Truth About FX

In this episode of Truth About FX, Walter digs into micro trading, risk management, and how to avoid intra-day trading. According to him, finding the right broker is the first step to finding the right system. Is your broker giving you some flexibility with your account?

You will also find here the best place to find the perfect broker for you.

Download (Duration: 05:04 / 5.79 MB)

In This Episode:

00:51 – strike rates

02:12 – too much or too little

03:38 – a big difference

04:20 – not limited

Tweetables:

Decide whether risk too much or too little [Click To Tweet].

Remember: risk management is the key.  [Click To Tweet].

Choose a broker that will allow you to take really small positions.  [Click To Tweet].

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. Another listener wrote in and they’re saying that they’re reading the 15 to 240 minute forex charts with Elliott Wave and they are trying to improve their win rate.I guess is what they are trying to say here. They have small accounts and they want to know how to avoid intraday trading and not watch in the market so much.

Walter: So, this trader is using Elliott Wave which is, that’s cool or whatever works for you and the strike rates are going well. So, high win rate, that’s excellent. You don’t have a lot of money to trade? Well, here is the thing that I think because this is a good question because this person is aware that it might not be a good idea to get sucked into the lower timeframe charts.

So, here is what I would have to say about this. Maybe what you want to do here is you simply want to go ahead and change brokers to a broker that will allow you to take really  small positions.

There are brokers that will allow you to change your lot sizes so that you can trade at 3 cents a pip, or 13 cents a pip, or 43 cents a pip, or whatever it is instead of having a trade for a dollar or $10 a pip. This is something that people forget that they feel like they’re stuck, that they have to trade micro lot — sorry, mini — lot at a dollar a pip or sell a lot at $10 a pip.

There are micro lots that are $10 a pip but even beyond that, there are brokers that will allow you to trade 2 and a half cent a pip or whatever. These are the sorts of brokers you need to look for because, otherwise, you are going to make it a really poor risk management mistake.

Which means that you can have a great system that falls apart because you are running to a massive drawdown because your position size is too big. Even worse, you could have that situation where you have to decide whether risk too much or too little on every single trade.

You might get unlucky. You risk too little on the winners and too much on the losers. These sort of things people don’t think about but the risk management is really — I don’t think you can really over-state that risk management and the psychology behind it is probably the fastest path to your tra...

In this episode of Truth About FX, Walter digs into achieving that winning mindset, building your trading confidence, and achieving that “dream” win rate. Can you really make those dynamic win rates work for you?

Download (Duration: 05:26 / 6.21 MB)

In This Episode:

00:40 – unpredictable

01:50 – big deal

03:14 – bump up

04:50 – drag down

Tweetables:

Work with your risk management. [Click To Tweet].

Trade what makes sense to you.  [Click To Tweet].

Remember, you’re trading differently to the other people.  [Click To Tweet].

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. A listener wrote in and they’re asking about Naked Trade setups. They said that they’ve been building confidence by backtesting a demo trading on daily charts and they are getting better.

It’s getting to breakeven-ish but the markets are still very unpredictable to this person. They can’t seem to get to this 75 – 80% win rate that they hear about. What should they do about that?

Walter: You can make money with all kinds of win rates. I have a friend in Canada, Enho, and he does quite well with 30% win rate. You don’t have to necessarily be right all the time. I know that something that a lot of people want to have, it’s probably because the system that you’re testing doesn’t really sort of jive with you.

That’s going to seem to be weird because, intuitively, we were thinking, “Well, once you see a setup, anyone can see it and anyone can learn to trade but it’s not really that transferable.”

It maybe that you’re trading differently to the other people. You might be missing a rule or something like that. For example, one common one that comes up if you’re trading Big Shadows is that you don’t necessarily look for the biggest candle that you’ve seen in the last 5, 6, 7, 10 candles.

That is a really good optimizer. Like, if you’re trading those patterns, you want to see a candle that’s a big one and is a big deal to the market. That is one thing but I won’t really get caught up in all of the minor details of trying to duplicate someone’s else win rate.

What I would do instead is work with your risk management and work with what you have. If you really, really… Like, for example, I don’t know what system this trader is testing but if you are trading, testing the Big Shadow, and you’re getting 65% win rate and you really wish that you’re up at 75, 80% win rate.

Can you make the 65% win rate work for you? It maybe that your targets are really aggressive and so you are still able to make money with the 65% win rate because your reward to risk ratio is 2.71 or something like that.

You know what I mean? That is the kind of thing. It’s probably related to the way that you see these and it could also be very likely related to the way that you’re exiting from these because some traders move to break even rather quickly. I typically do that which means a lot of my trades get stopped out at break ...

In this episode of Truth About FX, Walter dissects trading consistency, execution, and the psychology of a winning mindset. According, although books can greatly help you achieve success, a new and a much more scientific solution can help you manage higher timeframe charts.

And, did you know that wearing a “unique” headband can actually help you make better decisions?

Download (Duration: 06:46 / 7.75 MB)

In This Episode:

00:39 – winning mindset

01:22 – brainwave entrainment

03:07 – trigger hypnosis track

04:20 – reprogram your thinking

04:34 – muse headband

06:13 – personal record

Tweetables:

Seed yourself with some positive thoughts [Click To Tweet].

You can get the right mindset by using a brainwave track  [Click To Tweet].

Reprogram your thinking.  [Click To Tweet].

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. Somebody wrote in and asked, or they mentioned,  they are overall profitable but they are generally aiming for 2:1 risk to reward ratio. They are finding it difficult to be consistent.

I think they’re saying plenty of examples on the conditions in the overall psychology of a winning mindset would be helpful. What would you say to this person?

Walter: This person is basically struggling with the psychology of executing his system with a 2:1 ratio. That is tough. I mean it almost sounds like this person could be better off — I hesitate to suggest this but he could be better off — going with the higher win rate system, the lower risk reward.

The problem, of course, there is it puts a pressure to hit the win rate higher. There’s a couple of things that you can do. One is — I’ll put a link to this on the shownotes for this episode — but one thing you can take a look at is brainwave entrainment.

Brainwave entrainment is a great way to set yourself up so that it’s almost like you see athletes get their mindset right before they enter a big race or play the big game or whatever.

It’s the same thing where you can literally click into brainwave track and what will happen is you are putting your mind in because our mind goes to different phases throughout the day depending on what we are doing.

There are some that are very useful for traders, especially making trading decisions and there are others that are not so useful. It sounds like there’s some anxiety and some confidence issues here.

Some of those can be helped by using brainwave entrainment tracks and so what you do is you listen to the brainwave entrainment tracks then you sit down and make your trading decisions which is I always do.

I find that very useful and it’s good if you are trading the higher timeframe charts because you’ll know when you are going to make your decisions. If you are trading the lower timeframe charts, you could be making the decisions at any place.

In this episode of Truth About FX, Walter dives into the question of how to use price action trading with forex binaries… as a newbie. He gives some few choice books to help you with patterns and charts and Hugh’s go-to book for options.

You will also learn here about this famous “Three Soldiers” and whether to use them or not.

Download (Duration: 04:35 / 5.25 MB)

In This Episode:

00:45 – turbo binary

02:23 – three soldiers

03:35 – something emerges

Tweetables:

Why do you want to trade binary options? [Click To Tweet].

There’s more flexibility if you are trading spot forex.  [Click To Tweet].

Focus on the candlesticks patterns.  [Click To Tweet].

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. Someone wrote me a letter and asks: I am quite new to trading… They’ve only been trading binary options through a Signal Service for a few months and they want to learn candlestick pattern and price action trading as applied to forex binaries.

They say, right now, they’re only trading in a day or 15-minute chart end of day strategies and they’ve been doing some 30-minute, 5-minute and turbo binaries. I don’t know what turbo binary are but that’s something trouble. What do you say to that?

Walter: It does sounds like trouble. I mean, one of the advantages you have as a spot trader and trading spot is that you can make money with the trailing exit. You can get out if the market goes past your target, or almost to your target. You can tighten your stop, things like that.

With binaries, it has to hit your target, doesn’t it? So, it’s an all or none sort of thing. Some spot traders do trade that way but I would say it sounds like this trader was using Signal Service and was like, “I’m over with”.

It also sounds like this trader is trying to fit candlestick patterns and price actions into binaries. There’s nothing really wrong with that. I guess what I would say is, there’s a couple of books that I would probably recommend.

All of Bulkowski’s books are really good. I’ll link those up in the shownotes for this episode. That’s what got me started on patterns, was reading the Bulkowski books, encyclopedia, chart patterns, and things like that.

He was looking at stock charts but I tested in forex tester and found that there are a lot of those same things were happening in forex. So, that is where I got a lot of my ideas from forex seeds for different trade system.

There’s some other ones. I’m not a big fan of some of the candlesticks charts out there. I find that some of the patterns are actually don’t test out very well and I’ll give you an example.

Some of them, like they call it the

In this episode of Truth About FX, Walter dives into having the right mindset and a clear trading game plan. He talks about how to use key indicators for those who identify themselves as price action traders.

And did you also know that getting yourself bored can help you make better trading decisions? Find out more on this in this episode…

Download (Duration: 03:57 / 4.52 MB)

In This Episode:

00:35 – clear game plan

01:24 – wrong thinking

02:09 – bloody boring

03:05 – light bulb

Tweetables:

What is my system saying right now? [Click To Tweet].

Take a look at the systems that you are using.  [Click To Tweet].

What you focus on, you get more of.  [Click To Tweet].

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. This person asks, they aren’t having enough clarity when they open the market. They have acquired a fair amount of knowledge in terms of trading but it seems like they do not have a clear game plan.

I know that sounds familiar to a lot of people. They are price action trader who uses some key indicators. What advice would you have for them?

Walter: What this means is you haven’t fallen in love with approach. It sounds like this trader is interested in trading price action but does not necessarily have… Basically, here’s the difference between — and I hate to make it so simple but this is really the difference — someone who is a professional and approaches it as a job and somebody who is in a different mindset, maybe in the get-rich-quick or whatever mindset.

So, if you sit down on the chart — here is the test — if you sit down on the charts and you look at the charts and you think to yourself, “Self, I need to figure out which way the market is going so I can trade it.” That’s the wrong thing to think.

What you needed to do is when you sit down at your charts, you need to say, “Self, is the market offering me an opportunity to trade given the parameters of my system?” And, in most cases, that’s going to be no.

Sometimes, it is going to be yes for a different system or whatever. If you are trading 5 different systems, maybe 1, 2, 3 don’t offer a trade but 4 and 5 do, or something like that. The point is when people sit down at the charts and they think, “Okay, I need to figure out if the GBP/JPY is going up or down today because I need to take a trade”. That is not the way you need to approach it.

What you need to do is sit down on your charts and say, “Okay, what is my system saying? Does it say buy, sell or no trade?” That is really the goal. To get to that point where it’s so bloody boring that when you sit down in front of your charts, all you’re really thinking of is what is my system is saying? What does it say? Does it say buy or sell? Or, it says stay out.

That is the key thing here so I would suggest to this person that you probably want to take a look at the systems that you are using, if you are, and really fine tune your focus.

In this episode of Truth About FX, Walter digs into the subject of trading without using indicators. And, what are the best ways to go about this? He also talks about the pros and cons of using indicators, and how this affects your psychology.

Also, did you know that there are three types of traders? You can learn which type are you and more in this episode

Download (Duration: 05:26 / 6.22 MB)

In This Episode:

00:32 – off from trading

02:09 – hit a spot

03:21 – fine tuning

05:12 – get-go

Tweetables:

Look at what your beliefs are. [Click To Tweet].

Align your system from the beliefs from the get-go.  [Click To Tweet].

You do not have to blame it on the indicators.  [Click To Tweet].

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. Today’s question is from a student and he asks: I’ve started using trading indicators and I failed. I took 6 months off from trading and now I’m trying to relearn trading without indicators.

So, I guess the question is how does he do that and what are the best ways to go about that?

Walter: That is fairly tricky. One of my beliefs is basically what happens with people is that indicators — I really don’t have anything against indicators, if you think you can use them, fine. The issue I have with indicators is that it makes it difficult for you to stick to one thing because you will do exactly what this person did.

Which is you trade for a while, you use the indicator or indicators that you’re using, and then you hit a drawdown, and then you blame it on the indicator, and then you pull another one out of the hat. You’re stuck in that cycle.

To me, that is the main issue with indicators. It’s not really that you cannot trade with them or you cannot make money. Of course, you can. I think also, if you’ll talk to some of the older traders, what they’ll tell you is that — and I am talking about older indicator based traders that used indicators in their system, they’ll you that — they don’t really need them.

They can tell what is going on their chart without looking at the indicators. They know that they’ve got a trade on or they should get out of the trade or whatever so this is what I would suggest for this person.

You’ve been trading for 6 months with indicators, it didn’t workout and now you are trying to relearn how to trade without indicators. There’s a couple of things you need to do. First of all, you need to look at what your beliefs are.

Most likely — and in the shownotes for this podcast , I’ll put that video down to show how to determine what kind of a trader you are but —  the important thing to know is that you’re one of the 3 different types of traders.

You are probably either the type of trader like who likes to go with the flow and trend trade and follow a strong trend, or you are a reversal type trader where you look for the market to hit a spot and tu...

In this episode of Truth About FX, Walter digs into testing trading strategies and just how important it is to carefully manage your exits. He shares his three basic process on how to crack the confidence shell and be able to trust your system when you choose to go live.

Hugh also shares some useful tips on how he was able to overcome his trading barriers.

Download (Duration: 08:10 / 9.35 MB)

In This Episode:

01:25 – buying a house or a horse

02:25 – a bit quirky

04:03 – a little boring

05:12 – fruitful avenue

07:05 – split it

Tweetables:

Focus on the goal of trading confidently. [Click To Tweet].

What really matters is the management of the exit.  [Click To Tweet].

Use your system in a forex tester  [Click To Tweet].

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. We’ve got a question here. It’s a little bit broad but I know both of us get this question a lot. I’d like to see what you’re going to say about it. He basically just says, “I need help testing my strategy to go live.”

Walter: It sounds like the question is “I need help testing my strategy.” So, the assumption is “I have a strategy. I have a strategy and I want to test it and go live.” First of all, congratulations because you’ve identified one of the main issues which is you’re lacking confidence.

How do you build confidence? I read this question as “I do not have confidence in my system. I want to trade live. How do I get from where I am now to where I want to be, which is trading this confidently live?

Great question. This is what you do. You do a complete… It’s sort of like when you buy a house or, I guess if you are going to buy race horse or a dog or something like a greyhound race dog. What you’ll do is before you buy the house — or you buy the horse — you’d have someone come in and say look at it.

You’ll say, “Okay, this is a pretty good horse” or, “This horse has a gimpy leg”. Like, if you are going to play in the NFL, you’ll play in the NFL in the National Football League and what they are going to do? They poke and prod you, they’ll x-ray you, give you an MRIs and make sure that you haven’t been completely beaten up before you’ve got to NFL.

They want to know what is wrong with that knee or that shoulder or whatever. The same thing with the house, they want to make sure there weren’t any termites or foundation is cracked or the plumbing is a bit off or whatever.

So, that is what you do with your trading system. You do the same exact thing. The way that I recommend doing this is to simply go through basically like a 3 or 4 steps process depending on how you see it.

Number one is you use this system in forex tester. The link in the shownotes — you can get forex tester, you can get the course on how to use the forex tester for free — I’ll link that in the shownotes to...

In this episode of Truth About FX, Walter digs into the advantages and disadvantages between swing trading and day trading. According to him, the success of your trades — and whether you use a broker or not — depends on the movement of the market and when your trades are placed and executed.

You will also find out here about two groups — and which one you might belong — and more about the human psychology that affects your biases.

Download (Duration: 06:22 / 7.28 MB)

In This Episode:

00:35 – face the fear

01:38 – market maker

03:35 – blindsided

05:29 – get addicted

Tweetables:

Your set-up and rules should depend on the timeframe [Click To Tweet].

Do you reduce your position size?  [Click To Tweet].

Risk is what makes or breaks any system.  [Click To Tweet].

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. Somebody contacted me, viewed my blog, and they were asking you to explain the benefits and risk of swing trading vs day trading. Their second question is, how do you face the fear of currency meltdown?

Like you mentioned, like Francogeddon or Brexit or something like that. I guess, two questions.

Walter: Yeah, right. Great questions, by the way, these are excellent. Here is the way to look at this. If your broker is matching up orders to the true forex market so, you have a retail forex broker and they are matching up orders to the real market like FXCM or whatever.

If you’ve got a broker that claims STP or ECN and they are telling you, “Look, we’re legit,” and all that, you must know — and everyone should know now based on Francogeddon — that the weakness in that model is if the market moves extremely fast and their system cannot execute trades quick enough from their platform to the interbank market which is, essentially, what caught FXCM. Then, you must know that that is a risk.

I am not suggesting — like if you are a scalper — I am not suggesting that you should go and trade with the market maker but know that the market maker has the advantage here because the market maker does not have that risk. In fact, if you look at some of the market makers on Francogeddon, what they’ll you is that they made money that day.

FXCM goes out in business. Essentially, they are liquid and then the loan sharks came in and save them but, that is the difference between the market maker and a broker who’s trying to be honest and say, “Look, everyone’s in group A” — because most of the market makers they have group A and group B.

Group A are the traders that make money and the group B are the traders that do not make money. Everyone gets put in group B until proven otherwise, basically. They do not really care that much about you if you are in group B.

If you are group A, they do and they will edge you and make sure that you do not send them bankrupt. The thing that I want to get clear here is that things lik...

In this episode of Truth About FX, Walter digs into timeframes and risk limits. According to him, your risk limits should depend on the timeframe that you are trading. You will also find here a calculator that can greatly hel you in setting your parameters.

Download (Duration: 03:06 / 3.56 MB)

In This Episode:

00:33 – in and out

01:16 – kick in

02:16 – sophisticated

Tweetables:

Your set-up and rules should depend on the timeframe [Click To Tweet].

Do you reduce your position size?  [Click To Tweet].

Risk is what makes or breaks any system.  [Click To Tweet].

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. Should I set daily and weekly, monthly risk limits?

Walter: That is a great question, Hugh. I think it depends on the timeframe. If you are trading the lower timeframes and you are in and out, scalping or whatever, it is probably going to be daily, one-hour chart maybe, even if you have also daily.

If you are trading 4-hour or maybe daily charts, you can set weekly. If you are trading daily or weekly charts, you might set monthly risk limit. I think what this question gets at is the rules that you set up so that if you hit a certain drawdown or unlucky streak, basically, what a drawdown is if you are executing your system correctly, then those rules have to kick in place.

You stop trading, do you reduce your position size? Do you go away for a while and take a holiday which is the last thing that a lot of people want to do when they are in a drawdown?

They just want to make the money back but those are the sorts of things that will kick in once you hit those drawdown, that percentage. Now, remember, I know it sounds weird but you are actually in control of this because you can set your risk amount so that you are very, very unlikely to hit certain drawdown limits.

For example, if I want to avoid a 20% drawdown — I’ll show you in the shownotes how you can do this — you can go to a calculator and you can calculate that and go, “Okay, these are my system parameters. These are my win rate, this is my reward to risk ratio. What percentage can I risk without hitting that 20% drawdown?” or whatever that number is.

So, you really do control that. I know there are going to be black swans and there is going to be the Francogeddon or the Brexit or your broker gets belly up. Those things are going to happen.

I am talking about within the parameters of your system. I am not talking about sort of  outside things that can influence your trading account. That is a pretty sophisticated question.

Sounds like this trader is well on her or his way because when you start getting to this risks stuff, it is something that you do not really think about that much until you get further down the tracks. I am pretty happy to answer questions like this, I guess, is what I am saying.

Hugh: Cool. In the beginning, it is all about systems and risk is boring but once you get into it...

In this episode of Truth About FX, Walter talks about catching kangaroos and big shadows. According to Walter, there are different ways but it should always depend on your lifestyle and where you live.

He also talks about flagging currency pairs and keeping sticky notes with you.

Download (Duration: 06:42/ 7.67 MB)

In This Episode:

00:41 – busy life

02:36 – flag charts

04:14 – set up your life

05:03 – sticky notes

06:15 – really obvious

Tweetables:

Switch to a timeframe that you can manage. [Click To Tweet].

The simplest way is set up your life.  [Click To Tweet].

If the chart’s flagged, just pull it out a little bit.  [Click To Tweet].

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. We’ve got a question here. This person says, “I am always missing trading setups like kangaroo tails or big shadows because I cannot watch the charts all day. What should I do?”

Walter: That is a great question. There’s basically two different ways that I would approach it. It sounds like this person has got a busy life, have a job or whatever is going on. What I would say is, one is, just switch to a timeframe that you can manage.

That could be maybe the weekly or the daily or the 8-hour charts, or 6-hour or 12-hour, whatever where you can come up with a routine. Let’s say, you get up and go to work at 6:30 in the morning, maybe you can get up 15 minutes earlier and scan the daily charts or in the evening or whatever depending on where you are at.

For example, if I had a job and had a lot of things going on in my life and I was on a netball team or a handball team or softball, kids I’ve got to take to soccer, I’ve got bridge on Wednesday nights or whatever, what I would probably do is concentrate on the weeklies and the dailies.

What I would do is do something like… Let’s say you live in the UK, in that case, the candles are going to close in your evening. If you use the 5 pm New York close then, that will be 10 pm New York time in London.

What that would mean is that you would be able to check the charts at 10 and you would know, like seeing those charts, you would know whether or not you are going to have a trade the following day.

The same thing here in Asia. Like I am in Australia, I know in the morning when I wake up — it depends on the time of the year, right now the daily candles close at 7 am. I know at 7:01 am whether or not I’ve got any daily candles set ups.

The only thing I would say — and everyone has to decide on their own whether or not this is your experience — but my experience has been that you do not want these daily candles to necessarily trigger during the Asian session.

If you live in Europe, what that means is you might flag some charts at night before you go to sleep at 10 pm or 11 pm. If you are in Germany or something like that then, in the morning, get up quite early and put your order in before the London open.