Author Topic: How to Successful in International Trading / Best Trading System  (Read 23982 times)

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Offline Sadiq Jafri

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Re: How to Successful in International Trading / Best Trading System
« Reply #19 on: February 24, 2009, 11:13:09 PM »
As I said, everyone has their own way of seeing things...

Good luck to all of us!  :)

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Re: How to Successful in International Trading / Best Trading System
« Reply #19 on: February 24, 2009, 11:13:09 PM »

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Re: How to Successful in International Trading / Best Trading System
« Reply #20 on: February 25, 2009, 11:54:36 AM »
Wolla,

5 dollar per point,
And if Dow suddenly move 100 point against position without SL then 5 x 100 = $500 loss.

No No. this is a killing scenario. In this scenario Beginners cannot even think to enter in the markets. And in a few trades 10K account will be vanished and after that one cannot even think to enter once again in the markets.

What I endorsing that with Micro Account a Beginner can enter in the markets with FREEDOM OF MIND  with lowest capital.
As with one Micro Lot, 100 points move of Dow is equal to just 10 $.

Hence there is no Comparison of $10 with $500 loss against the 100 points move.
FREEDOM OF MIND is only with Micro Lots.   
And This is for the beginners to enter and learn, polish their skills, test their methodologies of trading with real live account and excel if they have the potential.


even if trading micro lots the question still remains how to b successful in international trading
maximise profits minimise losses


Offline Learner7

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Re: How to Successful in International Trading / Best Trading System
« Reply #21 on: February 25, 2009, 05:08:41 PM »
even if trading micro lots the question still remains how to b successful in international trading
maximise profits minimise losses


1)   Beginners trading initial loss is minimized because of Micro lots.

2)   How to maximize profit and minimize loss in regular trading? Or we can say How to Trade?

It’s a million dollar question, well there is no quick fix for this question, me too still learning for the right answer.



Offline Learner7

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Re: How to Successful in International Trading / Best Trading System
« Reply #22 on: March 03, 2009, 12:38:05 AM »
Success comes with knowledge.
Knowledge comes with experience.
Experience comes with time and hard work.


Price moves in a 100% random way so build yourself a system that is not affected by trend or consolidation.
« Last Edit: March 03, 2009, 12:40:35 AM by Learner7 »

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Re: How to Successful in International Trading / Best Trading System
« Reply #23 on: March 03, 2009, 11:41:34 AM »


First of all, lets define a Trading System.


Investopedia defines is as "A trading system is simply a group of specific rules, or parameters, that determine entry and exit points for a given equity. These points, known as signals, are often marked on a chart in real time and prompt the immediate execution of a trade."


So, its important that we devise rules that hold for itself. But before that, one has to understand that there is no holy grail which means that you have to compromise some thing for other and there is no system that shall work in every market scenario.


So, how do we go about Building a Trading System. Well, thats the big thing. For a start, you have to decide on a couple of things,


1. Charting Software you would use -> Any Trading system you build will have to be in the language the system understands. Also, for visual effect, its always better to have a charting software though the same can be done by using MS-Excel as well.


2. Time Frame: This is one of the most important parameters. I for example trade using 5 Mins, 15 Mins & 60 Min Bars. For my style of trading and my Risk Profile, I am comfortable using the same. But, shorter time frame means that you need to constantly monitor and if trading is part time (with a full time job on hand), this is a not a time frame one should venture into.


3. Market you want to trade upon: Many people express the sentiment that a good trading system should work in every market. I believe this is a very wrong concept due to a huge number of things which I shall not go into, but believe me, its always better to concentrate on a few rather than try to trade everything.



Now that we know the essentials,lets move to the next step.


Lets write a simple Trading System


A Simple Trading System can be a Moving Average Crossover




What are the factors to look at when testing. The following list is just some of them and are things I generally check.




1. Draw Down: This is the most important metric in my opinion. Trading Systems (TS) that are sensitive have lower DD's than systems that have lower sensitivity. Ofcourse, higher sensitivity means, higher number of whipsaws. So, a trade off all the same. The metric that has to be looked at is either CAR / MDD or RAR / MDD. Lower the better since a 20% DD on paper has no impact whereas if your trade is down even 10% when trading using real money, it has a huge Psychological impact.


2. Profit Factor: This metric shows the net profitability of the system. Most systems (good) have a higher number of loss trades than profit trades, but still are able to give out a fairly high profit factor which means that even if you have suffered a couple of whipsaws, the system will recover everything once there is a good trend (for Trend following systems).


3. Equity Curve: Most systems allow one to draw the Equity Curve which shows how the starting capital would have performed over the course of the period. Too smooth a equity curve will in all probability be the result of over optimization which results in a phenomenon we call Curve fitting. While the result looks good on paper, again, when the same is used with real money, Self Destruction is guaranteed.


4. Exposure: Too low a exposure means that the system is most of the time in cash and does not make sense.


5. K-Ratio / Sortino Ratio: For more info about these,please google them, but they are usefull metrics that show as to whether your profits are distributed across or just a few trades account for most of the profits (which is bad). While its said that a K-Ratio of more than 1 is good, I have never been able to get any higher than 0.25, so not sure if 1 is really possible. But, do eyeball the trades to see as to whether some trades could really have been taken.


Ok, I think that the above information is suffice and for more, well google is always on hand :)


Lets move to Optimization.


What is Optimization. Optimization is trying to determine what works best or rather what worked best in  history and trying to see if the same can be used in future as well to get similar returns.


When people optimize, they generally tend to look for the best profit making factor. That is entirely wrong since peaks constitute less than 10% of the total available trading. Trying to catch the peak will just result in a trading system which shows great returns on back test but performs medicorely in real time. What I am trying to say is that your system should not try to catch the 10% return that comes occasionally but try to catch say the 5% return that comes most of the time. The best performance in back test may not hence be the factor to choose.


To better understand that, one needs to look at a 3D Graph. AmiBroker provides such a thing where you can see the peaks as well as the valleys and Plateaus.


To ensure that your system is not curve fitted, its essential that you run a Walk Forward optimization to see how it would have performed in reality without the benefit of hind sight.


AmiBroker defines WFO as such,


The automatic Walk forward test is a system design and validation technique in which you optimize the parameter values on a past segment of market data ("in-sample" ), then verify the performance of the system by testing it forward in time on data following the optimization segment ("out-of-sample" ). You evaluate the system based on how well it performs on the test data ("out-of-sample" ), not the data it was optimized on. The process can be repeated over subsequent time segments.


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Offline Learner7

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Re: How to Successful in International Trading / Best Trading System
« Reply #25 on: March 05, 2009, 11:51:24 PM »
Test test test and keep changing indicators, methods, systems untill it works.  8)

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Re: How to Successful in International Trading / Best Trading System
« Reply #26 on: March 06, 2009, 01:32:49 PM »
Test test test and keep changing indicators, methods, systems untill it works.  8)

leaner bhai if u find any do let us know

i have been workin on moving averages work well for me but i loose wen i trade again them

Offline Learner7

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Re: How to Successful in International Trading / Best Trading System
« Reply #27 on: March 06, 2009, 03:59:58 PM »
Test test test and keep changing indicators, methods, systems untill it works.  8)

leaner bhai if u find any do let us know

i have been workin on moving averages work well for me but i loose wen i trade again them

Checked so many systems.
TrendChaser found useful above all. Here it is with screenshot, first try it on Demo Account.

http://www.4shared.com/file/91415147/822733ee/TrendChaser.html
TrendChaser.zip

Instructions for setup:

Extract the attached zip file.

Put "TrendChaser.TPL" file in the following directory
C:\Program Files\HY Trader\templates

and put all the remaining files in the following directory
C:\Program Files\HY Trader\experts\indicators

Start MT4 --> Select any Chart --> click menu:   "Charts --> Template --> TrendChaser"   Enjoy.




« Last Edit: March 06, 2009, 04:04:41 PM by Learner7 »

Offline Learner7

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Re: How to Successful in International Trading / Best Trading System
« Reply #28 on: March 12, 2009, 10:20:57 AM »
Test test test and keep changing indicators, methods, systems untill it works.  8)

leaner bhai if u find any do let us know

i have been workin on moving averages work well for me but i loose wen i trade again them

Try this Super Signal  indicator.

It gives about 90% best point for trade. But remeber it repaints / change its position so wait a while untill MACD start changing position in lower timeframe, now a days i am using it and found Excellent, but on breakouts don't follow it, let me know your feedback.

http://www.4shared.com/file/92433076/b18c2cad/SS_online.html
SS.mq4
« Last Edit: April 23, 2009, 11:42:16 PM by MAV »

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Re: How to Successful in International Trading / Best Trading System
« Reply #29 on: May 23, 2009, 01:52:53 PM »
Successful Financial Markets Day Trading Brief
InvestorEducation / Learn to Trade
May 22, 2009 - 06:45 AM
 
By: Christopher_Quigley

 
Judging from the contents of an increasing number of emails more and more investors are choosing to "actively" trade the market rather than "buy and hold." In the main, this is due to the fact that in a bear market the latter strategy creates losses that are difficult to accept long term. However another reason is that with limited business opportunity available investors are seeking "income" rather than capital gain from their investments.



Accordingly I set out below some parameters to help these new "traders" avoid the worse pitfalls and hopefully guide them towards the mindset required for long term success.

1.        Start. Markets are rational. The best theory to gain this insight is Dow Theory. Learn everything you can about Hamilton's and Dow's perceptions and make it part of your investment "macro-view".

 2.       Due to the growing complexity in financial reporting and the opportunity for abuse therein, with its concomitant risk, it may be advisable to trade through exchange traded funds (ETF') or Contracts for Difference (CFD's). These funds trade like stocks but offer exposure to equity sectors, commodities, currencies and interest rates. Thus you have better opportunity for diversification with less risk. If you do not understand CFD's see note 1 below.

3.        When you enter a position know beforehand your exit point. Always place a sell stop thus limiting your potential loss.

4.        As your profits rise adjust your sell stop upwards thus locking in your profits.

5.        A trading platform offering discount commissions is absolutely vital. I like IG Markets or Ameritrade.

6.        Technical analysis data is vital to judge your entry and exit points. Get a good system that offers "real time" streaming providing one minute, five minute, ten minute and one hour ticker readings in addition to the regular daily timelines. I prefer the five minute screen. I use Worden Bros.

7.        Using too many technical indicators creates "paralysis by analysis". Get to know the indicators that work for you and stick to them. Consistency will bring greater reward. I like MACD (moving average convergence divergence, 10 and 20 DMA's (daily moving averages) and purchase volume. For price I use the candlestick format rather than the simple line as it gives more information on the market psychology of actual price movement. See note 2 below on MACD.

8.        You must adopt a trading strategy. If you do not have one find one. If you are new to trading use the many simulation packages available online to test and retest your knowledge and approach. Do not start to spend a major part of your capital until you have proven to yourself that you can consistently make good investment decisions in real time. It is better to be losing time rather than time and money. For me the best strategy to successfully day trade is our Wealth-builder MOMENTUM STRATEGY. This strategy highlights top stocks which are going long and going short. Our BUY indicator is a BULLISH ENGULFING candlestick moving up through a DMA on high volume. ideally with a MACD changing from negative to positive. Our SELL indicator is a BEARISH ENGULFING candlestick moving down through a DMA, ideally with MACD moving from positive to negative.

9.        The holy grail of trading is patience. If you do not have a trade that has a good

probability to work profitably for you the best place to be is in cash. This is hard to learn but is

absolutely essential.

10.      If you think trading is gambling you have missed the point and need to be re-educated. Go back to start and get your thinking rational.

Note 1:

Contracts for Difference

ONE of the most innovative financial instruments that have developed over the last decade or so is the CONTRACT FOR DIFFENCE, better known as a CFD. The explosion in the use of this product is one of the reasons why London, as opposed to New York, is becoming the financial location of preference for many financial managers and hedge traders. CFD's are not allowed in the U.S. due to legal restrictions imposed by the American Regulators.

Contracts for Difference were developed in London in the early 1990's. The innovation is accredited to Mr. Brian Keelan and Mr. Jon Wood of UBS Warburg. They were then initially used by institutional investors and hedge funds to limit their exposure to volatility on the London Stock Exchange in a cost-effective way, for in addition to being traded on margin, they helped avoid stamp duty (a government tax on purchase and sale of securities).

A CFD is in essence a contract between two parties agreeing that the buyer will be paid by the seller the difference between the contract value of the underlying equity and its value at time of contract. This means that traders and investors can participate in the gains and losses (if shorting) of the market for a fraction of capital exposed if the equity was purchased outright. In This regard the CDS's operate like option contracts, but unlike calls and puts, there are no fixed expiration dates and contract amounts. However contract values are normally subject to interest and commission charges. For this reason they are not really suitable to investors with a long-term buy and hold strategies.

CFd's allow traders to invest long or short using margin. This fixed margin is usually about 5-10% of the value of the underlying financial instrument. Once the contract is purchased there is a variable adjustment in the value of the clients account based on the "marked to market" valuation process that happens in real time when the market is open. Thus for example if a stock ABC Inc. is trading at $100 it would cost approx. $10 to trade a CFD in ABC. If 1000 units were traded

it would therefore cost the investor $10,000 to "control" $100,000 worth of stock. If the stock increased in value to $110 the "marked to market" process would add $10,000 to the client's account (110-100 by 1000). As we can see the situation works very similarly to options but for the fact that there are no standard option contract sizes and expiration dates and complicated strike levels. Their simplicity has added greatly to their popular appeal amount the retail public.

Contracts For Difference are currently available in over the counter markets in Sweden, Spain, France, Canada, New Zealand, Australia, South Africa, Australia, Singapore, Switzerland, Italy, Germany and the United Kingdom. Their power and scope continue to grow. This development poses a problem to American financial institutions in that unless there is a change in security regulation Wall Street will lose out on a financial instrument that is changing the manner in which the greater public and aggressive financial managers are investing for the future. It is expected that Contracts for Difference will become the medium of transaction for the majority of World traders within the next decade.

Note 2:

Moving Average Convergence Divergence (MACD)

 Developed by Gerald Appel, MACD is one of the simplest and most reliable indicators available. MACD uses moving averages, which are lagging indicators, to include some trend following characteristics. These lagging indicators are turned into a momentum oscillator by subtracting the longer moving average from the shorter moving average. The resulting plot forms a line that oscillates above and below zero.

The most popular formula for the standard MACD is the difference between a stock's 26-day and 12-day exponential moving averages. However Appel and others have since tinkered with these original settings to come up with a MACD that is better suited for faster or slower securities. Using shorter moving averages will produce a quicker, more responsive indicator, while using longer averages will produce a slower indicator.

What does MACD do?
MACD measures the difference between two moving averages. A positive MACD indicates that the 12-day EMA (exponential moving average) is trading above the 26-day EMA. A negative MACD indicates that the 12-day EMA is trading below the 26-EMA. If MACD is positive and rising, then the gap between the 12-day EMA and the 26-day EMA is widening. This indicates that the rate-of-change of the faster moving average is higher than the rate-of-change for the slower moving average. Positive momentum is increasing and this would be considered bullish. If MACD is negative and declining further, then the negative gap between the faster moving average and the slower moving average is expanding. Downward momentum is accelerating and this would be considered bearish. MACD centerline crossovers occur when the faster moving average crosses the slower moving average. One of the primary benefits of MACD is that it does incorporate aspects of both momentum and trend in one indicator. As a trend following indicator, it will not be wrong for long. The use of moving averages ensures that the indicator will eventually follow the movements of the underlying security.

As a momentum indicator, MACD has the ability to foreshadow moves in the underlying stock. MACD divergences can be a key factor in predicting a trend change.  For example a negative divergence on a rising security signifies that bullish momentum is wavering and that there could be a potential change in trend from bullish to bearish. This can serve as an alert for traders and investors.

In 1986 Thomas Aspray developed the MACD histogram in order to anticipate MACD crossovers. The MACD histogram represents the difference between MACD and the 9-day EMA of MACD. The plot of this difference is presented as a histogram, making centerline crossovers and divergences more identifiable. Sharp increases in the MACD histogram indicate that MACD is rising faster than the 9-day ema and bullish momentum is strengthening. Sharp declines in the MACD histogram indicate that the MACD is falling faster that its 9-day ema and bearish momentum is increasing. Thomas Aspray recognized the MACD histogram as a tool to anticipate a moving average crossover. Divergences usually appear in the MACD histogram
before MACD moving average crossover. Armed with this knowledge, traders and investors can better prepare for potential change. Remember the weekly MACD histogram can be used to generate a long-term signal in order to establish the tradable trend, thus allowing only short-term signals that agree with the major trend to be used for investment action.

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Re: How to Successful in International Trading / Best Trading System
« Reply #30 on: June 21, 2009, 01:11:45 PM »
Why you behave like a loser


MOST traders lose money. Fact. Indeed, if you read some of the literature on the subject, the suggestion is that 60 to 90 per cent of them lose money, depending on their level of leverage.

For retail investors, trading foreign exchange is apparently the biggest killer, followed by futures, options, CFDs and margin lending on shares. By all accounts, in one of these groups only 2 per cent make money and in another the average lifespan of a trader is six to eight weeks from go to blow.

Why do so many people lose at trading? The answer is that they are humans, not machines. Most traders do not think clearly and, faced with losses, gains, luck and indecision, they start to function emotionally instead of mechanically. It is this weakness that the studied professional trader takes advantage of.

This is what behavioural finance is all about. Over a large population and a significant period of time, seemingly unpredictable emotions repeat, become predictable and can be exploited. For traders who understand this, and trade against it, it is like owning the "zero" on the roulette wheel, an edge that will manifest itself over time.

So how do you stop other people exploiting your emotions? You change. But before you can do that, the first step is to identify the common behaviour patterns that lose you money.

Here's a list of some of the more common ones. In financial (and social) theory some of these are called "cognitive biases", erroneous rules of thumb or common errors of judgement and in trading there are many. You might recognise a few of your own.

* Emotional bias: the tendency to believe the things that make you feel good and to disregard things that make you feel bad. In trading terms, this means ignoring the bad news and focusing on the good news. It's called losing objectivity; you don't recognise when things go wrong because you don't want to.

* Expectation bias: the tendency to believe in things that you expect. In financial terms this means not bothering to analyse, test, measure or doubt the conclusion you expect or hope for. It is also known as the law of small numbers - believing in something with little real evidence.

* The disposition effect: the tendency to cut your profits and let your losses run - the opposite of what a trader should be doing. Making small profits and big losses is a recipe for disaster.

* Loss aversion: the tendency to value the avoidance of loss more highly than the making of gain. Losses impact on you more than gains. Because of this you become more emotional when making losses, the point at which a rational decision would save you the most money.

* The sunk-cost fallacy: this is the tendency for our decision-making to be influenced by the size of the loss we have already incurred. The bigger the loss, the more likely we are to persist with a losing trade rather than take the rational decision to cut to a more profitable trade. The size of your loss has no impact on the future share price but a huge impact on your ability to make the right decision.

* The bandwagon effect: the tendency to think it must be right because everyone else is doing it - a thought process guaranteed to get you in when it's obvious and get you out when it's obvious. Put another way, it has you buying at the top and selling at the bottom.

* Past-price fixation: the tendency to avoid prudent trading decisions by anchoring your thought process to prices that no longer exist. "I'll sell it if it gets back to $4." "I'll buy it if it gets down to $4 again." We are all guilty. In trend-following trading, if the price goes up, you don't sell it, you buy it; if it goes down, you don't buy it, you sell it. The old high has gone, the old low has gone. Don't wait for them to come back to do the wrong thing.

It's not easy to be unemotional when trading - that's not how we're wired. . To move from the losing majority to the winning minority we will all just have to unplug and reconfigure.

Offline Farzooq

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Re: How to Successful in International Trading / Best Trading System
« Reply #31 on: June 27, 2009, 05:44:54 PM »

Five Fatal Flaws of Trading
InvestorEducation / Learn to Trade
Jun 26, 2009 - 11:22 AM
 
By: EWI

 
Jeffrey Kennedy writes: Close to ninety percent of all traders lose money. The remaining ten percent somehow manage to either break even or even turn a profit – and more importantly, do it consistently. How do they do that?



That's an age-old question. While there is no magic formula, one of Elliott Wave International's senior instructors Jeffrey Kennedy has identified five fundamental flaws that, in his opinion, stop most traders from being consistently successful. We don't claim to have found The Holy Grail of trading here, but sometimes a single idea can change a person's life. Maybe you'll find one in Jeffrey's take on trading? We sincerely hope so.

The following is an excerpt from Jeffrey Kennedy’s Trader’s Classroom Collection. For a limited time, Elliott Wave International is offering Jeffrey Kennedy’s report, How to Use Bar Patterns to Spot Trade Setups, free.

Why Do Traders Lose?

If you’ve been trading for a long time, you no doubt have felt that a monstrous, invisible hand sometimes reaches into your trading account and takes out money. It doesn’t seem to matter how many books you buy, how many seminars you attend or how many hours you spend analyzing price charts, you just can’t seem to prevent that invisible hand from depleting your trading account funds.

Which brings us to the question: Why do traders lose? Or maybe we should ask, 'How do you stop the Hand?' Whether you are a seasoned professional or just thinking about opening your first trading account, the ability to stop the Hand is proportional to how well you understand and overcome the Five Fatal Flaws of trading. For each fatal flaw represents a finger on the invisible hand that wreaks havoc with your trading account.

Fatal Flaw No. 1 – Lack of Methodology

If you aim to be a consistently successful trader, then you must have a defined trading methodology, which is simply a clear and concise way of looking at markets. Guessing or going by gut instinct won’t work over the long run. If you don’t have a defined trading methodology, then you don’t have a way to know what constitutes a buy or sell signal. Moreover, you can’t even consistently correctly identify the trend.

How to overcome this fatal flaw? Answer: Write down your methodology. Define in writing what your analytical tools are and, more importantly, how you use them. It doesn’t matter whether you use the Wave Principle, Point and Figure charts, Stochastics, RSI or a combination of all of the above. What does matter is that you actually take the effort to define it (i.e., what constitutes a buy, a sell, your trailing stop and instructions on exiting a position). And the best hint I can give you regarding developing a defined trading methodology is this: If you can’t fit it on the back of a business card, it’s probably too complicated.
 
Fatal Flaw No. 2 – Lack of Discipline

When you have clearly outlined and identified your trading methodology, then you must have the discipline to follow your system. A Lack of Discipline in this regard is the second fatal flaw. If the way you view a price chart or evaluate a potential trade setup is different from how you did it a month ago, then you have either not identified your methodology or you lack the discipline to follow the methodology you have identified. The formula for success is to consistently apply a proven methodology. So the best advice I can give you to overcome a lack of discipline is to define a trading methodology that works best for you and follow it religiously.

Fatal Flaw No. 3 – Unrealistic Expectations

Between you and me, nothing makes me angrier than those commercials that say something like, "...$5,000 properly positioned in Natural Gas can give you returns of over $40,000..." Advertisements like this are a disservice to the financial industry as a whole and end up costing uneducated investors a lot more than $5,000. In addition, they help to create the third fatal flaw: Unrealistic Expectations.

Yes, it is possible to experience above-average returns trading your own account. However, it’s difficult to do it without taking on above-average risk. So what is a realistic return to shoot for in your first year as a trader – 50%, 100%, 200%? Whoa, let’s rein in those unrealistic expectations. In my opinion, the goal for every trader their first year out should be not to lose money. In other words, shoot for a 0% return your first year. If you can manage that, then in year two, try to beat the Dow or the S&P. These goals may not be flashy but they are realistic, and if you can learn to live with them – and achieve them – you will fend off the Hand.

For a limited time, Elliott Wave International is offering Jeffrey Kennedy’s report, How to Use Bar Patterns to Spot Trade Setups, free.

Fatal Flaw No. 4 – Lack of Patience

The fourth finger of the invisible hand that robs your trading account is Lack of Patience. I forget where, but I once read that markets trend only 20% of the time, and, from my experience, I would say that this is an accurate statement. So think about it, the other 80% of the time the markets are not trending in one clear direction.

That may explain why I believe that for any given time frame, there are only two or three really good trading opportunities. For example, if you’re a long-term trader, there are typically only two or three compelling tradable moves in a market during any given year. Similarly, if you are a short-term trader, there are only two or three high-quality trade setups in a given week.

All too often, because trading is inherently exciting (and anything involving money usually is exciting), it’s easy to feel like you’re missing the party if you don’t trade a lot. As a result, you start taking trade setups of lesser and lesser quality and begin to over-trade.

How do you overcome this lack of patience? The advice I have found to be most valuable is to remind yourself that every week, there is another trade-of-the-year. In other words, don’t worry about missing an opportunity today, because there will be another one tomorrow, next week and next month ... I promise.

I remember a line from a movie (either Sergeant York with Gary Cooper or The Patriot with Mel Gibson) in which one character gives advice to another on how to shoot a rifle: 'Aim small, miss small.' I offer the same advice in this new context. To aim small requires patience. So be patient, and you’ll miss small."

Fatal Flaw No. 5 – Lack of Money Management

The final fatal flaw to overcome as a trader is a Lack of Money Management, and this topic deserves more than just a few paragraphs, because money management encompasses risk/reward analysis, probability of success and failure, protective stops and so much more. Even so, I would like to address the subject of money management with a focus on risk as a function of portfolio size.

Now the big boys (i.e., the professional traders) tend to limit their risk on any given position to 1% - 3% of their portfolio. If we apply this rule to ourselves, then for every $5,000 we have in our trading account, we can risk only $50-$150 on any given trade. Stocks might be a little different, but a $50 stop in Corn, which is one point, is simply too tight a stop, especially when the 10-day average trading range in Corn recently has been more than 10 points. A more plausible stop might be five points or 10, in which case, depending on what percentage of your total portfolio you want to risk, you would need an account size between $15,000 and $50,000.

Simply put, I believe that many traders begin to trade either under-funded or without sufficient capital in their trading account to trade the markets they choose to trade. And that doesn’t even address the size that they trade (i.e., multiple contracts).

To overcome this fatal flaw, let me expand on the logic from the 'aim small, miss small' movie line. If you have a small trading account, then trade small. You can accomplish this by trading fewer contracts, or trading e-mini contracts or even stocks. Bottom line, on your way to becoming a consistently successful trader, you must realize that one key is longevity. If your risk on any given position is relatively small, then you can weather the rough spots. Conversely, if you risk 25% of your portfolio on each trade, after four consecutive losers, you’re out all together.

Break the Hand’s Grip

Trading successfully is not easy. It’s hard work ... damn hard. And if anyone leads you to believe otherwise, run the other way, and fast. But this hard work can be rewarding, above-average gains are possible and the sense of satisfaction one feels after a few nice trades is absolutely priceless. To get to that point, though, you must first break the fingers of the Hand that is holding you back and stealing money from your trading account. I can guarantee that if you attend to the five fatal flaws I’ve outlined, you won’t be caught red-handed stealing from your own account.
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Re: How to Successful in International Trading / Best Trading System
« Reply #32 on: August 26, 2009, 03:02:39 PM »
Commodity and Futures Trading 1-2-3
InvestorEducation / Learn to Trade
Aug 25, 2009 - 03:46 AM
 
By: Charles_Maley

 
I would like to start with a simple yet very powerful concept. I am sure that over time we will elaborate much further on this simple concept but it seems appropriate to start here.



It all starts with the 4 possibilities. Once you put on a trade only four things can happen:
1- You can win big
2- You can win a little
3- You can lose big
4- You can lose a little
The goal is to eliminate number 3. What do we do?

Number #1- First form a hypothesis.

Your hypothesis can be as simple as this.
1- You (or your system) think the stock or future is going up.
2- You (or your system) think the stock or future is going down.
How you arrive at this conclusion may be based on your analysis of fundamental indicators, technical indicators or a trading system. You might even be in agreement with someone else’s analysis. For example, you might agree with Morgan Stanley’s opinion that crude oil is going much higher.


However, what you do next is extremely important.
You need to determine how much money you are going to risk on this particular trade. The easiest way to do this is to use a percentage of your account value. For example, if your account value is $100,000 and you are going to risk 1% of this value, you are going to risk $1000. You do this because your hypothesis might be wrong or you might be just early. By defining and accepting your risk, you hopefully eliminate the possibility of the big loss.

Number #2-The trend should confirm your hypothesis

This is done for two reasons:
1- If you are trading against the trend, you may not be in sync with your hypothesis and you either going to get stopped out often or suffer a big loss.
2- If you are trading with the trend, you know anything can happen. You are positioning yourself for the possibility of winning big.
Winning big is what will eventually make you a successful trader.

Number #3-You think in probabilities for two reasons:

1- It is unreasonable to believe that every individual trade is going to be profitable. It is equally unreasonable to believe that you will be able to identify only the successful trades. However, each trade has a probability of being profitable. The way to determine how your trading is doing is by evaluating a series of trades over time.
2- Evaluating your trading over a series of trades will also confirm or not confirm your hypothesis. If after a series of trades you are losing money it might be time to review your hypothesis.

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Best Trading System for KSE
« Reply #33 on: January 10, 2010, 05:26:22 PM »
Discuss how to use different indicator to make a trading system
for both the bullish and bearish trends
« Last Edit: February 27, 2011, 06:16:57 PM by Farzooq »

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Re: How to Successful in International Trading / Best Trading System
« Reply #34 on: January 10, 2010, 05:35:54 PM »
Stock In Bullish Trend



Stock Moving Sideways



Stock In Bearish Trend




Would like to see comments on behaviour of these mostly used indicators in different trends


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Re: How to Successful in International Trading / Best Trading System
« Reply #35 on: January 11, 2010, 12:22:16 PM »



in bullish trend a lots of false sell signals are generated by sts and rsi
in bearish trend a lots of false buy signals are generated by sts and rsi
in sideways trend the sts and rsi perform well

in the above 3 charts u can find similar movements in sts and rsi indicators
therefore use either sts or rsi


macd has performed well in all the three cases



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Re: How to Successful in International Trading / Best Trading System
« Reply #36 on: January 12, 2010, 11:12:59 PM »
trading made simple
but i guess no one is interested in techs  :(

everyone is interested to get tips one way or other to make or loose money  :mad:

SC

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Re: How to Successful in International Trading / Best Trading System
« Reply #37 on: January 12, 2010, 11:19:18 PM »
I think there are no technicians around.
I also think there are not many who want to learn or share their experience in TA.

That is okay. I guess.

People will want, what they will want.
 :salute:


Toshi

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Re: How to Successful in International Trading / Best Trading System
« Reply #38 on: January 12, 2010, 11:21:00 PM »
trading made simple
but i guess no one is interested in techs  :(

everyone is interested to get tips one way or other to make or loose money  :mad:


Actually Due to tezi in market everyone is seeking for tips,to make easy mony,when market wil take correction or lose its trend
then people wil learn the technicals.