Oh wow, big thanks to you!
Ummm, what are you trading? Options?
Yup, that was plan as well. Thanks for sharing!
Equities and commodities. Mainly indices.
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Even today? When was the last time you placed a forex trade? 
Probably 2005 - 2007. Could be wrong. But not by much. Certainly not in the last five years. Of that I’m 100% sure. Unless the US Dollar Index counts. In that case once in the last five years. And that ended badly. So that was the last.
Not to tarnish my reputation of course but I will admit to looking at some pairs now and then of late. There’s one or two that have set up just now as per a particular trading system that’s pretty darn good. But these are trades that could last for weeks or even months if they work out. Which again will probably not be of interest to most around here. I shall see. Tempting as it may be though: will probably give them a miss i.e. will tie up margin for an extended period of time that certainly could be used more productively elsewhere like Equities (of course).
Care to share any details about it? C’mon, I know you really want to. Ha!
Not keeping it to myself I assure you. Just that I posted a link to the e-book in which the system is detailed and I think exactly one person looked at it so didn’t bother here. You now: God forbid somebody actually has to read through something and learn i.e. not interested unless it’s spoon fed and/or doesn’t make 1 000% in five minutes type of thing.
Anyway. See link below. Go to page 41 section 4 “RSI Rollercoaster”. When I was indeed thinking about jumping in on a FOREX pair I was looking at AUDJPY and AUDUSD with this trading system. I actually got in and then decided no. Not for me. Have not bothered with FOREX for years and years. No reason to start now just to prove a point. So just closed the trade out (basically lost the spread is all). In just looking now though: still valid trades for the system as I type this i.e. stops have not been taken out as yet so could be a late entry with a very tight stop as per the system. Not the way I would trade it i.e. I don’t use stops. But that’s not for everybody for sure. Rather stick with the system as is (at very least until you are familiar with its nuances and shortcomings). Works a treat on Equities though I’ll tell you that.
Kathy Lien and Boris Schlossberg - High Probability Trading Setups for the Currency Market
Another possibility COULD be page 56 section 6 “The Memory of Price” on both pairs mentioned above at this current time. Now this particular trading system is REAL robust. Double tops and double bottoms. It’s reliable though simply because of the extreme wide stops and the way the trades are managed. Point is: with small accounts it’s probably not possible to trade it or not worth it.
Anyways. Good book and good reading I assure you. Even if a person doesn’t trade or isn’t interested in the trading systems the balance is sure worth absorbing.
And not infringing any copyrights i.e. these same systems were eventually published in their entirety on Investopedia.
By the way: not suggesting that anybody take any particular trades (the usual blah, blah, blah disclaimer). Just saying.
Also: none of these trading systems are my core trading system. Call them high probability opportunistic trades if you like.
For the sake of interest (although I’m figuring that given it’s not a FOREX chart it’s not going to excite but anyway) below is a daily chart of the Swiss Market Index Futures (Expiry 21 June). See if you can spot the last three slam dunk trades using The Memory Of Price. That’s serious money (if you have the capital of course i.e. very little leverage here).
Swiss Market Index Future Expiry 12 June
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I just use it as a back-up confirmation on occassions. In a uptrend I like to see price at or near bottom of Bollinger and opposite for downtrend. but have never used it to make a trading decision…
Holy smokes, Dale, thanks! That ebook link has 53 clicks now. Not sure if that’s been in the last day or two, but it got some action. Thanks again! I’m reading now and reviewing the two setups you mentioned. This is exciting!
Haha, this made me LOL. Too true, too true. Us newbs want it spoon fed with guarantees wrapped in gold bars and lambos.
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My absolute pleasure.
It’s really a good book and those two seem to know what they’re talking about. And as I said: if you didn’t even look at the trading systems their sections on trade management and psychology and whatever else are worth the read.
If you need any help just shout. There’s only two in the book that I use when appropriate as noted. And even then I bend the rules just slightly (try to be even more conservative at the expense of fewer trades). But I’ve been through it enough times to be able to comment anyway.
Hey, very kind of you! I gave the RSI rollercoaster a read overview and then at AUDJPY. Could be something there next week. Looks a bit flat at the moment, but with the right sized stops, might be something there.
I was a bit confused with rule #5: Exit half of the position at 50% of the risk and immediately move the stop on the rest to breakeven.
Is that assuming the trade is going in the right direction?
Thanks again for all the help!
Hello.
Apologies for taking so long to respond. Had some stuff on my plate today unfortunately.
I’ve not looked at AUDJPY or anything today. Actually lemme take a look now quick… Hmmmnnn… OK. NO question that you would have been stopped out today. What can I say. It happens. Sorry. Disappointing first example I know.
As for rule #5:
Yeh. I’ve found there are two ways. And that their explanation is ambiguous and open to interpretation.
1 - You would have two positions open both at the same price obviously (hopefully). Once the first TP is reached then you set the stop on both positions to the same stop level. This means that you will have profit locked in on the one position while the second will break even if stopped out. In other words you’ll clear out with SOMETHING.
2 - You again have two positions open but once the first TP is reached then then work out what BE will be for BOTH positions added together and set your stop to this level. What this means is that if stopped out you’ll make NOTHING. BUT: it has the benefit of allowing your BE stop to be placed further way and in some instances means you could even end up moving your stop backward from the original level. This obviously give the trade far more room to run. And of these two methods the second (2) has worked better for me.
But I need to say this:
Please take a look see at some if the Indices. I promise you it’s the way to go. And RSI has WAY more relevance. Take a look at the chart below as an example. That would have been some VERY serious money and at no point would you have been stopped out or even looking at a loss. Obviously this does not always play out quite as perfectly. But it sure does happen a lot more than it does on FOREX.
There’s three trades on this chart. First short but stopped out. Second short and lasted forever. And then third long and same thing.
Dow Daily:
But I must mention that I did not take these trades. Matter of fact I didn’t even see them at the time because I wasn’t trading at that time (got myself in trouble in August on a Gold trade and decided to give it all a miss for a while).
Oh wow, thanks for that explanation. Couldn’t wrap my head around it. Never thought to have multiple positions open.
Come to think about it, do all brokers allow you to do that? I haven’t tried it, but thinking about it, I feel like Oanda would just update my first position if I started a second one that was exactly the same. Or do I need different accounts to make this happen? Something I’ll need to try out this week.
Thanks again. Your explanations are always way more than I expect and feel I deserve. I’ll try to add into my mix looking at indices to see how they react. Dude, plenty of things to work from this post!
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Take performance of any indicator with a grain of salt because to calculate their value they take past values of the price as an input data then applying formula calculate the result. Basically it means that they are lagging i.e. doesn’t have much predictive power.
I would rather advice you to go with price action techniques which underlying principles correspond better with common sense.
Hey. How’re you doing??? My pleasure.
If your broker is one of those that allows you to aggregate positions then all the better. It means that if you close out one half of a position then your break even price is automatically calculated on the remaining portion of the position. This is great if you want to place a stop at break even as described in my point 2 above. I prefer this to be honest. Just that my broker doesn’t work this way is all so I have to manually wok out break even. The plus side of course is that it’s easy if I want to close out one half of a position at profit as in my point 1 above.
But yeh. I concur, to a degree anyway, with the post above this one. Bear in mind I posted a link to this book mainly because somebody was looking for info. on a BB strategy and then somebody down the line mentioned Kathy Lien. There are better ways to trade Indices. But let me also say this: indicators like RSI were never designed to work on FOREX to begin with. In my opinion they have very little relevance. There’s no such thing as overbought or oversold in FOREX. I can tell you for sure that the banks don’t give two hoots for an RSI reading. Stocks is a different story. The indicators themselves are nothing magical. But too many people watch them. Hence they have the propensity to become self fulfilling prophecies. Even Bloomberg watches this stuff RSI being a favorite. They broadcast it and to thousands and thousands of people. Therein lies but one difference. So to say indicators lag may be true. But don’t knock them or discount them too much nor judge them on their less than stellar performance in the FOREX market.
Thanks for the help. Yea, I gotta remember that about being lagging and not predictive. Any resources you can point me to on the price action techniques? I know there’s a long running thread here on price action from guy named Fox I think that I’ve had my eye on for a while. Just looking to focus on a strategy for once rather than bouncing around so much.
Okay good, one less thing to worry about.
BBs got me interested so I’ll give them a go for a while, see where they take me.
Thanks again for the feedback!
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And yup, that happened. No biggie. On demo, had my stop set (maybe too tight) so it’s a learning lesson.
Yeh well. As I say: it happens.
But if you want to explore it further and make the signals REALLY reliable:
Then you wait for RSI to close below 30 and then peek back above 30. Then do nothing. Wait for this to happen AGAIN and then take the trade. Reason being is that if you look at a lot of trades like this (albeit that there are very few): people will take the trade on the first signal as indicated by the system and then place their stop just under the swing low just as indicated by the system. Problem: there ends up being a cluster of stops right there at a very obvious place to be gunned for. Sadly: it cuts down the already few trades that this thing generates. But anyway: there’s some useless information!!! LOL!!! As I said: there’s better ways of making money I think. But then again: who am I to question Kathy Lien of course. So there is that. Bear in mind too: that system of theirs (as I think she actually states) works only because of the way the trades are managed and not because RSI(14) on the daily charts is something magical (my rough interpretation anyway). That seems to apply to most all of their trading systems i.e. they’re very big on taking half profit at a given point and moving the stop to break even after that (they always lock in profit as per my point 1 above).
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Check this out
using only Bollinger bands, there was no strong success, but along with the Stochastic and ADX indicators, the results became much more interesting
So you used all 3 together? Or just stochastics and ADX?