I am currently reading the book Trend Following by Michael Covel which talks about the trend following phenomenon and talks to a variety of traders how how they made it trading. One thing which stuck to mind was the advice which I hear time and time again, cut your losers and ride your winners.  A few paragraphs from the book write

“A good example of not letting profits run can be seen in trading strategies that take profits off the table before a trend is over. For example, a broker revealed to us that one of his strategies was to ride a stock up for a 30 percent gain and then exit. That was his strategy. Let it go up 30 percent and get out. Sounds reasonable. However, a strategy that uses profit targets is problematic. The biggest problem is that it goes against the math of getting rich, which is to let your profits run. Trend followers ride trends as far as they can instead of taking their profits as soon as they make them. If you can’t predict the end or top of a trend, why get out early and risk leaving profits on the table?”

I completely agree with this and I remembered the frustration of closing out trades only to find they rocket in my direction. If I am to get rich trading as per the paragraph, then I would need to ride the trend and this is what I aimed today.

The GBPJPY chart showed a sell signal and I went short at 159.69. The market went all the way down to 158.50 which was 119 points… and if I traded my usual strategy, I would have got out at about 158.60 for over 100 points of profit. I kept on thinking about riding the trend.. the 1 hour and 4 hour charts were showing a sell still… I decided to leave the trade running but my stop to my open price.

However, from the chart as you can see, right now the market has moved significantly higher and the 5 minute chart is already showing me a buy signal. I have just over 20 points before I am stopped out which would annoy me. That’s the hardest thing about learning something new if you get burnt..  us humans learn by reaffirmation. If we do something and we are rewarded, we will continue to do it.. if it hurts us, we will stop. That’s the thing which makes trading so difficult… you do things right, you get burnt, you do things wrong you are rewarded… then you repeat what you wrong (which rewarded you last time) to find that this time, you get burnt..  so then you try the opposite.. and so the cycle continues. The only way to break out of the cycle is to remain consistent.. you have to recognise that trading is a game where you will experience pain…  if your system works for you, you have to stick with it regardless of how many time you get kicked in the proverbial balls…. in the long term you will win!

Still, let’s see if I get stopped out or is there is a miracle and the markets fall before it hits my stop!

Tags: daytrade, foreign exchange, forex, gbpjpy, michael covel, spreadbet, Spreadbetting, Trading, trading psychology, trend follower, trend following

I have been trading.. or should I say, trying to trade for a long time now. My first interest was over 10 years ago in the Dot Com boom and bust… when it was going up, you could just put money in an IPO and watch it shoot to the moon. I was one of those who watched this happen and when others were making money, I thought I would get in myself and see if I could do the same. I didn’t make much money but ever since, I have been intrigued and watched the markets ever since.

Fast forward to modern day.. I have been more serious about the markets over the past 4 to 5 years but still have yet to make consistent profits. There are periods when I do fantastically well… say, 3 months of brilliant profits but the true case of success if I can consistently win over a year… so far, it hasn’t been this way.

I have met many people interested in trading along the way and a handful which have been successful. I tell them my story and ask them where they think I am going wrong. There are some interesting comments which have come out of these conversations which I want to share with you.

Trading point 1 - You need to have a passion for trading

This I do have.. however, it actually needs to be a passion for trading and not a passion for making money.. obviously they go hand in hand but what they mean is that if trading was a non-profit endeavour (even if you’re hugely successful) would you still enjoy it? It’s the challenge of being able to predict the market, playing the odds, managing your money. To succeed you need to truly have a real desire and passion for trading itself.

Trading point 2 - Trading takes time

The average time it takes if you have dedicated yourself to trading is a minimum of 6 years. You need to experience first hand the feeling of losing, winning. This is the trading psychology bit. Us humans like to take our money out of trades if we are winning and keep them running if they are losing. In fact, this should be the opposite, we need to be able to keep our winning trades going and cut off the losing ones.

Trading point 3 - Dedicate yourself completely to trading

Now I hope this one isn’t true as I trade part time. I have a 9-to-5 job and I come home each day to look at the markets. There have been numerous times when the market has moved significantly prior to my trading session and I feel frustrated that I have missed it. As a result, I jump in wanting to take some of the profits. Other times, I may put on trades during my 9-to-5 job or have trades running overnight.. when I am in the office doing my normal job, I can’t watch the markets and I can then miss my exit points and end up with a loss or vastly diminished profits. I know there are truths to this and trading can be a very unforgiving endeavour if you are not 100%… however, I won’t feel ready to do this until I know that I can make it 100% as a trader… a bit of a catch 22 situation!

Anyway, those are some of things which have been mentioned to me..  not sure if it’s of any use to anyone but I thought I would just write it down!

Tags: day trading, daytrade, Forex trading, make me some money, stock market, successful trader, trading hints, trading psychology, trading success, trading tips

Today was another disastrous day trading.. I have been trading on/off for over a year on this blog and I still am miles away from being successful. My stint with the trading academy showed signs of success before they terminated my contract (illegally… it’s going through solicitors currently) and recent courses have proved to be fruitful.

I know trading takes a long time to learn and although this blog has been running for over a year, I have actually been trying to trade for much longer than this. It seems that the same mistakes are made over and over again for me and that I never learn a lesson. The problem with trading is that there is no clearcut right or wrong… a winning trade doesn’t necessarily mean it was a good trade or vice versa… a good trade should be a trade which follows your trading plan and this needs to be developed. A trading plan is one which suits your personality and style of trading and then it must work.. however, the learning process is long and the directional path to success in trading is not a straight one but one with many misleading dead end paths.

Anyway, I am as persistent as they come but is there a point where you should say… “enough is enough? I am not cut out for this stuff”…  trading has been the hardest endeavour of my life so far and I can’t even see the light at the end of it.

Anyway, here are my trading entries today…

I bought when I should have sold and sold when I should have bought….. arrrgh! I am -40 for the day. Oh, I just made another trade.. long which then went south for another -20 (which is not on the chart) for -60.

Tags: daytrade, daytrading, dow, dow jones, long, make me money, make money, makemesomemoney, short, shorting, spreadbet, Spreadbetting, trading losses, trading psychology