My Advice for New Traders
If someone was ready to start trading and had a basic understanding of the markets and asked me for some of my best advice on how they could make money as a trader, this is what I would tell them.
- 1.Understand that trading is like any other professional endeavor, you will be monetarily rewarded based on the effort and work you put into it to learn how to trade. Trading is one of the few fields where amateurs can go compete with professionals with a very low price of entry. Your trading tuition will have to be paid through the experience of losses and time doing your homework. You will get out of trading the effort you put into it.
- 2.If you have to get others opinions about your trade, asking others advice on entries and exits, then you really need to stop trading and work on a detailed trading plan that gives you a road map of how manage a trade. If you don’t have a trading plan every thing you do is random. There is no edge in randomness.
- 3.Do not waste your time on searching for the Holy Grail of trading, an easy money, can’t lose, trading method does not exist because markets change in cycles. Trading is always a competitive event between traders and market conditions are always changing from volatile to stable and from trending to choppy, so nothing works in all market environments.
- 4.Successful trading is based on your winning trades collectively being bigger than your losing trades are collectively. So your goal is to either trade a system with a few huge wins and a lot of very small losses or a high winning percentage system that keeps the losing trades controlled.
- 5.Do not look for a good trade, instead look for a great winning methodology to trade with. Have the right trading process and the money will follow eventually. Looking for easy money in the markets is the process for losing money.
- 6.Your risk management while trading will determine your trading success more than your method. You have to make it safe to be wrong a few times in a row and not lose all your trading capital.
- 7.If you want to be a successful trader then focus on what is actually happening with price action and stay away from your own opinions and biases of what should happen. Wanting to be right for the sake of your ego is another expensive game. You can’t predict a nonexistent future.
- 8.You can’t use anyone else’s system, you have to trade a system that fits you. One that you understand and can trade with discipline because of your confidence in it and yourself.
- 9.Look for and find your own edge. What are you the best at doing in the markets? Some are masters of shorting, others trend following, some are great at selling options that expire worthless. Usually the type of trading you are the most passionate about gives you the drive to research it until you find that edge.
- 10.Master some aspect of trading, find something to be an expert on. A market, a stock, IPOs, options, futures, day trading, trend following, etc. Don’t be a jack of all trades, be a master of one type of trading.
The 10 and 20 SMA with 200 SMA Forex Swing Trading System Is A Very Simple Swing Trading System You Can Implement WithoutAny Difficulty At All. But First Lets Talk about Moving Averages… WHY MOVING AVERAGES ARE USEFUL There are two main reasons why moving averages are useful in forex trading: moving averages help traders define trend recognize changes in trend. If you see any forex trading strategies that have moving averages in them, the use of moving averages would be pretty much related to the two reasons given. I don’t want to bother with too many details about moving averages here…so moving on. THE TWO SIMPLE MOVING AVERAGES(SMA):10&20 SMA’s With this swing trading strategy, when the faster SMA, 10, crosses the slower SMA 20, it often signals a trend change. So when you see 10 SMA cross 20 SMA to the upside then you know there is a great possibility that the market is in an uptrend. If 10 SMA crosses 20 SMA to the downside, then you know there is a great likelihood that the market is in a downtrend. The 10 and 20 SMA with 200 SMA Forex Swing Trading System Trading Rules Trading Timeframes: Stick to 4hr timeframe and the daily Timeframe. After the faster 10 SMA crosses the slower SMA 20 look for these reversal candlesticksto enter your trade For Selling, look for bearish reversal candlesticks and place sell stop order 5 pips under the low of that bearish reversal candlestick for buying, look for bullish reversal candlesticksand place your buy stop or buy stop order 5 pips above the high of that bullish reversal candlestick. Place your stop loss above 5 pips above the high of the entry reversal candlestick if you are selling and 5 pips below the low of the bullish reversal candlestick if you are buying. Set your take profits to 3 times what your risked or look for previous swing high/lows and use these price levels as your take profit target. How To Use 200 SMA With This Forex Strategy Now as an added measure to ensure you only trade with the main trend, the 200 SMA can be used a further filter. if 10 and 20 sma are above the 200 SMA only take long positions. if 10 and 20 sma are below the 200 SMA only take short positions. This ensures you take trades only based on the significant or main trend which 200 SMA gives you an indication of. Did you enjoy this? It would mean the world to me if you shared it:
Swing trading inside bars is a simple trading pattern where one or many bars are contained between the high and low of another known as the “mother bar”. Often times, depending on the length of the inside bar pattern, it will appear as a triangle on your chart. Swing Trading Inside Bars This is a breakout trading strategy that you can use when price has found itself near levels of support and resistance. Using Inside Bar Candlestick Pattern At Good Areas Since the inside bar indicates a lower level of volatility, it can appear just about any place on a chart and that is why you must have some trading rules about using the pattern. A few rules you may want to use for a higher probability trade and to avoid over trading are: How many inside bars do you need to see inside the mother bar? Does the mother bar include the low and highs or will you use the real body of the candlestick? Will inside bar trading only take place at obvious levels on the chart? What technique will you use to pull the trigger on the trade? What system will you use in placing your protective stop loss? Every proper trading system has rules and this strategy is no different. Without trading rules, you will fall victim to emotional trading and that is one of the fastest ways to dwindle your trading account to zero. Developing Your Own Inside Candle Trading Strategy Let’s take the 5 points above and expand on them as you develop your trading strategy. I want to focus on swing trading inside bars in Forex because even though FX is a 24 hour market, not all of those hours are worth sitting at your desk for. 1. How many inside bars do you need to see? Since the formation of this pattern indicates lower volatility (volatility compression) and indecision, the longer it plays out the more pent up energy is contained within the pattern. You could have multiple occurrences of them which will form a triangle or you may only have one. For trading patterns, the more the merrier for me and some traders need to see weeks of consolidation before taking a trade. multiple inside candlesticks pattern 2. Mother bar body or shadows? For simplicity, you could simply use the entire candlestick but there are arguments for both. Remember that each close on a candle is an acceptance and willingness of market participants to hold their position at that price. Where the close occurs with the mother candle may have you decide which part to use. 3. Obvious levels on the chart? You may elect to only consider swing trading inside bars when they present themselves at obvious turning points on the chart. What about seeing a large momentum move and then a series of inside bars forming at the highs? Depending on where these occur, this strategy may be showing a trend reversal or continuation. You have to know how to read price action to have your order leaning one way or the other. Two examples of location 4. How will you enter the swing trade? Some traders will wait for the break of the mother bar and others will look for a price pattern on a lower time frame to indicate an entry. Just keep in mind that at every breakout point, there can be a lot of volatility which could also include slippage. One technique is to look on a lower time frame to see if there is an indication like a pin bar showing up in a range inside of the inside bar pattern. You may find an entry in that zone. 5. Stop loss when trading inside bars You could elect to use the low of the mother candle but keep in mind that you may be the victim of a bull or bear trap if you use a tight stop. You may study using the ATR as a stop measure or, depending on the strength of the break, you may use a point inside of the pattern. Swing Trading Inside Bars Conclusion Swing trading inside bars is a great non-day trading strategy since, once the mother candle has formed and the amount of inside bars have formed that your trading plan requires has formed, you can set a stop order to be taken into the market. If using that method, you may want to use the ATR value x 2 at the mother candle. This way you will have a better representation of the range prior to the inside bars.
The RSI trading indicator is a price momentum measure that also uses overbought and oversold zones to show when markets may be overextended. It makes up many trading methods and we are going to use it with our 5×5 RSI Trading System. RSI = Relative Strength Index The RSI, although referred to as “index” is not really an index so the name is a little misleading. Just think of the RSI indicator as an oscillator that measures momentum over a set period (look back period) and will indicate when the momentum has pushed price to far in one direction (oversold/overbought). Oversold And Overbought Oversold is a term that is used when price is deemed to have fallen a certain distance away from the average price. This is a condition that is measured by the RSI dipping below level 30 on the indicator and is used in conjunction with a trading setup, usually a buy signal. Overbought is the opposite of oversold. When price has risen a distance from the average price, it can be deemed to be overbought and the RSI will be above the 70 level. Depending on the trading system, when the RSI is above the 70 level, the strength of price is considered to have been strong and a reversion is expected. This will set up a sell signal for most RSI trading systems. What Does “5X5” Stand For? Quite simply, it makes up the settings for the two trading indicators that will be used in the strategy: 5 period lookback setting for RSI – We will use levels 30,50,70. 5 period simple moving average (SMA) Other initial details about the trading strategy: Time Period – Any time frame can be used including short term for day trading or longer term charts for a swing trading approach with the 5X5 RSI trading system. Currency Pairs – You can use any Forex pair you like however keep spread costs in mind if considering trading the exotic currencies. How To Trade The 5X5 RSI Trading System – Forex Example Here are a few notes before you get to the rules of the Forex trading system: the 5 SMA Indicator is for determining trend direction if the price is is above the 5 sma, it is deemed an uptrend or downtrend if price is below the 5sma. the RSI is used as a confirmation Here is a sample buy signal RSI TRADING SYSTEM – BUY SIGNAL SETUP Buying Rules: Price closes above the 5 period SMA and is an obvious bullish candlestick RSI is above the 50 level. If this is the first cross over after a downtrend, that’s even better. Place a buy stop above the bull candle Place your stop loss about 5 pips below the low of the candlestick depending how your risk parameters. You can set profit targets, trail stop once price moves in your favor. Many ways to take profits. The sell signal is opposite that of the buy set up just discussed. RSI trading method short trades Sell Signal Rules: Price closes below the 5 period SMA and is an obvious bearish candlestick RSI is below the 50 level. If this is the first cross over after an uptrend, that’s even better. Place a sell stop below the bear candle Place your stop loss about 5 pips above the high of the candlestick depending how your risk parameters. You can set profit targets, trail stop once price moves in your favor. Many ways to take profits. Using RSI To Trade – Important Points About This System Remember that the RSI is a trading indicator, will lag price, and although objective, price action trading can help improve this system. Using price movement, especially how strong the candlestick closes, can bump up the edge you can have. You want to see strong closes or, as shown in the sell signal at #1, using price patterns such as inside bars and break from compression can help improve the system. If you chose to take more trades after the original trend change trade, you may want to see that the RSI indicator has dipped into oversold or overbought territory. This often times will set up a pullback in the price that can aid in triggering another trade depending on how deep price moves. Use stop orders for your entries as this will show that at least in the short term, momentum is in your favor. There may be times that the candlestick that gives the buy or sell signal is quite large. Either reduce position size or wait until there is a pause or retrace in price. There will be times that the RSI flips back and forth over the 50 line. This indicates choppy price action and you may want to highlight that price action with lines to show a pattern break. RSI AND CHOPPY PRICE ACTION Regardless of the time period you trade, you will run into issues such as price action that indicates chop. You do not want to implement this strategy during those times. Use standard price patterns to contain price movement and wait for the break of the price pattern to occur. Once the break occurs, return back to the rules for the RSI trading system