Are you a trader or a software engineer?

2010-10-12T11:55:00.000-05:00

It's true that different personalities approach trading in differing ways. Some traders find a good system and just follow it and are happy with the results even if the results are not HUGE like all the claims that are made out there on the www. Other traders however are always tweaking (either their own system or one they found)and are never satisfied even when they are making huge profits! I am the latter ( ; The people that are always trying to make adjustments for a better system have what is called an engineer mentality. Engineers are the people that build things we use every day like automobiles, skyscrapers, even small containers that hold our lunches. They enjoy the quest to constantly refine and build a better widget. Then once it's built, they look for ways to update and improve on it!

Some traders over-tweak to their detriment unfortunately and these ones must learn a new skill in order to launch a sucessful career as a trader...that skill is "sitting on their hands". Sometimes however they can built a jaugernaut of a system with enough tweaking and backtesting so the sword can cut in either direction. Today I reset my own system once more and found a "memory" in the market where price reacts on que but it is not the standard S/R lines some people are familiar with. My "memory" points happen mors frequently allowing you to take a trade almost every day! Now I must quantify that I use daily charts to trade this idea since they have way more energy on the memory points than do smaller timeframes.

Anyways, as I was backtesting this idea , another profound thing jumped out at me (an AH HAAAA moment). I found that I could get rid of the only indicator left that i was using and now make my "Memory point" trades based off a raw chart! This is what every trader might aspire to since this means you are trading the market with ZERO reliance on indicators/oscillators. This is THE MARKET in it's RAW and NATURAL beauty letting you watch it's innermost secrets and just like a crystal ball you are now in charge and trading with 99% confidence (sorry, but this is still the market LOL).

If you would like to know about memory points, then you should subscribe to this blog. So far I have tested out daily charts on every FX pair I could find and even GOLD! It is uncanny how this thing knows where to jump in and how quickly it racks up the pips!My next backtests will be on weekly/monthly as well as hourly timeframes. Happy trading! ~ Bruce

Learning how to trade is not easy but once you learn it, it gets exciting!

2010-10-11T13:48:00.000-05:00

Well folks, I'm back again after a few years of trial and error. This time I hope I can control my lot size to match my account size. I think that's where MOST " 95%" of us traders take a wrong turn. It's like you can see exactly where the market is going to next and you are right trade after trade until you get over confident and ratchet up your lot sizing far higher than your account can endure if the trade flips out and turns against you. Then when that inevitable event occurs, your account gets thrown out the back door into the alley broke and desperate with lots of questioning about what just happened here???!

Well, I now can say with all conviction, that even if 98% of my trades work out to a profit, there will always be the 2% that will KILL my account and toss me onto the burn pile for re-programming unless I can do one of two things...either start using stops or only trade position sizes that will give me time to unwind a bad trade and turn it into a good/neutral/ or small loss comparable to my account size. You see, I have yet to find a way to use stops that will allow my to make more than 25% a year, where as when I keep my position size very small, I can bank trades that go against me 500,800,1100 pips only to bounce back to where my first entry was made and never have a stop set.

It takes a great deal of historic backtesting and many measurements but if you keep it up, it can really work out for you. I have probably came up with over a 1000 systems that are profitable over 50% of the time but when that bad entry happens, I just get laid out like a cheap boxer.

There are so many simple ways to find good entries like fractals,p-sar,moving averages,s/r lines,candle stick formations,chart patterns,oscillators,trend lines,channels,volume,gap-fills, and the list goes on for infinity yet if you built a system around any one/combination of these, you could probably have a consistantly winning system. So what causes a system to stop working? Usually because it relies on a financial instrument trending, topping or bottoming, or channeling which means when the instrument stops doing that and starts doing something else , your system quits producing winning trades!

Even the best automated robot trading software out there seems to have the same problem identifying when a forex pair stops trending and starts consolidating. Whipsaws are great if that's what you are trading until a trend forms against you. Then as soon as you trade the trend, a big spike blows up your account and something completely different happens. I think the best way to trade is to go with the flow of the market and don't try to ride trends, just take your profits and reset your system to find another entry.

That's what I have been doing for some time now and so far I'm doing great! As an example, here is how I did in January...

I made $84 for that month! Wow! Always nice to have that happen to keep me inspired especially when my account is only $800 which means I made 10% in just one month. Then came February...

Awwww crap! And I was doing soooo good in Jan, then I lost $64 in February. Just when I thought I was so speacial LOL! But on a brighter note, I am still up $20 or 2.5% for two months which is still like 15% a year which we all know is better than most mutual funds are doing ( ;

Then March rolls along and what do you know, I made $55 or +$75 for the year so far which now translates to maybe 35% a year...now we're talkin' !!!

But wait, never get too confident because the market is just waiting to humble you back down to size!

So here we go for April I make $139!

This is the time to just relax and don't start overleveraging yourself so what do I do?

That's right kids, i got too confident and doubled up my positions on a "sure thing" which humbled me big time! I ended up with a $366 LOSS for May!!! YIKES!!! That's why if I had kept my positions sized properly , I would only have lost $183 (I have actually changed technics since that month though and started trading with the trend for shorter durations rather than trading retracements).

Then comes June and hopefully I have learned my lesson (again)! Hey looky there, I'm back on top! In June I make a nice tidy little $84 profit...

Then comes July...

$118 profit...

I guess I'm onto something good here! August comes and I make $192!...I am now at $900 or $100 profit for 8 months or 12.5% which averages to about 19% per year if I promise to not leverage too high again.

Then i get a yen buy in Sept when the Bank of Japan decides to dump a trillion dollars or more onto the market to devaluate the yen! AUGH!!!! So I take the hit and lick my wounds again for a loss of $92 which based on the enormity of the event I guess I didn't get hurt too bad!

And finally here is where I stand for October...

So far closed $36 in profits and floating loss of $8 for a net gain of $28 so far. I hope to keep improving my methods and try to end the year with a 25% gain or better LOL! But hey, that's better than most are doing and I get to call the shots which is even more satisfying. If you would like to learn more about my trading style, just sign up for my blog and i'll send you a nice thankyou gift to help you stay upright in your trading.

Best regards! Bruce

Trading for Profits with micro forex

Are you a trader or a software engineer?

Learning how to trade is not easy but once you learn it, it gets exciting!