Here are more intriguing questions from my potential and existing subscribers, with detailed answers. These questions are in the mind of certain traders and the answers to them are supposed to help traders greatly. Please enjoy!
1. If the markets aren’t really predictable, how come some analysts are still predicting? – K. A
Answer: The thought that the markets would behave in a certain way is futile: you’ll often be disappointed. Thinking that the markets are predictable is even more dangerous to your trading mindset because you’d not want to get out of a trade if you’re wrong, since you may feel that the market may soon reverse, and which mayn’t happen. You don’t need to predict the markets before you can make consistent profits. We trading analysts are humans like you, only that we use complicated trading jargon to impress. One thing I don’t like (and which would no doubt, continue) is the fact that most professional analysts like to create impression that they know what the markets would do in the near future. It doesn’t matter whether the person is talking on the most respected trading news program on earth. How many of them can mention with certainty when they’re going to die, where they’ll die and what’ll be the cause of their death? They predict the market and continue predicting, but you don’t see their personal trading results. Novices are angrily forlorn because they think gurus don’t lose. If I say I make 300 pips last month, some trading rookies may say: ‘Hey, that’s the geek who doesn’t lose!” If they ask me for signals and the first 2 signals lose, they become mad. But if I display my losing trades and winning trades, plus how I still survive. Then if people ask me for signals, they won’t get furious after 2 or 3 losses because they’ve seen how I display losses with profits and they know our profits would soon outgrow those losses. The purpose for trading isn’t to avoid losses, but to make more money than you lose. You don’t need a complicated strategy to achieve this; only a simple and stupid trading idea you need. However, vendors would always be pushing complicated strategies to traders (How would they have something to sell if they don’t do that?). Most people won’t learn their lessons until they’ve learned thru harsh personal experiences.
2. I’m skeptical about your signals since I don’t know the reasons why you take your trades. Is having more reasons not important? – T. S.
Answer: How good and pleasant would it be if the markets were able to move in our favor because we have reasons for taking trades! Apart from certain no-rule traders, majority of trades are rule-based market players. Yet majority of traders lose. For example, a price action might be pushing up the upper band of the Bollinger Bands, when the RSI is overbought, when the Stochastic reading is in the overbought region, when a candlestick reversal pattern has formed, and many analysts are saying they’re expecting a reversal based on a certain fundamental event. You might still take that trade and lose. Making the best trading decision in the world is no guarantee that a trade can’t move against you, neither would the market respect you just because you know what’s going on in Bhutan or Vanuatu. Your survival on the markets requires something more than mere reasons for taking trades. Most trading reasons come from strategies (the least important factor in trading success). I’m not saying it’s bad to have reasons for taking a trade – for having no reason is even worse. I’ve reasons for taking my long-term trades, but my survival secret lies in cutting my losses and running my profits. With my short-term trades, I know that giving myself a nice risk-to-reward ratio is far better than having a reason. With my non-directional trades, I simply capitalize on the market unpredictability and stick to my exit criteria.
3. Why do you use stop loss in some strategies whereas you don’t use it in your GBPJPY strategy? – D. I.
Answer: I’m an ardent advocate of the use of stop loss in trading. The importance of stop loss is without question and can’t be overemphasized. Nevertheless, this doesn’t mean that no-one on earth can survive the markets without the use of stops. The stop is a money management tool, but not a perfect one. There’s no perfect money management tool in trading. Both wide and tight stops have pros and cons. There are great traders who don’t use stop loss and make consistent profits. How? They use very small lots in proportion to their capital base and know exactly where to get out of the market if they’re wrong. They know if their trade isn’t going in their direction and they have the discipline to get out with a small loss. The use of stop loss is good on the condition that it’s respected. Stop loss is pointless if it’s widened further to avoid being hit or it’s later cancelled to avoid its being hit during a negative trade. And if your risk is too high (high lots in proportion to your account), then your stop won’t make much sense, since the drawdown would be too much anytime it’s hit. If you don’t respect your stop loss, then someone who uses very low risk and honors his exit criteria is far better.
As for me, I use stop loss in all my long-term and near-term trading techniques except the GBPJPY strategy which has been surviving the market consistently for 4 months now. Its secret lies in the optimal entry period, low risk (0.01 lots per $500), respect for exit rules and the unpredictable nature of the GBPJPY cross that’s being used to my advantage. I’m presently testing this same strategy with a wide stop and would see how it survives the markets with that. And to this end, it remains 4 weeks for me to reach a final decision, after which a stop might be incorporated into the strategy. For now, I’m enjoying small and consistent weekly profits on this strategy. As far as I’m concerned, making a consistent 10 pips every week is better than -10 pips weekly.
4. Why do you announce more trading strategies and tweak the existing ones? - E. R.
Answer: Trading mastery is an ongoing journey. If you’ve been toiling and suffering in your quest for trading mastery, hope and help will come your way one day. If you don’t relent, there are many trading secrets you’ll stumble upon. While trying to play safe, I also figure out how to improve my trading results over time. For example, when the markets are ranging you could sell resistance and buy support safely. When the market is in a strong trending mode, then you simply need to sell support or buy resistance. Two consecutive losses in one week – amounting to a maximum of 3% drawdown - are enough to indicate to me that the market condition has changed. A strategy can survive any market condition if it’s flexible and adaptable according to an existing condition. I’m being exposed to numerous trading ideas on daily basis, but I need to first test them privately before deciding whether they’re worthless or worthwhile. There’s nothing wrong in tweaking your trading system to produce better results, or adding more systems to increase the overall profits. All roads lead to Rome!
5. Could you please show us your past performances? – M. S.
Answer: I need to let you know that I’m much happier if my trainees and clients have good results on their trading portfolios. Past performances on my strategies are displayed in my Sunday articles. For my long-term trades, the entry times and prices, exit times and prices, plus trade management and profits and losses are explicitly stated in my Wednesday articles. You can monitor the trades on your own. A summary of my long-term trading results would also be displayed on monthly basis. There are strategies that show results in weeks and some show results in months. Long-term systems are good for investors who prefer to evaluate the returns on their investments on long-term basis. You got to know the kind of trader you are. Impatient traders should avoid systems that show results only after some months. Whatever you preference is, you’re welcome; whether you prefer to evaluate your trading results after weeks or after months.
I conclude today’s article with another quote from Dr. Van Tharp:
“System development software publishers know that most traders want to be able to predict the markets with high accuracy; therefore, most of these software packages allow people to optimize system parameters to their heart's content. Given enough leeway, a system developer can create a system that perfectly predicts market moves and makes huge returns on paper with certain historical data. In the live market, however, such a system will likely perform miserably—all that effort created a meaningless system. Worse, the confidence that these software packages can instill in a trader can be outright dangerous. By just clicking the mouse, you can overlay numerous studies over past market data. With certain historical data, you might even believe that the right combination of indicators can make the markets practically perfectly predictable. Using such systems to trade real money in the live markets has been the downfall of many traders just like you.”
1. If the markets aren’t really predictable, how come some analysts are still predicting? – K. A
Answer: The thought that the markets would behave in a certain way is futile: you’ll often be disappointed. Thinking that the markets are predictable is even more dangerous to your trading mindset because you’d not want to get out of a trade if you’re wrong, since you may feel that the market may soon reverse, and which mayn’t happen. You don’t need to predict the markets before you can make consistent profits. We trading analysts are humans like you, only that we use complicated trading jargon to impress. One thing I don’t like (and which would no doubt, continue) is the fact that most professional analysts like to create impression that they know what the markets would do in the near future. It doesn’t matter whether the person is talking on the most respected trading news program on earth. How many of them can mention with certainty when they’re going to die, where they’ll die and what’ll be the cause of their death? They predict the market and continue predicting, but you don’t see their personal trading results. Novices are angrily forlorn because they think gurus don’t lose. If I say I make 300 pips last month, some trading rookies may say: ‘Hey, that’s the geek who doesn’t lose!” If they ask me for signals and the first 2 signals lose, they become mad. But if I display my losing trades and winning trades, plus how I still survive. Then if people ask me for signals, they won’t get furious after 2 or 3 losses because they’ve seen how I display losses with profits and they know our profits would soon outgrow those losses. The purpose for trading isn’t to avoid losses, but to make more money than you lose. You don’t need a complicated strategy to achieve this; only a simple and stupid trading idea you need. However, vendors would always be pushing complicated strategies to traders (How would they have something to sell if they don’t do that?). Most people won’t learn their lessons until they’ve learned thru harsh personal experiences.
2. I’m skeptical about your signals since I don’t know the reasons why you take your trades. Is having more reasons not important? – T. S.
Answer: How good and pleasant would it be if the markets were able to move in our favor because we have reasons for taking trades! Apart from certain no-rule traders, majority of trades are rule-based market players. Yet majority of traders lose. For example, a price action might be pushing up the upper band of the Bollinger Bands, when the RSI is overbought, when the Stochastic reading is in the overbought region, when a candlestick reversal pattern has formed, and many analysts are saying they’re expecting a reversal based on a certain fundamental event. You might still take that trade and lose. Making the best trading decision in the world is no guarantee that a trade can’t move against you, neither would the market respect you just because you know what’s going on in Bhutan or Vanuatu. Your survival on the markets requires something more than mere reasons for taking trades. Most trading reasons come from strategies (the least important factor in trading success). I’m not saying it’s bad to have reasons for taking a trade – for having no reason is even worse. I’ve reasons for taking my long-term trades, but my survival secret lies in cutting my losses and running my profits. With my short-term trades, I know that giving myself a nice risk-to-reward ratio is far better than having a reason. With my non-directional trades, I simply capitalize on the market unpredictability and stick to my exit criteria.
3. Why do you use stop loss in some strategies whereas you don’t use it in your GBPJPY strategy? – D. I.
Answer: I’m an ardent advocate of the use of stop loss in trading. The importance of stop loss is without question and can’t be overemphasized. Nevertheless, this doesn’t mean that no-one on earth can survive the markets without the use of stops. The stop is a money management tool, but not a perfect one. There’s no perfect money management tool in trading. Both wide and tight stops have pros and cons. There are great traders who don’t use stop loss and make consistent profits. How? They use very small lots in proportion to their capital base and know exactly where to get out of the market if they’re wrong. They know if their trade isn’t going in their direction and they have the discipline to get out with a small loss. The use of stop loss is good on the condition that it’s respected. Stop loss is pointless if it’s widened further to avoid being hit or it’s later cancelled to avoid its being hit during a negative trade. And if your risk is too high (high lots in proportion to your account), then your stop won’t make much sense, since the drawdown would be too much anytime it’s hit. If you don’t respect your stop loss, then someone who uses very low risk and honors his exit criteria is far better.
As for me, I use stop loss in all my long-term and near-term trading techniques except the GBPJPY strategy which has been surviving the market consistently for 4 months now. Its secret lies in the optimal entry period, low risk (0.01 lots per $500), respect for exit rules and the unpredictable nature of the GBPJPY cross that’s being used to my advantage. I’m presently testing this same strategy with a wide stop and would see how it survives the markets with that. And to this end, it remains 4 weeks for me to reach a final decision, after which a stop might be incorporated into the strategy. For now, I’m enjoying small and consistent weekly profits on this strategy. As far as I’m concerned, making a consistent 10 pips every week is better than -10 pips weekly.
4. Why do you announce more trading strategies and tweak the existing ones? - E. R.
Answer: Trading mastery is an ongoing journey. If you’ve been toiling and suffering in your quest for trading mastery, hope and help will come your way one day. If you don’t relent, there are many trading secrets you’ll stumble upon. While trying to play safe, I also figure out how to improve my trading results over time. For example, when the markets are ranging you could sell resistance and buy support safely. When the market is in a strong trending mode, then you simply need to sell support or buy resistance. Two consecutive losses in one week – amounting to a maximum of 3% drawdown - are enough to indicate to me that the market condition has changed. A strategy can survive any market condition if it’s flexible and adaptable according to an existing condition. I’m being exposed to numerous trading ideas on daily basis, but I need to first test them privately before deciding whether they’re worthless or worthwhile. There’s nothing wrong in tweaking your trading system to produce better results, or adding more systems to increase the overall profits. All roads lead to Rome!
5. Could you please show us your past performances? – M. S.
Answer: I need to let you know that I’m much happier if my trainees and clients have good results on their trading portfolios. Past performances on my strategies are displayed in my Sunday articles. For my long-term trades, the entry times and prices, exit times and prices, plus trade management and profits and losses are explicitly stated in my Wednesday articles. You can monitor the trades on your own. A summary of my long-term trading results would also be displayed on monthly basis. There are strategies that show results in weeks and some show results in months. Long-term systems are good for investors who prefer to evaluate the returns on their investments on long-term basis. You got to know the kind of trader you are. Impatient traders should avoid systems that show results only after some months. Whatever you preference is, you’re welcome; whether you prefer to evaluate your trading results after weeks or after months.
I conclude today’s article with another quote from Dr. Van Tharp:
“System development software publishers know that most traders want to be able to predict the markets with high accuracy; therefore, most of these software packages allow people to optimize system parameters to their heart's content. Given enough leeway, a system developer can create a system that perfectly predicts market moves and makes huge returns on paper with certain historical data. In the live market, however, such a system will likely perform miserably—all that effort created a meaningless system. Worse, the confidence that these software packages can instill in a trader can be outright dangerous. By just clicking the mouse, you can overlay numerous studies over past market data. With certain historical data, you might even believe that the right combination of indicators can make the markets practically perfectly predictable. Using such systems to trade real money in the live markets has been the downfall of many traders just like you.”
