How I beat the forex market. Or any game.

Image

519190164

Plan, reflect, and know the game

When I first started dabbling in forex, the singular assumption to make money in the game of forex was a simple one: Be right.

If you have that assumption, dump it.

I play games. Computer games, sports mainly.

In games, the goal is to win. To beat as many enemies as you can. Beat more than your opponent. Score more than the opposing team. Follow the strategy.

If you watch soccer, you’d know that it’s entertaining simply because there’s no “sure win”.  Through luck, a goal can be scored. An injury can happen. Bad umpiring.

Computer games, you can lose (or cheat) when there’s a bug to exploit.

Same with trading.

I beat the forex market be reflecting on my edge. By changing my perspective on what exactly is “winning”.

And here I am telling you, to beat the forex market, which consists of small time retailers and big banks, central banks, and cheaters, you’re set up to lose.

That’s the first thing you need to realize: You are set up to lose.

Embrace that fact. And find out why. What are the exploits others are using against you? Who are your opponents?

You don’t know, don’t you?

Acknowledge that.

Acknowledge what you don’t know.

And sharpen your own edge. Your own personal edge that no one knows except you.

When I play a computer game, I want to win, of course.

And pro gamers don’t just “git good”. Yes. Skill is important. But so is patience, deep understanding of their own weaknesses, as well as their opponents’.

Without knowing your opponents in the forex market, and acknowledging you are set up to lose, you need to change the rules your way.

You’re not going to beat the winners if you don’t know what the game is. You’re not going to beat the winners if you don’t know what you don’t know.

You’re not going to “win”, if your idea of winning is making money.

Winning in forex is about sharpening your edge, knowing your own personality, and thinking deeply what the other side of the trade has against you.

Being on the defensive is an option. Trade small. And through many, many trades, start to get a feel of how market action works.

Know what edge the others have against you. Speed of execution. Stop runs. Information you don’t have.

Just like computer games, I aim to win  by understanding how the game is designed. For example, if there’s a mechanic in the game to cook materials or build materials, you simply must know it’s there for a reason. Use it. Don’t say “I’m gonna just ignore it.”

If there’s a way to reduce electrical damage,  find out how to, because there’s a reason why the mechanic is there. Because clearly if you don’t make use of the mechanic, you will lose to enemies who attack with electricity.

ThinkstockPhotos-514070332-300x211

Yup. No electrical resistance=death

So what are the mechanics in the forex market available that you can utilize to sharpen your edge?

Here’s a handful.

  1. You can control lot size. Use it. Brokers want you to maximize your margin. Don’t do it. It’s like going in without “margin calls”, which can kill you.
  2. You can trade 24/5. At different timeframes. Brokers want you to trade quickly, trade more, so they earn commisions and from spreads. So don’t. Trade larger timeframes that are comfortable for you.
  3. News are sentasionalized to stir emotions in you to trade. Recognize it. Ignore it. Read the fine print and realize the ambiguous language analysts use that don’t tell you anything. Don’t trade on emotions. This is a powerful edge you can develop.
  4. There are only few important instruments that matter. The rest are just “made up”, tempting you to make more trades. But don’t forget co-relation and exposure. You’re just being dragged to think the more things to trade, the higher chances you can “hit the jackpot”. No. Focus on the very few that matter. Ignore the rest.
  5. Losing is part of any system or strategy. Remember you are set up to lose. But there are strategies that include “losing” as part of a long term winning strategy. So stop thinking beating the forex market is about winning every trade you take. And when you lose, jump to the next strategy. No.

There are many more. Just like computer game design, understand how the game is designed, and reflect on how to achieve “winning” in an efficient manner.

Know what you don’t know. Know what you don’t have. Know what edge you can never have against those who have privileged access to.

And finally, realize the market does not give you what you want from it.

Instead, take what it offers. And be happy with it.

 

Happy trading.

Advertisements

2018 March Performance: Best so far

Capture

Ain’t too shabby. But don’t get cocky.

Slowly but surely, the power of compounding is working its magic. I am happy, and surprised, with this month’s performance. Close to 20%* increase in NAV in a month is not something I see very often, but happy to share that it is possible.

What does the future hold? I don’t know. And this is what aspiring traders must always, always be wary of. Just because your have 20% growth this month, it doesn’t mean it will repeat the next.

Disclaimers apply.

*Note that I have an unrealized loss of $11k that I might just writeoff, but still I’ll be happy taking the overall increase in NAV if I do.

Happy Trading.

#smartcasualtrading

When Success is Failure: Loss of Momentum

momentum

Using momentum as a trading strategy but prices have to move

I haven’t blogged is such a long time until recently I’ve been getting pings of readers liking my old posts, which got me thinking what happened to my momentum in blogging and setting up Smart Casual Trading™ in the first place.

Linking it to trading, using oscillators or momentum indicators is one of the many ways of trading. The thing is, you need prices to move. You need force. And this force is provided by liquidity, traders entering and exiting the market at various prices, herd mentality, trading psychology, greed, fear, all these leading to rational and irrational actions that result in action: Buy or sell.

These actions create the force to push prices up, down, sideways, and with the movement of prices, comes momentum, which I’ve mentioned many times, is simply an indicator, which is always, always dependent on price movements.

In simple terms, if there is no price movement, no force, no action, there will be no momentum.

In 2017, I made enough profits to match my previous full time salary. To me, that is success, and achievement, a goal that I aimed for.

The flip side to that, is on reflection, this success came about from simply doing the same things over and over again, recognizing what works, reflecting on what doesn’t, and realizing mistakes, and taking action on those mistakes.

The nagging thought at the back of my mind, is whether this loss of momentum, of a force to try new strategies, test the unknown, venture and expand into what I wanted to be a successful project in Smart Casual Trading™, will result in my failure.

Failure to grow.

Sure, profits are still being made, the account is growing. But what about Smart Casual Trading™? I reflect now that, because I have succeeded in making consistent, sustainable profits that can cover the costs of living and more, I have lost the momentum in pursuing my other passion: Coaching and education.

Momentum needs a force. A call to action. And, action itself.

I am apparently considered an “established” and “expert” trader. I don’t proclaim to be one myself, I consider myself just a regular guy who had the tenacity, to the point of desperation, to make forex trading work for myself. I had the call to action. I took the action. And I had the momentum, and here I am now, an independent retail forex trader making a full time living from trading the forex market.

What happened to the momentum to push Smart Casual Trading™?

I guess, I have to say at this point..

Stay tuned.

Thank you to those who have chosen to follow my blog. You are the calls to action for me.

 

My personal problems with Trend Trading, the supposed Holy Grail

market-trending

I think it is safe for me to say every aspiring trader starts off with trend trading strategies. It’s easy to understand, easy to interpret, and easy to execute. I personally started as a trend trader. With the typical rules starting with:

  1. How to define the trend
  2. Where to place the stop-loss
  3. Let the trade go or take profit at a high Reward: Risk ratio (such as 2-3x your risk)

Then it gets more complicated.

  1. Which timeframe?
  2. Which indicator?
  3. What settings for the indicator?
  4. What is this thing called “drawdown”?

Initially, I think most traders go through the beginner’s luck stage where their first few trend trades work out well.

Then they find they keep getting stopped out, and then give up, and go looking for other magic, holy grails.

The Turtle Traders have finally come out with their full story for a while now, in case you didn’t know. And the Turtle Traders have always been regarded as the de-facto proof that trend trading is the holy grail. The problem is not with the system. The problem lies within ourselves.

And that is why I cannot trade trends. Well, at least unless I can change who I am, and my own personality, my own biases, my own perspective of the market.

Asking me to be a trend trader is like asking an introvert to become an extrovert.

I have had success with trend trading and deep in my heart I always know it is the best, proven, method to trade profitably. So why did I give it up?

I gave up trend trading for a divergence approach for the same reason why you would switch your favourite restaurant to another which is more suitable for you. Perhaps it is nearer your workplace, or home. Perhaps you feel more comfortable there. Even though the quality of food may not be the same, you made the switch, because overall, you have found your new “favourite” and you’re comfortable and happy patronizing the new restaurant. Despite knowing it’s not as good, not as good value for money.

Similarly, I trade divergences and retracements, despite knowing for a fact trend trading reaps (theoretically) much higher rewards per risk over the long term, because I like trading divergences and retracements.

To be honest, while I have tried to compare results between my own trend trading method vs my divergence methods, I just gave up doing it because it was simply awful to test them at the same time. It is probably better if I had a partner to trade one method and I another, and then compare results. Then again, always remember, results tell nothing about the future, but only what happened in the past.

So here’s a short list why I don’t like to trade trends anymore. Please take this as an opinion piece, there will be fans and haters, but here are simply my thoughts on why I don’t like to trade trends:

  1. I don’t like to be stopped out in a whipsaw price movement (which is expected in a trend trading strategy)
  2. I don’t like to let profits run. I like to set profit targets. And trend trading requires you to set high profit targets, or let it run, which can be very infuriating. (Requires the amount of zen as the ocean in my perspective)
  3. Trends are best seen on hindsight, and this is one of my biggest problems with trend trading.  As Elder nicely put it, you can’t trade in the middle of the chart. You are only faced with the “hard right wall” which is where the price is now. And there is no way you can know if the trend will end, whipsaw, fakeout, or be your friend.

And that’s why I don’t like to trade trends. Sure, for every point above, trend traders, breakout trend traders will have their counter points. And that further reinforces my point: The choice lies within yourself.

Happy trading, may you find your edge in your own trading strategy.

 

Going steady vs dating vs hanging out vs friendzones. What’s it got to do with trading?

dating_advice_0.jpg

just get a room and get it done with

Recently I read a post about Singaporean couples dating yet not taking it seriously.

So apparently dating is supposed to lead to marriage, and if you’re not dating, you can’t get married, and if you’re dating, you need to marry. Well, that’s my interpretation.

It’s about expectations. And a good, ethical coach/trainer with integrity will place managing expectations above all else when people engage their services.

Couples can date, sure, it is like a casual relationship that’s fun, and it’s ok to leave it as that. But if the couple is not honest about expectations, that perhaps one of them is expecting marriage while the other isn’t, then there will be unmet expectations and disappointments.

Similarly, aspiring traders who engage a coach or trainer must be honest with the expectations, and the trainer as well, lest there be disappointments and a breakdown of a coaching relationship.

Both parties will have to lay down expectations and discuss what the relationship’ s goals are. Is it about earning a fast buck? Is it about revealing a trading secret? Or is it about a long term commitment to learning, self discovery, walking a path peppered with failures and getting up, a path of dedication to mindful trading and developing right mindset about trading? 

Similar to the article about dating couples not being serious about considering marriage, there are aspiring traders who want the fun from trading, earn a quick buck from playing the market, while the coach expects otherwise. Sure, an unethical coach can play along and fool around as well. And the relationship will simply be going nowhere and end up likely toxic.

Trading for a living is a job. It is not a dating game with mind games and petty quarrels. It is a commitment to make it work, just like making the leap into marriage, making vows and promises, til death to you part.

Well. Hopefully wirh the right partner i.e.coach/trainer, you won’t die.

Happy trading!

 

 

 

Smart Casual Trading™ approach to Technical Analysis (TA): Divergence

grade11-regular-bullish-divergence.png

Image credit: Babypips.com

There are probably as many strategies to trade forex as there are the stars you can count in the sky. Simply because there is none that works, alone, without having the right perspectives, expectations, and risk, emotional, money management finesse, which can only come from practice, failures, and self reflection. To find out more about my thoughts about Indicators and Trading Strategies, check out my Udemy course, and use this coupon to get a great discount as a celebration of the first Udemy course I’ve launched to help aspiring traders learnt the Smart Casual Trading Method™.

In this brief post, I want to share my favourite “strategy”. It isn’t exactly an indicator. There are many divergence indicators, the most popular being the MACD. Rather, “divergence” is an occurrence when price action is divergent, as the name implies, from an oscillator. And yes, there are many oscillators around as well. But the MACD is probaby the “de facto” indicator that aims to identify divergence specifically.

The picture above shows a great illustration of a divergence signal. When prices are appearing to be in a downtrend, for example, lower prices between two candles, but when compared with an oscillator showing an opposite picture coinciding with the two candles: higher highs instead of being in line with the trend. That’s divergence between price action and an oscillator.

I like to use divergence because in my opinion, and preference, it is a clear signal. That does not mean the price WILL reverse or retrace, but it is a CLEAR signal. One that you can recognize at a simple glance. And the degree of divergence is also very clear, and it makes decision making rather easy.

The oscillator illustrated above is the Stochastics. And honestly, I don’t even know how it is calculated. I don’t know what is the best setting. And I don’t search for the perfect settings. But I use MACD and Stochastics with my own personal settings that I am comfortable with, but always bearing in mind, that indicators don’t predict anything, simply because indicators are based on past prices, and at most, at present price action, but never indicate future prices, because in order to calculate the indicator, you need a price. And the future price is not known. That’s the reality and the fact that many traders don’t quite seem to understand. And hence, they keep searching for the poorly named “indicator”, which indicates nothing except what has happened in the past.

But there are problems with using divergences, as with any strategy. Very simple questions need to be asked:

  1. When do I place an entry?
  2. When do I exit a trade?
  3. Where do I place a stop loss?
  4. Is the divergence a strong one?
  5. Is the trend a strong trend?

Yes, there are many questions to be asked, but with the Smart Casual Trading Method™, the focus is to simply trading as much as possible.

To learn more, check out the link about what I describe to be Smart casual trading, and feel free to contact me.

Happy trading!