Great! I am already looking forward to following it and wish you all the very best with it - you deserve it! 
As @anon46773462 said … I also wish you all the best @alphahavoc.
But, if you don’t take it personal, my concern is that have you prepared yourself for the said challenge on Live Account? Because I noticed a thread of yourself posted by you on June 06, 2018 in which you stated that “I have to start from scratch.”
No worries Sufshiken. I’m can be quite emotional at times… Hopefully, I’m a more seasoned trader now.
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Thank you, Manxx, I will take all of those that I can get! 
I appreciate your thoughtful comments.
One of the biggest things I’m learning by doing this sort of “practical lab” demo account is that there’s no substitute for trying something in a simulated live environment. So yes, I’m going to stick with this system for a while to really get to know it before switching to something else. (For instance, I’ve not yet done any looking into the maths beneath the indicators that I’m using. I need to do that.)
I’m definitely still in school… the demo account is the lab course and I’m reading theory as well. But seriously, one of the biggest things that I’m learning is how to integrate this into my life. There’s a lot of sitting around waiting for something interesting to happen involved, but you’ve got to be present to deal with it when something interesting does happen. Managing that is a lesson in itself.
I expect that what I do is going to evolve a lot before I go live… at the moment I’m still at the stage of “I don’t even know what I don’t know”. But I’m on a steep learning curve, so I’m kind of okay with that right now. Although I hate losing demo money, the real point of this exercise is the learning part… hrmph, but I still don’t like losing demo money!
Yeah, I think I get that. In the time I’ve been doing this, I’ve already found that it can’t be purely mechanical. I guess if it could be, then everyone would just run an automated program and get rich. The entry can be mechanical (although I’m getting increasingly skeptical on the wisdom of that) but the exit can’t be. That implies that some level of skill is required to get the most out of a trade.
Hope to see you around!
Thanks realtopsy! Best of luck in your endeavors.
Thanks alphahavoc. All of what you wrote is a new way of looking at it for me, and I shall delve in a bit.
I look forward to that!
This morning I’m happy to have spotted what looked like a signal that turned out to be not valid. At 08:00 the EMAs crossed to signal a short trade, and the overall trend was down. However, the MACD histogram had already crossed to negative a few candles prior, invalidating the signal. (Attentive readers might note that I made that mistake 2 days ago.) I steered wide of that.
If I had entered, I would have had to get out per the rules of the system before 09:30, when UK retail data was to be announced. If I had done that, I probably would have just about broke even. If I’d hung on through the news (against the plan), I would have been stopped out on the news candle, because the news was good.
Reading up on the indicators I’m using while I wait for something interesting to happen, to try to understand better the tools I’m using.
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A Tale of Two Trades
Today I ran an interesting experiment.
Up to now, I’ve been strictly following the Cowabunga system, except that I’ve been putting my targets at the 1:1 risk ratio level instead of following the system for setting targets as described by Pip Surfer. But honestly it didn’t seem to matter where I put my targets, because I was getting stopped out. A lot. Most of the time.
15 trades: 9 stop outs, 6 with risk ratios >=0. Or put differently, an average risk ratio of -0.39.
A couple of the 6 trades that didn’t stop out were managed poorly by me, and one of the 9 that did was one I shouldn’t have taken (because the indicators weren’t really right.) But still. We don’t seem to be on a winner here.
I’m starting to see a pattern. What’s more, quite a few of the stop-outs were by only a pip or two. I’m starting to feel a little bit paranoid, too. Like I’ve got red concentric circles painted on me or something.
Then I read this:
“Most trading books repeat the same advice: place a stop below the latest low when long or above the latest high when short. […] Professionals are not blind, they look at charts and know where those stops are. They gun for them, trying to trigger stops with false breakouts.” – Alexander Elder, Come Into My Trading Room
Gah. That’s exactly what the Cowabunga system says to do, so exactly what I’ve been doing.
Okay, so over the last few days I’ve been reading what Dr Elder has to say about placing stops. He gives a method in that book which attempts to measure the noise in the market and set the stops far enough away from the noise levels that they will be “safe.” Or, well, safer, shall we say.
Also I’ve been thinking about the triple screen system from the same book. It’s not really a hard and fast system with clear rules, like Cowabunga is, but probably more described as a method that can be applied to many things in different ways.
So when I woke up this morning to see the cable (GBP/USD) rocketing up because of some political comments made yesterday in the US, I thought I might try to use some of this new stuff that’s bopping around in my head. Even though I’m pretty sure I don’t fully understand it, and what’s more, I’ve been screwing around with those safe stops trying to make them useful for day trading. (In the book they are given more for swing traders and react too slowly for what I’m doing, or should I say, trying to do.)
Now, it’s worth noting that emotionally, I was suffering from big FOMO (Fear of Missing Out) watching that nice uptrend go without me on it. That’s background information. It probably influenced what I did with the first entry described below.
So I decided to do two things in parallel – first try some kind of Frankenstein’s monster of Cowabunga and triple screen, using my safe stop calcs based on four-hour information. Then at the same time, do straight Cowabunga.
Note that this violated my risk management rules, as I put both trades on as if they were the only trade, but I did this knowingly with a specific purpose in mind. Since I’m on a demo account, for now learning takes precedence over other things (within reason.)
Okay, so I entered on the… let’s call it the hybrid system, at 09:00. The entry was triggered by a signal on the “third screen” for which I was using the three minute chart. I don’t think that was particularly relevant or particularly advantageous… more research required here. But aside from that, I put my stop at the safe stop level (my 4-hour version), which made me take a smallish position size in order to limit the money at risk.
As I said, my entry wasn’t particularly good, and things started going horribly wrong pretty quickly as the market did a little crab-dance sideways.
About 2.5 hours later, a proper Cowabunga signal formed on the 15 minute chart, and I took that one too, putting the stop under the latest swing low per the system. The entry for Cowabunga was 4 pips lower than the other one, so actually a better entry. The tighter stop meant a bigger position size, in fact twice the first one. (Great! bigger profits! Right?)
About 1.5 hours after that, the Cowabunga trade stopped out. The spike just broke through the stop level by a couple of pips. Again.
The other trade that I started earlier was still in the game, because of the wider stop. About 6.5 hours after I opened it, it hit its 1:1 target. Since the candle closed just above the target, I took the profits, as per the Cowabunga system. Ended up with a 0.98 risk ratio.
Of course the day was just about break even, because these two cancelled each other out. The ideal trade would have been the entry of the second + the stop and exit of the first.
So here’s the lesson, I think… this was all about the stop placement. The second trade had a better entry, and had it had the same stop as the first, would have concluded sooner (because entered later.) It failed for one reason only, that the stop got hit by a big nasty spike.
Okay, that’s only one data point, but I think I’ll be changing the way I handle stops now. This was a really eye-opening experiment. The market was the same, I was the same, same emotions etc… only the entry and stop decisions were different. One ended in triumph, the other in disaster.
It is just a personal opinion but i think @elenmirie that you are far too intelligent and mature to be messing around with such short term charts of less than 1h.
You have all the makings of a serious trader.
You need something more mature than the Cowabunga and 15m/5m TFs. You are analytical and composed. You think, understand and draw conclusions. You have a trader future. Find it.
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A fixed risk reward is wrong. IMHO, a person should trade like there isn’t one.There must be enough room for drawdown. (Previously there was a Trader called Adnan in babypips, he doesn’t believe in stop loss.) Thus, the position must be small enough to not hurt the account. However, an ultimate protective stop must still be in place for insurance. I sound paradoxical, don’t i. But, this is what i really think. It is hard to explain it. I’ll try to.
Now we are trading at a specific timeframe in hope that we can hit our targets. We will need a healthy dose of market volatility. Market fluctuates it can go both ways. A system like cowabunga is akin to going with the flow of the market. Like a surfer on a wave and balancing ourself on the wave, and moving along wherever the wave take us.
You must learn to recognize the pitfalls of this kind of system. When market trend. The cowabunga system works! But in a choppy market. the system loses its shine.
The important thing is this. Zoom out of your current timeframe chart. This is where multi timeframe analysis becomes important. The protective stop should be base on a timeframe from a larger perspective.
In the 1st place, you should never take trades that go against the higher timeframe charts. Basically protective stop should be base on a timeframe higher then the ones you use to enter a trade.
I know, now you will be wondering. Then isn’t the risk like 10 : 1? Maybe, but sometimes it can be less than that like 6:1 . Still big isn’t it.
There are a couple of ways to mitigate the risk.
-
Averaging
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hedging and averaging ( i won’t recommend this)
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don’t set targets, let the profits run
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cut loss, hit and run like a sniper
(tough, but possible)
The drawdown risk isn’t necessarily huge in relation to the reward. If market trends in your trading timeframe. You might just hit your target and obtain a result close to 1:1 . If you find that you are getting stop out too often. You were late in entering your position because all indicators are lagging in nature. You need to develop the trader instinct to anticipate the move. Or it could be because the larger timeframe is flat market.
Me too. I have the same exact issue. Primarily because we value time a lot. Some people call it GREED. But i think Greed is an important force that drives the trader. We just need to learn to tame it.
PS : Go thru Dennis SW chart. It will definitely help alot in terms of larger perspective. Trading in forex is risky business. Decide whether such a path is your calling.
Thank you, Manxx, for your words of encouragement!
I shall do my best!
Yes, I know you will. 
Hi alphahavoc! Thanks for all that food for thought.
All that about how to optimise your exits is quite difficult… the Cowabunga system says to wait for your target to be hit, and then, if there’s a clean break through it (which is not specifically defined but basically the candle goes through the target by a good bit), move your stop to the original target and set a new one. If it doesn’t make a clean break, take your profits.
The danger of moving the stop according to that system, of course, is that you get stopped out of further profits by market noise, but it does guarantee you the profits from your first target (instead of just watching it fall back into a loss.)
For where I am now, that system works as well for me as any. I still find it hard to make the decision… in this case (the one that I’m describing), the candle closed just a bit above the target, so I considered moving the stop. In the end, I just closed the trade. If I’d moved the stop I would have been stopped out in seconds.
And to your point, I’ve certainly noticed that Cowabunga works in strong trends and tends not to when ranging… as you said, the indicators are lagging, so when the market is only making small moves, you get to the party just about the time everyone else is leaving. As I move on learning, I envision that I’ll have a few systems available (just a few, I don’t want so many that I spin around in indecision all the time) that could be strategically selected according to market conditions. But I’m not there yet.
Sorry to be thick, but what’s Dennis SW chart?
As an addendum to yesterday’s post:
Pip Surfer blogged about this trade. He didn’t get stopped out. Wait, why?
He set his stop 1.6 pips below where I set mine. I set mine bang on the low of the candle that formed the swing low. He set his below that (I’m guessing by an eyeballed amount, but I don’t know.) The system does actually say put the stop below the swing low, not on it. But, if he was only 0.6 pips away from being stopped out (or so), that still doesn’t feel quite right.
I would suggest adding an additional 10pips below the swing low for buffer against widening bid ask price during inactive market hours. For commodity related pairs add an additional 20pips below the swing low for buffer against widening of spread. For market makers brokerage forget about setting stop loss totally.
Is that because they can both see it and hunt it?
I have no evidence. But i think some broker does it. It seems very logical to me. It is very easy for them to widen the bid ask spread ( my definition of stop hunt) . When you complain, they can easily blame it on lack of liquidity during off market hours, It is a natural phenomena for bid ask price to widen. There is absolutely nothing you can do about it.
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One thing I have become good at in my life is playing a game called Nethack. Before anyone gets excited, the “hack” part refers to hacking monsters, not computers. The “net” part came to be because the original development team coordinated over ARPANet, which in the early 1980s was a Really Cool Thing. That’s how old the game is.
Anyway, I dabbled in that game for a long time without winning much, or at all. Long time, as in decades. Then probably about 6 years ago, I suddenly got serious, and now I’m pretty good at it, by one measure ranked fourth in the world. (Other measures rank me lower, but that one happens to be my favourite, for some reason.)
So how did I get from dabbler to serial ascender? (When you win in nethack, you ascend.) Well, I think there were a few reasons for this.
- Joined a community
- Listened to criticism
- Studied obsessively
- Played a lot, and I do mean a lot. I gave up other hobbies to make room for nethack.
One other thing about nethack that gives it something in common with trading… you don’t get a second chance. If you die, you’re dead. There’s no “restore to previous save point.” Your character is gone. The dragon is picking its teeth with your bones; the orcs are fighting over your stuff.
And it’s a horribly complex game. There are bits of it that I don’t think the dev team even understands.
So when I was going from dabbler to expert… a process that took probably about 2 years to get started, and is still going on, really… I spent so much time just reading up on the nethack wiki. Trying to anticipate situations, making sure that I understood what to do in case they happened. What are the things that aren’t poisonous but can give you poison resistance? How do you handle it when an arch-lich shows up and you aren’t magic resistant? What are the magic cancellation properties of different cloaks? What are the techniques for getting unholy water? What do you do if you’re riding on a dragon over lava, and something kills your dragon? (Options other than burning to a crisp, that is.)
You get the idea. Obsessing, making sure I understood as much as I could.
So that’s what I’m doing right now with forex trading. And I think I’m about at the stage where I was consistently able to get to the late game, but then would make a mistake… you know, dumb things like wielding a cockatrice corpse and moving around a room that might have pit traps… oops, fell into a pit, touched the corpse, instantly turned to stone. I don’t do that now, now I have very strict health and safety rules about cockatrice-corpse handling.
But it took a while to learn.
On the positive side, I still have my first ascension on a public server ahead of me. These days, I’m calm, cool and collected, kicking angels in the teeth and dealing summarily with angry priests. But that first one, I was in full fight-or-flight, heart pounding, palms sweating, “oh my god I’m gonna die!” mode.
And nethack is an ascii based game. All that was reacting to things like a purple & on the screen.
That part is still ahead of me in this journey. And I have a feeling I know when it’s going to come… when I go live.
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