Discussion On Stop Order Strategy

Trading Discussion
172

[QUOTE=“PipityPopityPo;548759”]Hi CNPFOREX, I would strongly recommend a stop loss. Your system works well while the price is ranging but you will get badly burnt if/when a new trend starts. The links I suggested earlier show that a large stop loss is a good idea to keep out of the daily noise and I agree with that but you do need to have a good idea about how much you can handle losing - don’t forget all the gains you made could get wiped out, or your account could get blown up from one trade that doesn’t go your way. And I can almost guarantee that happening when a trend starts because when it does, price will be leave your range and your loss will get bigger and bigger - you may be tempted to hold on to it tighter and tighter in the hope that your system, that worked so well before, kicks in and brings the price back. Be careful, thats all I’m saying. An efficient strategy for making money must have a very effective exit strategy to make money. The entry strategy can then look after itself. I strongly suggest you place a stop and stick to it before the market makes one for you. Best Steve L[/QUOTE]

Hi Steve,

That is one of the issues I have. The stop loss has been difficult to determine. Most of the time when the market gets out of shape it pretty much returns back to where it was but that is not a guarantee. So any help on the matter would be appreciated.

173

Hi cnp,

It seems to me that there are 2 choices - take a big stop loss or many little stop losses. I prefer to take many little stop losses. The stress of waiting for a position to come back is not good for me (I tried it and failed) and I can’t force the market to do what I want - so the risk of losing it all is higher; I am not in control.

And therein lies the issue. What’s good for you is not good for me. I can’t give you any help , I can only tell you what works for me.

My philosophy is simple:

I want to make pips.
The market goes up and it goes down (seemingly randomly; more at some times of the day and less at others - it’s worth watching to learn when and how).
I stand still and wait for the price to come to me - patience is the key here.
I need an edge to make money from these (seemingly random) movements.

My edge is that I stand still - both in [U]price[/U] and [U]system[/U].

[U]Price[/U]

I choose a price once a week and go long and short from that price, irrespective of indicators and other whatnot:

How do I choose the price - weekly pivot points (loveislife does the same, he uses S1/R1 (I think - I don’t actually care)).
How do I choose my stop - Stop = 10% of weekly ATR (not big at all).
I go long when price = Pivot + Stop with a stop = Stop; break even after 10 pips; close after weekly ATR/4 pips.
I go short when price is Pivot - Stop with a stop = Stop; break even after 10 pips; close after weekly ATR/4 pips.

I do not retake a trade unless price moves back through the Pivot price.

This means I do not trade very often; I miss trades regularly (because I’m an idiot); I have had quite a few losing trades but the loss is low; and I [B][U]AM[/U][/B] in control of all aspects of my trading.

I don’t care about missing trades though - I know that I am not at risk of losing money by missing a trade and the market will be there again tomorrow, waiting to try and take my money…again.

[U]System[/U]

Admittedly, I have only been doing this now since the beginning of September but I [B][U]am[/U][/B] making money, slowly but surely. I am only doing it for 4 pairs (GBPUSD, AUDUSD, GBPEUR, EURJPY) and I could probably make more with a different system, or if I tweaked this system, but I’m not ready to do either - I haven’t mastered it yet.

Why?

If I was a junior kid of 16 years old in his first few weeks working for a FOREX trading firm, do you think my boss would force me to trade one system religiously and to the letter until I was a master; or would he let me carry out random research, take random trades and deviate from the system? How long would I stay at the firm if I deviated from the system, especially if I lost money?

I’m 43 years old and I’ve held some very senior positions in management but I’m approaching this as if I were a junior kid.

Ego, be gone!

[I]And that’s the point I made about standing still - it’s important as far as the system is concerned as well as the price I choose. I haven’t changed the weekly price or the system once, even though I have been very tempted.[/I]

Well that was a ramble…sorry.

What has this got to do with the original subject that this post is based upon?

Metin,

I think if somebody can decide on a system, stick to that system, become comfortable with that system, master that system and make money with that system, then it is a good system. It may not be the best or most efficient system but if it makes money in the long run, and you can take money out of your account, it’s good.

I believe Loveislife has done that for himself and it’s working for him. I am sure he knows the shortfalls (all systems have them) but because he knows them so well he probably doesn’t care about them.

I think he has found his Holy Grail. Emphasis on HIS, because everyone is different.

That made me think of the Indiana Jones movie - from all of those complex and beautiful cups that could have been the Holy Grail, it was the simple, wooden one that turned out to be the true grail. It held water just as well as all the others. Ponder.

Best,

Steve L

174

[QUOTE=“PipityPopityPo;549101”]Hi cnp…;…… them. I think he has found his Holy Grail. Emphasis on HIS, because everyone is different. That made me think of the Indiana Jones movie - from all of those complex and beautiful cups that could have been the Holy Grail, it was the simple, wooden one that turned out to be the true grail. It held water just as well as all the others. Ponder. Best, Steve L[/QUOTE]

One of the best postings I have read so far. Thanks PPP. Yr name also stands for Pipspipspips right?

175

Thanks Zane,

nothing in the meaning of the name - just liked how it sounded.

BTW -I forgot to mention that you need to gain confidence in the system, just like any other relationship, professional or otherwise. Some of the trades I missed (because I’m an idiot) were because I didn’t fully trust the system. Trust is earned over time and my system is earning my trust.

As an aside, why don’t you take a quick look at pivots and count the amount of weeks that the price has returned to the pivot point (and how often each week if you want). It’s quite spooky! It should have a Certificate 18. And a Parental Warning!

You should read stuff from this guy: 301 Moved Permanently

Best,

Steve L

176

[QUOTE=metaframe911;546162]Ok Peter thanks for the reply I have gone through half the books so once finished I will reapply everything from this to see what my results are like on my current strategies / or new one :slight_smile: … Metin keep up th effort. Will come back to this thread after i have interpreted the feedback from Peter…[/QUOTE]

Metin, Paul, Meta and others here is your next installment re: Market Profile

In FOREX trading there is one important concept that must be understood: that is the concept of fair price that was mentioned in Market Profile. It is the bridge between fundamental and technical analysis. It does have some relation to support and resistance but there is more to it because fair value is what the gorillas battle over. I believe that many FOREX traders have a grave misunderstanding of support and resistance and this is demonstrated by gurus arbitrarily drawing support and resistance lines based on perception.

You did say you were reading the Market Profile book. The gist out of that exercise was to develop an understanding that there is a real battle in the market to identify fair price. Now that concept of fair price shifts according to different economic conditions and competing interests have an opinion of fair value based on their competitive values and in particular their perception of competition between nations and trading blocks.

For your benefit I have attached three pdf documents of the EURUSD that will give you a different perspective of support and resistance. As you will see I approach the idea from an analytic approach. Firstly, there are the document titled charts that shows an eyeball approach to identifying fair value on both the daily and weekly. I have estimated the fair price purely by observation. Also please observe that I have left the daily ranges on the weekly chart that are shown in small boxes on the right the chart.

The two other documents, daily divisions and weekly divisions, provide a cleaner analytic approach with some simple histograms showing the frequency that the EURUSD closes within particular divisions of the high low range. For this exercise I have divided the high-low range over a particular period from high to low (dates between 17 October 2008 to current for the daily) into smaller ranges of 10 units, 20 units and 40 units in each range. The same for the weekly between 19 October 1990 to current.

I think that you may be pleasantly surprised. Yes the distributions look very familiar and you can do simple statistics to take advantage. You can also observe that there appears to be a perception of what is considered to be fair value over time. Note that there appears to be trading opportunities in terms of a mean reversion strategy.

I hope that helps Peter K.

177

And the battle of the Gorillas becomes obvious in the pdf document attached. Both the 2 hourly and hourly histograms show bi-modal distributions in the battle for fair price. Is this information tradeable - I believe so and does the analysis provide some better indication of the conflict for fair value than eyeballing charts (read support and resistance) - I believe so.

178

Okay guys final comment re: market profile and above material.

From the hourly and two hourly chart it appears that there are ‘price holes’. That is not the case and all it does is demonstrate that movement between price levels can be quick, discontinuous and difficult to catch unless you are carrying some level of risk. Once the target price level is achieved you will find that the price movement will again start it random gyrations. In short, to succeed in FOREX you must have the perfect ‘holy grail’ system that can capture those sharp discontinuous movements or be like the rest of us who are willing to bear calculated risk in the hope that you can catch the so called, and what I believe to be, discontinuous trend. This is a difficult game indeed.

179

Thanks Peter K for your valuable info & your time… one question, when you say ‘EURUSD closes’ in the above context, what time frame closes your meant?.

or you meant the price no. of times revisited not necessarily candle closes?

regards

180

Vijaim - what I did was take the High and Low of the EURUSD over the specific periods as mentioned above. I then divided the High Low range into divisions of 10, 20 and 40 units. The histograms show the frequency that the a bar of the EURUSD ‘closes’ was within each division, irrespective of date. For example, if the bar on date X closed within a specific division then it would register on that division. Please read the Market Profile book.

181

All I can say is Touche dear boy. I got to let go and at 53, can it be done, lets see, but I will have some fun on the way…

182

Thanks Seajah,

I hope it works out for you. It’s not easy. Writing some rubbish here has helped.

Best,

Steve L

183

PPP

In the words of Spandau Ballet

Gold
Always believe in your soul
You’ve got the power to know
You’re indestructible
Always believe in, because you are
Gold

Try Gold if you can get into the “ebb and flo”, as I call it, fun.

Just don’t think in pips but in $ movements.

Easier for me to follow than 4 or 5 currencies, although i still attempting them, same as yours.

“One day Rodney we be millionaire’s”

Cheers

184

Hi Seajah,

Gold has always Ben unlucky for me. Do you have a strategy?

Best,

Steve L

185

Yep

Stay in the pub as long as possible so you can’t trade

Apart from that I’m newish to this but find gold easier to follow now I have watched it for some time

1 hr timeframe minimum, study resistance and support levels from previous months / years, historical levels seem to repeat themselves.

Fib levels seem to work well

Does luck comes into it? i never get on with Yen, its just i never studied it so I always fail with it.

But getting on a short trade just as someone dumps a whole heap of gold futures on the market helps, now I suppose thats lucky.

I think as newbies, we try and diversify too much, too many currencies, safety in numbers and all that and then we can’t follow what’s going on and end up loosing.

I am trying to keep to one instrument, trying, and I do seem to do better. And only trade when the time is bang on, not when you think but when you know its right.

Hope that helps a bit.

Cheers

186

Hi Seajah,

the pub sounds good but I try to stay off the pop nowadays - I succumb too quickly to hangovers!

But back to business. I like what you say about sticking to one currency pair (or commodity in your case). I sometimes find it a bit difficult to juggle 4 currency pairs and must say that I’m tempted to reduce it. The rules are so simple though that even I can handle it. That said, I have been guilty of missing a few winners that would have speeded things up a little.

I’m being a bit pig-headed with myself about sticking to my system. I do it because I am seeing all the problems with it, dealing with them (on paper) and now I am starting to notice how price moves around the chart. I have been uncannily accurate at spotting potential trades (I haven’t taken them because they were outside the system) and more importantly, I have learned how [B][U]not[/U][/B] to take a trade.

Last week I took just 3 trades - I have never done that before but I came out with a nice profit and moved my overall plan forward.

What I’m really enjoying though is seeing price action signals jump out of the screen at me yelling, “Buy now!” or, “Sell now!”.

I think I may be ready to move on.

Support and resistance on a 4 hour chart, Price action candle patterns (Inside, Outside & Pin Bars), PATIENCE, and a smattering of fundamentals, all washed down with a healthy glass of risk & money management is the way I will go.

And maybe I will see what you can see at the end of your rainbow!

Best,

Steve L

187

Hi Peterk,
Market profile book,I have gone thru 60 pages so far… Im slow in reading…Parallely I had watched videos about market profile courses that are available in youtube. so far good & i find interesting. I appreciate your teaching. Please continue your teaching when you have time. Im following

Thanks for your time and help
Regards

188

Been busy the last 2 weeks but have been reading the market profile (and fisher book also)for market profile i am specifically re-reading chapters 6/-10 interesting book i have found the new approach very interesting and I can see from the charts / histogram enclosed that if turn on its side the bell curve type structure is apparent and the highest tpo/ fair price is where price appears to return to. I think for me it’s hard to grasp when you would actually enter a position to presumably aim to return to the fair price range probably if there was a number of steps listed that a trader would go through in preparation for entering and exiting a trade would be useful.

In the fisher book it seems easier to grasp the content probably because it refers to areas I am currently more familiar with. . The fisher approach I found that eur/usd and Gbp/usd do respond well when the opening range is set between 4am 8am and less than 21 pips in range 2:1 are more easily achieved in any one trading day.

189

Hi Metaframe,

I have kind of being doing the same. Trying to digest all the info but also focusing on the GBPUSD opening range. After backtesting a few weeks it looks like it could be profitable. Ive noticed the smaller the range usually the better the outcome also. There tends to be one or occasionally 2 big moves during the week which can be capitalised on with this opening range approach. Just working on how to best utilise a trailing stop and stop loss.

Its been pretty quiet on this thread unfortunately. perhaps something to with the market being fairly choppy lately making this strategy hard work but I think its feasible. Loveislife’s thread appears to be almost dead?

190

The information and the charts are very usefull i wounder if mean reversion strategy is based on Envelops that are tailored to best fit or something like bollinger bands. I know from past that in consolidated market price that extends out of the envelope will usually revert to the mean and i suppose that is increased if that is where the market feels is fair price is and then will revert quickly ?

191

Hi Meta - well I must say that you are getting close to the holy grail, that is, even there is one. You are the first who has made any decent comment regarding the art of trading. The truth and the holy grail about trading lies between the ears and how we use it. It is all about decision making and most people in their quest for the holy grail continue to search for that magic indicator or instrument. Secondly it is not about the charts and indicators or even the method - it is about making money. Two elements to trading: decision making and making money. That is it. Guess what? You can make money out of any indicator if and only if the indicator does not throw too many decision making points. I suggest that you read Marty Schwartz who turned 40,000 into 20 m. There are others who used indicators etc. When you said that the material was very useful you started to differentiate between the forest and the trees. Keep going and always think about how to make money. Secondly backtesting systems. I do not believe that the conventional methods are adequate tools for FOREX. There are serious issues regarding the distribution of prices and systems will collapse as quickly as they were developed. I have found that the distribution is closer to a Gamma distribution and the only testing process that suits that method is the Monte Carol method. 68Futura yes the opening breakout has been tested by everyone from retail traders through to big hedgefunds. I know quite a few that still trade FOREX using the opening breakout. Anyway Meta keep searching because the answers are in your own hand and probably sitting right in front of you. But always and I mean always think about how to make money and always see yourself as the casino with the edge and keep your feet on the ground. Pk