When we started out at forex trading we were lucky enough to join a large group of over 30 day traders who traded the European and US sessions. Having just completed a number of courses we were still inexperienced but had been taught a basic method to follow. We also started building our knowledge of technical analysis by reading as much as we can. Books like Trading in the Zone by Douglas, Come into my trading room by Dr. Alexander Elder and the many books on technical analysis were our foundations.
We noticed a number of types of traders in the group.
There were the ones that were very knowledgeable about everything and new products in the industry. Traders that spent a lot of time on forums and in chat rooms and then the more experienced ones that focused on their trading.
We soon realized that there was a danger of becoming a perpetual student and industry participant on an ongoing basis and never committing to focused trading. On the other hand those activities were important.
So we created a forex trading career plan. For the next 2 months we decided to study and test everything there was available about Forex trading. We attended, bought and did every course we could find. Read every book and magazine we could find. Every concept was then related back to historic and current charts and back traded and demo traded. We were at it for 16 hours a day.
At the end of the 2 month period we had a good grasp of the price drivers in the Forex Market and the importance of taking day to day market information into account in making short and longer term decisions.
We also found many systems that gave exactly the same trading signal at the same time so a successful transaction could be explained by 4 to 6 systems. For example a new trend could be identified using a trend line violation, support and resistance, momentum, moving averages and a range of other indicators. So the technical analysis systems almost became less important and what was more important is knowing when and which currency was likely to move. That required so historic price behavior analysis and historic fundamental analysis to give clues about these movements. Most of the conclusions we reached we by personal observation and experimentation.
I, unfortunately then left South Africa and we continued some of the research on our own.
Why we had given ourselves 2 months to do all the research is to focus on education and learning about Forex trading. After that the focus shifted purely to trading because we should be then know what there was to know about Technical and fundamental analysis.
The Break through – closed Forex deal analysis
So Barry started using a system where fundamentals and momentum pointed trades in the direction of a short or longer term trend. Before going live he back traded and forward traded his system extensively using a demo account and put into place a pre-trading and postmortem system for every deal.
The postmortem would look at the deal and determine the reasons for failures (if there were any) and reasons why the best result was not achieved.
These 2 disciplines of doing closed Forex deal analysis were the main reasons for Barry’s success.
- They allowed him to change his system to reduce losses on an hourly, daily, weekly, monthly and annual basis.
- They allowed him to change his system to exit more favorably on an hourly, daily, weekly, monthly and annual basis.
- They allowed the market to tell Barry how it wants to be traded.
- He found many more reasons for successful and unsuccessful trades and his checklist grew and grew.
- Using this approach he could trade any time frame from the 1 minute to the 4 hour charts using the same principles.
Although analysis deals before and after trades is not new or earth shattering they were a break through merely because he did them. Not only did he do them but he put a lot of thought in analyzing the reasons for failure and found many unusual reasons for failure. More on that later in the course including the postmortem checklist.
Barry started trading big money (what was regarded as big those days) from day one.
Questions for the reader
Do you do a detailed postmortem on every deal that you enter on a demo or live account?
Can you find valid reasons for every single failure?
Continuous improvement / Postmortem survey
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