Why Is The Obvious Not So Obvious?

[Ricky Roma]

When the OP started this thread, over 13 years ago, I doubt they expected it to run to more than a few dozen posts.

And to think it all began with such a simple question:

What is the obvious pre-requisite to trading any market?

Hi Ed48...I see you've been following this thread for a while. Do you think you are any nearer to discovering the obvious pre-requisite?

For me, the following pre-requisites would be necessary before trading any market ...

1. Knowledge of the market's trading hours and times of imminent data releases (if LTF trading)
2. Define your risk amount per trade...get comfortable with fixed losses. Make the profit the uncertainty. Most traders are happy to accept fixed TP's but uncertain what to do with underwater positions. Bad for the mind.
3. Know where price has been the previous day, week, month. Define your line-in-the-sand for the current trading day..only longs above line and shorts below line.
4. Look for the average stop hunt distance (in pips) above recent HH,LLs

And here is the problem...now i'm starting to get into things that just don't seem "obvious". We can try and work a strategy where price has broken thru a line of highs with a quick 20 pip up spike ..and is near 100% ADR for the day. To short that might look like a good risk to take..with a clearly defined stop in place..SHABL.

What's the "obvious" then in simple terms? Do the opposite of what the herd does? Our human brains are programmed to snatch profits and become all confused when trying to handle a loss situation. All markets know this. Whether it's programmed into an algo or it's just really a self fullfilling prophecy.
Here's an interesting thought I had. What if the day came when there were no human traders left..only machine v machine. That can't be allowed to happen right? The way I see it, trading (regardless of the market you trading) is just human fear and greed on a chart. Machines don't have the complexities and frailties of our dear brains. And in any case, the markets WANT and NEED to take our savings..so they ain't gonna stop !

Anyway, I'm rambling on and I guess my posts are becoming repetitive as I seem to have hit a brick wall in trying to understand this. I like the idea of this thread but it's so damn infuriating !

 

[Ricky Roma]

Also..we're in the "risk Management" forum section.
Is that by chance or is it a big clue?
Control your losses and everything else falls into place...eliminate fear and greed

 

[Ed48]

Hi Ed48...I see you've been following this thread for a while. Do you think you are any nearer to discovering the obvious pre-requisite?

I've heard it said that 95% of all traders fail. Probably only a very tiny % are highly profitable.

Are the top traders successful because:
a) they have some innate ability; they just happen to be wired to be good at it?
or
b) they've had an extraordinary run of years of good luck?
or
c) they're doing something that all the rest aren't doing?

According to the OP, the answer is (c). But that something ain't risk management and position sizing.

Given the odds of being successful are so slim, the obvious pre-requisite is to find out what that something is. Otherwise you are probably doomed to fail like all the rest.
.

 

[Ricky Roma]

Do you think you are near to finding out that "something"?
If it's true that 95% fail (a stat I am aware of too) then surely doing the OPPOSITE of what the herd are doing is a good start?
When I started trading I was obsessed with winning trades. I'm pretty sure we all start out that way..the endless quest for the Holy Grail...a system that has no losers. But I think after the wasted years pass we realise that, just like any other business, losses are inevitable. We MUST account for them.
You say the "something" ain't risk management, but I'm convinced that has to be a major part of it. It just may not be the SPECIFIC "something" that this thread hints at.

After my first year or two of trading I sat down to try and analyse where I was going wrong. I mean I could have between 10 and 20 winning trades in a row, but at the end of the year I was barely profitable. The losing trades were always the same...BIG. Adding to positions as they go against me..trading on HOPE. But a lot of those winning trades had add-on positions too. It's a fine balance. It's ok to add on up to a point..but I never managed to define that point. Trends and ranges. The two polar opposites to mess with the human mind. Is it any wonder that any black-box trading system is doomed to fail over time?

 

[Ricky Roma]

5. The best party to join is one where you have proof that everyone is happy.

Ok, interesting. So..not just trying to get in on tops and bottoms, but maybe waiting until the turn is fully established and grabbing that slice of onward momentum?

 

[Ed48]

Buy Low does not mean Buying The Low point of a swing!
If I wanted to imply that then I would have said BSLASH
Another big misconception held by the majority of traders!

Trade entry is the most important thing ever, but this should be "obvious" to even a child, as if you get it wrong from the start, the odds are stacked way against you...

I will leave you with a few ponderings!
A. When a stock price is moving up you buy it.
B. When a stock price is moving down you sell it.
C. When a stock price is not moving you do not hold a position in it.
Question:
What do you do when a stock price is moving up and down?

 

[Ed48]

So..not just trying to get in on tops and bottoms, but maybe waiting until the turn is fully established and grabbing that slice of onward momentum?

There is a trader on another site that uses what I think is a sort of automated momentum system, and the logic behind this is very acceptable.

 

[Ricky Roma]

Ok Ed48.. yes, from the NS quotes it does look like he's implying to wait for a turn like I was thinking. Maybe multiple timeframe for added probability? Turn in H1 ..wait for next turn in M15...time entry on next M5 turn. Can set stops tight below the M5 turn and not all the way down at the H1 swing L/H. Might have a couple of stop outs before getting on board but the beauty is you can then target the other end of the H1 swing.

What are your own thoughts on it?
Regards
RR

 

[Jzwu2017]

It’s an edge itself to be able to tell a real trend turning point, which is by no means easy or obvious. When everyone realizes the turning it’s often too late.

 

[Brent Nicholson]

True. Imo, to trade forex profitable knowledge, understanding about the market, skills and experience are mandatory.