We get a lot of questions regarding the trading method or approach we take totrading Forex. The ability to answer that question with brevity is a challenge. Of course we wish trading were as simple as initiate trade when “blue MA crosses red MA….” This would be ideal.
But unfortunately we haven’t found such methods to be lasting, which makes crosses and simple price action plays unreliable over the long haul. And if you are anything like us Pipsters, you’ll be the sort of person who is not after a solution to earning good money for the next day, or the next week.
Rather, it’s the long haul that you’re after!
And a long haul approach to pulling pips out of the Forex market takes a thorough understanding of the market fluctuations. A trader has to understand how to adjust to the market, and apply steady and responsible trade management to an ever-shifting beast.
“But Why Can’t I Just Stick to One Simple Trading Method?”
“Why Doesn’t This One Simple Trading Method Work OVER AND OVER AND OVER?”
We don’t mean to start any arguments with the direction we are taking this page, but the firm belief we Pipsters have is that the market is much like a sleeping giant. Sometimes the market moves gently as he stirs through an evening’s sleep. At other times he has jarring movements that startle the market. And sometimes he is an insomniac who paces maniacally in his den.
Whatever the metaphor, the market has many gears, and these gears are showcased often times without obvious signs that the market has switched gears.
Many Forex traders we have met seem steadfast 15 minute chartists. Or steadfast 1 hour chartists. Some claim anything under 4 hours is simply white noise. Others claim the daily chart is the only thing requirement for a Forex day trading system.
Well, if we are to begin to touch on the Pipster Method, the truth is that we are not much for market maxims.
And we have NEVER, in all of our collected YEARS OF STUDY AND RESEARCH, ever witnessed a single simple trading strategy have any meaningful lasting results!
The truth is that they work for a while, and then they simply STOP WORKING.
The Pipster Method is all about defining the market we are in on that particular day. Our approach is to monitor several FX pairs throughout the week andzero in on markets that offer behavior that will tolerate our trades. We do not have to be “right” about the overall direction of the market to pull money out of the market. Our defining goal is to find areas of contention.
One firm belief we Pipsters have is the belief that the market suggests a leptokurtic distribution, as opposed to a normal distribution. An image below suggest the behavior of a leptokurtic distribution.
We don’t intend to turn this into a lesson on statistics, but the model above explains why we’re able to pull money out of the markets.
As a result of greed and ‘over-excitement” the market often pushes a trend, be it minor or major, beyond realistic expectations, and into areas where the market is susceptible to either retracements or directional changes. This is because the distribution of the market is abnormal, and the abnormal shifts in price behavior offer great opportunities for trading.
If we catch a retracement we pull pips out of the market with what some would deem “defensive trade management” and get into a position where a percentage of our earnings for the day are initially protected. Our aim is to position ourselves into a free trade (a trade where the equity we entered is no longer at risk). We don’t care to be right or wrong. We leave that to the CNBC commentators.
We simply want to make money. It’s just money that matters to us.
“But I Want a System That WORK 100% of the TIME!”
If you have an ego as a trader, and you “always” want to be right when it comes to market direction, then please don’t even bother reading any further. (Chances are you, the reader, may be in this group but want to break free. You may be the type who will hold onto a trade you don’t like when you’re down just a handful of pips because you want to be right. Then it turns against you and threatens real damage. If the case, please continue reading….)
So How Do We Trade?
We interpret two simple things from our preparation:
1) We want to be able to find markets that we feel are testing what we perceive to be potential limits for the trading session. We lack any communication with the gods of the market. We NEVER now with certainty the direction of the market. We simply search out what we deem soft markets.
2) From here we address these particular areas for contentious levels to trade.
We never make a trade without a risk:reward ratio that we deem responsible. We never enter a trade without a level that we deem a “we were wrong” level.
We know when we are wrong.
We do not get every trade right.
But our trade management has been created in a way that often allows us to escape failed trades with some positive gains. Occasionally we will have outright losses. But again, because of the risk: reward ratio, our wins are substantially larger than our losses.
And by employing this approach we continue to pull money out of the markets.
We do it with consistency. We do not try to become rich overnight.
We simply pull money out of the markets, and then compound earnings over time.
Just imagine what you can do with compounded earnings behind a steady and consistent approach to trading.
In fact, below is an image of the growth potential of compounded earnings:
“Is it easy to trade successfully with regularity?”
After practice, yes, it becomes relatively easy to come up with regularity.
“But are you being honest? Do people really come up in trading?”
This is a valid question any beginner should ask. In fact, a recent Los Angeles Times article showcased a finding that may substantiate the possibility for success in the Forex markets. Many people imagine, particularly when they are losing, that the game is rigged, and 99% of traders are losing.
But the fact is the game is not the problem for most, it is the players themselves.
Due to NFA policies, brokers now need to disclose quarterly results for traders, and recent filing show just what most of us already knew — that many people do lose money in this zero sum game, but a decent percentage actually come ahead.
At FXCM, 75% to 77% of customers lost money each quarter last year, according to newly required disclosures to the Commodity Futures Trading Commission. At Gain…. the number of unprofitable customers hovered between 72% and 79% every quarter last year, according to its filing. (Los Angeles Times 3/2)
The point we want to make with this is that this is a risky venture, and trading Forex (or anything for that matter) needs to be approached with caution. Because of the nature of the market, there are only winners and losers. And if you lack the skills or education to put yourself on the side of the winners, a margin call is inevitable.
Much of becoming good at this has to do with conditioning yourself mentally in order to prevent silly mistakes from capsizing your account. Brokers make fortunes daily as new or inexperienced traders drain accounts by letting mistakes run, hoping that their losses will be recovered by retracements that never come.
Forex trading is certainly not easy. Plenty of people have all the information necessary to make money in the markets, but lack the mental acuity or discipline necessary to prevent stupid mistakes or overaggressive risk.
Don’t let anyone tell you that a high stakes game like this is easy.
But it is possible to come ahead. The figures we cite demonstrate this fact.These are verifiable facts.
Yet new traders, particularly traders who have yet to master the skill, need to know that they are playing a zero sum game.
The winners, like anywhere else in life where stakes are high, make up a small percentage of those involved. As you can imagine, traders who can manage successive wins are positioned for earnings that are very very rare in the marketplace.
“So How do I Learn the Pipster Method?”
Well, we initially started with the concept of a video series. We then introduced a couple very intelligent non-traders to a rough sketch of the series. Unfortunately, we found that trading Forex, or trading any market for that matter, is not something that can be learned in a sitting or a seminar. It’s a skill game that requires a student spend time with the markets. And a video series; however long (we planned for a seven hour series), fails to give a student enough “practice time” with the markets.
So we’ve instead decided to go with a more affordable model (for our users) more time consuming model (for us Pipsters) that will allow visitors to learn the nuances of the overall Pipster method day in and day out.
We’ve decided to launch something called the Pipster Premium. Take a look at the Pipster Premium and see if it can be a tool to help develop your own trading.
Learn More About the Pipster Premium!