GBPUSD short positions

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Permalink Reply by Rachel Downs on November 16, 2011 at 2:02pm

Hmmm, can you be more specific? How is it less efficient? Isn't trying to analyze indicators less efficient because they are just showing price action in a different form? I don't see how trying to find trading signals from the combination of 2 or 3 or more indicators is more efficient than just watching for price action setups? I don't understand why you assume a trader's returns will be worse each month with price action trading? I think you would need some hard evidence to back up that claim.

Permalink Reply by Rachel Downs on November 23, 2011 at 3:07am

Wow, very good post Lisa! I read the whole thing. I tend to agree with most everything you said. Thanks!

Permalink Reply by Peter jcp on November 16, 2011 at 6:55pm

Hi Rachel - I have nothing against the idea of naked charts and just using price action - but from my own experience can prove it is less efficient. I need to explain in more detail which i will do - but I would probably need a few pages to do my findings justice. I certainly dont regard myself as a Forex or Trading expert but cannot understand why other so called experts have not wanted to discuss this matter in more detail.

First - my own backgound - I have been currency trading just over 7 years with the last 3 years being full time. My previous background  included an Economics degree and Accountancy training which lead me to a successful business career before semi retiring and entering the world of Forex. It took me over 3 years to realise there is so much rubbish talked about this market place and also so many untruths - so lets discuss some facts.

There is no one "holy grail" as you know - but ideally any trader would prefer to be 90% accurate rather than just 60% accurate? I appreciate some traders will say that does not matter as i can make money just getting 40 out of 100 trades correct because my Risk to Reward ratio is over 1 :5 etc. Well yet again would it not be better to be say 80% correct and still have R R trades of over 1;5?

If you say yes to these first two questions - it shows you want efficiency in your trading. If you disagree and say no - I am not bothered than carry on trading naked on a 4 hr or daily chart

See Price alone is not enough  - we need to know were the price will be in say 30 mins or even 2 hrs or dare I say in 3 days - which as you probably know is more difficult to predict. So to predict we need leading indicators - but for very high probability it is no good having major support 50 or 100 pips away from were price is. Many use candle patterns etc - but alone they are still not enough. Trendlines assist but are still not enough. The visual eye and the brain needs help - although i will say if you are a really experienced trader with over 10 years and 10's of thousands of trades - you will be fairly efficient trading naked - but for any trader with less than say 2000 trades and under 5 years-- naked is not helping you.

As of today I trade all ways from monthly charts down to tick charts. I do have the odd naked chart to view but to get down to 5-10 pip stops and trades with R R's of 1.5+ i need more help. From my own experience i trade between 3 to 10 trades a day. Over 15 trades a day i am less efficient - but doing say just 1 or 2 trades a day is yet again less efficient - pip total are irrelevant - R R and high probability is the key - so you can compound and grow your account quicker with lower drawdown.

 

For me starting the day and being prepared to use 2% of my capital on trading - i would prefer to have a trade with a 10 pip stop make 30 pips in under 30 minutes - than a  trade with a target of 120 pips needing a 50 pip stop. The first trade is efficient - because the result is know in a short term and i can make more trades etc . The second trade might take 2- 8 hrs to complete - inefficient with also a worse RR of less than 1 :3. But to have small stops and high probability trades in short time space - you cannot use naked 4 hr charts - and even on naked 1hr charts its difficult. OK say naked 5 and 15 mins with really good experience you will be OK. Its ok for fund managers and investors to use these charts - as they view 50--200 pips as "noise" - but yet again they only achieve 20-50% annual returns. Top intraday traders want that per month. Also if you are trading with larger lots sizes of over 100 per pip - your method of trading might be more restricted- but normally in retail online you can get an entry in a few seconds or certainly under a minute

I do use other factors off the charts to assist my entry and exits - the most important one being time. I achieved a trade on October 31st in the pound making a R R of 1 :15 in under 40 minutes using a 7 pip stop. Unless you are extremely experienced it would be very difficult for a naked trader to use less than a 15 pip stop and so they would not want to use the same stake -as their risk would be higher.

I will admit i have not read many articles discussing these points - many traders think if i am making money and doing ok - why change anything?. Instead due to my accountancy backgound ( forget the economics - a waste ot time for intraday technical trading ) i am looking at ways to improve my returns and my performance- and also to make trading more fun and easy. Some days i can achieve my normal daily target in 2 trades within a hour - and then stop. But I dont because i am still learning and wanting to improve. Hope this as explained more - and any more questions etc - please dont hesitate to reply - have a good month

Permalink Reply by Rachel Downs on January 4, 2012 at 6:41pm

OK, I still don't agree with a lot of what you said, good luck winning 80 or 90% of your trades...

Permalink Reply by Peter jcp on January 4, 2012 at 6:57pm

Hi Rachel - yes HNY and have a profitable trading year. My own win ratios lie between a poor 68% and a good 78% based on thousands of live trades last 3 yrs etc. I have never been able to get to 80-90% ratio - unless you count just taking a small sample - say less than 20 trades - but on a bigger sample of over 100 trades I think it would be very difficult to achieve over 80% on intraday trading.

I believe there are some traders who go years with no losses because thy make a smaller of number of trades - with no stops or hedging and then only exit with a profit - whether it takes a day or 2 months. Not for me as you lot size as to be very low and so not efficient.

Also i dont know whether you might be aware  - but even with a win ratio of over 70% its still possible to have 7-10 consecutive trades go wrong in a period - and with ony a 50 % win ratio you may get up to 20 trades go wrong in a row over a large period or number. Thats why MM etc is so important and RR ratios to keep you in the game and make good ROI 's - all the best Peter

Permalink Reply by Rachel Downs on February 8, 2012 at 8:26pm

I agree that RR ratios are key, I just don't know anyone who wins 80% of their trades. I have always been told that most traders who are very successful typically only win around 50% of the time.

Permalink Reply by Peter jcp on February 8, 2012 at 9:09pm

http://learncurrencytrading.com/Micro/KOM/KOMAugust2010/CASS082010.pdf

Hi Rachel - Heres an example of a real true "retail" trader who knows what he is doing. He would not dare to try and do this every month ( ie over 1000% per month) and have over 85% success rate on well over 120 trades with low drawdowns - but there again he is a "trader" not a hedge fund investor who are happy with 25-50% per annum.

PS- Lisa - I reckon you even believe Politicians never deceive or lie ( lol)

Permalink Reply by Peter jcp on February 8, 2012 at 9:47pm

LOL - do you know who the trader was Lisa ?? - I do - yes it was in a competition and yes it had to be on a micro account with approx $1000 and deadline in a month.

The facts are no hedge fund guys could employ these type of traders because they do not fit their criteria, This was not rigged and i can even show you further proof  of another trader ( not me) who on a live account did over 150 trades in a month and had over 84% accuracy - and no loss was more than 2% draw down - and the techniques he used you would not read about in any manuel or from any gurus. PS - not a robot - a manual trader

Keep getting hooked by all your old guru guys : -) lol.

PS - am I a myth ???

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