[The learning cycle for a newbie trader]

Hi folks.

 

Many of you don't know, but I used to be involved in training people in various things (not trading) and I thought I might share with you the journey that you take when beginning anything new. also if I show you my kind of writing style you might just buy my beginners forex book

 

This cycle is as true for trading as it is for learning to drive a car and consists of five components.

 

I'm going to take you through each stage so you can recognise exactly where you are in your trading journey.

 

Step One: Unconscious Incompetence.

 

This is the first step you take when starting to look into trading. you know that its a good way of making money cos you've heard so many things about it and heard of so many millionaires.Unfortunately, just like when you first desire to drive a car you think it will be easy - after all, how hard can it be?? - price either moves up or down - what's the big secret to that then - lets get cracking!

 

unfortunately, just as when you first take your place in front of a steering wheel you find very quickly that you haven't got the first clue about what you're trying to do. you take lots of trades and lots of risks. when you enter a trade it turns against you so you reverse and it turns again .. and again, and again.

 

you try to turn around your losses by doubling up every time you trade - sometimes you'll get away with it but more often than not you will come away scathed and bruised

 

Well this is stage one - you are totally oblivious to your incompetence at trading.Stage one can last for a week or two of trading but the market is usually swift and you move onto stage two.

 

Stage Two - Conscious Incompetence

 

Stage two is where you realise that there is more work involved in this and that you might actually have to work a few things out.

 

you consciously realise that you are an incompetent trader - you don't have the skills or the insight to turn a regular profit.

 

During this phase you will buy systems and e-books galore, read websites based everywhere from Russia to the Ukraine. and begin your search for the holy grail.

 

During this time you will be a system whore - you will flick from method to method day by day and week by week never sticking with one long enough to actually see if it does work. every time you came upon a new indicator you'll be ecstatic that this is the one that will make all the difference.

 

you will test out automated systems on Meta-trader, you'll play with moving averages, Fibonacci lines, support & resistance, Pivots, Fractals, Divergence, DMI, ADX, and a hundred other things all in the vein hope that your 'magic system' starts today.

 

you'll be a top and bottom picker, trying to find the exact point of reversal with your indicators and you'll find yourself chasing losing trades and even adding to them cos you are so sure you are right.

 

You'll go into the live chat room and see other traders making pips and you want to know why it's not you - you'll ask a million questions, some of which are so dumb that looking back you feel a bit silly. You'll then reach the point where you think all the ones who are calling pips after pips are liars - they cant be making that amount cos you've studied and you don't make that, you know as much as they do and they must be lying. but they're in there day after day and their account just grows whilst yours falls.

 

You will be like a teenager - the traders that make money will freely give you advice but you're stubborn and think that you know best - you take no notice and over leverage your account even though everyone says you are mad to - but you know better.

 

you'll consider following the calls that others make but even then it wont work so you try paying for signals from someone else - they don't work for you either.

 

This phase can last ages and ages - in fact in reality it can last well over a year - My own period lasted about 18 months.

 

Eventually you do begin to come out of this phase. You've probably committed more time and money than you ever thought you would, lost 2 or 3 loaded accounts and all but given up maybe 3 or 4 times.

 

Then comes stage 3

 

Stage 3 - The Eureka Moment

 

Towards the end of stage two you begin to realise that it's not the system that is making the difference.

 

you realise that its actually possible to make money with a simple moving average and nothing else IF you can get your head and money management right

 

You start to read books on the psychology of trading and identify with the characters portrayed in those books.

 

Finally comes the eureka moment.

 

The eureka moment causes a new connection to be made in your brain.

 

you suddenly realise that neither you, nor anyone else can accurately predict what the market will do in the next ten seconds, never mind the next 20 mins.

 

You start to work just one system that you mould to your own way of trading, you're starting to get happy and you define your risk threshold.

 

You start to take every trade that your 'edge' shows has a good probability of winning with.

 

when the trade turns bad you don't get angry or even because you know in your head that as you couldn't possibly predict it it isn't your fault - as soon as you realise that the trade is bad you close it . The next trade will have higher odds of success cos you know your simple system works.

 

You have realised in an instant that the trading game is about one thing - consistency of your 'edge' and your discipline to take all the trades no matter what.

 

You learn about proper money management and leverage - risk of account etc etc - and this time it actually soaks in and you think back to those who advised the same thing a year ago with a smile

 

you weren't ready then, but you are now.

 

The eureka moment came the moment that you truly accepted that you cannot predict the market.

 

Then comes stage four

 

Stage 4 - Conscious Competence

 

Ok, now you are making trades whenever your system tells you to.

 

you take losses just as easily as you take wins

 

you now let your winners run to their conclusion fully accepting the risk and knowing that your system makes more money than it loses and when you're on a loser you close it swiftly with little pain to your account

 

You are now at a point where you break even most of the time - day in day out, you will have weeks where you make 100 pips and weeks where you lose 100 pips - generally you are breaking even and not losing money.

 

you are now conscious of the fact that you are making calls that are generally good and you are getting respect from other traders as you chat the day away.

 

You still have to work at it and think about your trades but as this continues you begin to make more money than you lose consistently.

 

you'll start the day on a 20 pip win, take a 35 pip loss and have no feelings that you've given those pips back because you know that it will come back again.

 

you will now begin to make consistent pips week in and week out 25 pips one week, 50 the next and so on.

 

this lasts about 6 months

 

then comes Stage Five

 

Stage Five - Unconscious Competence

 

Now were cooking - just like driving a car, every day you get in your seat and trade - you do everything now on an unconscious level.

 

you are running on autopilot. You start to pick the really big trades and getting 100 pips in a day is becoming quite normal to you.

 

This is trading utopia - you have mastered your emotions and you are now a trader with a rapidly growing account.

 

you're a star in the trading chat room and people listen to what you say. you recognise yourself in their questions from about two years ago.

 

you pass on your advice but you know most of it is futile cos they're teenagers - some of them will get to where you are - some will do it fast and others will be slower - literally dozens and dozens will never get past stage two but a few will.

 

Trading is no longer exciting - in fact it's probably boring you to bits - like everything in life when you get good at it or do it for your job - it gets boring - you're doing your job and that's that.

 

You can now say with your head held high "I'm a currency trader"

 

 

 

I hope you've enjoyed this text and can recognise yourself in some stage or another - personally I'm at stage four now and am constantly making good amounts of pips - I've been trading in total for about 3 years and the first two were hell on earth.

 

for those of you reading this who stick with it, ill look forward to the banter we have together in the future when we are both bored to death during the trading day

 

Dupa 18 luni vine completare

 

 

Hello everybody.

Can't believe that it's 18 months since I wrote that thread - Jan 2005 it was.

 

 

Well, as they say 'you never stop learning in this game' and that's certainly true.

I thought it was time to add to the original thread with a new one - my last 18 months have been very interesting and many things have happened that I thought I would share with you that you may find useful.

 

 

At the time I wrote that thread I was an intraday trader and had been making money consistently for about 18 months - I thought that was it, I had made it as a trader and was at the end of my learning curve.

 

 

How wrong I was.

 

 

I don't think that this series of threads will ever end, I expect I will be writing another update in 2008.

 

 

When I look back at the last 18 months I cant believe how much ive changed from what I thought was the end of my cycle.

 

 

At the time I was daytrading several strategies which made me money. In the ensuing months I just kept on testing new ideas - reading systems on here and other forums and testing them also.

 

 

I got together with a bunch of traders in voice rooms and again started working on systems and testing. - again day in day out testing and trading - making money yes but never really getting closer to that dream that we all have of trading /easily, without emotion/ and having that millionaires lifestyle.

 

 

Systems development started to become easier when I looked at the market holistically - I.e. not tying myself down to a single timeframe and watching at a macro level as well as a micro level.

 

 

This resulted in the several screens I now have in my office so I could see all the timeframes at once - I was still specialising in GBP as to have more meant yet more screens and I thought that the study of cable would make me more than enough money.

 

 

 

 

 

I did what many of you will do in the future. I developed systems, gave some away and sold some also - The Hilda system was in my opinion my crowning glory - a system that I could trade on any timeframe on any currency. I spent the time and sold my system to many people.

 

 

When the fun of selling that and helping others died down I again started improving on it etc etc etc.

 

 

But then the realisation started to hit me.

 

 

All of this system work, selling etc wasn't getting me any closer to my goal of actually enjoying the money I was making.

 

 

 

 

 

You see a journey to a goal is a weird thing. all of the fun is in the actual journey to the goal and when you get there its very easy to start moving backwards to do it again.

 

 

what i'm about to explain to you is I think the final cycle in the journey to be a great trader and realising your ambitions. I may be wrong and find a Eighth step within the next two years lol - but for now this is the best I can offer you.

 

 

*Step 6 The wake up call

 

 

When the newbie trader reaches step five he/she thinks that's it. They now make money well, look back on the forums and chat rooms they've used for so long and with a smile see the struggle they have been through repeated day after day as new people begin their journey.

 

 

 

 

 

They see the highs and lows that they experienced, the heartache, the 'head in the gas oven' moments and the movement from sheer despair to brilliant exuberance.

 

 

They continue to design systems to test - spend hours upon hours of hand testing with a smile - they know that no amount of computer testing is good enough to give you the confidence to trade the system properly.

 

 

They test and test - still believing that there is a system out there which beats the one they are using now.

 

 

They continue to get the latest designer indicator - hell, they even pay for them now as they know that a few hundred bucks for an indicator is worth it if it increases the take.

 

 

Trading becomes a real chore and the rot starts to set in. Here they are watching charts all day long for that setup which pays the mortgage and buys the new car or house.

 

 

The system they are using is still indicator based, still needs a shedload of charts open and still relies on a good charting feed.

 

 

Even though they don't realise it for the most part, although their system is mechanical they still have decisions to make - when to close a trade, when not to trade, avoid the news etc etc.

 

 

One day they wake up.....

 

 

 

 

 

*Step 7 - Learning NOT to trade

 

 

 

 

 

Yep, you read it right.

 

 

what happens to a trader in this cycle is that they get so wrapped up looking for improvements to their trading that they forget what they started trading for in the first place - for freedom.

 

 

Yet here they are every day sat by the pc, still after 4 or 5 years testing new stuff, taking trades and even though they don't realise it making discretionary decisions on their trading.

 

 

If they want to go out for the day of course they can - and they can enjoy their money. but whilst they are away they make no money because their systems main component is themselves.

 

 

Here's what's happened.

 

 

The definition of success according to Earl Nightingale is the realisation of a worthy goal. however success isn't all it's cracked up to be.

 

 

The journey to this point in the traders life has been exciting, exhilarating, despairing and all of those things we call emotional.

 

 

This emotion is like a drug and we get used to it - it takes so long to reach our goal that the highs and low's become a part of our personality.

 

 

when we reach the goal - we can't stop.

 

 

until the wake up call of course.

 

 

 

 

 

At this point we realise that the answer has been staring us in the face from every book we ever read, every forum we visited and in reality every trade we ever made.

 

 

In stage seven the trader realises he needs to work on one more system - the last one he will ever work on. (I think!)

 

 

 

It will be completely mechanical. No user decisions to make, no worry about news, no worry about what the 'experts' say or what's happening in the news.

 

 

Now some traders will pooh pooh this - many city traders work on fundamentals etc etc - but ask yourself the question - if they are so good why aren't they trading their own accounts?

 

 

Anyway, this is my experience and not theirs - these two extra steps are what's happened to me and that's why I did it in a new thread as opposed to tagging it onto the first one which is kind of generic.

 

 

 

 

 

so in stage 7 the trader starts to work on this totally mechanical system and after a lot of backtesting by hand and parameter changes etc etc he finally has it.

 

 

he can now work for a few minutes a day or even automate the system and not work at all. if he wants to go out then he makes money whilst he's out.

 

 

This is the stage I'm now at and happily enjoying the money I'm making and I may be wrong but I think that's what the majority of people who come into this business would like to happen.

 

 

This stage will make me rich beyond my wildest dreams. but what you reading this have to realise is that you MUST go through all that shit to get here - it's like going from being a teenager to being an adult - there are no short cuts.

 

 

 

 

 

That's why I laugh when I see people posting that they are consistently profitable after a few months or even a couple of years - they may be, but it wont be for long. I think that even if you say this in chat rooms and on forums like this you know the truth yourself.

 

 

 

 

 

So that's the last two stages at the moment - might get bigger with more steps in the future though cos I don't know what I don't know yet.

 

 

you may be at this stage and you may be wondering how you will know if you have a truly mechanical system - well if your system is truly mechanical you should answer the following questions with a yes.

 

 

 

 

 

1. do you have a clearly defined entry point that wouldn't change no matter who was trading the system?

 

2. Do you have a clearly defined stop level that would not change no matter who was trading the system?

 

3. If NFP or a similar high volatility news item was due in 3 seconds and your system signalled an entry would you take it?

 

4. Do you have a clearly defined way to close your trade that would not change no matter who was trading it?

 

5. could you tell your 12 year old son what to do to trade the system and his results would be no different to yours?

 

 

If you answered truthfully 'yes' to each question then congratulations

you have a truly mechanical system - now you've got to make sure it makes

money - that bit is up to you.

 

Hope this helps some out there who are struggling away. Know that there

is a light at the end of the tunnel, but it's a bloody long tunnel!

see you at the light end

 

 

 

 

 

From The Desk Of ...

Soultrader

 

 

As dori sa raspunda in special traderii cu o vechime mai mare, va regasiti in acest articol. Ati parcurs toti acesti pasi?

[Comunitate forex romaneasca]

Fata Moragana scria pe alt thread: "mi-am propus un tel de-a dreptul ambitios: sa "incheg" o comunitate forex romaneasca".

 

Cred ca un pas important si destul de usor de realizat ar fi sa organizam niste intalniri lunare, trimestriale, in functie de posibilitatile fiecaruia. Asa cred ca ar fi mult mai usor, ne-am cunoaste mai bine si am impartasi idei.

 

Nu stiu daca blogurile au avut rezultatul scontat (aici poate ne spun cei 2 realizatori care a fost traficul), insa realizarea unui site despre forex cu forum, asa cum s-a spus pe alt thread ma face sa cred ca telul de mai sus este pe ultimul tur de pista. Intalnirea probabil ar marca intrarea pe linie dreapta.

 

Ce parere aveti?

[Romani de succes in domeniu]

Fiind mai patriot m-am intrebat daca exista si romani de succes in acest domeniu.

 

Din ce am apucat sa citesc pana acum despre forex am dat peste 2 nume care suna mioritic: Cornelius Luca, economist la GFT si Robert Balan, Head of Financial Markets Strategy at Saxo Bank

 

Ambii au niste studii foarte bine privite pe piata (nu am apucat sa le citesc)

 

 

Robert Balan, Head of Financial Markets Strategy at Saxo Bank

 

"Mr. Balan is Head of Financial Markets Strategy at Saxo Bank A/S. Mr. Balan is viewed as one of the financial sector's most-respected advisors in the area of technical analysis of financial markets. He earned his reputation as head of technical analysis and strategy at Lloyd’s Bank , Swiss Bank Corporation, Union Bank of Switzerland and at Bank of America, and his analyses are regular features of Reuter’s news service, and Market News International. Robert Balan is the author of the best-selling book on analysis, The Elliott Wave Principle Applied to Foreign Exchange Markets. Mr. Balan is a world-leading market strategist and is able to comment on global market trends from a technical-analytic perspective. His areas of expertise include equities, foreign exchange, bonds, precious metals and commodities."

 

"Robert Balan is a first-class talent, absolutely at the top of the field. We have had clients asking for more access to Robert’s ideas and now we are delivering it", explains Executive Director and Head of Global Trading, Claus Nielsen. "TradeMaker is an efficient approach for the professional trader. It defines a very clear set of specifications for the strategy. The trader can choose to follow that strategy or go in a direction of his or her own. These are real trading ideas", says Claus Nielsen. Click aici pentru mai multe detalii

 

 

Cornelius Luca, economist la GFT

 

"Mr. Luca is an internationally renowned foreign exchange and technical analysis expert. He has more than 20 years of experience in the currency markets; he had traded spot, forwards, futures and currency options at Creditanstalt Bankverein (now Bank Austria), Prudential Securities and Sanwa Bank (now UFJ).

He is the author of 'Trading in the Global Currency Markets' (Second edition 2000, First edition 1995), 'Technical Analysis Applications in the Global Currency Markets' (Second edition 2000, First edition 1997), both published by Prentice Hall, 'Technical Analysis Applications', 2004, published by McGraw-Hill and 'Practical Introduction to Technical Analysis', 1997, published by Euromoney.

He has conducted training programs in FX and Technical Analysis around the world since 1989.

Mr. Luca holds and MBA from the New York University Stern School of Business with a double major in International Business and Finance"

 

Click aici pentru detalii

 

Postati daca ati citit aceste carti parerea voastra, oricum par foarte tehnice si sunt destul de apreciate pe afara.

 

Mai cunoasteti astfel de romani?

 

Daca subiectul e fumat scuze

 

Later edit:

 

Am gasit urmatorul articol:

 

"The American analysis guru Robert Balan has joined Saxo Bank A/S as head of financial markets research. Balan is viewed as one of the financial sector's most-respected advisors in the area of technical analysis of financial markets. He earned his reputation in positions at Lloyd’s Bank and Bank of America, and his analyses were regular features of Reuter’s news service. Robert Balan is the author of the fundamental book on analysis, The Elliott Wave Principle. NewsStory =  

 

With the hiring of Robert Balan, Saxo Bank further strengthens its analysis capacity at a time when the chaotic conditions in the international financial markets make it more difficult than ever to predict developments in foreign currency exchange and stocks. His employment also comes as part of a general bolstering of human resources as a direct result of Saxo Bank’s success.

 

"I wanted a position where I could use my abilities and experiences as a market analyst in a more direct relationship with investors. It is precisely SaxoTrader that gives Saxo Bank a trading platform for drawing investors very close to the market," says Robert Balan.

 

"Saxo Bank is deeply engaged in developing new, exciting net solutions and top-rate analysis. Combined with the bank's service and product mix, Saxo Bank has designed the optimal framework for the active international investor - a framework I intend to take an active role in building."

 

Saxo Bank is Denmark's most dynamic international investment bank, with customers in more than 80 countries around the globe. The larges part of investment activity at Saxo Bank is handled through the advanced Internet-based trading system, SaxoTrader, which is one of the financial world's most effective tools for trading in foreign exchange, FX options, and stock CFDs. The system will be enhanced in the near future to include trading in physical stocks and futures.

 

"Saxo Bank is incredibly happy to be able to offer Balan's valuable recommendations to our clients around the world. Hiring him is an important step forward for Saxo Bank and a natural advance in the rapid development of Saxo Bank, despite the international financial crisis, "says Kim Fournais, CEO of Saxo Bank.

 

Robert Balan is also well known to analysts around the world for his book, The Elliott Wave Principle Applied to Foreign Exchange Markets, which The Society of Technical Analysts in London called the best book ever on The Elliott Wave Principal. In recent months, Robert Balan has worked with his own analysis firm, Finance Technology Solutions. He continues to work from New Jersey, but will be moving to Denmark as soon as possible."

 

Nu prea pare roman in poza

[Un blog romanesc despre forex?]

Si site si blog, e un lucru excelent, imi pare rau ca sunt la inceput si nu prea am cu ce sa ajut , daca este ceva ce pot face cu cea mai mare placere.

 

S-a oferit hosting si blog, sa vedem cine se incumeta 8->

[Un blog romanesc despre forex?]

O zi buna tuturor!

 

Cum acesta e primul meu post aici ar fi frumos sa ma prezint: ma numesc Dragos, am 22 de ani, lucrez in domeniul bancar (entry level) iar de forex am auzit mai de mult insa pot sa zic ca maine am o saptamana de cand m-am apucat sa vad cu ce se mananca.

 

Am descoperit pe acest site informatii extrem de pretioase, la obiect, foarte bine structurate si oameni valorosi care stiu ce vorbesc.

 

Am observat ca vara asta se poarta blogurile iar in lumea forex un blog este un izvor foarte bun de cunostinte, sau cel putin asa am observat din "aprofundatele" mele studii de o saptamana.

 

Traderii experimentati au bloguri unde pun informatii, sfaturi, opinii, etc.

 

Nu cred ca exista nici un blog romanesc despre asa ceva. Pe acest forum sunt oameni capabili sa faca asa ceva. Poate fi o sursa buna de informatie si raspandire a fenomenului in tara noastra.

 

Acum nu stiu si parerea celor capabili sa realizeze treaba asta, daca vad rostul unui astfel de blog, daca sunt dispusi sa faca asa ceva sau daca au timp pentru a infaptui un astfel de proiect.

 

Astept si parerile voastre. Daca nu vreti sa le spuneti macar votati in poll, poate asa ii determinam pe cei in masura sa realizeze un blog sa o faca (nu cred ca este nevoie sa ii numesc) 8->

 

O duminica placuta tuturor!