Okay, finally, after so many words and sentences, we are just starting to approach forex and my forex trading system. Let’s now discuss it.
So I hope you kind of understood my core approach to business in general. I am a very grounded and a very straight forward person when it comes to business. I figured I was always buying low, and selling high. Whether those were tennis rackets, whether those were watches, whether those were boxing gloves, whether those were houses, the principles behind my businesses were always the same; buy low, sell high. I figured that if I could learn how to do it on ebay, if I could learn how to sell to stores, or on trade shows, if I could learn how to buy houses cheap, and resell them for more money, I could also learn how to buy currencies cheap and resell them for more money, except I didn’t have to keep any inventory, I didn’t have to go out and drive to far and sometimes dangerous places, I could have unlimited leverage with my actions. If only I knew how to make money with small lots, I could keep doing the same thing, and simply increase my lot sizes, and by doing that make even more money.
When I wanted to do real estate business, I got hooked up with sophisticated real estate investors, I read some real estate books, and they taught me several systems of how to do this business that made perfect sense to me. Everything was clear, everything was logical, the only thing that was required of me was to firstly donate 10% of my income as I mentioned earlier, also to be persistent, to be determined, and to act, act, act on that knowledge, and success in that business would be inevitable. And of course I did just that, and success followed.
When I got into the forex business, things became a little bit different and a little bit more difficult. Mostly because it seemed like nobody knew what a heck they were doing. I would read a book of a seemingly sophisticated and educated adult person, wearing a suit, and wearing glasses, who claimed to teach you how to make money in forex, but when I started reading the book, all I would get is a bunch of pictures of chart patterns and lines crossing. No matter how hard I tried, and I tried hard, I couldn’t understand the logic behind it… I figured perhaps I was a little bit too dumb for these things. Or I would read a book about forex fundamentals, and it would explain what this indicator meant or what the other indicator meant, but it provided no actionable plan or system. There seemed to be way over 500 different economic indicators that come out every month out of 7 major countries, and if you read some of the books, it seems like every single one of them is equally important, yet the market doesn’t react to most of them. I would try to talk to some of these educators, and I would try to find out the logic behind their technical analysis techniques. Nobody seems to understand the logic of how and why does it work, and where is the logic of those indicators when it comes to actually making money, yet everybody swears by them. I remember somebody tried to teach me to use Fibonacci retracements in forex, and they had these exact levels for each retracement. They had the 38.2% retracement, they had the 50% retracement, they had the 61.8% retracement, they had the 78.6% retracement, they had the 100% retracement. So they would show these pictures, and they would tell me…look here is a 38.2% retracement, you see how it bounced off of it? And me being the logical and the exacting person, I would say, well actually, it’s a 41.3% retracement, and they would say, come on, don’t be so exacting, it was close enough. Or they would say, look! Here is a 50% retracement, and I would look, carefully calculate, and say, no it’s actually 56.5% retracement, and they would say, come on, it’s close enough. Or they would say, the candle wick was actually a 56.5% retracement, but the bottom of the candle body was a 50% retracement. After talking to some of these fibo fanatics, I realized for myself that if you throw enough shit up in the air, one of it will stick. They have identified a fibo retracement possibility every 20 pips, then in addition to that, they tell you to give or take 5 to 10 pips from those retracements, so at the end of the day, these fibo retracements is like drawing lines on your graph 10 pips apart…of course the price will bounce off of one of them, especially if you give or take another 2 or 3 pips.
Now most people have fibo retracements 20 pips apart, then they have pivot points 20 pips apart, then they have exponential moving averages, simple moving averages, MACD, stochastics, and at the end of the day none of them can explain to you logic behind any of it, except to show you some back-tested system that will stop working tomorrow, or tell you to trust their experience, and the thousands of dollars that they lost. And just like slot machine gamblers in Las Vegas, they all have that story of how they put in $1, and won $1,000, and left Las Vegas with a profit, but if you ask them a simple question, and if they are honest enough to answer it, most of them will tell you that overall they lost money, a lot of money… And the only ones that made some do admit that they also closely followed the overall fundamental picture. I honestly have a strong belief and even a generalization that all technical analysis tools in forex on its own are as useless as tits to a boar, and they can only be used as convenient ways of displaying price and information, and I think they should only be used if you can explain to yourself the formulas behind them, and relate them to some kind of core trading logic. Otherwise, they just become obstacles when making proper trading decisions. And believe me, I love charts. I think charts are very important, because they display recent price activity, which is very important. But I think one is better off just looking at pure charts, and price action, without clouding it with any indicators.
After placing thousands of trades in forex, after reading tons of articles, books, and after talking to profitable, unprofitable, knowledgeable, and not-knowledgeable traders, I have put a lot of information through my very straight forward, business-brain filters, and here is what I came up…
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