips into the red, what hope have you got?
It took me quite a while to edge my way up to the Daily charts, despite all the good advice I picked up in James16’s thread, and I still have a tendency to drop down to see what’s going on, but the difference is I don’t try and PLAY these short-term charts. I simply use them as entry points and possible stop positions for running trades.
If you can make the move, and working in a nano account helps, there are several things that soon become apparent. The concept of trading with the trend suddenly becomes easier to understand. Watching any of the Daily charts over the last few months, it should be apparent that, in virtually every instance, trades against the main trend would have carried greater risk than with it.
There is a valid argument that every time frame has its own trend, and, yes, you can make money trading any time frame if:
You know what you’re doing
You have solid Money Management rules, and
Your mental approach to trading is completely neutral
However, when I was new to trading I had none of these things and paid the price. Focusing on short-term charts stops you seeing the big picture, and keeps you in the vicious circle of trying to make small profitable trades (10 pips here – 10 pips there). 10 pips are fine if you’re trading big money, it might represent several thousand dollars in one trade. Making 10 pips on a small account causes us to take risks with leverage, in a vain attempt to grow our accounts faster, which is a bad thing.
Short-term charts also cause you to worry too much about every item of news that is listed on the Forum’s calendar, and this fear can take you out of good trades, or get you into gambling mode as you try and trade the news. Trading the news is a skill that is beyond me, relying as it does on extensive research in order to estimate the possible outcomes of each announcement. Anyway, why bother to try and gain a few pips in a few minutes when you can try for 100s on a Daily trend?
As you move up the time-scale, fewer of these news releases have an impact on your trades. The fundamental factors driving currency movements don’t alter, but these factors need to be borne in mind at certain times (Interest Rates, GDP, NFP etc), in case the figures cause a more profound alteration in a particular pair's relationship. However, I only use these announcements as a warning to consider where, and when, to set my orders, or maybe tighten stops on open trades.
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Trading Daily ChartsOne of the hardest parts of trading the daily, or weekly, charts is having the patience to wait for a trade opportunity to develop. When many of us were introduced to FX it was via the shorter time-frames (5/15 minute charts).
Because of the constant activity one sees in these charts, it is easy to fall into the trap of constantly chasing trades. You see price move up, you try a long trade; price goes back a few pips so you panic, close it out and try a short. You find yourself unable to walk away from the computer, just in case another opportunity appears. Alternatively, you have a trade running and you’re ‘hoping’ it keeps going your way, or you’re wondering if things are going to get worse. It all becomes hypnotic.
Trading long-term charts removes some of these immediate worries. Not all of them I must admit, but at least you get time to go and make a cup of coffee and a sandwich now and again! Therefore, you learn the art of patience. By scrolling out you get to see major areas of Support and Resistance much more easily. Many of the other standard tools (Fibonacci, trend lines etc) seem, to me, easier to apply and read.
The need to learn the correct Money Management required, coping with the larger stop-loss positions you will require on these charts, would also cause you to step back and THINK about what you expect from any trade.
If you find it hard, at first, to move to a daily chart for all your trading, at least learn to check them before placing a trade. Try moving up to 1-hour charts for a start; assess the current trend, as shown on the daily, and look for areas where a trade has a chance of responding to the dominant trend.
Let me show you briefly what I mean. I’ll develop these ideas in more depth later on, but for now I’ll keep it simple. This isn’t meant to be offensive, just a quick way of getting you to look at these charts in a simple way. Trading, in any time-frame, is hard; by keeping things as simple as you can you allow yourself the opportunity to avoid panic trading.
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Understanding the larger timeframesand the flow of the markets
The market for any currency pair is in a perpetual state of motion. At any given time it's doing one of three things; trending up - trending down - caught in a range (some call this sideways movement). This depends, to a great extent on the time-frame you use. On a daily chart, there can still be 100 pips movement while a pair is 'ranging', therefore, if you trade short-term charts you're always dealing with trends-within-trends.
Whatever your time-frame it's difficult, as a newbie, to know whether a trend is over, or just retracing for a while. Typically I would see price moving up, worry that I was going to miss out, place a Market Order and then panic if price started retracing a few pips, and close either for a loss, or for a few pips profit. Generally speaking, I would then have to decide whether to go back in again if price returned to its original direction, or stay out. Every trade paid the penalty of the spread cost. If we accept the fact that fundamentals drive the market, I understand now that the big boys aren't, as a rule, sitting there watching your typical MA cross-over system trying to squeeze 5 - 10 pips out of every movement of a currency. They are looking for bigger things that affect their ability to hedge commercial transactions, for example. I know there are professional traders who are looking to make vast sums of money from relatively small movements in the market, but, for the likes of you and I, we can't create a worthwhile % of profit per trade, taking 5 - 10 pip movements, without using dangerously high levels of True Leverage in our trades.
As I moved to longer time-frames, and decided to only trade with the long-term trend, I found I could see the bigger picture much more easily. If the trend was up, but price was retracing, I could look and see if there were possible Support areas where price might stall during the retracement, I would then consider placing a Buy Limit order in that area, or, alternatively, if I was unsure of the amount of retracement, where I could place a Buy Stop above any Resistance points should price return to its upward trend. If I had placed a Buy Stop, and price didn't resume the original trend, no trade takes place (ie I'm not Long in a falling market). If I'd placed a Buy Limit, and price kept falling, my stop loss would take me out of a losing trade, and I would wait until price stalled and then reconsider my next course of action. As I generally use Buy or Sell Stops more than Limit orders, as a means of entering trades, I'm kept out of a higher % of losing trades. It does mean, of course, that I don't win pips during those retracements, but I've learnt to ignore lost pips, and that's all part of the improvement in the mental side of my trading. If I'm going to be a trend trader, and I'm going to focus on daily charts, as a minimum, I can't go around thinking I could have picked up 100 pips on the 4 hour chart if only I'd played that retracement all the way down.
We all worry that we're not going to claim every pip from every trade we enter. That's another thing I've cast aside. If I can make 70 -80% of a particular trend's movement, I think I've done very well. In time I hope to have the skills to extract a little more, but for now I'm content with what I'm doing.
So the short answer to your question is TIME. I have time to think about my trades; where to enter and where to exit. I have a plan, and, whilst I'm not fully-rounded as a trader, I know that the skills I need to finish my development will only enhance what I do now. |
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The best entries and exits using support and resistanceIf you're going to be a trend trader then the first thing is to determine where you get in. For me I look for retracements to S/R. These you'll have to determine for yourself but it isn't hard to work out. Just look for major areas and try not to end up with a chart covered in horizontal lines and trend lines (which I don't care for much, myself).
Learn to take the middle chunk of a range between S & R for now, this will help stop you trying to pick every top and bottom. Once you have a handle on S/R sit back and wait for whatever signal type you normally trade by and trade only when you are as confident as you can be that the retracement is over. It takes a while to get a feel for price action around these points but after a while you'll develop a feel for the rhythm of the bars.
Of course, it will mean your stops will increase as you look for decent S/R areas to hide your stops behind and this is where you're money management skills will improve as well. So, your normal position size will decrease. But if you're keeping to a sensible risk profile (1-2%) then the fact that you aren't getting stopped out so often should balance this all out.
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How to calculate your exitsThe simple answer would be that if you use PA on entries, why not use it for exits. Easier said than done, but it's a starting point.
I'm focusing on Support and Resistance levels in my day to day trading and keep these levels in mind for profit areas. Fine if a pair is below an historical high point and you're long. Where this can't help is where a pair is at historical extremes. Then I tend to use Fib Expansions based on the TF you prefer. For me that's 4hr charts minimum.
On the chart below if you played the pullback to the upper green line there was a previous high you could have used, but for the sake of argument I've drawn the Fib Exp to set a target. In hindsight you could also have used the value of the previous range (approx 150 pips) to set as potential TP.
Just some thoughts. Generally if I have a set target, I tend to bring Trailing Stops in to play if we're close but showing signs of maybe not making it. Again it's a gut feeling, sometimes it's right, sometimes it's wrong, but overall it keeps me on the right side. Others who have stricter rules may argue with me, but I do what's right for me.
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Indicators verses Support and ResistanceGet rid of indicators asap
As a newbie, I believed that all I had to do was to learn to recognise the RIGHT signal, at the RIGHT time. Not only that, but if I could get 3 or 4 of these indicators' signals ALL lining up at the RIGHT time, I would have cracked it. It seemed so easy. I'd stay out of red news days, not trade Mondays or Fridays, and wait until the London Session opened. I studied all the Trading Systems threads, trying this one, trying that one, never quite getting to grips with any of them. Maybe if I'd stuck with one I might have done better, but I just couldn't find a method that suited me. Obviously the guys that designed them knew how they worked, but after a while I got tired of endless posts trying to modify the methods, or adding another indicator. All in an effort to prevent losing trades. I now know that this is not possible.
Why do I call it the Indicator Trap? Simple really. Indicators, for most newbies, are a crutch that you end up thinking you need to make a trading decision. The rules for entry can be so complex that you spend your time watching the indicators, and forget about watching the markets, as reflected in your charts. I also believe, rightly or wrongly, that they were designed to work in a completely different market place - Equity Trading. Having had an interest in stocks and shares in a previous life, I understood that decisions on buying, or selling, shares were premised on something different to FX. There is a longer-term view taken when considering buying shares, because apart from capital growth in the shares themselves, there was the additional benefit of dividend income. Buy and hold is not an attitude you meet very often in your early introduction to FX trading, and certainly has no relevance to a 5-min chart on GBP/USD, not in my mind anyway.
So there we all are, applying Slow Stochastics to fast moving FX charts, where, on any given day, a currency pair can move 100 pips or more. No wonder some of these indicators are always behind the action. The next thing we do is alter the settings, taking them down to even shorter timescales, expecting them to still perform the way the author designed, and optimised, them to work. I've had Stochs down to 5,5,3 just because it seemed to match what I wanted to see on the chart. If I still couldn't make the right call, I'd apply RSI, and adjust its settings until it seemed to match what I needed to see, or maybe CCI, or ADX, something, anything that would give me that magic signal.
Even the simplest indicator, the Moving Average (MA), is not the answer. Not in the way we think it is when we first apply it to a chart. I've tried all combinations of MA cross systems, and all have a weakness that I couldn't quite come to terms with. I didn't know why at the time, even though I knew I was dealing with something that dealt in averages.
The warning bells still weren't ringing. The answer is that these MAs lag. Obvious now, but, believe it or not, that simple fact didn't register. Too often, by the time I'd hit the order button, price was on a different path, adding a new position to its sequence of averages, and generally that path was against my trade.
Now I know that there are folk around who make these MA cross systems work for them, and I wish them well, but I'm sure they are bringing other skills to the table that enable them to refine (maybe subconsciously) how they use these methods.
I would love to tell you newcomers to clear all the indicators off your screens, but I know it would be a waste of time. Like any addiction, (I speak as a smoker) old habits die hard. At this stage we don't understand the markets well enough to simply trade the charts without some help. Even I have a couple of EMAs (Exponential Moving Average) on my screen, but I use them differently to how I did when I started. How I use them I will explain in due course, but I am starting to see that I really could get by without them (but I might have to demo first - not sure I can go cold turkey yet).
So, this is the first message. Start clearing your screens - watch price and then check if Stochs, RSI etc are confirming. Remember that you should be using these tools as Points of Interest, areas where a trading decision could be made. Learn to read your charts and don't just blindly follow what you think may be a signal. Try and learn the patterns that occur around these Points of Interest. For example, if you trade a MA cross method, does price ever pullback to the faster MA before taking off again? Maybe if you seem to get into a trade a bit late, and your stops are getting taken out too early, then why not wait for a pullback, if that pattern happens often enough, and go in as price bounces off the MA.
Indicators, of themselves, aren't bad things. The problem is we, in our development stage, don't understand how they work. Nor do we apply them to our trading in a logical way.
A classic here are the Overbought/Oversold signals give by certain indicators. Have a really good look, and see how long, and how often, Stochastics have been screaming Overbought on GBP/USD. I've been in most of this uptrend, on and off, for weeks, and I've always been Long.
I can promise you you don't need them. Try and lose them, or at least commit to only using one as an indicator (pun intended) of what MIGHT be happening.
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Trade with the trendThe real secret is - Trade With The Trend. You read it all the time in any senior trader’s posts, you steadily ignore it as you search for other answers to your trading dilemmas; you add another indicator (and tweak it every time you lose). You head off and start trading a new method you found in another thread.
All you have to do is keep with whatever method you employ now, but keep any eye on the longer time-frame charts (Daily for me) and only trade with the trend. Yes, you’ll miss pips on retracements. Yes, you’ll still get losing trades. Nevertheless, I’m sure you’ll discover that this simple rule will change your trading outlook in a way that no other change can. |
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Simplicity and PatienceI would like to go back over my modified list, explaining things in as much depth as I can. I would remind you that I am also quite new to this, and there is more for me to learn as well.
Nevertheless, all the points to be covered are discussed at our level, and will lack the complexity that some traders feel is necessary to get them through the day. Once you’re trading methodically, and your account, demo or live, is growing to your satisfaction, then by all means explore other areas in more depth. You never know when the next item you read will be the thing that launches you to a higher level.
As I re-visit each section, I’ll explain what my thinking is, and how I’ve applied it to my trading. If you are trading live at the moment this would be the time to open a demo account, and put these ideas into practice to see if any of this resonates with you. It’s true to say that, as individuals, no one way will suit us all. My aim is to try and get you to find a method that suits you, as a person. If you are very risk averse, some of what I will say might scare the pants off you. This is the beauty of a demo account; it lets you try scary new ways of trading without financial penalty.
There will be many indicators that I will not mention. Don’t ask me about them, because I won’t know. I may have tried them - most probably I haven’t. If I don’t use them now it doesn’t mean they’re no good, it simply means I didn’t find they added anything to what I do.
Wherever possible I’ll point you in the direction of solid threads, or posts, that have guided me in the past. I’ll quote sections of posts that I feel are relevant. If I mention a member’s name, go and search for his/her posts, and read what they say. Many of them don’t post that much and, if you’re new, you will have no idea of how much wisdom they can offer you. Never assume that a forum member’s number of posts has any relationship to his/her experience (and that includes me).
Never forget that the Forex market is always there. If you miss a trade, does it really matter? Once you learn to exercise patience in your trading, things start to become clearer. My own trading changed from the moment I started taking time to think about what I was doing, instead of hitting the Buy/Sell button every time price moved a few pips.
At the end of the day, our aim is to make money. No business has ever succeeded if it rushed into action with no thought of what it had to do to lay solid foundations on which to build that success.
The professionals you are trading against are businessmen & women, they take no prisoners, they can’t afford to. At least give yourself a chance of surviving long enough to take a little, or a lot, off them.
Enough of the waffle, let’s get on with it. |
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Before you start trading real money - Wise words from James16You do not have to go through hell trying to figure this business out
They say that 95 percent of traders lose and give up. For new traders, that trade anything less than 4 hour charts, its almost 100 percent. They lose everything within a year, and most of the time much sooner. Any new trader that wants to treat this like a business, and take future success seriously, should do the following as a minimum:
1. Whatever/however you trade, it should be done on daily charts or higher, and certainly not under 4-hour
2. To start it should be a demo account. It should stay a demo account until you show a profit three months in a row
3. After demoing open a small practice account with pocket change. You do this also for a minimum of three profitable months in a row
4. You open a normal account and never trade more than 1 to 2 percent of your account per trade. If after three months you have a combined loss you go back to steps 2 & 3.
5. If you get past step 4 you continue to refine what you are doing by never stopping the demo process. You continue to bring up/in refinements/additions to your normal account after they have proven themselves on demo and practice first.
After you have found solid success following this progression you then go back to step two and start all over with your intraday trading. This is how you treat it as a business with long-term goals and success in mind. Now let’s be honest, almost no one does this and there you have the 95% of traders that never accomplish what they set out to do in this business, that give their money to the 5% that do. I have been trading for almost 22 years and demoing is as big a part of my trading business as live trading.
Most new traders don’t want to trade, they want to gamble. There is the difference. The single biggest reason new traders blow out their accounts is thinking they have to day trade to be a real trader.
Professional traders don’t have a degree, they don't have more brains, they are not luckier, nor do they have some secret formula everyone else is trying to find. A professional trader is simply someone who takes money out of the market on a consistent basis. Consistent does not mean every day or even every week for that matter.
I don't know of one single good trader who doesn’t lick his chops over a new trader looking and trading off an intra-day chart (i.e. any time frame under daily). Even the very best trader has difficulty making consistent money trading under a 4-hour chart. There are a ton of reasons that I wont go into.
I have noticed more and more people posting that have come out of the futures markets, many from the Mini SP and Dow. The quickest way for a futures trader to get killed in the Forex market is to be ignorant of, or not aware of, the difference between an 8-hour market and a 24-hour market. The biggest obstacle I have faced in trading Forex is continuing to think like a futures trader.
A one-day move in Forex will take 2 or 3 days for a similar move in say the mini Dow. For years I have played the SP with great success. The day lasts 8 hours and I know to take my profit because,
1. The day does not last long and
2. With the way the world is I am not staying in overnight.
With Forex you don’t have to worry about overnight moves, and if you monitor your positions you can stay in any length of time you want. My problem has been that where I naturally would take a profit I now hang on looking for more.
The result has been the 24-hour problem. I get stopped out at Breakeven or at a loss. This is an ongoing learning process for me. Any trader just coming out of the futures markets would be well served to take what I am saying here seriously. For those of you who have never traded anything but Forex I think you have an advantage over futures traders. You are not programmed to think like they do. You already know that these markets can move fast and hard at anytime. You know that a 30 or 40 pip profit can disappear in 2 or 3 minutes overnight. Anyway I just wanted to bring it up, perhaps more for my own contemplation than anything else.
Discipline, hard work, and patience
If you’re not willing to give this at least two years of study and practice then you’re just playing around. Doctors and lawyers etc spend 6 to 10+ years mastering something that can make them rich. Why would anyone think that this business, which can make you much wealthier than most any other profession, is any different?
If you’re not going to treat this as a business then quit and go to Vegas where your odds are better. Going into the trading game blind with no plan is financial suicide.
1. State your goals
2. Make your plan
3. Execute your strategy
Ok so you’re brand new to this business. Get the worthless crap off of your charts. Stochastics, MACD, etc. There is a place for them but not with new traders. When it’s time, use them to spot divergence, which is all they are good for anyway. Get the stupid MA cross systems off your charts also,
They can work but that’s another story. There are only two things you need on your chart. Price and the 365 EMA. Nothing else. Daily, weekly and monthly charts only.
The bottom line
New traders starting off on intraday are already in the coffin. The nails are usually hammered in within two months.
Discipline, Hard Work And Patience
Yes, that’s exactly what it takes. There is no holy grail; there is no free lunch. There will always be fresh blood for those that have figured it out and paid the price. Without exception they were once the fresh blood and almost all of them found themselves on numerous occasions in the foetal position. Angry, frustrated and disappointed. This business can ruin you. It can steal your future, your family, and your sanity. Don’t put yourself through that. The only way to avoid it is put nothing of value on the line until you have proven you can do it.
Don’t open a $5000 account with money that is going to break your heart if you lose without proving first you can do it on demo.
It’s really just common sense.
I would just say that the 95 percent who never make it (and I say 95 is low) are the day traders. Put a calculator in the hands of any person just taking a look at this business and within ten minutes the leverage combined with a decent daily move will have their head spinning with the possibilities. The mindset of got to trade-got to trade sets in and so does disaster a great majority of the time.
Trying to figure this business out.
When I first started it was about the same time I was starting my contracting business. I was young, stupid and no way I was going to find any worthwhile help. No Internet, no nothing. All I had was a ruler, a piece of graph paper, a newspaper, and a phone to my broker. There was no one to convince me to paper trade until I knew what I was doing. I knew it in the back of my mind but fat chance I was going to give up all that easy money doing it on Demo. What an idiot, what a complete and utter fool I was. Worse yet I did it over and over and over again. Worked my ass off to fund yet another account. “Honey this is it. I got it figured out. That last 20 grand I blew was worth it, were gonna be rich”.
It makes me sick to my stomach, I swear to God it does. 8 years of it. Sure I had some great wins. I rode sugar from 2 to nearly 6, pyramiding up.
Made six figures only to lose it all trying to day trade before I had a clue. I can’t tell you how many times I cried myself to sleep slumped over my office desk. I couldn’t quit. I could see the reward if I could only figure it out. Maybe just a case of enough time trying, I don’t know. What I do know is, I started to realise this isn’t a game. Doctors spend 10-12 years killing themselves for a shot at a six-figure income. It took me more than that. What happened? What changed? I quit funding accounts with 1 or 2 grand and betting the farm. I flat quit period, with real money that is. The Internet came along at the right time and I flat said no more until I can prove it on demo. Period.
The key is this. The goal is to fund/build an account that it is large enough that it produces a staggering income off of a couple, or several, trades per month while only risking one or two percent on each trade. The pressure lets up and trading gets much, much easier. You don’t need every trade that looks promising. You know you don’t need but one or two and you know if you’re patient your damn sure going to get at least several in a month’s time.
It’s not hard to move your stop to breakeven or take some profit when your showing $2000 on the plus side after a small move. Its damn near impossible when that same move shows a 50-dollar profit. Think about it. Very few people can fund a $50,000 or larger account and even fewer can build one to that point starting from 500 bucks. It’s not that it can’t be done it’s just people don’t have the patience. So, my question is this. If it takes you ten years trading smart to build an account to that staggering point starting with very little, is it worth it? I can’t answer that for you.
I day trade the mini-Dow. I’m good at it. After so many years trading it and the mini SP it’s almost easy when I have even a little volatility. I position trade Forex. Why? Because I have proven on demo I can. When I can prove to myself I can day trade Forex for 6 months profitably on demo then I will. Not until.
I’m in no hurry, as I love the Dow. I wont go back to finding myself in the foetal position after blowing all my money being a fool. There is no reason in the world to go through hell risking your rent money, or, worse yet, money that took you a year or two to save. If you can’t do it on demo, you can’t do it live, I promise. So don’t do it. |
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Complacency Kills Forex accountsComplacency is word we do not often come across in FX trading. Fear, greed, hope, revenge, and panic are the usual ones. These emotions are commonly attributed to newcomers (newbies, or noobs, as they are called in the jargon).
So, how do we spot a Complacent Trader (CT). It’s simple; just look for these signs:
He will have been trading for a while, and, until recently, has had mixed success
At last, normally under very favourable conditions, he thinks he has found his own ‘Holy Grail’
Lulled into a false sense of security he becomes careless about his Money Management, even to the point of dispensing with setting Stop Losses on his trades
He compounds this basic, and most stupid, of newbie errors by taking any remotely positive signal his system, or method, offers, thereby increasing his exposure through over-trading
There may even be an element of greed appearing in his trading. His recent 'startling' success leads him to increase his trade size, irrespective of the potential quality of the trade. He's had a signal, that's good enough! No time to analyse it, just put the trade on, we don't want to miss all those pips do we?
Why should someone like this be classed as a CT?
Again it’s simple. He doesn’t need to listen to, or take, any of the advice he's read (and maybe offered) over the last few months. His Holy Grail will see him through. His extra months of trading have given him the edge.
It’s possible that he has survived at least one serious draw down, because the trend came to his rescue. He’s so sure his method has that vital edge; it will always get him out of trouble, and, anyway, he’ll pick up some rollover pips while waiting for the trend to re-assert itself, won’t he?
He rarely uses hard stops; the trend is always working for him isn’t it?
Of course the CT hasn’t realised yet that 18 months trading doesn’t give him the right to be successful. Therefore, the CT needs an event to shake him out of his complacency. Such an event took place over the last week or so. A seemingly minor problem (to him) in a small section of the American mortgage market spread out, like a virulent virus, to engulf every sector of the financial industry, including FX.
He sat, and watched (rabbits and headlights spring to mind), as all his smart, clever, carefully planned, trades turned and waved goodbye as they disappeared in completely the wrong direction.
No worries our CT thought. ‘Here’s the good old 150 EMA on the Daily chart. I’ll stick in a Support Zone, and trade the bounce. OK there we go, didn’t risk much but made some nice pips on that bounce. Panic over. Oh bugger, what’s going on? Still, I’ll hold till it hits the 365 EMA on the Daily chart, and play the bounce off that, as well. Seems like a strong Support area, too. WTF! What IS going on? The trend has never let me down before; it’s bound to turn soon, isn’t it?'
Well, the short (pun) side of a long (another pun) story is, it didn’t. Our CT’s long-held beliefs (all 6 months of them) meant as much, in the mayhem that followed, as Icarus’s faith in his waxen wings as he approached the Sun.
So, are there any lessons our CT should have learned from the recent events? I would hope that the main lessons he’ll take from this disaster are these:
Always trade with a hard stop loss. Even a ‘disaster stop’ would have saved most of his account
Don’t over-trade. Multiple positions on multiple pairs was a good thing when the trend was with him, but it’s a recipe for disaster for the ill-disciplined and over-confident trader
The Trend is your friend as long as it’s going your way
What has worked before may not work again. So be prepared for the worst
If he hasn’t the courage to change his method in order to trade against the long-term trend, as he sees it, then stay out of the market, re-assess things when the dust has settled, and watch what the market is telling him NOW
No doubt there are more lessons our CT can take from this period. I’m sure there are many here who could offer some further insights.
Maybe he should start re-reading this thread again, and listen to his own advice!
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