What Really Turned My Trading Around

[Relativity]

Update :

Just a simple annoucement;

I have decided to stop sharing any of the new advances of my research from this point.

I had came to terms of how far the work has became and the need to consider it as private proprietary.

I think the idea isn't new, but the execution and methodologies applied ono the idea is.

So for you peeps who have questions, its ok to ask. But take note that I can't give a full and direct answer due to to additional filtering required. Hope you guys understand.

Its almost like the race to map the human genome. LOL!

FYI The menu has been moved down to here.

[Relativity]

My posts in other threads worth a read :

- Trading the news
- Why don't you backtest your system?
- About Volume (the rest of the thread is also good!)
- Catching the main move of the day via Market Sessions
- Picking Cherries And Apples; good thread, technically not too strong, but have a lot of heart to look for success!
- My take regarding quant systems and news
- BumaSoft's Market Model -Excellent thread!
- Order Flow Trading - He explains it better than I do

[Relativity]

This 'system' was submitted for Best Forex Trading System of the Month: September 2012

Currently I am open to possible collaboration with other traders : An Open Opportunity. Anyone Interested?

This is a long thread, packed full of wonderful content, but there are the key posts IMO, so that one doesn't need to swim around the commentary too much and go straight to the meat :

- Using Statistics to describe PA
- Using Statistics to describe PA (corrected bugs)
- Another way at timeframes
- Price does travel at different speeds
- Modified Barros Swings Indicator
- How I now use Barros Swings after I've found SB waves is better
- The mindset to finding and using workable edges in trading
- The problem with indicators
- A general setup to conceptualise (semi workable methodology, but good to know)
- My reservations regarding trendlines and channels today
- How certain market orders affect price
- The problem with Candlesticks and Moving Averages
- Candle Structure Statistics
- What happens within a D1 Candle
- Where is the 20 pips zone?
- Handling Open Trades
- Finding your personal eyeglasses to read the market correctly #1
- What does Volume and Market Profile tell
- Finding your personal eyeglasses to read the market correctly #2
- The Tick Volume Curve
- A Trader's Predatary Instincts
- Basics of Market Profile
- Tick Volume Indicator with std devs
- Synthetic Currency Indexes Formula
- Where Stop Orders and Limit Orders are likely to be at
- Why DIY trading systems is better
- Why FX markets are considered directionless
- Calculating the Odds of when the high/low of the day is made using Excel
- The Tick Volume Curve Explained
- Simplistic statistical study of candlestick PA
- Synthetic Currency Indexes, attempting to get a global representation and perspective of price
- Anchored Moving Average Indicator
- A way to do statistical analysis for wave analysis
- A H1 view of how price tries to make its highs and lows throughout the day / within a D1 candle #1
- A H1 view of how price tries to make its highs and lows throughout the day / within a D1 candle #2
- Why the study of D1/W1 charts is mandatory
- How to read Gaps correctly
- What can Tick Volume study across different timeframes can reveal
- Using Statistics to describe PA Explained
- Why making your own system is better
- Why trading isn't just about systems, but trader's perception as well
- The problem with PA / TA
- Players who don't exactly use charts to trade
- The 'true' Forex Market
- Why Tick Volume can be useful
- How Price can move throughout the trading Week #1
- How Price can move throughout the trading Week #2
- How Price can move throughout the trading Week #3
- How Price can move throughout the trading Week #4
- How Price can move throughout the trading Week #5
- SB Waves Indicator
- The Flaw of Watching PA
- The painful journey but worthwhile to get Wave Analysis correct
- Why catching a conservative 20 pips daily is very possible
- H1 Price/Tick Volume correlation seen clearly on chart
- The Cyclic Nature of price activity via Tick Volume in H1
- Finally, a proper framework for Wave Analysis
- The 'controlled' Forex market is considered its main weakness
- Wave Construction and Classifications explained
- Using Statistics to Forecast Wave Analysis
- Using Highest Tick Volume of the day to determine SRs
- A case for Wave Analysis and ZZs
- An interesting question regarding time/price range/tick based bars/candles
- Reflections of evolution as a trader
- Live videos showing how I trade using SB Wave Analysis #1
- Live videos showing how I trade using SB Wave Analysis #2
- Classification of SB Wave Types
- The story of big players and small players in the market
- Finding structure in the market to assist the trader's understanding
- A study of 'global' tick volume
- SignalBender Basics Expounded (6 parts in total)
- My take regarding SignalBender/TradeVector/iDouble/7thSignalTrader/JetTrader/Veyron/GrowRevenue
- The limits of TA
- Using Tick Volume to determine Market Changes
- Creating News Statistics With SB Waves
- Updates to Wave Patterns #1
- Updates to Wave Patterns #2
- Updates to Wave Patterns #3



* Old intro has been edited out and archived to here *

[Skynet]

hi there Relativity,

nice to see that you are sharing your thoughts after 4 years after being successful nw.. tht is realy good and im happy for you.. my question to you would be quite straight.. what is your strategy lol? thanks (i dont knw if u'd like to answer that question..)

[Relativity]

hi there Relativity,

nice to see that you are sharing your thoughts after 4 years after being successful nw.. tht is realy good and im happy for you.. my question to you would be quite straight.. what is your strategy lol? thanks (i dont knw if u'd like to answer that question..)

Good question. Here's a simple and straight answer for you then. One very important core strategy involves trading off around 20 pips from a good price extreme. Makes sense to you? I can expound on it if you want.

[Skynet]

Good question. Here's a simple and straight answer for you then. One very important core strategy involves trading off around 20 pips from a good price extreme. Makes sense to you? I can expound on it if you want.

it must took you a long time to come to this strategy tht u have..it must be hard work.. yeh please do expand on it..il be very much glad to hear it..and share it with you?

[Relativity]

it must took you a long time to come to this strategy tht u have..it must be hard work.. yeh please do expand on it..il be very much glad to hear it..and share it with you?

Thanks for the compliments. Well sort of lots of 'hard work'. When it hit me, it really hit me hard that it makes sense that there are 3 kind of entries that are good.

1-Identify price extremes. Enter at these areas. Try to catch its retracement. There is also a chance this retracement becomes a reversal, which is what we actually want. This increases our edge to let the trade run.
2-Identify trends and retracements areas. Enter when the retracement is about to end, to catch the trend resuming
3-Identify areas where price consolidates into a range. Mark the top and bottom, then trade its breakout.

These 3 seem to be seemingly different strategies, but there are ways to 'combine' all 3 together. In fact, its natural that all 3 actually work together in harmony. This is where multiple timeframe analysis comes in.

But back to #1.

1- When you look at the statistics gathered here for D1 candles, you should see something obvious. Do you see it? It has something to do with 'minimal lengths' and 'voids'. Another hint : the market is fractal in nature. If you are able to 'catch this', the rest should easy.


Here's the legend of the bell curve I've created.



2- Price tends to like to breakout off boxes of 20 pips. This is proven when you look at the wave statistics of multiple small micro timeframes. Again, look at the 'void' areas of the higher timeframes I am talking about. These voids get 'filled up' with price action of lower timeframes.

I found this from gathering price wave lengths via statistics and plotting it into a bell curve


Basically, the bell curve shows when price moves 20 pips. Its a significant move coz it can either 1-continue 2-stop and reverse 3-stop and reverse 20 pips and come back again. #3 happens 60% of the time. 40% of time #1 or #2 happens This is my edge; very simple, but so hard to learn how to see (initially)

Coz so long I enter correctly, I will get 60 to 80% edge (#1 + #3 ). When price does #1, it enters into the higher level bell curve, which 'locks' it away from the lower level. Which means, when price moves 20++, aka many traders call breakout, it rarely comes back 60% of the time, its not going to come back.

From here, we play the 60 20 20 odds again. My research has proven that risk 20 pips with optimal target profit 40 to 60 is good. Anything more than 60 = luck. So with R:R around 1:2.5 its not hard, yet very very realistic.

So its true that when price moves up or down, its not really 50/50 odds. Its more of like 20/80 with good entry, 40/60 with an ok entry. That is assuming if your trading method is sound. I will admit that everywhere I look, 20 pips always show up.

If you are still not sure why I am saying the odds are 60 20 20, that a flip at Daryl Guppy's book "Trend Trading". He also mentions something along the similar vein, with plenty of hardcore research of his own down the line.



3- The average wick size of D1 is at least 30 pips for many pairs. This actually falls into the 20 pips range. Which means we can expect on the average at least, a retracement between 20 to 30 pips.







4- How is it that the average range of a H1 candle is also around 20 to 30 pips? And we all learn 'Always follow the H1 candle color'? A trend of a lower timeframe is a retracement of a higher timeframe. This translates to : a H1 candle range lives in a D1 candle wick. Look at the stats above again. See for yourself.





5- When you look at 1 + 2 + 3 + 4, you will eventually see how all the pieces actually do come together to give you a very very good description of price action. And its freaking tradable.

[Shr1k]

very cool
I wonder how your numbers hold up when you take smaller random sets of data? Is the result close or are there times when these numbers are very different.
say you have 3 years of data you tested if you only look at data from the month of June is the curve the same.

[Relativity]

'sort of hard work' lol. that is alot of hard work you have done. and thanks for sharing. thats alot of statistical analysis you have done and it is interesting..

abit hard to understand at first..but i think i kind of understand it. so the end result you're saying that price on any candle (1 hour and up candles) retraces atleast 20 to 30 pips before moving in any direction again.. normaly the candles break the low or high of the previous candle before moving again.. and this break or retracement you're saying is tradable for sure..

so exactly which time frame do you trade with and how do you see your entry and exit points for a trade..

thanks again man.

Thanks for the compliments =>

Generally yes, on any candle. You are correct about the breaks at some level. But to be more precise, i think you should start thinking about price moving in ticks 1st.

I don't trade 'timeframes'. IMO price is the same on all 'timeframes'. When I mean timeframes here, I have to make some major clarifications. Lets say for now, timeframes are the usual that we all know and seen often on MT4 or major charting packages. M1 M5 M15 M30 H1 H4 D1 ...etc I don't use these timeframes.

I only treat these timeframes as a function of zooming in and out of price. I treat these timeframes as compression of price, a summary. Sometimes this summary is good, sometimes its bad. I believe we need a good balance of both detail and big picture to trade efficiently. This is where Multiple Timeframe analysis comes in, which is something I've explained in part in the above post.

Moreever, I don't trust MT4 timeframes as MT4 is created with the broker in mind. If I am extreme, I would say the real chart is the tick chart. But frankly, none of us have access to quality tick data. So I would have to make do somehow.

So how do I define timeframe? I define timeframe by price swings. e.g. M1 x 60 = M60 = H1 swing. This IMO is a more precise reading of the market. If you want the full set of swing timeframes I have :

M5 x 1 = M5
M5 x 3 = M15
M5 x 12 = M60 = H1
M15 x 20 = M300 = H5
M30 x 48 = M1440 = D1
M60 x 120 = M10080 = D5 = W1
M240 x 150 = M36000 = D25 = MN1 (monthly)
M1440 x 75 = D75 = MN3 = Q1 (quarterly)

You should also see something very obvious from this set of timeframes. Do you see it?

So to answer your question regarding timeframe, when one sees timeframes in this manner, the answer of entry and exit will come automatically, since you now have a better reading of how price order flow is moving, and which level of players are entering/exiting the market.

very cool
I wonder how your numbers hold up when you take smaller random sets of data? Is the result close or are there times when these numbers are very different.
say you have 3 years of data you tested if you only look at data from the month of June is the curve the same.

Thanks for the compliments. So far what I've seen is that there is a slight variance dues shifts in price volatility. As for getting only recent data, I have my justifications : I would only like to know what is happening now. So far the answer = 20 pips, at least for the past 2 years. I am prepared for changes : thats why I've created such an indicator to tell me when it is happening.

My take is that there might be extreme variance if we tested data further back. e.g. USDJPY doesn't really pass the '20 pips test'. It might had passed it better if say we go back to a time when its more volatile. A more recent example would be EURCHF. It showed 20 pips during a season of market fear that send EURCHF on a downtrend, until SNB decided to intervene. Nowadays its not as consistent, as traders are not so willing to participate in this pair, therefore showing a drop.

[Aztrader2]

Hi Rel,
seems you've made a great job, but I must admit I've understood almost nothing about the way you trade...... I'm too dumb to understand it.....

E.g. 1 H candle close retracing at least 20 pips from S/R Area (Pivot, Round numbers etc.): If candle was long we go short?
Is this the way?


Thanks!