What's your Trading Philosophy ? Here's part of mine

Forex or currency trading is not buying and selling stocks and shares. It’s a different ballgame for me – a bit like comparing cars – ie a Ferrari and a Ford Bronco. They both have four wheels and an engine and seats and are designed to take you from A to B. However as any car enthusiast will tell you – they are so different a bit like “chalk and cheese”.

Talking of “chalk and cheese” or yin and yang - we all will have different views and ideas about how we can tackle this market - but we all have a common goal – we all want to make money and ideally a lot of it consistently without any major massive risks. (yes I think even me and Lisa would agree on that one ;-) )

I think though it is so important that we make our mind up on how we are going to achieve it simply because there is so much incorrect and wrong information out in the market place – and it can lead you on the wrong path.

You could say both good and bad tips have been passed down over the years – from Jessie Livermore and great traders of the past to Barbara Rockefellow – a forex trading veteran of only 25 years;-)

As far as I am concerned, I am still a novice, simply because I have not been live trading currency pairs over 10 years, However the fact that I have spend coming up to 6 years trading the EU day in day out as a retail trader on a full time basis, I have been able to piece together my own facts and thoughts, and develop my own philosophy.

Lets start by saying – not many forex traders are purely full time. I don’t know the actual stats – but ideally to go full time you need a few years under your belt. Over the last decade we have seen a big internet campaign on Forex trading as being the ideal part time business to make you very rich.

This as led to having millions of forex traders around the world and 70-80% of them lose money consistently and normally give up. If we say 10% of forex traders are full time retail professional ( note retail not commercial) then maybe only 20-40% of those lose money – the majority would be making money simply to remain profitable and to carry on.

My own philosophy is so different to so many other traders and tutors – even ones that are highly successful – showing that there are many many different ways to profit. Let’s go though say 20 of them that I like –

The Trend is your Friend – yes the trend is your timeframe. I follow trends to trade – normally my trends last less than 15 minutes and are small – but still give me RR’s of 2-5 in that time.
Risk to rewards are not the only important part of trading – agree ideally you need over 2+ but more importantly you need to have a system that gives you more wins than loses – ie 70% + success rate.
Those guys who say you only need to get 3 or 4 trades out of 10 correct to make money simply because the wins have RR’s over 6 - they are deluded – and inefficient ;-))
FACT – you make more money by doing more winning trades.
Overtrading is only bad if you are no good.
Let your winning trades run and cut your losses quick – true
The market is either bull or bear – don’t go against the flow – rubbish – ideally you can both buy and sell everyday – If I do say 10 trades on a strong bear down day – I would expect say 7-9 of them to be sells – but still 1 or 2 buys if needed.
Naked charts are the best – might be if you have over 10 yrs of experience.
KISS – keep it simple – what in the massive complex dynamic ultra sophisticated high tech fast trading market – wake up and smell the coffee – you need more than KISS ;-)
Big stops and big target are best – roflmao – talk about inefficient - yes OK ten or twenty years and I will be a millionaire ;-))
Small stops and small targets are a waste of time – LOL ( ok – I am not on £5k per pip – if I was I would be very happy with a 5 pip target every day ;-)
The market moves according to thousands or millions of trades around the world buying and selling – yes it’s a good story – but this market is so heavily manipulated its untrue ;-)
Fundamentals are far more important then technicals. Well I have got an Hons degree in Economics and for investing and long term trading – I would probably use it. For intraday short term trading its about as useful as tossing a coin- or watching the direction of your fridge magnet for a direction hint.
Trading the major news – big risk and also your in the hands of your friendly broker and its not like on a demo account.
Every intraday move bar one is false – true – stop hunting as become ridiculous
If you trade long term you miss the daily “noise” and have better success - yes right then – so you can predict the future –ie the next week and month and know all the news in advance and know everything that might happen that could have an effect on the pair you are trading.?
You have to predict even if you are only after 5 or 10 pip move. – correct – but with highly sophisticated technical info you have a higher probability of getting flows correct in under 15 minutes than you do over 15 hrs or 15 days or even 15 months – FACT
Psychology is more important than your strategy – rubbish, think about it if your strats was 100% and you never lost – you would not have a problem. The fact that most strategies are only 50/50 correct that’s why the psychology part is so important. You need an “edge” that you have to find yourself – it come over years of experience. Compounding also creates the psychogical problem ;-)
Money management is so important – true
Guru’s and tutors know all the answers and have the “holy grail” - roflmao again

You might not agree with my own philosophy – but that’s good as we are all different – with different logic and ideas – but all with a common goal in trading – to make a decent profit or return – which for me is not 30% per annum. Saying that if my capital account was £5 million – I would be content with 30% - but for accounts under £100k – you need to be doubling or more and with intraday shorter term trading combined with letting wins run – you can do it !!

PS – I notice a guy who we might know in this forum – is topping the FX contest this weekend after taking $25K to over $200k in a month ( 900% approx) – OK it was demo – and MM went out the window – but with proper MM and controlled risk 40% per month + is achievable – when you really know what you are doing ;-))

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Comment by Peter jcp on September 30, 2012 at 9:36pm: Good to see you back and around Split - and glad you like interesting reads. Please read also what Gissa has just added - as its another classic - that needs to be read twice to understand its full meaning - straight from his mentor - (known only as Goldfinger to the guys who know him)

Have a great October .

Comment by Splithand on October 1, 2012 at 12:45am: Again I can just follow the good Dr.s Andrews ruleset and fork it with a bit of MAs from the elders I trust wink wink nod fork it and hope the laws of probabilty are with me I do however believe in watchin the weekly forcast to avoid pitfalls & folks all the best no matter how we see it ty guys im coming back one step at a time like in learning to trade one step at a time>bit more than that not much though ty 4 the time and interest

split

Comment by Alan Hill From Sarrafx Trading on October 1, 2012 at 7:27am: OK, I was leading and was over 900% for the two weeks. Got it up over 1000% overnight staying up to watch the end of the Ryder Cup and had to trade!

I disagree with a few of the points (as I am sure you expected Peter). But rather than dissect your blog like an English GCSE teacher I will give you my overall impression of a market I only started looking at seriously two years ago.

Just to confirm my right to these opinions, I did my first FX trade in 1984 and have looked at the market from a number of angles ever since. Outside of the retail space, I have made markets, traded as a market user, traded on a proprietary basis and been a salesman advising both commercial end users and traders alike.

I disagree completely that it is possible to manipulate this market given its size.

The spreads in the Euro are a factor of liquidity. That is a FACT given to me by one of the biggest market making banks in the world.

The move to five decimal places is also a factor of the same effect and is something I do not believe in. It has allowed HF trading to proliferate and that is a far greater risk to the day trader than supposed manipulation could ever be.

Keeping it simple is a relative term; what is simple for Einstein clearly isn't simple for me. After all the market isn't all that complicated so why should anyone's method be any more complicated.

There is no trading methodology that works all the time and using money and risk management is the way to beat the odds. After all by being a successful day trader that is exactly what you are doing.

I agree that experience is everything but it must be relevant experience. Theory and practice are two very different animals.

It is way too easy to become influenced by someone because he has been successful in the Past. The proliferation of social and copy trading is, to me, a very hard phenomenon to follow. It is impossible to know enough about a trader to decide follow him. To a certain extent it defeats the reason to get into trading in the first place. Yes it’s about being profitable but how you make your profit (or losses) should be your decision. If not then give your margin to a money manager.

Turning briefly to the Trader of the Year competition, I have taken some huge risks on board but as I told Peter when it started in order to win it you have to be "balls out" 100% invested at all times and see what happens.

It is a reckless strategy and one that NO ONE who is serious about trading should take on. It started as luck getting a number of trades right but since I got to over 100%other than the size of the trades, I have used my experience; understanding fundamentals totally and marrying that to a rudimentary understanding of technical analysis to make money. I only got one move horribly wrong; that was the move higher for the Euro on the back of the Spanish budget. That made no sense to me and the market subsequently agreed. The unrealized loss I ran on that trade was crazy but it all came back and no damage was done.

What started as a marketing exercise for my business has grown somewhat. I do not expect to be anywhere near the top ten when the competition closes and that should back up the reasoning behind my apathy towards social trading.

Someone once told me that opinions are like arses. We all have them but it’s best not to air them in public.

Someone was wrong in my opinion ;)

Comment by Peter jcp on October 1, 2012 at 8:16am: Thank you Alan for your comments and yes I would expect you to have a "slightly" different view - which like Chris's - I respect and would listen to. I think you would both be shocked with some information I have to support some of the "manipulation" that goes on in the intraday forex market - but I probably agree it cannot be sustained to totally drive price the other way to what it should be on a continuous basis. Manipulation of 5 pips or 50 pips or even 130 pips - can be supported and therefore cleared by the regulators - but no 1200 or 2000 pips - cannot be. Remember the market makers of the session lead and they then influence the other say 70% of the market - as many ( commercial and retail) will follow - with the others who are "set in stone" for whatever reason - whether it be technical/ fundamental / or just an hunch - losing out. At some time they will then change their minds and join in - but normally far to late.

As a classic example this morning - what news or fundamental is being used for this move on the EU?. Personally I don't mind what excuse is given - I don't mind if its a false direction - or really is the true direction - I also don't mind if its started by 2 main players or no players at all - just all the other commercial - to me it does not matter.

What matter is following it ;-)) and yes as you can imagine Alan - I am following it - and I hope you did earlier on - have a great October ;-))

Comment by Alan Hill From Sarrafx Trading on October 1, 2012 at 8:19am: I have to say I love the exchanges of opinion on this site!

As a pure market user Peter your methods are spot on. Why should you care what is driving price action as long as you are on the right side of it.

Opinion is everything and its cool that we can exchange ours!

Comment by neel chak on October 1, 2012 at 4:08pm: Nice TO do and Not to Do thing,,i am a follower of ur blog Peter!...nice learning for me!

Comment by Peter jcp on October 1, 2012 at 6:27pm: Hi Neel - Thank you for your comments . Good luck on your forex journey. Please remember I am for the majority of the time a shorter term intraday trader who is only after 7-25+ pip moves based on tight stops. I would not recommend you trying this on a live account until you have a good understanding of the market and of price actions through out the day.

Make sure you study as much as you can from the education pages on FX Street and other reputable tutors - whilst watching and learning the market for as long as you can.

I try to do live trading every day in the ForeXmosgate group along with other excellent traders all with different levels of skills and experience. When you are ready for it - join us and see if that might assist you to the next level.

Regards

Peter