It is an interesting thread. I hadn't checked back on for awhile. Had been on an out of town job when one of my stocks tanked. Had no secure way to log in to my account, when I saw what was happening. And to top it off, I was too far from home when I realized that I had forgotten to bring the power cord for my laptop. So I've been in a protect assets mode, now. There is alot of positive information that I have gained from the thread. Be protective of the account. It's like war, which the OP had written in another thread. Be distrustful of market gurus, the news, "free information". What the recent comment mentioned, different personas posting. is kind of strange . I had a thought to do career change. Worked in a prison, as an officer. If you haven't been in that environment ever. It is pretty high up there, when it comes to strange. So now, what used to seem like strange to me, isn't.
I don't think so. The thing that really annoys me about threads like this is it leads newbies to waste tons of time and effort. Being a newbie takes enough time as it is. Leading them on a wild goose chase with hints of some secret that will make them rich is just wrong. The internet is full of garbage like this when it comes to trading. I'm not exaggerating when I say that easily 95% of what you read on the internet (and specially forums) about trading is written by people who either trade a demo account or have blown real accounts. Successful trading in 3 steps: 1. Find the trend. 2. Make sure it is fundamentally sound (the trend is based on some kind of news that the masses are reacting to). 3. Find a reasonably low risk entry point. You don't even have to wait for a retracement, though your risk/reward is much better if you do. You can just buy in an uptrend with a stop below the previous support/resistance level and chances are very good that you'll be profitable. I'm dead serious. That's it. Don't make it any more complicated than it needs to be.
this should answer the OPs question... http://www.yourtradingcoach.com/Articles-Strategy/Rock-Paper-Scissors-A-Trading-Analogy.html
In your first post, you state that you joined ET specifically to comment on this thread because you've read threads like this before and you think their misleading. Obviously, something touched you in this thread to go as far as to join ET specifically to critique this thread. Why did you not join to critique other threads, just this one? That's for you to think deeply about. You then proceed to give us a stock standard model of how the market works and how we can all be successful if we understand what you are saying. It's easy right...? Just do as I say. At the same time you denigrate the OP for holding themselves out as a guru. Irony is a sophisticated type of humor and I dip my hat to your sense of comic timing. You need to think about your motivation for posting... In your last post you give us the benefit of the three steps of successful trading, which is again, bog standard from any internet forum. You also note that 95% of whats out there about trading is not true. Perhaps you are a comic genius or perhaps you just haven't read this thread? What was you motivation in posting this? Think about it. The OP clearly states several times that this is not a thread for beginners, it's a thread to make you think. All of your criticisms have been endlessly rerun in this thread. We have heard it all before. This is one thread in a series of threads on the same subject. The OP/OP's paint a picture in the series its up to you to interpret what the picture is and how it may apply to your trading. You will not understand what the OP is saying unless you go through the entire series and think about it. OP states endlessly they will not just give it to you, but they are happy to help those who help themselves. There is a good thread set up in the psychology section to discuss the obvious. There are excellent thoughtful contributions, one post in particular is very very relevant. Don't take the above personally, just think about your motivation. Relax have fun. Regards TheBogan
OD is not necessarily wrong, though it's odd that he would wait four years to steer the thread into a direction more in line with what he considers to be the proper course. But, like so many others, he starts at a level that is out of reach for most beginners. Regarding "1", one can't find the trend unless he can define it. And defining it requires the ability to tell the difference between up and down. Start there. Regarding "2", trends, however one defines them, are not based on news but on imbalances between supply and demand. If there is no imbalance, there is no trend, whatever the news, if any, might be. Regarding "3", what is a "reasonably low-risk entry point" and how does one find it? This is not an inconsequential question. Beginners can spend five or ten or fifteen years or more trying to answer it. As for placing a stop below "the previous support/resistance level", what is that? And why would one want to place a stop there? Why would one want to use stops at all? Why not just exit if the trade isn't going as expected? And what criteria does one employ to make that determination? As is so often the case, words of wisdom appear to clarify until they are examined more closely. At that point, everything gets all foggy again and may eventually evaporate.
Simple, place a simple 200 period moving average on the chart and if the price is above that line the trend is up, if it's below it's down. There, you just mathematically defined a trend and you can backtest all kinds of trading ideas from there. This is of course just a simple example to illustrate my point, there are other (totally objective) ways to define a trend. Absolutely. In fact a systematic trader does not give a damn about the news and "why the hell the market is moving that way?", he only waits for a specific buy/sell signal from his trading system, period. Besides, the market can go up or down and the talking heads on the financial TV networks will ALWAYS give us an "explanation" later, from an already-made TV script The answer to that question: testing, testing and more backtesting. Because market makers know where the stops are and will hunt your stop if it is placed at an obvious support/resistance level, so you need to trick them and place your stop a little below/above these levels. Trade with no stop and then one day the market will wipe out your entire trading account after a price shock, especially if you are trading on margin. Even a wide stop is better than no stop at all. Currency traders who got crushed during the extremely volatile year of 2008 (when the market routinely jumped 1000 pips for no reason!) know what I am talking about... Sure, this is called a mental stop, but now you need to be glued to your computer for hours and hours. A stop allows you to walk away from your computer and do something else. Like sleeping for instance.
Regarding "1", one can't find the trend unless he can define it. Simple, place a simple 200 period moving average on the chart and if the price is above that line the trend is up, if it's below it's down. There, you just mathematically defined a trend and you can backtest all kinds of trading ideas from there. This is of course just a simple example to illustrate my point, there are other (totally objective) ways to define a trend. Yes, there are a variety of ways to define a trend and, yes, they can be simple. But one must nonetheless define "trend" in some way and then test one's definition to determine whether or not it is of any practical use. Regarding "3", what is a "reasonably low-risk entry point" and how does one find it? The answer to that question: testing, testing and more backtesting. Indeed. And forwardtesting. As for placing a stop below "the previous support/resistance level", what is that? And why would one want to place a stop there? Because market makers know where the stops are and will hunt your stop if it is placed at an obvious support/resistance level, so you need to trick them and place your stop a little below/above these levels. Even if this precondition is true, there are many "obvious" support/resistance levels. So one must first determine just what a "support/resistance level" is before he can determine which are obvious. As for placing a stop there once one has figured out what the levels are, much less a little below or above them, the problem remains. Why would one want to use stops at all? Trade with no stop and then one day the market will wipe out your entire trading account after a price shock. Not likely. Even 9/11 produced a drop of only a few percentage points. And why would one be long before then anyway? Why not just exit if the trade isn't going as expected? Sure, this is called a mental stop, but now you need to be glued to your computer for hours and hours. A stop allows you to walk away from your computer and do something else. Depends on how long one's trading session is. Mine is rarely more than two hours when daytrading. When trading dailies, the stuff I become involved with are not vulnerable to plunges. Even so, these plunges always provide a warning if one is paying attention. If one isn't paying attention, he shouldn't be trading. Point is, one can't just come up with yet another list and expect beginners' problems to be solved. The answers lie in the details, and in the time and effort required to iron them out.
I can assure you that there also ways to mathematically define support/resistance levels, and then backtest their predictive power. But shhhhh....cannot say more... And yet some future traders with 20 to 1 leverage account lost millions that day. Even worse, in the currency market, on a 100 to 1 leverage account, the market only needs to move 1% against your position to take 100% of your margin money. Absolutely. It could take years of study just to find/create a profitable trading system. And even more years to acquire the necessary discipline to trade it without ever deviating from its rules.