INGOT'S RAINBOW ... A Position Trading Strategy

[Ingot54]

Originally Posted by cosgrove

What do you make of this USDJPY setup? We've seen a lower low and lower high on the weekly chart, with all of the stochs turning down. On the daily, stochs have crossed down 76.4. The 4h stochs are oversold, and the last 4h bar on friday broke a previous support level around 112.72.

These make it seem like a valid trade to me, but I'm worried about the overall weekly and 4h trends. I guess I can sit this one out.

Cosgrove ... you make me smile ... always enterprising... and alert for a nice set-up!

I haven't responded prior to tonight (OZ time is 10pm 01-01-2008) because of technical stuff (had to rebuild my MT4 templates and am now wary of another crash in the Virtual Machine I use inside Mac Safari. So far so good...

All I can comment is to not try to pre-empt the chart direction - just trade the set-up as it presents. Go back over this thread:

Spuds Stochastic Thread Theory

and read it (print it out in full if you can). I was going to say to read specific post numbers in that thread, but it is all so valuable, it must ALL be taken on board. This will make you a confident trader. I can not thank this person enough (Spudfyre) - he seems to have left that forum.

You can see that the Stochs are very "frayed" as if the "rope" is unravelling.
While this condition is OK once you are IN the trade, it is NOT OK to use as an entry ... even if a shorter TF is looking good.

You can see that the 14/3/3 Stochastic (the heavy mid-line stoch) is wandering in no-man's-land, and when it is like this, it can go either way. Trying to trade when this condition presents, is likely to end in tears at some point.

Keep your patience and your head. The more you can discipline yourself to obey the rules, the stronger trader you will become, and the more you will commit the "right" conditions to memory.

This will make for a very confident trader over time, and there are days when you will need that confidence.

[Ingot54]

Originally Posted by cosgrove

Short USDCAD at 1.0133 (+315, looks like it's turning around)

The USDCAD is indeed in danger of turning around.
Both the monthly and daily charts are running against a short position, and the WEEKLY is getting into Fish-netting.

Time to go, mate. I would take my pips off the table, but be prepared for the next set-up. One good thing about a rally in this pair now, is that any correction will have more pips for us in its next move.

One of the warning signals is that long tail on the green candle on 1st November. While it is not a classic reversal candle, it IS a warning. Then the doji candle (December) which has just completed, is the reason for all the fish-net developing on the Weekly chart ... indecision.

When you see that fish-net - close out the trade. (Weekly chart)

The DAILY chart certainly does look like a tradable "LONG" setting up. Good for scalpers, if any of you blokes still have any ST or scalping blood left in you!

However, the 4H is telling us it is really "too late."

Patience.

.

[Ingot54]

Originally Posted by cosgrove

Long AUDUSD at 0.8729 (breakeven after a retracement of yesterday's gains, we'll have to see what happens)

The MONTHLY chart has that little indecisive doji too - just like the USDCAD did. "Indecision Ahead" is what it is warning us, and indeed both the Weekly AND Daily charts are looking more like developing the Fish-net pattern each day. The daily is looking very indecisive.

There is a good chance (maybe 70% at a bush-man's guess) that the January candle may be green too, so I wouldn't close my position until it begins to show its hand.

Of course, the risk is that there will be a correction, and wipe your pips away.

In such a situation, as you already have an open trade, you COULD accept that risk, with the probability in your favour of a further rally, but at the risk of current pips+.

However, this is one for your own discretion ... I think the Fish-net Rule would cover it, and say: "CLOSE IT"

Stay cool - there are heaps more pips ahead ... and it is far better to scoop these into the bucket and move forward in search of more fertile pip-ground!

At this point I have refrained from pointing out trades as they set-up. This is for no other reason than I would rather comment on what folks are putting forward. I think this is better - dig for your own gold!

More next post.

[Ingot54]

Originally Posted by Millowena

Good morning, Ingot, and fellow conspirators!

I am super new to FOREX. I've bought a few "strategies" and found them "interesting" and "informative", but short on applicability to my intended once per day check on my building fortune. (Thank goodness for demo accounts!)

I found this thread a couple of days ago and have been busily trying to figure out how the forum works, and what all the buttons, terms, etc. mean and how to use them, and trying to wrap my arms around what appears to be a REALLY neat concept.. Thank you, Ingot, et Al!!

I guess part of my confusion will be dispelled as the thread continues. Another part comes from my desire to break down the trade(s) into phases.. Trend recognition, Setup, Entry trigger, and exit trigger(s), etc.

That having been said, I look forward to your trades, charts, and explanations as to "why" the trades were put on, and what should've been done, when the trade didn't work out..

Thanks, again!

Millowena

Hi Millowena and welcome to your future.

I say that with all seriousness, because you have landed in the right place at the right phase of your trading life.

Normally folks graduate from Stock trading to Forex through a variety of paths. But regardless of how you became interested in FX trading, the important item to note is that you are in a LONG TERM (LT) thread.

Experts will say that new traders should hone their skills on LT trades before they attempt the roller-coaster thrills of ST trading, or even swing-trading. I fully agree with this, having discovered it to be correct in my own experience and evolution as a trader.

Our brains simply struggle to handle the fast-pace of leverage, especially when we are new to this. The pips (and thus dollars) flow in and out of our a/c at an amazing rate. Of course we want them to flow IN to our a/c.

But the very worst thing that can happen to ANY new trader is to have success at the first attempt.

Why?

Because straight away, the head comes off and on goes a pumpkin ... we begin to think: "How easy is this? How long has THIS been going on!" And we become bolder and more reckless than we ought.

Why not ... we really haven't experienced the events that keep us awake at night if we haven't had a loss. But this is NOT about winning or losing as much as it is about Trade Management, or rather Risk Management.

When you have the keys to the company coffers, you are employed as a Risk Manager. If you lose the firm's money, you get the sack ... right?

So why be less careful with your own money?

I know you will do OK with this (more than OK really) because you have had the drive to go out and have a go at getting something that works. This one is free, and I will say it is simple and works. Nothing to complicate it except our own impatience and perhaps being a tad greedy to harvest pips more quickly than the market is prepared to hand them over to us.

Before I go, (it is almost midnight here in the East Coast of OZ) I have to say that my input may be a bit restricted for the near future. I am going back to some serious study, and will participate where able.

In the meantime, run with it yourselves, and feel free to either PM me, or write a question on the thread. I will try to keep up with the thread.

I am certain you have enough info, especially if you keep in mind the MAIN TRENDS and do not trade against these trends.

Further, please read and re-read Spudfyre's thread here:

Spuds Stochastic Thread Theory

and if possible, PRINT is out and keep it on your desk to refer to frequently.

DO not OVERTRADE - just take the trades that are there, and try to specialise in no more than 4 of the majors - limiting your expertise will make you more focused and an expert in the few you DO choose to trade.

Restrict your use of leverage - try to learn more about leverage and its effects on your trading capital, and do try to keep your Stops wide. Manage risk sensibly and you will not only prosper and thrive in this, you will experience a joy that has been lacking.

Finally, try not to introduce any more indicators ... they really are not needed and only introduce other variables that will distract us. Eventually we will be able to dispense with even the candles, though I still like to defer to them briefly as I eyeball the majors.

God bless you all ... I will be back when able.

[Millowena]

Thanks, for the words of encouragement, Ingot!

Enjoy your "sabatacle"!

M

[cosgrove]

Thanks again for sharing your knowledge with all of us Ingot. Hope to see you around in this thread in the future.

[Grob]

Originally Posted by cosgrove

Just have to be careful about the rope being in overbought/oversold zones, because in one of your trades (cad) you sold when the 4h was in oversold but daily was breaking 76.4, and in another (eur) you bought when the 4h was in oversold and daily was breaking INTO the 23.6 level.

I think these trades contradict each other in terms of a system, and that's usually not a wise thing to do. As always, if I misinterpreted your trades, feel free to correct me, and post some charts when you get home from the office!

I think you're probably right Cosgrove that i mixed these trades up slightly - but so far has worked out ok so will leave open!!

What is your opinion on entering when the stochs are already in the overbought/sold regions. I went long EUR/GBP yesterday at 0.7436 with 200 pip stop. This is based on the very strong trend as the driver and the fact that the stochs on weekly and monthly are very tight and still rising whilst the daily stochs are rising and tightening again.

Doing very rough analysis of past data, when a strong trend starts, the stochs can stay in overbought/sold for quite a sustained period. Therefore possible scope to still jump on (even if we've missed the initial burst).

Another question for you is - given Ingots comments on stops - are you moving stops when testing this strategy. For example not reducing the 200 --> 250 pip gap but moving it as you (hopefully) generate large profits on trades. Especially interesting as the NFP data tomorrow could cause a bit of turmoil and the two conflicting arguments are:

1. keep original stop and possibly make a loss if hit by big movement (but conversley stay in the long term trend if it reverts back to that); or
2. move stop to break even or above so increase chance of getting stopped in the volatility but at least keep the profit already made

i'm going for 1 at the moment on this demo account but will see how it goes!

[cosgrove]

Originally Posted by Grob

What is your opinion on entering when the stochs are already in the overbought/sold regions. I went long EUR/GBP yesterday at 0.7436 with 200 pip stop. This is based on the very strong trend as the driver and the fact that the stochs on weekly and monthly are very tight and still rising whilst the daily stochs are rising and tightening again.

Doing very rough analysis of past data, when a strong trend starts, the stochs can stay in overbought/sold for quite a sustained period. Therefore possible scope to still jump on (even if we've missed the initial burst).

While maybe a good trade, I won't be trading these setups just for the sole fact that they don't follow any type of "system." Sure, it could be a profitable trade, but you never know. I think there will be plenty of setups using the hard rules of Ingot's system, so that's where I will throw my (play) money in.

One could make a counter argument that E/G is so high that a correction/retracement is possible anytime now and you'd be buying in at the very top right before a fall. That seems to be the problem in this business, when people trade on instinct/hunches without a solid reason, or years of experience with one pair.

Originally Posted by Grob

Another question for you is - given Ingots comments on stops - are you moving stops when testing this strategy. For example not reducing the 200 --> 250 pip gap but moving it as you (hopefully) generate large profits on trades. Especially interesting as the NFP data tomorrow could cause a bit of turmoil and the two conflicting arguments are:

1. keep original stop and possibly make a loss if hit by big movement (but conversley stay in the long term trend if it reverts back to that); or
2. move stop to break even or above so increase chance of getting stopped in the volatility but at least keep the profit already made

i'm going for 1 at the moment on this demo account but will see how it goes!

When I'm ~200-250 pips up, I will be moving my stop to break even. Also, if that never happens (say, an exit signal at +100p profit), here is my overall profit taking/stop moving strategy:

Initial position will be 3 whateverlots (in the case of my current demo account and most likely my first real account, micro lots), exiting one on a normal exit signal, moving the remaining stops to break even, exiting a second lot once we have another 100-200p profit depending on local S/R and what stochs are doing, and trailing the third 100-200p until it gets stopped out. I will exit a position with all three lots if there is an exit signal before my stop is hit and I am negative or breakeven profit.

I think the important thing to take away from Ingot's post on stops is to keep them WIDE, wherever they are. The question is, if I'm up 60p or so, and there's an exit signal, is it better to:

1. exit all three lots (+180)
2. exit one or two, move stops to BE (+60)
3. exit one or two, move stops to 200p away (-220)
4. exit one or two, leave stops untouched (-340)

The number in () is worst-case profit in total pips (pips*lots). I'd appreciate anyone's input on that that feels they would like to weigh in. I think moving the stops to BE when only 60p away is most likely a bad move...not enough room. I think I will be closing all three lots out then. There will always be more opportunities to trade, and positive pips are always better than chasing pips "that could have been" yet ended up nothing.

[cgjedi]

Thank you for these great ideas. you haven't yet discussed pyramiding or the "fractional method,"

[Millowena]

Could someone please point me to a summary of Ingot's Rules?

I've been searching the thread without success.

Thanks!

Millowena