Saturday, January 17, 2009

Are you ready to quite?

There is a forex trader named Ryan O'Keefe. You may have visited his blog. He has a post up about traders who have started out with great intentions and have almost blown up their account. If this is you, your might be asking yourself is "Are you ready to quit?".

Even if you're not ready to quite, this is worth a read. The theme is simple but not stated. When your having a rough go at it, make your trading plan simple, dumb it down. Trade only one pair, use only one system, trade a demo for a bit, talk to someone about your trading if there is anyone available.

The biggest problem you'll have with this is patience and waiting. If your trading only one pair and one system, you may go quite some time, days or weeks before you get a signal. This is part of the training. Wait for the right time. If you miss it, wait for the next one.

I use a trading journal, it is a royal pain in the ass.... but I fill it out as soon as I enter an order, when the order triggers (now I'm in the market), as the trade progresses (still in the market, recording my thoughts as well as target and stop adjustments and why I made them), and when the trade exits. Once I'm out I look at the chart, using hindsight since it is 20/20, to see if I read the situation correctly, and managed risk effectively. I have noticed that the losses that hurt the most were the ones that I had placed the stops at a point to far away for my comfort zone.

Where to place the stop and target? This pretty much defines if I get decide to enter or not. I identify the target and initial stop first, if the risk/reward ratio is less than 2 I don't consider it. If it is greater than 2, I now look at the position size. Here is the problem I had with this.... IB has a minimum order size that I'm not comfortable with for some trades, the stop placement would be too much of a $$ loss. So I opened an account at MBtrading, they allow smaller lot sizes. I haven't placed any trades on their system yet. One I start it up I'll post some trades and ideas.

So the whole point to the post is to "get back to basics" and follow the rules you made up in your trade plan. That is why I am reading my trade plan tonight, and every other night, until it is burnt into my brain.

Good trading!

Disclaimer

The information presented on this site is for educational and entertainment purposes only. This site contains no suggestions or instructions that you must follow, do your own research and due diligence before committing your cash to the markets. Your on your own.