Pip School

I have learned so much this week!  I did a lot more stupid trading and lost a lot of fake dough, but I learned many a valuable lesson.  Probably the most important thing is the whole business of planning one’s trades.  When I did that I won a lot more often.  One piece of advice I would give anyone who is considering getting into Forex is to read everything on this site:

http://babypips.com/

It was recommended to my by someone in the forums on another site ( http://forexfactory.com/ ), and it is full of good advice.  In particular I recommend going through their ’school’, which breaks down all of the key concepts.

Hooray For Planning

This planning thing is definitely a good idea.  I didn’t win every time, but I’m up $700 for the day, which is much better than spectacular losses.  I’m not even planning particularly well at this point, but just entering with a stop and setting stop loss and take profits seems to make a big difference.  Doing these simple things goes a long way towards taking the emotion out of the decision making, since the decisions are made ahead of time.  There is a reason you see this advice in almost every forum about trading!  Why did it take me so long to listen?

My strategy today has been to set buy and sell stops around areas of consolidation, setting my TP at twice my SL and going for relatively small gains.  So far I have been following the rules I set for myself.

Why Do I Suck?

Well, I was right about the upswing I talked about in the end of the last post, but despite my intuition there I managed to get stopped out, jump back in in the wrong direction, and lose, lose, lose.  Since then I’ve been doing more and more stupid things and losing even more.  Good thing I’m only playing with demo accounts, right?

I’ve been trying to look back on these retarded trades and see just what I’m doing wrong.  The main thing seems to be that I’m just not planning very well.  Whenever I’m looking at the market I want to be playing it, which leads me to jump in when I really have no business doing so.  I have been letting the adrenaline drive the bus, which is no way to do business.

Now that I’ve recognized that I am my own worst enemy, I’d like to come up with a set of rules that will keep me from interfering once I’ve made a plan.  Here’s what I’ve come up with to start:

1. Don’t hold on to losers.  For some reason I love doing this.  It makes no sense, because even if it is going to start moving the right direction again eventually there is no reason to keep losing money while I wait for that to happen.  Very dumb.
2. Don’t enter without a real plan.  At the very least that means having a firm stop in place and a price target.  Ideally it would mean having spotted a particular pattern or trend and basing the rest of the plan around that research.
3. Don’t change the plan once it’s underway!  I have second-guessed myself so many times and reversed my position, only to see it ruin me.
4. Don’t immediately jump back into the market after being stopped out, in either direction.  If the stop gets hit it probably means the plan or the timing was bad, so take time to re-evaluate.

I’m going to try following all these rules for a while and see what happens.  What it’s likely to mean is far fewer trades, and I’ve also seen that mentioned as good advice in the past, so hopefully I’m on the right track here.

Some days the bar eats you

First, let me talk about yesterday.  It was Sunday, and I had spent the day looking at houses for sale in the SF Bay area.  The end result was depressing.  There were lots of places I could afford, but they were all in questionable or downright shitty neighborhoods.  I was frustrated because I had so little money to spend on my home.  This got me to thinking about how I could make some extra money, which led to me playing with a forex trading demo account.

I fired up Metatrader at about 10:30 PDT and took a quick look.  EURUSD was going down.  I jumped in selling two lots, and within a couple of hours I had made about $1000 virtual dollars.  Suddenly my mood had improved!  I thought about leaving the trade open over night, but I didn’t want to risk losing that profit so I decided to close it out and call it a night.

Today (Monday) was not so good.  The first thing I noticed was that I should have left that trade open last night.  If I had I would have made 200 pips overnight, which would have been $4000 since I was trading with two lots.  This and some other experiences I’ve had recently have been making me rethink my usual trading window.  It seems like instead of picking up a few pips here and there in a few hours I should try doing longer term trades with better automation.

Anyway, I ended up screwing myself a couple more times as I tried to jump in on what was happening as I checked back in.  Another quick glance told me that EURUSD was still headed down, but that was far too hasty of me.  As it turned out it was really going mostly sideways and I ended up getting stopped out twice, giving back what I made yesterday.  I’m now betting on an upward swing.  I plan to leave it open overnight and see what happens.