{"id":30892,"date":"2013-08-28T08:54:46","date_gmt":"2013-08-28T12:54:46","guid":{"rendered":"http:\/\/www.smbtraining.com\/blog\/?p=30892"},"modified":"2023-08-01T17:43:23","modified_gmt":"2023-08-01T21:43:23","slug":"an-aspiring-traders-email","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/an-aspiring-traders-email","title":{"rendered":"An Aspiring Trader\u2019s Email"},"content":{"rendered":"

At SMB we get a lot of emails from traders of all levels. \u00a0Much of the time they are from aspiring traders who are very passionate about the markets and their work. \u00a0And all of us here make every effort to respond and provide some insight into the world of professional trading. \u00a0So in this article, I am going to feature an email from an aspiring trader from Australia. \u00a0It is clear she is very passionate about trading and I hope my answers offer some valuable insight to her and anyone else who can relate.<\/p>\n

So here is the portion of the email the we received from this passionate trader from Australia:<\/p>\n

\u201c I trade FX intraday, and have designed my own method which backtested well – I can’t program\/code, so I did it manually which means there is the possibility (probability) I made errors – this nibbles at my confidence when I have to sit through a bunch of losers. \u00a0It’s a technical set-up, and in my testing I didn’t take price action into account at all. \u00a0So my job now is to filter all the trades so I can see my A+ trades.<\/p>\n

I’m yet to see the backtested results in my trading account, so I’m also working on being more aggressive in adding to winners. \u00a0I never let my losses get big, so I think the key has to be reducing the size\/frequency of the losers that fail off the bat, and working out what they look like so I can put them in a sort of anti-playbook \ud83d\ude42<\/p>\n

Anyway, questions.<\/p>\n

You mention that you look at SPY when adding to\/entering\/exiting equity positions. \u00a0This makes sense to me, and I was wondering if your traders use a similar idea when trading FX. \u00a0I’m looking at the USDX (all my pairs are USD crosses) and can see how it might work, but wanted to know if your guys are doing that at all, or if they’ve tried it and dismissed it as \u00a0a waste of time.<\/p>\n

Also, I had a question about how your traders use ATR in their trading. \u00a0Currently I use it to gauge how far a pair might move in a given day, and set my targets toward the extreme based on how far price has moved from it’s intraday low. \u00a0\u00a0Is that pretty much on track with your traders? \u00a0\u00a0If price has already moved significantly intraday, would that make your traders think twice about entering a trade, or trade the set-up with smaller size? I imagine a 1:5 would be hard to come by late in the day, unless you’re fading a trend.\u201d<\/p>\n

To answer your questions:<\/p>\n

1. In the spot forex world, correlations can play a role in your analysis, but they are mostly for confirmation and not the primary focus of the trade. \u00a0Also correlations tend to be unstable much of the time and eventually change. \u00a0Using the Dollar Index against your dollar crosses is ok if you are using it for pattern confirmation. \u00a0Our forex traders learn how to do that, but they are observing very specific patterns and correlating them. This relationship is much different when it comes to the S&P and related equities. \u00a0In the stock world you are looking for evidence of relative strength. \u00a0Since currencies are affected by a much more complex process, it will be harder to find these relative strength situations when comparing dollar index. \u00a0Remember the dollar index is a basket of currencies against the dollar and each currency has the ability to do its own thing without the dollar reacting much.<\/p>\n

2. As far as the ATR is concerned, it has its role amongst system traders from what I understand but when it comes to the methodology that we use when trading forex and futures at SMB, the ATR is irrelevant. \u00a0The methodology we use is more concerned with market symmetry and watching for signs of trader\u2019s who are overreacting to conventional market signals. \u00a0We wait for exhaustion points and confirm that traders are caught and must get pushed out of their positions. \u00a0Those situations repeat, but not every 5 minutes. \u00a0And sometimes this concept doesn\u2019t play out as planned, so we take a stop.<\/p>\n

If you are looking for perspective on the markets, you will not find it with conventional methods. \u00a0Trend following is nice when there is a clear trend. \u00a0What we do is unconventional. \u00a0We have no problem being part of a trend, but we will not enter at prices that are obvious. \u00a0And when markets become range bound, that is where our opportunities emerge the most. \u00a0Everything you have learned so far in your effort is good in the sense that you have learned the basics of conventional trading. \u00a0You now need to learn how to exploit the weaknesses of such trading. \u00a0The obvious is your worst enemy unless you know how to capitalize on it\u2019s flaws in the world of professional trading.<\/p>\n

I hope this helps. \u00a0If you want to really get a sense of how to listen to the market, you need to spend your time focussing on price action related tools and information. Candlestick analysis, price action analysis, and order flow techniques are where you will find much more valuable information. Comments? Feedback? I would love to hear from you.<\/p>\n

 <\/p>\n

—
\nMarc Principato, CMT,<\/p>\n

Risk Disclaimer<\/a><\/p>\n

*No Relevant Positions<\/p>\n","protected":false},"excerpt":{"rendered":"

At SMB we get a lot of emails from traders of all levels. \u00a0Much of the time they are from aspiring traders who are very passionate about the markets and their work. \u00a0And all of us here make every effort to respond and provide some insight into the world of professional trading. \u00a0So in this article, I am going to … Read More<\/a><\/p>\n","protected":false},"author":1030,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2076,2051],"tags":[3357,1390,2092,383,2833,2877,420,56,18,726,2876,653,38,4690,3336,2060],"class_list":["post-30892","post","type-post","status-publish","format-standard","hentry","category-marc-principato","category-smb-forex","tag-email-question","tag-forex","tag-forex-training","tag-futures","tag-market-context","tag-multiple-time-frame-analysis","tag-setup","tag-smb","tag-smb-capital","tag-technical","tag-time-frame","tag-trader-training","tag-trading","tag-trading-education","tag-unconventional-trader","tag-volume-analysis","no-post-thumbnail"],"yoast_head":"\nAn Aspiring Trader\u2019s Email | SMB Training<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.smbtraining.com\/blog\/an-aspiring-traders-email\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"An Aspiring Trader\u2019s Email | SMB Training\" \/>\n<meta property=\"og:description\" content=\"At SMB we get a lot of emails from traders of all levels. \u00a0Much of the time they are from aspiring traders who are very passionate about the markets and their work. \u00a0And all of us here make every effort to respond and provide some insight into the world of professional trading. \u00a0So in this article, I am going to ... 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