Truth About FX

Headsup! If you want to dig deeper into this, head to the forum and you will find a very interesting (and frustrating!) original strategy there.

In this episode of Truth About FX, Walter shares his experience with trading strategies using Bollinger Bands. You will also learn about this trader in the NFN forum who uses some very effective tricks using this strategy. According to Walter, this is one of the strategies that can be automated easily if you know the trick (which you will find here too!) You will also learn about his “lighthouse” strategy and the pullback method.

Download (Duration: 8:34 / 20.5 MB)

In This Episode:

00:58 – original strategy 01:26 – rainbow 03:00 – whipsaw 04:29 – naked ones 06:24 – inherent difficulties

Tweetables:Wait for the bands to restrict [Click To Tweet].Warning: it can be frustrating  [Click To Tweet].Does it fit your personality? [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. Are there any strategies that you’ve tested with Bollinger bands?

Walter: Yes, I did do one and I actually traded it but it was back in 2006, something like that. Anyway, the way that it worked was that you would, I know Nicola and Emmanuel in the forum. If you’re in the forum, you can see that they both trade with… Oh no! Sorry. Emmanuel no longer does but he used to. Nicola uses Emmanuel’s original strategy with Bollinger bands so there’s a couple of them there. 

If you’re interested in that and you’re in the forum, you can check that out but the one I’m talking about is totally different. It was really cool actually. It was frustrating though and at a certain point I just decided to move to last keys setup instead but I’ll explain how it works.

It’s a simple idea. What you do is you put a bunch of Bollinger bands on the chart like a whole bunch of six or ten or something. Crazy, right? They all have slightly different settings and so they end up like these rainbow-colored charts and with all these different colors.

What you do is and this would be really easy to automate, by the way. In fact, one of my friends did do this, who is trading this. I think he ended up automating it and I don’t know if he is still trading it. I haven’t kept in touch but essentially what you would do is you would wait for the candles so you wait for all those Bollinger bands to restrict and get really tight and close together.

They all have slightly different settings. Point one and point one-five, or point two or whatever, it was like that.

And so then what will happen is that they would restrict and after a certain number of candles, you would have a trade ready to go. So if the market got really quiet and the candle sat inside all of those ...

In this episode of Truth About FX, Walter dives into the different types of human psychology and useful tools that you can use to keep you guided on the right mindset. He also talks about an expert named Michael Seligman and how his theory on the different aspects of positive psychology and resiliency can really help you get on the right track of your trading.

Walter also shares a really cool test to help you identify your resiliency issues and why resiliency is one of the MOST IMPORTANT keys to becoming profitable. All these and more in this episode of Truth About FX podcast…

Download (Duration: 12:54 / 31 MB)

In This Episode:

00:31 – positive impact 01:51 – commonalities 02:55 – resiliency 04:05 – built as pessimist 05:18 – idea of reframing 06:10 – self-sabotaging 08:16 – old Freudian idea 09:50 – major piece 11:16 – living on a couch 12:03 – stick with it

Tweetables:People always diagnose others [Click To Tweet].Reframe your perspective  [Click To Tweet].We’re built as pessimists [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. I know you’re always reading about cool psychological studies. Have you read anything recently that could have a positive impact with traders?

Walter: Absolutely! I would say probably one of the biggest things I’ve been thinking about this year as we record this is the idea of resiliency. In Psychology, they do a lot of work on why people are screwed up. That’s actually the most popular course. The most popular course in Psychology that people take in Psychology Majors is Abnormal Psychology. Everyone wants to know about the freaks so I guess that makes sense. 

I think also as part of it is we’re always trying to diagnose people. “Oh, she’s a Narcissistic and he’s depressed” or whatever. What’s interesting is there’s this guy – and he’s a really famous Psychologist –  and he came up with this idea of Positive Psychology.

He actually came to Sydney and I saw him and he’s such a cool guy. He’s getting up there in age so he’s kind of an older gentleman now. All that they do is totally different from what most Psychologists do.

Most Psychologists, they look at differences. They look at why is this group different from that group? Why are these people not able to do something? It’s a lot of breaking down groups in looking at differences. Even our statistics are set up to look at differences and very rarely do we look at commonalities.

This guy, Martin Seligman is his name. It wasn’t cheap to go and see him but he was great. He had this talk and he could go sign your book. You can ask him a question and he would answer it for you and all that.

This Positive Psychology moved him which is really has taken off around th...

In this episode of Truth About FX, Walter talks about the 3 things he wished he knew — and so should you! — before he started trading. Is it helpful to ask from other traders the answers to your questions? Walter also talks about the importance of forming the right beliefs and setting your own limitations. He also shares an interesting story about a guy named Steven Bradbury and how this can inspire you in your trading journey.

" rel="noopener noreferrer">Download (Duration: 10:30 / 25.2 MB)

In This Episode:

00:53 – guaranteed drawdown 02:05 – stubbornness or determination 04:19 – psychological cage 06:15 – speed skating 08:30 – race as fast as you can

Tweetables:Trading sets you up on a path

@TruthAboutForex http://fxtr.co/ax" rel="noopener noreferrer">[Click To Tweet].The best traders are resilient  [Click To Tweet].Don’t let anyone tell you what to do [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. What are the three things you wish you knew when you first started trading?

Walter: Probably would be number one would be that trading a system, it sets you up on a path that is based on the characteristics of that system and the way that you apply risk to that system, that sets up your equity curve.

Another way of saying that is depending on how you use risk with your trading strategy, you are guaranteed to have certain types of drawdown. I wish that someone should have told me that you are guaranteed that. That really you can change the whole look and feel of your equity curve by the way that you manipulate risk. I wish someone would’ve told me that. I really do. 

Number two is I wish someone would’ve told me that your trading system that you choose is not nearly as important as how you deal with the hard times as a trader, the difficult times.

The other way of saying that is the best traders are resilient traders. Resiliency is, I believe, is the key psychological component to trading. And if you read the interviews of the Market Wizards you’re going to see this over and over again.

They had this determination that no matter what happened, they’re going to make it work. A lot of people don’t do that. They try trading like you know, “The trading thing didn’t work out so I’m gonna go flip houses” or whatever. There’s a lot of that kind of stuff going on. They’re not really set on making the trading thing work.

There’s two pieces to that. There’s the resilience part and then there’s stubbornness or determination. Determination will not get you there as a trader. It is resiliency that you need. You need that other part if you can’t bounce back because the biggest deal in trading is what you do after you run into a losing streak. That’s what works.

Probably the last thing that I wish someone told me is that you really...

In this episode of Truth About FX, Walter lets out some tricks on how to have confidence in your trading system so you can get the best results. He talks about the Cycle of Doom, unraveling the psychology behind your trading beliefs and how this can make or break your trading system. You will also learn about this guy who won a trading contest and the unique way he was able to turn a $10,000 into $1.1 Million. All of these in this episode of Truth About FX Podcast.

" rel="noopener noreferrer">Download (Duration: 05:30 / 12.6 MB)

In This Episode:

00:33 – stellar results 02:01 – fancy candles 03:21 – risk point of view 04:43 – risk algorithm

Tweetables:Start with your beliefs

@TruthAboutForex http://fxtr.co/au" rel="noopener noreferrer">[Click To Tweet].Build confidence  [Click To Tweet].What is obvious to you? [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 trader writes in and asks: I have trouble sticking to and believing a system. I tend to drop a system as soon as I start and it shows a less than stellar results. What should he do?  

Walter: This trader is basically looking for like a “cycle of doom” — that’s what I call it — where we find a system, we get excited. We trade it for a while, we hit a losing streak and then get not very excited. We think it is broken or the market has changed and then we kind of give up on it and move on to something else.

We’ve all been there. As traders, we are all quite familiar with this. The key here really is to start with your beliefs and build confidence. If you can do those two things, you are going to be alright.

What do I mean by beliefs? Do you think the best trades on the chart are those when the market hits a certain spot and then totally turns around and goes the opposite direction?

Do you think the best trades on the chart are when the market gets really, really quiet, doesn’t really go anywhere and then, boom, violently breaks out? Or, do you think that the best trades on the chart are when the markets really trending in the direction, looking really strong in one direction —  up or down, doesn’t matter — and then you just kind of want to ride that trend and keep milking it for what it’s worth?

If you can figure out where you are — obviously, there are other systems. Like, if the markets in a box and then there’s a range-bound, you could assume that it’s going to hit the high of the box and then turn around and hit, go back down and hit the low of the box. If you like that sort of trading, that is another style. But, really, there aren’t that many systems.

You can slap lots of indicators and fancy candles and all that sort of stuff on the chart. You can use Heiken Ashi in forex indicator or whatever. It basically comes down to that. What sort of things do you really like that makes sense to you and then build it up fro...

In this episode of Truth About FX, Walter dives into finding the “perfect” system that fits your lifestyle and beliefs. And is it really possible to trade while doing a 9 to 5? According to Walter, there are a lot of ways you can work around this but it all comes down to doing this one thing that every trader should learn by heart. You will also learn these 3 key components that you need to be a successful trader no matter what time frames you choose.

Download (Duration: 04:35 / 10.5 MB)

In This Episode:

00:40 – pretty simple system 01:36 – what makes sense to you 03:17 – adjusting expectations 04:05 – hazy decisions

Tweetables:The key is testing

@TruthAboutForex http://fxtr.co/at" rel="noopener noreferrer">[Click To Tweet].Be patient  [Click To Tweet].Wait for the market to trend [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 about finding a system that works for them. They can scalp on the one-hour successfully. However, due to a job, they need to find something on the daily or weekly. What should they do?

Walter: Typically — not always but typically — if you have a pretty simple system, it should work on the higher time frames. I don’t know exactly what kind of… Unless this trader is using some sort of order flow thing or something like that or just some kind of looking at small, little movements.

If it is a technical system. In theory, it should work on a higher time frame. If you’re trading like a pullback to a moving average or something like that and it’s popular with the scalping group, I would do that.

The key is going to be to test it. I would recommend that you go to the daily and just test it in Forex Tester or whatever sort of thing you use to test it and see if it works. Now, alternatively, you could trade something completely different. 

If you are scalping and it is working pretty good on the one-hour and for whatever reason you think it might not work on the daily or you don’t want to trade the same thing on the daily, what you might do is just find something that makes sense to you.

If you like following the trend, you can wait for the market to trend and print a box and then use the last key strategy where the market comes back to the box and bounces off of the box and it goes to the direction to trend again. Or, you could use a trending kangaroo tail where the market prints a trending kangaroo tail after a little bit of consolidation and then it continues to the direction of the trend. 

If you like counter-trend strategies, you could go with double tops, double bottoms, the webby and the moolah. Or, the ones that I’ve used which are basically the double tops and double bottoms. Special case situations of those are if you want to trade those turning points or if you’re more of a swing trader.

In this episode of Truth About FX, Walter dives into CFDs and how to trade them successfully. Did you know that it is illegal to trade them in certain countries around the world? Walter gives some insider information in finding the right broker for you. And the two advantages of trading forex versus other instruments in the market.

Download (Duration: 05:18 / 12.7 MB)

In This Episode:

00:42 – they are illegal01:32 – swing that sucker03:08 – a cheeky way04:06 – bite the bullet

Tweetables:Test your broker

@TruthAboutForex http://fxtr.co/ao" rel="noopener noreferrer">[Click To Tweet].Forex charts are clean  [Click To Tweet].Find the right leverage [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 asked me how does CFDs work and do you have any tips on trading them successfully? What do you say to that?

Walter: CFDs are only for a few — if you’re listening to this, you’ve never heard the term CFD and you’ve been trading for a while. That is because you are living in the United States. They are illegal so you cannot trade them.

Hugh: Yeah.

Walter: Basically, CFDs are a way for you to get into the futures market without actually having a futures account. You can have better leverage and all that sort of stuff. Although, the leverage I think is about equal now in the States but because forex is basically regulated by the futures guys.

Essentially, you can trade coffee for example or the DAX which is the German Index. The German equivalent like the DAO. You can trade that with your broker but here is the rob. You’ve got to make sure your broker’s choice becomes really important and the reason why is because some brokers are going to be really… They’re going to swing that sucker around. You’re going to look, “The DAO actually didn’t move that much today why did you spike me and stopped me out?”

They’ll tell you this is not the DAO market. If you are trading the DAO as a CFD, you’re trading like a mirage. It’s like a copy of a copy. It’s not really the same. Yes, it’s true. If you look at West Texas crude oil and it goes up, it’s probably going to go up about the same amount on your CFD chart but that is not set on stone.

You really need to look at the reputation of the broker and test them out. The second thing of this is spreads will vary widely too and the amount of the margin that you get. It becomes a little bit tricky to choose the right broker.

Probably almost worth it to just find the right broker for CFDs and only trade CFDs on that platform. That will be my recommendation because when I first started trading them I was like, “Ohh! This is awesome. I have all these extra markets to trade.”

But then I realized really quickly that just because the chart looks like with one broker, it could be really different with your position.

In this episode of Truth About FX, Walter talks about the profit bricks method and how to overcome your psychological barriers. He also reveals some useful tricks on how you can make those losers work and turn them into profitable trades.

Download (Duration: 05:45 / 13.8 MB)

In This Episode:

00:36 – mathematical guideline02:00 – four possible results04:52 – how it differs from normal trading?06:00 – a tradeoff08:07 – be aware of probabilities10:22 – independent events12:13 – Monte Carlo simulation

Tweetables:It’s a psychological barrier

@TruthAboutForex http://fxtr.co/ap" rel="noopener noreferrer">[Click To Tweet].Embrace the uncomfortable  [Click To Tweet].Be aware of the probability [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. I read your book “Risk Management” and it’s excellent. The thing that stuck out the most in that book to me was the Profit Bricks method. Could you talk a little bit about that and is there a mathematical guideline as to when that will help you and when it won’t?

Walter: It’s more of a psychological barrier, I think. Great question, by the way. This is something that we’re talking a lot about in our Inner Circle group. A lot of people are trying to wrap their head around it and the reason why is it’s uncomfortable.

I believe as many traders believe that sometimes, we have to do the uncomfortable things to improve our trading. I think that’s part of what goes on with Profit Bricks. But, just for people who do not understand it, I’ll quickly explain. 

Let’s say that you have a trading system and it’s a 3 to 1 reward to risk ratio. You are risking 1% to make 3%. You are risking a 100 pips to make 300 pips or whatever. Let’s also say that you have a 30% win rate with that strategy. 

It has a positive expectancy, of course, because it is above the 25% mark and you could just trade it normally and you could make money. But, here’s where it gets really interesting.

Let’s say that I’m trading the strategy and I am just trading it normally. I’m risking 1% or whatever. If you’ll look at your trades at the two-trade level — a two-trade increment which is what Profit Bricks is all about. If you think about it, there are really only 4 possible results.

Number one is that you have a loss and then that is followed by a loss. Now, obviously, if you’re risking 1R on any given trade, you’re going to end up -2R after that sequence. In this scenario that is going to happen 49% of the time.

The reason why it’s 49% is to get the probability of something happening. You just multiply the probability of it happening by itself. So 70% of the time, I have a loser multiplied 0.7 x 0.

In this episode of Truth About FX, Walter talks about one of the biggest trading mistakes of all time: wanting to make more money quickly. What are the two mistakes most traders do in taking accelerated trades? And what are the solutions that you can make based on your system? You will also learn how the markets are correlated around the world… And is this a good thing or a bad thing for you?

Download (Duration: 05:45 / 13.8 MB)

In This Episode:

00:33 – still cautious01:07 – mistake number one02:23 – neural network04:45 – best way to mitigate

Tweetables:Don’t put too much money

@TruthAboutForex http://fxtr.co/an" rel="noopener noreferrer">[Click To Tweet].This is a big mistake  [Click To Tweet].Develop another strategy [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, “How can I become more aggressive? I have a strategy that’s sound and has excellent expectancy but I’m still cautious about taking trades.”

Walter: This trader is saying he needs to be in more trades. I think this is a mistake, actually. This happens a lot. This is one of those things that comes up when you start making money and you know you’re going to make money. The next question is how do I make more money or how to make it faster? 

The real concern here is, I actually talk about this in the Next Level Trading course. If you’ve seen the webinar, you’ll know we talked about this. This is a big one. This is something that all traders run into when you start making money. It’s like, “Okay, what do I do now? How do I build it up faster?” Here are the two mistakes. 

Mistake number one is: I’m just going to add more risk. “I’ve been risking 1.5%, what happens if I’ll risk 3%? Wow! If I’ve been risking 3%, I would’ve made this much. Wow! I really need to do that.” That is mistake number one.

Mistake number two is: What I needed to do is get more markets. I need to get a whole bunch of more markets. I’ve only been trading this strategy on 8 currency pairs, what if I were trading 28? 

Now here is the issue with 28 and look, I trade lots and lots of markets, that’s fine. But  when you have one strategy and you think that you are diversifying by looking at multiple markets, you’re wrong.

Unfortunately, that is not going to work because all of the markets are interrelated. Whenever you see a really strong trend on the USD/CAD and then you see one on the GBP/USD, why is that? Because they both have the USD in there.

It’s amazing how correlated our markets are around the world. From The Hang Seng to the New York Stock Exchange, to the ASX In Australia. All of these markets are so interrelated.It’s because funds are looking for arbitrage opportunities. 

All of these stuffs are basically equalized.

In this episode of Truth About FX, Walter shows some tricks on how you can start building your trading account from scratch. You can also do this even if you’re still working. Walter also advises not to quit your job first and you will know the reason why here.

If you’re interested to figure out a way to trade but doesn’t have the leverage to compound your account yet, then tune in to this episode and you might get some answers.

Download (Duration: 05:33 / 12.7 MB)

In This Episode:

00:43 – hidden question01:40 – screw-you-money03:17 – super aggressive04:27 – set aside money

Tweetables:Don’t put too much money

@TruthAboutForex http://fxtr.co/al" rel="noopener noreferrer">[Click To Tweet].How much can you gamble?  [Click To Tweet].Sell what you don’t use;[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 writes in and asks, “How do I build my trading account if I’m constantly taking money out to live on?”

Walter: Probably the best solution here is to not put too much money in your trading account. What you need to do is really set it. If you want to compound it which sounds like that’s the hidden question here. It’s, “I want to compound my account but I keep pulling it out, pulling money out”.

What you really want to do here is just decide: how much can I actually part with and not have to depend on that? That’s going to be a small amount obviously because you keep pulling out expenses.

Now, here’s one thing that will really take the pressure off. If you’re looking to leave your job, ideally, what you want to do is live like a monk before you quit your job. Get rid of that second car payment. Sell a bunch of stuff on eBay or whatever. Get rid of a lot of crap and try to minimize your life.

What you’ll do is you could save money so that you’ll get to the point where “You know what? I cannot take a trade for 12 months and I can still live the way that I did before when I have my job.” That way, you don’t have pressure to take a trade. That’s another thing.

You want to kind of have that screw-you-money in the bank where you can say, “Screw you. I don’t have to go get a job.” I know that sounds crazy. “Ohh, that’s so much. I’ve got to save up for so long.” Not really. Not if you’ll cut a lot of expenses.

It’s amazing how much those $6 lattes add to the expenses every month. Do you know what I mean? If you have all these crazy things, you know how it works. You don’t necessarily need to buy those new shoes or those peppermint lattes at Starbucks or whatever they’re selling this month. I think that is one way to do it.

You want to pull up that nest eggs so that you’re like, “I don’t have to take a trade.” That’s big because if you have a pressure to take trades when there are no trades,

In this episode of Truth About FX, Walter digs into the case of trading while working and is this really possible? He opens up ways on how you could manage your trades depending on your lifestyle.

He also shares inspiration about two forum members who use automation and how you could take this as an example for your trading system. All these and more in this episode of Truth About FX podcast.

Download (Duration: 04:12 / 9.62 MB)

In This Episode:

00:34 – the assumption 01:38 – getting ready for work03:03 – staying up

Tweetables:Shift your timeframes

@TruthAboutForex http://fxtr.co/ak" rel="noopener noreferrer">[Click To Tweet].Automate your system  [Click To Tweet].Watch the open[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, “How do I trade in the best times which are London and the US Open even if I have a busy work schedule?”

Walter: This is a good question. The assumption here is that you’ve got to watch the open to trade. Now, that’s not necessarily the case with a lot of trading system. If you’re trading a lot of breakout strategies or even like simple swing trades on a higher time frame like an H4 or even a D1 or H12 chart, then you don’t need to be there.

Let’s say that I live in New York and I wanted to trade the London open but obviously that’s when I’m sleeping. What do I do? You could trade the D1 charts and you could simply when you went to bed put your order in during the tail end of the Asian Sessions. What happens if you actually get that trade triggered if the London volume pushes through?

For example, let’s say, I think the market has made a double bottom and I put my order above that second touch. If the market does make a new high, I’m in. I expect that to probably happen during London open or maybe the New York open when I’m getting ready to work or whatever or at work.

That is how I would do that. If you shift to a higher time frame, it makes it easier to setup those buy stops and sell stops. But, if you feel like you’ve got to trade the system on the lower time frame, then probably automation is the way to go.

If you don’t know anything about automation, certainly you can hire somebody in the Naked Forex Now Forum we have people in there that are really good in that or actually teach you how to do it or you can hire someone in there. There’s Mark Fletcher and Adam Hartley.

Both of those guys, I would definitely trust in terms of creating something. For example, take a H1 or M15 chart breakout, you can have them code something up for you so that, that would run while you’re sleeping at night.

There are different ways of doing it. If you feel like you really have to trade the lower time frames then it sounds like you’re a great candidate for automation. Otherwise,