In my last post we started looking at using technical analysis to identify 1-2-3 trading patterns in up trending and down trending markets.
In this post we are going to start reviewing how we might use these patterns to provide us with entry signals in a trading system that will allow us to trade profitably.
I witnessed an interesting experiment the other day using an compounding calculator. The presenter started with $20,000 and compounded it monthly, starting with 2%, and showed that it would take 16 1/2 years (199 months) to turn that 20,000 into 1 million. At 3% it took just over 11 years (134 months), 4% 8 1/2 years (101 months), and at 5% it took just 7 years. Nothing new here.
However the presenter then added an extra element or dimension to the calculation, and that was - additional periodical deposits. Here is how it went; starting with $20,000 and compounding monthly at 2%, and adding $500 a month from another source, the 20,000 turned into 1 million in only 13 1/2 years, 3 years less than the example above without the periodical additional deposits. Depositing $1000 a month, compounding at 2% a month, the 20,000 turned into 1 million in only 11 1/2 years. In fact, if you take $20,000, compound it at 5% per month and deposit $1000 a month on top, you’ll turn that 20,000 into 1 million in 5 3/4 years, or just 69 months.
Readers will have noticed that the posts in this blog to date have been focussed on the trader far more than they have on trading systems. This is for a very good reason which you should all know by now. If not, please read our earlier posts.
This post however is going to introduce some technical analysis and provide some information on identifying 1-2-3 patterns on charts that will help you to trade profitably.
For this post I want to try something different and find out if you’re getting what you want from your trading, and if not, I’m then going to try and tell you why not.
All I need from you is whether or not you have set goals and why you think you’re not reaching them. Goals can be anything from a set dollar amount, percentage amount, short term consistency or long term growth. Think of this as a second opinion from a consultant, i.e. I’m going to try and figure out where you’re going wrong. Of course, the policy is you have to be honest, and I may have to ask another question or to of you, depends on how open you are with your initial post.
All you need to do is reply to this post by clicking on the ‘comment’ link below. If you haven’t already signed up, do so in the top right. It’s a very simple process.
So don’t be shy, it’s those who put their hands up that find the way.
Happy Trading
Dean Whittingham
Elite Insiders Group - Trading Systems
Financial Market Fisherman © 2004 - 2007
Some time go while learning how to trade profitably myself, I found myself getting frustrated with the amount of jargon and terminology I had to become familiar with.
The terms “option writer” and “option taker” for example didn’t seem to be very descriptive to me, and other terms seemed to be interchangeable, such as Forex and currencies.
Backtesting and paper trading are often talked about that way as well, but regardless of how others choose to use the terms I view them as two separate activities and after reading this post I’m sure you’ll feel the same way.
Forex is the common word used for Foreign Exchange, and is sometimes referred to as FX or Currencies. In the Futures markets currencies are bought and sold like any other commodity, but in the FX market, they are exchanged with each other, hence the term Foreign Exchange Market. This post will look at the Foreign Exchange Market.
If I am in Australia and I wish to buy US dollars, I will sell AU Dollars in order to do so. Therefore, I become a participant in the FX market. FX participants vary and may include tourists, shop owners, tellers, importers and exporters, banks and other financial institutions, fund managers, traders and investors. The FX market is open 24 hours a day and starts in New Zealand at 9am Monday morning their time and finishes the week in New York at 5pm Friday EST.
An effective money management strategy is an essential part of any trading system, and it can make the difference between one that lets you trade profitably, and one which erodes a traders capital until they can no longer trade at all.
In this post, we are going to explain why.
If you haven’t worked it out yet, our theme so far on this blog has been getting ‘you the person’ right before you begin your trading career, or if you already are a trader and struggling, giving you clear and concise ways to find out why you’re struggling.
The topic of this post is trend following vs. range trading. I’m writing this post because there is a big difference between the two and even more pertinent is that most traders are either one or the other. Rarely do you find a trader who does both.
In the previous posts in this series we have focussed on fear, as it is often cited as having the biggest impact on our trading psychology.
I would certainly tend to agree, but it is not the only emotion traders need to master.
In this post I’m going to talk about a couple of sins that traders also need to be aware of if they want to learn how to trade profitably.
Some traders can get confused between leverage and risk. By that I mean when someone says ‘you can obtain this financial product on high leverage or low margin’, they assume this means high risk, when in actual fact the risk is always there regardless of the leverage.
This common connection between high risks: high leverage comes from not understanding leverage properly, but even more so not understanding risk.
