I’ve decided not to trade until the holidays are over, but if I were, I’d be looking to go short on EUR/JPY. An engulfing pattern is quite visible and suggests that the retracement is over and the downtrend from the weekly chart may be about to resume.
I’m going to see if I’m right, but will not open a position.
Good work, happy holiday!
I’m watching the EUR/JPY and it seems to have stalled after initially moving in the opposite direction of what I expected. It seems the Bank of Japan may be the reason for this and it will be very interesting to see if the candlestick pattern holds or if it may be overrun by fundamentals.
Right now it seems EUR/CHF is behaving like I thought EUR/JPY would, so maybe the BOJ is the difference here.
As a side note I’m considering changing my max risk for both daily and 4H to 2% of total balance.
I’m also pondering the use of ATR to set my stops instead of the current method.
Also I’ve begun reading Alexander Elders Trading for a Living. Very interesting so far. Several observations that are really quite simple, but still elude many of us, me included.
Just one example. Quote: Traders often ask me how much money they need to begin trading. They want to be able to withstand a drawdown, a temporary drop in the account equity. They expect to lose a large amount of money before making any! They sound like an engineer that plans to build several bridges that collapse before erecting his masterpiece. Would a surgeon plan on killing several patients while becoming an expert at taking out an appendix?
The book is filled with simple wisdoms like this and I can just recommend everyone to read it, I’m sure it won’t be wasted whoever you may be.
As I’m tinkering with my system, I looked into the choice of broker again.
Until now, I’ve felt that Alpari UK was a good choice:
pros:
min lot 1000 units
clean records with authorities and good reputation / regulated
MT4
reasonable spreads
10 year history means some stability
cons were:
MT4 - needs to be running all the time for trailing stops to be active
bucket shop - although seemingly one of the best
not possible to access via web or java ( I don’t count cell phones)
only email support
After careful study and reevaluation, I’ve changed and now will go with MB Trading, for these reasons:
pros:
clean record with NFA and CFTC
true ECN - broker makes money if customer does well, not like with bucket shops the other way around!
regulated
many advanced order types, serverbased. For example place limit orders with trailing stop and much more. Much better than MT4 can offer and this fits my trading well
same or even lower spread/commission, i.e. cost per trade
also micro lots
not just forex broker - also futures, stocks, options - means this company is highly regulated in other areas - cannot be a disadvantage
very good reputation
easily accessible customer support
cons:
very poor charts - will need MT4 demo for this
somewhat less intuitive software, but also with more options
According to CFTC capital at 14,5 million $ - will have to be increased under the new rules
no web or java access
These factors together has made me swing over to MB Trading. Especially the serverbased order types and the fact that they make money if you DO NOT lose are very attractive to me.
More updates will follow when I’ve looked over my system completely
Well, just as well that I never put on any trade on this pair, today it would have hit a stop loss based on 100% of ATR of the signal day.
Btw, this is a S/L system I’m considering.
Back to studying
First of all, I’m not sure about rules on this forum regarding linking elsewhere so I’ll just avoid that.
However, I found a software, that is supposed to be free and free of malicious code. It’s called Forex Strategy Builder and claims to be a means of backtesting trading strategies without having to be able to program EAs or the like.
I haven’t even downloaded it yet, but I’m going to as it sounds very interesting.
Please be aware that I have absolutely no affiliation with this program whatsoever and I’m not trying to promote, just wanted to mention that it exists and that if it does what it says, it may be useful.
A short update on my thoughts after reading Alexander Elders first book - Trading for a Living.
A real learning experience. I can only recommend it to anyone interested in learning more about trading in general and about the all important psychological part in particular.
I also made an effort and really learned how some technical indicators work. It’s easy to read about them and think something like: ahh, well that’s clever. I think I’ll use it.
But to really understand it, it takes more. I’m still not sure I understand everything, but at least I know more about the inner workings now.
Now going on to read Dr Elders second book, which promises some updates to areas of interest, such as Triple Screen.
I want to read Nisons Candlestick book and I really like the idea of using candles for trading, but the Triple Screen system is really promising and I’m not sure if I can fit candlesticks into it.
Back to reading. Not sure when there will be time for trading again, but study always comes before reward.
Congratulations on your success thus far, and I wish you continued success in the New Year. I appreciate your transparency and will be watching your progress.
JEB
JEB - thank you very much. I will try to keep posting my thoughts and experiences.
Like the title says, no more sleeping in. Wednesday is back to work.
I’ve read Dr Alexander Elders first book, and skimmed a bit through his second: Come into my trading Room.
I will post much more in detail later, for now I’ll just mention that I’m going to use the Triple Screen trading system devised by Dr Elder.
This isn’t a system set in stone, so there are many decisions for every individual to make. I’m almost done, but not quite. I’m having trouble with my exit strategy. I’m thinking about using another Elder invention for this, the SafeZone indicator.
Well, more detail to come as mentioned above.
Well, it has been a while since I last posted here. During this time, I’ve been doing lots of thinking forexwise.
Of course we all want to get rich quick, but there’s a reason why that never happens: nothing good comes for free in this life. That’s my belief anyway.
I’m in this for real, I’ve spent too many hours reading and thinking to just throw it away. And really, can you imagine a better way to make a living, than trading? I can’t.
I’ve heard that JOB is sometimes said to stand for Just Over Broke. This is true, since a worker would probably quit and go to the beach if he wasn’t dependent on the next salary.
Enough rambling - my point is that I’ve set my mind to making it in this trading world. Only time will tell if I end up disappointed or happy. Happy’s the plan though!
Next post will be more to the point.
Lots of text - here comes an outline of the system I’m going to use:
This is a trend following system, detailed and invented by Dr Alexander Elder. First published in his book �Trading for a Living�.
It is not just a system but a method, or if you like a philosophy of trading.
Here is how I will apply it:
The system dictates that every possible trade go through three screens, before the trade is initiated. The screens are: Long term for determination of the greater trend, Intermediate for finding the right time to open a position, and the Order screen where you place your limit orders
My intermediate screen is the daily time frame, which means that weekly is my long term time frame. Daily also becomes my Order screen.
Screen 1 � Long term trend
The first step is to identify the current trend on the weekly time frame.
For this, I use MACD, standard settings, and a linearly weighted moving average (LWMA) set to 26 periods.
These indicators are applied to the weekly chart, and only when both LWMA and MACD Histogram agree on trend direction, is a trend considered to exist.
Any and all subsequent trades will be only in this direction.
Screen 2 - Intermediate
The second step is where I will seek to buy on a pullback from the larger trend on the intermediate time frame
To identify these pullbacks, I use a LWMA of 22 periods and the Force Index indicator. Force Index is set to EMA, two periods.
The LWMA is a visual way of identifying candles that pull away opposite to the general trend direction.
Force Index measures the strength behind these moves by combining price change and volume and is the primary indicator for identifying pullbacks.
If trend is down, a positive Force Index value gives a sell signal, and vice versa.
Additional positions may be opened on further pullbacks, on the condition that all previous positions have reached break even.
Screen 3 - Order
The last screen is used to place the stop order (different brokers use different names and order types, what I mean by stop is that when the stop price is reached, the position is automatically opened in the desired direction)
If the pullback of the signal day was up, and weekly trend is down, this means that a sell stop order is placed two pips below the low of the signal day. The reaching of this point suggests that the main trend has been resumed and the pullback is done.
If the pullback of the signal day was down, and weekly trend is up, this means that a buy stop order is placed two pips above the high of the signal day. The reaching of this point suggests that the main trend has been resumed and the pullback is done.
Risk is never more than 2% of equity. position size has to be adapted to meet this criteria, and if this is not possible for whatever reason, the trade is skipped.
Stop loss is placed with the aid of Elder’s Safe Zone indicator, set to a lookback period of 5, and a multiplicator of 2,0. For more information on this, refer to Dr Elders second book: �Come into my trading Room�.
Since this indicator is a sort of trailing stop, I use it also as my take profit.
Sadly, I’ve had to give up on candlestick reading as it doesn’t really fit with this system. Of course a confirming formation warms your heart, but they’re on the sidelines for now.
For my own record keeping, I will start posting my trades on meetpips.com
I will start after the one (and first) trade that I’m in right now ends. As of this minute I’m up 250 pips, however only about 32 of those are yet locked in by Safe Zone. It’s a never ending inner struggle to keep your mind cool and your ego in check when things go well, and perhaps even more when they don’t…
I’d like to point out that I’m not trying to create a following or anything of the kind. This is for me, but if my forex journey can aid anyone that’s an added bonus.
Seriously, I’m a beginner, so take it for what it is.
I might add one thing:
Force Index can be debated as it uses volume as a parameter.
Volume in forex is at best unreliable, so why have I still chosen to use it?
Well, because even though it’s not reliable as volume info from say an futures or stock exchange, I still believe it’s a valuable aid in determining the underlying power of the price move.
Volume says a lot about the strength of the price move, so I include it. but of course many other oscillators can be used instead, as dr Elder points out.
Some alternatives he mentions are: Elder-ray, Stoch, Williams %R.
My choice has been made. Elder-Ray isn’t bad either though.
Well, this trade was initiated before I posted here, so it doesn’t really count.
Anyway, the Triple Screen suggested a downtrend on EUR/CHF and after being stopped out at the end of this last week, I took a profit of 121 pips.
Very encouraging.
Downtrend is still valid for EUR/CHF, and also for EUR/USD, so I’ll be placing sell stops on them, as they’re both on pullbacks right now. According to the system at least.
I haven’t quite figured out how to report stop orders on meetpips, but I guess there’s a way.
On another note, I’m at it again comparing brokers.
I’ve gotten cold feet on MBTrading because of the fact that they may not be able to comply with the new capital requirement rules.
I’m looking at either Alpari UK (I’m in Europe) or Interbank FX who both use MT4 (which I will be using in the beginning but maybe not forever if I do well) and they both offer fractional lots down to units of 1000.
Tough match. Originally I thought scalping had to be the way, like most newbies think, I don’t anymore and for that reason Interbank is back in the fight in spite of their stand on scalping (not allowed if trades last less than 90 sec I think it was). I’ve discarded scalping as an option. Let others be killed by slippage and requotes and spreads and reactions to news.
Mind you, this is not an attempt to push any broker. What I find to be the best choice for me, certainly doesn’t have to be the best choice for anyone else. I’m merely writing it into my log here. Anyone reading this must do his/hers own comparing and detective work. Never trust anyone but yourself on these matters.
For more interesting info on brokers, try the CFTC, NFA web sites and this thread: 301 Moved Permanently
After some further study, I’ve decided to go with Alpari. Primarily because of the fact that Interbank opens candles every sunday, which basically does no good and the volume of the candle is laughable.
Alpari is clearly better in this, so the choice has been made. And it helps of course that their reputation in general is one of the best, something that Interbank cannot match.
Also, Alpari’s spreads are slightly better. And, since they’re in London I can go visit 
Utah is a bit further away from me.
Clarifying the systems rules on closing a trade:
Trade is closed either when Safe Zone stop gets hit, or manually when Force Index closes with a counter trend value (eg positive in a down trend).
In both instances reentry can be sought in screen 3, if the weekly macd histogram and MA still give a valid trend indication.
In trade 0 I took 120 out of approx 300 pips. If I had closed the trade manually when Force index first closed positive, the trade would have yielded 195 pips instead. You live, you learn… hopefully
Reposting the entire system in updated version in next post.
This is a trend following system, detailed and invented by Dr Alexander Elder. First published in his book �Trading for a Living�.
It is not just a system but a method, or if you like a philosophy of trading.
Here is how I will apply it:
The system dictates that every possible trade go through three screens, before the trade is initiated. The screens are: Long term for determination of the greater trend, Intermediate for finding the right time to open a position, and the Order screen where you place your limit orders
My intermediate screen is the daily time frame, which means that weekly is my long term time frame. Daily also becomes my Order screen.
Screen 1 � Long term trend
The first step is to identify the current trend on the weekly time frame.
For this, I use MACD, standard settings, and a linearly weighted moving average (LWMA) set to 26 periods.
These indicators are applied to the weekly chart, and only when both LWMA and MACD Histogram agree on trend direction, is a trend considered to exist.
Any and all subsequent trades will be only in this direction.
Screen 2 - Intermediate
The second step is where I will seek to buy on a pullback from the larger trend on the intermediate time frame
To identify these pullbacks, I use a LWMA of 22 periods and the Force Index indicator. Force Index is set to EMA, two periods.
The LWMA is a visual way of identifying candles that pull away opposite to the general trend direction.
Force Index measures the strength behind these moves by combining price change and volume and is the primary indicator for identifying pullbacks.
If trend is down, a positive Force Index value gives a sell signal, and vice versa.
Additional positions may be opened on further pullbacks, on the condition that all previous positions have reached break even.
Screen 3 - Order
The last screen is used to place the stop order (different brokers use different names and order types, what I mean by stop is that when the stop price is reached, the position is automatically opened in the desired direction)
If the pullback of the signal day was up, and weekly trend is down, this means that a sell stop order is placed two pips below the low of the signal day. The reaching of this point suggests that the main trend has been resumed and the pullback is done.
If the pullback of the signal day was down, and weekly trend is up, this means that a buy stop order is placed two pips above the high of the signal day. The reaching of this point suggests that the main trend has been resumed and the pullback is done.
Stop loss is placed with the aid of Elder’s Safe Zone indicator. For more information on this, refer to Dr Elders second book: �Come into my trading Room�.
Since this indicator is a sort of trailing stop, I use it also as my take profit.
The trade is closed either manually when Force Index closes with a counter trend value (eg positive in a down trend) or when the Safe Zone stop gets hit.
All right, my system indicated on Sunday evening three possible trades:
EUR/CHF short
EUR/USD short
AUD/USD short
I placed sell stop orders on all three, since I’m at home all day today and therefore able to remove the other orders if one gets hit.
Just a little while ago, EUR/USD short got hit.
I entered the trade at 1.3133 with a S/L at 1.3248.
This trade has been posted also on meetpips.
Let’s see what happens.
Since this is trade nr 1, I’ll just point out that this is in no way any signal service or attempt to play guru or anything else! This is my way of logging my performance, nothing more.
Moved S/L to break even