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Learning price action - how long, how many hours per day, how many pips


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Learning price action - how long, how many hours per day, how many pips

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  #1 (permalink)
London, UK
 
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I want to learn to trade myself (as opposed to automated trading). I figure I have the personality traits you need. I have equity enough in my account. And I control my day and I have a lot of related experience - I am a self-employed automated trader. Plus it would compliment my automated trading fantastically.

I currently only scrape a living as an automated trader, since starting 9 months ago. I've allowed various things to hold me back so my equity has never risen high enough that my monthly expenses don't make a big dent each time round. If my trading was a aeroplane, I've taken off but I'm still skimming the hedges and tree-tops.

I've learnt a lot - a hell of a lot - and I've experienced a lot too, especially the pain of drawdowns and the temptations to override my systems, but I'm along way from calling myself 'advanced'.

A couple of times my equity has got so low that I've thought that would be it - game over - but the systems have recovered fortunately. I use two systems and I have several more on the drawing board but like I said I've let things get in the way - trading and technical things, plus poor planning - so I'm doing some personal 'restructuring'. Let's just say, if I was employed by someone else to trade, I would have been fired several times by now.

While most of my friends and family advise getting a job, I don't see it that way at all. I think my equity is still quite viable as a trading stake, and rather than stop or pause, I want to raise my game now.

What I want to do first of all is to put together as convincingly as I can a plan of action, a business proposal, for myself primarily but also because I feel I owe my family a convincing argument if I'm going to ask them to carry on putting up with the perceived risk I run of going bust.

I keep saying you're just as much at risk of getting made redundant by your employer and there is no guarantee that the pay cheque is going to keep appearing. But that's what everyone else does and that's what's normal. However I do need to be seen to be working on something achievable and not just striving for a pot of gold at the end of the rainbow.

I have tried discretionary trading last year but my approach was totally unstructured and I gave it up - everything I tried I figured I could automate better, and I was trading much too big and scaring myself stupid.

My plan now is to learn price action. I'm into spot forex only, so I won't have any volume or order book to look at.

The best resource I've found so far is

Lance Beggs YTC

I've also read a lot of threads here about stuff from Al Brooks and it sounds like his book is a masterpiece but difficult to follow and covers a lot about volume anyway which wouldn't be relevant in forex, but if I don't get far with Lance Beggs, I'll read this one too.

My aim is to make US$3000 per month. So my first question is, how do I estimate how long it'll take to get to that level?

If I start off practicing with small trades and only build up my leverage when I'm confident of my edge, do I have an outside chance of achieving it in 3 months? Bearing in mind that as an automated trader, I've been through quite a lot of similar issues to discretionary traders.

I know that picking up the signals that the market is showing you - and acting on them - is difficult, and perhaps a very long process. I'm a big fan of Blink by Malcolm Gladwell which describes the process how professionals in their field internalise their knowledge and experience so that they can act on it without even being aware of their thought process. One thing that's missing from this book though is any suggestion of how long it takes to reach that level.

My second question is, can I do this one forex session a day? Is it enough to trade from 8am until 1pm? Or do I need to commit the whole day if I want to make the best progress?

Lastly, is $3000 per month a realistic target? If I concentrate on price action, are the setups and trading opportunities I'm likely to discover actually enough to deliver that number of pips without leverage of more than $100,000 per trade? Or would I have to trade longer hours or perfect my trading enough to up my risk even more?

I'm asking a lot of big questions here so feel free just to say whatever you want - I'll be grateful for any feedback.

Here's a screenshot of one of my systems underway right now. This system is reasonable, but it's dumb - as you can see it just took profit and then re-entered. I would love to be able to interpret the price action there. Maybe there isn't any! Maybe I should look at 5 mins bars instead - or maybe I need tick-based bars. That's where I'm at.

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  #2 (permalink)
Cancun, Mexico
 
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Posts: 770 since Dec 2010
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Adamus View Post
I want to learn to trade myself (as opposed to automated trading). I figure I have the personality traits you need. I have equity enough in my account. And I control my day and I have a lot of related experience - I am a self-employed automated trader. Plus it would compliment my automated trading fantastically.

I currently only scrape a living as an automated trader, since starting 9 months ago. I've allowed various things to hold me back so my equity has never risen high enough that my monthly expenses don't make a big dent each time round. If my trading was a aeroplane, I've taken off but I'm still skimming the hedges and tree-tops.

I've learnt a lot - a hell of a lot - and I've experienced a lot too, especially the pain of drawdowns and the temptations to override my systems, but I'm along way from calling myself 'advanced'.

A couple of times my equity has got so low that I've thought that would be it - game over - but the systems have recovered fortunately. I use two systems and I have several more on the drawing board but like I said I've let things get in the way - trading and technical things, plus poor planning - so I'm doing some personal 'restructuring'. Let's just say, if I was employed by someone else to trade, I would have been fired several times by now.

While most of my friends and family advise getting a job, I don't see it that way at all. I think my equity is still quite viable as a trading stake, and rather than stop or pause, I want to raise my game now.

What I want to do first of all is to put together as convincingly as I can a plan of action, a business proposal, for myself primarily but also because I feel I owe my family a convincing argument if I'm going to ask them to carry on putting up with the perceived risk I run of going bust.

I keep saying you're just as much at risk of getting made redundant by your employer and there is no guarantee that the pay cheque is going to keep appearing. But that's what everyone else does and that's what's normal. However I do need to be seen to be working on something achievable and not just striving for a pot of gold at the end of the rainbow.

I have tried discretionary trading last year but my approach was totally unstructured and I gave it up - everything I tried I figured I could automate better, and I was trading much too big and scaring myself stupid.

My plan now is to learn price action. I'm into spot forex only, so I won't have any volume or order book to look at.

The best resource I've found so far is

Lance Beggs YTC

I've also read a lot of threads here about stuff from Al Brooks and it sounds like his book is a masterpiece but difficult to follow and covers a lot about volume anyway which wouldn't be relevant in forex, but if I don't get far with Lance Beggs, I'll read this one too.

My aim is to make US$3000 per month. So my first question is, how do I estimate how long it'll take to get to that level?

If I start off practicing with small trades and only build up my leverage when I'm confident of my edge, do I have an outside chance of achieving it in 3 months? Bearing in mind that as an automated trader, I've been through quite a lot of similar issues to discretionary traders.

I know that picking up the signals that the market is showing you - and acting on them - is difficult, and perhaps a very long process. I'm a big fan of Blink by Malcolm Gladwell which describes the process how professionals in their field internalise their knowledge and experience so that they can act on it without even being aware of their thought process. One thing that's missing from this book though is any suggestion of how long it takes to reach that level.

My second question is, can I do this one forex session a day? Is it enough to trade from 8am until 1pm? Or do I need to commit the whole day if I want to make the best progress?

Lastly, is $3000 per month a realistic target? If I concentrate on price action, are the setups and trading opportunities I'm likely to discover actually enough to deliver that number of pips without leverage of more than $100,000 per trade? Or would I have to trade longer hours or perfect my trading enough to up my risk even more?

I'm asking a lot of big questions here so feel free just to say whatever you want - I'll be grateful for any feedback.

Here's a screenshot of one of my systems underway right now. This system is reasonable, but it's dumb - as you can see it just took profit and then re-entered. I would love to be able to interpret the price action there. Maybe there isn't any! Maybe I should look at 5 mins bars instead - or maybe I need tick-based bars. That's where I'm at.

Some thoughts:

1) being in a rush is a fantastic way to blow up. The more in a hurry you are, the easier it is.
2) trading with a fixed monthly target in mind is a great way to generate additional stress and pressure that are sure to cloud your trading judgement. Generally very damaging to most discretionary traders.
3) the amount of money you can make depends on your 'batting average' and the size of winners relative to losers. In addition, you should know your risk of ruin (ballpark figure at least) given your account size and position sizing per trade.
4) Al Brooks is great. Yes, the book is difficult, but worth it. Just learn the With-Trend pullbacks to EMA (H2/L2), be picky, and you should be fine.

Hope this helps.

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  #3 (permalink)
Denver, CO
 
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Anagami View Post
Some thoughts:

1) being in a rush is a fantastic way to blow up. The more in a hurry you are, the easier it is.
2) trading with a fixed monthly target in mind is a great way to generate additional stress and pressure that are sure to cloud your trading judgement. Generally very damaging to most discretionary traders.
3) the amount of money you can make depends on your 'batting average' and the size of winners relative to losers. In addition, you should know your risk of ruin (ballpark figure at least) given your account size and position sizing per trade.
4) Al Brooks is great. Yes, the book is difficult, but worth it. Just learn the With-Trend pullbacks to EMA (H2/L2), be picky, and you should be fine.

Hope this helps.

Lol..love it and concur on all counts, even the power of the mighty A2, and if you want to complicate it (but not necessary), throw a higher TF ema on there and focus on the first one after the cross , especially potent in currencies.

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  #4 (permalink)
Sacramento, CA
 
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I've been down a similar path. I strongly recommend reading:



Mike's video on that thread is excellent.

As far as time I would say you will need at least 3-6 months of 4-8 hrs per day. What I mean is watch every tick during that time watching the T&S. Be focused. No web surfing, no email, no outside distractions. Eventually you will just start seeing things and have a very high certainty as to what will come in the next 2-5 minutes. If you can record your trading day with a screencapture video program like Camtasia. Add this to your detailed written journal. Go back and rewatch your trades at the end of the day.

Also everyone says that sim trading is a waste of time. But the reality is if you can't profit in sim you can't possibly profit live. For myself I made sure I was profitable for 2 months on sim before going live.

Lastly, as Paul T. Jones stated 25 years ago - the money can't mean anything to you. Trading a $10,000 account is the same as a $100 million account. So if you are under a ton of financial pressure this will kill your ability to trade well.

As far as making $3k a month with a standard lot being possible? It is possible. It isn't easy especially if you are wrapped up in it mentally. Instead focus on trading well and trading consistently. Create a matrix of trade decisions (similar to what Bacon describes in the aforementioned thread) and grade yourself on how well you took your trades. Were there trades you missed or passed on that should have been taken? Were there trades you took that weren't in your plan? Focus on these things and NOT profit in my humble opinion.

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  #5 (permalink)
London, UK
 
Experience: Beginner
Platform: NinjaTrader, home-grown Java
Broker: IB/IQFeed
Trading: EUR/USD
 
Adamus's Avatar
 
Posts: 1,085 since Dec 2010
Thanks: 471 given, 784 received


Anagami View Post
Some thoughts:

1) being in a rush is a fantastic way to blow up. The more in a hurry you are, the easier it is.
2) trading with a fixed monthly target in mind is a great way to generate additional stress and pressure that are sure to cloud your trading judgement. Generally very damaging to most discretionary traders.
3) the amount of money you can make depends on your 'batting average' and the size of winners relative to losers. In addition, you should know your risk of ruin (ballpark figure at least) given your account size and position sizing per trade.
4) Al Brooks is great. Yes, the book is difficult, but worth it. Just learn the With-Trend pullbacks to EMA (H2/L2), be picky, and you should be fine.

Hope this helps.

Yo! Reality bites! Ouch.

You can discover what your enemy fears most by observing the means he uses to frighten you.
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  #6 (permalink)
London, UK
 
Experience: Beginner
Platform: NinjaTrader, home-grown Java
Broker: IB/IQFeed
Trading: EUR/USD
 
Adamus's Avatar
 
Posts: 1,085 since Dec 2010
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eudamonia View Post
I've been down a similar path. I strongly recommend reading:



Mike's video on that thread is excellent.

As far as time I would say you will need at least 3-6 months of 4-8 hrs per day. What I mean is watch every tick during that time watching the T&S. Be focused. No web surfing, no email, no outside distractions. Eventually you will just start seeing things and have a very high certainty as to what will come in the next 2-5 minutes. If you can record your trading day with a screencapture video program like Camtasia. Add this to your detailed written journal. Go back and rewatch your trades at the end of the day.

Also everyone says that sim trading is a waste of time. But the reality is if you can't profit in sim you can't possibly profit live. For myself I made sure I was profitable for 2 months on sim before going live.

Lastly, as Paul T. Jones stated 25 years ago - the money can't mean anything to you. Trading a $10,000 account is the same as a $100 million account. So if you are under a ton of financial pressure this will kill your ability to trade well.

As far as making $3k a month with a standard lot being possible? It is possible. It isn't easy especially if you are wrapped up in it mentally. Instead focus on trading well and trading consistently. Create a matrix of trade decisions (similar to what Bacon describes in the aforementioned thread) and grade yourself on how well you took your trades. Were there trades you missed or passed on that should have been taken? Were there trades you took that weren't in your plan? Focus on these things and NOT profit in my humble opinion.

Thanks for the input everyone. I'll definitely check these references out.

The plan is to trade on sim while I'm finding an edge, and then to switch to minimum lot size at Interactive Brokers - $25K - and to move on from there when I see definite improvements.

I'll plan for at least 3 months of losing small amounts, and then factor for months 3 to 6 for the transition to profitability with the potential for losing $3000 in each month.

I have some extra fall-back to draw on if I suffer that kind of drawdown.

Regarding watching the T&S, what are you using? I'm on IB TWS with NinjaTrader. Neither has a T&S window that I can imagine being able to watch that long. It's in the lull now before Asia really opens up and the EUR/USD is pouring ticks through that window. And what would I be looking for? OK, OK, I'd better read that thread.

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  #7 (permalink)
the coin hunter
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Adamus View Post
...
My aim is to make US$3000 per month. So my first question is, how do I estimate how long it'll take to get to that level?

...

as long as it takes you to make $100/mth consistently.

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  #8 (permalink)
London, UK
 
Experience: Beginner
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Haha. Well it's difficult to say if you're making $100 a month if you're winning and losing $3000 a month.

One idea I have about trading is that I should be able to do it more consistently than my automated trading. I make plus or minus $3000 a month on my first system, so talking about a monthly income from it makes no sense. A yearly income, perhaps.

Maybe it's a misconception. Maybe all you price action traders out there have got the same problem.

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Sacramento, CA
 
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Regarding the T&S you want to get a feel for the "pace" of the market as you watch price patterns develop. That pace can give you tips when things are working as they should and when they aren't.

You should be able to trade more consistently as a discretionary trader (although I was a crummy mechanical trader so maybe that isn't true). As the trader before mentioned if you can make anything consistently all you need to do is ramp up size from there. The hardest part is cracking the break even mark.

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  #10 (permalink)
London, UK
 
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Thanks: 471 given, 784 received


That price action thread is impressive and the Big Mike's videos are a revelation, especially the one using 6 tick range bars and HH/HL and LH/LLs.

It looks so simple, I was totally convinced it can't work, I thought it must have been cherry picked from amongst a sea of normal market conditions, and if not then it must be something special with Crude and wouldn't work in forex.

But I had an opportunity to try it out under real conditions as NinjaTrader blew up my automated trading and when I got it going again, I found it had missed a system entry which I decided to execute manually to get the system on the move again.

I set USD/CHF to 6 tick bars and got ready to sell short, and I was staggered how it actually came across just like the video. I saved myself $200 entering later as I held off while USD/CHF rose, and then I just let it fall back down to my stop which I'd been dragging up behind.

I guess it won't be like that all the time and I guess trailing a stop is easy, but it was a bit of a revelation.

Thanks to everyone.

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