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  #37601  
Old Jul 15, 2009 9:05pm
joelcf's Avatar
My gun control is a steady hand.
 
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Default risk:reward

Quote:
Originally Posted by mbqb11 View Post
The myth that you have to go for 1:1 or 1:2 risk to reward, is nothing more then a forex "slogan". It is whatever works for you.
Alot of the new traders in this thread seem to take the 'you need 1:1!@#' and run with it. And it isnt really true. and, since it has bugged me for a while and I am waiting for my coffee...

<semi-offtopic rant>

I blame Van Tharp for this one. Well, actually, people who read Van Tharp but didnt really understand what he was trying to say, and then tried 'teaching' forums how to 'manage risk'.

The problem with this is that the version of Van Tharp's stuff you see parroted in forums is basically just a dumbed down version of expected value calculation.

The only time you need a R:R of greater than 1:1 is if you are doing a coinflip entry.

EV = (probability of success*profit) + (probability of failure*loss)

Obviously, the probability of success (s) and the probability of not success have to equal 1. So, assuming you have a 1:1 risk to reward (ie your risk equals your return), then you dont need PA or anything. Keeping in mind that

EV = (0.5 * r) + (0.5 * -r) = (.5r) + (-.5r) = 0.. or breakeven. Theoretically, with a big enough account (to handle variance), you could flip a coin on every 5 minute bar and still profit, as long as you had a TP which was 1 pip above your stoploss.

But this is a dumbass way of trading.

The entire point of everything James is teaching us is to find good entries, more than a coinflip. So, conservatively, lets say our A++++ trade gives us a 75% probability of being right.

EV = (.75 * r) + (0.25 * -r) = 0.5r with 1:1.

But we could even go with a stop of double our reward/takeprofit level.

EV = (0.75 * r) + (0.25 * -2r) = 0.25r

And that is ignoring the fact that we can manage losing trades, rather than take a full bar loss. Or that our profit target is likely a minimum profit we expect to see... often, price will keep heading our direction. Or that 75% probability is conservative for an awesome setup.

There are problems, obviously. You cant really put an exact percentage on the probability of success. But you can ballpark it by looking for the best setups, how they have reacted before, etc.

Any more than this, and you start getting into risk modelling. Splitting out the chance is will go for 10 pips vs 100 pips vs 1000pips to construct a distribution of returns, the variance you expect in said distribution, etc. And it is entirely unnecesary for what we are talking. Why complicate things when you dont need to?

My entire point is what Mike said in one sentence. You really dont need a specific r:r ratio to enter a trade if you have a high chance of being right. And, unless the potential reward is HUGE, why are you taking shitty low probability entries?

Just concentrate on getting the trade right, and the dollars will look after themselves.

This stuff is easy. And obvious. But people dont bother thinking about it, they just hear from the interwebs that they needsome magical special r:r ratio and run with it.

It is all about EV, baby.

</rant>

Quote:
Originally Posted by mbqb11 View Post
Also as far as the risk to reward, that topic has been beaten to death so much I am not going to go into it more then this.
*beats it to death, cornfield-in-Casino style*

Last edited by joelcf, Jul 15, 2009 9:37pm Reason: clarification.
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  #37603  
Old Jul 15, 2009 9:13pm
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Default

Quote:
Originally Posted by stoli7188 View Post
*I am not trying to continue this discussion much further but I wanted to post my views on some of the recent postings in regards to growing an account.*
Oh man. This was the next thing on my list to yell at people about.

Stop making compounding spreadsheets. You are fooling yourself. You cant just assume that every trade goes you way, which is exatly what your silly sheet is doing. If you get stopped out of one trade for your 2%, then hit your TP with your next 2%, you are not back to breakeven.

Some people in this thread have completely unrealistic expectations. Thinking big is awesome. Everyone should do it. But unrealistic expectations will only end up blowing up your account. You arent trading your $150 account into $1m, regardless of what your sheet tells you.

The whole problem with the 'i will just increase my trade size up to...58% of my account' is that you dont take into account variance. Some trades WILL go against you. The bigger your risk, the bigger the hit to your account. Compounding works BOTH ways.

There are strong technical reasons behind the 2% rule. It has to do with 'risk of ruin' calculations, which are completely non-trivial. It is the level that stops you blowing up your account and having to start from scratch. Increasing your risk from 2% to 4% dramatically changes your risk of ruin. And you dont want that.

The problem isnt that your goal of growing your account is bad. The problem is that your $200 account is massively undercapitalised for the trades you want to take.

growl.

Quote:
Originally Posted by stoli7188
PS - went skydiving for the second time today ---- awesome.
You are braver than me. I went once (over the north shore of Oahu!) and will never, ever go again.

I dont think *anyone* in history has ever said more swear words in sixty seconds than I did that day!

It was an absolutely amazing experience though

Last edited by joelcf, Jul 15, 2009 9:22pm Reason: couldnt. stop. myself. aargh!
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  #37610  
Old Jul 15, 2009 10:20pm
joelcf's Avatar
My gun control is a steady hand.
 
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Default

Quote:
Originally Posted by batesmotel View Post
If you have a great setup and your SL is 150 pips but your target is only 100 pips...that is totally cool if your setup is generally 80% accurate!!

I thought that I was thinking the unthinkable...committing the unforgivable sin by targeting less than 1:1.

Anyways, please correct me if I've mis-interpreted you explanation.
No, got it perfectly.

.8*100 - .2*150 = 80 - 30 = 50... so, based just off this, you can expect to make 50 pips on average every time you take this setup.

So you might do it ten times, get 8 wins (800 pips) and 2 losses (300 pips).... pretty sure you will be happy you didnt stick to the 'law' of always needing 1:1

and that is assuming you only get to your TP and take your profit every time. You could just let it run through your 100 pip target and then trail a stop.

Half the time, it comes back.
Of the ones that dont, 75% go for another 50 pips and then end up getting stopped out. And the tiny 10% left get you a 1000 pip runner.

[(0.4 * 100) + (0.3* 150) + (0.1* 1000)] - (0.2*150)
= [40 + 45 + 100 ] - 30
= 185 - 30 = 155 pips average profit.

That is the real power of money management. Your risk is fixed, because your stop is set in stone. Your potential profit isnt.

(obviously, these are invented numbers and simplistic scenarios. dont trade your life savings based on this. etc)

edit: variance.

Obviously, just because a setup is 80% accurate, and you stand to make 50 pips on average everytime you take it DOESNT mean you can just go ahead and put 50% of your account on it. It might work 80% of the time, but that is an average - and based on the long term view. It doesnt mean it will work 4 times out of EVERY 5 times you see it. It could fail twenty times in a row, and then be successful the next eighty times.

Over the complete 100 trials, this is the 80% you expect... but it is going to suck if you went and put 50% of your account on the first twenty trades

(broadly, this kind of scenario is where the 2% rule and risk of ruin calculations come from)

Last edited by joelcf, Jul 15, 2009 10:31pm
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  #37621  
Old Jul 15, 2009 11:14pm
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Default

Quote:
Originally Posted by StoragePro View Post
Second - although we are all different, the basics we discuss here tend toward universal applicability. There is a right way to get started.
This should be in the first post. Everyone who has just started trading but thinks they can 'improve' on the rules set out by James in the first post to use the magic of compounding to make a million/billion/batmanillion dollars in x months, if only they use a little more risk... you are wrong.

Are you a better trader than James? Know more about forex? Richer? More experienced? No. You arent. So shutup and stick to 1-3% like you are told.

(note: this isnt meant to be harsh. questioning things is good, thinking about things for yourself is very good... but thinking you know better than what all the experienced guys are telling you is not.)

Quote:
Originally Posted by batesmotel View Post
Very interesting...can you recommend a book that I can look for on this?
Depends whether you want a finance textbook or not

Van Tharp does talk about it in his books - he touches on it in Trade Your Way to Financial Freedom,but really doesnt go into detail. He is too busy having a hardon for trend following traders/systems

I have only briefly skimmed this one, but he seems to cover very indepth in The Definitive Guide to Position Sizing. Looking over it now, he goes into alot of advanced concepts (calculating the expectancy of your system, mean and standard deviaiton of your R multiples, etc), so I suggest it would probably have what you want - but I would definitely read it first though, pretty sure it is fairly pricey.

Personally, I am not a huge fan of his writing. The ideas are there, but they are way too drawn out, and wrapped up in a bunch of cross promotion of his other products/seminars/candy bars/etc.

Van Tharp can only dream of teaching money management as well as Fijitrader does in his section on the pf. Highly recommended*


(* i am in no way connected to the pf, aside from giving James and Mike $169 AUD extra beer money for the last two months.. i know they are kinda against promoting it in the thread, but there is some great info distilled in there and it helped me a ton.)

Last edited by joelcf, Jul 15, 2009 11:46pm
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  #37650  
Old Jul 16, 2009 12:40am
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Default

Quote:
Originally Posted by james16 View Post
what is quantitative logic?

is that fancy lingo for all the times i lay shaking in the floor in the fetal position after losing next months trailer payment?
A fancy term for statistical math.
As opposed to empirical observation, a fancy term for looking at stuff.

mainly for people who want to impress people

...you could do a market analysis of buy and sell orders at a level where a pinbar has formed, examine the velocity of buy/sell orders, control the results for any kind of extrodinary items/news/etc, dig into the market structure for any impediments which add friction which can skew the outputs and result in an imperfect market, and then try and construct a solution which will give some kind of probability distribution detailing the chance of the pinbar 'succeeding', based on the given inputs...

Or you could just look at the damn chart.

(kk007: price action analysis is far too complex and subjective to be solved quantitatively. Many have tried. That is why we take a qualitative approach and use our eyeballs. It is also why any attempts to program PA will probably not work out.)

Last edited by joelcf, Jul 16, 2009 12:54am
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  #37673  
Old Jul 16, 2009 1:30am
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My gun control is a steady hand.
 
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Default

Quote:
Originally Posted by japapatramta View Post
I'm really enjoing this thread - maybe it could be a little bit "tinier", but it is ok. Anyway, you're always talking about something like A+,A++, .. I guess that it will some kind of trade ranking. Where can I get the description for each rank?
It isnt a formal ranking system

A+ means good.
A+++ means gooder.
A++++++++++++++ means goodest.

The others are even more subjective!
B means im boredtrading
c means i should know better but am considering actin a fool.
d means i finished that bottle of single malt tonight and its shotgun time!
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  #37694  
Old Jul 16, 2009 3:18am
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Default

Quote:
Originally Posted by supremeChaos View Post
how about this one? gj & ej's little brother, $jpy
Think you mean big brother
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  #37724  
Old Jul 16, 2009 8:57am
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Default AUDJPY

Niceish pin forming on the AUDJPY 1h/4h.

AUDJPY 4H - 16/07/09 2300hrs
1h/4h pin (2d)
Nose to 75.85
Break at 75.13

Entry Target 74.95

Pros: Bouncing right off a PPZ on 1h and 4h, low risk

Cons: right into a round number, pin doesnt extend through the ppz, i just got home from a 12h day at work, then dinner where I ate almost a kilo of wagyu and i feel sick.

Potential roadblocks:
75.00 - round number
74.80 - s/r ppz (daily), 23.6 fib

74.50 - swing low
73.75 - PPZ, 38.2 fib
72.50ish - big ppz, 61.8 fib


Potential stops:
76.10: r=115- above pin nose, round number, ppz
...


to be honest, if it wasnt 11pm and after a longass day, I would consider playing this one for a short term bounce down to 74.80, stop to b/e and then trail as per above.

As it is, I probably couldnt be bothered staying up for the 50-100 pips on a B grade setup in traffic

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double con: I think AUDUSD looks tastier. Longer pin, roundtrip through ppz, less traffic.

And has a tighter spread, since it isnt a stupid cross.
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  #37728  
Old Jul 16, 2009 10:11am
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My gun control is a steady hand.
 
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Default AUDJPY

Quote:
Originally Posted by whitegoodman View Post
lucky nno work for me tomoz, boss has swine flu... ill take it, its off a nice area for me, then again I could be dead wrong
I'm out with 30 pip profit. Wall St is too schizo this morning for me to have any faith in the aussie breaking 80c...and stayin there. this one probably needs more trade management than i am willing to put in.

If it goes BEOB on the 4hr I might get back in.

This is also why I shouldnt trade the hourly. Or crosses >:/

Good luck!
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  #37810  
Old Jul 16, 2009 8:39pm
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Default

Quote:
Originally Posted by Jlr View Post
Eswap is right though, you can't draw a trendline simply from 2 points, if you did, every single pip move upward would be breaking some trendline you need at least 3 points
The way I see it, unless a trendline really smacks you in the face, I wont bother with it.

It needs to be really obvious. Some of the ones I see on charts here are a lil
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  #38696  
Old Jul 23, 2009 7:44pm
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Default USDCHF

The swissie is one of my favourite crosses. It is just so...schizophrenic.

Will it close as a big pin bouncing off daily support/resistance?
Will it stall, form an IB and consolidate for a while?
Will it just sit back, eat chocolate and make cuckoo clocks?

NO ONE KNOWS.

(if it does, and I decide to ignore the big proceeding bars and play it for a quick move, I would get my stop to BE quickly... if it can break the traffic around 1.0700, it should be good down to previous support at 1.0620ish... and if it gets through that, then I am going to be the one sitting back and eating chocolate in the alps...)

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*edit*
and not to get into the drama (I get enough of that from my girlfriend), but the comments about the PF being a money making exercise with little value just ring hollow for me.

I learned alot of stuff on the pf that isnt discussed in here (money management, why I tilt off a stack/1R sometimes). And learned alot about things that are discussed in here (like setups), but with ten times less noise than this thread accumulated from time to time.

Just being able to follow the senior member journals has been invaluable. Not to mention the videos/webinars that the guys post - watching Mike isolate good setups on a chart, and how he distinguishes them from junky ones... well, it is light years ahead looking at a static chart.

to be completely fair, if I had more time and could participate more, it would be twice as worthwhile. Reading the conversations between experienced traders and newbies with tonnes of questions, or following the beginner journals there and seeing the feedback that they get from the senior guys is great learning material.

The guys put alot of time into it. Why shouldnt they make a few dollars? I have seen people pay a hell of alot more for a hell of alot less.

And hey, I am an arrogant jerk who thinks they know everything - so if *I* think it is valuable...

quick version: James is the best source of account-building strategies to come out of Texas since Bonnie and Clyde. There is a reason he has so many fans.

Last edited by joelcf, Jul 23, 2009 8:00pm
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  #38708  
Old Jul 23, 2009 8:13pm
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Default

Quote:
Originally Posted by mbqb11 View Post
The 1.7 area has a pretty strong flip there. All that bunched up prior resistance should act as support, or at least give it a problem if it wants to eventually cut through.
Mike
You are very right, as always.

I was busy looking for any kind of big support on the daily chart that could cause problems, and somehow ignored the obvious ppz on the 4H and wrote it off as 'some traffic', heh.

Quote:
Originally Posted by StoragePro View Post
Sheesh. I'll have to watch how you trade that pair then, 'cuz I suck at that one.
I was doing a monthly review, and a touch over 75% of my profit came from USDCHF. Almost exclusively 4H pins.

AUDNZD, on the other hand... >:/

Quote:
Originally Posted by StoragePro View Post
Laphroaig. Gimme one of those - on the rocks. Love those Islay Malts! Smokey, Peaty or Briney. Islay Malts ---
I pretty much run on Laphroaig 15yo, Ardbeg 10yo, Talisker 10yo and Aberlour A'Bundah. Glad to know there are more people out there with my... problem
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  #38725  
Old Jul 23, 2009 9:15pm
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Default

Quote:
Originally Posted by tyler812 View Post
what is this like some kind of riddle or something???
That's not a riddle. This is a riddle:

What's brown, sticky and left behind on your lawn by a dog?

...

a stick
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  #38762  
Old Jul 23, 2009 11:58pm
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Default

Quote:
Originally Posted by marcelnyo View Post
speaking of which, I remember merlin the wizard had a system that provides 99% winning probability, check it out here
That thread is comedy gold...

...and also kinda sad, when you see just how many clueless people there are here that think they are going to somehow make a million dollars 'trading the forexes' with a simple system they read about on the interwebs - because it is SO easy.

Although they generally arent in this thread - too much work involved!

Makes you realise how all the forex scammers keep making money. Pump out a dodgy EA, claim 'supar-backtesting yeilds 99.99% accuracy of tradings!', cherry pick some charts for post hoc 'evidence' and let the paypal transfers roll in...

also: this is easily the best thing I have ever seen on FF.

Quote:
Originally Posted by Four Kids View Post
Because of the recent losing streak with this method ,I came up with a very very accurate filter, to weed out those bad trades. If you have any questions about how it works please ask, but I think it is self explanatory.
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Last edited by joelcf, Jul 24, 2009 12:09am
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  #38769  
Old Jul 24, 2009 1:30am
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Default Sugar

I'm papertrading some of the softs at the moment, just to get an idea of how they move and what works in those markets.

Sugar made a nice bounce off support today, with a good bullish(ish) bar. Normally, I would try and enter on a nice hard break of the high, or an intraday retrace and/or bounce from this support line... but what works here? Interesting one to watch.

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Last edited by joelcf, Jul 24, 2009 2:04am Reason: tpyos
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  #38774  
Old Jul 24, 2009 3:00am
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Quote:
Originally Posted by supremeChaos View Post
that is a simple upside breakout (based on previous bar) &/or a double/triple bar high breakout.
breakout trade. but seems to have no immediate resistance. hence, i wont use sugar in my coffee anymore lol (any chart on Coffee? )
It isnt looking good

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  #38776  
Old Jul 24, 2009 3:24am
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Quote:
Originally Posted by aarangio View Post
Hi ya Everyone,

Could someone please point out if i am correct on my stop losses and also my Buy/sell placements please as i see a few failure trades that I would like to be clear on that i was right in my thinking or if i was wrong..
There may be a few extras in there you think should be added or maybe i should have left out a few please point out to me..

thanks,
Adrian
Amatuer opinion, pretty sure the experienced guys will be able to expand...

(if you want really good feedback from Mike/James et al, you should probably explain what you saw in each setup so they can go through it)

1. Are you playing the break of the previous IB? Because, if so, you want your trade where the bar was broken, not at the bottom of the next bar. Either that, or it was a pretty good BEOB that never broke.

I dont see any other trade here, it is a double bar low but didnt even come close to making a higher close.

2. Break of an BUOB, pure bar looks good to me but this is a dodgy setup that needs to be at a shitton of confluence. I see is it heading straight into resistance and the MA, but it is also off some decent support at a swing low with divergence. Probably pass on it though.

3. I assume this one is a BUOB? With all the traffic at the top (a 'this is critical' situation), I would wait for it to break the resistance... which is kinda where your green line. Dangerous trade though - again, ranging market can kill you with these bars unless you are really good at trading them.

4. It looks kinda like a DBHLC *squints*, at a swing high. At least a kinda bearish bar. Didnt really break the lows by enough to have taken it, plus the low close was pretty suspect. Pass.

5. Nice BUOB off support and the MA. Again, didnt really break. Personally, I avoid these in consolidating markets, but maybe I am just a big girl.

6. I assume you meant this as a pin, but it wasnt really. Bottom broke the previous bar(s), nose wasnt too long, though it did bounce off resistance. Headed straight into major traffic. Even so, you would want to enter a lil below the break of the pin. Has some divergence goin on, but I only ever use that for confirmation of some PA (not as badass as rac..yet)

To be honest, I would rate 1 as a good inside bar break, and maybe a hard break on 2 above the MA. Maybe.

Too much ranging for my likin

*edit*
I'm bored, and all I have is MS paint...



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clockin much dollars on the first and fifteenth.

Last edited by joelcf, Jul 24, 2009 4:04am
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  #38790  
Old Jul 24, 2009 4:40am
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Quote:
Originally Posted by supremeChaos View Post
Thanks. is that a free chart software -- futureSource?

OMG. is that coffee chart going to go up or down? please advise me
yeah, web based charts - good for a sneaky chartcheck at work, and nice and quick (unlike the slowass quote.com ones).

http://www.futuresource.com/charts/premium.jsp

And I am heavily invested in that coffee chart.. at 4 triple lattes a day, i cant afford to see any bullish PA
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  #39099  
Old Jul 28, 2009 8:33am
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Default AUDJPY

buenas noches.

This is what I am watching at the moment.

Pro: top of range 8h pin bouncing off a decent resistance level - which is also the 50 retrace for the aussies huge decline last year (aka the 'joel cant afford to go to new york anymore' decline.. isnt shown on this chart, and im too lazy to reattach

con: goes straight into a strong PPZ

variance: wall st about to open which could cause the aussie to act a fool.

I will probably play a break of 78 and hold down to the PPZ and then watch it like a hawk. Or a kookaburra, as the case may be.

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  #39348  
Old Jul 29, 2009 10:58pm
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Default AUDJPY trade

Quote:
Originally Posted by joelcf View Post
buenas noches.

This is what I am watching at the moment.
This trade worked exactly like I expected, quite happy about it.

Entered on the 50% retrace of the pin, moved my stop to BE once it hit the first TP area, moved stop again to the top of the second PPZ when it broke through (since it was a huge PPZ that would either break hard or bounce and screw around).

It bounced, as expected, to stop me out at 77.12 for a ~150pip gain. It is now chopping around between the two PPZs, and I am happy to be done with it. Might reenter if it breaks the daily pin in a big way.

Not exciting per se - but the fact that I put together a trading plan for handling it with clearly defined stop and TP levels, and then stuck to it... well, it is an improvement from the time I would have

a) held on and let this one (eventually) go against me, or
b) at least stop me out at BE after I entered on the first break of the pin and then held it even after it bounced hard off the first PPZ

Pretty sure that Jim, Mike, James, Ryan, Mark and Ghous have all said that trade management is harder and more important than entry signals. So it is probably worth listening to

Thanks again to the senior crew here for making my trading a bit less sucky.

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  #39520  
Old Jul 30, 2009 8:52pm
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Default G/Ch

More fun and games with the swissie.

I know a chart was posted a few pages back, but what are the thoughts on the 4h GU pin?

Pro
Great location - almost a double top, pokes through one PPZ and just touches the next, then comes right back down
Nice looking bar - long nose, close at the base.. although it does have c > o, but I dont see that as a dealbreaker.

Con
Thats a pretty damn big bullish move on the daily it is fighting
Has stalled for a few girlish bars
Traffic below

Variance
Weekend coming up
(daily) divergence... The shape is weird, it looks divergent but technically we are making a lower high. I dont really use MACD that much, so dont really know. (although it is something I really want to do some work on learning, given the names around here who use it)

Tons of space below if it breaks on H4... could see more movement than a fat woman at a bake sale.

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  #39521  
Old Jul 30, 2009 8:59pm
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Originally Posted by benji533 View Post
Although it was a good trade IMO, can anyone here please share with me reasons why not entering such a trade? This time it was a winner...just want to improve my knowledge.

The reason of myself is the heavy traffic. That's also the reason I thought closing early. Umm...not swing highlow is another point...anything else?
Throw up a chart for everyone to look at
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  #39524  
Old Jul 30, 2009 9:47pm
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Originally Posted by benji533 View Post
Can't you see the chart? I have pasted it on the post.
Sorry, it wasnt showing up - see it now though.

I think it is a nice breakout trade, but it isnt really a j16 type trade. You have a break of a strong PPZ, but nothing else to support it - no real PA (unless there was something on a lower TF?).

There are some guys here that do alot of touch trading/blind entries - but I dont see any of them here right now.

Breakout trades are kinda dicey, because they fail way more than they succeed.

Nice trade management though, your exit is textbook stuff.
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  #39530  
Old Jul 30, 2009 10:50pm
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Originally Posted by mbqb11 View Post
Towards the more earlier stages of this thread James explains TBH, TBL or multiple bar highs/lows as breakout plays. I rarely trade these as pure breaks.
Oh, dont get me wrong, I know the big guy does trade linebreaks. I just meant that I've only ever seen him do it with some kind of confluence - a big round number, lower low / swing low, a string in a row, etc. My notes also tell me that they are almost always with the trend...

..not two interspersed non-matching touches of a ppz which has been violated multiple times in the middle of traffic in a ranging market

Maybe I worded my response badly, apologies if there was any confusion.
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  #39532  
Old Jul 30, 2009 10:58pm
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Originally Posted by mbqb11 View Post
Orderflow
This is exactly why this play works in a directional market. You are pretty much banking on there being an established trend with a built up orderflow, and then some big player (generally a corporate) needing to hedge an exposure at a particular number.

So the big order bounces the bars back off whatever particular number the corporate needs them at (generally a round number - not many treasurers are calling the dealing room and telling them they need Y200m @ 77.73862).

The break happens when the order is completely filled, and so the 'blockage' is removed, so to speak, and orders are now filled above that number. And so the established trend continues.

It is also why trying to play blind breakouts in a directionless market, or without multiple touches is an account killer. You are just going to get eaten up by the hedgies that put a big order just beyond the level where all the amatuers think there is a breakout trade, and fade their accounts into dust.

Of course, this leads to levelling, of sorts, where one big guy tries to fade the faders... and in the process, whipsaw the little guys to hell and back.

(sorry for the long post! ordeflow and market dynamics are just something that fascinates me... obviously you know all this stuff, but i notice not many new traders try to understand the why of PA.)
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  #39540  
Old Jul 31, 2009 12:38am
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Originally Posted by kk007 View Post
After my last attempt to use pinbar (http://www.forexfactory.com/showpost...ostcount=39216) two days ago. I have my second attempt and failed again today.

I like this one when I took it, in term of pinbar shape it is good. and in terms of position it piereced a PPZ and a clear trendline, unfortunately it failed.

It didn't hit my first take profit point at 16455, so it is a complete loss trade. I am doing demo trading.

May anyone suggest a lesson here.
*EDIT* hehe, what mike said ^^^

I think the main thing you could try in future is to look at your ppz as a zone, rather than a line - you expect trouble in that area, not at that specific level... and so you could plan your exit strategy accordingly.

If you look at the bars you are using for your ppz, notice how they dont really line up with where you have set your TP? They are in that general area.

Maybe something like this?
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When I see something like that, I generally like to move my stop to either BE (if the movement isnt big enough to care about), or to just above the zone so if it comes back, I get some drinking money and get to watch what happens to learn for next time.

Out of curiosity, what is the MA indicator you have on there with the different colours for positive/negative gradient? It is pretty cool looking.

Oh... and countdown to Supreme positing 'this is critical!' in 5...4...3...2...
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  #39547  
Old Jul 31, 2009 2:03am
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Originally Posted by kk007 View Post
If someone enter position randomly with R:R=3:1, he will get 75% profit target hit in the long run, without using any indicator.
No he wont.

This is entirely based on the shape of the return distribition of the instrument - mainly, its standard deviation, skewness and any kurtosis present.

Random walk models are based on a binomial distribution. It isnt a triangle.

Look at it simply: does 3x p(1 SD) = p (3 SD) in a normal distribtion? No.

Either you didnt pay enough attention in your quantitative math class, or you have been reading too much into Van Tharp.

(this isnt meant to sound condescending, and if it does I apologise. Without knowing your background, it is hard to know what level of technical detail is appropriate)
(and this is hugely off topic, but anyways.)

Quote:
Originally Posted by kk007 View Post
Also, if someone keep trading R:R=3:1, he will for sure lose if he cannot hit profit target for more than 75%. This is not nonsense. Is it? IMHO.
No, you are entirely right - he will have a negative expected value. But this entire thread is about high probability entries, stops and TP levels - not random entries. And definitely not price moving in a random walk.

Your problem here is that you are setting your TP based on your risk - making it a meaningless, arbitary number. You should be setting your TP based on where you think price will run into impediments.

If price movement after you enter was *truly* random, then yeah - you could set arbitary TPs based on your r:R. But the entire thing Jim and the guys are trying to show you is that it isnt - that you can use previous price action to predict possible price movement. Including where price might stall. Or reverse, take out your stop and lead you to losing your account.

Your issue isnt with discipline or reactions. It is a forrest:trees one.
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Last edited by joelcf, Jul 31, 2009 2:18am Reason: clarificamation.
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  #39553  
Old Jul 31, 2009 3:34am
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Originally Posted by kk007 View Post
Let me clarify about my TP setting, if the next trouble area (PPZ) is too close to the inward end of the pinbar, in compared to the length of the pinbar, I will see the risk is high in compared to the reward. In this case, I will give up the opportunity, so I don't set my TP out of air.
And that is exactly how you should trade.

But in this case, we were talking about you ignoring a bunch of bar highs and setting a TP further away to achieve a certain r:R. Which led to what happened, which is what you asked about. And what Mike said.

But feel free to ignore what everyone is telling you.

Quote:
Originally Posted by kk007 View Post
Finally, about this "If someone enter position randomly with R:R=3:1, he will get 75% profit target hit in the long run, without using any indicator." If it is not 75%, can you tell me what it will be with your quantitative math lessons that you have paid enough attention.
risk:Reward ratio doesnt directly affect the outcome like that. Increasing your risk relative to reward (or vice versa) just means that you allow more steps to be taken in the negative direction before you are stopped out.

Even taking 'over the long run' (dumbed down talk for the central limit theorem), it doesnt work like that. If you wanted, you could construct a return distribution, calculate the value of your stop in terms of standard deviations, and then determine how likely it is that you would hit your stop after each bar.

But even then it wouldnt really help, because price moments dont follow a random walk. Returns dont form a normal distribution. Price moment isnt a linear function.

So you would have to account for both of these. Which gets into advanced modelling, the 'drunken walk' theory and brownian motion, Wiener processes, continuous time finance and a hundred other offtopic things I am not going to clog up this thread with on a friday afternoon.

You are just overcomplicating things based on incorrect assumptions that you read somewhere, probably written by someone interested in selling books rather than the actual truth. But there are more than enough words there for you to google if you need to satisfy your curiosity, without dragging this thread even further into the wilderness.

Didnt some guy once say 'This stuff is dirt simple, folks'? Seems like a smart guy. I would listen to him.
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  #39555  
Old Jul 31, 2009 3:54am
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Originally Posted by kk007 View Post
I can tell you it would be 75% without going to distribution/complicated calculation.

Why?

The reason is such a random method cannot consistently make money or lose money (ignoring the spread), otherwise someone can make an EA out of it. And 75% is breakeven value.
Actually, that is just a simplistic view of the CAPM and Efficient Market Hypothesis. And it is an assumption that is required for the model to work, not a result of it. Your reasoning is backwards. And ignores a whole bunch of other assumptions that EMH requires, like normally distributed returns.

Funnily enough, every single investment bank arb desk disagrees with you, given they specialise in riskless profit by exploiting market inefficiencies.

Anyways, I am done with this discussion. Not only is it offtopic, but you clearly know better than everyone else *rolleyes*.

Oh, and it is 6pm and time to go to the pub.
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  #39799  
Old Aug 3, 2009 7:04pm
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Originally Posted by StoragePro View Post
I noticed on the thread from last night and early this morning a lot of "manufacturing trades" going on. I will not get specific, but you just cannot jump on every PB that floats by. Most of what I saw failed.
I didnt even open my charts yesterday (the conflluence of bank holiday and my annual bonus being paid meant i spent all day drunk off my ass on the harbour), and so was fairly alarmed when i opened them up this morning.

'Oh god! Look at all the pin bars i missed!'

'Wait a second... that one is right into a ppz. And that one sux, its barely a pin. And that one was always going to fail...'

Without James' talk on 'this is critical' and Mikes 'look for a+++++++++ setups!', I would have got killed. Probably the reason people are told to demo this stuff first.
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  #39805  
Old Aug 3, 2009 7:40pm
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Originally Posted by StoragePro View Post
Does anyone here get the feeling that Joel is faking - just a bit??

I mean - read his back posts. There is far too much substance in them for me to believe he is a green horn...
I just lurked this thread for a long, long time before joining the fray

Quote:
Originally Posted by jarroo View Post
Yeah I couldn't even pronounce some this suff let alone understand it.
hehe, fancy booklearnin' with little relevance to trading (in this context, anyway).

I just get a bit worried when someone posts junk like 'if you have 3:1 r:R, you will automagically hit your TP 75% of the time!' (and therefore everyone can be a breakeven - or better - trader without trying).

I dont really want to be responsible for someone losing their house because they think the internets taught them the magic MM trading secret. Even if it means an offtopic rant every now and then

Quote:
Originally Posted by jarroo View Post
Fess up you . . . worldly . . . . hedge fund . . . market guy.
lol, I wish. My job is far, far more boring. And way less lucrative
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  #39808  
Old Aug 3, 2009 7:49pm
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Originally Posted by alyehoud View Post
Since obviously all brokers use different times, am I at a disadvantage using one over the other, and more importantly, am I taking bigger risks trading one over the other - ie. the aforementioned PA?
Alot of guys here use a bunch of different brokers with different time offsets. Helps you get a better overall picture of the market, as well as giving you twice as many bars to trade.

I think SC might even have 5? (I could be making that up)

You arent really taking bigger risks using either one, unless they do something retarded like close daily candles in the middle of the London session. If you look at it at the most basic level, you are looking at the same information on both screens - PA setups on either are just as valid.

Quote:
Originally Posted by jarroo View Post
I thought you were (or wishing you were) Merlin. He knows all about that
trade modeling stuff.

Anyway, your lurking has paid off well.

Jim
I wish. I still have pretty much every post of Merlin's saved.

And thanks, much appreciated - I'd like to think I've progressed at least a little in the 1500 pages or so since I made my first j16 trade (a pin right into a massive PPZ/fib/round number for a spectacular full bar loss!).
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  #39819  
Old Aug 3, 2009 9:26pm
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Originally Posted by StoragePro View Post
I've read Tharp's stuff on RR - and it looks good on paper, but like everything outside of PRICE, it lags. It is a calculation of the past. It is just not possible to calculate forward - hence high probability PA at confluenced areas is what you need. .5R, 1R, 10R - what ever the market will cough up, I'll gladly take - except for the super tight crap.

MM (proper position sizing specifically) - it ain't rocket science - so simple to do and understand, and hoped for RR has NOTHING to do with it!
This should be a page 1 quote.

If only more people thought like that! Take good bars in good places, watch for trouble areas and let the money sort itself out.

Not that risk management isnt important - it just doesnt need to be overcomplicated like some people end up doing. My basic rule is 'dont act a fool'.

Risking 1000 pips for a 20 pip gain? Dumb.

Risking 50 for a trade that will almost certainly hit 30, probably hit 65 and possibly shoot off to 100+? Seems fine to me, even if some of the 'strict' interpretations of r:R would tell you its a bad trade.

Quote:
Originally Posted by StoragePro View Post
A posting or two you've made leads me to believe that you might know something about how/when banks move funds into the market. I'd love to see you explain a little of it as you can. Pretty please?
to be honest, forex isnt really my area - i am on the debt market side of things. But, from talking to guys who do that kind of stuff, it is pretty similar. This is probably going to be alot more basic than you are looking for, but if there is any interest in stuff I'd be happy to expand in the slow-thread-3am times (aka its midafternoon on a friday and i am braindead and bored ) So not sure how much use this will be...

Your institutional desks do two main things. They spend a ton of their time filling orders for their big clients - mostly manufacturers/importers/exporters who want to hedge the cost of their inputs and/or lock in the selling price of their outputs. If a miner is shipping 20m tons of copper to Japan every six months, they dont want to risk the exchange rate falling through the floor and cutting their profit margin in half. So they use a forward contract to hedge it out.

(not all companies do this, though... many run a floating book to try and capture foreign exchange gains. whether or not this is appropriate is a whole topic on its own.)

They are the ones who are largely responsible for your round numbers being so strong - they are likely to buy/sell forward at the nearest round number. They are also the kinds of orders that lead to things like the breakout trade mike was talking about the other day - if they want Y20m at 96.75, for instance, price is going to hit that 96.75 and bounce off it again and again until the order is completely filled. And after that, price can shoot straight through.

The other half of what the insto desks do will be hedging their own exposures. The US and Europe (largely London) are the best place for banks to borrow big sums of money - huge, liquid, efficient markets where they can borrow with a tight credit spread and in big volumes. So when an Aussie bank needs more than it can profitably borrow here, they head to London to borrow GBP, convert it to aussie dollars, and then hedge the future payments.

(in reality, they do a cross currency swap, but the effect is the same since they are just laying off both sides of the contract to counterparties who are then going to trade it into the market)

These types of transactions probably lead to the PPZ's you see - their clients (mostly mortgages) are going to be paying them in aussie dollars, but the bank owes someone in London a bunch of GBP. To protect themselves from movements in the exchange rate, they might lock in 10 future payments at x.. and so you will see big reactions off those numbers as the bank locks in a bit more of their future obligations when price hits their target.

Banks are super risk averse, so they dont like holding forex risk on their books - but the traders are given some discretion to trade (with tight risk management and oversight). So price wont exactly hit a number and reverse - but close to it.


Then you have your investment banks, who do a bunch of different stuff.

Obviously, alot of them have retail sides, so they will be processing orders for people like you and me. Some also do a significant amount of prop trading. Amusingly, alot of their trading (at least the guys I have talked to) is based on the same kind of things we do here. One guy I have beers with every now and then works on a forex desk, and trades nothing but pinbars and s/r levels. And drives an Aston Martin.

The other big thing they do is arbitrage trading. From what I understand, it is mostly triangular arbitrage and covered carry trades, but they also have a bunch of advanced algorithmic trading (sub-second high velocity stuff) that no one really understands.

Tri arb is pretty straightforward. Theoretically, and ignoring the spread, an Australian buying US dollars should pay the same amount whether he goes through AUDUSD, or swaps his aussie dollars for yen and then yen for US dollars.

So they look at (for instance) AUDJPY, AUDUSD and USDJPY, and as soon as they get a little out of line, stuff as much money as you can into the trade until they are back in line.

And, being investment banks, they then take this as far as possible, so have a bunch of algorithms constantly looking at every possible pairing and every possible path between currencies to see if they can make a pip on a trade - which isnt much to us, but when you can put $100m into a trade...

I guess the big effect that this is going to show on the chart is the mean reversion you see - as soon as price diverges too far from where it should be (which is based mostly on interest rate differentials, see below) you will see these guys throwing money at the crosses until the divergence disappears. This is also a big factor in why you see pullbacks and retraces.

The other big thing they get involved with is the covered carry trade. Guessing you already know all this stuff, but basically if you can borrow yen at 1% and invest in riskless NZD at 6%, then you can make a ton of money by borrowing yen, buying nzd at spot, investing in 6m gov notes and then swapping back to JPY to repay your loans.

Obviously, if NZDJPY moves during this 6m period, you could end up losing more money than you make, so most of these trades will be covered- they will just go into a forward contract to buy the right amount of yen to repay their loan when it is due. Again, big order at specific number -> PPZ.

This kind of trade also serves to make sure that markets dont get too far out of line with each other.

Some of the less risk averse types also do these trades uncovered, banking on the movement between currencies either being in their favour, or being smaller than the interest rate spread they are banking. They make alot more money when it works for them (hedging is expensive), but get wiped out on a regular basis when it doesnt. Usually they will just get their stops to BE though.

Again, the carry trade (and, more importantly, what it does to the charts) could be a topic in itself. Especially when you get into things like risk aversion (why does the Aussie drop when the S&P does?) and correlations with commodities and other currencies (aka, CDN + crude/NG). I believe Mark uses alot of these types of correlations in his voodoo pot.

The biggest players who are probably most responsible for making PA 'work' are the hedge funds. They run covered/uncovered carries, triangular arbitrage, but also do massive volumes of trading. If you see something pin off a 365EMA, a breakout fail and go back hard the other way or a DBHLC dive through a PPZ, it is probably a hedge fund guy looking to get himself a new yacht. They are also the guys responsible for the news trade kicking your ass every time.

In a way, the hedge guys are the 'smart money' that is bustin your stops. They know that a bunch of people trade MA crosses (and where their stops are going to be), they wait for an MA to cross and then take the other side of the trade, push through the stops and liquidate.

Unfortunately, since there are a huge number of funds out there with a rainbow of approaches, the only way to really take advantage of what they are going to do is to be on the trading desk of the investment bank that takes their orders

Lastly, I guess you have your central banks who buy/sell huge volumes of currency, depending on what kind of monetary system the country runs. Many countries actively manage their exchange rate with their major trading partners, leading to super strong areas of support and resistance. This is another huge topic on its own, but look at a chart of EURCHF to see what happens when a central bank wades into the market.

The Swiss and Japanese central banks are probably the most interventionist out there. They have some massive s/r levels that stick out like nothing else.

*edit*
Wow, that was quite a bit longer than I planned. Shouldnt have had those 4 coffees and started typing randomly
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  #39836  
Old Aug 4, 2009 12:39am
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Originally Posted by Jigsaw View Post

lmao. that's awesome.


Quote:
Originally Posted by Cyrus View Post
We should tatoo this thread on our arms until we REALLY internalise what James has said!

The "when your yearly salary is worth 200pips" line smacks me in the head flat out! *splut splut*
Same. Complete perspective-changing stuff.

Posts like that are the reason this thread is the best thing on the internet. Except maybe that kid above

to paraphrase a wise man on the pf: anyone who buys another trading book or joins another website after having this material... is a moron.
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  #40042  
Old Aug 6, 2009 2:42am
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My failure rate at the moment is 75% with a risk level higher than 1:1.

This time I have set my stop-loss to fib 61.8. The price open my short stop order and went all the way against me! Again, there is no mental interference or reaction issues for me in this case.

Trading PB is not as easy as it seems for me.
1. Almost everyone I have seen trades ten pips below the break, not 3. To make sure it breaks and all. 3 pips doesnt even make the spread on some pairs. You cant judge a break of a previous pin based on something that barely touches it - especially when the break is an integral part of the PA setup!

I used to try and trade on the exact pip that a bar broke and a setup was 'valid' - why waste ten pip profit?! It was a disaster.

Now, if I want a quick entry on the first break of the bar/validation of the setup, I wait for a Jaroo-style 'hard break'... and kill it if it goes against me, mbq-style.

Add equal parts Jim and Mike, you get the 'JimMi' system

2. You traded it right into a massive pivot level. You even have it drawn. There is more traffic than the Daytona 500. Price was always going to react to that.

3. Warning! Personal opinion!
61.8 bar stops suck, seriously. Pretty much all fib based single bar stops do.

Fib levels arent some *magic* number that the market automatically respects. Especially on the lower timeframes. The reason you see them respected on charts is because other traders think they should respect them. So things like big retraces of downward moves will likely retrace to a fib level before resuming trend. But in this case, no one else was looking at your fib. No one else was trading it. And as a result, there was no reaction.

If you look at it logically, how much money does it take to retrace a huge 3000pip downswing to the 38.2 level? Alot - its a big move.

How much do you think it takes to move the market through a fib stop on an hourly bar? Or a 15m bar? The distance is alot smaller, so it takes alot less. My grandma's checkbook could bust your stop. And she's dead.

(most of the 'power' people attribute to fibs has more to do with profit taking than with magic numbers...but I digress)

*resume regular program here*

4. You are on the hourly. Yes, reaction times and everything comes into it more, and you say those arent a problem. And maybe you are right - but that isnt the point. As a general rule, as your timeframe decreases, random market noise increases. You are *only* making it hard for yourself, honestly.

-----------

With pins like these, if you *want* to play them, I always find it safer to wait for a retrace and then take them on the break. If I really like them, I might wait for a retrace through one level and then a break of the next one down (eg, let it hit/break the 61.8, then grab it when it comes back through the 38.2).

That way, if it goes against me, my stop is smaller. And if it never comes back and just blows through the top of the bar, I dont even get on the trade. Downside is that I might miss some pins now and then, but whatever - plenty of fish in the ocean and all that.

But generally only on the break of the pin. Its safer. And easier. And more reliable.

Hell, with the amount of traffic this one had to clear, I probably would have even waited for a break of the pin *and* the PPZ. I do the same around round numbers now, so they dont eat me alive.

Then again, with the immediate resistance on that one, I would have passed anyways.

-----------

You seem to be a pretty eager learner/studier, and that is commendable - you seem to put in alot more hours than people who are looking for an 'easy fiux' - but I honestly think you could benefit from slowing your roll a little.

You are still demoing, so demo the 4H instead of the 1H. Before you take a trade, make a copy of the chart, draw your PPZs in, look at what price might do. Write a trade plan - there are tons of examples in this thread where people lay out each potential roadblock and each potential TP, and your plan for what happens when price hits each one.

My winrate shot through the roof once I started doing that. You give yourself the time to check and recheck and make sure it is a good trade. You see things you missed the first time.

That's why posting setups here is a great way to learn - you have to take the time to re-examine the trade (to avoid looking clueless!) and then you get people like Mike, Jim and Ghous who tell you why your trade sux.

Mainly, it just stops your itchy trigger finger from firing off a few rounds in the heat of the moment

Good luck with it - I suspect you are going to be sucessful at this in the long run.



(also, as an aside...Fibbonacci was crazy, not some magic mathemagician. Hay guyz, watch me turn this lead into gold!)

** my grandma isnt really dead. sorry gramma!
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  #40050  
Old Aug 6, 2009 3:27am
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Originally Posted by ghous View Post
yeah but "JimMi" doesn't go well,

"Mijim system: the road to financial freedom" sounds much better.
lol. In all fairness, that is only the entry/trade management side. The complete JamMiRacJimGh Wizard MCD system is going to compound your account so fast it will collapse on itself and create a black hole
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  #40057  
Old Aug 6, 2009 4:00am
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Originally Posted by pipmax View Post
Hi guys

I?ve a dump quest, i didn?t find out what you means with IMHO.

Please, can somebody explain IMHO for me???

Thanks
In My Humble Opinion

Generally used when being condescending towards someone on the interbirds
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  #40070  
Old Aug 6, 2009 5:51am
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Originally Posted by idejs View Post
I hope I got the idea right- I have to take a printscreen at the current situation to look back at it later after the fact and compare the things I see then that I did not see before, right?
Am I catching the idea?
Yup, pretty much! I do a review before and after though.

Before I do the trade, I always save a copy of the 'setup' (MT4 lets you export the graph directly now), as well as my trade plan, which has outlines of all the key levels (confluences, entry points, potential roadblocks, targets). If price is being cooperative and giving me time, I sometimes post it here or email it to a friend for a second opinion.

I've found that doing that forces me to analyse the trade before I enter it and commit my capital. Which means I can grade the trade and decide whether I should take it or not, as well as how tightly it has to be managed, what kind of entry is appropriate (hard break, retrace, PA on lower timeframe, etc).

Not to mention that the regular guys in here are damn good at this, and they spot stuff I miss constantly. A second pair of eyes really does help.

Before, I was more 'OMG, PINBAR! BUYBUYBUY!@#', and then looking for PPZ/confluence/roadblocks afterwards. Needless to say, I screwed up a ton of trades that way

I do something similar each time I change it - like, if i move my stop - and when I exit. So I build up kind of a 'trading diary' that lets me review what went wrong and why, or *hopefully* why the trade worked. And hopefully lets me learn from my screwups and not make the same mistake twice.

Kinda stole the idea from my poker reviews, where going over hand histories outside 'the heat of the moment' is the best ways to learn

Its probably not for everyone - I guess asking ten traders how they plan their trades will get eleven different responses - but I figure if I am (potentially) committing a couple thousand dollars to a trade, the least I can do is spend a few minutes analysing it first.

I dunno, it suits my nature I guess, so it works for me.

Quote:
Originally Posted by idejs View Post
And quick Q- I did not get this, what was the thing that increased your winrate? going to higher TF or this what I wrote above?
both

Going to a lower timeframe just makes me 'shoot from the hip' alot more. Which is fine for someone like James or Ryan, who know this stuff inside out and have a 6th sense for price action - I'm just nowhere near that good yet!

Going to the 4h gives me enough time to think through my trades before committing, get advice if I need it, and then the freedom to manage them if needed.

Going over it later and reviewing it really makes you think about what you did, why, and whether it was a good idea.

I guess either way, you end up thinking about things more. And for me, its a good thing.

My overall winrate on the 4h is almost double what it is on the 1h... and I am yet to take a full bar loss on the daily. I know it is probably a limited sample size and unsustainable, but it is working so far

Plus, it means I dont have to spend so much time staring at the screen, and I dont overtrade out of boredom.
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  #40073  
Old Aug 6, 2009 6:11am
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Hi Joelcf,

Thanks a lot. Your reply was a very good detailed one indeed, although a bit personal.
Hey mate,

Sorry if I was rude or abrupt, didnt mean to be. Just had a couple of minutes spare so was trying to get done before my boss came back from his meeting and waved his arms around and yelled a bit

no offence intended.


Quote:
Originally Posted by kk007 View Post
I use 2-3 pip for H1 was to scale down the 10 pip for D1.
See, I dont know if it really works that way. On one hand, I guess a smaller bar (on the hourly as opposed to the daily, for instance) means that a confirmation signal (like a break) probably is a smaller distance, as you say.

On the other, 3 pips just seems a bit tight... especially when i could be trading something with a 5 pip spread! I want something more than random noise to signal an entry to me.

And hey, I stole the 10 pip thing off someone else here (possibly Mike or Jim, I think). It has worked for me, saved me from a few false moves. I dont think it is a James16 rule or anything, but he can probably answer that better than me

You do raise an interesting point though, so I think ima definitely look into it in future (possibly after learning more about MACD/divergence, IPBs, 14Bs...). Maybe you could come up with something based on average bar size/volatility/etc which can be scaled to timeframe, but I dunno... 10 pips is a hell of alot easier and more practical, for me anyways.

Quote:
Originally Posted by kk007 View Post
The Fibo 61.8 was not some too exact here. It is just representing that more than half have gone.
yeah, that's the way I see it. Basically, if I want to take a short, but there is a 'battle' of buy and sell orders at my entry point, I want it resolved one way or the other before I commit. So if price goes up, then stalls and heads back down, I take it as a sign that buyers have been overwhelmed by sellers, and so my short should be good.

Quote:
Originally Posted by kk007 View Post
I have to decide to use H1, until I master it. If someone can do it, I can too. Perhaps, it may take a bit longer.
If that is what you are set on, fair enough. I dunno, if someone with 25 years experience like james tells me to start on the daily charts and then work down, i start on the daily


Quote:
Originally Posted by kk007 View Post
If enter on retracement in your method, the inner end of the pinbar may not be broken, even if it break 38.2? Right?
Yeah, completely right. That is the risk of an agressive entry, I guess. If I do that kind of entry, I generally look for some kind of PA on a lower timeframe and use that to finesse my entry.

But like I said, at this point in my trading 'career', I generally just wait for a second break if I think price might retrace a bunch before coming back.

Quote:
Originally Posted by kk007 View Post
Your winrate shot through the roof. Congratulation! Can you reveal your winrate and average R:R.
It went from below 40% to above 80%. Confirmation enough for me.

r:R is a little more complex, since I tend to manage alot of my entries once I am in them, and so initial risk is never really a true indication of the loss I am prepared to take. And I always trail my stops, so reward is never going to be accurate either.

But I always do a rough expected value calc before I enter, and it is always positive.

I guess that is my biggest problem with people that focus on risk:reward ratios. Unless you set your stop and take profit, and never move them (ie, you sit there and take a full bar loss, or grab your profit as soon as you hit your target), it isnt an accurate measure of...anything. If you kill a trade if it looks to be turning bad, and let your profits run through your TP targets and beyond, you are way better looking at pips won : pips lost.
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  #40121  
Old Aug 6, 2009 9:31am
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Originally Posted by SeekingLight View Post
I hope not, I use it all the time. Thought it was more of a meek gesture.

Way I see it it's like saying "I'm fine with your standpoint and definitely don't mind you having it. I have a perspective that might differ. If I may voice it, mine goes roughly like this:"

..and not like "Yea, that's nice that you think that, but I don't give a toss about it and here's how it really is"
No no, just a little tongue-in-cheek because I think *I* overuse it a little.
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  #40217  
Old Aug 6, 2009 8:29pm
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Default PA, the EMH and why newstrading isnt for rookies.

Quote:
Originally Posted by Jigsaw View Post
Is it just me, or say when big news releases happen, the news actually breaks in the way which price action shows in the previous hours. An example of the news today with the QE announced by BOE.
Nope, its definitely not you! In fact, there is even a name for it - the efficient market hypothesis - and it is the basis of all modern finance

Broadly, the EMH states that in an efficient market, price incorporates all known information.

Some smart guys (ignoring the fact that they later had a massive shocker with LTCM(5) and almost crashed the world) in the 1960s had pretty much the same observation as you - price seems to already 'know' these news releases before they are made.

So they came up with the theory that if a market is efficient, it instantaneously assimilates all known information into the price of a security/currency/etc(1).

This has the byproduct that, if the market already incorporates all known information into the price of the security, it must be impossible to outperform the market using public information, including price, in the long run(1a).

But there is a reason I underlined two parts at the top... for this stuff to be strictly true, there needs to be an efficient market, and the information has to be known.

Market efficiency is the first part. If there is some kind of structural inefficiency in the market - stuff like transaction costs, people (in aggregate) not acting rationally, etc.. then this will distort the market and allow riskless profits.

The other part, and this is where the relevance probably starts, is that the information must be known. If the information isnt known (9/11) or if the information is wildly different (central bank makes a very unexpected move), you will see price spikes.

But, generally, a big announcement like NFP is *not* news. Well, not new information - it is just a synthesis of a bunch of information that people already know (see below response to LasVahGoose). That's why you often dont see much of a big reaction (or, at least, a lasting one)


This should have two results for our trading around big news events:
  • Price will already 'know' where the news is going to take the market, as Jigsaw observed above
  • When there is 'new' information (such as a hugely unexpected result), price will 'spike' as it rapidly incorporates that news
It also means, by extention, that if you choose to try and 'trade' these announcements based on your own view, you have probably been beaten to it. All the big guys positioned their money *well* beforehand. And probably have better data to go on than you. Some people can do it, some people cant - anecdotally, most home traders that try and newstrade get lucky now and then, but generally lose.

This also relates to something that has been thrown around here a bit lately - should we look at fundamentals and PA, or just charts? In effect, the question answers itself - the charts incorporate the fundamentals, so you are already looking at them.


Personally, I combine them for my main account (I also have a short term j16 account, which is why I am here learning!) - I have a market position I want to take, based on economic fundamentals, and I use the methods we learn here to get low-risk / no risk entries in the direction I want. But for my short term account, which is what I am learning here, I try to ignore all outside stuff since it just adds noise (plus, Mike and James told us to, and that is good enough for me!). I kinda suck at it at the moment, but I'm improving

EMH attracts alot of flak (2), but generally only from either people who dont really understand it, or people who do understand it but want to twist its conclusions for their own marketing purposes ('YOU can beat Wall Street! They are all stupid, you can outsmart them... just send me 4 easy payments of $199.95 and attend my $5000 seminar!). But to dismiss it out of hand is probably silly.

The theory itself is actually very sound - it is just that markets get out of line, become inefficient, make bad predictions, etc. And it is easy to see why - the 'market' is really just millions of people like me, you guys, pension fund managers, Jim Cramer, etc(3). And we are far from perfect, and dont always act rationally(4).

Quote:
Originally Posted by LasVahGoose View Post
yeah, you have to figure there are insiders that know the numbers ahead of time and position themselves. PA tips there hand. Can't prove it, but my theory.
Not insiders, per se - just people with alot of resources who have crunched the numbers themselves (or, more likely, paid people to do it for them. and then not paid them as well as they should, nor given them holidays when they wanted them *sigh*)

These numbers - NFP, interest rate policy announcement, net imports/exports, GDP, etc - all come from somewhere. Usually, they are based on surveys or statistical info reported to the government. Either way, the information can be replicated - people can carry out their own surveys, can try to reconstruct the info that goes to the government, etc.

And while the government might have the official figures, every single bank, investment bank and economic research firm have done their own figures to get an estimate of what the number will be. And they are very, very good at it.

-----------
ps: this is a 9am Friday morning, coffee-based stream of conciousness on a pretty huge and complex topic, so it shouldnt be taken as gospel... hopefully, if you are interested it can point you in the direction of more info. plenty of wikipedia keywords

-------------------
*warning: massively nerdy footnote content follows*

(1) There are a couple of different types of efficient market though - weak form, semi strong form and strong form being the main ones. Stock markets are generally either weak-form (people take account of all past price movements, but not necessarily all available public info) or semi-strong (basically, price will rapidly incorporate all information).

(1a) Incidently, one of the people responsible for this theory, Eugene Fama, is very anti-technicals and says the evidence is sparse at best

(2) One big one is that people claim EMH cant work, or Warren Buffett wouldnt be so rich. But EMH never claimed that the present price of a security is the true representation of its future value... just that price is an average of all the known information at the time, true/false/otherwise. Which means that the market can come to bad conclusions. Mr Buffett is just exceptionally good at synthesising that information and using it to predict future outcomes.

The other one, probably more relevant to us, is that if price incorporates all known information, PA/tech analysis shoudlnt work... since it is entirely based on price (and sometimes volume). But that is taking a simplistic view. Markets get inefficient alot of times, and stray away from their equilibrium (ie, where they 'should' be). At that point, arbitrage players will come in and shove money into the market to make a profit from the inefficiency until it resolves itself. Without going into massive details, we are acting like arbitrage players - taking advantage of market inefficiencies that arent widely known to make a profit.

(3) probably not rac. that guy is a supercomputer of some kind.

(4) The (fairly new) field of behavioural economics examines and tries to explain these things. And is absolutely fascinating, if you are into that kinda thing.

(5) Long Term Capital Management, a hedge fund that sought to arbitrage market inefficiencies, and (somewhat poetically) suffered massive losses when an unexpected news event (ie, Russia defaulted on its sovereign debt) hit them. They were so hugely leveraged and spidered throughout the financial system that they almost caused a massive worldwide crash. The book 'When Genius Failed' is an excellent look at what happened, why, and the personalities behind it (and is also a fascinating 'insider' look at Wall St)
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  #40230  
Old Aug 6, 2009 9:29pm
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Originally Posted by Jigsaw View Post
Was there any say, abnormal type orderflow before it the QE which would have given up the gig ?
Not abnormal, as such - but you can see the 'footprints' in the chart, pointing the direction that the smart money thinks the market will head... which is basically what you were describing.

If you were in on the transaction and someone you knew had inside information (or higher quality information than everyone else), you could use that to your advantage. BUt that probably involves being on a desk, unfortunately.

Quote:
Originally Posted by Jigsaw View Post
So, Since hedge funds need banks for their orders, would the banks not either

a) Piggy back along with the hedge fund orders for some momentum and then pick up some pips

or

b) use the Hedge fund orders as liquidity and then trap them in the opposite direction.
Order flow is quite possibly the most valuable info you can have. If you know what people are going to do (because they told you to place the order) before they actually do it (because you havent placed the order yet), you could jump in front of them... aka 'front running'.

Basically, assuming you are a big executing bank, if one of your clients calls you and asks for a huge short position, and you *know* it is going to push prices down a bunch, you put in a short order first, then place their order - effectively using their money to push price down even futher, making you a profit. Not *strictly* bad, unless your order pushes the market price down before you put through their order, since they would lose a couple of pips there. But it isnt like big orders all execute at the same price level, or at the same time anyways.

The other thing, using the orders against the client, is a bit dodgier but undeniable happens - generally to smaller accounts though. After all, your big clients are the ones making you money, so you dont wanna annoy them too much

Quote:
Originally Posted by StoragePro View Post
One thing has consistently bothered me about economics as a whole - the desire of the economist to reduce to a model, no matter how complex and impenetrable, human behavior. Depending on the decade, there are the theories du jour.

I heard a quote once that fits - "everything is true in its own time"
At its core, economics is about explaining things complex things by simplifying them to the most basic, simple level... and then building on it. LIke, obviously there is more to it than supply/demand... but that is a decent starting point. Then you can 'bolt on' things explaining how people get to their supply and demand decisions, how that moves in a market, etc.

It gets alot of criticism for sometimes 'assuming away' anything that makes it relevant. And it is a fair criticism in some cases - the more you remove, the less explaining power your theory has.

But I guess in the end we are closer to explaining why things work the way they do, and that can only be a good thing. I dont know how to fly a plane, but I know vaguely how it works, and that is good enough for me to get on one.

In a way, economics and human behaviour almost seem like a problem that can never really be solved. At the core of pretty much all economic and finance theory is the idea of the 'rational agent' - everyone acting in a rational and predictable manner. This is generally simplified to 'on the whole, when taken as a group, people act rationally', but just look at dotcom/residential real estate/tulip bulbs/south seas/etc... people dont act the way we think they 'should'.

Human behaviour is a fascinating thing, both on an individual and macro level. I doubt we will ever figure it out.

---
and I think I should stop my weekly derail now
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  #40237  
Old Aug 6, 2009 10:43pm
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Originally Posted by LasVahGoose View Post
I do agree everything is baked into the chart, however...

I maybe getting this mixed up, but aren't the folks that preach efficient market the same people that talk about random walk?
Kinda. They are related concepts, not necessarily the same though. Random walk basically says that price fluctuations are random, and you cant use past price to predict future price (although, another conclusion is that prices tend to move upwards in the long run).

Why is this? Because news, by definition, is random and unpredictable. And if the only thing that can change the fundamental value of a security is news, then movements (in aggregate) will be random.

There are also variations on it that seek to incorporate other factors. Drunken walk, Noisy Market Hyp, etc.

Quote:
Originally Posted by LasVahGoose View Post
If they are then it's a joke. Efficient markets presume that markets are rational, which they are not. I respect things like indexing and over the long haul does well, but I think the Market Wizards pretty much prove you can beat the market by a long shot.

Which pretty much debunks efficient market / random walk since the Wizards are doing something that is supposedly impossible to EMH & Random Walkers.
I kinda touched on that, but basically the whole 'this guy makes money therefore that theory is bad!' is almost always either a misunderstanding of the theory, or someone purposely twisting it for their own ends.

Part of the theory is that markets get out of line all the time. When they do, smart people see that they can make profits, so they pile into a trade until the potential for profit disappears. This is why alot of the tactics that worked in the past (like the whole Turtle trade, or MA crosses) dont work anymore. The information is so widespread that you cant make a consistent profit from it because everyone else is looking for it too.

It also says that as a group, you cant make above-average returns (without taking on additional risk). Obviously, within that group, there are winners and losers. Sometimes big winners and big losers.

And after that, you have the point that it just states that information is incorporated into price - people can interpret that price however they want. People like Buffett interpret information differently from other people at the time, and now he has 42 billion dollars.

Also, market efficiency doesnt preclude anyone from making profits. If anything, it explains how and why people profit from the market - by taking on additional risk. This kinda gets into CAPM (Capital Asset Pricing Model) territory, but basically you have to take on risk in order to beat the basic market return. And that is exactly what good traders and investors do.

Jack Schwager is a really, really smart guy. I have alot of his books (Schwager on Futures, in particular, rocks). But I feel like he is sometimes a little disingenuous when it comes to this topic.

In general, it seems to be used as a 'you, the ORDINARY GUY, can beat those WALL STREET IVORY TOWER FATCATS with their FANCY THEORIES... even without a fancy formal education in economics/finance' type of thing to get you to buy their book. No one really wants to hand over money to a guy that says 'this will take you 6 years study, hundreds and hundreds of hours reading and work, and a hundred thou in tuition!'. Well, except me

And of course you can make great returns on your money. With limited risk. It's called the James16 Chart Thread... and its free

Quote:
Originally Posted by Cyrus View Post
Manias, Panics & Crashes. Extraordinary Popular Delusions and the Madness of Crowds
I think we have the same bookshelf

Austrian economics is an interesting area, although mainly as a new light to look at shortcomings in traditional models, rather than actually proposing solutions or explanations
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  #40479  
Old Aug 9, 2009 8:53pm
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Quote:
Originally Posted by tac View Post
...whether to use one time frame (Daily) for all analysis, not even looking at weekly or monthly. Zooming out to get a bigger picture though.
I am a big fan of zooming in and out. I usually have my PPZs marked on the weekly and daily, and then trade off the daily and 4H - sometimes stepping down to the 1H to finess my entry/exit points. That way, I can cut down my risk and potentially squeeze a bit more out of my exit. Sometimes.

I'd post a chart or two, but I am at work atm.

I know alot of people here recommend to just stick to one timeframe though, and I can see the benefits - if two charts are giving conflicting signals, it can put you in a difficult spot.

And to be honest, when you are starting out, the last thing you need to do is add another layer of complexity. KISS (the acronym, not the rock gods) is such a popular concept because, well, it works.

But when the weekly, daily and 4H are all telling you the same thing...well, its time to start eyeing off that new Audi R8


Quote:
Originally Posted by TiaForex View Post
...
Quote:
Originally Posted by tac View Post
...
thanks guys, I am flattered - even if I dont think I really deserve it!

I've gotten so much from this thread, so more than happy to try and return the favour by helping to shed some light on some of the more arcane and less useful things that come up
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  #40568  
Old Aug 11, 2009 1:36am
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Thumbs down

Quote:
Originally Posted by tradertt View Post
GBPJPY H4

Pro: BEOB Formed, High of BEOB at Whole Number and PPZ, Low of BEOB (entry level) is below a PPZ so if entry at 158.80 should miss recent low and PPZ, 1st take profit level 150EMA (Red MA)
Con: Not swing high, used as continuation pattern
Howdy,

Assuming you take the break below the PPZ (which you have marked in around 158.90ish), it looks like a pass.

Personally, I wouldnt take this one - I am a bit of a girl about BEOB/BUOB patterns, and if it doesnt close near the bottom I pass on it. Ideally, bottom quater of the bar, but I will take bottom third if it is a nice location.

..but I am sure many arent as discerning/wussy about it.

The problem is that the pair is going sideways. If it breaks downwards, as you are expecting, it could be nice. But it could very well just move back up to the top of the range again. I'd want to see a pretty damn strong break through that PPZ that is forming the bottom of the range.

As for the 'not at swing high' part, I like to play these bars as trend continuations, rather than hoping for a reversal - in my mind, that is the best way to play these patterns. Especially when it isnt a 'strong' bar shape, like this one is.

I'd also watch out for this PPZ (in yellow), since it could cause probs before you get to your EMA target.

Overall? Pass for me. If you do take it, guard your grill

*EDIT* added some pictures to explain what I mean about bar shape, demonstrating the artistic flair of a 4 year old

Click image for larger version

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  #40573  
Old Aug 11, 2009 2:35am
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Quote:
Originally Posted by Cyrus View Post
Joel, quick question pse.

How do you define "trend"?
I had a similar thought about trading pinbars which are in the direction of the trend over the weekend... but was wondering how to define it.
Generally, I look at the TF I want to trade, and then the one above it. Then I employ my highly technical system:

If it starts at the bottom left and finishes in the top right, its an uptrend.
Top left to bottom right? Downtrend.

I really like to trade with the daily and 4H in my favour. That's bingo time. If they disagree, I might take a trade in the direction of the 4H (ie, against the D1 trend) if it was a great setup, but I would keep my stops pretty tight.

I experimented with a few indicators, EMAs, etc - but all they ended up doing was telling me what I should have been able to see on the chart. I figure if it doesnt jump out at you, it isnt a strong trend.

If you *had* to use something, ADX/DMI and a smoothed Rate Of Change are decent.

(most of the indicators I looked at were basically either a 1st/2nd derivative of an EMA, or a difference of 2 EMAs anyways, with different MA/AMA/etc smoothing applied to make them pretty)
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  #40691  
Old Aug 12, 2009 12:35am
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Default j16 and stocks - they can be friends, if you take them on a playdate.

Quote:
Originally Posted by batesmotel View Post
Do you just pick any stock, or do you sift thru the 100's of stocks and consider their fundies? How do you know which stock to pick...there are so many?
(I figure a stock chart is okay... i mean, if the pf can have a stock section and we can throw up charts of coffee and sugar in here, it cant hurt *too* much...)

I'm not Jim (by a longshot, lol) but I do use some of his methods to trade stocks. Well, kinda - I use them to get a good entry into equities which I have a longterm fundamental interest

I am primarily a fundamental equity investor - 70% of my money is in stocks (20% fixed income, 10% equity options). I didnt really care about its day to day value.

But after all the stuff I have learned here, i decided to try and use the stuff james had taught me (via this FREE, public thread... jesus people have it good here!) to finesse my entries a little - hopefully, in the process, acquiring more of what I want for less money.

This is a chart for Cochlear, a brilliant Australian company that makes hearing implants. I've loved them for a long time - excellent company, superbly managed, strong revenues and ROI growth, a practically impenetrable 'moat'... and they are just a really good company that does really good work.

But, because they are so desirable (a Buffett A+++ trade, if you will), they are hard to get a 'cheap' entry into. I started off with a substantial (for me, lol) holding, and just traded in and out of them based on the chart. And so I now have more shares than when I started, and a lower average price - all thanks to James and the gang.

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(sorry for the crappy yahoo chart, im at work atm)



There are a few things I've noticed when using j16 PA stuff for stocks (US and Australian)
  • In general, I am more willing to accept weaker PA on the bullish side than PA of a bearish nature (because my end goal here is to accumulate shares)
  • Watch out for PA around dividend dates, especially in Australia.
  • PPZs are much, much stronger. Any well-covered company is going to have a 'normal' price, based on P/E and so on. That will help form a strong PPZ zone which it will tend to move around, until some underlying fundamentals move it (up or down) to a new PPZ.
  • I dont like to see gaps. I ignore PA if it was formed by a bar that gapped. This may or may not be an unfounded fear - possibly I am just being a big girl about it. I know Pring loves his gaps, so maybe I should learn to trade them.
  • Same goes for strong (read, close at high of bar) PA. It takes an exceptional setup the next day to interest me in going against that (see the first 'gap pin', which I mislabeled).
  • I dont really want to miss a big move with my favourites, so I almost *always* use a 2 bar trailing stop after bearish PA (which means I probably liquidated my position, and now use the 2day trailing to get back in)
  • Dont trade short term timeframes, esp on non-US/UK shares, because they just arent going to have a smooth chart. It will jump around and make things hard. I am strictly daily/weekly.
  • I look at volume as a kind of 'confluence'. If there is a pin with heavy volume at a PPZ, I do a dance and buy a bottle of Talisker for the inevitable celebration.
  • Forget fibs. Worthless.
The best thing here - for me anyways - is that you really cant 'lose'. You still get hold of something you want (based on other factors), even if you end up *slightly* raising your average entry price. This is also because I only do this kind of PA swinging on things I already want - obviously, if you just go through charts and look to trade them, this point will be completely void
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Last edited by joelcf, Aug 12, 2009 12:46am
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  #40696  
Old Aug 12, 2009 1:08am
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Quote:
Originally Posted by pakiestra View Post
Pin was a poodle and was broken easily. CAD?JPY went down further and this bar was like a bit of indecision. This stuff is realy working.
Nice work!

Finding pins and taking them is easy. Anyone can do it - and I suspect that many people starting out do. I sure as hell did.

Knowing which ones *not* to take (and why) is where you really start to be in control of the game.
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  #40698  
Old Aug 12, 2009 1:58am
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Quote:
Originally Posted by supremeChaos View Post
joelcf,
in your above Cochlear/COH.AX chart post, u mentioned SCPB (small crap/py pin bars).

just FYI for the others... it was mentioned by AnimalHungry & Ryanmcd & coined by StoragePro back in early July.
SC, you are definitely the wikipedia of the j16 chart thread!

I think I am going to start leaving out random details in my posts, just to try and catch you out
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  #40720  
Old Aug 12, 2009 6:13am
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Quote:
Originally Posted by nasir.khan View Post
And i am long now but we both could be profitable.
I'm on the long side of EJ. Up about 50 pips at the moment, but like the shape/location (potential daily pin, fingers crossed) so i think I am prepared to give this one some room to play.

Well spotted.

if we can break 136, there is a minor battle between 136.50-137.00...and after that, I'd be looking for this one to go to 138.00 - 138.25. And then come back down, prolly.


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  #40832  
Old Aug 12, 2009 5:33pm
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Default EJ

Quote:
Originally Posted by mbqb11 View Post
Joel my man

I took the eur/jpy 4hr pin, and took full profit shy of 136.50 which is going to be tough to motor right through easy.
I do love it when the market reads this thread and does exactly what it is supposed to

I set my stop to b/e (136.30), went to bed, and woke up to 105 pips. Got kinda lucky when it missed my stop by 8 pips, but I can live with it.

Locked in some profit now, and will let it *hopefully* take another shot at 137, based on the daily lookin like it wants to take a run upwards.

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  #40841  
Old Aug 12, 2009 6:51pm
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Quote:
Originally Posted by StoragePro View Post
I must be an absolute idiot. Where and what did you trade?
Ej 4H pin last night
http://www.forexfactory.com/t/2331/p...ml#post2948684

although it looks far cleaner on this guys feed.
http://www.forexfactory.com/showpost...ostcount=40715

----------
I see something tasty cookin up on the loon. 2d pin with the trend through a PPZ, and bouncing off the 38.2 retrace of the last swing down.

Its a big sucka, too.

Looks like traffic below, specifically at 1.0775ish and then 1.0600...and after that? Nothing but air. If this breaks through, it could go so far down it will wake up in China.

(sorry for the dodgy writeup, im on the train)

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Last edited by joelcf, Aug 12, 2009 7:16pm
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  #40848  
Old Aug 12, 2009 8:23pm
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Quote:
Originally Posted by consisTracy View Post
Compounding interest the 9th wonder of the world:
72 divided by the interest rate = number of years to double
at 30% thats 2.4 years
at 50% thats 1.44 years
The 'rule of 72' is just an estimate. It doesnt work as well when you use big numbers or long periods. Once you get outside 5-9%ish, it breaks down.

Rule of 69 is a better estimate, although it also breaks when you start getting into 'what is my $1000 compounded at 40% for 50 years?!'

For the math inclined (or those with excel), the actual formula you want to find the time to double is f(X) = ln(2) / ln(1+(r/100))

Quote:
Originally Posted by consisTracy View Post
In 1960 Warren Buffet started investing maybe 250,000? (this is a total guess based on his wikipedia info) he has been compounding this for 49 years. at 30% it could have doubled 18 times. Look at the picture - no wonder he is worth 62 Billion!!!
He isnt worth $62bn. Closer to $40bn. I suspect you have been looking at the old Forbes Rich List, which is pre-GFC.

Fascinatingly, he started with even less than that. When he started the Buffett Partnerships (which was the precursor to Berkshire), he had closer to $150k. Alot of money for those days, but not a huge amount by any stretch.

BRK hasnt compounded anywhere near 30%. It is around 20%, give or take a financial crisis or two. Still amazing.

He has written some absolutely fascinating things about compounding that you may be interested in. His old shareholder letters (particularly this one from 1989 http://www.berkshirehathaway.com/letters/1989.html about tax effects and 1963/1964 http://www.rbcpa.com/WEB_letters/1963.01.18.pdf and http://www.rbcpa.com/WEB_letters/1964.01.18.pdf , the famous 'Joy of Compounding' letters that talk about valuing Manhattan and the Mona Lisa) go into it quite a bit.

I'd also recommend 'Buffett: The Making of an American Capitalist', and 'The Snowball' if you are really dedicated (its like, a thousand pages)

(can you tell that I'm a massive Warren Buffet nerd?)

Quote:
Originally Posted by consisTracy View Post
Lesson - good returns even 20% - 30% compounded over your life or applied to a reasonable size trading account over time will give you massive wealth - there is no need to aim for %returns any higher this way you will have a smooth equity curve and be a trading force to be reckoned with.
'good returns' are not 20-30% per annum. Those are extraordinary returns. Like, massive outliers.

No one makes those returns consistently. No one. As I said above, Berkshire has compounded around 20.3%. Cramer managed to do around the same.

The share market, historically, returns around 12-14%. Property is closer to 8%.

The thing is, you wont make either of those. No one does. Why? A few reasons:

1) Buffett/Berkshire never pay dividends, they reinvest everything. They buy and hold for the long, long run. And so they dont pay tax.

You, on the other hand, will pay tax, because you are engaged in short term trading, not buying an business and holding it for 50 years.

2) Buffett didnt make his money by 'picking stocks', despite popular opinion. He did it by buying great businesses, and holding them, and having them expertly managed. And he bought them using some financial tricks (basically, using insurance float as low cost funds). This is where the *real* compounding happens.

And then there was a ton of stuff made on complex arbitrage transactions, special situations and workouts. Hugely profitable, but highly risky. Not really what we are looking for here.

3) Once you get to a certain size, you are a hell of alot less nimble. You cant just short the break of a 4H pinbar when you are trying to invest a hundred million dollars - as I said to someone via pm the other day, you cant play the market... at that point, you *are* the market.

Buffett recently said that he could get 50% returns if you gave him a small amount of money to invest. That's one of the advantages we have, we can get in and out of things and not really have any effect on the market at all.

4) Like James has said a ton of times, once you get a large account, you will never trade the same. He says he is a hell of alot more patient and picky now. You really think you are compounding a huge account consitently at 30%?! Congratulations, Wall St will (literally) pay you hundreds of millions to run money.

--------
Sorry for the rant, its early and I need coffee!

Just to be sure, though - I'm not trying to have a go at you or anything! Alot of people just get carried away when they start plugging arbitary numbers into spreadsheets. Hell, I did - I sat in the back of my lecture theatre after learning about PV/FV calculations and annuities, and figured out that I could be a multimillionaire by my 30th birthday if I stopped drinking beer! Now, I am 30 in about two months...

I just think that people need to be realistic, not play around with compounding spreadsheets and get crazy expectations. At best, they make you lose focus. At worst, you start taking stupid risky trades and blow up your account.

Also, watch out of Mike comes around. I once saw him choke a compounding spreadsheet to death with his bare hands. And then kick it while it was down, just for good measure.
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Last edited by joelcf, Aug 12, 2009 9:21pm Reason: linky mclinkerson.
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  #40852  
Old Aug 12, 2009 9:11pm
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Quote:
Originally Posted by tyler812 View Post
Yeah, another great example of price breaking and going exactly where expected. I personally took profit at the congestion just below 137.00
Nicely played, pretty much textbook picture perfect.
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  #40853  
Old Aug 12, 2009 9:14pm
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Quote:
Originally Posted by supermatt View Post
thanks for the help there twobuck

just for example purposes is this regarded as an outside bar. I know its not engulfing but I think it is an outside bar as it is just the mirror image of an inside bar
Technically, it is an outside bar, by some definitions... but I wouldnt take it. Ever. If anything, it looks more like an indecision bar, representing a pause in the downward trend (notice how price barely changed)

This page from last week has some good talk on what we like to see in outside bar type formations.

http://www.forexfactory.com/t/2331/p...ml#post2945357
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  #40857  
Old Aug 12, 2009 9:42pm
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Quote:
Originally Posted by consisTracy View Post
The general concept I am trying to convey and the thing that makes me excited is this - there is no need to risk silly amounts.... No need to risk any more than 2% (and thats on the risky side) once you understand the things being taught here and in the PF.
Oh, definitely. If only more people thought like that, they wouldnt be putting 80%+ of their money on every trade!

If you sit back and wait for the good trades, and take just two 2% risk trades a month - even if they each only go to 0.5R, you have earned your 2% for the month. And 27% for the year.

The problem is that you have to take into account losses, negative compounding and the like. Even the best setup can fail, at which point you need a ~4.1% profit from your next trade(s) to get back to where you should have been.

And if you were a bit more agressive and risked 5%, you now need 10.53%

And if you were dumb and put 20%, you need to make a 50% return.

Asymmetric returns and negative compounding are a bitch.

Quote:
Originally Posted by consisTracy View Post
No aiming for ridiculous 100%+ returns as new traders a apt to do (I know I have done it)
lol, you and me both. I shake my head at some of the dumbass things I did starting out. Hey, lets throw $2k into short dated barrier call index options, they cant *possibly* go down!

whoops.
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Last edited by joelcf, Aug 12, 2009 10:17pm Reason: 'assymetric'
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  #40863  
Old Aug 12, 2009 10:23pm
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Quote:
Originally Posted by StoragePro View Post
You have a way with words! You gotta have some Irish in ya.
Yeah, my Irish background is what gives me my lovely disposition and temperament

I should probably alter that quote though - negative asymmetric returns are a bitch. Positive asymmetric return profiles (small downside, big upside) are exactly what we are aiming for here

(I just got through this tome that talks in great detail about this topic - http://au.wiley.com/WileyCDA/WileyTi...470042664.html - excellent reading if you are into that kinda thing. Although, if you are, you might have to question whether you are *really* happy with life )

Quote:
Originally Posted by StoragePro View Post

At any rate - (sorry, no pun intended), once you get hold of 'it', and more importantly, get hold of yourself, then, and only then can 'I The Trader' take advantage of compounding.

...

When the visions of sugar plums stop dancing through your head, you'll be ready to focus on the important stuff.
lol, it isnt me that has a way with words. This is the most poetic 'focus on trading, dumbass' I have ever seen!
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  #40867  
Old Aug 12, 2009 11:46pm
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Quote:
Originally Posted by batesmotel View Post
I'll give it a go, long AUDUSD on break of PB....can you guys see all the bright bars? GregB
Looks hot to me (esp on a white background )

Length of pin sux a bit (i hate drawdown), but it is with the daily and weekly trends, and is a nice lil retrace of the last upward movement (almost to the pip!) and roundtripped through a strong PPZ.

Obvious PPZs and lots of space afterwards.

My only problem is deciding between this setup and usdcad...

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  #40871  
Old Aug 13, 2009 2:19am
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Quote:
Originally Posted by joelcf View Post
AUDUSD long
Trade - 20090813 - AUDUSD

D1 pin bar
Nose - 0.8178
Break - 0.8369
Length - 191 pips

Positives/Confluences
long nose, nice form, with trend, nose just touches 38.2% retracement of previous upwards move

Entry
(long) at 0.8380

Stops
0.8325 - 55 pips - below strong PPZ, right eye of pin
0.8225 - 155 pips - below strong PPZ, 23.6 retrace
0.8170 - 220 pips - below nose of pin, 38.2 retracement, .8200 round number, strong PPZ

Potential roadblocks
0.8400 - stupid round number
0.8450 - strong PPZ at swing high

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Progress
1611 - entered long @ 0.8389. Stupid slippage.
-------

Time to see how they run.
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  #40874  
Old Aug 13, 2009 2:31am
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Quote:
Originally Posted by CkM8 View Post
I keep a trading log but not nearly as detailed.
You just inspired me...
lol, I have to. Otherwise I tend to do stupid, impulsive things

and if I do, at least I have a clear record of what stupid things I did so I dont do em again
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Old Aug 13, 2009 4:35am
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Quote:
Originally Posted by tac View Post
Great post, however I think you are completely wrong with "you will never make 20% a year". Unless you mean for very large accounts? Dont think there are many in here with the account size you are talking about.
I do, sorry if i was unclear. With the stuff here, people should be able to clear 25% a year, taking only a handful of a+++ setups a month.

I only touched on it kinda briefly, but there are a world of reasons that it is practically impossible to compound large accounts at that kind of rate. At some point you are just too big for the market. And well before that, you will run into trouble with market frictions (not being able to stick your money in at the price you want, people shooting against you, etc)

Quote:
Originally Posted by tac View Post
There are traders who have earned 25% a month consistently for 10 years, the trader I am thinking of always cleared his account down to a few hundred thousand then build it up to millions.
That isnt really compounding then

This is basically what the really sucessful hedge funds do - close their doors at a certain amount and dont let any more money in, or just liquidate the fund and start from scratch.

Nimbleness is a hugely important thing in short term trading.

Sounds like a good person to follow though, that kind of consistency is rare.
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Old Aug 13, 2009 5:21am
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Quote:
Originally Posted by Pirabuji View Post
Hi Joel,

What made you take this one over the USDCAD trade?
It broke first, its the stronger pattern, and I get a much tighter spread with my local broker


Actually, I dont see the two as mutually exclusive. I will probably take the 2d USDCAD as well, depending on how hard it breaks south.

*edit* actually, going to dinner and cant watch it, and feel like there could be a decent retrace in this one. Will set some alerts and wait it out. Not too worried on missing it, fish in the sea and all that.

Quote:
Originally Posted by batesmotel View Post
I was considering the USDCAD Short.....but doesn't a BEOB have to have a lower close that the previous bars low? Or is this a judgement call?
If you combine the two bars, it is the same as a pin bar - so it gives us the same information (ie, price moved up, exhausted the buy orders and the bears took over).

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Last edited by joelcf, Aug 13, 2009 5:33am
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  #41268  
Old Aug 17, 2009 7:39pm
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Default Superninjamegagodzilla candlestick pattern!@#

Quote:
Originally Posted by tradertt View Post
Saw a new price pattern that may be worth considering. If any seniors here can give some insights on this, it may be great to trade.

Three Black Crows. Was just looking at some candlestick patterns and came across this.

http://www.forexbrace.com/content/view/220/73/
I love candlesticks as much as the next guy (possibly moreso - look at my reading list from a month or two back! ) but I think I should throw out a word of caution here.

Candlestick 'patterns' are, on the whole, overrated.

Yup, I said it.

Why? Because they lead to bad decisions from people that dont really think through what they are doing.

Look at that 'three black crows' pattern. What does it really tell you? All it really says is 'price went down a decent amount for 3 periods in a row'. But is that tradeable information per se? Probably not.

If I said 'hey guys, there are 3 red bars on my chart, should I short it?!', I would get laughed out of the thread. Heartily. Because, by itself, it doesnt really mean anything. For every 'example' like the contrived one on the linked page, I can show you ten charts where it failed.

Now, if I said something more like 'hi guys, I saw a big bearish bar which closed at the low and went straight through a PPZ and round number, with a broader range than the last couple of bars on a pullback from a downward trend'... well, people might be more receptive to my ideas.

The problem is that people get so caught up in the cool names and spotting the patterns (something our brain loves to do) that they dont really consider the underlying movement. What does the candle actually mean? What is the market doing? Where might it go, and where might it stall?

But they dont worry about that. It's all just 'omg, i spotted a samurai morning star engulfing megashark pattern on AUDJPY so I shorted a hundred contracts $$$$ lol!'. And a few days later, they post a whinge about how their patten didnt work and now they live in a box.

Dont get me wrong - some candlestick patterns are useful.... unsuprisingly, the ones that mirror the PA setups we look at here! And, even more unsuprisingly, they get more and more useful as you look at them in context - what confluences are around? What is the general market direction, and are you with it? Is there a big PPZ there?

Gee. Sounds alot like what a (big) Texan gentleman has been teaching.


Summary: exotic candlestick patterns are just going to lead to you donking off accounts on quasi-Eastern sounding crap bars in bad places. Leave them for the suckers who think they stumbled onto some mystical secret.

Stick to the basics, friend.
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Last edited by joelcf, Aug 17, 2009 8:26pm Reason: clarification.
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  #41272  
Old Aug 17, 2009 9:39pm
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Quote:
Originally Posted by StoragePro View Post
I must dive in. Anytime an Aussie with a brew in his hand starts going off, I gotta go with him - even if the pool is full of box jellies and hungry sharks...
hey now, its eleven am on a tuesday... I wont be drunk for *at least* an hour


Quote:
Originally Posted by StoragePro View Post
Yeah, like buying a drink for a pretty girl. You know what comes next - right?
My girlfriend pulls a gun on me

Quote:
Originally Posted by batesmotel View Post
All of the Japanese Candlestick Patterns basically reduce down the the "Big Three"... PB, BU/BEOB or IB....

I don't think there is a big difference between Jim's Bar patterns to that of Japanese Candlestick patterns...
No, I completely agree. A bar chart or a candlestick chart are both just an abstraction of price, so they really tell you the same thing.

It's the same as the discussion from a few weeks ago that a DBHLC is usually just a 2-period pinbar.

My problem is more with people focusing on the 'pattern' they saw, as opposed to what it actually means - and whether it is actually tradeable.

It happens with bar charts too - sometimes, people will see a tiny little countertrend pinbar and try and trade it...and lose. And it is for pretty much the same reason - they looked for a pattern, rather than thinking about what they are doing.

I just think it is way more prevalent with candlestick charting 'patterns', because people see these three and four bar setups with an esoteric name and assume that they have to work.

And so someone like tradertt, who is starting out, should probably just be sticking to basics, rather than looking for new patterns to add to the mix and overcomplicating things.

as I said, I really do like candlesticks, and used to use them exclusively (although I never really traded 'patterns', just thought they looked cooler than bars or lines)... but, since discovering this thread, I have really tried to simplify things. and going to bar charts and *just* focusing on what price did, and why, has been a huge help - half because they 'cut the clutter', and half because I dont look for patterns that i read about in a book anymore.
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  #41288  
Old Aug 18, 2009 5:58am
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Originally Posted by tac View Post
If you say candlesticks are overrated then you are also saying price action is overrated.
That's not really what I said at all.
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  #41291  
Old Aug 18, 2009 6:43am
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Originally Posted by tac View Post
You said candlestick where overrated, candlesticks are just patterns like bar patterns all price action.
I said candlestick 'patterns', especially the more esoteric 3 and 4 bar setups, are too abstract to be of any real use.

I said people, especially new traders, look for the patterns and dont understand the underlying movements, but assume they dont need to think about it because 'its a shooting star + harami pattern which means short'. It teaches pattern recognition, which is the least important part.

I said that a new trader, who was looking at a bunch of obscure patterns and asking whether he should be trying to match them to a chart and trade them, was a recipe for disaster, because they are concentrating on the wrong thing and - as StoragePro said - they are running headlong into a forrest/trees issue.

I also said I use candlesticks and have for a long time. I only said the patterns are overrated as a trading tool, especially for new guys.

Let's not take one line out of two long posts, take a key word out and then quote it out of context. Because otherwise, 'this stuff is dirt...folks'.

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  #41293  
Old Aug 18, 2009 7:01am
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Originally Posted by tac View Post
Ok no worries, glad you explained it in more detail as candlestick patterns can be a useful tool just like any price pattern.
hey, its all good. as long as people are thinking about what the chart is telling them and why they are trading, they can use astrological tea leaves for all I care

*edit*

So we have an actual chart on the page, here is something I have been demoing for the last few weeks, but still dont have the balls to take live - softs! I've started live with silver, gold, crude and nat gas... but I feel like I wont be a complete degen until I have made a fortune shorting frozen pork bellies

(sorry for the dodgy ms paint chart, I'm sitting in the car waiting for the gf, and my netbook doesnt have anything better)

Cotton:

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There is a failed pin in there that is bugging me, it seems like it should have worked (and if I had been patient, it did)... and that great bearish outside bar could have actually been a multi-period pin with a way better entry, but I guess that is why I am demoing it still

(specs: http://www.wikinvest.com/futures/Cotton_Futures )
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  #41427  
Old Aug 18, 2009 10:09pm
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Originally Posted by dhh View Post
it's not a pin BY DEFINITION. it gapped down at open, the open(and close) needs to be within the prior bar.
No, you are right - I guess, technically, it would be some kind of island reversal pin crossbreed.

But, to me at least, it says the exact same thing. Especially on a gappy instrument like soft futures. So I would be comfortable trading it as a pin.

definitions are all well and good, but I dont think they are set in stone.

Good pickup though, thanks - completely missed that one!
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  #41433  
Old Aug 18, 2009 11:03pm
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Quote:
Originally Posted by dengzhi View Post
you cannot rush from 500bucks to 100k trading hourly and 4HR..
you need to be realistic about your gains..

trading forex will not make you rich
in most cases it will make you poorer than when you started
...
it will not replace your daytime job..
I know you got alot of heat for this, but I agree 100%.

I probably wont ever trade as a replacement for my day job. Mainly because I love what I do, and I dont have $250k in capital... being poor sux

I treat my trading like I treat my poker. I love playing, I love learning, but I'm not going pro anytime soon. Its better as a supplement to income than as a sole income source. But there is real money involved, and it is a business to me. It builds my savings faster, gives a bit of alpha to my portfolio, and gives me some extra spending money. Hell, I bought these the other day with the profits from that AUDUSD pin.

I know a ton of people want to make this their 'living', but without enough capital to start with, it just ist gonna happen.

Either way, you either treat this stuff like a business, or you treat it like a gamble. If you want to treat it as a business, you manage your risk. Period. This entire building I am in is basically dedicated to managing risk. Profits look after themselves.

The main problem here is that if you want to be in business, you need capital. Not only that, but you need adequate capital. How much is adequate? Like Mike, or Fiji, or Van Tharp, or any of the other guys will tell you - it depends on your risk. On Oanda, a hundred bucks can be traded with proper money management. But you wont be a millionaire in two months. Sorry.

I'll touch on this below under risk of ruin, but you WILL make losses, and you need to have enough of an account to survive the drawdowns. The best traders in the world lose on trades. Jim and Mark have both talked about times they took losses, and touched on what kind of win rate they have. James' story about the power outage is the best example of how you can do everything right and still get your ass kicked. Same with the loonie last week (or the week before) when it schooled a bunch of people with a huge spike.

Remember kids, compounding works in reverse too - at 8% risk, just three losing trades in a row means you now need a 28% trade just to get back to breakeven - thats 3.5R. How many 3.5R runners do you really get?

Then you have to be realistic in your projections. If you are withdrawing, you ARENT compounding. Warning: massive simplification follows:

Assume you really do manage to compound your account to 100k, and you think you can live on that 6% a month.

Oops, make that 4% after the taxman gets done with you.

Or 3.5%, after you take out the constant returns you are going to need to keep up with inflation.

But that's fine, you still think you can live on that much. Awesome. Your risk of ruin just went through the roof. Why? Because, when you withdraw your living expenses every month, you are effectively cutting your return to zero. Which means you have a massively negative expected value.

On the other hand, if you are only interested in how quick you can build your account, you are more likely to be treating it like a gamble. Which is fine, honestly... just dont fool yourself into thinking it is a retirement solution.

Quote:
Originally Posted by markf45 View Post
I know some people are gonna bash me about this but here goes...

With regards to your risk management I really don't see a problem once you learn how to trade this method. I personally have a very high win rate and I too risk up to 8% per trade (but only on the best setups). I've been doing this for a long time now and I am fully comfortable with risking that amount on certain trades. I've never, ever taken a loss on an 8% risk trade because I only risk this much on the best setups that I believe are extremely likely to work....
There have been a bunch of studies done (I think Van Tharp even talks about one in one of his books, the position sizing one I think) that have shown there is no correlation between a trader's feelings about the probability of the trade at hand and the actual returns

Fiji's stuff on psychology has really turned my brain around on how I think about stuff like this. Cant recommend it highly enough.

ps: I really hope no one does bash you, because it takes some guts to go against the consensus opinion and present your own point of view. It wouldnt be a very good discussion if we all agreed

Quote:
Originally Posted by markf45 View Post
Anyway, I don't intend to encourage you or anybody else to risk more than 2% because most people will probably blow an account eventually by doing this. But it doesn't mean that you can't risk more than this if you are comfortable doing so.
You can, but you are absolutely right here - eventually, you probably will blow up your account. The problem is that you run into risk of ruin issues - ie, eventually you will hit 100% drawdown and have no capital to trade with.

I made a quick couple of charts... hopefully, they help explain why 2% is a good recommended risk level.

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The calculations involved are non-trivial, best reference if you are interested in this kind of stuff is Trading Risk: Advanced Profitability Through Risk Control or Portfolio Management Formulas - mathematical trading methods for futures, options and stock markets, both by Ralph Vince. His models arent perfect (complete RoR calcs are ridiculously complex, and are generally just done via a Monte Carlo simulation). Also, if you hate math, dont even bother... you will want to kill yourself after a few pages

There are a few simplified models floating around on the web, based on 'edge', but they have far more serious shortcomings. I wouldnt rely too much on them.

There are a bunch of assumptions involved, so I have modeled these ones off my own data.

The main point to take away, though, is that you CAN go broke with a profitable system if you dont manage your risk.
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Last edited by joelcf, Aug 19, 2009 3:04am Reason: when did i forget how to use paragraphs?
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  #41435  
Old Aug 18, 2009 11:19pm
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Quote:
Originally Posted by Eclipse View Post
In my opinion the central point it's not the account size, but the pickiness and R/R ratio.

1. On the daily, high quality setups need a 30 pips SL and, on average, they give you 200 pips of profit....You have a R/R ratio of 1:7 (more or less) and with one trade you made +20%. Just take other 3-4 high quality trades looking at 20 corsses (not so difficult in a month) and you doubled your account.

2. Now let's considering the 5min. timeframe. Same account size, same risk percentage, same quality setups, but here you need a 10 pips...
Those are nice numbers, but they are pretty unrealistic. You cant just say that daily bars offer 1:7 and 5mins give 1:3. I took a quick look through my trading log, and I couldnt find a single daily setup that I took with 30 pips risk. It was closer to 150. Maybe with some small inside bars or something, I guess.

*edit* I lie, there was this small crappy pin bar (love that term) that I took as a test. It worked out well for 23 pip risk.

The other thing that people ignore is the impact of random noise. The markets arent an orderly series of bars. They are a bunch of guys (many of whom, amusingly, actually do wear suspenders and striped shirts with white collars) yelling at each over over a thousandth of a cent. There are banks hedging exposure, clearing inventory and scalping. There are a ton of algorithms constantly buying and selling. There are all of us, buying 1/10th of a contract at a time. Orders are constantly going back and forth.

The stuff that shapes the weekly chart (ie, the bars you actually see) is a subset of the stuff that shapes the daily, which is a subset of the stuff shaping the hourly.

When it gets down to it, setups will fail more on the 5 minute than the 15 minute. Not because of reaction times (although they come into it), but mainly because there are a bunch of people doing a bunch of different things. These get smoothed out on a longer timeframe, so you can actually see what is happening.

Can you trade the 15m or the 5m? Definitely. Without a doubt. Look at how kickass some of the guys here that specialise in those charts are. I dont know the guy, but looking at Ryan's charts is pretty awe inspiring.

But is it the same as taking pins on a daily? No.

Quote:
Originally Posted by TiaForex View Post
To summarise:

The profitability of your system (win rate, average winner etc) which some call expectancy

Your money management so that each trade is a fixed percentage of your account, and one that doesn't spook you into messing with your system.

Your psychological tolerance for your trading style.

These are three separate things and need to be worked on separately. It strikes me that you might be confusing the purpose and effect of the three.

Hope that helps.

Aaron
Aaron, your posts are always awesome and insightful. Always. Thanks for making this a better place to learn
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  #41439  
Old Aug 19, 2009 12:40am
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Originally Posted by benji533 View Post
Guys, I know many of you may think trading psychology, or psychology in general is bullshit. But I want to share to books witch improved my way of handling my trades dramatically. Everyone is more that advised to take his time to read them during the weekends.

Ben
Great post, and I know you mean well... but I am gonna take a shot in the dark here and suggest that sharing copyrighted materials is probably not kosher. or halal. Or, as we say here, beer.

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  #41446  
Old Aug 19, 2009 1:35am
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Quote:
Originally Posted by supremeChaos View Post
So that makes me the 3rd guy to vouch for him...
so far my prized vouch is this guy below....
Whoa. I only just noticed those vouch things. I always wondered what the 10+V thing meant next to everyone's name.

Awesome


Quote:
Originally Posted by supremeChaos View Post
Nice posts.
Hey, if u say u are poor, then what am i called?
A guy whose goal is to climb mountains - and, without a doubt, one day will

Although I do admit it was a pretty poor choice of words on my part... but 'undercapitalised' was way too much effort at the time
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Old Aug 19, 2009 3:30am
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Quote:
Originally Posted by nasir.khan View Post
Sorry i think i confused you. When i said IB i meant to say the high of the bar before IB.
That looks more like a bounce from a big strong PPZ than any kind of IB play. If anything, it broke the IB in the opposite direction of the trade (ie, it was a bullish break) and you would want to get out (with a profit) of the pin bar trade (or at least set BE) if you were managing on that timeframe.

To me, anyways.

I mean, you could be doing some kind of master candle / multi IB that didnt break... but its still headed the wrong way.

Regardless, I would have completely set a stop a couple pips higher than the PPZ when I saw it heading north so strongly. Its either gonna hit the PPZ and bounce back down (and so never get triggered), or smash through and you minimise your loss. Dont see the value in leaving your stop above the nose.

Quote:
Originally Posted by supremeChaos View Post
Warmagus,
just for the sake of the others (those learning words/terms etc), it's
Czech Republic (CZK or CCK) Czech koruna (plural: koruny)
Like I said... wikipedia of the j16 chart thread
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  #41479  
Old Aug 19, 2009 4:03am
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Quote:
Originally Posted by nasir.khan View Post
My entry did't have to do anything with IB there was not even one there when i entered actual entry was of pin bar+sHs+61.8%+bouncing back from 365 EMA. I use the mother candle H/L as my little S/R when i am managing trades i.e setting SL's and TP's. So i get warned if i am buying at the low of mother candle and VICE VERSA.
I get that. But what was your plan if it broke bullish through the candle?

If you were going to get out of the trade, either by moving to BE or just closing it, you could have already moved your stop to just above the PPZ (right at BE) and limited your risk. Anything that broke the candle was putting you in drawdown almost by default.

And if you werent going to get out of the trade, and wanted to just let it run... why watch the IB?

I'm genuinely curious on your reasoning here. i know you were talking about only managing a small account, and taking (relatively) big %R positions, so I would have thought this was the perfect opportunity to give yourself some brilliant asymmetric returns... no risk and huge potential reward is what builds small accounts.
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  #41571  
Old Aug 19, 2009 8:50pm
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Quote:
Originally Posted by supremeChaos View Post
supermatt,
i think it's ok to combine bars --just dont overdo it.
try 1 or 2 different (unconventional TFs) & stick to it for awhile.
This is probably the best answer.

I think combining periods is fine, as long as you dont act a fool. After all, things like D1 and H4 are pretty arbitary anyways, with different brokers showing different bars even though they represent the same underlying price moves.

Price movement is a continuous thing, it isnt like orders are placed, and then everyone goes to get a coffee and waits for the next H4 bar to open before they place some more orders. So there shouldnt be any problem with us being a little more fluid and adaptable too.

Essentially, a pin is just a movement up and then a move back down (or vice versa), so whether it happens over one period, two periods or 5 periods shouldnt really matter.

The only complication comes when you are managing your trade. A 5 day pin is really a weekly pin, so do you manage it on the daily or weekly?

to be honest though, starting to 'read' the charts and think about whether a 3 day movement can combine into a pin bar is an intermediate-advanced topic. No need to confuse someone just starting out, they have enough to get their head around first!

(and, like mike said a few days ago - PPZ / SR levels are far more important than the exact PA patterns anyways)
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Old Aug 20, 2009 8:07am
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Quote:
Originally Posted by Radsson View Post
Hope (Can't wait ) it will close like that.
H1
Watch out for the huge PPZ just above, waitin to kick someone's ass

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In the words of Naughty By Nature... guard your grill
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  #41652  
Old Aug 20, 2009 7:30pm
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Default Sunshine the Werewolf.

Forex dead? No trades? The answer could be closer than you think

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*edit* 6 cents per lb might not sound like much... but take into account that each contract is for 37,500lbs

I've made about $9k demobux off the last two pins. And that is with *missing* the big bullish outside enveloping awesomebar in the middle.

As of next week, softs are going live
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  #41654  
Old Aug 20, 2009 7:55pm
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Originally Posted by batesmotel View Post
Nice....Where do you get the commodity charts?
I use futuresource.com for the ones I post (usually on the train so using my netbook thingy, and I dont have a ninjatrader licence for it) - sign up for their free premium charts, they are pretty cool for a web based thing.

(quote.com is decent too, but it kills my netbook - it might be okay on something with some actual power)

*edit* if anyone can point me towards a lightweight portable graphics program, it would be very much appreciated. Something like paint.net would be perfect, as long as it can be run from a USB stick.

thanks!
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  #41661  
Old Aug 20, 2009 9:00pm
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Originally Posted by ijay View Post
Would like to hear views on how some of you go about setting trailing stops. Some possible scenarios:

For instance, do you set the trailing stop pip size equal to the length of the PA? What are the common issues with using trailing stops?
Hey ijay,

I have three different kinds of trails I use, depending on the situation...

(in order of complexity)

a) 20 pip stop. Simple, easy, automatic and I dont have to think. Downside is that it is arbitary as hell

b) 2 bar trailing stop - aka 'the mike'. If I dont have any clear signals, but dont really think there is much room to run, I set a stop at the high/low 2 bars back. Its straightforward, but only really good with small bars - with big bars it can give too much back to Mr Market for my liking

c) my favourite trailing exit strat is to jump down a timeframe (or two, sometimes) and base my stop on the PA there. So, for instance, if I have a position on a daily, I might move the stop to just outside the last swing high/low on the 4H. Usually gives a good balance of tight stops and room for the trade to move. Downside is that it is more work.

I've also been experimenting with modifications of (a) but trying to make it a little less arbitary by using either the average true range of the pair on that timeframe, or taking the volatility of the pair and putting the stop just outside 1/2/3 standard deviations.

To be honest, neither are working as well as (b) or (c) at present. lol.
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Old Aug 20, 2009 9:22pm
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Originally Posted by TiaForex View Post
Awesome stuff Joel. What platform do you use for charting futures?

I think tradestation my well end up being my Christmas present....
Ninjatrader through IB.

I'm kinda jealous. I had a play with TS8 once at a (ex) friend's place, and it was pretty kickass. He does a bunch of stock index arbitrage, and had it set up to analyse the spred between the index and a representative basket, then jump up and alert when they got out of line - at which point you could automatically buy the whole basket of (23?) stocks and short the index futures instantaneously, then track the spread and close when it got below a preset trigger. The whole thing was just incredibly powerful.

The option chain analytics, if you are into that kinda thing, were cool as hell as well. Not to mention the 'press button for calendar spread'.

I think it is probably way too hardcore for me though, lol. I doubt I would even use (or know how to use) 1% of its capabilities. Although it would almost be worth it just to able to press a button and get a H2 / H8 / D2 forex chart *shakes fist at MT4*
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Old Aug 20, 2009 10:36pm
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[quote=mbqb11;2973451]
Quote:
Originally Posted by mbqb11 View Post
Basically you can sort of see it, but MACD helps hint at this for me too. When a pair becomes over extended you can sort of feel a retrace is in order.

Here is an example, of a likely scenario that I see happen quite often. You can see if we make a new low here (with this breakout) we are going to have this extreme MACD. There is almost no way that the MACD can catch up to price before their is a spring back or some kind of retracement. [/QUOTE
Reading your breakout posts is fascinating, Mike. I always figured breakouts were an obvious trade ('duh, there is a line and price went through it...easy game!'), but I guess like anything there are layers upon layers of complexity that just go further and further each time.

Kinda shows the difference between a rookie and a pro is all in the depth of thinking.

God damn I have alot to learn

(still working through the breakout thread...slowly)
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  #41702  
Old Aug 21, 2009 6:47am
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Originally Posted by tradertt View Post
P.S. is it just me or are there no A setups to trade these 2 days
Depends how risk averse you are

I like this lil lady for a bounce down... if you missed the 1H, the 4H train is still in the station, waiting to depart with a beautiful 2bar pin.

(obviously, it should go without saying that if you want to play this, you should watch out for some idiot action around those purple areas)

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So, just to make it clear, this is a consolidating market. I think it could easily head to the bottom blue line, as outlined on the daily. But it could also bounce back up and retest the top blue line. Might even get a false breakout, who knows.

The senior guys have talked about this a bunch of times, and why no one should lose a bunch of money on it.

Its strictly a 'stops to breakeven' type trade for me. I've got my 20 pips buffer and my stops at +5. I'm not losing money. Are you?

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Yes, I'm talking to you, lurkers who use this thread as a signal service. Dont go losin your houses because you dont know the difference between a flat market and a trending market
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Last edited by joelcf, Aug 21, 2009 7:16am Reason: stupid ovecautious nature.
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  #41704  
Old Aug 21, 2009 7:07am
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Quote:
Originally Posted by LittleLuca View Post
Gbp Chf H4

PB

+Rejected off serious level (1.7440ish) this level goes back to Oct 2008..
+ Rejected strongly..

-Lots of busyness to get through to get anywhere...

The 1hr was a reasonable pb with good rejection.. we shall see!
1st level for me is 1.7650ish..
Good spotting - nice big BUOB at swing low bouncing off the bottom of the channel, strong support.



(same comments as the EURGBP above)

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  #41881  
Old Aug 24, 2009 7:25am
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Default When forever comes crashing.

pow.

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  #41888  
Old Aug 24, 2009 9:52am
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Default trends

Quote:
Originally Posted by Bocajunior View Post
I'm throwing this out there for discussion, but what are your thoughts regarding trading against the major trend?
I always look at the overall trend before I go into a trade. It is suicide not to. You gotta know the environment you are trading into before you do it.

Generally, I want to get into a longer term position, usually based on fundamentals, but sometimes just on a weekly/monthly chart based outlook - and I am using PA for a riskless/low risk entry. So trend direction is everything for me.

Even when I am trading a 4H chart, I like to be in the direction of the trend. If not, I like to have a damn good reason to take the trade.

However, and this may be a bad habit I have picked up here , I dont mind a bit of a scalp on a quick countertrend move. But you have to realise that you are trading against the trend, and act accordingly. Its a short term trade, it could go against you at any time (and go against you HARD) and you really need to manage your risk well.

I use the river analogy.

If you want to go downstream, with the current (ie, trend), you can eat a big meal, get half drunk, screw around in the water, not really know how to swim and you will probably still get to where you are going anyways. it isnt really advisable, but the current will override most of your mistakes and take you there, no matter how much you try to screw up.

But act stupid when you are swimming against the current or let your guard down, and your ass is probably gonna drown.
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  #41956  
Old Aug 24, 2009 5:18pm
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Default lame.

Weak indecisive markets today. Nothing but a weakass pin on the aussie, or a slightly less weakass pin on the yen at retracement.

I passed on the H4 aussie, probably pass on the daily as well. Too much rubbish for it to run through.

Yen is a bit stronger, and has some decent downside potential. Kinda torn here - I like (but dont love) the location, but dont like the PA. I might get in if it breaks that strong PPZ there, even more likely if it breaks and retests it before heading south. Its still a girly pinbar though.

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  #41958  
Old Aug 24, 2009 6:32pm
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Default 30y Tbonds

Quote:
Originally Posted by joelcf View Post
pow.
I cant even express how happy I am that I found this thread. Before, things like this would have been a complete shock, stopped me out for a loss and probably tilted me into doing something stupid.

Instead, now I see a bar move through recent support/resistance and move my stop to the base of the bar, then play the pin on the way back up for almost a full point each way.

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  #41963  
Old Aug 24, 2009 7:19pm
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Quote:
Originally Posted by TiaForex View Post
The stop loss is the point at which I will admit I was wrong and get out of the trade. Plenty of trend trades can take out this stop loss and then move on down..
It's funny you should put it like that - when I started trying to 'trade' (as opposed to the longterm fundamental stuff I was good at), I always saw putting a stop loss was like admitting I was wrong (or could be wrong), so I never used one. I mean, I knew price *had* to go in that direction - my workings told me that - so why would I let some stupid stoploss order ruin my trade.

And naturally, I was using hugely leveraged OTM options.

So while the trend had more room to save me, I also took a 100% loss more than once. Far more than once

...idiot with an account and an internet connection would be putting it mildly.

Quote:
Originally Posted by TiaForex View Post
Edited to add: I should also say, that when this market does start trending properly again, there is simple easy money to be made from price action at pullbacks to trendlines and 50% retraces. Jacko style. That's the kind of big picture trend trading I like.
To me, this is the gold standard of trades. Everyone wants to pick a bottom/top and then run it all the way... I'd rather miss the peak and then pile on at every retracement.
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  #41964  
Old Aug 24, 2009 7:24pm
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Default

Quote:
Originally Posted by nasir.khan View Post
if i may say this is something similar but did't work. Any comments.
The pin is too small, it followed a huge bearish bar and it barely broke the previous low If you did want to risk it, which you shouldnt, you would want the hardest break ever.

This is a failed setup to me anyways, as it wasnt confirmed by the next bar (I use a 10pip break of the pin for confirmation.. think i stole it off jaroo, maybe). Not sure how everyone else does it.

Also, the two previous pins at the peaks are gorgeous.

*edit* LittleLuca, what software are you using to chart? Someone here will probably be using the same and be able to help you with your problem.
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  #41980  
Old Aug 25, 2009 1:01am
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Default Round numbers.

Quote:
Originally Posted by benji533 View Post
Another thing...I would like to ask here the seniors or whoever know the answer - does bigger round numbers mean bigger order flow? I guess yes. but it will be nice to get a confirmation.
I'm not a 'senior' by any means, but my answer to this would be a qualified 'generally yes'.

Big orders get clustered around xx00/xx50 numbers for ease of communication (whether this is as relevant as it once was is a matter of debate), and because the types of people putting in an order like this often dont need it to the nearest pip. They just wanna hedge an exposure, and so they pick a round number at an acceptable level. On top of that, you will get a clustering of trader orders, because big numbers make big dumb obvious profit targets.

Remember, you arent talking about pips here - you are talking about cents. The reason you see orders at 0.8100 is because it is $0.81...

This follows through to the next level, but the effect isnt linear. Yeah, you will see more orders around .x000, but not like ten times more orders or anything - because there isnt rarely a reason to round off to the nearest ten cents. But what you will see is an increase in trading orders, because it is a bigass number, with a big psychological effect. So you get people putting orders around there, and then you get other people trying to take advantage of the orders there, and so on. Generally, this leads to choppiness, rather than big clear jaroo-esque moves.

What you are definitely going to see is a far larger number of stop loss orders - 'if this trade hits 0.8000', ima kill it! and then myself!'.

And as to whether this extends to the big ones - 1.0000... well, hell if I know I'd wager, though, that it will continue in the same manner - more important, but not ten times more important.

Also, one thing that people often miss is that there are orders on both sides of round numbers. They form strong support/resistance and usually reject price, but if price breaks through there are likely a bunch of orders (stop loss and/or buy stops hoping for a breakout) on the other side... I'll let you draw your own conclusions as to what that might do to price.

Mike did an awesome video on it, which I only just got around to watching this morning on the train. He basically explained everything I have ever said about order flow in one diagram and about two minutes, lol*.


*..can you tell I used to be a legal writer?

Quote:
Originally Posted by benji533 View Post
I am wondering if there is any style that has a large win rate, and a large R:R ratio as well?...
For me, it has always been getting into a PA setup on a lower timeframe. If I see price on the daily go right up to a PPZ, get rejected and start coming down, I'll drop to the 4H and see if a pin is forming there (often, you miss the peak). And sometimes even down to the 1H..

As a result, you can get into a 'daily' setup before it has completely formed, and get a killer r:R. Just pick the location.

Same goes for what Cyrus posted above - entering on a retracement can cut your risk down significantly. It's one of my favourite new tricks. Takes some practice to recognise the type that is going to work for this kind of play though - often, I prefer to wait for a retracement to come back through a previous level - so let price retrace to the 50, and then enter when it comes back down through the 38.2. Just dont mistake a retracement for a big move in the opposite direction!

On a pure single-timeframe-with-proper-confirmed-PA setup, looking at it logically I think inside bars should usually give you the best r:R, as they should have the lowest relative risk...assuming you are entering based on a break of the inside candle, with a stop based on the outside candle. Otherwise, most setups should offer the same risk, on average - a full bar.

Although, again, it really is all about location.

*edit* and, of course, a blind bounce of a big PPZ/round number is going to offer huge r:R, but I dont think that is really a j16 setup (although happy to be corrected). You can basically get in with, conservatively, 10pips risk (often less.. 5 pips seems common too) and huge potential reward. Obviously, the effectiveness (ie, sucess rate) is going to be entirely decided by how well you assess the strength of your levels. I wouldnt recommend it to my grandma to trade.

(the other really huge r:R I get is with rac setups, but I am completely rubbish at those right now)
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Last edited by joelcf, Aug 25, 2009 1:38am Reason: r:Rtastic
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  #42001  
Old Aug 25, 2009 6:03am
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Default EJ 4H

Quote:
Originally Posted by ghous View Post
Eur/Jpy looks swweeet!

365 ema
trend line
ppz
with the current time frame trend
lot's of space.
not a fan of EJ. Looking at the daily, it isnt definitively with the trend - although it could be! Looks like it could easily head south still.

Plus, that big PPZ doesnt wanna be broken just yet, although there is clearly upwards pressure there - maybe a break above those two pins (on the 1H) could convince me otherwise though

(keep in mind it is a zone, but I have it drawn in as a line for some unknown reason)

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*edit* daily
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*double edit*
id be careful of AUDCAD too, it is still ranging and I would be weighting a downmove more than an upmove. The 4H pin should be good for a quick trade, but dont get married to it
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  #42010  
Old Aug 25, 2009 7:27am
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Quote:
Originally Posted by ghous View Post
The only thing I didn't like abt Ej was the close. It "should" have been a bit higher to give the buob a more authoritative look or let's say given the location I was expecting this to happen,

But I am in anyways...

g
Its formed a sweet bullish looking bar on the hourly, so it will probably work out for you if it can bust the highs around 134.85... there seems to be a bear sitting in the middle of the path.

Price keeps coming back, so it might only be a medium sized bear, which eventually gives up and lets price keep headin higher

Just meant it wasnt for me

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*edit* these ones

15m/5m isnt something I really post here, it doesnt really fit the methodology and I wouldnt want to give people bad ideas, but I often watch for things like this - multiple rejections of a PPZ/round number and enter on a nice break. Seeing a few rejections on the lowers makes me believe in the PPZ more than just one on the higher timeframes.
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  #42016  
Old Aug 25, 2009 7:50am
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Default Crude 4H

Almost feel like there might be some kinda PPZ around here somewhere... now where could it be?

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*edit*
Quote:
Originally Posted by Grousman View Post
Many thanks guys, I'm here to learn & the charts sure help. Agree re lurkers taking trades based on experienced guys. I need to learn how to do it by myself.
Welcome! I found the absolute best way to learn is to post setups yourself and get feedback from some of the senior guys. They spot the stuff we miss, and it only takes a couple before you figure out what you are missing, and why it is important.

And try and analyse the charts that are posted to see if you can spot something that the poster has overlooked - Mike and jaroo have saved me, conservatively, about a hundred trillion dollars doing that.
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Last edited by joelcf, Aug 25, 2009 8:51am Reason: wrong chart. nice.
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  #42019  
Old Aug 25, 2009 8:54am
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Quote:
Originally Posted by nasir.khan View Post
Edit: i think we should ask someone more senior cause its very........
Sorry, lol. I know where the big resistance is, I was being a touch too flippant for my own good

now, the real question is... north or south?

I wouldnt dream of touching this one, that PPZ simply isnt something you screw around with. In case anyone picked 'south' above

Dont mess with the SNB

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  #42022  
Old Aug 25, 2009 9:13am
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Quote:
Originally Posted by Bocajunior View Post
Evening everyone,

I know I said I would stay away from shorter timeframes but just caught a glimpse of GBPJPY H4, which is the one pair I do track intra day.

Pinbar/ doji at a PPZ. Looks tasty!

Cheers
Assuming you are careful with this one around this trouble, looks good *edit* (for the initial pin. no way i would chase this one). Id be getting to b/e though, just in case... she definitely has a big fake down to retest in the universe of possibilities... though that big barrier level seems to have broken.

(although, as someone else said, I think Ghous' EJ looks like the stronger hand tonight/this morning)

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  #42028  
Old Aug 25, 2009 10:04am
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Quote:
Originally Posted by StoragePro View Post
Here is a pair I rarely trade. The last trade was a dinger!
Wow. So, the best thing I learned today was that dinger does not mean the same thing in america as it does here..

http://en.wiktionary.org/wiki/Wikisaurus:condom

Quote:
Originally Posted by pmn100 View Post
I've been meaning to ask, what is the significance of the 365 ema on a H4 chart? I can understand the daily because its a simple way of averaging a years worth of price data (even though there's actually only 5 or 6 bars per week), but what's important about three hundred and sixty five 4 hour bars?
It doesnt mean anything, per se.

Basically, most charting packages are dumb. Or were dumb - high end stuff is smarter now, but most retail type stuff isnt. They treat MA/EMA/etc lines as a x period moving average. So, while the 365 line makes sense on the daily (and is heavily used), it doesnt really make any sense on the lower timeframes.

But, everyone else is using the same charting packages too. So you are pretty much banking on it having meaning because everyone else is looking at the same screen and saying 'oh shit, 365EMA!' and trading based on that. Which is why they are now so ingrained in trader's minds... in effect, they mean something because everyone thinks they do.

Personally, I dont really use EMAs on my charts under the daily. I think I have them setup, but I will only really look at them on the daily because I *know* everyone is using them there. So they are definitely a factor/confluencegiverofpips.

On lower timeframes, if there are a bunch of big EMAs clustered I will take notice, since it is entirely likely that a bunch of people are going to trade off at least one or two of them... but as for one all on its own? Its minor to me. I'll look, but I dont much mind ignoring it if I like the setup.

But alot of people use it. And it cant hurt to at least consider it as part of the puzzle.
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  #42074  
Old Aug 25, 2009 6:37pm
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Quote:
Originally Posted by TiaForex View Post
I always have a mantra in my head "Buy at the ask, sell at the bid, bid price shown".
Easiest wway to remember is that it is the market bidding for your shares, or asking $x for them, not what you are doing...'Bask' and 'bidS' have saved me from screwing up more than once

Quote:
Originally Posted by TiaForex View Post
Which is a very long and convoluted way of saying... add the spread to your entries on buy orders (and SLs and TPs for your sell orders).
I found the button in MT4 to turn on the ask line, and it makes things alot easier when you are dealing with a cross with a stupid spread on a lower timeframe... everything Aussie, for instance >:/
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  #42079  
Old Aug 25, 2009 7:20pm
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Quote:
Originally Posted by Billy73 View Post
Hi all

I'm looking at this small pin on nzd usd and wondering whether i should place an order to sell around the 0.6820 level.

Price is at a major resistance level 0.6900 and there's some nice divergence but overall trend is up and the pin is rather small, maybe i'll put an order in but only use less than half my normal stake on this trade.
I'd pass on this guy.

As Ben said, location is nice but the pin is a baby in a field of bulls and bears (or, in what seems to be the current lexicon, a 'poodle bar').

But my main issue with it is the lack of protrusion from the surrounding bars - it barely breaks the previous bar. That pretty much tells us that the bar doesnt mean much one way or another - there was no firm buying pressure and then an overwhelming avalance of selling pressure to put it back down... it just kinda traded around a small range.

I'd be looking to play a bullish break of the PPZ as a breakout trade maybe, but wouldnt be shorting it based on that PA.

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  #42100  
Old Aug 25, 2009 11:58pm
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Quote:
Originally Posted by krue View Post
everything seems congesting, why is this happenning ? coz holiday season ?
Ima draw a picture. It isnt a Monet; it is more like a crayon drawing. But...

The S&P is at a precarious place at the moment - the rally, fuelled largely on speculation and hope, has petered out. Is it overbought? Is there more bad news? No one is certain - even Ben is 'cautiously optimistic'. The broad sentiment is that recovery has begun, and the worst is over... but the majority of the rally was simply a correction of the massive overselling. So you have a healthy dose of fear and doubt, but mixed in with enough optimism and positive data that we are at a bit of a crossroads, waiting for either the train or the devil to appear.

In the recent environment, S&P has been leading currencies around like a shetland pony. Bad news about Goldman translates to fear in the S&P, which pushes up risk-aversion currencies (yen, franc and usd) and pushes down speculative ones (the aussie is the most obvious one affected here). So any move in currencies is probably going to be a result of S&P movements - and, as above, there havent been much of them lately.

Then, tying it all together, this is a very light data week, with not much of consequence - and so people are just being cautious. No one wants to take big positions into uncertainty. Home sales could change that. Maybe. But they arent as important as they once were.

Wait, did someone say fundies? Erm, I meant... something about a second elliot wave retracement to an astropivot EMA on the RSI divergence cross!
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  #42123  
Old Aug 26, 2009 6:39am
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Default USDCAD 4H

Caught a nice breakout on USDCAD 4H. Went straight to where I expected too, which is always nice



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Only other thing that interests me so far tonight is the 4H AUDJPY outside bar. Obvious PPZ below.

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Quote:
Originally Posted by TiaForex View Post
Can you post astropivot EMA indicator with settings please. Thanks.
Shouldnt you be demanding backtest data and account statements, otherwise you will refuse to use my free method/indicator?
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  #42125  
Old Aug 26, 2009 7:27am
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Quote:
Originally Posted by nasir.khan View Post
Hello every one,

GU is breaking its PPZ, 365 EMA (4H) and Trend line.

GJ is breaking its PPZ, 89 SMA (Daily), Breaking IB (4H+Daily) and tested Trend Line several times and broke it.But its also sitting at 61.8% retracment level.
Looks good, but beware of the bigass PPZs below

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*edit*
Wow. Only just figured out that Metatrader cuts off like half the chart when you use the 'Save 800*600' option. Jerk.
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  #42127  
Old Aug 26, 2009 7:30am
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Quote:
Originally Posted by StoragePro View Post
Geeze Joel - I am glad I was sleeping for this one...
Even if you werent asleep, you would have been by the end of that post
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  #42133  
Old Aug 26, 2009 7:56am
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Quote:
Originally Posted by nasir.khan View Post
Thanks.

No if you close/open or resize the tool bars on left that could do that.

And whose the jerk btw me or MT4?
MT4

or possibly me, for not looking closely at the charts it has been outputting for the last two years or so...

Quote:
Originally Posted by StoragePro View Post
Funny thing about that post - I could not tell if you were serious of full of it! LOL. I guess you put FUN in Fundies!
Stuck at a conference all day, so completely serious but also slightly delirious.

AUDJPY has been firmly rejected on the 1H. Might set a sell order and wake up to check the close of the 4H. Or might just get some sleep.

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  #42135  
Old Aug 26, 2009 8:18am
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Quote:
Originally Posted by StoragePro View Post
Check out the GBPAUD today. BUOB at an extreme with divergence at the 1.9500. Hourly and 4 Hour.

Tastes like Chicken.

AUDJPY - Not sure I want to trade against Rac on this one... I am very short on this pair.
Who are you with? None of my brokers have that cross. Even my australian one

Looking to get short on AUDJPY too, so hopefully I have rac-confluence

*edit* I lie, IB had it, but with a terrible spread.
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  #42140  
Old Aug 26, 2009 9:01am
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Quote:
Originally Posted by ijay View Post
Hi Joel,

I see AudJpy being somewhat in a no-man's land. Price is now at 7800 round number support. It also appears to be winding up.

There's also a bit of traffic to the left. It could very well go down hard, but I'm kinda leery about it.
yeah, not in love with it. only wanted to try and squeeze in 40 or so pips down to 77.60, then possibly hit the big PPZ around 7700. Below that, there is a PPZ around 74.50, then 71.00. One to get to b/e and give room to run, if it cooperates...

Its been pretty strongly rejected three times now from where I expected, so you are probably right.. time to give up on it, seems like i am trying to be an alchemist and turn air into pips... and only on person here that I know of can do that
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  #42261  
Old Aug 26, 2009 8:14pm
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Quote:
Originally Posted by StoragePro View Post
I have not written full books - co-authored some articles and book sections.

It SUCKS. Not enough money and a ton of effort. My head hurts - and it was over ten years ago..
Not to mention the fun and games when your boss/some jerkoff editor/etc decides to change things around at the last minute (often for random, arbitary reasons) and completely screw up the entire publication. Regularly.

Moving from words to numbers is the best thing I ever did.
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  #42268  
Old Aug 26, 2009 9:16pm
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Default FCOJ

(sorry for the dodgy web charts, forgot to post NT charts last night)

Aaron, you should appreciate this one.

Original entry was @ 100 (although I got screwed by slippage), and doubled up on the break of the daily pin. Sept.

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All my dreams of transforming in to a completely degen, Livermore-style 1930s futures trader are finally coming to fruition*.


*Poor pun intended.


Quote:
Originally Posted by Thierry89 View Post
Do you open this trade on the breakout 1.2345 or to the next candle close 1.2288 ?
Thanks for your advices
I enter on the break. Some people wait for a break and retest, depending on the location and whether there is a PPZ overhead.
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  #42272  
Old Aug 26, 2009 9:30pm
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Default

Quote:
Originally Posted by StoragePro View Post
It sucked. Not poor. Sucked.

BTW - Can you do Livermore without all the Livermore FAIL?
Nah. You cant be Livermore without occasionally wearing a sack/barrel.

Not that I actually want to be. Livermore, while clearly a brilliant mind, was also a degen gambler. And there is nothing cool about that.

There is just something about the reaction you get when you tell people you just shorted orange juice/pork bellies/etc..



And damn you are a harsh critic
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  #42288  
Old Aug 26, 2009 11:21pm
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Retrace to touch a PPZ and big round number, in the direction of the daily and short term trends?

Sounds like a homerun to me. Nice trade

wrt to 'trend bailing you out', I use it in reference to getting sh!tty entries, missing obvious PPZs, etc. If I jump the gun and enter into a pin before it closes, if it is with the overall trend, it usually works out anyways.

Countertrend in the same situation will almost always burn you.

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(obviously, this is easier with hindsight, but the point remains - if you get sloppy countertrend, you get eaten alive. by sharks. really cranky ones.)

Same with missing a PPZ - if I have the weight of the market momentum going in my favour, price is more likely to break through big PPZ/round numbers I neglected to notice. But if you are trying to pick the bottom and make a countertrend herocall, an overhead PPZ can reject you hard, and then kill you when the market keeps going the way it wants to.

Even down to just making stupid mistakes, like the time I wasnt paying attention and ended up with a 10,000 pip stoploss. If that was a countertrend trade...

Obviously, being with the overall trend doesnt give you licence to just blindly do whatever you want, as long as you have the overall direction right. That's a massive sucker play, and one which I am glad I have removed from my repertoire.

As for 'hopping on a trend', my favourite entry in the world is a nice big pin at a pullback/retracement. Preferably with some kind of confluence, a touch off a big PPZ or one of the major fibs is always nice.

I know some people like breakouts for this too, but they have only ever worked as a short term trade for me. Could be because I suck at them though
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  #42310  
Old Aug 27, 2009 5:39am
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Exited USDCAD trade from yesterday on touch of 1.100 for 125pips on a risk of 20

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Now, is it getting too cocky to try and go for another breakout of 1.100? Its a pretty big ppz level, looking at the recent history...

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  #42312  
Old Aug 27, 2009 5:48am
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Default USDJPY 4H

The old me would have taken this one. Pinbar! Off support!

The new me sees a bunch of resistance 10pips above, choppiness, a small pin following a big bearish bar, selling pressure from two big pinbars in the last week, and going against the daily trend.

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  #42322  
Old Aug 27, 2009 8:21am
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Default

Quote:
Originally Posted by StoragePro View Post
Don't be liquidity.
This might have to be my new favourite quote.

Quote:
Originally Posted by StoragePro View Post
Joel's thoughts were on risk avoidance.
True, but I am also a massive nit when it comes to this stuff. Still somewhere in the concious incompetance stage of things - im a dumbass at it, but at least i realise it now - so I dont trust myself to take anything less than the A+++ trades

I skipped this one, for instance.

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I really think i need to take a leaf out of your book and just commit when I see something that I know will work. Overthinking, overanalysing, second guessing and eventually outleveling myself into not taking trades is one of my biggest weaknesses.

Could be worse though, could be the other way
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  #42338  
Old Aug 27, 2009 9:56am
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Default USDCAD

Quote:
Originally Posted by aserbfx View Post
what about this pb on usdcad?
to much traffic on a break?
I'm watching that one. Off a nice PPZ, but you have that huge 1.100 level above. Break through 1.100 and I'll be all over that one like a fat girl on cake.

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Shorted AUDUSD too. Feel like a traitor

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  #42343  
Old Aug 27, 2009 10:34am
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Quote:
Originally Posted by Jduester View Post
Careful guys... u/cad pinbar is a bullish pinbar at a swing high... not how we look for them... I like the idea of 1.10 break, retrace, with PA and entry though...
Sorry, was doing twenty things at once and shoulda been clearer - i like it as a breakout trade of the 1.100 line, not as a pin.. just noted the hard rejection from the ppz and move back north as a positive sign
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  #42351  
Old Aug 27, 2009 11:05am
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Default round numbers... or are they?

Quote:
Originally Posted by Eclipse View Post
You miss the base principle of levels tested in the past (supports and resistances or ppz if you prefer) which not always match with big round numbers (don't forget that 1.03, 96 etc. are still round numbers, and they are very strong, see charts above).
Eclipse makes a really, really good point.

I think another thing people miss is that many of the transactions we are talking arent one way. And so round numbers arent always obvious...

I'll tell it in story form, since Sto was a jerk about my art skills

I'm an aussie selling my pale ale to americans, cause yall make rubbish beer (except Kona Breweries!). All my costs are in AUD, so I clearly dont want your silly paper money, I want aussie dollars. I call the bank, say I want the nearby exchange rate of, say, 85 US cents on the dollar, so I can manage my costs. The bank says 'peice of cake, you can buy AUD for your USD at 0.8500. Big number, shows up as a bigass PPZ at the .8500 round number on the AUDUSD chart.

Now let's say i am an importer. I buy $100m worth of US plutonium. Mr Burns pays for the parts, material and labour in his plant in USD, so doesnt want silly kangaroo money. So he calls the bank, and says he want to lock in the future exchange rate at A$1.30 for each US dollar. Big round number, 1.3000, right? Obvious on a chart of USDAUD, but that isnt the instrument we trade.

What's the rate that will show up on your AUDUSD chart as a big fat PPZ, stopping you out every time?

This is dead simple, once you think about it. i'd wager that 95% of people dont. The point isnt to know what it is, the point is dont dismiss a ppz because it isnt a 'round number'

(and with that, night all )
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  #42352  
Old Aug 27, 2009 11:08am
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[quote=Pirabuji;2998337]Hi Joel,
Sorry what signal did you skip on this one? Is it the BUOB?
Quote:
Originally Posted by joelcf View Post
I skipped this one, for instance.
Attachment 296628
Attachment 296629
Combine those two 4H bars and you get a nice 4H pin, right off the PPZ

I'd do a chart, but I cant ever get that stupid periodcon thing to work. It hates me.
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  #42390  
Old Aug 27, 2009 5:03pm
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Quote:
Originally Posted by joelcf View Post
Shorted AUDUSD too. Feel like a traitor

Attachment 296712
Love it when things work the way they should. 30 pips down, close on a stall at the ppz, 85 up, closed when it came back through my tl.

easy game.

(although I did expect it to stop and reverse at the pink ppz, nice suprise that it broke through and didnt come back to take out my trail )
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Quote:
Originally Posted by Lapin View Post
There is a PB under formation on the daily TF.

Pros:
- Long nose
- Off 134 Weekly PPZ
- Off EMA 150
- Off the short term trend line
- With the Weekly trend

Cons:
- I can only see the traffic above its head.

Would you classify it as a A+ setup?
My strategy would be to have a TP at 135.5

Cheers
For my money, GBPJPY is the better pin on the yen crosses today, assuming it comes back to close properly. Nice protrustion into space, through a PPZ. EJ is in too much traffic to be A+ for me.

Both have decent PPZ zones right overhead though.

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  #42393  
Old Aug 27, 2009 5:46pm
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Quote:
Originally Posted by Bryan View Post
First stop 1.2320
Nice!

I stopped trading this pair because it was too choppy for me, and just gave me headaches (and a bunch of losses). Beat some pips out of it for me

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  #42399  
Old Aug 27, 2009 8:38pm
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Default USDCAD daily

USDCAD made a nice 2d pin at close. Big PPZ sittin on a round number below it, but it is with the overall trend, and in general fits the direction I want to get into this trade (ie, bullish on resources and hockey).

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I hate entering these on a Friday though. And my new trading assistant isnt offering any useful advice!

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(It's Daffodil Day - go out and support your local cancer charity, aussies)
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  #42405  
Old Aug 27, 2009 11:35pm
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Default VXX

Slow friday, so here is something I've been looking at.

I shorted VXX almost as soon as it became available. Not for any technical/PA reasons, but some pretty solid fundamental ones. Didnt even realise that, at the time, I was looking at a BEOB at double top swing high with divergence and break of an IB.

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Funny thing is, looking back at the equities I have held at some point or another, almost all of my entries could have been improved using j16 goodness.

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I get this is all based on hindsight and woulda-shoulda-coulda and small sample size, but I've looked at twelve separate charts now, and I could have improved my entries on 8, and my exits on 6. Unfortunately, it took until like March this year for the penny to drop, so to speak.

It constantly amazes me how well this stuff works everywhere.

Now, if someone could just construct a OHLC chart of my girlfriends crankiness, I'd recognise the bullish pin last weekend and would have gone long flowers
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  #42408  
Old Aug 28, 2009 12:32am
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Quote:
Originally Posted by faces View Post
I'm looking at this too! CAD is making a lot of 2D pins lately. The one from august 10/11 was looking pretty nice, but the next day it dropped just enough to trigger any shorts based on that formation and then turned back up. .
You mean this one? I have it as the 13th, but being from the other side of the world makes my dates screwy and I never remember which way to adjust them and by how much >:/

Quote:
Originally Posted by joelcf View Post
Actually, I dont see the two as mutually exclusive. I will probably take the 2d USDCAD as well, depending on how hard it breaks south.

*edit* actually, going to dinner and cant watch it, and feel like there could be a decent retrace in this one. Will set some alerts and wait it out. Not too worried on missing it, fish in the sea and all that.

Attachment 288901
That was a nice little winner a couple of other people here I think - I missed it because I had reservations at Tetsuya, and you dont skip those for anything - even the Micheal Vick of pins

Went right to where we thought it should

It's all about what you do when it gets to that PPZ. I see like 12 bars bouncing off it, so its clearly got some fight in it - I woulda gone b/e, or possibly dropped down to a smaller timeframe once it got to the PPZ to see if I could hide a stop down there somewhere.

(as discussed previously, I am also a big girl when it comes to risk management, so others might have been more aggressive and squeezed some more pips out of it... something im working on!)

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(also, check out what the next one, that you took, did.. specifically, where it stopped and came back up )
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  #42412  
Old Aug 28, 2009 1:20am
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Quote:
Originally Posted by faces View Post
Yes, that's the one I meant. Looking at it now, I suppose a good way to manage it would have been this:

1. Place entry stop below the bars, stop above.

2. Next day your trade triggers, but as the day ends in a bin bar, move the stop loss 10 pips above the newly formed pin bar.

3. Stop gets triggered making a loss of about 79 pips instead of 200-something pips which was the size of the bars.
You could, but then you would still make a loss when you probably shouldnt be. You know there is a pretty decent probability that the PPZ is going to send it back up at you, just based on the chart.

If I know there is a huge PPZ that I am going to run up against, I always set my stop to at least BE. That one had rejected like 11 or 12 bars, in both directions. No way I am taking a loss on one of those. Like StoragePro said - dont be liquidity.

I'd wanna either bail with my profits once it hit the ppz and reversed (usually setting the stop to the top of the PPZ so if it keeps going, you should be able to stay in the trade), or drop down to the 4H/1H and micromanage based on the PA down there.

If I had to just set the trade and not look until the next day, I'd either set a TP at the PPZ (which I hate), or just pass on it based on the r:R.

Quote:
Originally Posted by faces View Post
An even better and agressive way would have been to put a stop and reverse above the pin bar and take a long trade I wonder if anyone really did that.
That's a pretty hardcore move, but you have the framework there to do it. You know where the PPZs are, where price is probably going, and where it will probably stop and stall or come back.

I do it occasionally (see the AUDUSD yesterday), but a couple of guys here seem to specialise in it - just bouncing off each side of the channel. Pretty impressive stuff.

Quote:
Originally Posted by faces View Post
Well, on this one I closed half pretty early and trailed the other half which got stopped after the price bounced of the PPZ. I was ok with giving those pips back cos I already had locked a nice profit and it could have broken down through the PPZ
Nice Pretty cool to make a big trade like that after ten days!
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  #42419  
Old Aug 28, 2009 2:02am
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Quote:
Originally Posted by nasir.khan View Post
Did you get this one.
There was a 1:20 reverse split at the start of July

You want once in a lifetime? Check out YHOO at the start of 2000

This was my third year of uni. The guy I sat next to in some dead boring lecture (continuous time finance) told me he thought the tech market was overheated, and he was buying some puts over yahoo, amazon, ebay and someone else.

Never saw him again. Didnt even show up for the finals. lol.

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  #42523  
Old Aug 30, 2009 1:39am
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Default ticks vs time.

Quote:
Originally Posted by turnip15 View Post
4000 tick ? whats nearest minute time frame to that please?
That's going to entirely depend on traded volume of the instrument involved.

If it trades 4000 contracts a minute, its a minute chart. If it trades 4000 contracts a day, its a daily chart.

(from this, you can probably figure out why forex tick charts arent really that useful)

For ES, volume is highest in the first and last half hours (about 250k), with a low of about 100k for the half hours around noon. So a 4000 tick chart is anywhere between 30 seconds and a minute or so.

Now, YM is about 130k daily...

Should be easy enough to go from there to work out what period a YM tick chart represents.


(you could have found all this for yourself within a few minutes)
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  #42525  
Old Aug 30, 2009 3:30am
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Quote:
Originally Posted by rustyjeff View Post
Hey joel ...

Just wanted to say I like reading your posts..
You obviously have knowledge in how things work practically...
I have read about what you say but to see it appear hear is just more confirmation..
Thank you.
Jeff
Not a problem at all.

James, Mike and the guys have given me so much - for absolutely nothing - that I kinda feel obligated to chip in a bit and help explain some of the less important stuff
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Old Aug 30, 2009 7:24pm
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Quote:
Originally Posted by ghous View Post
Hi guys,
...
My university starts from tomorrow and I'll be there for just as much time as I am at home trading and posting/reading at FF.
Good luck with the studies - I know it can be a grind at times, but the 'click' you get when a concept just falls into place and the absolute clarity that accompanies it makes the climb all the more worthwhile.

Look forward to hearing from you again. Dont keep us waiting too long

Quote:
Originally Posted by TiaForex View Post
I know SeekingLight has a similar personality and his stuff is well worth reading. I think you'd like it. He does well with complex analysis because it's who he is, and a simpler reading of the charts wouldn't suit him. Trading really is personality based.
I wholeheartedly agree. I read alot of market analysis, and Patrick's take is one of the very few I look forward to each week.
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  #42571  
Old Aug 30, 2009 8:10pm
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Quote:
Originally Posted by benji533 View Post
This is really interesting, but also confusing. A pin bar is a sign of fast and sharp rejection, and an inside bar is a sign of indecision.
Not necessarily. On a daily bar, it could be a sharp move upwards in the first hour, then 23 hours of gradual descent. An inside bar could be a combination of a few big orders to form the first bar during a period of market quiet, and then thousands of orders battling for market position on the inside over a tight spread.

Without access to order book info from at least one large liquidity provider, if not several, you really dont know. It is far too easy to read too much into simple bars, something I am often guilty of.

(interesting you bring this up though, it is one thing I have been investigating lately. breaking down pin bars to look at how the market actually reacted, and distinguishing the quick reversal type from the slow movement type)

Quote:
Originally Posted by benji533 View Post
What does a DBLHC or a DBHLC really tells us? as I see it, price failed to break one side, which is a sign of weakness, and a break to the other side is a sign for strength. I am not a big fan of this concept.
That is the exact same thing that a pin bar tells you. Price went one direction, reversed, and made a small break on the other side. As Aaron pointed out, a DBHLC almost always forms a 2 day pin bar.

I think the problem here is the way you are looking at it. Price movements (and markets, in general) arent a series of discrete bars, even though it might look like it on a chart. It is a continuous stochastic process - and the lack of volume data and order info in forex means that you are always going to have issues coming to any kind of absolute conclusion on what may/may not have happened.

Quote:
Originally Posted by benji533 View Post
I will explain why this is very important. Lets say I want to go long. I see a BUOB - why it is important to see it went much lower than the previous bar and shot up?
Quote:
Originally Posted by benji533 View Post
This is simple. If I have a BUOB that engulfs the previous 3-4 bars, I know that below theses previous bars, there can be many TP orders of buyers, or stop orders of fresh sellers, or limit orders of fresh buyers.
When the BUOB tests the low and shots up, it tells me:
1) sellers TP orders were hit, and now the buyers have more...
Again, this isnt as absolute as you might think. Banks and big traders arent stupid. They dont just set a bunch of orders and then go to the pub (although, Fridays...). When a BUOB tests the low and shoots up, it could be a dozen different things. It could be, like you say, that TP/limit orders were hit. Or it could be that none of the orders were hit, and a big player swung the market back up. Or it could be that the selling pressure just naturally subsided, and so the process of order filling naturally pushed price back up, without any of the three.

Your third conclusion is also not made of stone. All you know is that buying pressure overwhelmed selling pressure. And without knowing how many units were on each side, you cant conclude that no sell stops were triggered. There could have been ten million units sold, but if there is demand at that price level for eleven million units...

I think you should have a look at some actual order flow data, watch it live for a bit. If you have access to it, watching a Level II order book can be quite fascinating.

First thing you will notice is that there arent big 'buy' and 'sell' orders just lying around, sitting in the sun and waiting to be triggered. Generally speaking, orders arent just dumped into the market. Price improvement algorithms run the show, and they dont work as simply and straightforwardly (is that even a word? ) as we would like.

*edit* as an aside, I think we sometimes put too much stock into what *we* would do, and then assume it will be true for the whole market. Or, more accurately, we overweight the effects that we expect from the orders of people like us. Yeah, traders might put buy stop orders at a certain level based on particular PA, but are they going to be the orders moving the market? In some situations - yes. Like a ranging market waiting for a breakout, because that is an extremely common way of trading.

But in most situations, it isnt our orders (or those of PA trading proponents generally) that are going to make the market react. Some people are trading economics. Some people are trading dumbass MA cross systems. Some people are using an EA and dont know wtf is going on. And some people are just buying currencies to pay for a bigass load of copper they need to build some cheap electronics.

To paraphrase (paraquote?) Roy Batty, our orders get lost like tears in the rain.


(this is also why blindly trading stocks using PA can be a killer if you dont know what you are doing)

Quote:
Originally Posted by benji533 View Post
Elliot Wave stuff.
Elliot Wave Theory is largely rubbish. Well, that isnt fair - Elliot's original observations were sound. However, his conclusions were erroneous at best. And the way they have been twisted into some kind of psuedoscientific crystal ball is ridiculous, and mainly just a way for people to sell book/software/newsletters on their 'market insight'. And even then, they are too vague and subjective to be useful (except when posting after the fact charts).

Prechter's stuff is well written, but ultimately he leaves enough subjectiveness in there to make sure he can curve fit his data to suit his needs.

My point is... dont put too much stock in EWT.
--------------

I enjoy reading your posts, Ben. Hopefully school doesnt cut back on your posting time too much!
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Last edited by joelcf, Aug 30, 2009 8:38pm
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  #42577  
Old Aug 30, 2009 8:45pm
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Quote:
Originally Posted by jarroo View Post
Watching the Aud/Usd Daily PB at the top of a consolidation. We have some good confluences here. A hard break, low risk setup is what I will take.
That makes two of us
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  #42596  
Old Aug 30, 2009 10:58pm
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Quote:
Originally Posted by raczekfx View Post
.
Its always good to have Jim AND Mark on the same side as you.

(edit: stop posting off-topic stuff)

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My main concern on this one is the time of the week and corresponding lack of volume. Are there going to be a bunch of cranky NY/London traders who are going to fight back once they wake up and see what the sneaky Aussies have been up to?
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  #42640  
Old Aug 31, 2009 6:57am
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Default The Aqua Line?

Quote:
Originally Posted by tradertt View Post
Saw this as a good pin bar but I was stopped out when I placed my stop just above the PPZ (Whole Number)

Did I miss something?
Let me help a little here. It isnt about divergence, or round numbers, or swing highs. You picked a nice looking bar at a swing high - it might not have had the perfect shape as it didnt poke out enough, but hindsight is 20/20, as they say. On it's own, I see no problem at all with taking this bar.

But you forgot the aqua line.

It is all about the aqua line.

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Now, look at the 4H. Ignoring that Sunday bar, 6 out of the last 8 bars stopped there (including the pin itself, which I forgot to mark). You think it might have some power to stop a move? Especially countertrend? Hells yes it does.
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Anyways, I will address divergence in another post, because I think it needs to be talked about (badly, judging by the responses you got)... but that wasnt your problem here. You want to fade a big trend, you gotta dot the Is and cross the Ts. And you just missed a PPZ, that's all.

Happens to all of us. Mike and Jim have picked me up on it more than once... and every time, the trade woulda gone against me. now I am extra careful about looking at where price might go, and managing things appropriately.
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  #42656  
Old Aug 31, 2009 8:42am
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Dollar Divergence.

This is alot longer than I planned. So, here is the short version.

Behold, the power of the sports analogy:
I kick a football at a window. It doesnt break, and comes back to me.

Next, I kick it at the window again, but from a bit further back. The ball goes to the same point (ie, to the window) but by the time it gets there, it is already decelerating, because I kick like a girl. Either that or I kick it more softly. Because I kick like a girl.Therefore, it is travelling slower when it hits the window this time. If it didnt break the first time at 30kph, it probably wont break at 15kph either.


Congratulations, you now understand divergence.

Next time, I kick it a bunch harder. It goes to the same spot, but is travelling faster when it hits the window. The window has a greater chance of breaking. This is a lack of divergence. And being a destructive jerk.

------------------------
please feel free to stop here. you probably understand enough at this point to be happy
---------------------

Quote:
Originally Posted by tradertt View Post
P.S.
1 more thing: Tell you the truth, I personally very rarely trade trend reversals if there is no divergence. But I still remember that it is a killer if I use it alone on trending markets.
Why do you not trade reversals without divergence? If you cant answer that question any better than 'x told me not to', then it isnt a very good rule.

People dont think about what they are trading, and that is just crazy (to me anyways).

As most people, they will tell you that divergence means that price is lying. Or that the trend is turning. Or that price is about to reverse. All variations on a theme.

Not really.

Broadly, the MACD measures the velocity of price increases. Or, more correctly, the difference in the velocity of two seperate measures of price movement. If you know calculus, think about it basically like a second derivative. If you dont, then congratulations on having a much more fun life than me in college

The MACD is constructed by taking the difference between the 26 day (slow) and 12 day (fast) EMAs. So when it has a high positive value, the difference between fast and slow averages is high (ie, fast - slow > 0), and so you can conclude that over the last 12 days, the moving average is higher than over the past 26 days.

So what does that mean? Broadly, it means that rate of change in price is increasing faster in the near term than it is over the longer term.

But people* werent happy. No. They wanted more. So they went and made the histogram. The histogram is the difference between the MACD line, above, and its own 9 day EMA. So when the histogram is large and positive, it means that the MACD line is increasing faster than it has been over the last 9 periods, and therefore we conclude that price might be rising faster than its immediate short term average.

CHART!

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Seriously. That is all the silly little picture means. If someone told you that up front, you would probably tell them to go away, and never use it again. But whatever.

So what is divergence? As anyone in this thread can tell you, it 'means' that price made higher highs, but the MACD histogram didnt.
Well, from the above, we can see that the MACD histogram is a broad measure of how fast price is rising/falling. So divergence really means that price is going up, but not as quickly as it did last time it got to these highs.

Does that mean that it has to reverse? On its own, hell no. That's why, by itself, it is a rubbish signal for entries and exits. Its like saying that if your car does 0-100kph in 5 seconds, but then takes another full 5 seconds to get to 120kph then it is going to stop.

The way Jim uses it, though, is different. Look for divergence at a PPZ. Since we are talking about a swing high, we are saying that we want to look for an area where price has already been rejected once, so there is probably a bunch of orders there. And then, on top of that, the divergence tells us that the rate of increase is slowing as price approaches that PPZ - so there is probably less power behind it.

This divergence doesnt mean that price will reverse. It means that there is a greater likelihood of it reversing, given the PPZ.

Likewise, hitting a PPZ without divergence simply means that price is increasing at the same rate or faster as it was last time it hit the PPZ.

See: football analogy.

But even then, we dont know that price is going to reverse. Fortunately for us, Jim is awesome and knows what he is talking about. So, not only do we look for a PPZ, but we look for PA at the PPZ.

A pinbar tells us that price may reverse.
A PPZ tells us that price may reverse.
Divergence tells us that price may reverse.

Put them together, bank pips, repeat.

This is the real power of confluence, and why it gets stressed so hard here. One sign on its own can fail. Two can fail, but are less likely to do so.

But put all three together, and you definitely have the odds in your favour. And that is all we want in this game.

Stuff you should now be able to answer:
1) Why is divergence a killer in a ranging market?
Because it is a dodgy signal that only means that price increases are slowing down compared to their moving average. In a ranging market, your moving average is naturally going to be lower, because you are in a range. Prices naturally bounce around in a range, because...uh...its a range.

So changes in the increase of that MA mean pretty much nothing ON THEIR OWN. If you trade this, you are essentially trading an MA cross system. Dont do that.

Combined with PA and a PPZ/round number, it is still useful, just less than with a trending market due to the tighter range.


2) Can we trade a swing high pinbar at a PPZ without divergence?
Hell yes, but keep in mind the lack of divergence tells us that price is moving faster than the last time it hit the PPZ, so it has more chance of breaking it. This doesnt mean it will break it. Go back through some bars and see for yourself. Or kick a football at a window.

3) Is divergence a useful tool, and should I use it?
Is it useful? Definitely. As seen earlier on our programme, it basically tells us that the rate of acceleration is slowing, and so either buyers are drying up, buyers are becoming sellers (ie, taking profit) or that sellers are starting to get back into the market, or all of the above. It doesnt mean that 'the bears are in charge', or anything like that. Why? Because price is still going up.

Should you use it? Only if you want to, and it suits your style. You dont have to use it.

4) Should I go kick a footy through my mum's window and blame it on a guy from the internet called joel?
No.


----------------------

Now, what is the bet that Mike or Jim have already done a video that explains this in about 3 minutes flat?

--------------------------
Most people (including you, looking at your chart) use the MACD, so I've use that here. But it applies equally to RSI (perhaps moreso)... basically, almost all the oscilators you see are just some kind of moving average difference, a derivitive of an EMA, or a combination thereof. I should throw in that the RSI is a bounded oscillator - it moves between two points. So you always know when it is at the top/bottom of its range. The MACD, TRIX and CCI arent, so they can just keep going up and up and up.

* it was all one guy, Gerald Appel I believe. Maybe Apeal. Anyways, he wrote a pretty good book about it.
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Last edited by joelcf, Aug 31, 2009 9:43am
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  #42658  
Old Aug 31, 2009 8:52am
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Quote:
Originally Posted by benji533 View Post
I guess I am guilty again

I will be glad to get a post on this from you.

Ben

PS - Joel, a part of trading against the trend is also naturally trading into "traffic"PPZs. So usually I automatically see this, but thank you for stressing it.
nah, you are all good Ben. You have an inquisitive, analytical mind and you seem to pick up things ridiculously quickly and - more importantly - the concepts behind them.

How many chart monkeys trading MA cross EAs understand what the lines on their chart mean, understand order flow? Like one in a thousand, maybe? But you do. Takes most of us a hell of alot longer than you to start seeing the light.

And yeah, the biggest problem with going countertrend is exactly that - you are against the trend. You are selling when everyone is buying. You pick a A+ pin at a PPZ with divergence and you are essentially saying 'I think that sellers are now in control*, at this point in time, at this exact bar'.

It's a big call. That's why we give ourselves the best possible chance to be right by getting as much confirmation as possible, and still being picky!

* because buyers ran out, because they turned into sellers (ie, took profit) or because more sellers have come into the market. doesnt really matter, results are pretty much the same.
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  #42659  
Old Aug 31, 2009 9:04am
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Quote:
Originally Posted by Area51 View Post
Could you please clarify for the dummy (Me). What you are saying is that price hits the aqua line PPZ and finds it hard to work through. So when it did break it then becomes support and the same difficulty in breaking back down occurs? Additionally because it is with the trend it is even stronger?
Basically, yeah. Resistance becomes support. And because it is with the trend, there are going to naturally be more buyers than sellers. Absolutely right.

The quick version is that this happens because there were a bunch of sellers, they all sold their stuff and left. So now the buyers push the price through the PPZ, and the buy orders on the other side get filled (pushing price up more).

So, say you have sellers at .9995 and buyers at 1.005. Everytime price goes to .9995, the sellers are going to sell and go home. Selling pressure pushes the price back down, so you see a rejection. This is the resistance zone you see.

But each time, there are probably less and less sellers there. The rest already sold up, went home and made dinner. Eventually, price breaks through.

Now you have the jerks at 1.005, who all buy when price gets there. Pushing price up. And they probably dont all get filled, so there are a bunch of orders left there.

On top of that, everyone in the market sees 1.000 as a support zone, like you said. And so they put a bunch of buy orders right above it, because they expect a bounce. Price comes back down, buy orders get filled, price smashes back up.

(extra credit)
All those buyers at 1.005, where are their stops? Probably tucked below the round number/PPZ, at .9995... waiting to be triggered when we get a breakout back down
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  #42662  
Old Aug 31, 2009 9:21am
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Quote:
Originally Posted by benji533 View Post
I have read at several places how the histogram is calculated, difference between moving averages, etc. That is a very common subject you can find anywhere in the internet.
Exactly! So why dont people read it?!

I have to work like a hundred hours to build up a decent size trading account. Pretty sure I can spare a couple of hours to learn wtf I am doing and not lose all my money. That's why people here will always be better than the idiots out there losing all their money blindly gambling and not even trying to understand what they are doing.
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  #42666  
Old Aug 31, 2009 10:24am
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Quote:
Originally Posted by supremeChaos View Post
Yes Sir, it's Gerald Appel (from what i've read). & he probably does have "Appeal" too. LOL

RSI created by Welles Wilder
btw, RSI too, like Stochastics & other bound oscillator, can remain overbought/oversold for a long time, specially in trending markets.
hey now, I'm not a Sir.. yet. one day, maybe

Since watching Jim's YM video (also, the best training video I've ever watched), I've been playing with TRIX. It makes alot of sense to me, looks promising so far.. just need more time to test it and get to know it a little better.

(re: RSI, it can, definitely.. i'd hate to think of the number of orders that 'became liquidity' due to a misunderstanding about how a bound oscillator works - but overall, i feel it is probably easier to read for someone new because you can always judge where in its range it is. of course, this comes with the downside that people start autotrading like an idiot on a break below the 80/above the 20 and blow up their accounts without even considering what the chart is doing)

*doubleedit*
Quote:
Originally Posted by supremeChaos View Post
in your chart, u say "This is what creates pullbacks on trends. every buyer needs a seller in order that the market will move."
if i understand your post correctly, i think this is not always the case.
technically, you are both right :P

If there are no buyers at a level, people trying to get out will need to offer to sell cheaper. and cheaper. and cheaper. until they find someone for the other half of the transaction. So, if 'price' refers to the current bid/ask, then it can move without orders.

On the other hand, obviously, if you use 'price' to mean the last transaction, then you obviously need two parties to agree on a price, and so you cant move price without a buyer and a seller :0

(this is a bit of a moot point in forex, it is more applicable to illiquid stocks and futures. talking to a guy today who runs the forex desk for a very large bank, he told me the daily market turnover is about a trillion dollars, give or take five hundred mil. At $100k a contract/lot, thats 10m ticks a day - well, i assume he meant an american trillion. point is, liquidity isnt an issue )
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  #42710  
Old Aug 31, 2009 5:30pm
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Quote:
Originally Posted by faizal82 View Post
nice pin at swing high
1.5800 round number / ppz
lots of space

already taken 2/3 of at 1st sign of trouble 1.5700. stop moved to b/e.
Nice! I missed the 4H entry (stupid needing to sleep), but will probably take the daily bar if it closes as a pin.

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also, exited out of the AUDUSD last night at the pink PPZ. When price broke the top of the zone, moved my stop to the top of the zone, 0.8345. Came back and stopped me out (and just as well, since it seems headed to take out my original stop).

50th successful j16 trade!

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  #42724  
Old Aug 31, 2009 8:34pm
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[quote=Janegra;3009829]
Quote:
Originally Posted by Janegra View Post

FROM THE RESPONCE TO MY EARLIER QUESTION, DO I ASSUME THAT THERE ARE NO DEMO'S AVAILABLE????
GRAHAM
Ninjatrader + Zen Fire demo account. Free, but limited historical data on some contracts (not sure why). Platform is very good, but definitely has its issues (like constructing continuous contract, ugh - god I want tradestation). NT7 should fix alot of the problems.

The thing is, futures data costs money. The exchanges charge companies for it, so companies arent just handing it out for free. A couple of places, like Mirus, will give you a month free or whatever. Even once you have an account, they will pass the data charges on to you, although most will rebate it if you do a certain volume of trades per month.

This is markedly different from forex. Because forex is an OTC market with no exchange, there is no data charge. So companies like IBFX or Oanda will happily let you demo forever and a day.

But honestly, if you have a small account, futures trading isnt for you. Yet*.

*edit* I note you are from Australia. You can probably get data to play with from a CFD provider, but just remember that you arent getting *true* exchange data, you are getting their own version of it. Oh, and the charting platforms all suck. All of them.

Anyhoo, I use Interactive Brokers. And have used them for years, and still very happy with them. Easily the best choice for locals, imho.

*this wasnt directed at you specifically, but I have had a bunch of 'so, can i trade the futures with $100 like forex?!'. No, you cant. Exchanges have minimum margin requirements that you need to be able to meet. You can sneak around this by daytrading because most brokers only require o/n margins, sometimes.
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  #42761  
Old Sep 1, 2009 1:44am
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Quote:
Originally Posted by bundyraider View Post
Far Northern Australia, definitely agree. But not swimming off the rest of Australia would be like telling your kids never to go out in the sun ever, ...they might get skin cancer.

Sounds like some nature program has talked up Australia's dangerous creatures again. LOL

You're more likely to die in a plane crash (while it's sitting at the terminal. ) than come to an end at the hands (lol ..."hands") of one of mother nature's pets.
I used to think that - then there was a shark warning off our beach one day last summer. Oh, and some kind of stinging jellyfish invaded too, and you couldnt go in the water for a week.

...and it isnt exactly what you would call 'far north', lol.

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(funnelweb and redback spiders are a regular occurence, but i dont know anyone that has ever been bitten. apart from that, australia is harmless. although I did see a brown snake at the coast once, and apparently they can be a bit bad for your health)
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Old Sep 1, 2009 1:57am
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Quote:
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Bondai beach. it has warnings about the jellies & yet people still flock to the beach. why the bloody hell is that so?
Bondi Beach is 98% English backpackers, and they dont even know what an ocean is, let alone that there are animals in it that can kill you
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Old Sep 1, 2009 2:57am
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Quote:
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Ahhh....Newport Beach....I lived at Whale Beach for two years and spent some quality time in the beer garden at the Newport boozer.
love The Arms.

Had my (future) sister-in-laws wedding up at Jonah's on Whale Beach earlier this year. Beautiful spot to live, one of the absolute best in Sydney...if you happen to have $2m for a rundown shack.

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Had a baby brown slither through my legs as I was doing a pumpover in the winery one day...I just just put a big jug in front of it and it obediently slithered in and I carried it across the road and let it go in a field.
Jesus Christ. They say Aussies are supposed to have a tough reputation overseas for fighting animals and taming the wild, but it is the kiwis that are the real hardasses.

Pretty sure if I saw a brown snake coming, I'd be headed in the opposite direction as fast as possible.

----
back on topic, this OJ trade is still going. Think it has room to run still, nothing has indicated otherwise.

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Old Sep 2, 2009 5:56am
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Quote:
Originally Posted by gasgas View Post
Hey guys

Just thinking why this pin failed!?

Should be order deleted couse next bar after pin didnt triger the order?
Some people say that the setup is fine, as long as it hasnt been invalidated (like price going past the nose of the pin, for instance).

Other people (Mike falls into this camp, I believe) kill the trade if the next bar doesnt trigger it.

I am in the second group. For me, a pin bar is a momentum play, I want a nice hard break. And if it hasnt broken my way in the next bar, I lose confidence that the momentum is still there... and so I kill it. It might work, but I figure why bother with something I dont have complete faith in when I can just move onto the next setup.

It's up to you really, whatever suits you, your trading style and your personality.



(oh, and I think your pin probably had trouble because it went against a very strong trend, and wasnt a very large bar compared to the last couple. But I wouldnt have seen it as a failed pin, it was just one that never got triggered)
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Old Sep 2, 2009 8:09am
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Quote:
Originally Posted by dogfight View Post
If the next bar touches your entry point, 10pips above/below your high/low respectively, and retraces back, where would you exit your position, taking into account your stop loss is quite large, assuming trading on the dailies?
To be honest, that is a really tricky one.

First, I'd want to check for any news that might have sent it that way. Check other pairs with the two currencies to see how they are reacting. If there is something big that has changed since I placed the order, and I get a high probability it will go for a full loss, I'd kill it.

Barring that, I would double check my entry - is there a big PPZ i missed (aka the aqua line)? Is there opposite PA on a higher timeframe? Did I miss a huge round number?

I dont want to take a full bar loss. If it retraces hard against me, I would look for any kind of zone (ppz, round number) that might stop the retracement and send it back the way I want, and tuck my stop behind there. Lastly, I'd probably look at the PA on a lower timeframe (4H, maybe 1H), and if it looked like it was going pear shaped, cut my losses short.


Havent had to yet. If you pick your trades right, it should be pretty rare.
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Old Sep 2, 2009 2:48pm
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(Mike pretty much said everything I was going to, but anyways...)

Quote:
Originally Posted by Jduester View Post
My questions to those that manage trades this way:
1. Do you only intend to move your stop up (ie, not take a full bar loss) if the trade moves slightly in your favor and then against you quickly? This was the case described above, to which Joel was replying. Or do you plan to move your stops closer Anytime the trade is going against you (even if it's a slow movement against you).
I really only move my stop if something completely out of the ordinary is happening. A retrace is normal, we all see them and I am comfortable with that. But when it retraces through a big number without blinking, or hits what i thought was a weak ppz (such as the base of the pin i want to trade) and moves sharply against me, I get concerned.


Quote:
Originally Posted by Jduester View Post
2. Is there a reason you don't look for round numbers, ppz, etc prior to entering, and putting your initial stop there (even if you position size based on full bar stop?) That would allow you to walk away from the trade and wouldn't have to 'manage' it until you are ready to move stop to b/e (or take profit)...
I do look for all these first, and put a list of 'potential stops' into my trade plan before I enter. To be honest, the reason I dont put my initial stop behind one of them is that I really havent tested alternative stops enough - so i just stick with what I know

I do agree though, it seems bizarre that you would put a full bar stop there when you never intend for it to be used.Or at least like a case of poor planning To me, what you are saying makes complete sense - if I picked my setup, I should just be able to commit, shove my money into the middle and stand up. But it just doesnt sit with my psyche... yet.

Definitely an area that I can improve on, I tend to micro manage things sometimes if they dont go just right. Most of the time I have done it has been because there has been a genuine change in the market that is going against me... but at least a few times, it was probably just me overreacting. Possibly stems from some ridiculous need to be right - and if the market is proving me wrong about the trade, moving my stop and getting out with a smaller loss can make me right again. Or something. Back to FT's section

(forgive me if these thoughts are a bit all over the place, it's half past four in the morning... stupid work.)
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  #42899  
Old Sep 2, 2009 8:27pm
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Quote:
Originally Posted by endo77 View Post
Anyone feel lucky enough for this buob off of old lesser pvz and a little divergence?
Like you said, weak, small ranging BUOB that *barely* engulfs the previous bar, against the main trend and right into a PPZ on a choppyass pair made up of two choppyass currencies? That's not even a D- in my book.

But I *know* there is a Dirty Harry quote in here somewhere


Quote:
Originally Posted by endo77 View Post
Sunday bars are gay
That is a p1 quote if ever I saw one.
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  #42903  
Old Sep 2, 2009 8:55pm
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Default rubbish bars in rubbish places.

Quote:
Originally Posted by supremeChaos View Post
PA setups do not always work --meaning, we cannot just trade every PB or BEOB that we see. in your chart's case, it could be a 'pause' PA -- a pause of the uptrend at that time.
(this isnt aimed at anyone specific - quoting SC because he gets it and put it so well)

Over the last week or three, I've seen alot of C, D, E and straight F trades posted. I get that the markets are in a bit of a sideways motion at the moment, but people are trying to trade crap.

Not just 'it isnt A++++, but it is still a great setup that will work again and again', but like absolute crap. Inside bars against the trend into big PPZs. Pin bars that look more like indecision bars and dont even protrude from the previous couple of bars. Breakouts into triple zero round numbers.

It seems to come from either inexperience, and not knowing what to look for in a great bar (which is fine, expected and you should read the thread and ask questions more), or overconfidence and thinking you are good enough to take marginal setups and manage them like a pro (in which case, you are usually deluding yourself).

I've been as guilty of the latter as much as anyone.

The whole point of this thread is that trading can be easy - if you make it easy for yourself. How do you do that? Take kickass setups in kickass locations with a bunch of confluence. Look at Jim's charts, or Mike's charts, or the other Jim's charts, or StoragePro's charts, or any of the long time guys. You dont have to search for what they are trading, or what the confluence is - it is obvious as hell. The bars jump out at you, bash you over the head, shove money into your wallet and then run off.

No brainer trades are where it's at. Forget trying to squeeze out that .13R trade to compound your account that tiny bit faster. I have better things to do with my time and money, and so do you.

It goes back to what Josh said, which really got me thinking. 90% of my losses are my own fault, and have come from getting myself into a difficult spot. Taking poor quality setups is how you get into difficult spots, and have to make difficult decisions. And making difficult decisions under pressure is how you lose money.

Be a sniper, not a drunk 12yo kid on the back of a pickup with a 12 gauge full of birdshot.

Sorry for the rant.
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  #42925  
Old Sep 3, 2009 2:16am
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Default %R, again.

I suggest that anyone trading 8%, 15% or 50% of their account has another look at these graphs from p 2763:





These arent made up numbers. These are based on a 75% win rate and a fairly optimistic return structuring - neither of whichanew trader has.

You increase your %R, you increase your risk exponentially. You keep doing that and you will go broke eventually. The 2% rule isnt just some arbitary number, it is the best balance of risk and return that stops you going broke.

Stick to 2%. Seriously.

Quote:
Originally Posted by NoBread View Post
Thanks man i thought i was loosing my mind, i have been sitting here going ok anyday now.
heh, you and me both. its been a bunch of choppy rubbish. a few decent trades here and there, but not many.
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  #43022  
Old Sep 3, 2009 5:37pm
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Great post.
Not sure...but I have the feeling it is a bit referring to me also (even if you didn't thought about me).
lol, complete opposite actually! your charts are clean, and clearly explain your thought process, entry, potential roadblocks and exit strategy in a logical manner.

Despite what you seem to think, people could do alot worse than emulate your style

Quote:
Originally Posted by TiaForex View Post
Nothing C grade about any of your setups Benji.

I noticed the same thing as Joel, and it had nothing to do with you. Yours are clean and obvious and you're an example in keeping it simple.
As usual, Aaron reads my mind.

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JOEL - BTW - I am planning a 3 continent, World Tour soon for my job. Sydney is on the itinerary ... we need to chat over a couple cold ones.
Absolutely. That would be awesome.
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  #43040  
Old Sep 3, 2009 8:41pm
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Default Correlations lite.

Quote:
Originally Posted by Jim4x View Post
basically, there are a number of pairs that all go up and down together, so what are the implications of that?
Just look at the attached screenshot and you'll see what I mean. I could have included GBPUSD, AUDUSD plus EURUSD at a squeeze..... they all basically run the same direction as each other.

does that mean that if a good setup occurs on any one of the correlated pairs you would just take the one with the highest daily range (more pips available)?
I'm hungover and tired, so this is going to be brief... for now

It's good that you brought this up. Correlation is a funny thing. And it confuses some people, and it really needn't do so - there are generally only two things to remember, and those are both at the bottom.

I mean, the three you posted are always going to move together. For anyone that doesnt know why, think about it for about a quarter of a second

EURJPY
GBPJPY
AUDJPY

Obviously, any movements in the yen are going to appear on all three charts. Again, treading lightly, there are two main things at play

a)the yen is a major world currency of exchange (the aussie isnt, the pound is borderline when it comes to asia), so it will often be the driver of movements

b) these are all minors - basically constructions of AUDUSD+USDJPY, EURUSD+USDJPY and GBPUSD+USDJPY. Implications of this are pretty clear.

But the others you posted - GBPUSD, AUDUSD plus EURUSD, wont really work like this. They are all majors. Sure, they all use the USD, so will all see effects from movements in the USD, but they will have weaker relationships, and the relationships will break down more. The correlations you do see will often be other forces at work (risk seeking/aversion, resources-driven, etc).


As for
So really a buy on GBPUSD is pretty much the same as a buy on AUDJPY.....

That doesnt really follow at all. Correlation doesnt mean they are the same, just that there is some connection between their movement. Unless they have a corr co of 1, they are different instruments and should be treated as such for the purposes of what we do here.

Those two pairs, btw, move together more because of risk aversion flows. And correlations like this can (and do) change.

I do a bunch of correlationish trading and arbitrage plays based on this stuff, but it isnt really j16 stuff. And unless your trading is based on the correlations, keep it in mind if you are choosing between a couple of setups with a common base, but probably dont need to worry about it much more than that.

The thing is... in the end, it doesnt really matter. The different charts will usually move together, but you will have different PA on each, different s/r zones, etc.

No real need to trade more than one, either. It isnt terrible, but if you are adhering to a %R system and simultaneously trading every yen cross under the sun, you are smashing your volatility through the roof and could autocorrelate yourself to the poorhouse.



So what should we do?

If the trades have a common base (in this example, yen), generally just pick the one with the strongest PA. I wouldnt worry about which has the highest volatility. You want the easiest one to trade and make a profit, not the potential to squeeze a few extra pips.

As long as you dont end up doing something potentially silly like going long on USDJPY and AUDUSD at the same time, you shouldnt really worry about it any more than that. No need to complicate things.

Despite appearances, I'm a big fan of keeping things simple

(if this doesnt really answer your question, feel free to shoot me a pm and I will try and help when I am a bit less muddled)

*edit* as expected, mike already talked about this. and explained it much better
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  #43043  
Old Sep 3, 2009 9:01pm
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Quote:
Originally Posted by Jigsaw View Post
!
Jigsaw, that was an awesome post, and your Renko charts are cool as hell - they make the market look like some kind of badass 1980s video game!

Quote:
Originally Posted by atton View Post
Thanks for the info. But these PPZs are everywhere. I think when I look for a trade there is always a PPZ that is near to my PA pattern .
yes, yes there are. And as long as you know they are there, you are ahead of the game
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  #43045  
Old Sep 3, 2009 9:13pm
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Quote:
Originally Posted by 2mas View Post
Isn't long UJ and AU at the same time is like long AJ?
From a fundamental point of view... kinda - AJ is traded by itself too, and not in light volumes (carry trade is massive). But then you have arbitrage flows keeping it from moving our of step with the UJ and AU and bleh. But yeah, you could construct your own synthetic AJ by trading AU and UJ at the same time. Not sure why you would want to though, unless you love paying the spread... or the relationship has broken down, in which case you quickly engage in some triangular arbitrage and make some riskfree dollars.

Talking charts, though, and it is a very different matter. If you are trading PA on AU, it is because you have picked out something that AUD is doing against the USD.... Japan doesnt come into it. Same with UJ. But move to AJ, and you are now looking at their relative movements, and USD is effectively filtered out. USD could go up, down or stay still and you wouldnt care.

So having an AU trade or a UJ trade is fine. But going the same way, in both, is effectively fighting yourself. You might as well have an AJ chart, and be basing your trade on that.

Hope this makes sense. As I said, I am far from eloquent today.

The other main thing to keep in mind is that the US is the dominant mover here, so by going long AU and UJ, you are effectively hoping for USD to simultaneously move up and down
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  #43050  
Old Sep 3, 2009 9:31pm
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Quote:
Originally Posted by 2mas View Post
Thanks a lot Joe.
I didn't mean to trade the UJ and AU instead of the AJ, why would I?? AJ is available and i'll save in the spread. I was just using the example in your post. Just wanted to clear the point itself, if it happens in other pairs, so I am aware of what I am doing.
Thanks again.
ah, okay, no worries. In that case, your understanding was completely correct.

Basically, my other poorly explained point was that you should probably try and avoid having a long and a short position in any currency, unless you are doing it on purpose
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  #43058  
Old Sep 3, 2009 10:30pm
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Quote:
Originally Posted by jarroo View Post
50% retracement is not a Fib ratio level. lol
the more lines you have on your chart, the more chance you have of being 'right' when one of them gets hit.

Geez, dont you know how to sell a trading system?!
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  #43080  
Old Sep 4, 2009 2:12am
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Default Resolution.

I propose renaming the thread to

'james 16 - start at p1, stop trading the 5m chart... and no, we dont have an EA for you'
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  #43260  
Old Sep 7, 2009 4:58pm
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as its all quiet out there atm... wondered if I could pull a straw poll on the thread's favourite books...? I have just been away for 2 weeks and really enjoyed Black Swan... makes you think about a few things. And wanted to get some more ideas on what next.
If you liked Black Swan, give Myth of the Rational Market a try. In the same vein, but imo far better. I just finished it and really enjoyed it.
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  #43265  
Old Sep 7, 2009 7:58pm
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Originally Posted by Jigsaw View Post
Do you know of somewhere where I can get data for the individual stocks of the FTSE 350 (I understand I will have to pay for this feed).
I trade LSE stocks sometimes - mostly the big financial and insurance houses. I get the feed through my broker (interactivebrokers), it costs me GBP5 for a non-professional investor. Those are standard data fees, so it shouldnt cost you any more than that through any other broker. Most of them will rebate it to you, as long as you trade a minimum volume.

You will find all the FTSE 100 and FTSE 250 stocks on the LSE (FTSE is a joint Financial Times / LSE index). The FTSE 350 is just a combination of the companies making up the 100 and 250 indicies.

If you want London futures or derivatives (ie, trade the ftse100/250 itself), you need to subscribe to Euronext (which gives you LIFFE/Paris/Amsterdam/Brussels/maybe Lisbon) for GBP5, which gets you L1 derivatives and L2 stocks. Not that there is anything else on EuroNext (outside of LIFFE) that I want to trade, except maybe to short Louis Vuitton and Renault into the ground

*edit* the interbirds tell me that it should cost you around 6 pounds for level 2 and 4 pounds for level 1
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Old Sep 7, 2009 8:47pm
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Originally Posted by Jigsaw View Post
Cheers Joel,

Yeah I was thinking of getting an IB account for a while. . . And the data feed price is better than I have seen elsewhere so far, what is their charting like ?
I generally dont use their charting too much - I pass the data through to ninjatrader and use that for charting/trading, but it isnt too bad. You could definitely trade from it and be happy.

It's a step above the rubbish that most brokers give you, but it cant hold a candle to Tradestation.

Quote:
Originally Posted by Jigsaw View Post
Joel, quick question if I may -

What percentage of forex market activity is purely speculative ? I have my own opinion on this but I keep seeing contradicting views and it drives me crazy.
lol. That's a long, complex question that far smarter people than me have tried to answer and not been able to.

Figures suggest somewhere around 75-90% of activity is non-deliverable (ie, the end user is trading the movement in the currency and never intends to get a pile of Swiss Francs dumped on their doorstep) but the problem you run into here is that while this could be considered speculative from a technical definition, it also includes hedging transactions (generally, when you hedge against a risk you dont actually take delivery of the currency).

To add complexity, some hedging transactions can be partially speculative - an exporter might only hedge half of their currency risk, because they expect currency movements in their favour... but dont want to risk everything on it.

Then you have arbitrage trades, which are kind of speculative (you dont want delivery) but not really (since you are looking at relative movements in riskless transactions, and speculation implies risk).

Then you have problems with under reporting, transaction pooling, etc...

I've read a bunch of different papers that came to a bunch of different conclusions - but broadly, the amount of speculative (ie, betting on a rise or fall) volume by hedge funds is very high, probably higher than other activity. So you could say that this kind of speculation dominates the market volume. Obviously, the volume is also going to vary a whole bunch, depending on outside factors (compare the asian financial crisis or the whole Soros/BoE period with 2008, for instance).

Probably the best paper I read was called Speculation, Hedging and Intermediation in the Foreign Exchange Market by Malte Krueger (sp?). It is a bit old (1996), so while the quantitative conclusions are outdated (hedge funds are far more active now than they were then), he does a really good analysis of the issues and why it is so hard to actually determine the level of pure speculation. You should be able to find it on SSRN, or googleweb, if you are bored enough.

But, in short - hell if I know, but alot
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Old Sep 7, 2009 9:09pm
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Quote:
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As far as book recommendations go I think Tyler closed the discussion with Lord of the Rings. Man, I loved that book!
Agreed. I reread the series every couple of years, and it gets better each time.

Quote:
Originally Posted by Rocket! View Post
Also, since Taleb was mentioned, George Soros is another trader who is mentioned quite a bit in Taleb's books. His book 'The New Paradigm for Financial Markets' is a stellar read full of invaluable thoughts on the current state of the markets.
The reissue of this book, The Crash of 2008 and what it means: The new Paradigm is even better, since you get a new section with George talking about how he screwed up and why - the stuff on AIG (pairs trading CDS and vulnerable companies' bonds) is completely worth it.

Soros' Alchemy of Finance is an absolute classic, and pretty much required reading imo.
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Old Sep 7, 2009 9:30pm
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Originally Posted by tormo View Post
I am not the best with excel and want to input a function that will automatically calculate the max DD when given a column with the adjusted acct bal. over a one month period. Is anyone good with excel that can help me?
I'm not quite sure what you mean, but from your graph it *looks* like you want to find the biggest 'dip' - ie, each time your account hits a peak, how far it falls below that peak before you move to another high?

Grabbing the max difference is easy, =max(high1-low1,high2-low2). But that assumes you know where your high and low points are.

The way I would tackle it would be to setup a column next to your adjusted account balance called 'maxbal', and set it as a kind of 'high watermark' that records the highest your account has been at that point in time and work off that.

So it would look something like *edit* screw it, i made a quick sheet because I suck at explaining things.

Book2.xls
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Old Sep 8, 2009 3:24am
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Originally Posted by lacika View Post
Would You be so kind to post the math, or how did You get those numbers?(Complication is no problem.) Want to check it.
THX in advance, NL
Hey there,

not at home, so I cant send through the spreadsheet, but you will be able to find all the working in the book I referenced in the original post.

joel.
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Old Sep 8, 2009 4:37am
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Originally Posted by jarroo View Post
Great post Cyrus.

Your right, Josh's post is mega awesome.

http://www.forexfactory.com/showpost...ostcount=23250
agreed. that should be the default for 'im new, how did I pa?!'

(Its now also preserved in my vault of awesomeness' notebook, so that even a nuclear war cant erase it)
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  #43411  
Old Sep 9, 2009 8:30pm
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Quote:
Originally Posted by StoragePro View Post
hey look - an outside bar (marked)

Hey, cool - it crossed the 85.00

hey cool - it closed in the bottom third

Hey - an entry 10 pips off of the bottom will clear the bar lows to the left. (white dashed line)

Now scale it out. Hhmmm... bar highs on the four hour....

Now look at the daily - trading into the PPZ

Draw some fibs...
I think you are vastly overestimating the amount of thought that goes into a chump trade

I'd probably limit it to

Quote:
Originally Posted by StoragePro View Post
hey look - an outside bar (marked)
.. followed by 'press buttan on internets for making moneys!'

-------------------

Quote:
Originally Posted by Dale View Post
Let's see what happens if this breaks to the upside, I will cancel the order if the last low is breached.
At least you know exactly where this one is going and probably stopping
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Old Sep 9, 2009 10:38pm
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imho, this is a very subjective question. it cannot yield 1 general answer.
It can for me: 2
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Old Sep 10, 2009 12:13am
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Quote:
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Hey guys, I've been reading this thread...
Congrats on making your way through the wilderness and into the light

Quote:
Originally Posted by Monroe View Post
I have to be honest here and tell you I don't fully understand money management yet, or the Forex trade in general, so that is where most of my questions are concerned. Can anyone point me to a very detailed artical explaining this?
Most people use the %R system, which means you stake a certain percentage of your account on each trade - less than 2%. StoreagePro uses 1%, and is consistently profitable trader - using this gives him effectively NO risk of ever, ever going broke. I'd recommend everyone new sticks to this or lower since you probably arent going to be consistently profitable at first.

Quote:
Originally Posted by Monroe View Post
And for a short answer, (on a pin bar setup for example), how many pips apart do you generally put your stop loss from your buy stop/limit on a daily?
You really want to base your stop on the PA, not the number of pips. So, with a pin bar for instance, put it 10 pips past the nose.

So how do we reconcile the two? Easy. I note that you use Oanda, which is half the battle won

*note* this is a simplified thing I sent to a friend who was acting a fool with huge position sizes and blew up like five accounts. It's just an overview to stop people that have no idea from losing at life. See below for some references that will make you a position sizing ninja. *edit* or just listen to mike above, as usual

1. First, take the % of your account that you are risking, from above. Let's say you go for 1% and you have a $10k account. Easy, you want to risk $100. This is your total risk, the most you can lose on this trade.

2. Now, look at how many pips you need your stop to be. Say that your stop is behind the pin, and that ends up being about...125 pips. Remember, your trading system (ie, entry and exit) and money management system are separate. Set your stop based on the chart, not your account.

3. Next, you need to work out your position size which reconciles the two. So you want to risk $100, and want that to equal 125 pips (your risk on the pin). Open calc.exe (or grab your handy HP12C *nerd alert*) and work out 100/125 to find out the dollars per pip... 0.8, in this case.

4. Finally, calculate the number of contracts.. as you probably know (but some people out there might not), a pip is a hundredth of a cent, so a ten thousandth of a dollar.

A 'full lot' is worth $100,000, so dividing by 10,000 gives us $10/pip
A mini lot is $10k, which is $1/pip
A micro lot is $1000, or 10c a pip.

So, since you want to risk 80c per pip, you want to trade 0.8 of a mini lot (which Oanda will let you do), or 8 micro lots (if your broker offers them)... and you know that if it goes 125 pips against you, then you will lose $100 and live to trade another day with the 99% of your account that is left.

Similarly, if you have a $1000 account, 125 pips @ 1% risk = 8c per pip, so you want .8 micro lots.
((account size) * (risk% / 100)) / stop in pips = mini lots, x10 for micro
($1000* (1/100 risk))/125pip stop = .08 mini lots = .8 micro lots
This is a huge simplification, but it is enough to stop you going broke and ending up like the 90% of chumps out there.

There are a few tricky parts, like needing to convert non xxx/USD pairs to make sure your %R in USD (assuming you have a USD account) = your %R in whatever currency you are trading... but unless you are trading a huge amount of money, it probably isnt all that important for a new person. Then again, if you are new, you shouldnt be trading a huge account anyways.

There are some more advanced stop-placement strategies, too, to try and finess your risk:reward and profit ratios, but you dont want to mess with them until you really know what you are doing.

FOr more info, Van Tharp is a big fanboy of the %R system. His Trade Your Way to Financial Freedom and Definitive Guide to Position Sizing are very highly recommended by basically everyone.

Dont want to pay? Well, Diallist is your man. He has a whole thread of awesome here, or do a search on his name.

---------
The trap that most people run into is that they think 'i have a thousand dollars, I can set a 10 pip stop and trade $100 a pip! and when I catch that thousand pip move, i'm set!'

You arent. Risking too much of your account on any trade will send you broke. And you are just setting an arbitary stop based on irrelevant, non-market information (ie, your account size). So your stop will get hit. And you will lose your whole account, and have to start again.

Using a professional risk management system is what stops this happening, and ensure you can take trade after trade after trade, and compound your account into whatever you want.

You might think that you will never make enough money, when your hundred pip move nets you like eight bucks. But that is because you dont have enough capital. Increasing your risk might increase your returns, but it will also send your broke sooner - especially if you dont have a consistently positive expected value. You think professionals risk their entire $500m portfolio on one trade? Hell no. Consistent returns and compounding are the name of the game.

Base your stops on PA, limit your risk, compound your account, make dollars. Easy game.
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  #43428  
Old Sep 10, 2009 2:44am
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Originally Posted by rikrok View Post
I don't see any trdes on the dailies for today.
I am looking at the GBP/SEK following a 4 hour pinbar at a PPZ low yesterday afternoon, it may indicate a double bottom, it is still in play following the quiet overnight session. If it breaks upwards I will trade it. However I have noticed these Scandi currencies trade in huge increments and are a bit jittery, tho they still respond well to price action, it just feels more hairy.
Welcome to the world of trading illiquid instruments - high spreads, huge variance, unpredictable craziness.

I skip the exotics, too much of a headache - especially the scandinavians, who arent going to have any kind of spectacular asian or african style inflation blowout that could potentially net you enough pips to buy Neptune
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  #43443  
Old Sep 10, 2009 9:08am
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These illiquid currency pairs cause a lot more stress than the smoother liquid pairs.
That is what makes them so damn fun
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  #43494  
Old Sep 10, 2009 8:12pm
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1. Just wanted to know if there was a place that listed all the major Market Makers and
Internbanks positions that heavily influence FX.
Finding out who the major market makers are is easy. Not that know it helps much, though.

Getting their orderflow information is also easy. You can either get a job trading on a forex desk of a big insto, or you can start your own hedge fund and put a couple hundred mil in volume through them..pay enough in commissions and they will probably give you some tidbits.

Order flow information is incredibly valuable - it is one of the most valuable things a trading desk has, if not the most valueable. Think about it - if you know how to interpret it, you basically know what the market is going to do before pretty much everyone else knows. They arent posting it up on the internet for everyone to read for free.

Quote:
Originally Posted by triger88990 View Post
2. and how do you use the information about order flow in your favor
Learn to tape trade, get a job where you have access to order books, make money. Should only take about 5 - 7 years to get qualified, a couple of years to get experience and then a couple more years to get into a position to use that info

Quote:
Originally Posted by triger88990 View Post
do you guys think that it's better to stick only to the information from this thread,
Definitely. Until you have the basics down to an artform, everything else is just noise and will lead to poor decisions or paralysis. Wish I had figured this out earlier.

Quote:
Originally Posted by triger88990 View Post
do you think that I'm overcomplicate all this stuff
As someone who also massively overcomplicates things: yes.

That's the beauty of the stuff Jim teaches us - it works brilliantly in isolation. You dont need to know fundamental analysis, economics, statistics, monetary policy, trade theory, whether Hugo Boss make better suits than Zegna or which subway gets you to the corner of Broad and Wall.

All you need is this thread, a chart and discipline. The rest is a matter of time

Quote:
Originally Posted by supremeChaos View Post
Just FYI.... are most of u aware of this??

i dug up in my subscribed thread's...
Tesla's trendline alerter indicator.
it's in post#1 of his thread (check it out).
Wow. That is ridiculously awesome.

Now I just have to figure out how the make the email push to my iphone, and setup the logmein thing and I will be in trading heaven.

Oh, and figure out how to use the stupid iphone in general.

Thanks for posting this, I would have never found it.. I occasionally venture into the FF wilderness outside this thread, but it never turns out well. Last time I did it, I ended up reading about how to trade the 5m chart with dynamite and a detonator that you have to prime with a three red light indicator, or something
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  #43499  
Old Sep 10, 2009 11:47pm
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Hi guys, there is a pinbar on daily EURAUD.
The pinbar itself looked good, but there is divergence (Chart1)
and when I zoom out, I can see that the low of the pinbar will hit a very strong PPZ (Chart2). So this bar is no go?
The divergence you have highlighted isnt actually divergence, and doesnt really mean what you think it does. If anything, it just confirms what price already did - made lower lows, then reversed back up to hit the area it is in now.

You should probably do a bit more research into divergence before trying to incorporate it into your trading. Start at http://www.babypips.com/school/diver...eat_sheet.html

Personally, I dont even think that divergence, if it was actually there, is a reason not to take a trade anyway.

As you also note, there is a big PPZ. That, on the other hand, is a reason no to enter. If price broke that band, I might consider it. I'd be careful though... as it is, this one is definitely not an A+ trade for me. I'd have to be bored, drunk or demoing.

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Old Sep 11, 2009 12:22am
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Hmmm... have been reading up on this thread?
After about two minutes, I can safely say that only a handful of people in that thread have any idea what they are talking about - and the rest is a whole bunch of people misinterpreting things they have read/overheard, twisting basic concepts to fit their ideas and just plain talking rubbish..

(which is unfortunately, because there are some IF, D, H&A hidden in amongst the truckloads of quartz and zirconia)

protip: the wisest people are usually the quietest ones. It isnt hard to see who you should listen to.

Quote:
Originally Posted by supremeChaos View Post
Darkstar & Gaston...
(Darkstar & mbqb11 - awesome mentor & student, repsectively )
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  #43518  
Old Sep 11, 2009 5:00am
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Default EURCAD

i swear, sometimes the market just likes to tease me.

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Old Sep 11, 2009 5:35am
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lol its just like poker(thats why I play poker)...they just dealt you a pocket KKs and the flop give ATT lol and someone bets into the pot do they have the Ace lol or is he bluffing lol experience will give you the answer.
this one is more a QTs... looks pretty, new players love it, but it will send you broke if you dont know how to play it
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Old Sep 11, 2009 12:40pm
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LOL, that bar treats me like the girls in high school did .... all talk, no action.
That analogy works almost *too* well! Back when I was just starting out, I would have jumped at the chance to play this one - after all, it has a decent enough shape at first glance... but now, you couldn't pay me enough to waste my time on this trash.. It's all about finding the A++ action
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Old Sep 13, 2009 7:45am
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Originally Posted by triger88990 View Post
I knew that is more than just liquidity in those order flow,it's something more deeply(or maybe I'm wrong) but I'll figure out by myself,I will not give up,the truth is somewherehere(in the bush where we are waiting to enter with our position) it's just waiting for me to find him

or maybe I'm not really know about what I'm talking
Here's the thing: you are chasing shadows.

'Market inefficiency' isnt something you are spotting on your USDCHF chart. It isnt something you are going to read about on an internet forum. Why? Well, assuming you know basic finance theory - EMH, sharpe, CAPM/APT, etc - then you should be able to figure it out.

And if not, how do you even know what you are looking for?

When Mike said that there is never enough liquidity, he gave you the answer to the problem. Honestly. It is all in that post.

Uuniversities, colleges and business schools have the smartest people in finance studying market efficiency. All day, every day. And I mean actual market study, not reading forums or retail books.

Banks and hedge funds pay people with pure math and applied statistics doctorates many millions of dollars to find exploitable inefficiencies, and they exploit them until the market closes them.

And then you have the brokers and interbank players, who your orders actually get sent to. You are going to somehow beat them to the market?

This is the core of the problem - the 'market' isnt just the bars on your screen, or the orders behind them. It is these people you are competing against. So while you are searching for market inefficiencies on the internet, these guys have found it, figured out how to exploit it and arbitraged it into the ground.

It's the very nature of an efficient market that any explotable inefficiencies will quickly vanish. And by the time you hear about it, it is long dead.

Look at the list of thing that dont work anymore - off the top of my head: seasonality, 'the January Effect', dividend stripping, mon/fri, cross-listing arb, the whole 'Turtle' system that retail traders love to get hyped up over, and a whole ton more that I am too tired to think of.

You, the retail trader, are very unlikely to ever discover an exploitable inefficiency. You lack information that everyone else has, you have to deal with retail brokerage spreads, and you are trying to get your order in faster than people with hundreds of millions worth of IT equipment. Look at the HFT programs of some of the big investos - you really think you are outtrading that with MT4 on your laptop and your adsl line?

At best, you might find a loophole in a dodgy brokers software that they will close, and quite possibly reverse your trades.

I'm not saying it cant be done - look at the SOES guys, they made a killing. But that was a one in a million, and was quickly closed. Without inside information and an inside view of how the market really works, it just isnt gonna happen. Sorry. But it wont. Neither you nor I trade anywhere near enough money to get that inside information.

I honestly think your time would be better spent reading what a big guy from texas is trying to teach. It is a thousand times more valuable than anything else you will read.

And that is the key here. We arent trying to outsmart the market. We arent trying to outtrade the market. We arent even trying to predict the market. We dont need to. All we are doing is looking at a chart, trying to determine what the market is doing, and piggybacking onto it. Combine it with some self discipline and good money management, and that's all we have to do to make alot of money.

I'm all for people learning more about what they are trading - hell, I would never throw my money away betting on something I dont understand (and make no mistake about it, betting is what we do here). But so many people seem to think that 'order flow' is some kind of magic trading bullet. And it isnt. It's a great way to understand why the market is doing what it is doing, sometimes. But, with the resources you have, you arent going to profit from it.

Stock traders have had L2 info for years. And they still, at least the bottom 85%, suck at life.

Anyways, this wasnt meant to sound harsh, you seem like a nice guy and I'm just trying to help you avoid walking down a path that will only end in frustration. But I honestly think there are alot of people here spending alot of time studying something they dont understand to try and find something that doesnt exist that they couldnt profitably exploit even if they found it.
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  #43648  
Old Sep 13, 2009 8:36am
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Quote:
Originally Posted by triger88990 View Post
I have actually a few pages to read of this thread and I'm finishing reading the hole thred.
I know I messed up with this stuff, sorry guys but I'm such a noob, my all forex experience come from no more than 6 months.
Hey, no need to apologise. We are all here to learn. And we all get carried away in the details sometimes, trust me


Quote:
Originally Posted by triger88990 View Post
ps: as more as I read through the FF I have the feeling that a majority of the people who really are successful are ex student from james class. In the near future I'm planning to join the PF, but in the meanwhile I'll study hard(for eg yestarday cost me 11 hours,
and in average 8-10 hour/day)
Everything you need to be a profitable trader is in this thread. Seriously. It's mindblowing how much valuable time and info Jim and the senior guys have given away here, for absolutely nothing.

And with a work ethic like that, I suspect you are going to do very well at this game
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Old Sep 14, 2009 6:14am
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Originally Posted by jarroo View Post
I look at some of my past runners and they seem to happen on Mondays. I love Mondays.

Breaks with no draw down, the ulimate confirmation. . . gotta love it.
That is a damn nice trade. Textbook stuff.

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  #43695  
Old Sep 14, 2009 8:41am
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Originally Posted by nasir.khan View Post
Any boby watching BUOB at GJ 1H.
check. Well, assuming it breaks that high before I finish reading in the next twenty mins.

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  #43697  
Old Sep 14, 2009 8:58am
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Originally Posted by oltciter View Post
But that bar it isn't BUOB. It is a simple BUB (at least on my feed)
There is a 1 pip difference between the lows. Pretty sure I can let that one slide.
*edit* completely posted the wrong chart.

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Old Sep 14, 2009 9:03am
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Originally Posted by nasir.khan View Post
You mean the first aqua line right??
*edit* now that I look at the real chart, and not GU...absolutely. Since I want to wait ten pips for a break, it isnt enough room to that PPZ for me to be comfortable.

Sorry for the confusion. its late. and im retarded.

(probably a good sign that trying to take a trade would be -EV!)
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  #43845  
Old Sep 16, 2009 3:56am
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Originally Posted by Flem26 View Post
cha-ching . .
The question is... now that it has hit my first 'where is price going', do I take some profits, or give it enough space for a shot at dropping through the floor?

There's some bigass momentum behind it atm.

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*edit* wow, those PPZs are alot more pink than they look on my notebook >:/
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  #43849  
Old Sep 16, 2009 4:44am
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You know that there's going to be some movement around the 90.00. If there isn't . . . look out below. A continuation of breaking previous day Lows (green line) and it could smash through the 90.00.
My thoughts exactly.

I like having jaroo confluence

*edit*
bigass 2 day pinbar on EURCAD, sitting on a big ppz, up and back through whatever those EMAs are on my chart (I dont even know where they came from, lol) and heading into more trouble than Kanye at an awards show.

Hard break of the PPZ should give up a hundred pips or so, but definitely too much traffic for me. Fail.

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  #43853  
Old Sep 16, 2009 5:28am
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Now this 2 day PB presents the same situation. If a hard break occurs, great, it makes sense. If it doesn't, we may be heading the other way. I have found that when a good setup has a weak break, where Price is heading is the other way.
Definitely on the same page here, although my reasoning is slightly different.

I figure there is some momentum to it (judging by the size of the move), but just dont know how much or how far it can go...and there is a ton of roadblocks below. A nice hard break lets me get into it with a b/e stop and freeroll it.. after that, it can do whatever it likes.

Most of the time, you get stopped out, but once in a while...

I'm all about the freetrade.
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Old Sep 16, 2009 7:40pm
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I read from some articles that for those bank or institutional traders, a return of 20-30% annually on their funds is considered good. I am pretty sure that most of the seniors here could easily beat that.
Not really.

Bank and institutional traders are there to put orders into the market for their clients and offload the bank's risk into the market (basically). They arent there to net pips. They get risk limits to trade within, so they can massage their orders to make a little, but their main job is to buy/sell what the bank has and doesnt want, or what the bank needs and doesnt have.

Chances are that one making 30% would end up getting fired for breaking his/her risk limits.

If you mean a hedge fund trader, on the other hand, then 20-30% is excellent and puts you at the top of the pile.


Quote:
Originally Posted by esbatu View Post
So I was wondering if any of the bank or institutional traders use this PA stuff the way James teach here?
(some) desk traders definitely incorporate it, but it isnt the only thing they base their trades on. Like i said, they have other priorities - massaging their entries to get the best possible price and make a spread on the order is more important (and lucrative).

Are there PA-only hedge funds? Probably. But they arent going to be that big, for reasons discussed below.


Quote:
Originally Posted by esbatu View Post
Or will they have issues with liquidity since they move a very large funds? If that is the case, how big can a retail trader grows until he/she can't use the PA effectively?
They will absolutely have troubles with the kind of trade size they need to swing. Like I said, they arent there to make money trading, they are trying to offload the hundred million euros that they need to dump, so it iis based around trying to get that money into the market at a good average price.

Same as the big interbanks - they make money from the spread, not from trading super dragonball doji reversals.

As for the hedge funds (inc daytrading/prop trading firms) who are trying to do the same thing as you, then yeah - at a certain size, they are going run into issues.

Most hedge funds dont trade PA as a methodology. Why?

Firstly, no one wants to give a guy $500m to invest on mystical squiggles on a chart. People dont trust it enough. Hell, before discovering Jim (and making friends with a couple of insto traders), I thought it was all bullshit for a chumps who got lucky during the tech boom and thought they were onto something magic. I am more than happy to admit that I was wrong**, but it isnt really accepted in the mainstream as a sound investing methodology (for a variety of reasons).

** (in this instance, anyways - Jim is the real deal. I still think 95% of small traders/investors are monkeys with an internet connection).

----

Then you have the liquidity issue, which you mentioned. While it is obvious that more money = bigger positions, you have to consider *how* much money we are talking about.

We might have a $10k account, which lets us trade $200 on a bar setup. With a 100 pip stop, thats $2 a pip... which equates to 2 mini contracts, or $20,000 worth of currency. Is $20k moving a market? Probably not Are we going to be able to easily get in at our target entry, and out at our target exit/stop? Almost certainly.

Now consider the guy with a $500m fund. His 2% would be $10m. With the same hundred pip stop, you are talking $100,000 per PIP. Which is 10,000 full lots. Which is one billion dollars worth of currency.

A billion dollars.

You think that might move the market?
What are his chances of being able to get in/out at his target levels?

----

People also need to understand that the returns they make come from leverage. You are investing $100k, and only using $1k of your own money. Probably less, if you are using stops. Any tiny market move is going to give huge returns. Big players cant do that, and wont - because that level of leverage is very, very risky.

As an example, what is the *true* profit on the aforementioned 100 pip pin on a $10k account? With leverage, your 1R nets you 100 pips @ $2 a pip, a return of $200. Pretty good for an hours work.

But what if you didnt have those friendly folks at IBFX sitting back to lend you the other $19,800? Your $200 could only buy.. .$200 worth of currency. Which gives you the massive profit of $2. For a return matching the leveraged trade, you would need a 10,000 pip runner. You catch many of those?

What's the level that you can trade without running into issues? It will depend on the turnover of the pair in question, the time of day, and the general market activity at the time. Short answer - dunno

----

The other main problem they face is that this stuff is risky. It really is, dont fool yourself. We are betting on the outcome of a random process.

Using Jim's methodology, we can be confident about what we are betting on... but it is still risky. And no one in a position to manage tens/hundreds of millions wants to go to their investors and tell them that they made a loss because a swissie pin reversed.

Investment managers get rated by both return and risk*. You dont want to fall into the high risk category, or no one gives you money, and then you dont make your 2 and 20.

*google 'Sharpe Ratio' if you want the gory details. you probably dont though, trust me
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  #43939  
Old Sep 16, 2009 8:53pm
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I can somewhat understand why "most hedge funds don't trade PA as a methodology", but then what is their methodology? (black box systems, algorithms, hedging, arbitrage, etc? Why wouldn't a hege fund or a prop shop want a trader that trades J16 PA methodology with an 85% win rate and 12% annual return
You name it, someone specialises in it. Fundamental (in either everything, specialising in a particular market, or a particular instrument/sector), tech/a, carry trade, arbitrage, classic value investing, dividend stripping, longterm economics, special situations/workouts, algo/HFT, pairs trading, tape trading, off market, buyout/M&A specialists, option writers, option spread traders, yield curve analysts, etc.

There is one I have read about that specialises in physical soft futures arbitrage - betting that they can buy 40,000lbs of 'lean hogs' and 'store' them until the delivery date, for less than the associated future contract! (i was tempted to give the guy my money, just because it seems so crazy that I *have* to get in on it)

It all depends on the background of the people running the fund/firm.

I'd wager that the majority take a balanced approach though. The specialists tend to run into trouble with correlation and concentration issues. So PA trading could definitely form a part of the overall methodology, whether in a vertical (we want to take a fundamental longterm view on oil, then the chart guy gets us the best entry) or a horizontal (we specialise in short term trading - including option writing, tape trading, and PA anaysis) capacity.

(if you are wondering whether a kickass PA specialist could get a job - absolutely. assuming he wanted one )

The reason behind the small numbers specialising in this kind of PA thing are mainly the aforementioned position size problem, and volatility/variability issues (which, in the investing world, translate into 'risk'). The aim of the game is to minimise volatility (risk) while maximising returns, and for that you need to diversify.

Plus, I suspect there just arent that many people capable of running big money using this kind of approach. For every Jim or Mike, you get a thousand business school grads who think that charting is rubbish*, dont have the technical skills or aptitude for it, and couldnt handle the psych aspects.

* :shh: the majority of the finance world thinks that longterm profits from technical analysis methods are impossible to attain. in a way, we are exploiting this view.

Fiji talks alot about how central the mental part of the game is to everything, and I definitely subscibe to his beliefs. Moving from my 'demo' ($500) account to my 'im kinda comfortable making this part of my portfolio, but im not betting the farm on it so here is 10% of my money' account was stressful enough. Moving up several orders of magnitude to what the funds management world defines as 'real' money would be killer for 99.99% of people.

(I guess my overall point was that there are thousands of different approaches, and this is just one - and so there are myriad reasons that people might be entering/exiting a market at any point in time... we shouldnt assume that they are all looking at the same pinbar as us and wanting to trade it)
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Old Sep 16, 2009 9:10pm
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Originally Posted by jarroo View Post
lol. I can just hear the investors on that one . . . "Didn't you see the traffic on that Pin, you fool!"
haha. That's awesome.. "didnt you watch Jim's last video? everyone knew where price was going to. amatuer. go back to demo!'

Although I cant decide if it is better in a Gordon Gecko voice or a little old lady voice
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  #43949  
Old Sep 16, 2009 10:17pm
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Originally Posted by StoragePro View Post
The question is this - what part of this info actually helps?

My sense is that not much really does, although a little knowledge about what goes on provides some level of comfort that I am not 100 percent blind.

For example, order flow is interesting, but do I need the knowledge to know what a good PB looks like? No, I do not. Do I need order flow knowledge to undertand what strong order flow looks like? No.
I completely agree with you. It is a forrest:trees situation that I think new people to almost everything get stuck in.

I guess this goes back to this - not much of it matters at all...though it varies with your approach, pych and level of sophistication.

Understanding more about how markets work is a good thing, imho, but you absolutely dont need to know it to trade 'j16 style'. You could think that order flow has something to do with a mcdonalds drivethrough and a trading desk was a peice of wood with 4 legs and you could still make an absolute killing using the steps that James has laid out here.

For me, it gives me enough confidence in what I am doing to back my beliefs, and allowing me to finesse my trades a little more to squeeze a bit more R out of them.

I didnt believe that much in support/resistance - until I understood it. Now I have enough confidence that the strong PPZ level at 90.00 will hold and reject my trade, so I move my stop to the top of the PPZ once it breaks through... rather than assuming that it 'might' break and leaving my stop in place and taking a big loss, or a b/e trade, or *at best* putting a trail on it and getting out with a moderate profit.

Similarly, no one *needs* to know how to calculate their expected return, their variance or their risk of ruin. You can stick to 2%, like you are told, and trade practically forever without losing your capital. But knowing a bit more, I can use expected return to help filter trades, position size more appropriately and a range of other stuff.

Same with orderflow stuff. As you said, you dont need to know what is happening in a pinbar. James told you what to look for - size, shape, location, where the eyes are, etc. But understanding the orderflow behind it lets me take combination (2 day, 8 hour, whatever) bars. Or trade only bars which bounce off a round number. Or to weight moves more heavily if they occur during a high volume session. Or know that price will accelerate once it breaks through a round number, as all the orders that were holding it up are likely exhausted. Or so on.

Do you need it? Nope.

Can you make a truckload of money without reading anything outside this thread? yup.

Can it help you squeeze that bit extra from your trading? I think so. But only if you have everything else down.

----

Since I like analogies, here is the way I see it.







I suck at golf. Badly. So I need to work on the fundamentals.
  • First, I need to hit the ball. With the club, not with the dirt. Or my foot. Or hit my foot with the club (yes, this happened)
  • Once I can hit the ball, I move on to hitting it straight. Not slicing it into a car window (this also happened)
  • Once I can do that, I might work on putting.
  • At this point, I have a decent basic game. So I might work on hitting it out of the rough, which I use a couple times a round.
  • Then, I might work on bunker shots, which I might only need occasionally.
  • Then I might work on adding draw or fade to my shots, or a bit of extra loft, which I very rarely need to do
..and so on.

Knowing what kind of shoes I need, or knowing whether I want a high spin or low spin ball, or choosing a driver with an extra half degree of lift is a long, long way down the list of importance.

The problem comes when people concentrate on these minor issues and ignore the big picture.

It happens everywhere. When I used to box, there were new guys 40+lbs overweight that couldnt hold their hands in front of their face or throw a decent forehand jab - but they would spend their time reading about the right amount of creatine to supplement with, or practice their uppercuts on the bag, or talk to each other about 'the mental game'.

Instead of wasting your time, how about just running around the block, throwing a straight shot and practicing not getting punched in the face?

If you cant spot a decent pin, draw in correct PPZs and know where your stop/tp/break/entries go, then wtf are you doing spending your time reading about orderflow or the mechanics of interbank quoting? Practice the basics, son.

Tiger Woods can spend time on those kinds of things, because the fundamentals are second nature to him. The small edges are what puts the best in the world above the second best. Me? I just need to hit the damn ball.

Like the big man says - Keep it simple.
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  #43956  
Old Sep 16, 2009 11:27pm
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What about "space"??

I've thinking about this - space as a prerequisite to a trade than moves well after PA.

Clearly, the bigger players take note of minor ppz's and place conditional orders there. I say clearly, because almost always, price reacts at it. No space means a lot of orderflow not in your favor.

In the case of space, I surmise that since there is no traffic, price will flow in a natural manner with more and more being added to positions to drive till exhaustion or a solid PPZ is encountered.
I think it is more a case of them having orders at certain numbers already, which then form the PPZ rather than the other way around, but the end effect is the same.

I'm also fascinated with the concept of 'space' - how do you tell how a market will react when there is nothing on the chart for it to react with?


My guess, when you are looking through a 'drop through the floor' type scanrio with no PPZs in sight, the obstructions that might stop the trade are
  • Natural supply and demand - currencies can trade however they want, but people are still going to be selling iron to the Euro zone, buying cheap Chinese crap, holidaying in NYC and Disneyland (hurry up and move up, AUDUSD, so I can go to noo yawk) and hiding their money in Swiss numbered accounts... so there is always going to be supply and demand, regardless of price. Obviously, the amount of hedging/translation is going to be partially driven by the currency markets, but there will always be trading outside of speculation
  • a change in sentiment - The kind of fear->optimism shift that stops falls, as seen in the DJI in March
  • fundamental values - definitely with stocks, you will see a 'floor' somewhere at their 'fair' value, and again at their NTA/liquidation value... given how hard it is to determine the 'correct' fundamental value of a currency (let alone two) and the wide number of valuation/prediction models, I dont know how well this works in forex
  • Bigass round numbers - the aussie dollar cant reach parity with USD, those kangaroo-riding drunks are getting out of line!
  • and lastly, I guess, countertrend hero trades. People love calling tops/bottoms, and I guess if you get enough of them, it could stop a move
Quote:
Originally Posted by StoragePro View Post
Now the comment about the psych side of things.

Since I know from hard experience over a number of years now, that waiting for the best setups pays off like crazy in account increase and peace of mind, why is it that I still feel the pull of the less than beautiful?
If you ever figure out the answer to this one, please feel free to share it. I'm still stuck in the gravitational pull of the B/C trade, and escaping isnt as easy as 'just say no' (even though it should be).
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Old Sep 16, 2009 11:42pm
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Originally Posted by mbqb11 View Post
One of these big factors are options. Options are HUGE with large sums of money on the line.
yeah, i wasnt going to go near that one - I think I confuse people enough without going into options, let alone single/double knockout/knockin plain/reverse/compound barrier options or the more widely traded exotics (mostly binaries) ... Hull is there for anyone that wants to get that deep into it

Expiration day and rollover day are time to either hit the 15m chart or go to the pub, depending on how brave you feel.

Quote:
Originally Posted by rossbennett View Post
A lightbulb just went on in my head after reading this.

"traffic" is just another way of saying that there are more s/r levels around your trade where others are placing orders opposing to yours and price is likely to react at these levels.
That 'moment of clarity' where all the bars and lines and traffic and fibs and round numbers and everything gets reduced to that single idea completely changed the way I traded.

If anyone still thinks it is a crazy mess without rhyme nor reason and arbitary PPZs all over the place... reread what Ross said.

This thread rocks
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Old Sep 17, 2009 12:51am
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So it comes down to is that 3-5% a big deal to me and for me I would rather have the time to do other things.
This is why Ryan is one of the seven people on the whole of FF that I have grabbed every post, read and reread, taken notes and saved.

Last I checked, there were 25,000 active members.

Quote:
Originally Posted by Ryanmcd View Post
...after 10k trades and 10 years
This is another reason
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  #43983  
Old Sep 17, 2009 1:41am
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Originally Posted by supremeChaos View Post
noo Yawk? sounds like a korean or mongolian city?
I had a girlfriend from New York - an italian from Bensonhurst, Brooklyn. She told me that if her dad ever heard me pronounce it 'kneww yourk', they would find me floating in the Hudson

Every new yorker I have ever met has pronounced it the same, lol.

Quote:
Originally Posted by supremeChaos View Post
what's Hull?
http://www.amazon.com/Options-Future...ref=pd_sim_b_3
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Old Sep 17, 2009 10:00pm
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Default Broker backoffice operations.

Hi guys,

This ended up in my inbox, so thought I would share.

For anyone who liked DS's 'Structure of Forex Brokers', this should also be interesting. It talks about how the backoffice of a retail FX brokerage works, why you sometimes get requoted, why you get broad spreads during news and why your broker isnt really 'out to get you'.

Probably not much new information for some people (*coughmikecough*), but pretty sure some of you will get some value out of it.

http://www.ibtimes.com/articles/2009...operations.htm
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Old Sep 17, 2009 10:12pm
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Originally Posted by Icehocey77 View Post
to quote a wise man, kaboom.
Very nice
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Old Sep 17, 2009 10:15pm
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Quote:
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Ed Seykota said it in New Market Wizards.

"A lot of people would rather understand the market than make money"

I'll ask it again - just how much do I *need* to know about the market?
Wow.

As much as I'm not a big Ed fanboy, that's a scarily insightful observation.
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Old Sep 17, 2009 10:32pm
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Quote:
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I'd say about as much as an airline pilot needs to know about the plane he's about to fly. Basically, you need to know as much as possible. "Less is more" can be taken as, "Less knowledge will cost you More," as well.
Quote:
Originally Posted by StoragePro View Post
With many endeavors, deep knowledge of inner workings can help. Mostly in areas where exert control or influence - IMHO....
Despite seeming to have opposite viewpoints, I completely agree with both of you.

I am an absolutely left brained kind of person. Probably a necessity, given what I do. I dont just want to know how something works, but why. And I want to understand it well enough that I can take it apart, find problems, improve it, bolt a supercharger to the manifold and then put it back together again - bigger and badder than ever.

(I drive a 200sx. It's neither big nor bad )

And that's a good thing. Is it all completely actionable? Probably not. But it gives context to what you are seeing, helps you understand why the bars are doing what they are doing. It's up to you to take advantage.

If I dont understand the market/instrument/timeframe, I'm not going to be comfortable trading the conclusions I arrive at. Some people are, and that's great. Neither is better or worse, it just depends how you are wired. Different strokes and all that.

Having more information is never a bad thing. Having greater understanding is always going to be a positive. Just because you understand how to price an option or how to calculate volatility doesnt mean you cant also know how to trade a pinbar. It is all about choosing which information is important in each context.

I think the key is being able to balance things, and - like SP said - being able to understand what you can and cant control.

I like to think that I am the pilot on the plane. I like to think I am in control, I am telling the plane what to do and making it go where I want.

In reality, I'm not the pilot. I'm a passenger. The plane is going where it is going, and someone else is behind the wheel (stick?). I am just a guy who looked at a map, decided where the plane is likely going, and then decided to put some money down to buy a ticket on the plane because I want to jump on board.

The best part is that the planes will come and go, with or without you. There are always more planes. Once you can read the signs and the timetables, you know where each one is going, so you really have no excuse for buying a ticket on the wrong plane... you can just wait for the one you want.

Welcome all to the j16 thread. It's existential analogy week here - pull up a chair and enjoy.

Quote:
Originally Posted by StoragePro View Post
Geeze - I am full of rants today. I hope it is out of my system before I get home...
I think I speak for alot of us here when I say that I am glad you are full of rants sometimes. I get infinitely more value from the thoughts of people I respect than from just looking at another chart with s/r lines drawn in and a pinbar highlighted.
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  #44093  
Old Sep 18, 2009 8:00am
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Originally Posted by supremeChaos View Post
i finished it about 30minutes ago.
its 1.47hours long (1:47:08 or 1hour, 47minutes+).
i think i viewed it for 2+ hrs (to replay a few segments, as my earphone's max volume was pretty
yeah. Jim's videos are ridiculously awesome.

I can safely say that the PF is the best money I have ever spent on learning stuff.

that he gives away the info on this whole thread AND pf videos is... Wow

*edit* first iPhone post!
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  #44253  
Old Sep 21, 2009 5:56am
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Originally Posted by tehuringa View Post
Lol....mate....I couldn't find the black helicopter emoticon so it was the best I could come up with
I've seen some bizarre behaviour on FF (including the guy that asked me yesterday if I wanted to move to Indonesia and be in 'the trading businesses forex' with him), but that post is by far the strangest.

That post has to be a level. No one that is going to college also thinks someone is mind controlling them via 'voice to skull' tunneling on the interbirds.
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Old Sep 21, 2009 8:18am
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Quote:
Originally Posted by tradingcube View Post
Now does waiting for all three to line up mean we have a probability of winning now @60%?? well no, as i understand it this can only work in an environment 'without replacement' as opposed to the markets that are 'with replacement' so in this situation the probability is simply the probability of best 'thing' you use.
...
Please correct me if im wrong, and please don't think im trying to be argumentative
Given you havent mentioned independent/dependent events, correlation, conditional probability or joint probabilities...

You are talking sampling methodology (which isnt entirely appropriate, given what we are looking at), and essentially asserting that the probability of sucess of a formation based given each individual indicator are independent events.

I would probably disagree with you there.

Then again, I agree that you cant just go p(total) = p(a) + p(b), because they clearly arent mutually exclusive events. I've definitely seen people make that (somewhat bizarre) assumption before, here and in the other couple of threads I follow.

(dont mean for this to sound vague or imprecise, just hard to tell what level of detail is appropriate sometimes )

edit: I should point out that I completely agree with your conclusion that people unnecessarily complicate things for themselves, and there is definitely a declining marginal utility to 'confluences'... mainly because of their inherent correlation - after all, they are almost all just derivitives of price anyways. Looking at some EMAs, and an MACD, and an RSI plot, and CCI... yeah. That's why Jim says that a clean chart is a good chart, I guess.
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Old Sep 21, 2009 5:57pm
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Originally Posted by supermatt View Post
just wondering if anyone has any opinions on the latest gold pa. is gold still bullish? depends what feed you have but the pin is probably a B grade one? wouldve been better with a stronger close into the previous bar? not sure
Can you put up a chart? Nothing on mine >:/

(definitely still bullish on gold, just waiting for an entry.. until that happens, though, it has seen enough volatility that I am happy playing the swings either way)

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Old Sep 21, 2009 8:47pm
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Quote:
Originally Posted by Que View Post
The only one I think is worth using is the MM and Bar time.
I love the bar time indicator, never knew where it originally came from though - thanks!
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Old Sep 22, 2009 6:03am
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Default USDCAD 4H

Dear pinbars,

You are awesome.

Love,
Joel.

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Old Sep 22, 2009 6:07am
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Originally Posted by Jduester View Post
However, it is best to look for these setups only at swing lows. Playing them near swing highs usually causes them to run straight into a resistance zone.
It did work this time, but you'll find that most seniors wouldn't have considered trading this setup, namely because of the location.
Personally, I woulda given this one a wide berth just because you are looking at a breakout from bars formed in a low volume session, so it isnt really the kind of flow *I* want to see. That's just me though, mainly because I am a complete wuss when it comes to breakout trades.

But hey, glad it worked out for you
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Old Sep 22, 2009 8:31am
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Quote:
Originally Posted by Que View Post
Ok, based on my thoughts of the Daily EU believing a reversal on historical resistance; I am looking at the H4.

This pin gave me the PA to initiate a trade southbound.

1% trade
50 Pip stop
Its a pretty looking pin, nice shape and extrusion at a swing high, and a deviant side to her... but she's damaged goods IMO. Size is way too small compared to the big bullish bar and the trend behind it, and running into big resistance at every step.

Not sayin it wont work out for ya, but too much drama for my tastes.

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Old Sep 22, 2009 9:38am
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Quote:
Originally Posted by dmc View Post
when do you guys keep on trades ? Until the bar is invalidated or even after the enxt time frame does not trigger your order.
If the next bar doesnt break it for me, I kill the trade. It's all about momentum, and if the next bar doesnt follow through then I would rather avoid the hassle.

I completely stole this approach from Mike, so cant take credit.

On the other hand, some of the top traders around here wait until a setup has been invalidated and consider it a live trade until proven otherwise.

It seems to be a personal preference thing... which probably isnt the definitive answer you would like
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Old Sep 23, 2009 4:57am
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Quote:
Originally Posted by pipsdaily View Post
SORRY sometimes theres a latency between my fingers and my thoughts
You are WAY too zoomed in. You need to be able to see the big picture, not like 5 bars.

How are you going to draw PPZ/SR levels, or check out important price levels, or see the general trend?

These bars need to be taken IN CONTEXT. You cant just take a bar based on how it looks against the last bar.
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Old Sep 23, 2009 5:07am
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I was hoping for a PPZ bounce, but this pin was good enough for me.

Bam.

1.6975 target.

(also, I got completely screwed on the spread. 14 pips, ffs. New broker time...though I think my slowass mobile internet dealie had a bit to do with the slip)

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  #44395  
Old Sep 23, 2009 5:25am
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Quote:
Originally Posted by supremeChaos View Post
Good enough? u are very picky, Sir. that's great enough for me.
this was a double 00 bounce (1.67). probably took out some stops (stops & buy stops, buy limits) above & below that round number, on the way to your target area.
To be honest, it suprised the hell out of me. I was looking for a modest bounce and retest.

*edit* i think i scared the girl next to me on the train when it took off and I swore a little louder than I thought (damn earphones)

Interesting how it reacted to the 365EMA on the 15M. I only put the 365 up on the daily tf - maybe I need to do some testing. Nice pickup
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Old Sep 23, 2009 7:13am
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Originally Posted by mattfx View Post
BEOB formed on daily chart, I've added some trouble spots for the move, moving sl to BE ASAP EURGBP chart attached
Hi Matt,

On the EURGBP BEOB, I dont know that it is a great looking bar. It barely broke the top of the previous bars, and didnt close low enough for my (possibly overly picky) liking. if anything, it looks more like a pin that only just protruded.

its also against a strong trend, and those bars are far too small to be reliable.

I woulda passed on this one.

Given you decided to take it, I do like your entry - waiting for the break of the low was the smart play. Especially since those bars make it look kind of like an exhaustion and fade of the big round number at 9100, so you definitely want to see some bearish movement (rather than just an exhaustion of bullish movement) before entering, which i think you did nicely.

Hope you bank some pips buddy

j.
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Old Sep 23, 2009 8:31am
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Quote:
Originally Posted by triger88990 View Post
the emotional power of the candlestick chart versus bar-chart.
I was always a candlestick guy, but for forex I much prefer bar charts.

IMHO, candles make you focus more on the open and close, and less on the daily range. Great for stocks on a daily chart, where the open and close actually mean something... not great for forex when you are more looking at how prices moved, as opposed to where arbitary time periods start and stop.

But yeah - whatever you are comfortable with. It's gotta work for you, screw what everyone else thinks
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Old Sep 23, 2009 9:29am
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Quote:
Originally Posted by Cyrus View Post
Wow Joel! 1:20 R:R setting up for you?

Just got into GBPCHF on the 4hour on the engulfing green hammer.

In my noob opinion, doesn't look like there's anything significant until 1.700 =)
possibly 1.6900, but tt's it.
1:20 would be very nice, but i'd settle for half that... Hopefully the market gives us both a nice little run up to 1.700. I have some minor ppzs drawn in there, but overall I agree with your take on things.
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Old Sep 24, 2009 1:12am
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My small tribute to the J16 thread.
I cant wait to package these up, change the names and release my TRADE THE FOREX MARKET ebook... only $399.95
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Old Sep 24, 2009 1:55am
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Quote:
Originally Posted by james16 View Post
lets keep our eyes towards the bottom of this page and see who shows up.
I guess you could say that they will probably show up right on time... or, to rephrase it, like clockwork...

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  #44556  
Old Sep 24, 2009 9:09pm
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Quote:
Originally Posted by pavulon2007 View Post
I think there were some clues that those oil lovers are going bye bye and uc will travel north. Besides rac mentioned sth few times before and I am personally convinced that these rumors moved the market ... next to the cristal ball ofcourse
Those moves has alot less to do with arbitary trendlines, and alot more to do with the FOMC announcement and existing homes releases last night.

Quote:
Originally Posted by mbqb11 View Post
Mike W has been at this awhile, so he knows the forums are where we share ideas not where we trade off others. One trade doesn't make a method.
I used to read mike_w's posts back in here, the DIBs and AUSLANCO threads what seems like forever ago. Good stuff. Real good stuff.

Quote:
Originally Posted by mike w View Post
Your trying to do the same thing I did man....listen to me on this. Get the knowledge first. You will completely screw yourself if you don't. You'll end up in a bad trade and then, trying to get out of it or trying to make it ride, lose your equity. There is no fast way to money without empowering yourself with the knowledge of how to make the money in the first place. If I want to play the guitar, I can't just pick it up and play some Hendrix or Grateful Dead without learning the basics first. If you want the knowledge, go to the place where...
(had this one taped up for a while... cant seem to find the others, it wont let me search that far back lol)

Add this to smjones, DarkStar and tehuringa all making comeback appearances recently... there must be some kind of oldschool conspiracy in the works...
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Last edited by joelcf, Sep 24, 2009 9:38pm Reason: hands no type good.
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  #44558  
Old Sep 24, 2009 10:28pm
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Quote:
Originally Posted by supremeChaos View Post
i hope this is the beginning of FF's "resurrection", rather than a beginning to the end of FF.
After browsing through some of the other popular threads on FF, closing it would probably be the best trading system ever released.

The average return of the overall userbase would shoot through the roof once people stopped gambing on most of what I saw...
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  #44561  
Old Sep 24, 2009 10:36pm
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Quote:
Originally Posted by StoragePro View Post
What was up on the GBPAUD?? 120 pips in 15 minutes and NO bar to get in!!! WTF Joel - help a brother out?

and the AUDJPY this evening moved 64 pips in a hour - headed by a BEOB (Thanks man!) (3R... )

Then the AUDUSD threw a hard fake - moved a bit, and stopped and is ranging - I got out at BE, but sheesh. What is up with all the fireworks (except the AU - could have used some money flow man...)
I see you have been hanging out with my old drinking buddy, Risk Aversion Play Explosion.

The acronym describes what happens to your account if you are long the aussie on bad economic news
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  #44563  
Old Sep 24, 2009 10:39pm
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Quote:
Originally Posted by StoragePro View Post
Stop messin' with the liquidity Joel...
haha. Maybe that is Jim/Merlin/etc's plan:

1. Start forum
2. Trade against whatever is posted outside this thread
3. $$
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  #44572  
Old Sep 24, 2009 11:44pm
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Quote:
Originally Posted by bundyraider View Post
And the beauty of it is , you didn't even need to know 'why' to make money out of it.
That really is a nice thing, makes actually making money a hell of alot easier and less complicated

My only gripe here is that there are two groups of posts from last night (not just here, either): people were playing the flow and saw the pin that Ben did here...

Quote:
Originally Posted by benji533 View Post
.
Or The Oracle did here

Quote:
Originally Posted by raczekfx View Post
.
...and then people who later drew 'trendlines' on the hourly/daily that cuts through half the bars and then claim that it was almost a certainty that price did what it did.

Maybe its just me, but fwiw I see the reason for this stuff working as ridiculously well as it does being because we are looking at supply and demand, and where they might lie.

A big market shock like yesterday cant, by definition, already be incorporated into the PA that people are looking at until the market starts becoming aware of it... hence those killer pins on small timeframes*...

If Ben got in where his pin said to, he was shorting at the exact moment where bullish pressure stopped and bearish pressure started. And that's a kickass way to do things.

I just worry when I see people ascribing meaning to random post hoc diagonal trendlines that dont even really make that much sense. It's just curve fitting, imo. Price has a reason to pause at a PPZ before an announcement. But no reason to respect a random line that someone drew in and no one else is looking at because it ignores a bunch of other stuff. And there has been more than a few of these charts scattered in between the ones that do actually tell us something like yours, rac's and ben's.


* the timeframe here is important, because anyone trading an hourly/4hourly got to the party after all the beer was gone and the hot women had left.
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  #44579  
Old Sep 25, 2009 12:10am
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Quote:
Originally Posted by pavulon2007 View Post
ps. and i promise to try not to post any diagonal trendlines that dont even really make that much sense in the future for the sake of keeping this thread as good as it is
I wasnt specifically referring to you - I think your post was just the last post I read this morning, so I hit reply.... sorry if it seemed that way, I can see how that would have sounded harsh! No offence intended at all.

I just read a couple of forums, and.... well, lets just say that the difference between the guys in here and the people outside this thread is like the Patriots playing against a team of chihuahuas.

Drunk chihuahuas.

and this kind of thinking:
Quote:
Originally Posted by pavulon2007 View Post
the big news just gave the kaboom effect. they could either accelerate my profits or stop me out at be or small loss. it was like we were just waiting for the news to come out so we can move on...
leads me to believe that you arent as new to this as you claim
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  #44582  
Old Sep 25, 2009 12:23am
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Quote:
Originally Posted by pavulon2007 View Post
hope i'll stay long enough....
definitely stick with it. Even if you spend 100 hours learning all the stuff Jim/Mike/etc have to teach, think about it in terms of the $/hr it is going to be worth in the long run.

Adds up to a pretty killer wage
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  #44589  
Old Sep 25, 2009 12:43am
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Quote:
Originally Posted by Que View Post
So in your example if you looked back 3 bars and said the pin must be at least 75% of the sixe of any of those bars, it would not trigger.
*edit* comprehension fail. I cant read.

One way you might want to consider is to change it from 75% of any of the last x bar ranges to 75% of the average of the last x bar ranges.

Either way, this combined with push gmail is awesome. Cant wait for my gf to think I am having an affair because I keep getting mysterious messages every 4 hours

I am so glad there are people in here a hell of alot smarter than me that can do this stuff.
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  #44675  
Old Sep 27, 2009 8:07am
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Quote:
Originally Posted by stoiter View Post
mbqb11- i find it amazing you were involved in the early days and your still here selflessly helping people, even though youve probably answered the same questions hundreds of times.
The real Mike was replaced around page 800 with a robot that has answers to the top 1000 newbie questions
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  #44676  
Old Sep 27, 2009 8:22am
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Quote:
Originally Posted by supremeChaos View Post
Please indulge me... (non-trading related)

Please visit this thread
Help needed.
Thank you!
That's absolutely terrible - I saw it on the news earlier, and the scenes were just incredible.

Donated some money to the Philippine National Red Cross.
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  #44704  
Old Sep 27, 2009 8:03pm
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Quote:
Originally Posted by benji533 View Post
WTF was going with the AUDJPY in the last hour?!
New homes and durables were disappointing, so people are worried that perhaps they have been a bit too optimistic and got carried away with the whole 'everything is fixed now!' thing...risk appetite is headed back down, and so people want out of the carry trade (which has a rubbish differential at the moment to begin with)... so they dump the aussie as soon as they could.

Everyone is pretty much waiting for Tokyo to open and then take a lead from them.

Or, to put it simply... bearish outside bar

You are completely right though, could see some big moves this week if we really do tip from 'guarded optimism' -> fear. Lookin forward to a flood of Ben charts!

Whole thing is kind of annoying, since I've been planning to take the gf skiing in Japan in the January holidays, and if this silliness keeps up, I wont be able to afford it.
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  #44705  
Old Sep 27, 2009 8:08pm
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Quote:
Originally Posted by Que View Post
I generally risk 1% on a gap trade and attempt to pull 0.5%. I know this is negative R:R, however I have back tested gaps on all pairs that IBFX offers and have found that they close approximately 86% of the time. As I get better than 3 right for every 1 wrong, the R:R ends up paying positive in the long run.
r:R is for girls. Real men look at expected value
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  #44711  
Old Sep 27, 2009 8:44pm
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Quote:
Originally Posted by benji533 View Post
You have the answer to everything lol.
I'm trying to fix that, I swear

Quote:
Originally Posted by benji533 View Post
I"m planing to practice some "rac trades" (PPZ blind touches....I'll add div as well) this week on the higher TFs
Excellent. I really dig your charts, not many people really go into their thought process in so much detail (to be honest, I'm not sure many people think about it in such detail to begin with...)

I'm still in the 'Ben = Mike posting from a second account' camp
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  #44785  
Old Sep 28, 2009 8:47pm
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Quote:
Originally Posted by thesnacker View Post
I have a little saying printed in BOLD above my monitors.

DON'T THINK
HAVE RULES
PLAN
EXECUTE
Someone that trades a strictly rule based system and refuses to think might as well write an EA and go to the pub.

Rules are great for beginners, they stop them doing stupid things. At some point, you get beyond that - as Ben put it, 'why would I want to trade like a robot?'... he just got beyond it a little quicker than most

What if your rules are wrong? An efficient market is always going to render some of your rules invalid at some point in the future. The turtle traders that everyone idolises had 'rules' - if you tried trading by them now, you would blow your account.

Everyone works differently. Some people like rules, and dont want to exercise judgement. It imposes discipline, I guess. And that is fine - if it works for you, awesome.

Personally, I'd rather put my money in an index fund than follow a strict rule based system. My alpha comes from evaluating a situation, processing the information presented and positioning myself accordingly. ANd I know a ton of people that work the same way, and consider judgement an integral part of their 'system'.

Horses, courses, etc.
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  #44786  
Old Sep 28, 2009 8:48pm
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Quote:
Originally Posted by StoragePro View Post
Nice. We are attracting this kind of thing more now since the commercial forum. You are not the only one abused.
Opensource jerkoffs preaching 'information wants to be free!' as a cover for wanting to steal people's work and/or have some sense of nerd superiority?
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  #44792  
Old Sep 28, 2009 9:17pm
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Quote:
Originally Posted by thesnacker View Post
Agreed for the most part, I think you misinterpreted where I say "DON'T THINK'

When I say 'DON'T THINK' I meant, when you see a pattern, setup, PA, don't think about it to the point of paralysis by analysis. I meant don't try to psyche yourself out by thinking what will happen if it goes against me or for me. Have a plan/rules for when the setup goes against you, and have a plan/rules for when it goes for you. That way you can mitigate the emotional aspects and trade the chart.
I completely agree - planning is the essence of everything.

I just think some people (not you, obviously) get so stuck on 'rules' that they get into bad trades that they should have been able to avoid, or pass on great trades which they should have been able to take... all because it doesnt fit their rules (which they usually stole out of a book or off the internets anyway). SO they either continue to miss opportunities/take bad trades, or they rewrite the rules to accomodate new information... which makes it a discretionary system with a lag

It's why mechanical systems either suck to begin with, or suck after the opportunity has been arbitraged away but they dont know any better.

Quote:
Originally Posted by thesnacker View Post
True, whether something is open source or closed is the decision of the author of the code, not the users.
uh oh, the /. nerds are going to lynch you for that
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  #44795  
Old Sep 28, 2009 9:45pm
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Quote:
Originally Posted by benji533 View Post
By the way, here is what I like to do when I'm bored and there are no good intraday setups. These are stress free trades, and I don't care about the lame R:R, it's better than just knowing where price is going, looking at it doing what out thought it will do, but not making the money out of it - that's lamer
I generally pass on this kind of 'barb wide' action, where price is flat and oscilating around the EMA. It is easy to make a couple of pips (since you really do know exactly where price is going and where it should stop), but it doesnt seem worth the effort.

Al Brooks talks about this kind of action in his new book 'Reading Price Chart Bar by Bar' - covers it over a couple of pages somewhere in the middle. Its probably the best part of the (exceptionally poorly written but useful) book. You would probably like it.

------
The bit of extra return doesnt seem worthwhile for the -EV if it does decide to break out against you. I figure trying to trade setups you know are C trades, at best, is just boredtrading. I'd be better off playing a couple of tables of poker, or working on my terrible golf swing, or reading.

Or...my new game for the quiet periods is spreading and scalping ticks on the 10y/30y tnote/tbond futures using L2 DOM and T&S.

Pinbars are a lagging indicator
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  #44796  
Old Sep 28, 2009 10:01pm
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Quote:
Originally Posted by StoragePro View Post
Think about why you take a trade or not - I bet you have a very clear set of reasons, that actually repeat over and over again.
Absolutely. I guess my issue isnt with rules, per se, but more with the strict application of them. The edges need to be grey, not clear black/white delineations.

Hell, my dishwasher can engage in fuzzy logic... I should be able to as well.

Quote:
Originally Posted by StoragePro View Post
The best traders kind of go by 'feel'. At least on the surface.

Longer term traders do get to the point where another sense begins to operate - I've noticed in me - but upon reflection and examination, information was on the chart that in hindsight was shouting at you - and at least the subconscious mind was listening making you feel the way you did.
I guess this is the level I aspire to - I moved through unconsciously incompetent, consciously incompetent and I feel I am somewhere in the consciously competent area at the moment... its that next step, the unconscious competence that people call 'feel' or 'instinct'.

You get flashes of it now and then... but that is quite different from being rac and making money just by being within 15ft of a price chart.

Quote:
Originally Posted by StoragePro View Post
Systems do not work.
This should be in the page header for FF... though you would lose 90% of your traffic

----

You are definitely my favourite forex philosopher. Its a whole level removed from 'hey guys, what about this pinbar?', and I always walk away reconsidering something about how I think or act.

You should write a book. It would kill Van Tharp and Mark Douglas.
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  #44798  
Old Sep 28, 2009 10:29pm
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Quote:
Originally Posted by StoragePro View Post
OK - now you've lost your mind.
No one ever claimed otherwise.
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  #44810  
Old Sep 28, 2009 11:52pm (47 hr ago)
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Quote:
Originally Posted by jarroo View Post
Ditto with the Eur/Gbp PB.
That's a nice looking pin.. and it doesnt get much more swing-high

2d bar, for anyone on IBFX. Hasnt hit my entry point yet.

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  #44814  
Old Sep 29, 2009 12:30am (46 hr ago)
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Random request: does anyone have an EA/script/etc that will let me save a chart to a specific directory with a predefined naming scheme?

So sick of having to rename my files.
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  #44820  
Old Sep 29, 2009 1:23am (45 hr ago)
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Quote:
Originally Posted by Dale View Post
Here a couple things you might try.

1 Only use stop orders for entry and exit.
Isnt that gonna depend on whether you want to get short or long?

Quote:
Originally Posted by Dale View Post
2 Only make markets decisions at the end of the bar of the time frame you
I dont know if that is really discipline. I make my decisions well before the end of the bar, I just dont commit until a confirmatory break. After all, bar opens/closes are really just arbitary delineations that dont mean anything to the market, they just help us organise the information.

And if a position hits a PPZ and goes against you, I dont think waiting for the bar to close is discipline or just stubborness.


Quote:
Originally Posted by Dale View Post
3 Always follow the plan you had prior to entering the trade.
Sun Tzu and Clausewitz would disagree.. plans should be fluid
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Last edited by joelcf, Sep 29, 2009 1:35am (45 hr ago)
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  #44824  
Old Sep 29, 2009 1:55am (45 hr ago)
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Quote:
Originally Posted by Dale View Post
The software I use allows me to use stops for trading long or short.
Putting a sell stop above the current price isnt really going to work out the way you want

Quote:
Originally Posted by jarroo View Post
The classic hard break and retest on the Nzd/Jpy Daily current PB.
Damnit, Jim, where is my hard break? Fiber is puttin me to sleep here!
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  #44832  
Old Sep 29, 2009 2:34am (44 hr ago)
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Quote:
Originally Posted by stoiter View Post
for arguments sake what would you say if i posted this chart instead?
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  #44915  
Old Sep 30, 2009 1:22am (21 hr ago)
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Quote:
Originally Posted by jarroo View Post
Damnit joel, I'm doctor not a taylor. (going with the Star Trek theme. lol)

I missed this post last night, joel. Was it this PB last night on the Euro? Wait a mintue, that can't be right.
lol, that's how asleep I was - I meant the eurosterling. I think I am going to have to make my girlfriend subject me to some kind of LAPD-style sobriety test before I enter into trades - 'count backwards from ten... now walk this line... okay, you can short the yen now'

And, magically, the hard break came about an hour after that...

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(entry was .9181)
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  #44929  
Old Sep 30, 2009 2:17am (20 hr ago)
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Quote:
Originally Posted by letitride View Post
p.s don't mind my fibs yes they are upside down in reagards to traditional standards
I wouldnt worry too much... fib levels are alot less mystical when you look at what (100 - 61.8) or (100 - 38.2) equal...
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  #44979  
Old Sep 30, 2009 6:08pm (5 hr ago)
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Quote:
Originally Posted by Primi View Post
Hey!

Can somebody please explain to me how come my sl got hit but price never even touched 0,91380? It was a sell order to close my position so spread is not an issue. Is there something I'm missing?

P
I'm gonna wager that price actually did hit .9138, it just did it before the period shown in your tick chart. Looking at my chart, it bounced right off .9137 on two seperate feeds.
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  #44982  
Old Sep 30, 2009 6:45pm (4 hr ago)
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Quote:
Originally Posted by Primi View Post
I had my tick chart up and I was watching it. It never showed it that low. Here's another chart with a low of 0,91397. Now I also looked at a 1M chart (never done that before). That's the only one that shows 0,91378. How are these clowns aggregating their bars?! It was live. I might ask them to explain anyway.

EDIT: It looks like some longer TF charts also have this low of 0,91378 and it is now only missing from 15M chart that I had up.

2nd EDIT: They have changed 15M chart also now showing the spike down to 0,91378. Don't like it, but at least...
That's completely crap, to be honest. It's only one pip, but inconsistent charts and backdating bars is shady as hell. I was starting to look at Oanda as a backup forex broker, but that kinda thing (and their charting package, ugh) makes me want to reconsider.

I stopped using my last broker earlier this week for similar reasons - highs and lows not matching across timeframes, or even across two separate installs on the same timeframe (plus, the slippage they managed to import into every trade was retarded). Either they have some kind of drunken leprachaun filtering ticks, or they source the aggregated data from somewhere different to the tick data. Either way, it happpened way too often.

At least when I get screwed now, it is the market doing it
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  #44983  
Old Sep 30, 2009 7:06pm (4 hr ago)
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Default Revvin' up your engine, listen to her howlin' roar....

On one hand, I want to short GBPCHF. Nice pin with the trend at retracement with plenty of room to run.

On the other, taking a long position in francs with the SNB so twitchy makes me want to sing Danger Zone as I trade, and that could just get embarassing in the middle of the office.

I might see what Mr Bloomberg has to say.

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Last edited by joelcf, Sep 30, 2009 7:38pm (3 hr ago)
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Old Sep 30, 2009 8:29pm (2 hr 38 min ago)
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Default !

Happy 3000th, Jim and crew. You guys rock.

See you on 4k.
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