Trading

I’ve been trading the past four years, primarily in the foreign exchange markets, part-time as mostly an intra-day trader. What this means is that I was looking at very short term positions, sometimes measured in minutes, and can also be referred to as scalping.

Although this is an “entertaining” method of trading, I found that it was the focus of many marketed trading publications and the risk/reward in the long run wasn’t worth it for my personal style. It can also be very time consuming as if you are targeting say 2% return per day or per week and you end up in a down draw, you may need to trade many hours to get back to even or in profit. Of course the increased risk is your emotions get caught up in the fast action and you just keep losing money.

As Warren Buffet said, there are two rules. Rule 1: Don’t lose money. Rule 2: Don’t forget Rule 1.

Coming into my fifth year now in 2011, I’ve looked back and realized I’ve learned a lot. I’ve also realized that I prefer a “calm” orderly approach to trading that allows me time to look and analyze a position in more detail before taking it. I’m also a new father of twins, so to say there is a couple distractions sometimes while trading is true, so having the option to trade less and not as consistent in front of the screen is important to me.

Therefore, I’m going to be focusing on long term, four hour and daily charts in a trend following manner looking for retrace entries. This is commonly known as Swing Trading. Usually you will find the most common form of Swing Trading involves Fibonacci levels.

There is a lot of debate about using Fibonacci levels in trading, and I’ve seen them work brilliant, I’ve also seem them fail miserably. I think the thing to remember is if a lot of big traders, and I mean HUGE traders, are using them, then perhaps they will be a self-fulfilling prophecy. However, if that day they are not, then they won’t mean a thing.

The other thing to remember is, they are based on historical price action and not CURRENT price action. From what I have seen, systems that involve price action more than indicators and Fibonacci levels are more successful in the long run.

That’s not to say that historical support/resistance levels don’t play a factor and should be watched to see if previous market sentiment is equally as strong when these areas are reached, I’m just saying that they should never be taken as a “sure thing” or as the only method used to qualify a trade.

I’m going to be using a system that one of my mentors has been using with great success on the four hour and daily charts which he calls the “Simple Trend Trading” system. He’s well known online and his name is Dean with Forex Mentor Pro. I hate affiliate marketing, so I’ll let you Google that on your own.

Anyways, the system is quite simple as it is based on two moving averages to determine trend and if there is enough momentum to consider a position. It also uses these moving averages as a “floating” support and resistance to confirm the trend. Lastly is uses three types of Japanese candle formations to confirm entry.

I’m going to start posting various ideas on positions I’m going to take. As this is a fairly new system, I’m going to be on demo for about four months, live with a small account for a couple months, then full live with capital. The idea here is to sustain a profitable return on demo, baby-step into live to avoid any emotional entanglements, then finally move into production with it.

This site is NOT a signal service and should NOT be followed for anything else than just information/entertainment. If you decide to follow me off the bridge and lose money, hair, patience, wives or husbands, cars, dogs, cats, or anything else I’m NOT responsible.

Here’s the best to all the traders out there in 2011!

Cheers
Aaron