Start trading forex all over again? Is the notion fanciful?
Even so, considering the proposition, what would YOU do?
This is what I’D do…
Update August 23, 2016: those of you who have been following my most recent posts on AuthenticFX will be aware that I am doing a lot more in the way of forex robot development nowadays. Therefore, 4) below is somewhat dated.
In particular, I am nowadays employing several tools for developing the robots, which just weren’t available when I first tried automated trading systems many years ago. This means that development of the robots and their maintenance over time is no longer necessarily the domain of the Big Dogs only.
Over the coming months I intend writing several more posts to give an account of my progress and success (or lack of it) in developing my own forex robots. My ultimate aim is to offer portfolios of robots through the website. Stay tuned 🙂
1) No Trying to Hit Home Runs to Pay the Bills! This Is a Business…
I would never again put myself under the stress of trying to make a living from trading, well before I had mastered the trade of trading. This is something I see time and again; the experience is not unique to me.
So many traders ask something like “I’ve saved up $10,000 and I really hate my job, so can you tell me the best way to trade for a living on this amount of capital? ….Oh, by the way, my job used to pay me $70,000 per annum, so I would need to replace that pretty quickly with the profits I’m making from trading.” Seriously!
It would be the equivalent of getting into a Formula One car and taking it out on the open highway for a joyride, when you’d never done anything more complex than pedal a bike.
Disaster will certainly follow.
I repeat: this is a business. Get serious about it. Accept that you will have a long road of learning ahead of you, and that road can either be a fun adventure or a hellish ordeal, depending on your attitude and the discipline and patience you can enforce on yourself.
So having accepted that I would need to educate myself about the market, where would I go next?If I had to start trading forex all over again, this is what I'd do…Click To Tweet
2) No More Wasting Thousands of Dollars (and More!) On All-in-One Courses
In the beginning, once I realised I had a lot to learn, I started looking for shortcuts. Since I was still working in a well-paid job (which I hated, a common theme amongst would-be traders) I reasoned that I could just throw money at the problem and it would disappear. In fact, I figured that up to a point, the more money I spent on a course that promised to teach me everything I needed to know, the more certain I was to get full coverage of the things I was ignorant of, and the more certain I was to get great value from the trainers!
All up, I took about 3 to 4 of these multi-thousand dollar courses. And yes, I did learn things from each of them (things I now include for free on this website, and/or are included with my own courses) but none of them was worth anywhere near what I paid for them. And there is another problem with these courses: They do not have your best interests at heart!
What do I mean?
I mean that all of them are trying to get you as a long-term client. None of them has an interest in training you to be an independent thinker, capable of ongoing self education, and fully equipped to tackle the markets on your own.
Each of these slick organisations has their own “Hook”. That hook almost invariably revolves around teaching you to trade THEIR way, using their own proprietary software systems, which can be conveniently rented by the month. It’s a nice little earner for them. They never teach you enough to go out on your own; instead you become dependent on them, their “trainers” and their supposedly brilliant software.
And really, I wouldn’t mind so much if the software systems these guys sold actually worked. But in the years I spent shelling out for such programs, and conducting my own private, back and forward testing, I could see that absolutely none of them would work into the future, barring constant and major amendments and updates. In other words, you might as well do it yourself.
But of course, by that stage you’ve invested so much money in these outfits that you start to believe all the hype, because you don’t really want to believe that you’ve been dumb enough to have been suckered yet again. What you want to believe is that if you just upgrade to the next level, take the next seminar or buy the next software strategy they are peddling, it will all fall into place.
It never falls into place!
And the real kicker about these courses? None of them offered a money back guarantee that was worth anything. I think one, from memory, gave you 30 days, but by that stage you hadn’t even seen any of the important parts of the syllabus, and they hadn’t spent any real time or effort on you. Nice one that: I wonder how many people just lose interest or drift onto something else without bothering to refund. Again, a nice little earner for these organisations.
So much for the mega-buck courses. Where does that leave me now – remembering I’m a start-again trader – having come to the conclusion that I have a lot to learn, and would still like to take shortcuts that are worthwhile?
3) I’d Set My Own Syllabus for Ongoing Education
Instead of spending a small fortune on a course that begins with teaching you stuff you can get anywhere for free (e.g. a recent example I saw: what the term “Pip”* means, see definition below) I would set down on a piece of paper all the things I KNOW I DON’T KNOW, that I NEED to know! I would then look around for reliable sources of that information.
I’d start out with those sites that provide free information – such as this one, Babypips, Forex Factory and so on – and trawl through the reams of information looking for the answers to my questions. In particular, I’d be looking for short courses that addressed a particular area I had identified as one I needed to come up to speed on quickly. I would actually tick these off as I did them, so that I could see progress being made.
At some stage, I would recognise the need to spend money on courses, but I would put off doing this until I felt I’d exhausted all the free resources first. Either that, or in the lucky event I discovered a teacher and a course that I felt certain would fast track my learning, I would sample what they had on offer, but only if I knew there was a money-back guarantee in case of disappointment.
* Pip = “price interest point”. The smallest price change that a given exchange rate can make. A pip measures the amount of change in the exchange rate for a currency pair. See, now you know; just saved your thousands there, LOL!
4) I’d Realise That Taking Full Responsibility for My Results Means No More Reliance on Forex Robots/Automated Trading Software
Again, knowing what I know now, I would realise that depending on forex robots for a steady income is for the huge market players only. Only the Big Dogs with extra deep pockets have the resources to constantly update, upgrade and maintain these so-called “automated” systems so that they actually work in all markets over extended periods of time.
What attracted me about forex robots in the beginning, was the idea that I could just buy a system, plonk it on a chart and go off and live my life while it made me money 24/7.
Now, your experience may be different, but my own experience is that though you may be able to come up with a forex robot that is somewhat profitable at the retail level, the amount of effort you’ll need to do so, and the time and effort you’ll need to spend maintaining it, very likely won’t give you that magic pot of gold you thought was waiting.
Sure, you might actually turn a profit with a good robot, but it won’t be much to celebrate, and certainly won’t outperform a skilled and disciplined manual trader. And that is what you really want to aim for.
So, given that I’m still attracted to the idea of playing around with forex robots, this is what I would do.
Firstly, I’d only ever trade them on demo for at least the first six months. I would log all the trades they took and at the end of six months, assess the performance. If I believed it was a winning system, only then would I progress to trading it on a micro account.
But for the most part, I would concentrate on manual trading. Because I now understand how manual trading performs better and can be adapted to circumstances that should cover most of the attractions of trading robots.
For example, if you think you don’t have time to trade manually, well, in fact you do. You just have to switch to a higher timeframe, and have a different focus to Day Traders. So, if I was working now, I would probably concentrate on swing trading and long-term position trading.
I would realise that I wouldn’t be making the fast money I could as a successful Day Trader perhaps, but I’d settle for this until such time as I’d saved up enough money from my day job to quit and trade full-time. And I would only do that after I had proved that I could trade and make a full-time wage for a period of at least six months. Again, this requires constant logging of every trade taken, and honest appraisal of results.If I had to start trading forex all over again, this is what I'd do…Click To Tweet
5) I’d Avoid The Ruinous Trap of System Switching
I’d begin with one strategy that appealed to me, that I had assessed as the sort of strategy I could trade given factors like my time zone, hours of availability, account size, risk profile and so on. Then I would trade that strategy – on a demo account – for a period of at least 3 months and at least 100 trades, and again I would log every single trade in a proper document that allowed me to analyse the results.
If, after 3 months, I was in profit and I assessed the strategy as being worth staying with, I would go through the same process trading in a live, micro account. In other words, 3 months and at least 100 trades, on a micro account, logging every single trade and analysing the results at intervals.
And it’s obvious that if the strategy survived this further trial period, I would then graduate to a mini account. And thereafter to a full account. But the important thing is this: I would be single-minded about strategy selection until such time as I was certain that the current strategy under test was not worth pursuing anymore. And really, this does take about 3 months and 100 trades or thereabouts, depending on the exact nature of the system in test.
All the above is not to suggest that you can’t be evaluating more than one strategy at a time, of course. Depending on your own personal limits, you may be able to test several at once in a demo account, or even have two or three running in demo, another one in micro and another one in mini. But you have to be careful with this: it really does depend a lot on your personality. You know the old cliche about women being able to multitask and men being hopeless at it, well I fall into that cliche personally: I can really only evaluate one strategy at a time.
If you do decide to test and evaluate several systems simultaneously, just take care that you don’t fall into the further trap of comparing all the systems side-by-side as you go. This is a subtle variation on the trap of system switching. Remember that you can’t fairly and properly assess a system until it passes that 3 months/100 trades milestone, at least.
6) I’d Make it My Business to Know Who the Big Dogs Are and Their Current Positioning, at All Times.
Because it’s the Big Dogs who drive the market, who are responsible for all those nasty spikes that come out of nowhere and wipe you out.
This was always one of the things that mystified me about trading forex in the beginning. I would be looking for trades based on predictability, and whenever I encountered savage moves that went against me, I never knew what to do. Of course, the market took care of that decision for me: I’d invariably get taken out for a loss.
These days I understand that the predictability of the market depends on your understanding of what drives it. You have to do make it your business to find out:
- Who is behind the big moves,
- When they are likely to occur,
- Why they are likely to occur,
- How to see them happening early on,
- How to predict the big moves before they even begin, and above all:
- How to use those moves to your advantage, not devastating loss!
The only way to do this is to educate yourself to the inner workings of the Price Action Engine. Armed with this you can approach any market with a degree of safety you would never have otherwise. If only I had known this when I first started it would have saved me countless thousands of dollars, as well as years of grinding stress and disappointment.
7) I Would Only Ever Trade WITH the Big Dogs, Not against Them, and Ignore the Trend Unless It Coincides with Their Positioning.
I would understand how to use the power of the big players in the market to my advantage. I would watch for their BIG moves, and enter when I knew conditions were as near to perfect as they were going to get. I would in essence, surf the wave they made. Or at least, catch a few of the crumbs that fall from their banquet 🙂
8) I Would Set up My Trading Environment to Trade Price Action off the Levels the Big Dogs are Watching
I would have my charts set up to automatically identify the levels in the market where I believed price was extremely likely to react or even switch direction entirely. This would save me time every day when I sat down to my charts, because the major levels would be there on every chart in front of me, identifying these Power Levels ahead of time, not after-the-fact like lagging indicators.
All of which leads me back to the Price Action Engine. That engine identifies all the things I have discussed above, and deeply explores the dynamics around those levels that the big dogs have their eyes on.
Now, you don’t have to buy the Price Action Engine in order to do this, of course. Many of the tools can be found for free on this website, even if they are not as powerful and convenient as the Paleo Indicator that comes with the course as a bonus.
Also, many of the subjects covered in the course are discussed throughout this site, although again, not in anywhere near as much detail. But certainly, if budget is a problem for your education at present, just keep reading through AuthenticFX and availing yourself of the free software tools I provide.
However, if you are ready to take your trading to the next level, please take a look at this course. I honestly believe it’s all you need to know about the market in order to trade successfully and safely.
So there you have it: this is how I would change my approach if I was to start trading forex all over again, knowing what I know now. Of course, it’s a bit of a fantasy situation, as we all start out from a position of ignorance, and I am supposing here I possess at least some of the knowledge necessary to trade successfully.
I just wanted to set it down in print, and especially to ask you: “What would YOU do in this situation?” If you had the chance to start trading forex over again, what would you now do differently?
You know what to do: leave a comment below 🙂
Take Care & Trade Well,