Simplicity
Is Best for Trading
Currencies and Commodities Futures
I primarily trade foreign currencies and live
cattle market, using 2 simple trader methods for futures
trading. It took more than 10-yrs to boil my trading
down to simplicity and finally profitability. I
tried Gann, Elliot Wave, complex technical systems,
chaos, volatility breakouts, optimizations, other
people's systems, etc. Not to say that these systems
are unworkable - just didn't work for me. My conclusion
is that you have to find your own way and trading
simplicity is best.
You should concentrate on the pure beauty of price,
the immediate market action and try to internalize
trading wisdom from master traders. For example,
famour old trader Jesse Livermore said you should
wait for extreme price movement and then place your
trade risking a small amount. I have made this wisdom
part of my gut and trading plan and I wait for these
trading opportunities.
I will describe my methods of trading live cattle
and currency. If readers have any suggestions or
comments, I would welcome them. I do not trade in
isolation and contrary to many others' methodology,
I believe two heads are always better than one.
Fundamentals work well with live cattle when combined
with Seasonals and a technical entry system. I watch
the trend of cattle weights, box and load movements
and carcass price equivalents. These fundamentals
measure supply and demand. My technical entry system
is very simple. I go long as the oversold RSI begins
to tic up and short as it tics down from overbought.
I use a 10-bar RSI. I never short in the winter
or go long in the summer. My entry is at the extreme
and I risk no more than $1.00. If it fails, I wait
some more. That's it. It is a slow but steady moneymaker.
With currencies, I'm about a 75% technical trader
but use reaction to news as my fundamental filter.
Over the years, I have found that what works with
currencies are always changing. Sometimes you need
to focus on forex markets, bonds, gold, the S&P,
Mexico, European markets, Japan and always the
Federal Reserve.
I keep a little book with columns listing the fundamentals
and what the crowd is focusing on. I note crowd
reaction to the news. Along side of that, I record
net changes in prices of bonds, all the currencies,
CRB index and the S&P. I will not enter unless
all indicators point in one direction. If they are
all dollar bull, I will short the weakest currency
at a time the momentum is really pushing hard. I
place my stop over a swing high and will quickly
move my stop to break even on the next swing.
I have found the greatest trading risk of a trade
is when you first put it on. I have learned from
market expert Joe Ross the important thing is to reduce
risk as soon as possible and try to put your positions
on at the time of least risk. This method works
for me, as it meets both of these criteria.
reprint permission from webtrading.com
Forex Course:
A Quick Forex Guide for Traders
In this Forex course we will review some steps
you need to take care before you venture into your
trading journey. Most traders venture into the Forex
market with little or no experience in the Forex
market. This results in painful experiences like
loosing most of the risk capital, frustration because
it seemed so easy to make money, etc.
The first thing you need to realize is it's far
from easy to make money. As every other endeavor
in life, where important rewards are to come after
mastering it, you need to work hard. You need to
get very well educated and experienced before having
the possibility to receive important rewards on
it. The key on mastering the Forex market relies
on commitment, patience and discipline.
Ok, you have decided you are going to trade the
Forex market, you have seen several advertisements
featuring how easy is to make money in the Forex
market. You might think this is your opportunity
to reach your financial freedom, right away, time
is money, why waiting any longer if you have the
opportunity to make money now. I know, I've been
there, but you have a chance now, I didn't, no body
told me what I am going to tell you.
We, Forex traders, make transactions based on a
set of rules. These sets of rules are what we call
a Trading System. Our systems tell us the exact
time where we need to get in the market and out
the market in order to make a profit (i.e. buy low
sell high.)
Creating a forex trading system is the first big step you need
to take care first. Why is this so important? Because
you need to build a trading system that suits your personality,
otherwise you are going to find hard to follow it,
thus hard to profit from. A system can be based
on technical indicators or what we called a mechanical
system or based on experience and intuition or what
we call discretionary systems. I highly recommend
using and trying first a mechanical system, because
discretionary systems are dangerous during the early
stages of a Forex trader (can lead to indiscipline.)
With experience, on later stages, you will find
out which signals work better and which ones to
avoid.
The next step in this Forex course is to try your
system on a demo account. Most Forex brokers offer
a demo account, an account with virtual money. This
is an excellent choice to test your trading system
as there is no money at risk. In this step you will
figure out if the trade strategy works for you. If you
feel comfortable trading it, then it is most likely
to produce good results. How much time should you
stay in this step? It varies, but you shouldn't
go one step further until your system gets consistent
profitable results over a period of time. It can
take many months, but remember, you need to be patient.
You must be honest to yourself; you need to take
every single signal generated by your system, not
only the signals you thought were going to work,
otherwise, you are going to have problems in the
next two steps.
Ok, by know you had consistent profitable results
on your demo account. You might think its time to
go full. Nope, nope, nope. There is a big difference
between trading a demo and a real account. The most
important difference lies on emotions (fear, greed,
anger, etc.) These are psychological barriers that
affect every single decision made by traders regardless
of what he/she is trading (stocks, bonds, Forex,
futures, grains, etc.) These emotional factors,
in my opinion, are the most determinant factor that
separates profitable traders from the others.
The next step in this Forex course is specially
designed to deal with emotions and to confirm the
results obtained in the prior step (consistent results
in a demo account.) At this step you need to trade
in a real account with limited funds. Some brokers
offer fractional lot trading. Meaning you are able
to trade any desired amount (even cents.) The important
thing here is that these emotions we've been talking
about are present only when there is real money
at risk.
At this stage, you are going to see if
you are really comfortable trading your system and
if you are able to trade with such system, remember
different trading systems produce different emotions. If
you are able to produce similar results than those
obtained in a demo account, then ready for the next
step. If you didn't, then you might need to create
another system, there is chance your system never
fit you. If you created consistent profitable results
on this stage, you have a chance to produce similar
results in the next one, on the other hand, if you
didn't produce good results in this stage, you will
not be able to make on the next stage. Remember,
you need to do things right, and be honest to yourself.
The last stage is trading in a real account with
sufficient funds. If you are at this stage, and
have passed successfully every prior stage, then
you have a chance to make it, go ahead and try it,
you need to be confident in yourself and in your
system, your strategy have already produced consistent
profitable results, there are reasons to believe
you are going to make it. Very few traders fail
at this stage (if passed successfully prior stages.)
Trading successfully is no easy task, it requires
a lot of work, patience, discipline, and education.
By completing the steps outlined in this Forex course,
you have a chance to produce profitable trading results.
I repeat it again, you need to be honest to yourself
about the results obtained in every stage. Some
times you might need expert guidance regarding your
forex system development strategies.
reprint permission from
goarticles & Raul Lopez who is a full time Forex trader; his
trades are based on a price behavior approach. Raul
is also founder of straightforex
a high quality Forex training company.
