Why does the average forex trading strategy lose money?

Opening range breakout

The opening range is used by the World’s Most Successful Traders. This trading approach provides a trading path for the new and experienced trader alike. During the first 30 minutes of the day’s trading traders and investors are reacting to any news they have heard or analysis they have done since the close of the prior day. This makes the opening period psychologically very important to many traders.
I use first 30 minutes(for forex first 1h or asian sessioan can be consider as opening range) price action as my opening range.
What I look for to trade opening range high / low:
· A long tight consolidation at the ORH/ORL.
· Relatively high volume.
· Price is trading above to 10 MA for long and below 10 MA for short, if the price is close to MA that’s add more probability .
· Momentum in the price action is necessary when we enter this breakout.

Few trades

Some days are wild, you can’t get enough of any thing, and I tried to be a short term trader but I am not. I regretted it afterwards, when I saw that I was actually lucky to get out with some or no profit. I went long EUR/USD at the top and it was clearly struggling to go up, but I didn’t see that at all, it could have been a loss.

Not a good start

Not a brilliant day, for some reason i cancelled the EUR/USD long order and it can’t stop going up .I exited too early in the EUR/GBP as well, I am completely out of focus.

Long EUR/USD

Just one trade so far.Went long EUR/USD with one lot. Short term pattern looks bullish and conservative approach towards buying EUR from big players made some nice move today.

Baby boy

Hello readers, I know it's a long time since I posted anything on my blog, I am sorry for that. As you guys know we were expecting a baby and at last he decided to come out and by the grace of God mum and baby are doing alright. He had a little bit of a fever at the delivery and some kind of urine infection was the reason for that so he is now under doc’s care.
Hope you guys are making money and are enjoying life. Take care.

$830 gain

Market is still unstable, Greece debt is apparently not giving comfort to the big players. I went long on EUR/JPY and GBP/JPY pair; after 40 pips gain I put my stop at breakeven as always. GBP/JPY just couldn’t give me enough time to react and stopped out.

Why Does the Average Forex Trading Strategy Lose Money?

ATR (average true range) Level Stop-Reverse System:

This system is very easy to understand and it is profitable. I prefer a 4 hour time frame to use in this system but 1 hour time frame is also recommended. The good thing about this system is that it will not only give you a good entry point but also a stop level and exit point. The Price Retracement is the most important element of this system, without a retracement or pull back we should not consider any entry point.
This system is designed to use ATR stop level indicator and has the following conditions:
· ATR stop level indicator

· This trading system is an always-in-the-market trading system.

· Long Entry: Price has to cross above the Trailing Stop Level (Red line) and we will wait for retracement and entry will be the high of the last candle of the consolidation plus 3 pips plus spread. We will not enter any trade if the retracement is too deep and breaks the red line.

· Long Exit: We will exit when the price crossing is below the Trailing Stop Level.

· Short Entry: Price has to cross above the Trailing Stop Level (Green line) and should retrace back and enter at the low of the last candle of the consolidation plus 3 pips plus spread. We will not enter any trade if the retracement is too deep and breaks the green line.

· Short Exit: Close price crossing above the Trailing Stop Level and that is our short exit point.

· Suggested currency pairs: EUR/USD, GBP/USD, USD/CAD, AUD/USD, AUD/JPY, EUR/JPY, GBP/JPY and EUR/GBP

· Remember that without money management a golden entry will fail to give you the success that you deserve. Do not enter any trade if the conditions don’t allow you to do so. You must take partial profit

1036 dollar profit

GBP was showing some strength and I was willing to join the rally but missed the actual entry .I had to wait for the pull back to enter long on GBP/USD and GBP/JPY pair. Vertical price movement from the fair value often end up in same way.

$874 profit in four trades

Market moved and I was in, all my order executed on time and happy with the results. It could have been much better in this market sentiment. I was extra cautious and cut down all my position size into half, little annoyed there.

Stocks tumble on worries about jobs, European debt

Todays link

A look inside hedge funds

Money management

1. 1% risk per trade of the allocated capital and 5% risk for all open position.
2.First target (first partial) at 1% gain, second target at 2% gain. Rest of the open position will be keept open till the system say different thing.
3.ATR allows the open position to breathe in the market volatility .Setting stop at the ATR level is most logical and effective.
4.If the ATR does not apply ,high of the consolidation is the second best place to set stop.
5.Consolidation some times become too large to set stop, in that case we will use 1% rule.

Trading with Dow Theory

There are many times in a bear market when people (especially the media) start getting excited. The market starts to rally, and before you know it we have truck loads of market experts calling a new bull market. But how do you look through all the news and noise and really tell if a new bull market has really started?
Here is one way that has been very successful in keeping out of bad trades and staying in good ones over the last 50 – 100 years. Originally coined from Charles Dow’s own writings (if his name sounds familiar, it’s because it is one half of the “Dow Jones Index”) Dow Theory, as it is now called, is simple and quick to use. But why would we use Dow Theory?
Here are the main benefits:
1: Dow Theory is an easy and measurable way to recognise when the market is heading up, and when the market is heading down (and likely to continue).
2: As Dow Theory is viewed on a weekly chart, you only need to scan the market once a week. This means you can work full time and still trade successfully.
3: Being a weekly strategy, you get to capture the longer weekly trends. These will usually range from 5% to 30%, but can stretch out to 50%, 100% or more.
4: Dow Theory is easy to recognise. You do not need to have any fancy indicators, volume, or astrological charts on your screen to recognise a Dow Theory signal.

Now, according to Dow Theory, to have a bear market we must see a peak in price, followed by a trough, then followed by a lower peak. Once price trades through or closes below the previous trough, this is our signal to sell.
By the same token, to have a bull market we must see a trough, followed by a peak, then followed by a higher trough. Once price trades through or closes above the previous peak, this is our signal to buy. If this all seems confusing, I find a picture says a thousand words:

http://www.asxmarketwatch.com/2009/06/trading-with-dow-theory/

Pending orders

After two weeks of sell off, it seems like market having some rest. Consolidation period might be over at any time or be extended for weeks. Some of my pending orders have been set to the important levels, if the market takes my order I will add some to it.

Making Millionaires Out of Average Joes

Sometimes that magic million dollar mark can seem out of reach. I mean – you earn your $50,000 paycheck, and by the time you’ve paid the mortgage, the car, the kids, the wife / hubby, the insurance, the rates, the groceries, the renovations (this list could go on for a while) there is hardly anything left for yourself – let alone to invest!

The good news is that a million dollars and beyond is actually not out of reach, and you can achieve it with less effort than you’d imagine. You don’t even have to do anything crazy like sell your grandmother or walk across hot coals – you just need to know how to use a simple mathematical tool called “compounding”.

The Eighth Wonder of the World

Compounding – a wise man once described it as “The eighth wonder of the world”. You may have heard of him – his name was Albert Einstein. Others have said that the moment you understand it your world will never be the same again. But, what is it exactly?

Compounding is when you have some money, earn a return on that money, and then re-invest the returns and do not take any out. This has the effect, over time, of earning “returns on your returns”. Now it can start out slow, like growing grass, and this is why many people give up. But with time these small returns grow exponentially, and your grass instead grows into mountains.

Let’s check out an example with a young man we’ll call Jake:

Jake used to buy two coffees and lunch at work every day – costing him around $15 a day. Over lunch one day I pointed this out to him, and also pointed out what would happen if he invested this money instead. Jake was dumbfounded - he vowed right then to change his ways. Over the course of time Jake earned a 15% return on his money – let’s see what happened:


In his first year Jake saved $5,460, but had $5,851 in his account after his returns.
In his second year Jake had saved $10,920, but had in his account $12,643 after his returns.
After five years Jake had saved $27,300 of his own money, but actually had $40,301 in his account. As you can see, the gap between his own money and investing his own money was starting to widen.
After 10 years, Jake had an amount of $125,223 in his account (the grass was really starting to grow).
After 20 years Jake had a nice $681,243.
But this is where the real magic happened (remember those mountains I told you about). In the next five years Jake earned a massive $794,562 from his investments, bringing him to a total of $1,475,805. Jake was officially a millionaire, and all because he started bringing his own lunch to work.

By the way, Jake didn’t even miss the $105 a week by the end of this – it left his account first and he didn’t even see it. And he can now afford to buy any lunch he pleases, whether he wants to continue working or not.

How Can I Get Started?

As you can see the really magic happened in the last 5 years – so I can’t stress enough that the longer you delay the longer it will take you to get there. Now of course you do need some money to invest. If you haven’t got any (or even if you do) the best way to get started is to “pay yourself first”. Set up an automatic transfer into another account so you never see the money, and set aside at the very least 10% of your net income each pay. There is a great book called “The Richest Man In Babylon”, which describes this perfectly. Go for it! A regular person really can become a millionaire, and that makes me happy.
By Dave McLachlan

No trades today

One setup i was interested in but i let it pass . Another boring day full of chopp.

229 dollar profit

Happy new year to all my readers. I have just finished my second part of the advanced forex setups, it was due long time ago. Not much writing was left but I didn’t feel like finishing it. It’s cool to see how a simple step can get into something that you always wanted to do, with or without any influence. I always wanted to be a writer, when I went to school. I wrote some poems for my school magazine, I still have the copy of that .I guess your inner urge, the hunger for creativity is important for anything you want to create.

No trades

Market was extremely choppy and i decided not to trade in this market condition.

How to identify a trend

I was away from my computer in the European session and missed opportunities in EUR/USD and EUR/GBP pair. Clean breakdown from the consolidation gave us good short opportunities in both pairs. If you are new to trading, I will suggest a few important things to clearly identify impulse and consolidation mode of a trend.
1. Size of candlestick: Usually when the market is trending it will make wide range candles with small shadows
2. In a consolidation period we will see mixed candles which mean bull and bear candles and small in sizes.
3. Usually one directional or impulse candle will cover most of the consolidation range..
4. Usually first candle will close with no or small shadow, which shows strength of the trend.

News trading

It’s Unbelievable that I couldn’t get any thing out of the EUR/USD short. This is the problem with news trading, you have gamble, and I never gamble with my money (may be with other stuff).I made some money in news trading before but never felt comfortable trading news. Since I missed the opportunity in EUR/JPY I was already frustrated and tried to get some money out of news trading. I usually follow the sentiment even its news related trading and enter long before news release, well it worked for me .After the news release price dropped 20 pips and I thought it was enough room for the trade to breath ,but when price failed to contain in the range and I had to close it manually.

$813 profit

Martingale principle is popular in FX trading; its works very well if you have a high provability system. High probability means more the 70% winning ratios in trading. my trading strategies are able to produce 70% winning rates in any given time frame ,I was following Martingale principle. Any fundamental news related trading will consider only 50% winning ratios. Yesterday I lost three consecutive trades, though USD/JPY was up 200 dollars, I was not active enough to put it in a break even trade. After three losing trades I was sure that my system will produce a winning trade and I just follow the principle. Here is one problem if you don’t know what’s your system probability is, you shouldn’t be using this principle.

229 dollar profit

Monday is always quiet and choppy and I am always aggressive in my stop and target. Mistakenly I set target at only 3 pips instead 30, which could have made me another 150 .Other than the mistake not a bad trading day.