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"Quoting Nial Fuller"
Winning traders know simple strategies like price action trading work best because what really separates the winners from the losers is how well they manage their emotions and remain disciplined, not having a super-complicated or fancy looking trading strategy. Therefore, winning traders know there is no sense in over-complicating one’s trading strategy when you can learn to trade with a simple and effective method like price action. Winning forex traders master the setup(s) they trade, one at a time, as a result of this they know when to trade and when not to trade. Losing traders jump the gun because they don’t master their setup(s); they switch from one strategy to the next on a never-ending futile search for the “perfect” trading strategy that will allow them to win on nearly every trade.
Winning forex traders know they must develop and implement a patient mindset with the trading strategy they use, as a result they don’t rush any trade, they let the market show them its cards, instead of trying to “out think” or control the market. Losing traders typically manifest trading setups that aren’t really there, they over-analyze the market and try to digest as many market variables as they can in a vain attempt to predict what will happen next, once they convince themselves they are right about market direction they will risk too much simply because they think they have covered all angles and they can’t possibly be wrong. Winning traders know that the market is an untamable beast and that the only variable they can consciously control is how they react to what the market offers them. Price action trading gives winning traders a high-probability entry method so that when the market shows them its hand they can take a trade setup with confidence and clarity because they have been patiently waiting instead of actively over-analyzing
Well said Nial, we couldn't express it better !
and I think these words may help here.
Last edited by PiCoTrader; December 17th, 2010 at 12:49 PM.
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I think that quote is referring to those few with some special inexplicable talent, who can innately make judgment calls on the market and be correct most of the time. For the rest of us, as long as their is subjectivity in our trading approach, the majority will lose money. If 2 traders are sitting side by side, and one sees a head and shoulders, and the other does not see it, one of them will loose money. I you see a bull flag right now and you buy it, and you see another one 30 minutes from now, and you make a judgment call to skip it, in the long run you will loose money. If you risk $100 on this trade signal and $500 the next time, in the long run, you will loose money.
I can take a decent rule based mechanical winning strategy, give it to 10 traders, and 8 of them will turn it into a losing strategy. Why? because they make it discretionary and introduce subjectivity by 'analyzing' the market, and the price action, and the crowd mentality, etc, etc. They will destroy the expectancy of that system, because they judge and cherry pick the signals. Stop it! Just trade the rules of your strategy rigorously. If it has a calculated and proven edge it will make money, don't 2nd guess it, don't cherry pick it's signals, don't make it subjective. Once you start introducing subjectivity, I guarantee you will choose the majority of the bad signals built into the expectancy of that system, and skip most of the good ones. The result, you turned a winning strategy into a losing one. If you know your strategy has a 50% win/loss ratio, and 1:3 risk/reward ratio, it is guaranteed to make money if you take every signal with the defined money management, don't introduce any discretion/subjectivity to it.
Last edited by monpere; December 17th, 2010 at 05:33 PM.
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I have evaluated at least 150 different systems. If not more. I have yet to meet a mechanical system that works over the long term besides long term buy-n-hold. I am not saying you can't have a successful mechanical system, but I do not believe they exist.
Good discussion, good suggestions by all thus far.
Few points, some repeated, but repetition is success.
If you are afraid of "pulling the trigger" then ask yourself these questions:
Do I have a trading plan?
Is my plan simple yet does it cover what I need to do? how I need to trade, etc?
Did I back-test my trading plan over the different markets I plan on trading?
Did I find consistent results and do I feel I have an "edge" for trading the markets?
(If you back-test your method and realize that it doesn't work so well, then before trading real $$$, you might want to look for another method)
When I did the back-test did this method work, and was it profitable?
Does my plan tell me when to exit the market? and how to manage the trade once I'm in the market? Or do I just exit out once I make a few points?
When you are trading, when your method identifies a trigger, and a time to enter the market, are you aware of the risk before you enter the trade, to find out what it will cost you if the market goes the other way against you?
If you are aware of the risk, are you ok with the risk, according to your money management rules? if its beyond the risk then you will need to pass on the trade, IE Stick to your plan, which should have defined in it, your money management rules. Remember its all about preservation of your trading equity/capital, etc. Preserve, Preserve, Preserve....
And you have to remember that your method might be highly accurate once you back-test it, and if so that is a good thing, but you also have to take into consideration, that you dont know when the market, will put those odds in your favor. so if you have a loser, dont consider that a BAD thing, if you stuck to your plan, and followed your plan then you did well.
Get to thinking, that that the next trade setup, will bring you closer to realizing your odds of having a winner. Remember if a pro has a bad trade, but followed their plan.. they just wait for the next setup, and execute the trade.
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