books to help

[b1u3lee]

depends, experienced traders who create systems, know the underlying market environment and how and why to use those systems. so those people know what they are doing, there is nothing wrong to use those systems.

but then some black box scammers use systems to curve fit data then present to you systems which have no edge in forward testing. these you want to avoid.

tape reading is about learning how to read price action and fundamentals, hence learning how to pulse the market, and understand what kind of mode or mood the market is in.

give you an example, a range based system only aims to capitalize on range bound market environment while a trend based system is only capitalizing on trending environments, some systems are hybridized. but experienced discretionary traders will be able to pulse the market properly and decide which system them think suits the current environment.

so by learning and having proper grounding knowledge of how proper trading is done, you can achieve 2 things, firstly, you avoid being scammed of your money, and second, you more often than not will know enough after learning for awhile, to produce a profitable edge for each type of market environment.

so systems is how a specific method of trading goes, whereas tape reading means trying to understand the market, in terms of price action, news, mood, and perhaps fundamental drivers.

and further into your journey to learn about trading, if you do learn a system, you may encounter systems which worked in the past but do not work now, because the edge in the system has eroded and has no more edge, and then when you can learn to readjust because of that, it means you have enough knowledge to become consistently profitable.

so the point would be learning how to craft an edge out from the markets. once you can learn how to learn from an ever changing market environment as well as craft a new edge from it, then you will be consistently profitable, or enough such that you can make a really really good living out of it.

but the learning curve can take as much as 4-5 years or even more if you have no mentor and have to trial and error your way through. some info takes alot of thinking and digging to derive.

if you do want to find a mentor, there probably are many experienced ones around, but the ones you want to find are those who properly explain why they do something, especially with respect to the market environment.

market environment is a topic which i don't see many courses cover but this one is essential if you want to make it as a trader.

give you an example regarding adjustment of trading methods.

last time if you compare 3 to 4 years ago, markets flow was better in forex, because last time not so much HFTs around, price action had a more normal ebb and flow to it, but these days, i recently saw some news where many banks also now use HFTs for their market making. and price action and flow of the markets is more different, market now produces a more bivariated volatility distribution, such that last time you see a very nice ebb and flow impulse pullback, now what you see is market range in a fairly tight range then suddenly explodes, thats because in the range, all the HFTs are holding the range, then when it breaks, they all leapfrog each other causing volatility to either be very small and very noisy or very large and is 1 straightline with lesser pullbacks.

so if this were the case, how would you adjust your trading strategy if last time you were used to buying pullbacks? there are many ways to answer it depending on what you feel comfortable with. you could go lower in timeframes to look at whats happening and trading that (called the race to zero), or you could change your entry method more towards momentum than pullbacks, or you could shift to higher timeframes and trade the pullbacks, as HFTs are basically scalpers, so they don't price in fundamental useful information, last time dealers do that by being willing to hold what other informed traders are holding and not holding for long what others are not willing to hold or are getting rid of, since they are middle man(can see flows), so since HFT not pricing in these info at a shorter timeframe, means higher timeframe may trend alot better.

I though of reading tape cause its the most fundamental analysis. Supply & Demand 101. One way of retaining the trading edge.

I agree systems can only work in certain conditions and once it's no longer applicable, will be at the mercy of the trainer who designed the system in the first place, via subscription to their system. win for them lose for me even if that system worked during that period.

so to quote alexchia01, gotta focus on learning tape reading in specific markets, e.g futures.

All other indicators/ technical analysis seem to be derivative of tape reading.

 

[CookieMonsta88]

I though of reading tape cause its the most fundamental analysis. Supply & Demand 101. One way of retaining the trading edge.

I agree systems can only work in certain conditions and once it's no longer applicable, will be at the mercy of the trainer who designed the system in the first place, via subscription to their system. win for them lose for me even if that system worked during that period.

so to quote alexchia01, gotta focus on learning tape reading in specific markets, e.g futures.

All other indicators/ technical analysis seem to be derivative of tape reading.

yep. in fact, all tape reading is is simply analysing the tape, and understanding the transactions which occur with respect to whats happening now.

indicators are a very small branch of technical analysis, and in fact what you will see is the least laggy are the tick charts then the 2nd least laggy are the price charts, anything else is extremely laggy especially for intraday trading, ma and the like can still be used on daily but usually intraday just sticking to the bare charts will do. then there is the support and resistance zone, where people like to place stops and big players like to hunt stops, so if you know where these are, you can use it for timing of entries. then there is the generic idea of trend = higher high higher low and such (dow theory). then there is also news, and fundamentals which these days technical analyst seem to for some reason neglect, whereas in the past during the era of edwards and magee, what their branch of technical analysis taught was that news and fundamentals find their way into the charts, and was never neglected. then there is intermarket correlations, sector correlations and the like.

essentially what you are reading is how the money is flowing. for example the turkish lira crash, when it happened, you see the ripples on all major pairs right? because USD is 1 leg, so ripple effect causes the move on other majors too.

yep as for the system yes, thats why its best to understand the fundamentals of how the markets work.

then there is also the understanding of market structure, this one is key as well, who are the biggest players? who are the intermediaries? why do some correlation of instruments tear or become correlated? and how can this be used? so if big players need liquidity and market makers know where the stops are, where will market makers try to bring price to in order to satisfy big player's requirements? if so can this be an edge to exploit? these are some of the questions you may ask yourself when analyzing the charts.

 

[CookieMonsta88]

Just to top off on the post below, the key to good trading is being able to respond and adapt to changing circumstances and honing extemporaneous responses is the key to being able to handle tricky situations which the market can throw at you and survive it, when market throws you a lousy situation, it's bad luck, but how you respond, thats the skill.

 

[b1u3lee]

so what kinda time frame you trade??

 

[b1u3lee]

how would you go about studying the market components, players, intermediaries etc? thats important for the order flow

 

[CookieMonsta88]

so what kinda time frame you trade??

Well I trade 2 time frames mainly, I trade daily charts using h4 as timing, for my swing trade book.

And I trade intraday Forex on h1 M5 during US mornings.

To be honest my tilt is towards intraday trading as I started out there, but because of time commitment issue, I have to trade both as sometimes I don't have the time to trade intraday so I go to daily to pick swings.

 

[CookieMonsta88]

how would you go about studying the market components, players, intermediaries etc? thats important for the order flow

Well, first I would go study what are the fundamental drivers on the week.

There are many kinds of weeks, news week, super Thursday, FOMC, numbers driven, and nothing going on week, NFP weeks.

The sequence the news comes out can influence how price action manifest too.

Say for example, this week has FOMC, I would begin by wondering, how would hedge funds and hedgers be acting like, they would hit market makers, and then around Wednesday when FOMC is due, I would wonder how market makers will hunt for stops after being hit by these corps.

So you see on the charts that they form turning points, whose are usually when someone large turns it for their purpose, so next time when they hit those points, what happens? Do they fizzle out quickly upon hitting these areas or proceed to push through really fast or are feeling like they are attempting a break but someone else is blocking them or do they pop the stops and then immediately reverse?

So with the price action and the market fundamental driver as the general conditions, what information and state of the players are in can you derive?

This is mainly for h4 swing trading and intraday as these help you on developing a feel for the markets.

If you are going for position trades, looking at COT reports and understanding the macro drivers and major timeframe trends like monthly/weekly would help.

If you are trading strictly intraday and have to manage a sometimes very noisy 5min chart, your strategy will have to change as the players you are trading against are different, in swing and position trading, you have fundamentals and the major trend backing you if you got it right.

Whereas for intraday, it's the market makers arena, so intraday is when market makers help big players get orders by know where the stops are, matching big players orders with those stops if there are or opening their proprietary books to the the other side of the trade.

So sometimes intraday can get noisy, but these noise can be profitable too. So intraday has 3 main kinds of environment, trend type where daily is strong, noisy type and very choppy if daily and h4 looks like it's turning and then news type where the day is practically very quiet till the news gets released and majority of the volatility of the candle stick for that day is from news till afew hours after.

Then as for strategy, well this is entirely up to you, what you feel comfortable with to employ as a strategy.

 

[CookieMonsta88]

Then there would be the intermarket relationships, for example, Cny and Aussie and nzdusd is very correlated because of their import export relationships, as China is their major trade partner hence any thing which affect Cny will affect aud and nzd. So this information you can go to wiki or their ministry page to find out.

The info in this post and the post before are geared for Forex.

As for stocks and others, you have to see what's their seasonality like, for example for stocks, earnings season maybe where the consistent edge can be taken. Or 2nd day trades after momentum push.

So different types of instruments have their own characteristics. So the strategy have to factor these in.

Anyway a good book would be reminiscence of a stock operator about Jesse Livermore, you can see how he thinks like when he trades.

 

[CookieMonsta88]

today's USDCAD is the example of such a day, in which the hours before the CAD new release, there is little movement, then when the news releases, then it just goes down 70-80 pips in 1 5min stick.

 

[b1u3lee]

today's USDCAD is the example of such a day, in which the hours before the CAD new release, there is little movement, then when the news releases, then it just goes down 70-80 pips in 1 5min stick.

so did u win some or lose some?

 

[CookieMonsta88]

so did u win some or lose some?

Well, i didnt hold long enough end up 10pips scalp only. Easily could have been 30pips. Was tied up trying to salvage another trade also. But all in all, good day .

The perks of having 2 trading style on 2 different timeframes. A whipsaw on a higher timeframe is a trend in a smaller timeframe.

If you can employ both a trend following strategy while also using another range bound strategy together, and adding some discretion to tilt the odds, you can have 1 strategy counteracting the loss on the other strategy. Overtime you can get a very stable p&l because of how tge 2 methods interact with each other. Then using both to construct an all market environment portfolio.

 

[peterchan75]

Catch 22 situation. Since the title of this thread is about book, read and doing is like head and tail of a coin. One have to read so that one has the knowledge to doing something. One has to do something in order to reinforce what one has read. Those books in the first page is not easy to understand. One must read them again and again and doing it and experience it and have the ah..ha... moment.

Here is the summary of Trading in the zone by Mark Douglas.
http://www.forextrainingacademy.com/blog/trading-zone-members-summary

 

[CookieMonsta88]

Well this is something that most books either don't have or do not go in-depth into, the whipsaw market environment.

The main issue with most strategies is this, it works for specific environment types, but there is 1 environment type few mechanical system can handle, which is the whipsaw market condition, and how to place your stoploss. Unless of course that mechanical strategy is targeting to profit from whipsaws.

Well the answer is, if you attempt to analyse your position in a whipsaw type environment, to try to pick a direction, you would probably end up getting stopped out.

You see the answer is not as much on analysis, it's a whipsaw environment and that's that.

So the answer lies in strategy, what can you do to either mitigate it or buy yourself some time or lessen the odds of getting taken out.

So the theory is that once you can figure this out it's all about simply being able to buy yourself time by locking your position in till the market shows a clearer direction.

So 1 way is to figure out how to lock in exposure to then decide if you want to accept the loss later or if it has a chance to go in your direction.

The other is counteracting strategies.

But then again, if you look at that, it's pretty much the same underlying idea. Protect position till you can have a proper resolution for it later. And that sometimes mean opposited positions.

So long short strategies can be used to implement locking, options too then rotational hedging using correlated products, and everything in-between, including pyramiding pairs which are profitable now and just keeping pairs which are not profitable as a hedge. Then after that taking off the hedge, and averaging into the pair in loss if still feasible.

So the main issue with martingale and averaging in is that, if you do it against the trend, you are guaranteed a blown account, unless your trading really small exposure, which does work, but if you incorporate some kind of locking to lock exposure and use some discretion, it can be very viable, as you are not letting losses ride by locking in exposure while the market is tanking. The main idea is to be able to decorrelated portfolio's exposure to the market losses while the move is going on.

 

[b1u3lee]

have u checked out material by trader dante? he trades in forex markets too

 

[CookieMonsta88]

have u checked out material by trader dante? he trades in forex markets too

Well, never really heard of him before, maybe you could point me to his materials for a look?

Edit, ok i googled it, his method seems ok, seems to me from what i can see from his youtube vids to be priceaction + s&r + generic trend analysis.

However i think even after you have learnt from his material, it may still take afew months to 1 to 2 years of consistent practise to become consistent. Majority of the learning has to be done by actually trading the markets.

Also, seems to me his trading style just simply picking swings.

There are different styles of trading which may perhaps be more interesting than that.

For example you can have split entries active management strategies with long short mixed into it to handle trend runs against your position.

 

[terryhoho]

Usually the first type of book I look for is the local university course material book.

It has very detailed formulas and steps, globally accepted, No sales pitch.
Good for sending u back to sleep at night.

Most of books by random dude from their own website is like collating surfacs information from google.

That being said, some do provide unconventional valuable knowledge.

 

[CookieMonsta88]

The main rite of passage of all traders, is to find their own trading style.

A mentor can guide and help you speed up your development, but does not guarantee success.

Because at the end of the day, you have to find your own edge in the markets.

That's the reason why I think trader Dante is a legit guy, not endorsing or advertising, I have no affiliation with that guy. But what he said in 1 video rings very true, which is you are the edge when your trading, not really just the strategy and all other, it's really your thinking process and how you apply it that determines if you are successful.

So this process without a mentor to guide you can take up to 5 years or more. But with a mentor maybe it's 2 to 3 years.

But to be a full fledge trader whom can get consistency usually it takes 5years, for the bull bear cycle as you have to prove yourself in the markets in actual trading.

 

[CookieMonsta88]

What is pattern recognition?

Pattern recognition is a broader term which can encompass price action.

But need not be only price action.

For example, towards the start of the session, price action is good, very volatile but towards the end, price action tones down, and becomes choppy as everyone looks to exit.

This is a pattern to, which tells you early in the session, momentum is great, so a mention strategy is better and towards the end, a range bound strategy is better as it's choppy.

In truth pattern recognition just means something that keeps repeating. It can even be applied to non price chart trading, like news trading, during NFP, we expect market to push really strong in 1 direction, we can craft an edge purely only around trading NFP and trading that momentum specifically whichever way the price action manifest.

But of course, these edges may have eroded as hfts came aboard and it's not as easy to do these trades anymore as during these volatile times, these hfts would leap in front and push these orders really fast.

But then, this itself gives another edge, once these hfts are done leaping in front, they are already in a trade and have to exit, implying fading these moves when price begins to reverse now has a higher more stable edge, as you are gunning for the slower hfts. These are also simple patterns, if market is overloaded in longs it may have to sell off and when that happens, you just wait for the entry signal to show it's actually selling off and just time your entry to the beginning of the move.

This is also partially related to understanding your edge in the markets, which is your ability to think like the above that allows you to identify opportunities to profit from the markets.

 

[CookieMonsta88]

finally, the psychology of trading.

what it takes to be a trader.

the reason why it takes so long to become a consistent trader is also mainly because of personal psychology.

what some of the posters post before here about trading discipline, is very true, but in truth, trading discipline is the hardest to master among all of them.

some people may already have enough knowledge to be profitable right out of the box, because they already got the proper knowledge. they did demo and also did well too, but when they move on to real trading, they lost everything.

because they lack the proper psychology of trading.

to be an extremely good trader is sort of like a tight rope walk.
you have to be even tempered so you don't go on revenge trading. you can't be afraid of taking risk otherwise why are you trading? you also can't be so un-afraid of risk that you just randomly take large risk too, as you will just have a big blow out.

you also can't be so undisciplined that you just take any trade just to enter trades. and you also can't be so disciplined that you keep following a system which has already lost its edge forever.

you also can't be so impatient that you don't wait for the optimal entry point, and you also can't be so patient that you wait for everything to line up and then the edge is gone.

hence, it really takes quite awhile to calibrate yourself the proper conducive mindset to trade optimally.

for some, if its fear of losing and such, because its so deeply rooted in their psychology, some may never make it as traders, that they do the very opposite that they should be doing, like letting losers ride and cutting winners short, even though they know deep down they have to do the opposite.

others may be born to trade.

but for most what they need is a period of time to properly calibrate themselves to what is required to trade well.

the key to learning how to adapt to the markets is a balanced mindset.

knowledge can be taught to anyone. the psychology, well it cannot be taught, only advised and to be learnt through experience.

so because of this, no one can make you into a trader, only you can make yourself into a trader.