Help with my Trading System

Hello, Recently after trading the 4h time frame for almost 6 months now I switched over to the Daily time frame only.
Since then, I’ve been about 90% accurate with my trading having almost all my trades go in the direction of my predictions. Just by using RSI 14 , Stochastic 9,3,3 Price action, Candlestick analysis, and sup and Res.

I hold trades for about 2 weeks, some go as high as 100- 300 pips in profit.

But here is where the problems come in, during these 2 weeks, i notice how price always retrace, one day ill be up 100 pips the next day ill be up down about 70 pips, and so own. I had a trade where I was up $300 than to end the week with only being up $100.

My questions to you guys, is how can I take advantage of the daily swings, how do I determine a good TP level. Would it be safe to say that i should always go for 100pips when trading on the daily? This is something i struggle with for months now.
Thanks

Sure. It’s natural to struggle, to some extent, with this stuff. We’ve all been in that position.

What you’re asking about, really, is “trade management” rather than “entries”. And trade management is at least as important as entries. Many people would say it’s more important.

Entries aren’t a “system”. A “system” includes all the other stuff you’re asking about, too, and getting that other stuff right will usually be the difference between overall profits and overall losses.

No, definitely not.

The main reason for that is that it’s a big mistake to have a fixed target set in terms of a number of pips.

How much you should go for depends on the current volatility and positions of support and resistance.

These are part of “price action”.

You need to define your stop losses and targets with reference to these things.

Sometimes, you should go for a lot more 100 pips for trades from daily charts; other times less will be much better.

There’s a big learning curve, there.

Even looking at the ATR and settling on some multiple of it (usually a fractional multiple) will be a lot better than just “100 pips”. You could look at something like “1.5 times the ATR” as a target. Or “2 x the ATR”. Maybe those numbers are completely wrong and unsuitable, but that kind of idea, anyway. I don’t even know what instrument you’re trading, let alone what its volatility is.

Sure - that’s very typical.

Also common.

There can be perfectly good, profitable systems that sometimes have trades that are $300 up and then go to $100 up, That can be a perfectly legitimate feature of a perfectly valid system.

What matters isn’t what happens on a specific trade, it’s what happens over 200 trades.

You need to do a lot of research and learn what performs best in the long run.

It’s frustrating when a trade’s 300 pips up and slips back to 100 pips up, but it doesn’t necessarily invalidate your system.

It doesn’t even necessarily mean that you should have moved the stop loss up to prevent that from happening. Though that’s one possibility (not necessarily a good one!).

You need to monitor carefully over a large number of trades to learn the answers to these questions, and that takes a long time. Backtesting (for all its limitations) can really help a great deal with this.

The point is that it’s a question nobody can answer for you with certainty, and if anyone tries to, that’s someone you shouldn’t be listening to anyway.

Price action (of which candlestick patterns and analysis are part) and S/R are a big learning curve all on their own, even without the two indicators.

Incidentally you’re using two oscillators together, there, which monitor similar parameters. Are you sure you need them both? My guess is that you don’t. Again, a lot of time and effort and research and accurate monitoring of results from alternative ways of selecting the entry parameters are needed, to answer that.

It’s usually a mistake to imagine that “having an extra indicator or two to confirm the entries” is a good thing to do. What commonly happens is that they reduce the trading opportunities quite a lot and increase the win rate a little, but overall you actually do worse with them than without them.

It’s always very easy to find specific examples where “doing something else” would have been better, and that’s normal, even for profitable methods.

What’s important is not to be influenced by small numbers of instances of things happening, but to analyse large numbers of instances, so that what you analyse has statistical significance.

People who don’t learn this lesson early in their trading careers are the ones who keep changing their minds about things, switching their system parameters at the first sign of adversity, and they go on doing that for ever, without ever really learning how to tell whether they’re doing the right or the wrong kinds of things.

Throughout the world of trading forums, we’ve all seen loads of people who do this.

They think they have something good, until it goes wrong, and then they semi-randomly change a parameter or two and the same pattern keeps on repeating. These are people who don’t understand “statistical significance”, and without understanding that they can’t learn how to analyse and when it’s valid and correct to change things. Which means, ultimately, that they can’t learn.

My suggestion to you is to read a couple of books which explain “how to produce and analyse a trading system”. Michael Harris and Van Tharp are both good authors with books on this subject.

But don’t expect other forum members to be able to suggest specific answers to specific questions about whatever you’re doing without having seen it in detail. Honestly, they’s just be guessing, and that isn’t going to be helpful to you.

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Ah, yes. You’re beginning to notice the profits you miss during pullbacks while swinging the dailies. I know it stinks, because I trade the dailies also. The sheer patience you have to have for this timeframe will drive you insane.

There are two main camps of thought when trading the daily charts. 1) Most traders, like myself, will trade between weekly support and resistance. For example, if there is finally a setup to go short at the weekly resistance level (major resistance), then we will all jump on board and take a reversal trade down to the weekly support level. That actually is where we take profit–BORING!! 2) You can trade those weekly levels like a trading range: buy support, sell resistance and take profit in the middle. Nothing wrong with that.

There is a third option a lot of traders don’t think about when swing trading. Why not just trail your stop from swing level to swing level. This way you don’t have to worry about where to take profits. The market decides for you.

Lastly, fading a trend is not my thing-- usually. Pull up your daily chart on the EUR/USD. What do you see? Those traders who bought the breakout of previous resistance are pretty happy campers right now. They started taking profits around the 1.18500 area. If you had decided to fade the trend at that point, you would have been okay, as long as you could settle on scalping your profits (it’s okay to scalp the dailies, it’s not illegal). but for me, I am content holding through to the trend line support, knowing that a downward breakout would only be a 20% probability. And then, you saw what happened on Friday.

Hope this helps

This is what Im currently doing, using weekly S/R levels. But not just levels, Weekly Zones, because most of the time price comes near these levels and revese. I only trade if stochatics agree. The only problem I have with this is, sometimes the next major weekly level may be 400 pips away and sometimes price may reverse in the middle.

this is a good idea and i will try it[quote=“steveepperson, post:3, topic:112334”]
Lastly, fading a trend is not my thing-- usually. Pull up your daily chart on the EUR/USD. What do you see? Those traders who bought the breakout of previous resistance are pretty happy campers right now. They started taking profits around the 1.18500 area. If you had decided to fade the trend at that point, you would have been okay, as long as you could settle on scalping your profits (it’s okay to scalp the dailies, it’s not illegal). but for me, I am content holding through to the trend line support, knowing that a downward breakout would only be a 20% probability. And then, you saw what happened on Friday.
[/quote]

Im not too sure I understand this. I never heard of Fading the trend.

Have you ever heard of trading the 12hr time frame? I was thinking about doing anaylsis from weekly, then daily, then entering on the 12hr and finding a target from the 12hr perspective. Or maybe using the 8hr time frame.

Thanks for your advice, What another indicator should I use instead of RSI?[quote=“LaughingCharlie, post:2, topic:112334”]
My suggestion to you is to read a couple of books which explain “how to produce and analyze a trading system”. Michael Harris and Van Tharp are both good authors with books on this subject.
[/quote]

I will take a look at these books

Those books will help you to appreciate that substituting another indicator for the RSI probably isn’t a good approach. :relaxed:

(For myself, I would probably keep the RSI and get rid of the stochastic, make sure the RSI is a “long-period” one - like 20-25 periods - and use it only for looking at divergences.)

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To clarify, just go ahead and hold through the entire pullback. It takes a lot of patience to do so, but well worth it. The EUR/USD right now is good proof of that.

I do not trade anything but the daily charts at this time. My support and resistance levels are drawn on the weeklies.

Hope this helps.

i think is better to close the position and open it again later, try to avoid the loss period and be in the trade at other times

different approach, more profitable in my experience

Your timeframe and strategy appear sound based on your 90%+ accuracy rating, I use multiple timeframes (4hr - Daily - Weekly) and 1 hour timeframe for entries, Retracements can be measured and recognized, take some profit, wait for the conditions to aline, when the retrace has ended re-enter again (Hint: use a lower timeframe for this).