Top 8 Forex Trading Strategies and their Pros and Cons

[Strategies] Here is My Trading Approach, Thought Process and Execution

Hello everyone. I've noticed a lot of us here are quite secretive about how we trade, especially when we comment on a fellow trader's post. We're quick to tell them what they're doing isn't the "right way" and they should go to babypips or YouTube. There's plenty of strategies we say but never really tell them what is working for us. There's a few others that are open to share their experience and thought processes when considering a valid trade. I have been quite open myself. But I'm always met with the same "well I see what you did is quite solid but what lead you to deem this trade valid for you? "
The answer is quite simple, I have a few things that I consider which are easy rules to follow. I realized that the simpler you make it, the easier it is for you to trade and move on with your day.
I highlight a few "valid" zones and go about my day. I've got an app that alerts me when price enters the zone on my watchlist. This is because I don't just rely on forex trading money, I doubt it would be wise to unless you're trading a 80% win rate strategy. Sometimes opportunities are there and we exploit them accordingly but sometimes we are either distracted by life issues and decide to not go into the markets stressed out or opportunities just aren't there or they are but your golden rules aren't quite met.
My rules are pretty simple, one of the prime golden rules is, "the risk is supposed to be very minimal to the reward I want to yield from that specific trade". i.e I can risk -50 pips for a +150 and more pips gain. My usual target starts at 1:2 but my most satisfying trade would be a 1:3 and above. This way I can lose 6/10 trades and still be profitable.
I make sure to keep my charts clean and simple so to understand what price does without the interference of indicators all over my charts. Not to say if you use indicators for confluence is a complete no-no. Each trader has their own style and I would be a narcissistic asshole if I assumed my way is superior than anybody else's.
NB: I'm doing this for anybody who has a vague or no idea of supply and demand. Everything here has made me profitable or at least break even but doesn't guarantee the same for you. This is just a scratch on the surface so do all you can for due diligence when it comes to understanding this topic with more depth and clear comprehension.
Supply and Demand valid zones properties; what to me makes me think "oh this zone has the potential to make me money, let me put it on my watchlist"? Mind when I say watchlist, not trade it. These are different in this sense.
👉With any zone, you're supposed to watch how price enters the zone, if there's a strong push in the opposite direction or whatever price action you're observing...only then does the zone becomes valid. YOU TRADE THE REACTION, NOT THE EXPECTATION Some setups just fail and that's okay because you didn't gamble. ✍
!!!IMPORTANT SUBJECT TO LEARN BEFORE YOU START SUPPLY AND DEMAND!!!
FTR. Failure to Return.(Please read on these if you haven't. They are extremely important in SnD). Mostly occur after an impulse move from a turning point. See attached examples: RBR(rally base rally)/DBD(drop base drop). They comprise of an initial move to a certain direction, a single candle in the opposite direction and followed by 2 or more strong candles in the initial direction. The opposite candle is your FTR(This is your zone) The first time price comes back(FTB) to a zone with an FTR has high possibilities to be a strong zone.
How to identify high quality zones according to my approach:
  1. Engulfing zones; This is a personal favorite. For less errors I identify the best opportunities using the daily and 4H chart.
On the example given, I chose the GBPNZD trade idea I shared here a month ago I believe. A double bottom is easily identified, with the final push well defined Bullish Engulfing candle. To further solidify it are the strong wicks to show strong rejection and failure to close lower than the left shoulder. How we draw our zone is highlight the whole candle just before the Engulfing Candle. That's your zone. After drawing it, you also pay attention to the price that is right where the engulfing starts. You then set a price alert on your preferred app because usually price won't get there immediately. This is the second most important part of trading, PATIENCE. If you can be disciplined enough to not leave a limit order, or place a market order just because you trust your analysis...you've won half the battle because we're not market predictors, we're students. And we trade the reaction.
On the given example, price had already reached the zone of interest. Price action observed was, there was a rejection that drove it out of the zone, this is the reaction we want. Soon as price returns(retests)...this is your time to fill or kill moment, going to a 4H or 1H to make minimum risk trades. (See GBPNZD Example 1&2)
  1. Liquidity Run; This approach looks very similar to the Engulfing zones. The difference is, price makes a few rejections on a higher timeframe level(Resistance or support). This gives the novice trader an idea that we've established a strong support or resistance, leading to them either selling or buying given the opportunity. Price then breaks that level trapping the support and resistance trader. At this point, breakout traders have stop orders below or above these levels to anticipate a breakout at major levels with stops just below the levels. Now that the market has enough traders trapped, it goes for the stop losses above or below support and resistance levels after taking them out, price comes back into the level to take out breakout traders' stop losses. This is where it has gathered enough liquidity to move it's desired direction.
The given example on the NZDJPY shows a strong level established twice. With the Bearish Engulfing movement, price leaves a supply zone...that's where we come in. We go to smaller timeframes for a well defined entry with our stops above the recent High targeting the next demand zone.
The second screenshot illustrates how high the reward of this approach is as well. Due diligence is required for this kind of approach because it's not uncommon but usually easily misinterpreted, which is why it's important it's on higher timeframes.
You can back test and establish your own rules on this but the RSI in this case was used for confluence. It showed a strong divergence which made it an even easier trade to take.
...and last but definitely not least,
  1. Double Bottom/Top. (I've used double bottoms on examples because these are the only trades I shared here so we'll talk about double bottoms. Same but opposite rules apply on double tops).
The first most important rule here is when you look to your left, price should have made a Low, High and a Lower Low. This way, the last leg(shoulder) should be lower than the first. Some call this "Hidden Zones". When drawing the zones, the top border of the zone is supposed to be on the tip of the Low and covering the Lower Low. **The top border is usually the entry point.
On the first given example I shared this week, NZDCAD. After identifying the structure, you start to look for zones that could further verify the structure for confluence. Since this was identified on the 4H, when you zoom out to the daily chart...there's a very well defined demand zone (RBR). By now you should know how strong these kind of zones are especially if found on higher timeframes. That will now be your kill zone. You'll draw another zone within the bigger zone, if price doesn't close below it...you've got a trade. You'll put your stop losses outside the initial zone to avoid wicks(liquidity runs/stop hunts)
On the second image you'll see how price closed within the zone and rallied upwards towards your targets.
The second example is CHFJPY; although looking lower, there isn't a rally base rally that further solidifies our bias...price still respected the zone. Sometimes we just aren't going to get perfect setups but it is up to us to make calculated risks. In this case, risk is very minimal considering the potential profit.
The third example (EURNZD) was featured because sometimes you just can't always get perfect price action within your desired zone. Which is why it's important to wait for price to close before actually taking a trade. Even if you entered prematurely and were taken out of the trade, the rules are still respected hence a re entry would still yield you more than what you would have lost although revenge trading is wrong.
I hope you guys learnt something new and understand the thought process that leads to deciding which setups to trade from prepared supply and demand trade ideas. It's important to do your own research and back testing that matches your own trading style. I'm more of a swing trader hence I find my zones using the Daily and 4H chart. Keeping it simple and trading the reaction to your watched zone is the most important part about trading any strategy.
Important Note: The trade ideas on this post are trades shared on this sub ever since my being active only because I don't want to share ideas that I may have carefully picked to make my trading approach a blind pick from the millions on the internet. All these were shared here.
Here's a link to the trade ideas analyzed for this post specifically
Questions are welcome on the comments section. Thank you for reading till here.
submitted by SupplyAndDemandGuy to Forex [link] [comments]

That Time I Gained 337.59% In One Week - Storytime

Just a quick story on my biggest gain in one week, which I'll more than likely never do again because my risk tolerance is not as high anymore.
But before: I highly discourage anyone especially the newbies on here to risk as much or trade in the following manner.
It was late May and I was popping off from paper trading, I must've hit 20+ take profits with no losses. I was growing a demo that I started with $70 two weeks prior and I was already at like $623 lmao, in only two weeks??? So of course I thought I was a god.
I saw some better trades coming up and decided it was time to get back in the market with some real money. I had $75 from freelancing, I got $60 as a covid grant from the government and my mom gave me another $60 to trade in the casino (Forex Market). So it was time.
I got into trades Sunday night (May 31) as soon as the market opened and they were already doing well the next morning. Here's a screenshot I sent showing off my gross trading prowess and the positions I had opened: https://imgur.com/a/GFrcLEu
I stayed diligent and took my setups just as I would in demo, and fast forward: https://imgur.com/a/5JwIDl3
I got way too overwhelmed and closed some shortly after, and ended the week with no losses, 1155.5 pips, 9 trades completed and net $651.41. I thought I was the best trader ever but luckily I withdrew half of it and took my steady, inevitable losses after :)
Here's all the trades I had made (I didn't know about myfxbook but I had recorded all my trades in a nice little excel sheet to help me with risk and I still do - I'm currently making it into a nice little software): https://imgur.com/a/RNtt5wz
The statistics from excel: https://imgur.com/a/8gQlFBU
Strategies: Breakouts, Swings (S/R) and Trends.
Risk Tolerance: I was literally risking about 25% of my account on trades and whenever the trade took off, I considered it 0% risk so I could re-enter more so I didn't have to wait until close.
Why I probably will never gain this much in a week again:
  1. Risking 25% on a trade is downright awful unless your account is super small.
  2. Deeming a trade 0% risk is never true unless you have your sl in profit (most times I didn't).
  3. I'm okay with not gaining quickly, now I'm just about protecting my capital.
What I learnt:
I did take some good trades so there's not much I could've learnt, the weeks after though did teach me:
  1. Not to risk that much on trades
  2. Go for slow and steady gains
  3. Stay out of the market as much as possible.
TLDR: I went from $193.48 - $846.64 in one week by taking big dick risks and then lost half of it later, lol.
submitted by proskaterlegend to Forex [link] [comments]

Surge of New Forex Traders? Read this!

I've noticed that about 2,000 people have joined the Forex community in the recent weeks. Has anyone else noticed this? I suspect this is because of the lay offs due to the corona virus, and people are frantically looking for ways to supplement their incomes. While I'm glad that people are trying to better themselves and take control of their financial situations, I have to admit that the daily "newbie" questions are getting quite annoying. And it's not because there are new, inexperienced traders asking for help, but it's because the questions are more-less the same questions. I know there is a pinned "New Traders" section at the top of the thread, but it seems it isn't catching much traction.
But first, to the new traders I'd first like to say:

Welcome! This will be a tough journey, but it will pay in dividends (not literally).
A couple tips before we start:
FIRST, see the pinned New Traders section of Forex
SECOND, go to babypips and take their FREE courses where you will learn the basics. I never did because I'm an idiot, and it took me many years of trial and error to succeed in this game. Don't be a lemon like me, go to babypips.
Now my basics;
Always have at least a 1:2 Risk:Reward. Simply put, risk at least $1 for $2.
Always set a stop loss and take profit.
In the beginning, I find it best to give new traders a black or white, go-or-no-go trading strategy. Trade mechanically. While discretionary trading is profitable, you need years of experience and time in the charts to be good at it. It could be something like, "I only trade low volatility break outs on the 4hr. Any candle below x ATR and I will enter via stop order at the high/low of that candle. My sl will be at the high/low of the entry candle, and I will look to make at least 2 reward on that trade. I will risk 1% per trade, even on demo, and I will trade in the direction of a 10 period moving average" This is a VERY crude strategy, one I just pulled out of my ass, so don't go using it and blowing your accounts!
I recommend starting with 1 pair in the beginning, at MOST 3. And I recommend not swapping into different pairs. Keep those 1-3 pairs.
Once babypips is completed, demo trade. Put time in the charts and develop a strategy (mechanically, preferably). Your strategy could be as complex or as simple as you like. Simplicity is genius in my opinion, but you do you. I'm not trying to sound like an ass, but everything you really needed to learn you learned from babypips.
With that said, DO NOT pay for courses from ANYONE. They will often know the same as you, if not less. In my opinion to be really great in this game you don't need a lot of information., and capitalize on every opportunity. You just need to be really good at one style and max that the hell out. For instance, being really good at low volatility breakouts, and having a system based off that. No amount of schooling (high school, college, or courses via Forex gurus) will make you successful. It's one thing to know a strategy, but to implement it in real time with real consequences is daunting. The only way to conquer this is to simply do it. Trade.
Trade with an amount of money you can emotionally and financially afford to lose! I would even recommend starting a live account with $50 and only trading micro lots (0.01) until you become comfortable and your strategy proves successful. This is AFTER demo trading your strategy.
Master yourself before you master the markets. Work out. Feed your brain. Get enough sleep. The money you make or lose isn't worth your health.
Psychology. In my opinion the best psychology you can have while trading is a form of stoicism. You've placed your trade based off your strategy, you managed your trade based off your strategy, and you risked an amount you've told yourself you were comfortable losing with an account you told yourself you were comfortable blowing, so what's the worry? Why the second guessing? Everyone's heard that story, right? Where a man goes to a successful "guru" and says he wants to be successful. The guru says, "Ok. Show up at the beach this time tomorrow." The man shows up at the beach in a suit and tie, ready for success! The guru tells him to get in the water. Once in, the guru holds the mans head under the water, drowning him. At the last second the guru lets him up and says, "once you want success as much you wanted to breathe, you'll be successful. That's what you need to be like. You need to be willing to do what is necessary and put in the work. It's not easy. You're going to lose money, maybe even blow accounts. You may struggle for years without a return, or even lose money over that time. How bad do you want it success, though? And are you willing to drown to attain it?
Best of luck new traders!
Experienced traders, please feel free to add things or tell me I'm a goof in the comments.
submitted by SandfordKing to Forex [link] [comments]

my dilemma on what to do with my trading

I just started forex last june and I'm currently down 50% of my capital. should I read books about technical analysis like the book of al brooks about price action trend, ranging, and breakout. should I understand the Japanese Candle Stick? I'm currently in dilemma what on what to do. If I'll go to youtube some says it's best to use pure indicator and some youtuber will say price action is enough. I also think I lack patience when the trade is ongoing. I kept on watching the chart and my account if its positive or negative. As I reflect during this month, I don't have a strategy and i just decide base on my feeling about the market. Do you guys have a recommendation what to read? I plan to stick with price action with less than 5 indicators
submitted by PusangKuryos to Forex [link] [comments]

My First Year of Trading

So here it is, three more days and October begins, which marks one year of trading for me. I figured I would contribute to the forum and share some of my experience, a little about me, and what I've learned so far. Whoever wants to listen, that's great. This might get long so buckle up..
Three years ago, I was visiting Toronto. I don't get out much, but my roommate at the time travels there occasionally. He asked everyone at our place if we wanted to come along for a weekend. My roommate has an uncle that lives there and we didn't have to worry about a hotel because his uncle owns a small house that's unlived in which we could stay at. I was the only one to go with. Anyways, we walk around the city, seeing the sights and whatnot.
My friend says to me "where next?"
"I don't know, you're the tour guide"
"We can go check out Bay Street"
"what's 'Bay Street?'"
"It's like the Canadian Wall street! If you haven't seen it you gotta see it!"
Walking along Bay, I admire all the nice buildings and architecture, everything seems larger than life to me. I love things like that. The huge granite facades with intricate designs and towering pillars to make you think, How the fuck did they make that? My attention pivots to a man walking on the sidewalk opposite us. His gait stood out among everyone, he walked with such a purpose.. He laughed into the cell phone to his ear. In the elbow-shoving city environment, he moved with a stride that exuded a power which not only commanded respect, but assumed it. I bet HE can get a text back, hell he's probably got girls waiting on him. This dude was dressed to kill, a navy suit that you could just tell from across the street was way out of my budget, it was a nice fucking suit. I want that. His life, across the street, seemed a world a way from my own. I've worn a suit maybe twice in my life. For my first communion, it was too big for me, I was eleven or whatever so who gives a shit, right? I'm positive I looked ridiculous. The other time? I can't remember.
I want that. I want the suit. I want the wealth, the independence. I want the respect and power, and I don't give a shit what anyone thinks about it.
Cue self doubt.
Well, He's probably some rich banker's son. That's a world you're born into. I don't know shit about it. \sigh* keep walking..*

A year later, I'm visiting my parents at their house, they live an hour away from my place. My dad is back from Tennessee, his engineering job was laying people off and he got canned... Or he saw the end was near and just left... I don't know, hard to pay attention to the guy honestly because he kind of just drones on and on. ("Wait, so your mom lives in Michigan, but your dad moved to Tennessee... for a job?" Yea man, I don't fucking know, not going to touch on that one.) The whole project was a shit show that was doomed to never get done, the way he tells it. And he's obviously jaded from multiple similar experiences at other life-sucking engineer jobs. My mom is a retired nurse practitioner who no longer works because of her illness. I ask him what he's doing for work now and he tells me he trades stocks from home. I didn't even know you could do that. I didn't know "trading" was a thing. I thought you just invest and hope for the best.
"Oh that's cool, how much money do you need to do that?"
"Ehh, most say you need at least $25,000 as a minimum"
"Oh... guess I can't do that..."
Six months later, I get a call and it's my dad. We talk a little about whatever. Off topic, he starts asking if I'm happy doing what I'm doing (I was a painter, commercial and residential) I tell him yes but it's kind of a pain in the ass and I don't see it as a long term thing. Then he gets around to asking if I'd like to come work with him. He basically pitches it to me. I'm not one to be sold on something, I'm always skeptical. So I ask all the questions that any rational person would ask and he just swats them away with reassuring phrases. He was real confident about it. But basically he says for this to work, I have to quit my job and move back home so he can teach me how to trade and be by my side so I don't do anything stupid. "My Name , you can make so much money." I say that I can't raise the $25,000 because I'm not far above just living paycheck to paycheck. "I can help you out with that." Wow, okay, well... let me think about it.
My "maybe" very soon turned into a "definitely." So over the next six months, I continue to work my day job painting, and I try to save up what I could for the transition (it wasn't a whole lot, I sucked at saving. I was great at spending though!). My dad gives me a book on day trading (which I will mention later) and I teach myself what I can about the stock market using Investopedia. Also in the meantime, my dad sends me encouraging emails. He tells me to think of an annual income I would like to make as a trader, and used "more than $100,000 but less than a million" as a guideline. He tells me about stocks that he traded that day or just ones that moved and describes the basic price action and the prices to buy and sell at. Basically saying "if you bought X amount of shares here and sold it at X price here, you could make a quick 500 bucks!" I then use a trading sim to trade those symbols and try to emulate what he says. Piece of cake. ;)
Wow, that's way more than what I make in a day.
He tells me not to tell anyone about my trading because most people just think it's gambling. "Don't tell your Mom either." He says most people who try this fail because they don't know how to stop out and take a loss. He talks about how every day he was in a popular chatroom, some noob would say something like, "Hey guys, I bought at X price (high of day or thereabout), my account is down 80% .. uhh I'm waiting for it to come back to my entry price.. what do I do??"
Well shit, I'm not that fucking dumb. If that's all it takes to make it is to buy low, sell high, and always respect a stop then I'll be fantastic.
By the end of September, I was very determined. I had been looking forward everyday to quitting my painting job because while it used to be something I loved, it was just sucking the life out of me at this point. Especially working commercial, you just get worked like a dog. I wasn't living up to my potential with that job and I felt awful for it every minute of every day. I knew that I needed a job where I could use my brain instead of slaving my body to fulfill someone else's dream. "Someone's gotta put gas in the boss's boat" That's a line my buddy once said that he probably doesn't know sticks with me to this day.
It ain't me.
So now it was October 2018, and I'm back living with Mom n' Pops. I was so determined that on my last day of work I gave away all of my painting tools to my buddy like, "here, I don't need this shit." Moving out of my rental was easy because I don't own much, 'can't take it with ya.' Excited for the future I now spend my days bundled up in winter wear in the cold air of our hoarder-like basement with a space heater at my feet. My laptop connected to a TV monitor, I'm looking at stocks next to my dad and his screens in his cluttered corner. Our Trading Dungeon. I don't trade any money, (I wasn't aware of any real-time sim programs) I just watch and learn from my dad. Now you've got to keep in mind, and look at a chart of the S&P, this is right at the beginning of Oct '18, I came in right at the market top. Right at the start of the shit-show. For the next three or four weeks, I watch my dad pretty much scratch on every trade, taking small loss after small loss, and cursing under his breath at the screen.
Click.
"dammit."
Click.
"shit."
Click. Click.
"you fuck."
Click.
This gets really fucking annoying as time goes on, for weeks, and I get this attitude like ugh, just let me do it. I'll make us some fucking money. So I convince him to let me start trading live. I didn't know anything about brokers so I set up an account using his broker, which was Fidelity. It was a pain and I had to jump through a lot of hoops to be able to day trade with this broker. I actually had to make a joint account with my dad as I couldn't get approved for margin because my credit score is shit (never owned a credit card) and my net worth, not much. Anyways, they straight up discourage day trading and I get all kinds of warning messages with big red letters that made me shit myself like oooaaahhh what the fuck did I do now. Did I forget to close a position?? Did I fat finger an order? Am I now in debt for thousands of dollars to Fidelity?? They're going to come after me like they came after Madoff. Even after you are approved for PDT you still get these warning messages in your account. Some would say if I didn't comply with "whatever rule" they'd even suspend my account for 60 days. It was ridiculous, hard to describe because it doesn't make sense, and it took the support guy on the phone a good 20 minutes to explain it to me. Basically I got the answer "yea it's all good, you did nothing wrong. As long as you have the cash in your account to cover whatever the trade balance was" So I just kept getting these warnings that I had to ignore everyday. I hate Fidelity.
My fist day trading, I made a few so-so trades and then I got impatient. I saw YECO breaking out and I chased, soon realized I chased, so I got out. -$500. Shit, I have to make that back, I don't want my dad to see this. Got back in. Shit. -$400. So my first day trading, I lost $900. My dumbass was using market orders so that sure didn't help. I reeled the risk back and traded more proper position size for a while, but the commissions for a round trip are $10, so taking six trades per day, I'm losing $60 at a minimum on top of my losing trades. Quickly I realized I didn't know what the hell I was doing. What about my dad? Does HE know? One day, in the trading dungeon, I was frustrated with the experience I'd been having and just feeling lost overall. I asked him.
"So, are you consistently profitable?"
"mmm... I do alright."
"Yea but like, are you consistently profitable over time?"
.........................
"I do alright."
Silence.
"Do you know any consistently profitable traders?"
"Well the one who wrote that book I gave you, Tina Turner.. umm and there's Ross Cameron"
......................
"So you don't know any consistently profitable traders, personally.. People who are not trying to sell you something?"
"no."
...................
Holy fucking shit, what did this idiot get me into. He can't even say it to my face and admit it.
This entire life decision, quitting my job, leaving my rental, moving from my city to back home, giving shit away, it all relied on that. I was supposed to be an apprentice to a consistently profitable day trader who trades for a living. It was so assumed, that I never even thought to ask! Why would you tell your son to quit his job for something that you yourself cannot do? Is this all a scam? Did my dad get sold a DREAM? Did I buy into some kind of ponzi scheme? How many of those winning trades he showed me did he actually take? Are there ANY consistently profitable DAY TRADERS who TRADE FOR A LIVING? Why do 90% fail? Is it because the other 10% are scamming the rest in some way? Completely lost, I just had no clue what was what. If I was going to succeed at this, if it was even possible to succeed at this, it was entirely up to me. I had to figure it out. I still remember the feeling like an overwhelming, crushing weight on me as it all sunk in. This is going to be a big deal.. I'm not the type to give up though. In that moment, I said to myself,
I'm going to fucking win at this. I don't know if this is possible, but I'm going to find out. I cannot say with certainty that I will succeed, but no matter what, I will not give up. I'm going to give all of myself to this. I will find the truth.
It was a deep moment for me. I don't like getting on my soapbox, but when I said those things, I meant it. I really, really meant it. I still do, and I still will.
Now it might seem like I'm being hard on my dad. He has done a lot for me and I am very grateful for that. We're sarcastic as hell to each other, I love the bastard. Hell, I wouldn't have the opportunity to trade at all if not for him. But maybe you can also understand how overwhelmed I felt at that time. Not on purpose, of course he means well. But I am not a trusting person at all and I was willing to put trust into him after all the convincing and was very disappointed when I witnessed the reality of the situation. I would have structured this transition to trading differently, you don't just quit your job and start trading. Nobody was there to tell me that! I was told quite the opposite. I'm glad it happened anyway, so fuck it. I heard Kevin O'Leary once say,
"If I knew in the beginning how difficult starting a business was, I don't know that I ever would've started."
This applies very much to my experience.
So what did I do? Well like everyone I read and read and Googled and Youtube'd my ass off. I sure as hell didn't pay for a course because I didn't have the money and I'm like 99% sure I would be disappointed by whatever they were teaching as pretty much everything can be found online or in books for cheap or free. Also I discovered Thinkorswim and I used that to sim trade in real-time for three months. This is way the hell different than going on a sim at 5x speed and just clicking a few buy and sell buttons. Lol, useless. When you sim trade in real-time you're forced to have a routine, and you're forced to experience missing trades with no chance to rewind or skip the boring parts. That's a step up because you're "in it". I also traded real money too, made some, lost more than I made. went back to sim. Traded live again, made some but lost more, fell back to PDT. Dad fronted me more cash. This has happened a few times. He's dug me out of some holes because he believes in me. I'm fortunate.
Oh yeah, about that book my dad gave me. It's called A Beginner's Guide to Day Trading Online by Toni Turner. This book... is shit. This was supposed to be my framework for how to trade and I swear it's like literally nothing in this book fucking works lol. I could tell this pretty early on, intuitively, just by looking at charts. It's basically a buy-the-breakout type strategy, if you want to call it a strategy. No real methodology to anything just vague crap and showing you cherry-picked charts with entries that are way too late. With experience in the markets you will eventually come to find that MOST BREAKOUTS FAIL. It talks about support/resistance lines and describes them as, "picture throwing a ball down at the floor, it bounces up and then it bounces down off the ceiling, then back up." So many asinine assumptions. These ideas are a text book way of how to trade like dumb money. Don't get me wrong, these trades can work but you need to be able to identify the setups which are more probable and identify reasons not to take others. So I basically had to un-learn all that shit.
Present day, I have a routine in place. I'm out of the dungeon and trade by myself in my room. I trade with a discount broker that is catered to day traders and doesn't rape me on commissions. My mornings have a framework for analyzing the news and economic events of the particular day, I journal so that I can recognize what I'm doing right and where I need to improve. I record my screens for later review to improve my tape reading skills. I am actually tracking my trades now and doing backtesting in equities as well as forex. I'm not a fast reader but I do read a lot, as much as I can. So far I have read about 17-18 books on trading and psychology. I've definitely got a lot more skilled at trading.
As of yet I am not net profitable. Writing that sounds like selling myself short though, honestly. Because a lot of my trades are very good and are executed well. I have talent. However, lesser quality trades and trades which are inappropriately sized/ attempted too many times bring down that P/L. I'm not the type of trader to ignore a stop, I'm more the trader that just widdles their account down with small losses. I trade live because at this point, sim has lost its value, live trading is the ultimate teacher. So I do trade live but I just don't go big like I did before, I keep it small.
I could show you trades that I did great on and make people think I'm killing it but I really just don't need the validation. I don't care, I'm real about it. I just want to get better. I don't need people to think I'm a genius, I'm just trying to make some money.
Psychologically, to be honest with you, I currently feel beaten down and exhausted. I put a lot of energy into this, and sometimes I work myself physically sick, it's happened multiple times. About once a week, usually Saturday, I get a headache that lasts all day. My body's stress rebound mechanism you might call it. Getting over one of those sick periods now, which is why I barely even traded this week. I know I missed a lot of volatility this week and some A+ setups but I really just don't give a shit lol. I just currently don't have the mental capital, I think anyone who's been day trading every day for a year or more can understand what I mean by that. I'm still being productive though. Again, I'm not here to present an image of some badass trader, just keeping it real. To give something 100% day after day while receiving so much resistance, it takes a toll on you. So a break is necessary to avoid making bad trading decisions. That being said, I'm progressing more and more and eliminating those lesser quality trades and identifying my bad habits. I take steps to control those habits and strengthen my good habits such as having a solid routine, doing review and market research, taking profits at the right times, etc.
So maybe I can give some advice to some that are new to day trading, those who are feeling lost, or just in general thinking "...What the fuck..." I thought that every night for the first 6 months lol.
First of all, manage expectations. If you read my story of how I came to be a trader, you can see I had a false impression of trading in many aspects. Give yourself a realistic time horizon to how progress should be made. Do not set a monetary goal for yourself, or any time-based goal that is measured in your P/L. If you tell yourself, "I want to make X per day, X per week, or X per year" you're setting yourself up to feel like shit every single day when it's clear as the blue sky that you won't reach that goal anytime soon. As a matter of fact, it will appear you are moving further AWAY from that goal if you just focus on your P/L, which brings me to my next point.
You will lose money. In the beginning, most likely, you will lose money. I did it, you'll do it, the greatest Paul Tudor Jones did it. Trading is a skill that needs to be developed, and it is a process. Just look at it as paying your tuition to the market. Sim is fine but don't assume you have acquired this skill until you are adept at trading real money. So when you do make that leap, just trade small.
Just survive. Trade small. get the experience. Protect your capital. To reach break even on your bottom line is a huge accomplishment. In many ways, experience and screen time are the secret sauce.
Have a routine. This is very important. I actually will probably make a more in-depth post in the future about this if people want it. When I first started, I was overwhelmed with the feeling "What the fuck am I supposed to DO?" I felt lost. There's no boss to tell you how to be productive or how to find the right stocks, which is mostly a blessing, but a curse for new traders.
All that shit you see, don't believe all that bullshit. You know what I'm talking about. The bragposting, the clickbait Youtube videos, the ads preying on you. "I made X amount of money in a day and I'm fucking 19 lolz look at my Lamborghini" It's all a gimmick to sell you the dream. It's designed to poke right at your insecurities, that's marketing at it's finest. As for the bragposting on forums honestly, who cares. And I'm not pointing fingers on this forum, just any trading forum in general. They are never adding anything of value to the community in their posts. They never say this is how I did it. No, they just want you to think they're a genius. I can show you my $900 day trading the shit out of TSLA, but that doesn't tell the whole story. Gamblers never show you when they lose, you might never hear from those guys again because behind the scenes, they over-leveraged themselves and blew up. Some may actually be consistently profitable and the trades are 100% legit. That's fantastic. But again, I don't care, and you shouldn't either. You shouldn't compare yourself to others.
"Everyone's a genius in a bull market" Here's the thing.. Markets change. Edges disappear. Trading strategies were made by traders who traded during times when everything they did worked. Buy all the breakouts? Sure! It's the fucking tech bubble! Everything works! I'm sure all those typical setups used to work fantastically at some point in time. But the more people realize them, the less effective they are. SOMEONE has to be losing money on the opposite side of a winning trade, and who's willing to do that when the trade is so obvious? That being said, some things are obvious AND still work. Technical analysis works... sometimes. The caveat to that is, filters. You need to, in some way, filter out certain setups from others. For example, you could say, "I won't take a wedge pattern setup on an intraday chart unless it is in a higher time frame uptrend, without nearby resistance, and trading above average volume with news on that day."
Have a plan. If you can't describe your plan, you don't have one. Think in probabilities. You should think entirely in "if, then" scenarios. If X has happens, then Y will probably happen. "If BABA breaks this premarket support level on the open I will look for a pop up to short into."
Backtest. Most traders lose mainly because they think they have an edge but they don't. You read these books and all this stuff online telling you "this is a high probability setup" but do you know that for a fact? There's different ways to backtest, but I think the best way for a beginner is manual backtesting with a chart and an excel sheet. This builds up that screen time and pattern recognition faster. This video shows how to do that. Once I saw someone do it, it didn't seem so boring and awful as I thought it was.
Intelligence is not enough. You're smarter than most people, that's great, but that alone is not enough to make you money in trading necessarily. Brilliant people try and fail at this all the time, lawyers, doctors, surgeons, engineers.. Why do they fail if they're so smart? It's all a fucking scam. No, a number of reasons, but the biggest is discipline and emotional intelligence.
Journal every day. K no thanks, bro. That's fucking gay. That's how I felt when I heard this advice but really that is pride and laziness talking. This is the process you need to do to learn what works for you and what doesn't. Review the trades you took, what your plan was, what actually happened, how you executed. Identify what you did well and what you can work on. This is how you develop discipline and emotional intelligence, by monitoring yourself. How you feel physically and mentally, and how these states affect your decision-making.
Always be learning. Read as much as you can. Good quality books. Here's the best I've read so far;
Market Wizards -Jack Schwager
One Good Trade -Mike Bellafiore
The Daily Trading Coach -Bret Steenbarger
Psycho-cybernetics -Maxwell Maltz
Why You Win or Lose -Fred Kelly
The Art and Science of Technical Analysis -Adam Grimes
Dark Pools -Scott Patterson
Be nimble. Everyday I do my research on the symbols I'm trading and the fundamental news that's driving them. I might be trading a large cap that's gapping up with a beat on EPS and revenue and positive guidance. But if I see that stock pop up and fail miserably on the open amidst huge selling pressure, and I look and see the broader market tanking, guess what, I'm getting short, and that's just day trading. The movement of the market, on an intraday timeframe, doesn't have to make logical sense.
Adapt. In March I used to be able to buy a breakout on a symbol and swing it for the majority of the day. In the summer I was basically scalping on the open and being done for the day. Volatility changes, and so do my profit targets.
Be accountable. Be humble. Be honest. I take 100% responsibility for every dime I've lost or made in the market. It's not the market makers fault, it wasn't the HFTs, I pressed the button. I know my bad habits and I know my good habits.. my strengths/ my weaknesses.
Protect yourself from toxicity. Stay away from traders and people on forums who just have that negative mindset. That "can't be done" mentality. Day trading is a scam!! It can certainly be done. Prove it, you bastard. I'm posting to this particular forum because I don't see much of that here and apparently the mods to a good job of not tolerating it. As the mod wrote in the rules, they're most likely raging from a loss. Also, the Stocktwits mentality of "AAPL is going to TANK on the open! $180, here we come. $$$" , or the grandiose stories, "I just knew AMZN was going to go up on earnings. I could feel it. I went ALL IN. Options money, baby! ka-ching!$" Lol, that is so toxic to a new trader. Get away from that. How will you be able to remain nimble when this is your thought process?
Be good to yourself. Stop beating yourself up. You're an entrepreneur. You're boldly going where no man has gone before. You've got balls.
Acknowledge your mistakes, don't identify with them. You are not your mistakes and you are not your bad habits. These are only things that you do, and you can take action necessary to do them less.
It doesn't matter what people think. Maybe they think you're a fool, a gambler. You don't need their approval. You don't need to talk to your co-workers and friends about it to satisfy some subconscious plea for guidance; is this a good idea?
You don't need anyone's permission to become the person you want to be.
They don't believe in you? Fuck 'em. I believe in you.
submitted by indridcold91 to Daytrading [link] [comments]

Let's Talk About Trading Reversals

Let's Talk About Trading Reversals
I feel I could have done much better this week. The retracement of GPJPY on Friday from the 132.15 high got me out of the week at a profit, but I really think I should have done better. I'll spend the whole weekend dissecting my trades and working out where I may have made mistakes and where I can improve upon these.

Part of my reason for joining here was to teach things that work for me, and to learn about things working for others. The best thing for me is for people to provide well thought out and well presented suggestions on ways I can improve upon weaknesses. I've always made my bigger major breakthroughs in trading based on this. Small observations, well explained by people who know what they're talking about.

I've had it said to me many times here that I can not take criticism, but that's not true. I assure you, I'll be 1,000 times more critical of my mistakes that anyone else. I will still be working on them long after others forget them. What I am not interested in is comments I've got here that usually amount to, "You're stupid, and I think I am a better person than you". I'm not here to learn how to be egotistical, I already know how to do that.

In this post I'll discuss how trading reversals, and particularly how I traded shorts on GBPJPY this week. I'll start by doing a run through of the trades I took.
Thing started well, shorting on Monday 129 - 128.25 (Here my sell was stopped out right before it dropped 100 more pips, so I was not happy with this winning trade. I view it as 100 pips loss in some ways).

Then I bought the low of 127 with a 128 target, but took profit and reversed 127.40.

Stopped out this trade, and sold 128.
Stopped out, and sold 128.50.
Stopped out, and decided to stop selling. Worked on a more developed plan in case the market continued to go up.
Bought 130 area, and took profit 131.
131.50 area started selling again, got some stop outs. Sold high 132.15.

All my stops were 10 - 20 pips. Very tight for this pair.

Where I'm going to focus here is 131.50 - 132 area. Getting stopped out for 10 pips when the market goes up 300 more is fine for me. I can work on filtering these trades, but as far as I'm concerned I am losing these well. Someone commented on one my GBPJPY sells signals from 128.50 saying I was "Rekt" when it went to 130 ... but I got out for 15 pips. This is exactly the type of useless "feedback" that's obviously worth ignoring. Hopefully this post can be a more constructive conversation.

So here is where I am starting to sell GBPJPPY and getting spiked out. I call myself out on the mistake I am making.
https://preview.redd.it/g3k0sfndi1l31.png?width=678&format=png&auto=webp&s=dfc6b9c8afeea66a4292301c5b3f143062bf02f7

I then took up my own advice, set some limits. Took some more nominal stop losses for 10 pips or less and got in a good trade 132.15.

https://preview.redd.it/87xbdrhcj1l31.png?width=815&format=png&auto=webp&s=33ca2e15bbe216f9fb3fe1b00e885a1c63aaafea
https://preview.redd.it/4rmiujljj1l31.png?width=758&format=png&auto=webp&s=7103dfefb681d8db748cefd3c6ab0fcae2b5fd2b
Source https://www.reddit.com/Forex/comments/czyoo6/i_think_a_huge_gbpjpy_sell_is_due/ez7any5/

I added to my sell 132, 132.05 and 131.90.

The end result of this was profitable, but I know I can do better. This is one of my known areas of improvement.
I'd be interested in sharing ideas and thoughts with people on how to improve here. These have to be comprehensive, though. Including entries, exits and Rprobability assessments. Saying things that amount to cliches and catchphrases do not help. I've also thought of the obvious things.

Options for Trading Reversals



So now we'll get onto some of the options we have to trade this move, and the risks and rewards we get in each one.
I've covered what I've done here. My risk is I am going to invariably get whipsaw stop outs, have to re-enter a few times and have random people telling me I got "rekt". I can deal with all of these, because I'm getting into RR situations that have 10 - 20 + pay outs with the ways I structure positions, add to winning trades and trail stops. I need to be successful something like 7% of the time doing this, and I am successful more than that. Makes sense, to me.

These are the other ways of trading this I am interested in speaking about.
https://preview.redd.it/namn0aahl1l31.png?width=743&format=png&auto=webp&s=02a972ce8f8f42110fb0a3eccf7122950cda68ba
We'll take them one at a time, and I will explain these setups as I think the people are saying to trade them. If I'm wrong, kindly correct me. I'm just basing this on what people who usually say this give when asked to elaborate (assuming they do).

So here is number one. We wait for a sell signal.

https://preview.redd.it/4x504q3ul1l31.png?width=1342&format=png&auto=webp&s=109a2440bd4a424c1e2577ab3ad69fcc76dd7ccb
What now? How do we enter?
If we enter at the low, we're fair game for stop hunting unless we use the highs. Inside of the swing down leg we can expect price to trade in there, even if it's going to fall more. So if we enter after the signal, we have high stop out probabilities unless above the high. Above the high, we have usually 80 - 100 pip stop.
So it seems this is not offering the same RR if we assume the market does top and then fall 500 pips. It's a less profitable trade, or the same, even accounting for it having higher win rate.
Our second option is to wait for the retrace and limit in. This is a great trade.
https://preview.redd.it/rumv8utfm1l31.png?width=1344&format=png&auto=webp&s=16245690beae9c11d10dc569f1e83e251127db6f
Trouble is, this does not always happen. The retrace is not always predictable. So when we use this method, our reward is good entries, good RR, "confirmed" signal. Our risk is missing a big move. For the highly risk adverse, this is probably ideal, but for those who can take small losses for a big win, this is not optimum.

Our other option is to place sell stops, so we enter into momentum. I've shown the areas for this in red.
https://preview.redd.it/kfyaqwsxm1l31.png?width=1036&format=png&auto=webp&s=b35911a87fe57e2ae1c153d368da2ea905f761c9
We have the same issue on RR. Where to place the stops. Has to be above the high, really. Or we have the same risk of small stop outs we have in my method, but we have a worse price.

Here I've circled all the points these alternative confirmed entry strategies flag up sells.
https://preview.redd.it/1zu6ydkcn1l31.png?width=819&format=png&auto=webp&s=184d17cb15574dccf5aa849b0cac74a36fd42f86
On all occasions using the breakout rules, they enter at almost the worst possible price. On the retrace rules, they enter at good price but lose. My trades have engaged the same levels of this (apart from me stopping selling before the 129 trap). I've lost 10 -20 pips on them, and these other signals generated losses of 60 - 80 pips. Same bets, same levels. 1/4 losses, and 400% more RR per trade.

Could those who have different ways in which they approach these reversals explain their rational for it in the same way I've went through mine here?

1 - What the entry signals is.
2 - Where to enter.
3 - Where to stop.
4 - Applying this to losing signals as well as winners (not cherry picking).

If you do this better than I do, I'd be interested in how you do it and your rational for it.
I'm also interested in well thought out explanations of mistakes I make/areas I can improve, as long as it's comprehensive. I'm not the best I can be. I want to get better. I am very keen to learn where I can. I always deeply consider constructive critics and ideas based on what I do (or things others do).
submitted by whatthefx to Forex [link] [comments]

Strat for 50 - 100% a Year - Common Points, Example of Setup 3 and First Weeks Results.

Strat for 50 - 100% a Year - Common Points, Example of Setup 3 and First Weeks Results.
Part 1
Part 2

We're going to start this post with dealing with common heckles. Some people have heckled me already in this posting series. I know from having done things like this publicly a few times before there are catchphrase heckles to be dealt with, and we'll do this one and for all here. If I've linked you here, you've done a FMH (Frequently Made Heckle).
If you're not a heckler, you can skip the line break for the strategy stuff, but this section may still be interesting for you.
FMH 1 : Elliot wave does not work all the time.

I know. The clock in my living-room does not work all the time. If it tells me it's 2am and I look out and it's broad day light, I use some discerning judgement based on my experience of looking out of a window, and I suspect it may be incorrect. If it tells me it's 8.30am and I look out and see little kids with school bags walking past the window, I suspect the clock may have a point.

When I write all the rules and exceptions in my posts, I am not doing this to make the posts longer. These are rules and exceptions designed to describe situations when it probably is happening. Of course it does not "Always work". I am not say it does. Your assumption I have not thought through the same extraordinary simplistic, "But, what if ...." questions is either you under estimating me, over estimating you, or both.

FMH 2 : Fibs levels do not work, studies show it is as good as random.

Two points. Firstly, I've read some of these studies. These hypothetical things done by people who have never traded in the market and want to produce intellectual ideas about it. While reading through the method of the experiment it's apparent to me it won't work. I could save them some time if they call me and tell me their hypothesis;

"Nope. You'll lose about 20% a year doing that. Good general idea. Okay starting point, but you get fucked here, here and here. Work on that".
I will not value the opinion of someone paid to write papers on fibs over my experience being paid to trade them. I will not go out my way to try to get you to value my opinion. I've learned people will either test things I say and know the truth of them for their selves with me posting the amount of interesting evidence/results that I do, and others would not test it if I posted a million examples.

Point two. Not perfect does not mean not practical. Fib levels do not react absolutely perfectly. I suspect the reason for this is so many people use them to put stops behind these days. In days gone by, they were probably more accurate, but as stop clusters became more predictable and concentrated this change. Game theory sort of stuff. Read more about my thoughts on this here.

The thing is, for those who pay enough time and attention, there are patterns of when the fibs either do work very well, or "do not work" in the exact same way over and over again. If they do "not work" in the same way over and over, that's the same as working to me. I am looking for patterns to trade for profit. Not to compile a pretty chart of data points as to if price turned specifically on the 61.8 over a million samples.

FMH 3 - "Everything you're saying is wrong", "You're an idiot", "I am non-specifically and non-constructively disagreeing" (Yeah, people drop that last one, verbatim, all the time)

Pics, or it didn't happen. I am willing to "get up here" so to speak and succeed or fail in front of everyone. I'm posting what I do, and explaining all my rational. Results are being tracked. Time and continuity will display my outcomes. Is there a way you suggest you can provide stronger proof I am wrong that I am proposing to prove I am right?

If you're just saying you think I am stupid, because you know the market so much better than me my standard reply is as follows;

" If you'd like to propose, explain and track a strategy you think will outperform this we can both keep our records and that will best determine who's opinions have profitability. It seems something that would be good for the community. "

Pics or it didn't happen. Only analysts and economists are paid for opinions. My job demands a far more practical approach.

FMH 4 - "What REALLY happened with (insert news related thing) this and your guesses were just lucky".

If I said it would happen yesterday, then set trades for it happening and profited from them today; it does not matter to me the reason you give me for it tomorrow. If you choose to view the market as being like this, you may. If it ever does start to become more relevant to me making profits or not, I will pay attention to other things. Right now, I do not follow them closely and that has never mattered. Either I am consistently lucky, physic or right. Pick the flavor for you.

I will not engage in conversation on any of these points coming from a closed minded perspective. By which I mean you only commenting to tell me why you're right. If you feel someone has to add balance with these comments, go ahead. I encourage people to be scientific in their approach and having different viewpoints helps with this. Do your own experiments.

I will answer honest questions, and will gladly engage people who disagree with me and do so from the perspective of personal study. Usually we can both learn and teach if both of us have firsthand knowledge. This is rare, but enjoyable.

==================================================================================================

On to GBPUSD. As I said may be possible in the previous post, the trade for the bigger run up post Chicago was missed. This can happen. It's better to miss bad opportunities than squander good money on bad ones, and at the time I had the option of entering, there was no way to tell the difference between these - so I did nothing.

Later in the day price continued to be consistent with the formations of a spike pattern. Here I engaged the market.

GBPUSD 1 Minute

My entering pattern was to first open two small trades with a 13 pip stop. This was an emergency stop, I always planned to tighten it up (it'd only hit in the event of an immediate capitulation). The risk here was about 0.15%. When the market moved a bit lower, I entered more positions and having more data felt better about where to place stops. All stops went to 6 pips or less (bigger position, same starting risk).

As price reached the best level, I opened my largest trade. Stop went from 3 - 6 pips with big stops being 2 pips. Effective stop something like 3-4 pips. Targets hit for 10 - 12 pips, giving an effective pay off on risk just short of 1:3. I do not use aggressive position sizing in this part of the trade (usually it already carries made profits), so the net risk was low. Around 0.25%. Net gain in positions was 0.6%.

GBPUSD 1 min
From left to right the positions get bigger. Notice also the biggest position (low) takes profit a good bit before where I forecast the high (bulk close). This trade hitting should give assurance of breakeven on this trade, so the risk on capital is gone on this trade on a double top move, then profits accumulated in the breakout.

Results for the day;


https://preview.redd.it/96zq7cy1j9i31.png?width=821&format=png&auto=webp&s=d324348621a5c0931a90de207fe8aebb116f934d


Current Gain = 0.65%
Max risk exposure possible - 0.4%
Max real equity drawdown - < 0.2%

Due to not being entirely available for trading today this was a big under-performance of what the strategy could have achieved. It's been a decent example day to show the logistics of how the trades can form. To make 2 - 3% today with the same draw-down was possible.
submitted by whatthefx to Forex [link] [comments]

Shorting Noobs - Style Adaptions and the Search for Sustainability

Shorting Noobs - Style Adaptions and the Search for Sustainability
Part [1] [2] [3] [4]

So in the first week of this an account initially funded with $10,000 got to around $40,000 / $45,000, but it was wild. The drawdown swings were large. Equity swings were what I would describe as problematic. My broker agreed. I got a call from them and it went a bit like this;

"Hi, Whatthefx (yes, me and the broker are on first name terms). One of your new accounts has done a lot volume this week. I was wondering if you're going to continue to trade so aggressively? Can we expect the same volume this week?"

I replied; "Of course not. I started last week with $10,000 and now there is $40,000. It would be fair to assume I will trade four times as much volume this week".

They advised me if I did this, in the near future we'd be having a discussion about re-evaluating how much leverage the broker would offer me. I told them I could not believe they'd speak to me like this after all we'd been through. "You've changed, man" I ruefully muttered into the phone. He told me risk compliance was getting edgy, and they felt the best solution would be to reduce my leverage. I told them to a hammer everything looks like a nail. They told me this hammer was about to come down.

Long story short, compromises has to be made.

I decided to split accounts and reduce risk acceptance on both of them (dramatically on the larger of the two accounts). I started an account with $25,000 running a very similar but slightly watered down version of the initial strategy. I then started another account with $50,000 and used this to trade against people who consistently bet against trending moves.

Vrs scalpers results:


https://preview.redd.it/f2ixgaz8lsh31.png?width=923&format=png&auto=webp&s=2aa495b2df70e32cd49d7ce6786a8dac652c928c

As a recovered "Trend doubter", I understand the mindset of people who fade the trend too aggressively. There is a fine line between being an effective contrarian and just being dumb enough to think you're smarter than the entire market. When you're the latter, you come to learn the infallible truth in the saying "A fool and his money are soon separated".

I take a bit of time to snoop on those I am reverse copying from. Through some statistical analysis and good old fashioned reading through their feeds on platforms they promote themselves I seek out the ones who have die hard doubt on the existence of strong trends and also with some ingrained belief that the fib levels are irrelevant.

I find the ones most die hard against these things. It's easier to find committed doubters of fibs than it is of trends. I find those who are the most extreme on this bell curve. Some of them are practically evangelical about how sceptical they are of fibs. I take these people and pay particular attention to their trades. Most specifically I run analysis to see how the trades they make at important fib levels perform. I have a few I look at but the most important one for basic trend following is the 61.8% fib (explained in previous post).

I find an extremely high correlation between the people who know so much better than us who like to use fibs and them consistently making losing trades at important fib levels.

https://preview.redd.it/vxu0ehnrlsh31.png?width=266&format=png&auto=webp&s=cc5692b1677ae4a4af1c5ac7c177c4f3cc6680b3

This is all I need to feel confident sticking some money on this. I make some filters to allow me to copy their mistakes and dodge the times they are more likely to be correct. I add some other ways to identify strong trends. I include some aspects of ATR, ADX and MAs. I also do some lot sizes rules to prevent them from martingaling against me. I do not want to let them accumulate larger and larger positions against me on the slight breakouts of the 61.8% level, because there is a high chance of there being a retest of that level. If they close all their positions there, this will give me a net loss.


Vrs trend faders results:

https://preview.redd.it/bz7mp4xelsh31.png?width=913&format=png&auto=webp&s=91f17d291a135a772bbf5048a72b038fcba0c5a4
submitted by whatthefx to Forex [link] [comments]

Common Trading Mistakes: How Trend Strategies Lose Edges in Corrections.

Common Trading Mistakes: How Trend Strategies Lose Edges in Corrections.
Losing consistently in a trend is frustrating. It tends to make people feel either stupid or conspired against. The market always goes up ... until you buy. What's with that?

If you find yourself getting the run around in trending moves, this post should help.

We'll start with having a look at the areas common styles of trend following can generate losing signals '/ stop losses. The two main types of trend trading are breakouts and retracements. Here we can see the areas they are likely to generate losing trades in a typical trend formation.

https://preview.redd.it/14c7t96ufbj31.png?width=637&format=png&auto=webp&s=ca52ae781d968c106609808963ff2202e0cfcce9
On the left, we have breakout loses. On the right we have retracement losses.
The trades on the right are not too much of a problem. If you had a sold trend trading strategy using breakouts and maintained it with good money management, you'd be doing well. Having some strings of small losses would not matter relative to the trend moves you catch. It's this red bit. This is where things get sketchy. Here a lot of false signals will be generated. In a larger picture for retracement traders, but also on short term false breakouts.

Strategies that would have been very profitable ran through the blue area can become breakeven or losing strategies in the red area. This is actually (in my view) likely the reason most trend based EAs that can be designed easily or bought have limited long term profitability even if they produce great short term results. To make money in a blue market, the EA needs you to tell it how to do two things. Not get stopped out, and sell. There may be bumpy bits, but it will make money so long as that market condition continues.

This is all well and good, but the reality of having to deal with risk control in adverse market conditions will inevitably come along. When this happens, not adapting your trend strategy to filter out the losing streaks that most strategies will generate seriously hampers your net profitability and can even turn a good strategy bad.

In the early week gap and brief breakout on USDJPY, I thought it was likely we were switching from a blue market to a red market. So I activated the trend followers of different variations on my Shorting Noobs strategy, and waited to see if they'd pick up the worst signals (giving me ideal entries).
https://www.reddit.com/Forex/comments/cvki79/shorting_noobs_fake_news_false_breakouts_and_the/

https://preview.redd.it/v34h1n0sgbj31.png?width=1017&format=png&auto=webp&s=ae7055bf385ee44465b3d2afb42246998bac1114

I explained what I thought the best trade pan for the sort of price action we'd see in the coming trading sessions would be.
https://preview.redd.it/x9qmvoqwgbj31.png?width=763&format=png&auto=webp&s=34a250cf147cda489629c824cd4addb93118701b
My theory here is if you put a bunch of okay strategies (and these are not horrible traders. They have rules, and follow them. Do overall okay) into the very worst conditions, they'll do the worst thing. Which saves me the effort of being here doing what I think is the best thing. To look for big drops, and then it have a little false breakout. Buy this and take profits into spikes.

Here that is a bit closer.

https://preview.redd.it/1vgi23ohibj31.png?width=805&format=png&auto=webp&s=cb13f88ed34431c1e23a0da04fcf3c00f849ee0a
Particularly where the red mark is, this has produce a perfect counter signal. Sharp drop, false breakout. Buy and take profit into spike up.

The interesting thing about this for me, is I do not find too much to be critical about with many of these positions if we are to look at the market from the perspective of a seller. Their stop losses seem to make sense from much of the stop loss rules commonly used (and ones working for them okay in other times of the strategy), but they're commonly being stopped out at the highs.

The main problem most strategies have is the recurrence of what can be increasingly strong looking sell signals. When using solid rules, this is a limited problem (can still be big), but without this and with there being emotional decisions made, this is a really hard time to trade. It's easy to lose all your money trying to follow the trend here, without really doing too much wrong other than starting to chase a loss or refuse to accept a loss. Then things happen so quickly, and that's it. Being a revenge seller selling into the bear engulfing bars right before the 50 pips 1 minute candles does not go well a few times in a row (tried and tested, would not recommend).

As I mentioned in the comments for the OP of this analysis, I stopped selling at 106.05. I stopped copying most of the strategies there because I didn't want them accumulating sells at a possible high. All through the consolidation period their have been sells accumulating and obviously the stops are above the highs, which is exactly the area I'd expect to spike out and reverse from in this pattern. It's what my manual trade plan inverts.
https://preview.redd.it/3488sp3hlbj31.png?width=692&format=png&auto=webp&s=3cbc46de4a1b121526421d27568fe0d7f30d86f8
So at this point these strategies that have been doing well over the blue period (which has been a longer time) have lost most of gains. If the trend continues from here in the main they will breakeven on this red section (would be okay). If there are spike outs of the highs they will generate a lot more losing signals. By the end of this, strategies that have been profitable for 3 months will have leaked back a substantial amount of that in only 4 - 5 days.

Learning to remove these correction weeks from their trading patterns would very much benefit most trend following systems.

Here's the overall results from betting against either trend following or trend reversal mistakes like this.
https://preview.redd.it/6f8v4vgumbj31.png?width=818&format=png&auto=webp&s=7bc8049fedf69a447597695a15e9ff1510d3a515
submitted by whatthefx to Forex [link] [comments]

Forecasting the End of Major Corrections, and Accumulating Trend Trading Positions.

Forecasting the End of Major Corrections, and Accumulating Trend Trading Positions.
A prerequisite post to this post can be read here; https://www.reddit.com/Forex/comments/clx0v9/profiting_in_trends_planning_for_the_impulsive/
It will also be beneficial to read this;
https://www.reddit.com/Forex/comments/clbxk2/shorting_noobs_common_trend_following_mistakes_im/

Before getting into the meat of things, you need to understand the 'elastic band' effect of large moves in the market. What this means is most of the time before a market starts to make a big move in the direction it is ultimately going, it will make a strong and usually fast counter move. You know this already in a way. You've been taught from early on (I assume) that pin bars (hammers etc) are indications the market is reversing. You're told the wicks are formed by price pushing into an area and being rejected from it.

In a trend formation, this is what the intra-week price action would tend to look like when there is the formation of reversal candles at the close of the weekly timeframe.


https://preview.redd.it/nv1nbk0c9th31.png?width=909&format=png&auto=webp&s=f87d94ee33f0d07cde211c05d9234a236a487309
Here we would have been in a down trend and then for a week or two seen bullish momentum. The blue swing is the "elastic band" move. Or what I like to call the "ping swing".

The formation I have drawn here is not arbitrary. A lot of specific things are going on in this chart. Here I've highlighted the relevant ones. When we've seen all of these, we know there is a good chance we have reached the end of a C leg correction (read up on basic Elliot wave theory if you do not understand this terminology).


https://preview.redd.it/8u9bg43nath31.png?width=1066&format=png&auto=webp&s=1ddb04a27b9a99ddbcaab5eef4e3ca7eea78e000

There can be variance in the 4 and 5 area. I am being polite, I should be honest. This area is often a bitch to trade in. Sometimes there are deep retracements and sometimes they are really shallow. Personally I've not been able to find ways to get strong ideas of how to forecast which is more likely. It tends to be an area I lose money and one I continue to work on trying to develop better ways of dealing with.

Here are examples of each type from trades I've taken recently.


https://preview.redd.it/6n0x4k43cth31.png?width=744&format=png&auto=webp&s=f03fdbff3176e1df36727f3606dbf6fc67912e53
This is explained in more context at https://www.reddit.com/Forex/comments/cks8q1/shorting_noobs_problems_proofs_and_fine_tuning/

This chart is messy because a lot of positions are being taken rather than a specific strategy being followed, but as I've explained in the 'Shorting Noobs' series of posts, I am mot interested in trading off the 61.8% fib.


https://preview.redd.it/97cb1x0wcth31.png?width=719&format=png&auto=webp&s=d49bbac385242184d9f9ba2708d1e9fe92efba42
Here is one with EURUSD that had very shallow sell-off then made the ping swing.

https://preview.redd.it/dbiujru0fth31.png?width=1025&format=png&auto=webp&s=277682a868af7cb2dc2b612243a8abfef54e9de0
You maybe thinking at this point, "But the range bit looks like it should be the 5". I know! I told you it's a bitch. As you can see here regardless of this I have still sold the best price. I am doing this by having a clear SR level I am forecasting in this sort of move. (Explained in more detail in the shorting noob series [2] [3] )
Note, it is still entirely possible that this can make another ping swing and slightly spike out this high. If it does, we have a great opportunity. At this point, we are wiser to look for the better RR trade with trend continuation by considering we are possibly in this part of the move and we have the next (usually stronger than previous) sell off coming.


https://preview.redd.it/15xd09pzfth31.png?width=730&format=png&auto=webp&s=c5e3a70fbc9411b36d74a7e32ebf5c1aabf1ad05

Which actually fits inside another cycle for a ping swing.

https://preview.redd.it/31craqbkgth31.png?width=1018&format=png&auto=webp&s=4d7cc139aa406673213c62009220a3182e7e9e55

Here is a real time forecast of a ping swing we can watch for and set pending orders (or define areas to watch for reversal patterns)

GBPUSD

https://preview.redd.it/uz93cn53ith31.png?width=1082&format=png&auto=webp&s=3b2d9a7fc12c961dafb7ee3cc7aa4c1aec29c927
(Ignore the buy trades on this, they are from a different type of strategy)

This is a lot of information, and to intrinsically understand this you'd have to go over a lot of trending charts and watch how they have developed. I have spent a hell of a lot of time on this. I will round up with leaving you just a few simple rules we can take from understanding this general pattern that recurs in trends. Some of them will help you win, others will help to prevent you losing.

1 - When it starts to chop, it's time to stop.

When a trend that has been in a free flowing form starts to get choppy, it's time to stop following the trend for the time being. You should be aware the next breakout(s) can be false ones, and the next shallow correction for a "Retest & continue" type trade is likely a trap.

2 - Big corrections rarely feature only one leg.

When you see a really big move against the trend it gets really tempting to rejoin the trend once it starts to form price action reversal candles. Any time you're entering without the market having previously faked and then spiked out early sellers at least a couple of times, you have a more risky trade.

3 - Forecast where early sellers will lose.

Quite simply, if you see a downtrend and then a spike up and what looks like the continuation of a downtrend you can assume there are sellers into what they think will be the new downtrend move. It's also quite likely these sellers have it very wrong on their stop area. It will be just above the previous highs and the consolation range. This is the very area we'd expect the ping swing to spike into and then make the proper trend move after whipsawing those who sold too early.
Where they are getting stopped out, you want to be entering. Not sure where this is? Look in Forex forums, they'll tell you.

4 - Velocity does not mean victory!

As price comes into the reversal area it will usually be carrying a lot of short term momentum and moving fast. Moving quickly into an area is not in any way an indication of a break of that area or a reversal. In fact, once you've identified where you think the ping swing will end, the more parabolic that move is into that area the better for the reversal trade. Plan ahead, do not be caught up in the moment. The moment will be deceptive.

5 - Have excellent exit plans on both sides of this sort of move.

If the move fails, the counter move running against you can be persistent. Stop losses should be around 78% of the swing. Small spike outs of the 61.8% level are to be expected. Breaks of the 76% level are not. Similarly, profits can come lightening quickly. Which can actually be a problem if you've not planned the areas you want to exit or how to trail your stops. So be well prepared to exit before you enter.


The things I have explained in this post have validity on all timeframes. I scalp with it, and I swing with it. It transfers readily to any market with trending properties. If you were to master this (especially at an intraday level - which is harder) , it would be highly likely you significantly beat what most people would think are "good returns" when the markets are trending.
It would be possible for someone who has sufficient skill in doing this to make themselves substantial profits even starting from a small amount of money and using moderate risk over the course of just trading 4 - 5 major trend moves on daily and weekly charts. This is quite an easy setup in my opinion (once it's been highlighted at least) and for as long as you can find trends to use it, it will outperform most strategies I see on public display.

(All bets are off in ranges. This will make a mockery of you if you try to do it in ranges)

Happy trend following :)
submitted by whatthefx to Forex [link] [comments]

Shorting Noobs - Fake News, False Breakouts and the Sneeze.

Shorting Noobs - Fake News, False Breakouts and the Sneeze.
Part [1] [2] [3] [4] [5] [6]
In preparation for the possibility of GBPUSD (et al) making some major spike out moves on large charts and potentially entering into sharp corrective moves, I've been honing in on another area of trend trading mistakes. Up to now, the main focus has been on the 50/61 trap [2] [3]. This has been largely effective. Some pretty wild swings, but it's ultimately swinging in the right direction. This is to be expected. Markets have made this sort of pattern for decades. I've no idea why people think it's not there or is going away any time soon. For the time being, betting on it has great odds.

I've said in previous posts the 61.8 trap formation is one of the areas where most of the money is made and lost in Forex. This is the other one. Between these two points, it would be my guess this is where most retail traders lose their money. It's where I've lost most of mine, I am sure of that. They are cunning traps, and these traps snap down hard. In the 50/61 trap section we've covered how to enter into the start of trend legs, and now we'll cover how to exit at the optimum profit level (and reverse).

We'll start looking at what I've explained previously while alluding to this mistake. This is the first selling mistake, indicated in the chart here with a 3 as we switch from black to blue.

https://preview.redd.it/l0hwb7k9eqi31.png?width=715&format=png&auto=webp&s=a49ea3bbf2cac1ecaca171baa16b5cac241b2111
Source: https://www.reddit.com/Forex/comments/clbxk2/shorting_noobs_common_trend_following_mistakes_im/

The mistake is explained as "breakout trading rushing in", and also as an area people are stopped out using H/L rules.
I've explain many times in many ways how news events can carry what essentially amounts to misinformation in terms of what you do in trading, and how these events are often found marking out the extremes in trend moves. I've mainly focused on entering in line with the trend to this point, but the same is true for the end of a trend/start of correction.

https://preview.redd.it/k3m9fkngfqi31.png?width=715&format=png&auto=webp&s=9f2b56e619445b0ce8e58352bfbca02e6428ae42
https://www.reddit.com/Forex/comments/clbxk2/shorting_noobs_common_trend_following_mistakes_im/

I've also explained how I design my trade plans ignoring any news there may be in the sense that I do not do analysis on it (or try to guess it). While doing this I've explained that I do think it's very possible news events will feature during the moves. They usually do. I do not need to know about them. All I need to do is make a trade plan that understands it might have volatile moves in it, and how a person would give themselves the best chance to profit from that.

https://preview.redd.it/0dboiov1gqi31.png?width=709&format=png&auto=webp&s=61b89626b18a18452b27ef2756631bd58d6ca445

This news stuff is very important. You need to understand that when I think about news events, I think of them in terms of the sort of price moves they create ... because nothing else matters!
I know in some parts of the cycles price moves fast. Sometimes it moves in ways that abnormal, seeming. I also know that when there are news events, these are the things that happen. So when we are trading in areas where I know price can move aggressively, I also know there may be news triggers for this. Here are the areas I'd expect news triggers. Red circles are sell news and green buy news.

https://preview.redd.it/sj07v00khqi31.png?width=736&format=png&auto=webp&s=6f71af323d151cfc6fe6b83f2c19465b3c8c907c
Of course, the way the market actually moves does not have to make any sense at all relative to the news. Let's face it, it rarely does. Not without some mental gymnastics anyway. This is why I'm not paying attention to that. There are points at which I actually expect the news move to make no sense at all. One of these is in the rally to retest the high, notice the circle for the news event is before the spike up.
So when I make winning trades that take profit in some news event, it's entirely correct to say I did not know that was going to happen. However, it's entirely incorrect to assume I did not calculate there being "some event". It is wrong to think yourself mere cannon fodder to these sorts of events, you can do better (Test! I'd like you to come to understand this, and it must be learned, there's only so much I can teach).

Now, I had been setting this up to trade the possible swing from GBPUSD making a spike out low, and this would have been some time from now (at least days, I'd expect) but we've got a chance to test out this feature early using social indicators. Social indicators are a thing. They are really useful for spotting these.

https://preview.redd.it/b458e36bkqi31.png?width=751&format=png&auto=webp&s=49d8e44741989d6c8ee7121733f0d2dd7b2e31ab
Main sorts of indicators. "What just happened?", "HUGE breakout on XXXXXX", "Game changing news .... XXXXXX breaks the highs ... to the moon". Any of this stuff, when you see it and go look on a chart for counter signals of whatever it is that is implying. Look and see if we've had the conditions that predict this kind of breakout - then fade the public chatter.
Look out for flash in the pan news events. Do not follow these, they are nonsense. I promise you, when there's someone who tells you otherwise talking about what they think happened, I am executing on my positions. When they first found out something was happening, I may well have been hitting my take profits.

These "market movers" tend to be over and done with in an hour. Unless you followed them ... then you're stuck in a shitty trade for as long as that takes.

Bringing us to our social trigger. Someone posts a Trump tweet. Apparently these are important. I've not noticed. I am in trading positions most of the time he tweets, usually a few days later I find out that was "why it happened". The thought of using this for real time indicators to follow is madness to me, now. There's a time I'd have thought that perfectly logical. When you do the charting hours, it does not make sense. So should be ignored.


https://preview.redd.it/fy503xs3kqi31.png?width=506&format=png&auto=webp&s=6c4ffa3db2d85fd672e4665185636202e3de7dfe

Maybe not entirely ignored. When I seen this, I went and checked for counter trading signals on USDJPY. Seen one instantly (social indicators are fucking accurate, I'm being serious).
This was the position I took. I also suggested the poster stopped following this bullshit.

https://preview.redd.it/kjzszt9ylqi31.png?width=689&format=png&auto=webp&s=5cda228fd244b558cfe3efaecb171bb7cbfaa8bf
Source: https://www.reddit.com/Forex/comments/cvdjzv/will_the_usdjpy_breakout/ey3xr6y/?context=3

I explained the mistake.
https://preview.redd.it/qbl9mbdamqi31.png?width=567&format=png&auto=webp&s=e346d013d4c4919ae709f6be22d476917194fcb7
Source: https://www.reddit.com/Forex/comments/cvdjzv/will_the_usdjpy_breakout/ey43knb/?context=3

Here is what that looks like on a chart. Blue circle is where the breakout alert comes, green circle is where I bought.

https://preview.redd.it/uc33jx6roqi31.png?width=810&format=png&auto=webp&s=7df939a336ef903f67628fc9a410cf452c84a356
We can see this is probably not something we want to be basing our trading decision on. Quite evidently.
After taking my position, I took some time to explain the situation to someone who commented saying they'd bailed out on a sell after reading through my posts (good things happen when you read my posts with an open mind). Price spiked 100 pips from the price they escaped on.

https://preview.redd.it/9gwu2mfdpqi31.png?width=738&format=png&auto=webp&s=23e5a1a7fdd0d076e38f1d6318845848041cf1f0

https://preview.redd.it/99vbci1gpqi31.png?width=688&format=png&auto=webp&s=2bba455a946f836fe94e4f82b08f2481e4edcb02

So our strategy to trade from here is simple. We buy into the sharp drops on USDJPY. We watch for short term drops and mini false breakouts - then we buy for the "swish" up move. The same strategy I said could be used on GBPUSD early last week, you know ... before the news made it happen.

We do have to be cautious, price can re-test the lows (and it can do it in one big fast candle). It can even make a further breakout (which could be stronger). For as long as USDJPY trades above the lows it's made in the start of the week, though we should see all drops in price as opportunities to buy with great risk:reward.
With this in mind, I've activated my trend traders on USDJPY, they should start to sell the false sell offs for me, and be putting me in nicely near the end of the bear traps. We might be on the way to seller mistake #2. Where the break/retest trade fails, and if we this should be very profitable betting against those who get slaughtered in the quick correction.

Update:
This has done really well, as would be expected. This really is a deadly part of the market for trend followers.

https://preview.redd.it/yi8qqdjq7ri31.png?width=817&format=png&auto=webp&s=eeb5ade882dfc3a7ff1d17bfbd432f994be7065d
submitted by whatthefx to Forex [link] [comments]

Finding Trading Edges: Where to Get High R:R trades and Profit Potential of Them.

Finding Trading Edges: Where to Get High R:R trades and Profit Potential of Them.
TL;DR - I will try and flip an account from $50 or less to $1,000 over 2019. I will post all my account details so my strategy can be seen/copied. I will do this using only three or four trading setups. All of which are simple enough to learn. I will start trading on 10th January.
----
As I see it there are two mains ways to understand how to make money in the markets. The first is to know what the biggest winners in the markets are doing and duplicating what they do. This is hard. Most of the biggest players will not publicly tell people what they are doing. You need to be able to kinda slide in with them and see if you can pick up some info. Not suitable for most people, takes a lot of networking and even then you have to be able to make the correct inferences.
Another way is to know the most common trades of losing traders and then be on the other side of their common mistakes. This is usually far easier, usually everyone knows the mind of a losing trader. I learned about what losing traders do every day by being one of them for many years. I noticed I had an some sort of affinity for buying at the very top of moves and selling at the very bottom. This sucked, however, is was obvious there was winning trades on the other side of what I was doing and the adjustments to be a good trader were small (albeit, tricky).
Thus began the study for entries and maximum risk:reward. See, there have been times I have bought aiming for a 10 pip scalps and hit 100 pips stops loss. Hell, there have been times I was going for 5 pips and hit 100 stop out. This can seem discouraging, but it does mean there must be 1:10 risk:reward pay-off on the other side of these mistakes, and they were mistakes.
If you repeatedly enter and exit at the wrong times, you are making mistakes and probably the same ones over and over again. The market is tricking you! There are specific ways in which price moves that compel people to make these mistakes (I won’t go into this in this post, because it takes too long and this is going to be a long post anyway, but a lot of this is FOMO).
Making mistakes is okay. In fact, as I see it, making mistakes is an essential part of becoming an expert. Making a mistake enough times to understand intrinsically why it is a mistake and then make the required adjustments. Understanding at a deep level why you trade the way you do and why others make the mistakes they do, is an important part of becoming an expert in your chosen area of focus.
I could talk more on these concepts, but to keep the length of the post down, I will crack on to actual examples of trades I look for. Here are my three main criteria. I am looking for tops/bottoms of moves (edge entries). I am looking for 1:3 RR or more potential pay-offs. My strategy assumes that retail trades will lose most of the time. This seems a fair enough assumption. Without meaning to sound too crass about it, smart money will beat dumb money most of the time if the game is base on money. They just will.
So to summarize, I am looking for the points newbies get trapped in bad positions entering into moves too late. From these areas, I am looking for high RR entries.
Setup Examples.
I call this one the “Lightning Bolt correction”, but it is most commonly referred to as a “two leg correction”. I call it a “Lightning Bolt correction” because it looks a bit like one, and it zaps you. If you get it wrong.

https://preview.redd.it/t4whwijse2721.png?width=1326&format=png&auto=webp&s=c9050529c6e2472a3ff9f8e7137bd4a3ee5554cc
Once I see price making the first sell-off move and then begin to rally towards the highs again, I am waiting for a washout spike low. The common trades mistakes I am trading against here is them being too eager to buy into the trend too early and for the to get stopped out/reverse position when it looks like it is making another bearish breakout. Right at that point they panic … literally one candle under there is where I want to be getting in. I want to be buying their stop loss, essentially. “Oh, you don’t want that ...okay, I will have that!”
I need a precise entry. I want to use tiny stops (for big RR) so I need to be cute with entries. For this, I need entry rules. Not just arbitrarily buying the spike out. There are a few moving parts to this that are outside the scope of this post but one of my mains ways is using a fibs extension and looking for reversals just after the 1.61% level. How to draw the fibs is something else that is outside the scope of this but for one simple rule, they can be drawn on the failed new high leg.

https://preview.redd.it/2cd682kve2721.png?width=536&format=png&auto=webp&s=f4d081c9faff49d0976f9ffab260aaed2b570309
I am looking for a few specific things for a prime setup. Firstly, I am looking for the false hope candles, the ones that look like they will reverse the market and let those buying too early get out break-even or even at profit. In this case, you can see the hammer and engulfing candle off the 127 level, then it spikes low in that “stop-hunt” sort of style.
Secondly I want to see it trading just past my entry level (161 ext). This rule has come from nothing other than sheer volume. The amount of times I’ve been stopped out by 1 pip by that little sly final low has gave birth to this rule. I am looking for the market to trade under support in a manner that looks like a new strong breakout. When I see this, I am looking to get in with tiny stops, right under the lows. I will also be using smaller charts at this time and looking for reversal clusters of candles. Things like dojis, inverted hammers etc. These are great for sticking stops under.
Important note, when the lightning bolt correction fails to be a good entry, I expect to see another two legs down. I may look to sell into this area sometimes, and also be looking for buying on another couple legs down. It is important to note, though, when this does not work out, I expect there to be continued momentum that is enough to stop out and reasonable stop level for my entry. Which is why I want to cut quick. If a 10 pips stop will hit, usually a 30 pips stop will too. Bin it and look for the next opportunity at better RR.

https://preview.redd.it/mhkgy35ze2721.png?width=1155&format=png&auto=webp&s=a18278b85b10278603e5c9c80eb98df3e6878232
Another setup I am watching for is harmonic patterns, and I am using these as a multi-purpose indicator. When I see potentially harmonic patterns forming, I am using their completion level as take profits, I do not want to try and run though reversal patterns I can see forming hours ahead of time. I also use them for entering (similar rules of looking for specific entry criteria for small stops). Finally, I use them as a continuation pattern. If the harmonic pattern runs past the area it may have reversed from, there is a high probability that the market will continue to trend and very basic trend following strategies work well. I learned this from being too stubborn sticking with what I thought were harmonic reversals only to be ran over by a trend (seriously, everything I know I know from how it used to make me lose).

https://preview.redd.it/1ytz2431f2721.png?width=1322&format=png&auto=webp&s=983a7f2a91f9195004ad8a2aa2bb9d4d6f128937
A method of spotting these sorts of M/W harmonics is they tend to form after a second spike out leg never formed. When this happens, it gives me a really good idea of where my profit targets should be and where my next big breakout level is. It is worth noting, larger harmonics using have small harmonics inside them (on lower time-frames) and this can be used for dialling in optimum entries. I also use harmonics far more extensively in ranging markets. Where they tend to have higher win rates.
Next setup is the good old fashioned double bottoms/double top/one tick trap sort of setup. This comes in when the market is highly over extended. It has a small sell-off and rallies back to the highs before having a much larger sell-off. This is a more risky trade in that it sells into what looks like trending momentum and can be stopped out more. However, it also pays a high RR when it works, allowing for it to be ran at reduced risk and still be highly profitable when it comes through.

https://preview.redd.it/1bx83776f2721.png?width=587&format=png&auto=webp&s=2c76c3085598ae70f4142d26c46c8d6e9b1c2881
From these sorts of moves, I am always looking for a follow up buy if it forms a lightning bolt sort of setup.
All of these setups always offer 1:3 or better RR. If they do not, you are doing it wrong (and it will be your stop placement that is wrong). This is not to say the target is always 1:3+, sometimes it is best to lock in profits with training stops. It just means that every time you enter, you can potentially have a trade that runs for many times more than you risked. 1:10 RR can be hit in these sorts of setups sometimes. Paying you 20% for 2% risked.
I want to really stress here that what I am doing is trading against small traders mistakes. I am not trying to “beat the market maker”. I am not trying to reverse engineer J.P Morgan’s black boxes. I do not think I am smart enough to gain a worthwhile edge over these traders. They have more money, they have more data, they have better softwares … they are stronger. Me trying to “beat the market maker” is like me trying to beat up Mike Tyson. I might be able to kick him in the balls and feel smug for a few seconds. However, when he gets up, he is still Tyson and I am still me. I am still going to be pummeled.
I’ve seen some people that were fairly bright people going into training courses and coming out dumb as shit. Thinking they somehow are now going to dominate Goldman Sachs because they learned a chart pattern. Get a grip. For real, get a fucking grip. These buzz phrases are marketeering. Realististically, if you want to win in the markets, you need to have an edge over somebody.
I don’t have edges on the banks. If I could find one, they’d take it away from me. Edges work on inefficiencies in what others do that you can spot and they can not. I do not expect to out-think a banks analysis team. I know for damn sure I can out-think a version of me from 5 years ago … and I know there are enough of them in the markets. I look to trade against them. I just look to protect myself from the larger players so they can only hurt me in limited ways. Rather than letting them corner me and beat me to a pulp (in the form of me watching $1,000 drop off my equity because I moved a stop or something), I just let them kick me in the butt as I run away. It hurts a little, but I will be over it soon.
I believe using these principles, these three simple enough edge entry setups, selectiveness (remembering you are trading against the areas people make mistakes, wait for they areas) and measured aggression a person can make impressive compounded gains over a year. I will attempt to demonstrate this by taking an account of under $100 to over $1,000 in a year. I will use max 10% on risk on a position, the risk will scale down as the account size increases. In most cases, 5% risk per trade will be used, so I will be going for 10-20% or so profits. I will be looking only for prime opportunities, so few trades but hard hitting ones when I take them.
I will start trading around the 10th January. Set remind me if you want to follow along. I will also post my investor login details, so you can see the trades in my account in real time. Letting you see when I place my orders and how I manage running positions.
I also think these same principles can be tweaked in such a way it is possible to flip $50 or so into $1,000 in under a month. I’ve done $10 to $1,000 in three days before. This is far more complex in trade management, though. Making it hard to explain/understand and un-viable for many people to copy (it hedges, does not comply with FIFO, needs 1:500 leverage and also needs spreads under half a pip on EURUSD - not everyone can access all they things). I see all too often people act as if this can’t be done and everyone saying it is lying to sell you something. I do not sell signals. I do not sell training. I have no dog in this fight, I am just saying it can be done. There are people who do it. If you dismiss it as impossible; you will never be one of them.
If I try this 10 times with $50, I probably am more likely to make $1,000 ($500 profit) in a couple months than standard ideas would double $500 - I think I have better RR, even though I may go bust 5 or more times. I may also try to demonstrate this, but it is kinda just show-boating, quite honestly. When it works, it looks cool. When it does not, I can go bust in a single day (see example https://www.fxblue.com/users/redditmicroflip).
So I may or may not try and demonstrate this. All this is, is just taking good basic concepts and applying accelerated risk tactics to them and hitting a winning streak (of far less trades than you may think). Once you have good entries and RR optimization in place - there really is no reason why you can not scale these up to do what may people call impossible (without even trying it).
I know there are a lot of people who do not think these things are possible and tend to just troll whenever people talk about these things. There used to be a time when I’d try to explain why I thought the way I did … before I noticed they only cared about telling me why they were right and discussion was pointless. Therefore, when it comes to replies, I will reply to all comments that ask me a question regarding why I think this can be done, or why I done something that I done. If you are commenting just to tell me all the reasons you think I am wrong and you are right, I will probably not reply. I may well consider your points if they are good ones. I just do not entering into discussions with people who already know everything; it serves no purpose.

Edit: Addition.

I want to talk a bit more about using higher percentage of risk than usual. Firstly, let me say that there are good reasons for risk caps that people often cite as “musts”. There are reasons why 2% is considered optimum for a lot of strategies and there are reasons drawing down too much is a really bad thing.
Please do not be ignorant of this. Please do not assume I am, either. In previous work I done, I was selecting trading strategies that could be used for investment. When doing this, my only concern was drawdown metrics. These are essential for professional money management and they are also essential for personal long-term success in trading.
So please do not think I have not thought of these sorts of things Many of the reasons people say these things can’t work are basic 101 stuff anyone even remotely committed to learning about trading learns in their first 6 months. Trust me, I have thought about these concepts. I just never stopped thinking when I found out what public consensus was.
While these 101 rules make a lot of sense, it does not take away from the fact there are other betting strategies, and if you can know the approximate win rate and pay-off of trades, you can have other ways of deriving optimal bet sizes (risk per trade). Using Kelly Criterion, for example, if the pay-off is 1:3 and there is a 75% chance of winning, the optimal bet size is 62.5%. It would be a viable (high risk) strategy to have extremely filtered conditions that looked for just one perfect set up a month, makingover 150% if it was successful.
Let’s do some math on if you can pull that off three months in a row (using 150% gain, for easy math). Start $100. Month two starts $250. Month three $625. Month three ends $1,562. You have won three trades. Can you win three trades in a row under these conditions? I don’t know … but don’t assume no-one can.
This is extremely high risk, let’s scale it down to meet somewhere in the middle of the extremes. Let’s look at 10%. Same thing, 10% risk looking for ideal opportunities. Maybe trading once every week or so. 30% pay-off is you win. Let’s be realistic here, a lot of strategies can drawdown 10% using low risk without actually having had that good a chance to generate 30% gains in the trades it took to do so. It could be argued that trading seldomly but taking 5* the risk your “supposed” to take can be more risk efficient than many strategies people are using.
I am not saying that you should be doing these things with tens of thousands of dollars. I am not saying you should do these things as long term strategies. What I am saying is do not dismiss things out of hand just because they buck the “common knowns”. There are ways you can use more aggressive trading tactics to turn small sums of money into they $1,000s of dollars accounts that you exercise they stringent money management tactics on.
With all the above being said, you do have to actually understand to what extent you have an edge doing what you are doing. To do this, you should be using standard sorts of risks. Get the basics in place, just do not think you have to always be basic. Once you have good basics in place and actually make a bit of money, you can section off profits for higher risk versions of strategies. The basic concepts of money management are golden. For longevity and large funds; learned them and use them! Just don’t forget to think for yourself once you have done that.

Update -

Okay, I have thought this through a bit more and decided I don't want to post my live account investor login, because it has my full name and I do not know who any of you are. Instead, for copying/observing, I will give demo account login (since I can choose any name for a demo).
I will also copy onto a live account and have that tracked via Myfxbook.
I will do two versions. One will be FIFO compliant. It will trade only single trade positions. The other will not be FIFO compliant, it will open trades in batches. I will link up live account in a week or so. For now, if anyone wants to do BETA testing with the copy trader, you can do so with the following details (this is the non-FIFO compliant version).

Account tracking/copying details.

Low-Medium risk.
IC Markets MT4
Account number: 10307003
Investor PW: lGdMaRe6
Server: Demo:01
(Not FIFO compliant)

Valid and Invalid Complaints.
There are a few things that can pop up in copy trading. I am not a n00b when it comes to this, so I can somewhat forecast what these will be. I can kinda predict what sort of comments there may be. Some of these are valid points that if you raise I should (and will) reply to. Some are things outside of the scope of things I can influence, and as such, there is no point in me replying to. I will just cover them all here the one time.

Valid complains are if I do something dumb or dramatically outside of the strategy I have laid out here. won't do these, if I do, you can pitchfork ----E

Examples;

“Oi, idiot! You opened a trade randomly on a news spike. I got slipped 20 pips and it was a shit entry”.
Perfectly valid complaint.

“Why did you open a trade during swaps hours when the spread was 30 pips?”
Also valid.

“You left huge trades open running into the weekend and now I have serious gap paranoia!”
Definitely valid.

These are examples of me doing dumb stuff. If I do dumb stuff, it is fair enough people say things amounting to “Yo, that was dumb stuff”.

Invalid Complains;

“You bought EURUSD when it was clearly a sell!!!!”
Okay … you sell. No-one is asking you to copy my trades. I am not trading your strategy. Different positions make a market.

“You opened a position too big and I lost X%”.
No. Na uh. You copied a position too big. If you are using a trade copier, you can set maximum risk. If you neglect to do this, you are taking 100% risk. You have no valid compliant for losing. The act of copying and setting the risk settings is you selecting your risk. I am not responsible for your risk. I accept absolutely no liability for any losses.
*Suggested fix. Refer to risk control in copy trading software

“You lost X trades in a row at X% so I lost too much”.
Nope. You copied. See above. Anything relating to losing too much in trades (placed in liquid/standard market conditions) is entirely you. I can lose my money. Only you can set it up so you can lose yours. I do not have access to your account. Only mine.
*Suggested fix. Refer to risk control in copy trading software

“Price keeps trading close to the pending limit orders but not filling. Your account shows profits, but mine is not getting them”.
This is brokerage. I have no control over this. I use a strategy that aims for precision, and that means a pip here and there in brokerage spreads can make a difference. I am trading to profit from my trading conditions. I do not know, so can not account for, yours.
* Suggested fix. Compare the spread on your broker with the spread on mine. Adjust your orders accordingly. Buy limit orders will need to move up a little. Sell limit orders should not need adjusted.

“I got stopped out right before the market turned, I have a loss but your account shows a profit”.
This is brokerage. I have no control over this. I use a strategy that aims for precision, and that means a pip here and there differences in brokerage spreads can make a difference. I am trading to profit from my trading conditions. I do not know, so can not account for, yours.
** Suggested fix. Compare the spread on your broker with the spread on mine. Adjust your orders accordingly. Stop losses on sell orders will need to move up a bit. Stops on buy orders will be fine.

“Your trade got stopped out right before the market turned, if it was one more pip in the stop, it would have been a winner!!!”
Yeah. This happens. This is where the “risk” part of “risk:reward” comes in.

“Price traded close to take profit, yours filled but mines never”.
This is brokerage. I have no control over this. I use a strategy that aims for precision, and that means a pip here and there differences in brokerage spreads can make a difference. I am trading to profit from my trading conditions. I do not know, so can not account for, yours.
(Side note, this should not be an issue since when my trade closes, it should ping your account to close, too. You might get a couple less pips).
*** Suggested fix. Compare the spread on your broker with the spread on mine. Adjust your orders accordingly. Take profits on buys will need to move up a bit. Sell take profits will be fine.

“My brokers spread jumped to 20 during the New York session so the open trade made a bigger loss than it should”.
Your broker might just suck if this happens. This is brokerage. I have no control over this. My trades are placed to profit from my brokerage conditions. I do not know, so can not account for yours. Also, if accounting for random spread spikes like this was something I had to do, this strategy would not be a thing. It only works with fair brokerage conditions.
*Suggested fix. Do a bit of Googling and find out if you have a horrific broker. If so, fix that! A good search phrase is; “(Broker name) FPA reviews”.

“Price hit the stop loss but was going really fast and my stop got slipped X pips”.
This is brokerage. I have no control over this. I use a strategy that aims for precision, and that means a pip here and there differences in brokerage spreads can make a difference. I am trading to profit from my trading conditions. I do not know, so can not account for, yours.
If my trade also got slipped on the stop, I was slipped using ECN conditions with excellent execution; sometimes slips just happen. I am doing the most I can to prevent them, but it is a fact of liquidity that sometimes we get slipped (slippage can also work in our favor, paying us more than the take profit would have been).

“Orders you placed failed to execute on my account because they were too large”.
This is brokerage. I have no control over this. Margin requirements vary. I have 1:500 leverage available. I will not always be using it, but I can. If you can’t, this will make a difference.

“Your account is making profits trading things my broker does not have”
I have a full range of assets to trade with the broker I use. Included Forex, indices, commodities and cryptocurrencies. I may or may not use the extent of these options. I can not account for your brokerage conditions.

I think I have covered most of the common ones here. There are some general rules of thumb, though. Basically, if I do something that is dumb and would have a high probability of losing on any broker traded on, this is a valid complain.

Anything that pertains to risk taken in standard trading conditions is under your control.

Also, anything at all that pertains to brokerage variance there is nothing I can do, other than fully brief you on what to expect up-front. Since I am taking the time to do this, I won’t be a punchbag for anything that happens later pertaining to this.

I am not using an elitist broker. You don’t need $50,000 to open an account, it is only $200. It is accessible to most people - brokerage conditions akin to what I am using are absolutely available to anyone in the UK/Europe/Asia (North America, I am not so up on, so can’t say). With the broker I use, and with others. If you do not take the time to make sure you are trading with a good broker, there is nothing I can do about how that affects your trades.

I am using an A book broker, if you are using B book; it will almost certainly be worse results. You have bad costs. You are essentially buying from reseller and paying a mark-up. (A/B book AKA ECN/Market maker; learn about this here). My EURUSD spread will typically be 0.02 pips or so, if yours is 1 pip, this is a huge difference.
These are typical spreads I am working on.

https://preview.redd.it/yc2c4jfpab721.png?width=597&format=png&auto=webp&s=c377686b2485e13171318c9861f42faf325437e1


Check the full range of spreads on Forex, commodities, indices and crypto.

Please understand I want nothing from you if you benefit from this, but I am also due you nothing if you lose. My only term of offering this is that people do not moan at me if they lose money.

I have been fully upfront saying this is geared towards higher risk. I have provided information and tools for you to take control over this. If I do lose people’s money and I know that, I honestly will feel a bit sad about it. However, if you complain about it, all I will say is “I told you that might happen”, because, I am telling you that might happen.

Make clear headed assessments of how much money you can afford to risk, and use these when making your decisions. They are yours to make, and not my responsibility.

Update.

Crazy Kelly Compounding: $100 - $11,000 in 6 Trades.

$100 to $11,000 in 6 trades? Is it a scam? Is it a gamble? … No, it’s maths.

Common sense risk disclaimer: Don’t be a dick! Don’t risk money you can’t afford to lose. Do not risk money doing these things until you can show a regular profit on low risk.
Let’s talk about Crazy Kelly Compounding (CKC). Kelly criterion is a method for selecting optimal bet sizes if the odds and win rate are known (in other words, once you have worked out how to create and assess your edge). You can Google to learn about it in detail. The formula for Kelly criterion is;
((odds-1) * (percentage estimate)) - (1-percent estimate) / (odds-1) X 100
Now let’s say you can filter down a strategy to have a 80% win rate. It trades very rarely, but it had a very high success rate when it does. Let’s say you get 1:2 RR on that trade. Kelly would give you an optimum bet size of about 60% here. So if you win, you win 120%. Losing three trades in a row will bust you. You can still recover from anything less than that, fairly easily with a couple winning trades.
This is where CKC comes in. What if you could string some of these wins together, compounding the gains (so you were risking 60% each time)? What if you could pull off 6 trades in a row doing this?
Here is the math;

https://preview.redd.it/u3u6teqd7c721.png?width=606&format=png&auto=webp&s=3b958747b37b68ec2a769a8368b5cbebfe0e97ff
This shows years, substitute years for trades. 6 trades returns $11,338! This can be done. The question really is if you are able to dial in good enough entries, filter out enough sub-par trades and have the guts to pull the trigger when the time is right. Obviously you need to be willing to take the hit, obviously that hit gets bigger each time you go for it, but the reward to risk ratio is pretty decent if you can afford to lose the money.
We could maybe set something up to do this on cent brokers. So people can do it literally risking a couple dollars. I’d have to check to see if there was suitable spreads etc offered on them, though. They can be kinda icky.
Now listen, I am serious … don’t be a dick. Don’t rush out next week trying to retire by the weekend. What I am showing you is the EXTRA rewards that come with being able to produce good solid results and being able to section off some money for high risk “all or nothing” attempts; using your proven strategies.
I am not saying anyone can open 6 trades and make $11,000 … that is rather improbable. What I am saying is once you can get the strategy side right, and you can know your numbers; then you can use the numbers to see where the limits actually are, how fast your strategy can really go.
This CKC concept is not intended to inspire you to be reckless in trading, it is intended to inspire you to put focus on learning the core skills I am telling you that are behind being able to do this.
submitted by inweedwetrust to Forex [link] [comments]

Shorting Noobs - Tweaks, Improvements and Parabolic Results

Shorting Noobs - Tweaks, Improvements and Parabolic Results
Part One

I made some tweaks and further improvements to the filters to determine the ideal times to look for positions. These produced parabolic results.

https://preview.redd.it/8qhmv1nn3ud31.png?width=918&format=png&auto=webp&s=461e1e91006e701063ede1c0da6ba943afba7a94
I know a lot of systems pick up false breakouts, and quick corrections against them take out the stops. So I am interested in finding areas where people join the trend at the wrong time. Similarly I know there is a tendency for them to try to re-join the trend too early. Then think the market is reversing just before it enters into the real trend move. I am looking for ways to make full benefit of these. From the short side point of view, these are the best trades for the master accounts to take. They produce good risk:reward trades with an expected profitable win rate (in my analysis).

The retracement ones are easier to pinpoint. When people sell too early in corrections they are usually doing it based on price action and confirmation patterns. These usually come from the 50% fib area. So when people start to load into positions after a bounce from the 50% fib with targets for a new breakout and stops in the 60% area, these are great trades to take the other side of. A lot of the time these trades are spiked out. From the 61.8% fib level there is a higher chance of the trend continuing. Here there's usually price action that will scare short term traders out of their trend trades and make them reverse on the market. Reversing on a trending market at the 61.8% fib using the common rules for taking profit and stopping loss is a bad bet. I'm more than willing to bet someone doing that a lot will lose money.
I know there are people who think fibs are useless. I'm not here to debate with you, I am just telling you tweaks I have made and my rational for them.

I also know a lot of short term traders give away their money with the "1,000 small cuts" style when the market uses irregular ranges. Irregular ranges tend to form after there has been a strong breakout move. Price holds itself between certain levels and makes a lot of false breakout sort of moves in that range. I know these are hard areas to trade if you're looking at what is happening now, rather than pre-prepare for how to trade these. So when we enter conditions like that I want to do two things. One, I want to get into trades on the short term small chart false breakouts. These will usually whipsaw people trading them unknowing of the broader market context. Secondly, I expect when there's been a strong breakout and price forming irregular ranges (to explain this next, I just means it's not a nice zig zag range that is predictable) to see there being another breakout of this level.
A lot of strategies lose in this period (even many winning ones). In this irregular range they pick up reversal positions and stops losses go where the market would make a new breakout. So when we're in an up-trend and there is this sort of action, I'm interested in accumulating buys at the bottom of the range. To put it another way, those who get into false reversals at bad times. When strategies collect these in the ranging periods with their stops at the breakout level, I'm more willing to accept more positions against this.
See real time build up of positions on AUDUSD. You can also see in this how I've profited from the false breakouts in this pattern (green lines are profitable trades)
https://preview.redd.it/2qz2f04d3ud31.png?width=1315&format=png&auto=webp&s=8bee9cda085f5b95da2b4238d59250136f645912
Update after AUDUSD swings completed. https://www.reddit.com/Forex/comments/cks8q1/shorting_noobs_problems_proofs_and_fine_tuning/
For more detailed views of the results here are some breakdowns of the overview (which is posted near the top)


Overview


Yesterday intraday


Today
submitted by whatthefx to Forex [link] [comments]

Shorting Noobs - Common Trend Following Mistakes I'm Trading Against.

Shorting Noobs - Common Trend Following Mistakes I'm Trading Against.
Part [1] [2] [3]

Not much in terms of adjustments to add from previous post. I'm going to implement all risk adjustments at the weekend. In the meantime I've used some manual hedging to prevent from over exposure.
In this post I'll talk more about the ideal trades I am looking for. The mistakes people make at these areas, and how to build forward looking trade plans so you are less likely to find yourself caught in one of these market traps. I do consider these to be traps. I think price routinely moves in ways that induce market participants to take losing positions. I think this is done in algorithmic fashion and this means it leaves clues in forms of recurring ways laying traps.
This is just an opinion. I don't know.

First we will examine the classic structure of a trend. All examples will use a downtrend.

Basic Recurring Trend Structure:

Basic Trend Structure

Most of you will have seen this before, and probably recognise it as Elliot Wave theory (EWT). Whether or not you think EWT is valid or not, there are some things I think all of us can agree on. That is for the market to be in a downtrend, it has to keep making new lows. If it doesn't, it's not in a downtrend anymore. You'll also probably agree there are retraces in moves. That not often are new lows consistently made without any retrace. In a broad sense, this is all EWT is describing, which makes it noteworthy in good trending conditions.

Here are the points where most mistakes are made by traders in EWT cycles.


Trend Best/Worst Entries

All areas marked off in orange are places where it's easy to make mistakes.

Looking closer, this is what the more detailed price action on these sorts of moves tend to look like on lower timeframes.


Detailed Best/Worst Entries

Brown boxes are where buying mistakes are made. Purple circles are where selling mistakes are made.
We'll look a bit closer at what the specific mistakes are usually based on (conventional technical analysis theories) soon. First here is an example of this on a real AUDUSD chart.


AUDUSD Example Chart
This is a 45 minute chart, so the swings are not as detailed as the ones I've drawn (mine are more like 15 min), but you should be able to see how this concept can be transferred over onto a real chart. All of us who have been trading for a while know there are times we have made these mistakes. Everyone has ended up selling the bottom pip, or getting stopped out right before it reversed. Many of these times (in a trending market) fit into these areas.
This is not just curve fitting. Using rules to help to describe these conditions to pick the best trades and trading against the trades strategy providers offer, I picked up these trades. This was not perfect, what I'm doing needs a lot of work.

AUDUSD Trade

Here we can see a couple few of the mistakes. The green lines are profits and orange lines are losses. Here shorting these mistakes has done quite well on the spike out low. It's hard to see, but it also got a lot of good buys at the low. There are some losses at the high, but there is a far larger position accumulated around the mistake level.

AUDUSD Result
See previous analysis on these trades in [2] [3]
A big trend leg followed this build up of positions and hit take profits where stops were set under the low. This is where people start to sell, but this is also usually a mistake to sell immediately after this breakout.

The types of mistakes made are due to a handful of concepts. Here I've numbered them.

Mistake Types
Rules/Rational people have in mind making these mistakes.

1 - Breakout/new high relative to recent leg / stops above previous high on sell/ previous low on buy.
2 - Single candle price action mistake.
3 - Breakout trading rushing in / stops go under recent supports/ over recent resistance.
4 - Break and retest.
5 - Deep correction.

Everything listed above has the potential to be very useful and valid in a technical analysis based strategy. However, in some contexts they are literally the very worst thing you can do. That's the thing about trading, you can do the same thing at different times and get wildly different results. What I'm trying to do here is not find people who lose every trade (I want them to win overall, actually. So I can keep copying them). I just want to work out ways to bet against mistakes they are likely to make. I think people will make these mistakes more reliably than an automated system will pick up trades.
I should add that most of these areas the mistakes happen at will be hit with a lot of velocity. This I think is what triggers the mistakes from so many impulsive traders. The market will amble along in a slow non-threatening / uninteresting sort of way, then suddenly all in a rush make these moves that imply something BIG is happening in a certain direction, when actually it's just about to move against these very positions if you take them. Velocity is one of my key filters.

Let's talk about the end of the two leg correction, this is one of the places I think most of the money is made and lost. At this point in an EWT cycle, the market is gearing up to enter it's strongest move. The best move to trade, and the smart market is going to need to get people on the wrong side. This is usually achieved with three things. One, the market makes it's first false reversal from a 50% retrace, and then moves with a lot of velocity into the 61.8% fib (briefly described in [2]). Then there's a second false breakout with price trading a little over the 61.8%, followed by a price crash into new lows.
The interesting thing about this move is if you speak to anyone with any sort of interest in EWT, they will tell you this move often completes with a news spike. There is positive news, the market moves quickly in the direction it "should" and then quickly makes a rapid reversal. Sometimes the move on the news makes absolutely no sense what-so-ever fundamentally. but does strike these areas.
Here is the Brexit chart.
Brexit trend continuation from 61.8% spike out pattern

Let's go further back.

Scotland Vote High
Here is where GBP made it's high point. This was after the fantastic fundamental news (apparently) that Scotland was staying in the UK. Price shot up, then began to heavily downtrend. I've marked in the start to the previous swing with a line, if you check these fibs you'll see it fits with the mistake. We are now in the part of cycle where GBP is aggressive pulling away from the range where the false reversals happened. This is punishing those who bought in this range, and we should expect to see it end in a violent spike down. Remember the people who thought buying Sterling after Brexit was free money? Nah uh.
This happens a lot. When it happens I see people trying to explain it with all sorts of theories. Usually involving the saying "priced in already". People often refer to these in aloof and vague ways, as if there was no way we could have ever known, and it's certainly not worth trying to forecast these sorts of things ... but next time you see this, have a quick check and see if we happened to be in a correction that spiked out a 50% high and reversed around 61.8%. It is wiser to look at what happened than take wild guesses as to why. I am not saying that it always it, nor am I saying it works like magic. I'm just saying it can be quantified. When someone says, "Well you see it was not what was said, or the number, but what was inferred ...", really means nothing. It's an opinion. We're better to look for things we can test, in my view at least.

So, let me talk you through the mental mindset of people when they're making these mistakes. I'm going to use this big Sterling chart, so this will also be a bit of a price forecast.


Mistakes Thinking Patterns.
1 - Price has been going up strongly, it's retraced and there is a single candle PA buy signal. Sets people up to take a horrible trade.
2 - Price has been falling hard and made yet another breakout, it's an easy sell ...
3 - This has fell too far, it's a reversal now. Look how strong it is.
4 - This is a strong breakout and this must be the start of a bigger move.
5 - Wow, it's broke the lows and look how hard it's falling, big sell time.

I think we will see stage 5 complete around 1.190. I think we may be due a fast move into this. Maybe in the coming week or two. It would be typical of the spike nature of end of this sort of move that this will be a single candle of over 150 pips that fills this. Being and holding GBPUSD shorts targeting 1.196 seems a great idea to me.

These five mistakes, made at these handful of areas are the ones I wanting to trade against, and if you'd like to be a profitable trader, are the places you should be looking for entries.
submitted by whatthefx to Forex [link] [comments]

GBPJPY Trend Invalidation Signals and Contingency Plans

GBPJPY Trend Invalidation Signals and Contingency Plans
Took multiple losses on GBPJPY as it ran through all the trend continuation setups, and the persistence of how it has done this move is something that gives us reason to re-assess trade plans, and be diligent on risks as well as opportunities the conditions we are now in may present.

I feel like I've seen this movie before. Usually when getting squeezed in a trend continuation, there are a few hits you have to take and then there is a big pay off. As a general rule, the better the move will be the harder it is to position for. So early losses on this were all within the acceptable margin of error in this strategy (I think I also made setup errors, which was bad. I can do better on that). After we ran some more setups (that looked fully valid at time of execution), I noped out. Stopped selling, and waited to see what happened.

Last time I remember being on the wrong side of such a fierce move of this form on GBPJPY was similar. Done well shorting, scalped some buys at a support, then reversed into the "correction" - and it went parabolic against me. I remember this well, because in the coming week there were news reports of the GBP having it's best day/week in a yeadecade (I forget specifics, but GBP was in the news for the rally). In the week after that, the high was made .... because that was when Brexit happened.

What happened there, from a charting perspective, is we went into a 2 week corrective cycle and then started another impulsive wave. If this happens we may see something spectacular in GBPJPY in the near term. This may feature a record breaking rally (or at least strong one) into 145, and even 155 (current price 130). From there, we may start a new trend taking the market into the large chart forecasts of 89 and 61.

I can retire if that happens. Absolutely. I'm going to plan, with various contingencies, for something like that possibly happening. In this post I''ll show what warnings signs we got over the last days as sellers. Where our main dangers will be as buyers. The levels as which we can be more sure buyers have won out in the short term, and also where the possible spikes low could come and how we'd trade them / what we'd do next.

I'll use MT4 charting for this analysis, since it will require a lot of different fibs and patterns assessment, I find fibs on MT4 quicker to work with than cTrader.

The Big Gartley Pattern


So the first thing we want to establish is where the buyers are coming from. Double bottom is accurate, but a bit vague. If we look closer, we can see the daily chart pinging off the 61.8 and 76 fib levels. This would be consistent with a Gartley pattern, and this would be a bullish reversal pattern (If successful). We have a couple probable scenarios here. One is a big break and move lower, and the other is a persistent move up in a small time frame trending chart form.

https://preview.redd.it/ycjwj3bsxmk31.png?width=806&format=png&auto=webp&s=94198bcff8cdf3e9b4cae306496bd91b5477a7f0
Let's look closer and see what the last days of trading have suggested to us about this.
Here is the 1 hour chart around the 76 level.
https://preview.redd.it/1c31uqv4qmk31.png?width=809&format=png&auto=webp&s=47df97d3f4f31238bacbb20282f8495399e01527
We've possibly formed the start of a second trend leg in the recent move up. Our best move here would be wait for a dip, buy into that and then run the trend upwards. We should see more strong moves like today, and these should be in nice structured form giving us easy entries and exits. This would be a good scenario for trading.
If a spike out is to form from this level, we'd now have it in a clear butterfly pattern. So we'd look for a 1.61 extension of this swing giving us a projected low of 125 area. This would be a harder move to trade. We either have to keep selling into the resistance levels and risk multiple small losses, or wait for momentum downwards and use breakout strategies. I feel method one has failed this week. We can perhaps look more at method two in a close under 128 (which will not happen if we are to trend).

https://preview.redd.it/djz31dxdrmk31.png?width=814&format=png&auto=webp&s=ce05f051a785177e7598e8c4f430224183366013
As buyers, the possibility of this take out low move is our main danger. We have to be aware this can happen and it will be a fast move if it does. Risk control is important.

Bullish Scenarios

For now I am going to work on trade plans for if price remains above 128.50 and indicates bullish momentum. I want to work on targets and then reversal areas.

When we use the analysis above and consider we may be entering into big corrective leg, we can consider that this might be a 'ping swing' like move.

https://preview.redd.it/s9fyuyhmsmk31.png?width=813&format=png&auto=webp&s=8aa69ac8b99bbd3874593a60fcf6e76b930be911
Remember the main characteristics of a ping swing. It's very strong. The move is parabolic. There's a spike out of major levels, and then there is an impulse leg.
Weigh that against the price action I described the last time I seen the same setup on GBBPJPY running into Brexit. The market followed that same template of price movements, and then came down in spectacular fashion.
This is where our main opportunity is, and this is where it seem the smart way to be betting is at this time. If the lows made here are taken out, we can look for positions around 125 to load up for this (a spike out and rally is still valid).
In the immediate term, we can just buy dips. Use tight stops and get high RR if it runs up, have very small losses to the downside. A correction from 130.20 to 128.50 gives us a great buying opportunity to get started in this move (buying over 130 but under 130.60 I think is a bad trade. Better to wait)
If we can establish a good buy position and see a ping swing move (which would be 2,000 pips - and GBPJPY can do this without many pullbacks, it's wild) the profit potential on this is enormous. Very small risks can be taken for extreme profits on the other end. If we do this and make good profits in the run up to that, we can then use a portion of these profits to position aggressively on the 61.8 spike out, and maybe have big positions in a decade long breakout to the downside in GBPJPY.
Whether or not there is a spike out low, when buying our first target is 145.00. This is either buying from 128.50 or 125 if that trade does not work out.
It would be very dangerous to sell if there is a spike out low into 125. Selling here could be brutal in the whip against you (as could selling in the leg we have but not getting out quick). For some perspective on this, GBPJPY went from 145 to 160 in only a couple strong trading days the last time we had conditions similar to this. The possibility of this, makes it a bad time to be a seller - horrible time to be a stubborn one.

Wrap up.

No buys 130 - 130.50. Possible buys if there is a break of this.
Sells possible in this area, but risky. Not great RR. I'd not bother.
Buy level 1 - 128.50. 143 could be swing target here.
128 major bear break area. Danger of fast move here. Cut buys.
125 if met in spike, big buying area. Target 143 and stop 123 (tighter with price action).
145 first major upside resis. If we break this, 155.
Absolutely no selling into parabolic moves on GBPJPY at levels not mentioned here, isn't worth it.
submitted by whatthefx to u/whatthefx [link] [comments]

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