INGOT'S RAINBOW ... A Position Trading Strategy

Trading Systems Free Forex Trading Systems
41

Well, I must say that this is definitely interesting.

Having tried to trade candle patterns, support/resistance, pivots, fibs, etc., it’s kind of refreshing (and takes a little getting used to) to look at a chart without anything but MA’s and Stochs.

The MA’s I could trade with, even without candles (actually, I find them easier to read without the candles), once I get the hang of using the short time frames for entry/exit only, while concentrating on the longer time frames as my actual trade.

But, the Stochs confuse me, especially on the 4H and 1H charts. They bounce up and down so much. Of course, I’m not used to them so I don’t really know what I’m looking at. Maybe you’ll expound on them a bit more.

As for the larger Stop Loss that you briefly touched on, that’s a given (at least for me). Obviously the price can vary considerably over a longer period of time, so we’d need to have larger stops to prevent “accidental” exits. Of course, that also means that we need to make sure that our account balance can cover it. :slight_smile:

I’m looking forward to more, Ingot. You’ve got a great way of bringing the reader into the story and keeping our interest without overwhelming us with everything all at once. Keep up the good work.

42

Thank you Tony and Terry for your kind remarks.

My charting platform is behaving nicely now, and tonight (Aussie time now 23:15 hrs) I ran over the majors to see what has been happening.

I can tell you this is very exciting stuff - especially for me!

When I look back over the daily and weekly charts, and commonly see 500 pips … 800 pips for a week and a month here and there … it does me good. And this is EVERY month without fail.

If one of the majors is not trending strongly, well we simply move on - maybe another of them is on a roll. If not - then we have a day off, and look again tomorrow!

If this method is not a license to print money, while you still get a life outside the office - I don’t know what else to say. This is about as easy as it gets to follow Forex … so feel free to ask questions. If you need to know something, you can bet your boots others are wanting to know too.

What I look for is the MTF Stochastic “BS line” turning upwards from the 23.6 line. As well, I look for the Stochs to be as tightly knit and close together as possible. It does not matter if they are not close - as long as they are orderly, like a comb, and do not criss-cross each other … then you KNOW this will be one mother-of-a-good-trade!

[For those just joining the thread - the jargon we are using here: BS line = Basic Stochastic line, which is the THICK 14-1-3 line on the MTF Stochastic window. MTF = Multiple Time Frame Stochastics. I know the thread got off to a slow start technically, but it is good for those just joining us to go back and have a read of the complete thread before we go too much further. Soon we will be getting into live trading and you will want to have full understanding to be able to clearly get those “aha” moments]

Further, once the MTFS hits the 76.4 line, and STAYS above that line, the rally in the pair usually continues. In fact, as long as the BS line stays in overbought territory, you are making pips.

Do a bit of a browse through the daily/weekly charts of the majors, and become familiar with the patterns which go with the bigger moves. Then look for the start of those moves. What are you seeing there? Hold a card up to your screen so that you conceal the action, and only have a limited view of what is happening.

Now slide your card slowly to the right of the screen - you can see the rally develop … and you can see what is happening to the Stochs at the same time. This is a great way to learn.

I won’t post a chart tonight - (man is only human and I’ve had a big day … lol ) but within the next 24 hours I hope to conclude the historic look over patterns, and by then we will be prepared to select some live trades.

The plan after that is to look at setting stops, position sizing, profit-taking, exits, and something a bit more exotic - pyramiding. To round it off, we could look at something like Fixed Ratio Money Management. If you Google for “Ryan Jones Fixed Fractional” or “Ryan Jones Fixed ratio” then you will come across the idea there, without my needing to post a link.

I noted some negative commentary on the web about this, but they have not taken into account the ability of traders today to increase their lots incrementally by 0.1 of a lot or multiple of that. There probably ARE flaws in the money management method … but if you have a system that delivers 800+ pips over one month, I think a money management plan needs to be fairly aggressive to seriously take strong advantage of the strategy.

To be candid, I have not looked fully into Ryan Jones’ method (From his book: “The Trading Game”) but I am hoping some of you have had an opportunity to have given it a run, or be willing to research it a bit. It’s just on my list of potential goodies and I have yet to appraise it for myself.

With best wishes

Ingot

43

By the way … are you beginning to see the difference here in the way this method is unfolding, compared with the way Bill was trading in the earlier few posts in this thread.

Here was Bill, poring over his charts, indicators right and left, blood pressure rising, trades getting knocked off by Stop Loss orders being hit, and STILL losing money.

Worse - his spouse was quite off-side with his trading activities.

And his lifestyle was far from the idyllic model which the FX brokers had seemed to depict when he viewed their web-sites.

His friend Joe was a rather laid-back sort of bloke - calm, objective, patient and focused. In fact, Joe seemed to be in control, and could look into the activity without becoming thrown off by the winning/losing mind-set.

What Joe was searching for was the method, while Bill was consumed by the idea of making money. (This was evidenced by the way Bill loved to chat about his successes in public).

The lesson we can learn so far from these two men is this:

“GET THE METHOD RIGHT AND THE MONEY WILL LOOK AFTER ITSELF.”

With best wishes

Ingot

44

[QUOTE=Ingot54;31975]Do a bit of a browse through the daily/weekly charts of the majors, and become familiar with the patterns which go with the bigger moves. Then look for the start of those moves. What are you seeing there? Hold a card up to your screen so that you conceal the action, and only have a limited view of what is happening.

Now slide your card slowly to the right of the screen - you can see the rally develop … and you can see what is happening to the Stochs at the same time. This is a great way to learn.

For those with MT4 disable autoscroll and use F12 to advance 1 candle at a time

Again Ingot you are a fascinating story teller and I am totally hooked!

45

So it looks to me like the current situation on the GU daily is what we are looking for?

ScreenHunter_02 Dec. 10 22.50.jpg700×559 76.3 KB

46

Been re-reading the Spud links tonight but its now 11.15 here in the West, there is always tomorrow!

47

Yes Tony

The chart you posted looks good. Also to a lesser extent EU Long. There are several charts (majors) currently with Stochs in overbought which may be worth watching for a sell signal to rejoin downtrends (eg USD/CHF USD/CAD)

I have put a small GU entry in at 2.0450 currently with SL and TP open. But bear in mind this is a much smaller position than I normally take to help me learn without fear of loss - or worse here - taking profit early.

I am pondering where Ingot would put a stop. I could take the spike low of 2.0180 or I could look to go lower than the trendline, which then brings into play th 2.00 level- so could go below 2.00

This sounds sloppy but I suspect the final target may be above 2.10 so R:R is still valid.

I would appreciate anyones comments though

Andy

48

All,

I’ve added the stoch settings to the template, please see attached file and image to compare to the weekly chart ingot posted a while ago:

ingotrbex.gif600×600 23.1 KB

ingotsrainbow-withstoch.zip (1.07 KB)

49

tony,

Please save your charts as GIF files (in the file type dropdown box when you save charts), as they will look a heck of a lot better than JPG.

50

The stoch lines are fishnetting on the EURUSD if that’s what you meant by the EU, isn’t this a sign to stay out of the market? Ingot?

What about for exit signals when they’re fishnetting? Do you not exit?

eurusd_d_20071210.gif600×600 19 KB

51

I suspect below the retracement low as the obvious choice. Thats not too bad a stop distance in terms of a position size either. Looking forward to tracking this

52

I wondered why others charts looked brighter than mine. Cant seem to find the dropdown you are talking about. The file is a gif on my computer but when I load it as an attachment it is automatically turned into a jpeg. Can you give me a bit more guidance

53

We are maybe getting ahead of ourselves as Ingot hasnt gotten to the nitty gritty of the system yet. Wouldnt have thought this was fishnetting, looks more like an orderly roll over to the long side. I guess thats what experience will help us pick

54

I have no idea why they might be saved as JPG now that you mention it. The dropdown box I was refering to doesn’t even let you save as JPG (oops)! Strange problem indeed. You aren’t opening them in another program and saving them again, are you?

Yep, we’ll need some clearer “landing skills” from Ingot. From what I can imagine though, why wouldn’t we just use a 14-1-3 stoch for entry/exit, what do the other lines serve unless it’s to warn us of a bad setup (e.g. fishnetting)?

Also, I’m:
long GBPUSD @ 2.0450 with a SL at 2.0170
long AUDUSD @ 0.8851 with a SL at 0.8600

Ingot, what do charts like the current weekly USDJPY tell us? To stay out?

usdjpy_w_20071210.gif700×700 35 KB

55

Hi Tony … and everyone

WOW! I am so glad you are feeling like having a go at this yourselves now.

I look at the thread and see some really good ideas, and some questions. You are answering a lot of these yourselves … and yes, the best thing is to read over “Spud’s Stochastic Thread Theory” link from post #10 - that’s where this sermon is based … l:^)

To answer your question, “on the GU daily” the short answer is “YES” this is what we are looking for - but in the next post you can see that the better entry would have been yesterday.

I have decided to skip the history lessons on this stuff - you can review heaps of these now for your own self-directed learning at your leisure. I can see that the interest is in the “meat” of this so we should get to LIVE trading ASAP.

Please indulge me as I post the current WEEKLY view of the GBPUSD in this post, and the Daily view in the next.

I have annotated the charts, so should be self-explanatory to a degree.




56

And here is the same chart but looking at daily view.

The stochastics are totally different, and that is the absolute miracle of this method … the degree of confirmation available to us OVER TIME.

NO rush!
NO panic!
NO hasty decision-making!
NO need to race home from an otherwise great family outing to “check my trades”!

In fact - this kind of trading can be rather boring!

Just a calm look over the chart with one question: “Is this a tradable chart?”

If “No” then go to the next chart.

If “Yes” then start to look at adjacent time-frames, and have a mental check over your rules… (we’ll define those shortly … patience … patience!)




57

You are correct Cosgrove - and thank you for your great contributions by the way - refreshing to have another opinion here.

All the fish net pattern is saying is that the price action is becoming very unstable - there are conflicting forces coming into the trade.

Because we don’t know how strong these forces will turn out to be, we are safest to EXIT when this pattern appears.

Having said that - always refer to the TF either side of the one you prefer to trade in. In this case, I am looking at weekly, so I would compare Daily and Monthly to see if this is an ongoing threat.

Don’t laugh when I say look at Monthly. I ask: “Do you want to make money” Do you want to have a life? Then application of longer TF will deliver both of these things to your door while you sleep."

The thing we have to get over is this:

WE NO LONGER HAVE TO BE ACTIVELY INTERFERING IN THE TRADE!

STOP IT!

STOP OVERTRADING!

Go to the track if you want action … or to the Casino - but leave your trades alone - these are your bread-and-butter.

Just let the trade run its course. But you can be excused (not you personally Cosgrove - I refer to myself here as well) for getting a bit jittery when the lower TF begin to wobble.

Only TIME and experience can give you the confidence.
Trading is not a theory - it is an experience.

In time, that experience will make you quite a lot of money.
I suggest the hardest thing you have to become accustomed to now, is having time on your hands … time to get in touch with the family again … or the fishing rod … or … l:^)


58

Good question Cosgrove … thanks.

The 14-1-3 Stoch is the BS line - Basic Stochastic Line - and yes, it COULD be used alone … except for the Fishnetting thing!

Keep in mind that the reason we go through these exercises is not because we like to complicate our lives … but the opposite.

Remember the analogy of Bill and Joe?

One guy used as many signposts as he could to absolutely nail the market … and almost ended up writing off his sanity and his health and relationships.

The other guy stepped back and took a look at what is really going on. He could see that it is not possible to trade everything that the market throws up.

But that one good trade that comes along every 2 days or so, is the one you need to be alert for. Not only will you harvest your 200 pips for the week - the trade can keep going for a few months - 3000+ pips.

Now you might not get another good entry into that trade … but you might not get a good exit either.

We haven’t gotten to pyramiding, or the Ryan Jones fractional strategy yet, but what could strategies like those do to a 3000-pip trade? How much would you be loaded up on THAT trade by the time an exit signal finally appeared?

This is the stuff we will miss out on if we can not shed the short-term mindset.

I often see short-term Intermediate trades set up, but I don’t have the inclination or the time to sit there and pull out of the trade when it turns negative.

We are in this business for:

A) Money
B) Lifestyle
C) Time Freedom
C) Benevolent Opportunity to assist others
D) … World Peace … (or here insert your own higher ideal!) … l:^)

Trading is our servant … not our master as in the past!

Let’s put it in its place.

Sorry - I re-read your question Cosgrove as I previewed the post!

I would think to allow the trade to pass just now. There is no compulsion to trade it … just keep it on your watch list and check it out every day like the other majors.

Its time will come.

With best wishes

Ingot




59

My Online Forex Trading Plan

I came across one of my trading plans recently, and while we are at this stage, I think it appropriate to share it.

I offer it as an addition to your current plan - I don’t want to change you from your written course. But if there is a slim chance you are trading with thousands of dollars and DON’T have a plan … well - here’s one you will find easy to adapt to your own circumstances.

By the way - it is not an “Ingot Original” - I like to give credit for someone else’s hard work - here is the link:

trading-plan.co.uk/forex-trading-plan.htm

My Overall Objective

In the next five years I plan to retire. In order to help plan for my loss of salary, I have decided to begin trading foreign exchange to develop a small, but growing income stream which will be secondary at present, but which will be a replacement for my salary when I do leave my job. I will continue to keep working full time at present. My trading analysis and decisions will be done in the evenings and weekends.

My Strategy

I plan to start my trading with a cash sum of $10,000. If during the course of my initial trading, I exceed my targets then I will consider adding further funds. I propose to trade in currency using an on line FX broker and will be trading both long and short.

Currency Selection

I will only trade the the major currency pairs using a mini account as follows :

  1. GBP/USD
  2. EUR/USD
  3. EUR/GBP
  4. USD/CHF
  5. USD/JPY
  6. GBP/JPY
  7. EUR/JPY
  8. GBP/CHF
  9. AUD/USD
    10.USD/CAD
    11.NZD/JPY
    12.AUD/GBP

Trades will be selected using a technical approach
Trades will be selected using daily, weekly and monthly charts
Trades will be selected using candle analysis, Multiple Moving Average Rainbow Charts, and Multiple Time-Frame Stochastics.

Trading Rules

I will use the following rules :

  1. Every trade that I open will have an appropriate stop loss in place
  2. I will always place the stop loss at the same time as my trade
  3. I will never lower my stop loss
  4. Starting trade size to be one mini contract
  5. I will determine the weekly trend before making a trading decision
  6. I will not enter trades against the weekly trend
  7. I will not exceed 10:1 leverage preferring 5:1 if available
  8. My broker will be *** *** if the leverage available is compatible with this plan
  9. I will write down my rules in an unambiguous form

Money Management

My money management will be dictated by the following rules.

  1. The maximum loss per trade to be 5% of capital
  2. The maximum number of open trades at one time to be 3
  3. Stop loss to be set at 200 pips below market price

Trading Targets

I feel that a return of 50% on my trading capital should be achievable in the first year after costs. I have divided this into 12 equal amounts giving a monthly target of $420.

If I can repeat this consistently I will be doing better than most traders and can always factor the amounts up as my experience grows. I would be happy of this target is achieved in less than 12 months.

A target of $420 per month for the first 12 months is a total of $5000 for the year. This equates to 5000 pips of profit in the year. On full lots this would equate to $50,000 of profit trading single contracts.

Trading Records

I will keep a trading diary every day
I will keep a trading journal record of each trade including the following:

Currency Pair
Price bought or sold
Position of stop loss
Time trade opened
Time trade closed
Profit or loss on the trade
A chart showing entry/exit if possible for further examination later
(I will print out a chart at the close of every trade)

A daily balance of the overall account position, including cash in the account and open positions value
A weekly summary of the total capital at risk
A monthly P/L summary of closed trades

At the end of each trading week I will summarise my activity and set guidelines designed to exploit strengths and minimise weaknesses in my trading rules.

This will prevent repetition of error, and boost confidence and skill

I will discuss my activities with a colleague or mentor each week in order to improve my strike rate

That may help some of you - if you have never had an actual trading plan before - use this.

Note that this is a TRADING PLAN.

It is not a TRADING STRATEGY.
Strategy is what we are grinding through right now.

As well, you should have a BUSINESS PLAN.

Don’t beat yourself up if you haven’t been organised like this before - but please - for your own financial future - get yourself organised and disciplined.

You will not become financially secure through good luck - it only happens as a result of planning.

Participating in this thread is good for my plan, and yours too.

Change is in the air.

60

Thank you for sharing that Ingot. Pieces of my plan (with similarities to your’s) have been floating in my head for about a year now, but you have inspired me to put it all down on paper tomorrow.