newbie question(s)

M

malaka56

hey all. ive been lurking around ET posting every now and then with questions about trading. FX interets me a lot, and i have a few questions for some of those that may know more.
First, is forex considered a non-zero-sum game or zero-sum? In FX trading it seems pretty zero-sum to be, but theoretically money can be printed and "made", so...

also, i have been demo trading for a while with Oanda. i got some FX technical basics and stuff.
What time frame do you personally generally trade in? swing, intraday, etc? how long do you usually hold a position, and how many different "indicators" or whatever do you need giving the green light in order for you to take a position?

seems a lot of people are using 5 and 15 minute chart. do these work mostly for intraday traders?

although im interested in learning more about the fundamental side of trading, FX seems to lean toward the technical side a lot, and technical tools are easier to come by if your a home based retail trader like me. Oanda seems lacking in indicators, a lot of of the obscure crazy japanese ones im interested in arent available, along with fibonacci stuff, or at least im not seeing it...

so far, im trying to get a feeling for candlestick reversal patterns (hammer, shooting star, engulfing, doji, hanging man), bollinger bands, and RSI. these all seem to be well respected by a majority of people as useful indicators. any input would be great.

As for news, i havent figured out really how to even use it in trading. its quite confusing (again im reading seem news feeds on the oanda demo), and i suppose pure technical traders dont use news, but i would like to be balanced and learn both sides of trading.

i guess i just wanted to put a little info out there on what im doing, and see if anyone had input/suggestions. anyway, thanks for your time.
 
Quote from malaka56:

First, is forex considered a non-zero-sum game or zero-sum?

It is a negative sum game because there is a broker involved.

What time frame do you personally generally trade in? swing, intraday, etc? how long do you usually hold a position, and how many different "indicators" or whatever do you need giving the green light in order for you to take a position?

I am a position trader. I have been doing this since June 1995. For me to hold a position for a week is common. However, it must be profitable. I will stack my profitable positions. Presently I am long USDCHF since Wednesday of last week. I have been stacking from 1.2788 to 1.3100. I keep my losses small and do not like to carry them from day to day. This reduces the stress of trading. I use 3 technical indicators. What is important is that I know under what conditions they work and do not work. The most important indicator, though not a technical indicator, is price.

seems a lot of people are using 5 and 15 minute chart. do these work mostly for intraday traders?

I don't know. I've never met a successful FX day trader in my 10 years. Maybe they have all been hiding from me. :) When I started in June 1995 with this currency trading firm in San Francisco, the majority of the traders there were day traders. After some time, they were all wiped out.

so far, im trying to get a feeling for candlestick reversal patterns (hammer, shooting star, engulfing, doji, hanging man), bollinger bands, and RSI. these all seem to be well respected by a majority of people as useful indicators. any input would be great.

Study Elliot Wave Theory, Sun Tzu, and Zen. Read biographies on successful people. Be modest, patient, and disciplined. Understand correctly how risk-reward influences the outcome of your trade. I say this because I once read on this forum another poster recommending a trade that calls for a bottom in a downward trending market. Calling for a bottom or a top in a trending market is very foolish. How many times do you think you will be right compared to how many time you will be wrong? It just is not worth it. Learn to make the trend your friend. Of all the markets, the forex market is known to trend the most. Take advantage of this. When the market trends, you don't have to get in right away. Exercise patience. Look for a retracement level, then get in.

As for news, i havent figured out really how to even use it in trading. its quite confusing (again im reading seem news feeds on the oanda demo), and i suppose pure technical traders dont use news, but i would like to be balanced and learn both sides of trading.

You must learn to anticipate news if you want to be an elite FX trader. Take for example my USDCHF trade. I knew that it was being driven down because the market did not want to take a chance if the European Central Bank decides to raise rates the following day. I felt the move was overdone. So I placed a limit order to buy USDCHF at 1.2788, 61.8% of the move from 1.2694 to 1.2882. I waited for the ECB to announce. When they did announce that they would keep rates the same and Trichet did not come out with a hawkish statement, I knew it was time for me to build the position. I also felt that the market would not make a move until the ECB makes a rate decision. I was correct. So you need to learn how to read the market too. I also used Elliot Wave theory to help me. I believed at the time that the move from 1.2928 (Oct. 3 high) to 1.2694 (Oct 28 low) was a flat zig zag corrective wave, though not perfectly flat. The move from 1.2694 to 1.2882 I thought was wave 1. So I tried to catch the beginning of wave 3.

i guess i just wanted to put a little info out there on what im doing, and see if anyone had input/suggestions. anyway, thanks for your time.

Sure. In regards to trading a system, you must not let your system blind you. Systems do not work all the time. A lot of these guys who are system traders can't produce the stellar results that a discretionary trader can produce. They don't have a strategical mind set. Furthermore, they don't want to work as hard as a discretionary trader. I usually wake up a couple of times at night to check on my position and I am CONSTANTLY thinking. I can assure you that it is worth it. Gain Capital is currently quoting USDCHF at 1.3155/60. I am floating a profit of $36,911.44 since Wednesday of last week. I will be unloading everything at 1.3220 for a profit of about $44K. I recommend that you have 6 months to 1 year of savings as well as about $20K in trading capital, the more the better of course. It will take awhile before you get your feet under you. Even some of these guys with 1+ years of FX trading experience don't seem to get it.
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Deptrai - congratulations on that shrewd & profitable USD/CHF trade. You obviously have confidence in your broker's trustworthiness and net capitalisation to place what I am assuming to be a fairly substantial amount of money with them in order to be able to execute such a trade. As you advocate $20K or preferably more to give yourself a fighting chance of success in forex - can I ask the choice of your " safe harbour "?
 
As usual you are providing the kind of "advice" that will get a new trader into trouble.

First, any new trader should avoid Forex as it is not regulated. Instead look to US exchanges to trade currency. Please go to
www.cme.com to get more information about this subject.

Second, the idea that anyone can make consistent money using Elliot wave theory is laughable. Since there is no single "gold standard" for that theory, a new trader is likely to find it confusing and the bottom line is, Elliot wave doesnt work. If it did work, by now it would have become part of the mainstream of professional practice. Reputable professionals consider Elliot Wave to be about on par with Astrology.

Finally, a new trader wishing to trade currencies must have some basic understanding of how the banking system functions in order to make informed decisions. Learn the basics first, then trade.

Often traders learn by finding entry level jobs in the industry, or by making contact with a mentor who is willing to teach. This is very difficult. In my opinion, the best foreign exchange traders in the United States work (or used to work) for Citibank. Overseas, you can find good reputable foreign currency traders at the major banks. As you can imagine it is very difficult to get them to disclose their techniques to the public. You have a long road ahead and I encourage you to go slowly and be very hesitant to put money at risk.

Steve
 
Quote from Deptrai:

Quote from malaka56:

First, is forex considered a non-zero-sum game or zero-sum?

It is a negative sum game because there is a broker involved.
years of FX trading experience don't seem to get it.
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Deptrai, if it's a negative sum game then it should not be worth your time.
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Negative sum games can be beat. Whether it is worth it to play depends on the the degree to which your edge overcomes the negative sum.
 
Quote from Deptrai:

First, is forex considered a non-zero-sum game or zero-sum?

It is a negative sum game because there is a broker involved.
More...

To state that "forex is a negative sum game" is flat out wrong. Especially for the reason given.

It is not even a zero-sum game.

Fact: forex is a positive-sum game for the speculator.

Why is that so?

Think about who the different types of participants in the global currency markets are.

Now think about what the motivation of each one is.

Finally, think about what the definition of a zero-sum game is.

That logical process leads to the correct characterization, shown in italics above. If anyone has trouble filling in the blanks, I'll elaborate.
 
Quote from PipGoddess:

can I ask the choice of your " safe harbour "?
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Gain Capital. I have been with them for 5 years since I left San Francisco for Orange County. Take a look at the USDCHF thread. I think that wave C is over and now we are in a bigger wave 3.
 
Certainly, Elliot Wave Theory is hard to accept. I too doubted it when I started 10 years ago. Then as time went by, I saw that there isn't anything wrong with the theory just the way I am using it. That is why you don't see it used by everyone because most people use it incorrectly. The wave counts on some exchange rates are easier to identify than on other exchange rates. That is my insight. Anyway, this is not a classroom. You are trading your own money. Do with it what you will. Just don't ever say, "Geez. I wish there was an elite forex trader who told me about Elliot Wave theory and demonstrated how I could profit from it with real trades." Remember, the proof is in the pudding. As for why I wish to compete in forex trading if I believe that it is a negative sum game, let me be very frank. I believe that I can beat most of you. I am sorry if it offends you, but I have been in training from day 1. I never stopped learning. I work harder than most of you and am more focused than most of you. My views on life and trading are probably very different than most of you. In other words, I have a competitive advantage. My apologies once again if I have offended you. I am sorry. I too was once a bad trader.

Regards,

Deptrai
 
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