THE JOY OF CANDLESTICK TRADING - a Learning Experience

[tymen1]

Chart 9 >>>


By tymen1 at 2008-10-13

What is going on here?

The PCI is gone!!

Yes, we are going to reset it to a break even point.
You will see that in the next chart - chart 10.

In the meantime, the price action has gone down somewhat.
The last candle is red.

Never mind, each candle has a duration of 30 minutes.

[tymen1]

Chart 10 >>>


By tymen1 at 2008-10-13

Now what???

The entry line has become a dashed line!!

Yes, the PCI stop loss has been shifted directly on top of the entry line.

You can see that this is so by looking at the left of the chart where you will see 2 tags to the line - one red and one blue.

The blue tag is the entry line and the red is the PCI.

I now quote from my 4 Levels "COMMON PROCEDURES AT ALL LEVELS"

The 2 amounts strategy works as follows :

1) Firstly, we get one small profit from the 1st amount.

2) The stop loss or trade closure is now moved to the trade entry point. (Break Even).
The 2nd amount has a much larger profit target, but at worst, it would retrace to the trade entry point, giving a profit/loss of zero for this amount.

3) Therefore, at worst, we have the 1st amount profit only, but this is superior to a loss.

Or, if you like, the same quote from the original post regarding multiple amounts.
It says it in more eloquent language than I can use........

Therefore, when the first lot meets its first objective, the second lot’s stop is moved up to break even which locks in the gain and guarantees that profit.

When the first target has been met, the worst that can happen from that point on is the second lot retraces to the breakeven point and the trade is closed out for the net profit on the first lot.

We now concentrate on the 2nd amount.

[tymen1]

Chart 11 >>>


By tymen1 at 2008-10-13

I had a look at the opening upper Bollinger band and decided on an exit point for the 2nd amount.

I set this exit at 70 (1.7270)

The entry was 10 (1.7210)

So the difference is 60 pips. (yes I know there is a spread!).

So a profit of 60-4 = 56 pips. (The 4 is the spread).

The price action will probably go a lot higher and you could get a much larger profit with this 2nd amount.
But the principle here is just to give an example, that is, to teach.
The exact profit is not so important.

Just in case, you did not see it, the 2nd amount exit is shown by the new upper dashed line on the chart.

[tymen1]

Chart 12 >>>


By tymen1 at 2008-10-13

In this chart we see that the price action rose rapidly and hit our target profit of 70, then went down again.

The target profit line had disappeared, therefore, and we now have that 2nd profit of 56 pips.

We now have an important work to do............

CLEAN THE CHART

This is most important.

That is, since we now have our profits and the trade is finished, we must now
remove any lines remaining.

If we do not do this, then, should the price action reverse, we will start a new trade and we will not even know about it.

This will most likely be absolutely disasterous.
The new unwanted trade will probably be a large loss trade!!!!

And, of course, this will kill all of your good work.

So this final action of cleaning the chart of outstanding orders and stop loss orders is just as important as trading itself.


Now the final chart.

[tymen1]

Chart 13 - final >>>


By tymen1 at 2008-10-13

Here we see the final result.

All trading lines are removed and we have a look at the final outcome.........

We see that the price action has gone in accordance with our predictions, that is, we had a high probability trade.

The trend line shows this action and the Bollinger bands are opening up.

At last look after this chart was screen printed, the price action went up still higher, and you could have set the 2nd amount profit much higher than I have given here.
But, as I said, this is a teaching exercise.

[tymen1]

STATISTICS

The Strategy

Basic level
Multiple amount trade.
1st amount - 3 mini lots.
2nd amount - 2 mini lots.

The trade

GBP/USD (The Cable)
30 minute candlestick chart.
3 green soldiers pattern.
Bollinger bands added.
Program used - GFT Dealbook.
Magnification - 72
Long trade.

Times

London open.

Traded at.....
Perth - 6 pm.
GMT - 10 am
New York - 6 am
Los Angeles - 3 am
Sydney - 8 pm

The Figures

Entry - 1.7210
Exit 1 - 1.7224
Exit 2 - 1.7270
PCI - 1.7108

1st profit 10 pips.
2nd profit 56 pips.
Total 66 pips.
Reward = 56 pips.

Maximum price action before reversing 1.7437
Maximum profit potential 2nd amount 227 pips.
Maximum profit obtainable 237 pips.

Distance from entry to PCI - 102
Risk 102 pips

Risk/Reward = 102/66 = 0.64
Maximum Risk/Reward = 102/237 = 2.32
Average Risk/Reward expectancy = 1.0

[forexlover89]

Amazing work Tymen I'm thrilled!!! with every post you have me on the edge of my set I cant wait for the next levels (especially the 4th level) thank you so much for your time and commitment I think your work will change lives.Details are key to truly learning this system and you spared NONE!Once again thanks

[jpang]

Tymen amazing work as usual, and I don't mean to question your methods but I've been struggling with the concept that we don't do a traditional entry in the advanced or intermediate levels. I know the majority of pips are made on the retrace trades but if we can still potentially lock in some pips with the traditional entry why wouldn't we?

Thanks again for all your hard work, look forward to seeing the rest of your posts

[tymen1]

Originally Posted by jpang

.............. I've been struggling with the concept that we don't do a traditional entry in the advanced or intermediate levels.

........ if we can still potentially lock in some pips with the traditional entry why wouldn't we?

I have researched this carefully Jpang with a lot of trading of my own.

With the Int/Adv levels, traditional entries are simply too messy to warrant those extra few pips.
Too much vigilance and mouse clicking is required.
Make a mistake and you lose it all.

The levels have been worked so that simplicity rules.

This is most important.
A complicated system may look very sophisticated but in a fast moving market, such a system is completely impractical.
Quick thinking is required and a mistake can be disasterous.

We are working under pressure in a live market with emotions running high.
A cool head is needed.
When under pressure, simplicity makes for easier decisions, and more time to actually look at the price action rather than wondering what to do about it.

Complex decisions and trading does not work well under pressure.

[tymen1]

Thank you for your compliments Forexlover89.

You will have to wait a little for the Advanced level examples.

I wish to cover these levels with several examples for each.