I want to start this thread to share with you my way of trading, and to follow some sort of a journal.
This method has allowed me to have more time for myself, and has given me the opportunity to bank good profits.
I’m not an expert in the field, I’m still learning, and I do believe that sharing ideas is the best way of learning. So if you’re interested in this particular method, or you already have an approach with the concepts, feel free to share with all.
Before starting I want to say that if anyone disagrees with this thread or the ideas expressed in here, please try not to distract the main idea. I’m pretty sure there are thousands of ways of trading the markets, and this one has worked for me, so give me the time to make a point. What works for me not necessarily works for others and viceversa, so please I ask for respect, tolerance, and since this is a site designed to learn and for newbie people, no question or contribution is dumb or stupid.
This method is not of my own, there’s nothing new under the sun, it’s a compilation of what I have learned here in the forum and in some books.
Finally I want to thank three great persons, [B]TmoneyBags, SweetPip, and MonsterTrader[/B] for pointing me out in the right direction. Thank you guys, I admire you and repect you very much.
Basically, this is a really simple method, with nothing more than price action. Once you learn to identify what the position of the market is, and spot important areas of support and resistance, you can trade with the trend and stay for as long as possible with little risk.
How is this achieved?
Well I use four basic aspects to identify high quality set ups. Just a little introduction, I’m going to talk more about every aspect in further posts, so take this just like a little preview.
Elliot wave theory. Nothing fancy here. This is what is going to tell us what the position of the market is, and thus will help us to know what to expect from it. Basically we wait for a correction to complete, and then we jump to trade the resume of the trend. I keep things easy and no complicated counts, just the obvious and basic ones.
Gartleys. Our Elliot Wave count (12345, ABC) must result in this kind of chart pattern so we can identify the end of the correction.
Fibonacci levels. We’re going to use fibonacci convergences to identify the potential support and resistance zones, that is, the end of the correction and the completion of the Gartley pattern.
Market timing. I use fibonacci time retracements to identify the minumum and maximun time in wich a correction should be completed.
So these are the four main aspects I use to trade, separeted they are not really useful, but together they are powerful and this really gives you an edge because it can keep you away from fake outs.
Even though I’ll try to explain in detail how I use these aspects, I’m not going to dig in the history/psychology/academics behind all of this. I keep things simple and it works, so no need for complicated things. If you want further information regarding this the babypips school and google are a great source to dive in.
Ok I trade the 4 hr and daily timeframes, for clarity purposes. Once you learn to identify the position of the market, you can change to the 30 min charts to trade the fractals.
I place a few trades a month, maybe ten, and they can last from a few hours up to four days.
From a winn/loss ratio perspective, I can say that out of ten trades, five are winners, three break evens, and two losers.
Risk reward ratio is really great.
On average the stop loss is 20 - 50 pips, and the profit taking goes from 70 to 400 pips. I’ll write a post dedicated entirely to money management, to clarify how I choose stop loss and profit taking levels.
I check the market one hour in the morning, one at noon and one at night. I make my analisys, set my alarms, and wait for the action to start.
This is what has given me more peace of mind, more free time, and hence more quality of life.
I don’t like being stick to the computer all day long waiting for something to happen, I rather know in advance what price levels are key, and wait for them to be reached. My mobile platform has been playing an important role in my trading, so I suggest you to take advantage of technology.
Ok I’ll try to update this thread as often as possible. Now I have to do some work to explain how I use Elliot Wave. :rolleyes:
wrtm_19, I look foreward to reading your thread and trying to learn the methods. I tried to read about a few of them but never could apply the technique.
We use Elliot Wave theory to find the position of the market. This is the first step of the method
From the Babypips School,
[I]‘Mr. Elliott showed that a trending market moves in what he calls a 5-3 wave pattern. The first 5-wave pattern is called impulse waves and the last 3-wave pattern is called corrective waves.’[/I]
I’m going to add some important details.
Not always, but generally the longest wave is wave three.
Wave three can’t be the shortest of the 3 main impulse waves.
Wave 2 cannot overlap the start of wave one and wave 4 cannot overlap the closing price of wave one, or close within that range.
AC corrections are greater in time and/or price than previous waves 2 and 4.
And a very important one. Every wave can be subdivided in a similar 12345 abc structure of minor level, and at the same time, your main count is part of bigger waves. This is of important consideration since once you’re familiar with Elliot wave, you’ll be able to trade the fractals and/or add lots to an already open position.
Ok I know it sounds complicated, but we just use this information as a guide, no need to complicate things, if you don’t see an EW structure, don’t force things, look for another instruments, and wait for a pattern to emerge. Not always you’ll identify a perfect count, and no need to label every leg, actually I’m only going to label the charts at first for explanation purposes, but what we are looking for is a pattern that pops up in front of our eyes.
This is really important because remember that we’re looking to trade with the trend.
Sounds good so far, hopefully I will understand a little better when I see the picture. I did not understand the whole EW theory, this leg longer than that one…I am going to read up on EW’s and then ask questions.
THis is a the current Eur/usd daily chart, and here is where our analisys starts.
THis is just for explanatory purposes. Remember you don’t have to label anything, just try to identify the pattern. I will label this same chart in the next post.
This is all we need to know about elliot wave, remember, I use it just to identify the position of the market, no complicated counts. No need to label anything.
Let the market tell us its story, and as it unfolds itself, let’s take decisions accordingly.
Ok got to go for today, but I’ll write about gartleys and fibo levels tomorrow.
Look forward to reading more. Especially on the gartleys as they’ve always interested me but have never understood them fully enough for me to begin trading with them.
Hi wrtm…I think it’s great that you’ve started a thread to join all the pieces together…I’m sure it will be helpful to anyone interested, and that includes myself. And thank you too for your kind words
The second part of this method is conformed by gartleys.
Gartleys are harmonic structures, popularized by Larry Pesavento, and described by H.H Gartley in his book Profits in the Stock Market.
Basically, a gartley is a pattern that signals a reversal and that is formed by four legs.
Leg1: From X to A is the largest of the four legs, and the base of the pattern itself.
Leg2: From A to B is a retracement of at least 23.6% of the XA leg.
Leg3: From B to C is a retracement of the AB leg. It can’t exceed point A. It can be equal to A, but can’t exceed that point.
Leg4: From C to D is a projection of the AB leg. It has to be at least 100% of AB, but it can’t exceed X.
The point here, is that, market will present us XA, AB, and BC, and once we have those legs, we project CD, so when D is reached, a reversal in price should occur.
Ok ok I know this might sound difficult, but in practice it is not. So I’ll try to illustrate some examples.
It can be either bullish or bearish. and it looks like this.
I have to admit that I find drawing all those fibs, counting waves and flipping between timeframes all a bit too much and I don’t think I could sustain doing it. However, I do feel that all of it is crucial to go through to develop one’s skillset in general.
From there I have reduced it down to something simpler. I use a couple of fibs, and each I use them in a couple of different ways depending on what price is doing, and enter when when I get a signal that price may resume from a pullback, or break from a previous swing high/low. Then basically I use the previous or next fib line or two to set my stop & profit targets respectively. I use another modified indicator to help with the timing.
So far I find it a better fit for me and the session I trade in (the Asian), and results so far have been mostly positive. I have set a profit target in my demo account and when I reach it (which won’t be long if this continues) I’ll take it to my real account.
