If you can please clarify this point for me. You have posted many times your 4rules for bad entries and I have been trading using those rules. As prescribed they do keep you from having any significant losses. I also adhere to the not entering more than twice rule for any one pair if they were bad entries on the same day.
What I have found is that although many times the entries went against me right away or went positive a little then negative and triggered my tight (manual) stop loss. My overall evaluation of the trade was solid and had I stayed in for the full amount of a well evaluated stop loss many of my trades would have been winners but the cut your losses short kept me out.
Now in your post above you presented a well thought out trade and stop loss and it appears you were willing to let the trade run to the stop which would conflict with the advice on cutting your losses on a bad entry. I know one of your exercises was to try and go a week without having a stop loss hit. I trade mostly EURO and as you know it has been maddenigly rangy lately so for newbies this can be tough. So to sum upā¦
1-Do bad entries trump a well though out stop loss? Do you take your 2 bad entries and 8-10 pip losses on those trades or do you stick with what you believe to be a valid stop loss and let the trade run and risk 20-30 pips?
2-Is it a time frame issue. Could it be that if your home chart is the 1H or 4H that you give yourself more latitude on the entries?
I know you have addressed this in past posts but since it keeps popping up in my head as an issue thats not resolved I needed to ask.
Hi Graviton
I want to say big thanks to you for such post! its very helpful
I noted that last week there is increasing in faked breaks of the bands in the squezes on 1H TF. I curious was it the same on 4H timeframe??
On Friday, I took short trade on USD/CAD at the time when I saw that the lower band was broken and the bands was just expanded pretty well. (I didnt do the timing entries if I trade the squezes as the price will come back to the level of entry since PA touching the band.)
But when I did the loss I found the the price was bounced off the mounthly trend line, in other words I was entered on the peak . This squeze has formed very near to the mounthly trend line.
Now I am thinking if your strategy of higher lows on the lower TF can make a volid entry trading 1H squeze?
you said
I wanted to be sure I wasnāt buying right on the peak of a move
what do you do or what do you use to make sure you donāt buying/selling on the peak since even next higher lowes wonāt guaranty it I guess.
Can I ask if the amount of entry equals 1000$ and leverage 100 total of 100 000$
will such lot affect 5min chart any how and how if it will?
thanks once again
In case you are wondering Grav, I think this would be very educational to all here. Being a newbie there has been much to absorb, comprehend & retain. As Tymen says ārevision is a good thingā.
There seem to be quite a few traders who are tending toward longer timeframes because of work & other commitments. I think your introduction into entering swing & position trades would allow us to get into very profitable trades that require less monitoring than shorter timeframes. And thatās a good thing!
Good questions. The EU has been frustrating this week, trading in a tight range and not providing good trend trades on longer time frames at all. You can trade a shorter time frame when a pair isnāt trending well on the longer time frame, or move to another pair that is trending in the time frame you want to trade. The time frame you are trading, the time of day and the pair all contribute to how much stoploss you will need to use. When both London and New York are trading, youāll probably need two or three times as much stop loss as when New York closes and before Asia opens. The time frame you are trading makes a huge difference, and some pairs are just more volatile than others. 8 to 10 pips would be a minimum to see if a trade is going your way or against you during the lull between the New York and Asia sessions, on a less volatile pair, and a shorter time frame.
The problem is that in a very volatile pair, with both NY and London trading and to enter directly on a higher TF, you might need more stop loss than the trade is worth. In that case youāll need to either pick a less volatile pair, trade a shorter time frame, or even better, just wait until the markets are less noisy.
Essentially, the random noise of the market can be so great that it would take a very large stoploss to avoid being stopped out just by the random noise. You can get a very good idea of that random noise level for a particular trade with the ATR. If the ATR for the 15M EU is 8 pips, youāll usually need a stop of 1 to 1.5 ATR just to get above the noise, or 8 to 12 pips. But the EU H4 has an ATR of about 50 pips, you are looking at needing 50 to 75 pips just to get above the noise level of EU for a direct entry on H4.
So you only really have two choices. If you have a good cbl entry on the H4 you want to trade, and ATR is running 50 pips, you either have to look for a tighter stop entry or drop down to a lower time frame and look for a cheaper entry. Iāll often look for an entry on the 1H or 30M time frame and sometimes on the 15M time frame when I really want to trade the 4H but donāt want to risk that much stop. If the extreme candle just so happens to allow me a tight stop entry, I may take it directly. I also use trend line breaks to achieve a tighter stop, placing my stop just above the old up trendline that has just been broken for a short entry.
The point is, you canāt just keep risking larger and larger stops to stay in trades as a strategy for winning. You really need to give a lot of thought to how you can risk less and still stay in good trades. You need to have a stop wide enough to be outside the usual noise of the trade, but no more. And if the noise is too high and the stop needs to be too wide, then the trade is just too risky and you need to pass it up.
If you decide to drop to a lower TF to get a cheaper entry, thereās a good chance it will retrace before the trade on the longer TF develops and you have to exit with just a few pips or break even, but that doesnāt count against the two losing entries for a pair limit, so you can try again. You can just try to ride out 30 or 40 pip retracements, but some of those will just never turn back around, so best to try to find a way to cut your losses short. So 8 pips may be to few for most good trades, and 75 pips may be too many to risk. For me, itās really better to focus on making better entries with smaller stops than using a larger stop to cover up bad entry timing.
I know some traders will just enter with a 1.5 to 2 X ATR on every trade and let it run until it stops out or makes a 1:2 risk reward ratio. If that works for them over the long haul, thatās great. I just do better trying to enter trades with tighter stops. Perhaps somewhere in the middle would be best for you. I think itās one of those things where I have trouble telling someone else how to trade best for them. It always seems like they have to discover that for themselves in the end and no two traders are going to be just the same.
you are correct, robstanberry. It helps a little today. Gravitonās lessons and answers are big help, we are very fortunate!
I cant wait to study something new and more advanced technique
Yes, it was a tough week for trend traders since most pairs were ranging and just about the time you get in a good trend price reverses and you are kicked out for not much if any gain. The trick during such weeks is to realize quickly the pairs are ranging and not trending.
Iāve discussed many qualitative methods to look at trends and trending pairs. For some of these methods it is a pattern recognition that we train our minds on after many years of trading. I realize now that some people will pick up on recognizing trends very quickly and some will have great trouble seeing them. The more you look for them and draw their trend lines on your charts, the easier they are to see. Often Iāll just look at a chart and see several s/r lines and trend lines without even having to mark them up. But taking the time to mark them up helps see them in the future.
The problem is, these methods are all qualitative and itās difficult to tell people how to improve other than practice, so Iāll discuss a quantitative method. I look at indicators as just a visual aid, to use like glasses, until your eyes are trained to see the same thing in price action. The goal is to see the trends and such directly in price action, but an indicator may be helpful for a while to train some peopleās eyes to see these trends. The same goes for s/r lines. Do if price goes up to test 1.2700 three times and bounces off it to the pip three times, you see resistance at that point. It may be a pivot point, fib number, past H-L or BRN (big round number) resistance. If you search long enough for a reason, youāll find one, but the reason is of much less importance than the fact that you saw the resistance directly from reading price action in the first place.
In the beginning, youāll have many trend lines and s/r lines criss crossing all over your chart making a mess of things. But in time youāll see these things directly in price action and there will be little need to draw many lines criss crossing all over your charts. I still draw very long trendlines lasting months or years, but I donāt draw most of the very short term ones since I can see them just by looking at PA.
That said, letās look at some trend indicators that may help train your eye to see trends, since thatās such an important element of trend trading. One of my favorites is the ADX. I donāt use it to tell me which way to trade, since that should be obvious from Price Action, that is if price Action is up Iāll want to trade up, and down for down. I just use ADX as a objective quantitative measurement of the trending nature of a pair in a certain time frame. So for instance, look at the EU H4 default ADX Average Directional Movement Index.
Youāll see that a couple weeks ago, around Sept 1, the ADX approached and then moved above the half way line on the indicator display. It stayed above that half way line to about Sept 8. So by that very simple objective measure, there were trends worth trading on the EU H4 from Sept 1 through Sept 8, sure enough, if you go back and look at price action you can see, in hindsight, a nice trend up and another back down, during that period. After the ADX dropped below the 50% line around sept 8th to 9th, the EU 4H went into a range trading pattern and offered nothing but reversals and whipsaws to trend traders. Notice there were three or four crosses above and below the MACD line during that period with about equal amounts of time spent above and below the line on MACD, hinting that overall the market was direction-less during that period. Unfortunately, the MACD is so slow, it doesnāt help much real time.
I am NOT saying you should enter and exit based off some complex ADX system. Iāve tried that and like most indicators, it is not reliable enough to be consistent. I am saying the ADX can provide another filter to help decide when a trade is trending well enough to bother taking. Of course, as you apply more filters, you get fewer trades, but they are better trades or you should drop the filter from your trading.
Letās look at one more example, the AUD/USD. I think if you look at the 4H ADX I donāt even have to go through this much. The ADX moved above the half way line and has been there for the last 10 days, moving up about 300 pips, and itās still well above the half way line today. Given a choice between the two, today, AU is obviously the better pair to trade than the EU. Iām not using the ADX to decide if it should be traded up or down, or for entries and exits, just as an objective measure of the pairās current propensity to trend. That may change tomorrow, but thatās always the case with trading.
So, to quickly review, If you are having problems picking out a trending pair, use the ADX, but use it simply. Donāt try to devise some complex system with it. Just use it to see if a pair is trending enough in your time frame to make it worth trend trading, or not.
On your other questions, in most liquid markets a $100,000 trade usually wonāt make any blip at all in price. These markets trade billions and it takes a lot to move them. Of course, 1 million small traders reading $100,000 each all at the same moment off some news or similar indicator indications will move the market. But most market chops are caused by an ill-liquid market and trades of millions to billions by large traders like a company repatriating funds back to the USA (like Caterpillar that sells lots of tractors overseas) or discretionary traders like City and Goldman, or by central bank actions. All of your trades fly under the radar, so no need to worry as long as you have an honest broker.
Finally. There is no guarantee to make sure you arenāt buying right on the peak high price of an up trend, but you can improve your odds. Say you have a valid up cbl on the 4H, the daily trend is up, any you have other very good reasons to trade up like good fundamentals and a trendline break up. The only question is, do you enter the moment the cbl forms, wait until the close of the candle, or use some other timing clue. Sometimes you can see a s/r line and enter if that line is broken. But sometimes if you move to a lower TF, it sort of magnifies the price action in a way that just zooming in on a higher TF does not. That is because more detail about PA is shown on lower TFās.
Usually, in a steady up trend, if you look at a lower time frame, you can find one that clearly shows the series of higher lows that represent the up trend. Actually, usually price will go to a higher high, retrace a little making a higher low, and resume back up to make another higher high. Of course, if you are looking to buy, and the cbl has just made on the higher time frame, you want to consider where you are on the lower time frame. If you are right at the peak of forming a higher high, you can buy and possibly ride out a retracement as a new higher low is formed, or you can wait until a retracement occurs on that lower timeframe and enter long just as price turns back up. This is one clue. Direction of the 15M stoch may give another. Location of price relative to s/r lines could be another. There is no one indicator that works all the time, but as you learn to interpret direct price action better, you will get better at picking the best points to enter and exit. I think lots of that just comes with lots of practice. I hardly see any one who can do it well without a year or more of practice. And really, people like PipBandit that can do this with only a year or so of practice are very rare. For most of us mere mortals, it will take 2 to 5 years of practice to get really good at this and no amount of study will make up for a lack of practice. Of course, study is needed too, but practice is needed.
I donāt know if you play any instrument RenaLa, but itās just like that. There are a very few phenoms like Mozart that could play like some one who had played 20 years, when he was only 6 years old. He was so amazing he was brought before kings just so they could witness this feat. But almost anyone can get good at it with a combination of study and practice, with heavy emphasis on the practice, over a period of years, 2 to 5 years for most people in my experience. Maybe lots of good study would reduce your personal required practice time from 3 years to 2 years, but it wonāt reduce it to 6 months, for most people.
I hope I answered your questions. I havenāt given up on making you a world class trader. Donāt give up on yourself
OK, itās coming. The problem with trading longer time frames is you risk more pips on each trade to get more reward for the same spread costs, but you canāt get much practice on finding entries and exits. You may only get a couple or few of these trades a week and some weeks none at all. I learned to trade starting out on very short time frames and moving up over the years to longer time frames. It may not be the fastest way to reach your goals, but I donāt know how else to get there. I believe most people who have followed this thread are close to being able to trade these shorter mid time frames at break even or better now. A few who have been trading less than a year really need more practice and I donāt know of any good substitute for practice.
Going forward, Iāll still work to help anyone who is having problems trading these shorter and mid TFās, but yes, to reach our longer term goals, we will want learn to trade longer term charts, or at least know how that can be done. I know many traders who have tried all time frames and prefer staying with the mid term and closing all their trades at the end of each trading day or when they hit their profit or loss target for the day, which ever comes first. I know a few who are scalpers to the core and will never trade longer time frames. But like you say, thatās just not practical for many who work a day job, so we will move on and let each choose the style that best suits them.
OK, hang in there. You can probably already see how this could be done using the techniques we have discussed. I wanted to wait a bit to the end of US and GB summer, which is now. Weāll start out by looking for good entry signals on the daily and weekly charts, so you can get a head start by surdying those charts.
For example:
Last week we had good breakouts high on the AU daily and weekly charts.
AJ broke out higher on the 4H and is trumpeting open on the daily.
EA is breaking out down on the daily, close to breaking out down on the weekly and probably will this week, and has only had 3 up months out of the last 20 months.
EU is in a squeeze on the daily and difficult to trade long term until it gives clear signals.
EJ has just made an up 1 cbl on the daily.
GU similar to Eu with a little more down bias.
GJ, daily and weekly making cblās up.
UJ is making a daily 2 cbl up, but weekly and monthly are walking down the bottom bb.
ECHF is going into a squeeze on the daily, and the weekly and monthly are walking down the bottom BB.
EG daily is still moving up and down in a triangle chart formation that started back around mid July, weekly and monthly are squeezing and chop chop.
UCHF is very close to an up 2 cbl in on the daily, weekly is trumpeting down and monthly is ranging,ā¦ and so on for the pairs you will want to follow.
So do some study, draw in some s/r, high lows, fibs, trendlines and such, decide which pairs look like the best to trade longer term, mark up their charts and post them and weāll discuss and look for entries. Happy trading
Itās a good time to start looking at positioning for the week, so Iāll start off looking at some majors, comdolls and popular crosses:
AU powering up. This is one of those strong trending moves that is hard to enter late. The trend is still solid up, but strong retracements are needed to enter due to volatility. Look at enter long on price pullback to M30 midband followed by a good bullish signal.
AJ been flatish due to aud up and jpy also up. Yen pairs have been touchy due to BOJ possibly intervening at strongest yen points. Expecting more BOJ trying to talk the yen down as the week rolls on, but that just makes short spikes down in yen value, followed by more yen climbs. For now, a good H4 down cbl makes a good short entry.
EA has hit the H4 midband. Recently when price has climbed up and hit the H4 midband, it bounced off and went back down strongly. If thatās going to happen again, youāll see down cblās and down breakouts on the lower timeframes. Those down cblās make good short entries. If they donāt occur, then donāt enter short and no harm no foul.
EU had a nice breakout up on 1H and 4H due to the relaxed rules that allow euro banks 8 years to raise capital. This doesnāt make their banks sounder, it just takes the pressure off them to quickly raise capital. The daily is reaching the top bb in a squeeze, so it either breaks out high following the H1 and H4 high breakouts, or bounces off the top band trapping the eu bulls. Thereās an old saying, that the market does the thing that will hurt the most traders. If I was in eu long Iād be looking at taking some profits off the table and if not, Iād look for signs of that bull trap and short it on good short cblās on shorter tfās. If eu continues itās bull run and itās not a bull trap, then no entry, no risk, no harm and no foul. If the short occurs, it could at least run to the bottom of the daily range. This has been a very choppy pair so care is advised.
hi Graviton :),
I enjoy visit Alferaki Palace and listen to Chamber Orchestra when it plays - such amazing place!
All of your trades fly under the radar, so no need to worry as long as you have an honest broker.
I hope I answered your questions. I havenāt given up on making you a world class trader. Donāt give up on yourself
I dont give up, I have to be like a phenom in trading
Now I reserch on correlated pairs trading. Its requared testing to much. Have you ever traded correlated pairs?
I would need honest US broker when I will return to US. What honest broker is it?
Iām not a tax professional, so I canāt comment on that. There are some other benefits. Higher leverage is allowed than by US law and the first in first out (FIFO) rule doesnāt apply.
