Comment by Alan Hill From Sarrafx Trading on December 1, 2012 at 10:04am

Using a smaller leverage and smaller trade size would have the same effect. It is a case of utilizing your existing capital more effectively rather than lamenting a lack of further capital

Comment by Oasis on December 1, 2012 at 1:23pm

Hi Surjiya, You must heard that beginners should not risk more than 1% of capital in a single trade. Even experienced ones are advised to limit themselves to 3%. I think the key is not to get carried away by our analysis and keep strict money management rules as no one knows what the market will do.

All the best.

Comment by Peter jcp on December 1, 2012 at 7:26pm

Hi Surjya 

Before discussing your chart may I ask - with the heading of your blog being "Capitalisation matters" are you thinking that if you had had a lot larger account and placed a lot larger stake - the price would not have gone against you so much and would have fallen quicker ?

If you are - you could be correct - but you would have needed and account size of multi billions or even larger - to have the effect you required. Normal retail traders have no effect on price movement whether trading 1 lot per pip or 100 lots per pip. 

We just don't count in the market and even if all the retail traders in the world all sold at the same time - we would only account for 10% of the total market size - so in effect a top player could easily "out trump" us by placing a buy.

So as Alan says - its a case of utilizing your capital more effectively whether its $1k account or a $1 million account - you still have to use money management - as in both cases you do not want to lose your account.

Moving on to your chart and the technical side – I do have some questions I would like to ask you and will also you with a few ideas or hints –

1. When you placed your sell – what % of your capital was you using for your stop – and what was your target to take profit.?
2. I notice it was a 10 min chart (I like them) and you have BB’s and a RSI Oscillator a MACD and some MA’s – but unfortunately all on standard settings – which I will discuss another time . Was you also looking at any other chart on another time frame?
3. You had drawn in a resistance line – where was your next resistance lines and most importantly if you were selling – where was you support lines?
4. The main problem – which was shame – but we all have done it – was you sold at 2994 – right on support - - shown by the bottoms of at least 6 other 10 mins candles over the previous few hours.
5. If you had waited and price had gone say 5 -10 pips below support- you would have gone into profit – but with it not happening you got the bounce back up (also pin bar bullish candle) – which was strong enough then to break up through resistance and carry on up over 25 pips – before hitting another resistance level of 3025/30 area.
6. At the high – your RSI on standard setting is not maxed out – on my RSI at a 2 setting on charts from 10 min to daily – all the ones up to 2 hrs were maxing out saying – well OB – time to sell.
7. Your BB’s broke on the 10 mins but not on 30 mins and 60 mins  so the path was available up and that’s what happened.
8. From the high – we then had a 123 or an ABC – with a LH saying sell again
9. Your previous entry was on support which was broken but the bounce was just technical and led to the LH again.
10. Your Ma’s are not tight enough – but had not crossed at your first entry but then did after the false bounce and high.

 

In conclusion – your decision to sell had been correct – but you can still be “right and dead” as the saying goes – simply because the market would have tricked many bears into selling early and then stopping them out.

Hindsight – its dead easy – as is normal in life – but learn from it and be ready next time.

Finally think about your stops – it should have been say at 3005 or 3010 – just above resistance – or even I pip above – as you can always renter rather than lose say 25 -30 pips.

Remember – its always better to get it wrong once or twice and lose 5 -10 pips and renter – than have a big 50 + pips stop – and lose all of it  In this case you just keep reselling with a 5 pip stop until it works – as you knew it wanted to drop – as it did.

Look forward to your comments – and don’t worry – it all part of the journey

Regards

Peter

 

 

Comment by talisman on December 2, 2012 at 5:16am

i could be argued that you traded correctly and this is just one of them things.  having said that i would point out that risking a few more pips so you could make 20 total is not good logic unless you re very confident that over time your win percentage is 60 percent or better since your rr is less than 1:1.  you may want to consider sitting out on fridays,  they tend to have a few odd moves that can throw a loop into things.  leave fridays for the pros and the wannabes, theres plenty of opportunity from monday to friday until you become very seasoned.

i ll close by saying alan gave the best advice, utilize your capital more effectively.

Comment by Surjya Gogoi on December 2, 2012 at 7:37pm

Thank you all for reading my post, having a look at my chart and giving feedback on it.

I am in forex trading (micro lots) for around 1 and a half year and am still learning and have yet to learn a lot. As you have all mentioned, I really need to check my charts more meticulously before jumping into the trade.

When I started forex trading with a demo account having a capital of $50,000, I didn't know much about forex trading, the indicators, the fundamentals news, chart patterns, etc. The only technical indicator that I understood a little bit was RSI with its overbought and oversold rules. In the demo account I sold when RSI was OB and bought when RSI was OS after checking the currency pairs. In a month I made $10,000 in the demo account. I thought wow…..so easy. Among those trades, if a trade did not go in my favour I used to keep it open and the price would somehow come back to the breakeven, may be even after 10 days or so. I traded all the currencies & commodities which were available with the broker, regardless of the margin required or the spread. With the same attitude I opened a live account with a $1000 capital and use the same style of trading and the inevitable that had to happen, happened. I lost all my money.

I again funded my account after some more studying of forex trading and as trades went on I realized that there is still a lot to be learned.

With my present account, I do not leverage and used small stops as my capital was getting smaller. So, Alan with my small account I do not leverage but I should have used my capital more effectively initially when I started out.

Peter, thanks a lot for your analysis of my chart. When I said capitalization matters, I meant that if I had a large capital in my account I would have kept the trade open and my trade would not have been a losing one. I had read during my forex studies, how unlike the stock market where a large trade by a single trader can move a stock, the $ 4 trillion forex market cannot be moved like that. As for your questions responses:

1) Since I trade intraday with small targets and am still in the learning curve, I usually put a stop loss of 30 pips. I hardly calculate % of my capital, one of the things that I have to learn well. In this particular trade, I was kind of very confident that the trade would go my way, but when it spiked up, I closed my deal fearing it would go further up. Because in another instance with the EUR/USD pair, around 1 and a half or 2 months ago, Draghi of ECB was about to comment on something and the pair went bullish by more than 60 pips very quickly.

2) I usually look at different time frames when I want to trade. I look at the larger time frames of 4 hour and 1 hour to find out which way the pair is moving and for major supports and resistances. Then I come down to the 10 min, 5 min and 1 min charts to enter a trade. I finally take into consideration the 1 min chart to enter a trade. In this particular trade, the 1 min chart was kind of volatile in a range but on checking with the 10 min and 5 min charts, I found it to be a good trade and so I entered it. I don’t usually change much of the settings of the indicators because sometimes they seem to be giving proper signals with the default settings and I myself am yet to figure out what periods to use in my time frame in the MAs and so I use the popular ones like 20, 55, 100.

3) What to say Peter, I draw only one resistance line and one support line for my trades in a chart. For this trade I figured the price would go down to 1.2970 and would move much above the resistance which was above 1.3000. Then after price moves in my favour by say 5-6 pips, I usually move my stop loss to 1 pip profit, which in this case would have been 1.2995 and watch the price movement.

4) Since the RSI was at 80 and there was a bearish divergence, I thought price would go down as sometimes price would tend to break through supports and resistances.

5) As I was also looking at the other smaller time frames, I though price would go down. I simply didn't notice the support so close by in the 10 min chart.

6) My RSI had a setting of “14 close”. From my studies, 14 seems to be the standard setting and so, I use 14 period.

7, 8, 9) I need to refine my technical analysis a lot more.

10) The MAs, I used are SMAs. Since my trades are intraday with small trades, the SMAs tend to give a signal quite late while the EMAs tend to give false signals. So, in this particular trade, I entered the trade without heeding the MAs. Is the periods that I am using not proper for my charts in the smaller time frames.
What do you suggest? Kindly correct me if I am wrong somewhere.

Talisman, Oasis and Leon (thanks for your link, I have seen the homepage and will go through it), thanks for your comments. I didn't expect price to move about my resistance which was above 1.3000. But anything can happen in the market as I realize.

The forum had really made me aware of things which I myself did not notice at all.

Regards,

Surjya

Comment by Peter jcp on December 2, 2012 at 10:25pm

Hi Surjya - a very comprehensive reply from a trader who I can see is serious about learning as much as he can to be successful in the future. Although you have been trading for over a year and seem to have grasped the basics etc - its still a long journey to get to the level you require.

For example if you were studying to become a Doctor or Lawyer or any other profession requiring special skills it can take 5 -7 yrs. Many think trading is easy - but as you have found it - it requires special skills and learning and is certainly not for everyone - as psychologically it is very testing etc etc.

The majority of new traders will do well on demo accounts - but with real cash - it is a different "ballgame"

Besides learning as much as you can on the technical side along with an understanding of the fundamentals - make sure you can learn to lose and understand all about probabilities, game plays etc etc.

On the technical side for intra-day - try matching at least 4 charts such as a 1 or 3 min with a 10 /30/60 min and then try you RSI at a tighter setting on the 30/60 mins and also tighter BB's on those frames along with you MA's off a 1-5 mins. If you also can the watch a few thousand hrs of small frame movements at busier times - you will start to see the patterns and movements evolve. 

For say 20-30 pip target you need to work ideally on stops under 10 pips ( 8 pips ideal) but if you still want 30 pip stops - you need to look at larger targets. Ideally stay under 2% of your live capital and try to work on achieving over 65% accuracy - as you develop over time that should then go over 70%. Get your accuracy levels based on over 30 trades - ideally 50+

Even on 70% success accuracy - you can still have 10 winning trades in a row - but also quite easily 4 -7 in a row wrong - always remember that as traders can flip if they have 4 trades in a row wrong - thinking they have lost it ;-)

Good Luck on your journey and join the Forex Street - ForeXmosgate group for additional info etc etc

Regards

Peter 

Comment by Oasis on December 2, 2012 at 11:05pm

Fantastic advice RM, pity there is no way to put a "Like". The best one is #14.

Comment by Surjya Gogoi on December 3, 2012 at 11:28am

Thanks Peter, I will work on my technical indicators and improve them. Will change the setting of the indicators and do some trades in my demo account before trading on my live account again. I still have a long way to go and acquire the 10,000 hours level, which I have read in some posts, on this site, is the amount of time required to be highly competent.  

Hi, Repeatable, I liked your comments and my pulse really rises when I am about to take a trade. I will go on refining my strategies as long as needed, which seems to be as long as I am a trader.

Regards,

Surjya

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