In this episode of Truth About FX, Walter talks about trading strategies and the key factors to look at when making your own strategy. What are your goals? What are the thing that you should avoid?
You will also hear about one of the forum’s member, David Franklin, and his unique trading strategy and how this might help you find your edge. All this and more in this episode…
Download (Duration: 03:52 / 4.42 MB)
In This Episode:
00:39 – sounds weird
01:39 – chop down
02:11 – in and out
03:31 – a big mess
04:27 – one bullet
Announcer: Sometimes, forex trading is a wild and wooly place to be. That’s why Hugh is here, to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.
Hugh: Hi, Walter. I know that you trade on the daily and on a longer term chart but, do you have a favorite day trading or scalping strategies?
Walter: Yeah, that’s interesting that you’ve mentioned this. In the forum, we’re actually going to bring in someone who has — I know it sounds weird but — he’s going to talk about his daily scalping strategy.
It’s weird what he does. I think he closes his trades the next day so it’s like a one candle deal. You take the signal, you take the trade and then, at the end of the day, you basically close your position out.
It’s like scalping because it’s in and out but because it’s the daily chart, it’s weird but that would be interesting. I could probably see about putting a link up to that
The other thing I should mention is that — I probably said this too many times but — if you were looking to trade the lower time frame, you need to ask yourself as a trader, what is your goal?
What are you trying to get out of this? Is it that you want to have more trades? Because, you can do that by trading multiple markets, many markets. You can trade the 8-hour chart or the daily charts and watch 40 different markets. That is one way to get more trades.
You do not have to necessarily chop down to the 5-minute charts and trade that because there are some very drastic things that happened to you, into your brain, when you do this. You have to be aware that it is a lot more difficult to trade these 5-minute charts, these 1-minute charts, than it is to make decisions on the daily charts.
I encourage everyone, specially in the beginning, to try to avoid trading the lower timeframes and spend your time on the higher timeframes, getting really good at that first before you start looking at the lower timeframe.
That is my suggestion. If you want the in and out then maybe you can do something like what I was talking about. He’s going to show us — we haven’t record it yet — he’s going to show us in the next couple of weeks as we record this. By that time this podcast is out, it would have been done so maybe you can look at something like that.
Where you have a system that gives you these signals on the higher timeframes but you’re in and out. If that is what you are after, that is a viable solution too. So, that is something I should mention.
The other thing is I had a system where you would basically take trade and then you get out 3 candles later. It’s like the exit is time-based. You might look at systems like that on higher timeframes if that is what you are after.
I’m trying to steer people away from the lower timeframe. I think that is something that you graduate to as you get better as a trader. Also, something you need to really focus on your mind and where you at when you are making these decisions because it’s very close to gambling and addiction and according to your brain, it’s the same thing.
The same area of your brain lights up so I would try and steer away from these if possible. That is my point. I don’t know, have you ever tampered with the lower timeframes, Hugh?
Hugh: Oh yeah, for sure. Like you said, I don’t know, I’m just not build for that. I end up chasing stuff and I end like trying to get things back, risking too much and it’s a big mess so I agree with you on that.
Walter: One thing I’ve heard though, I should just say if someone is really adamant about doing this — one of my friends, he’s in London and he was showing me. I met up with him in a pub and he was showing me his chart, his equity curve on his little scalping system.
What he said which made a whole lot of sense to me which is he basically had one bullet. So, he would scalp during the interbank market just between when London close, — oh sorry, when New York closes — but the Asian hasn’t quite fired up yet.
Like, New York closes but Tokyo has not open yet. He would take this really simple trades, sort of reversion to the mean trade,s and he would do quite well. He showed me he did really well, as far as what I could see. It’s only I think 2 or 3 months but he was doing quite well.
What he said made a lot of sense to me which is, he would only take one bullet. So, he had one bullet, he had one trade to take and if he took that trade and it’s a loser that was it, the end of the day. He would come back the next day.
He wouldn’t allow himself to chase that last lost. If he had a winner, I think he had the option taking another trade but if he didn’t have one winner, that was it. Close it down, go to sleep. It was quite late, obviously, where he lives.
That made a whole lot of sense to me. If you are going to adapt the lower timeframes system, that might be something that you do to sort of build that in to avoid chasing trades.
Also, have someone to be accountable to so that you can report every week or everyday, “This is what I did. This is the trade that I took.” Because, you want to make sure you are sticking to your system. You want to make sure that you are not taking on too much risk.
Like you say, I mean, it is so tempting, isn’t it? You have a loser, you’re going to go back and take a trade twice as big so you can get it back, right? And then, some… I don’t think that is going to work for most people. So, there you go.
Hugh: Okay, cool. Some great strategies. Thanks for that.