Sometimes it’s nice to have a signal to enter a trade on. Have you ever considered simple candles like the Engulfing and Pin Bar? They can be effective at important areas:
Just a thought. I use these 2 regularly on the daily and 4H, no harm in it as long as you’re not just using them randomly. You want to wait until the candle has closed, then use a stop order at the low.
Yes. There are several reversal signals that I look out for.
However, what if the trend is continuing its direction and not reversing?
Then I miss out on that big swing because I’m trading what I want to trade, not what’s actually happening.
And that’s not what happens in trading. It comes down to “do you want to be right, or do you want to be profitable?”
The market is always right—not me. If there are five opportunities, and only one of them is a reversal, I’d rather profit from five instead of just one.
I can’t just keep trading what I want and take losses with no chance of recovering those losses.
If it’s reversing, and I take 3 losses and finally catch the swing, then the losses were well worth it.
But if it’s not reversing, and I lost 3 times, there’s no way of making up those losses.
That’s why I have to be open to what the market is doing. If it goes up, then I have to be open-minded to that possibility. If it’s going down, I have to be open to that possibility as well.
But ignoring all but one possibility is not benefiting me.
What do you do? When you have some expectation, but then something unexpected happens and now the signal is the opoosite of your expectations.
Have you had situations like that? What did you do?
The chart I posted is in a clear long-term downtrend, so I don’t consider these trades reversals.
These moves IMO are pullbacks, so these would be trend continuations trades, therefor I’m only looking for signals to the down side. One could argue that these pullbacks are trends when on a shorter time-frame, like 1H, and they may be right, but I’m not trading the 1H chart here, I’m trading 1D.
If you’re trading SR levels then I believe this is the best way to approach it, higher time-frames, with the trend.
Here’s one I’m watching:
4H uptrend, just bounced off resistance and formed a bullish pinbar.
You get stopped out and move on to the next setup, not much else you can do.
Here’s a good one. We have a clear uptrend, this is actually happening. But, we also have a reversal signal, the 2nd bar being a bearish engulfing candle. What do you do?
Some would ignore the uptrend and assume this trend has been exhausted and go short. However, statistics show that there is a better chance that the trend will continue rather than reverse. So, it’s best to be patient and wait to see what price does at the S level. Looks like it might go back to test it. But as for now I consider it a typical pullback.
Yeah, those big candles are uncharacteristic so, that tells me that it’s still bullish—at least until it retests the recent high. Whether it’ll test and bounce that high, or break through is another question…
Another reversal signal is losing momentum, then one unusually large candle. There is that candle, then MAYBE there’ll be one final small candle. To me, that’s a reversal sign.
My problem right now is that I was chasing reversals. I was ignoring the possibility of the trend continuing. Now, I just gotta keep an open mind.
That was my problem. I ignored the bottom side of consolidation periods and waited for a reversal signal at the topside. That didn’t work out well at all.
Paying attention but missing out on a huuuge swing is like someone offering you a ball of money and you say “no thanks, I’m fine.”
I hate to admit this because being wrong is invalidating. But I think the time has come to further reduce the pairs I’m watching and also trading.
I’m noticing that I can review my charts up to four hours. After four hours, I start getting antsy; I start having trouble concentrating, and I start looking for something else to do.
It would be nice to finish all my work in 4 hours or less. To be honest, the less screen time, the better.
Why would I WANT more screen time. That’s when it’s turning into a job, which defeats the purpose for me.
Also, trading so many pairs uses so much of my margin that I’m not even able to place an OCO in case of a breakout on the other side.
I don’t like trading breakouts, but not all breakouts are the same and a poorly placed OCO will lose most times.
So, I’ve done poorly with OCOs in the past, but I’ve recently found some use for them. And I can’t exercise that option without enough margin.
That gives me an additional reason to reduce the pairs I’m trading.
Sometimes less is more. And of course one of my favorite expressions is “if you chase two rabbits, you won’t catch either one of them.”
My margin and attention is stretched too thin.
My desperation doesn’t want to miss any opportunities out there. But perhaps the divides attention is controbuting to me missing opportunities on the first place.
In that case, trading more pairs achieves paradoxical results. It shouldn’t be that way, but it is. Trading more pairs is supposed to give me more opportunities to win, but right now it’s giving me more losses.
If my brain is starting to drift away and get burned out after 4 hours, then I should be done in 3.5 hours. Maybe even 3.
And hey, that’s not a bad thing.
My first thought is that I shouldn’t reduce the pairs I follow. But, the more I follow, the more I want to trade. Following 6 AUD pairs may tempt me to trade 5.
Which is fine, but only if I’m ONLY trading AUD. But then there’s crosses for USD, GBP, JPY, and the majors.
Now what? Am I gonna trade up to 4 for each base currency? If I do that, I’d be trading a super small lot for each trade. At that size lots, what’s the point? The profits from each trade will be so small.
Perhaps, I can just limit myself to trading just a few pairs per base…
But that wouldn’t change the time it takes me to review my charts.
If I removed five or six pairs, that might help…
But my first thought is that if I’m less busy, then I’m not working hard enough.
That’s partially the idea of working for the sake of working.
The Disciplined Trader says that idea is irrelevant in the world of trading.
I should be willing to let it go.
I think I really am stuck on the idea that more work= more profits.
It really isn’t the case. In trading, good entry and well placed stop loss = more profits.
Frankly, doing that once only takes a few minutes.
Now I understand why some people only trade EUR/USD. Of course they trade other instruments.
But just imagine only trading forex, and only trading 5 pairs, and watching 10.
You’ll pay more attention to every move without rushing. And your work will be done in less than 1 hour.
2 hours if you’re being lazy about it.
I should reconsider how many pairs I watch in total. Because I don’t like the idea of my brain getting exhausted before my work is complete.
I’ve removed CNH because it requires too much margin.
I also removed some whose spread was too wide. GBP/DKK was one of them. I like how it moves, but the spread makes me rethink it.
I guess I’ve got plenty of homework for the weekend. Haha
The strategy I trade is bases on trend continuations. And after backtesting for 9 hours the last three nights. I can tell you trading with the trend is much easier than picking out reversals.
I have a strategy that I will be testing - it involves reading price action as well as using major levels of structure to guide me on whether we are about to see a reversal or not, however, I will only do this once I have my current strategy nailed down.
I want to backtest at least 100 trades with it for 9 pairs so it will take me quite a while to do!
I’d suggest maybe concentrate on trading the trend first, learning the ins and outs, getting confident and then start looking at reversals.
Keep in mind that when you backtest a trend continuation strategy you are likely to learn a lot about reversals too as you will be watching the price play out!
Best of luck mate!
Perhaps you’re right! And I’ll be backtesting more over the coming days/weeks. Here I go!!!
This is good advice. I didn’t choose reversals at first, even though it probably seems that way.
What happened was I backtracked the swing to its beginning, which is a reversal.
I think this is just part of my natural progression.
I traced the trend to its point of origin. But you won’t catch every trend at its beginning. Some upswings have been happening for 6 months already. So then what?
Well, I wasn’t prepared for that. I was using a hammer, but not every opportunity was nails.
Also, there was just a tiny bit more to my reversal strategy than I realized. But now I got it.
However, I caught a nice entry recently on an AUD trade only to abandon it for short-term profits because I crossed two different strategies unecessarily.
I have more wrinkles to iron out from my strategy. I just have to keep making better mistakes, and exercise patience and persistance.
Yes, I think if you focus on mastering the easier method, along the way you’ll learn a lot about reversals. That being said there is no right or wrong way. So whatever tickles your fancy to be honest. Although I would say backtest backtest backtest. Backtesting is so important according to so many consistently profitable traders out there.
This is standard mate. Everyone does it. But again, when you backtest enough, you’ll have information on your strategy that you will be able to implement (such as whether you should be managing your trades live, how you should be managing them etc)
Keep going mate. The longer you go at it the more likely you will end up consistently profitable.
And keep posting, we can all support one another by reading each others journals and sharing ideas.
I have to eliminate more pairs. The greed is strong with me.
But if I’m gonna get different results, I have to do different things.
So, I got rid of some pairs with wide spreads, and I also got rid of some pairs that move a bit slow for my taste.
I’m looking for some volatility on W1. If it looks a bit on the flat side on W1, for sure there won’t be much volatility on D1. Unless I go to H4.
I’m really liking how the GBP pairs move. I’ve kept more of those than any other base. I’m watching 9 GBP pairs, 4 AUD, about 7 EUR (for now)…
I removed USD/CHF from my list as well. I don’t like the long wicks.
My brain is tired now, so I’ll continue tomorrow.
I’m reviewing W1 charts.
I keep a note pad for writing down ideas. Right before going to bed I had an idea to review each pair, and write down what each one is doing: consolidating, mid-swing, or appears to nearing the end of a swing (losing momentum).
I made sure to write that down even though I was already in bed and thought, ¨nah, I’ll remember that in the morning¨. Been there, done that where I usually forget.
I got the idea to write down what each is doing because I remembered that one strategy I used to have was to wait for a consolidation period, then trade the breakout and hold for the duration of the swing. That’s what I wanted to do when I first started looking at W1 chatrts.
It’s a nice strategy for someone who only wants to trade a couple times per month, I think. Check W1, look for nice periods of consolidation. If you can see it on W1, then D1 is gonna probably produce a big swing. If I had done that, and placed an OCO, I’d be in the green right now.
So, that made me think I should try categorizing what each pair is doing, so I can assign the appropriate plan of attack; not just attack. Just a way of organizing my thoughts. It helps me if I can put all my thoughts on a spreadsheet. I can’t keep all the info in my brain. It’ll get mixed up for sure.
I’m taking my time, reviewing W1 charts, and getting my thoughts together.
I’ve eliminated several pairs, and it seems it’s not enough.
I’m looking at how many consolidating pairs I found. So far there are 13.
That’s too many to trade.
I don’t want to spend too much time deciding which ones I should take out of 13. It’s really unnecessary.
One easy way is to just look at the potential R:R. That’s probably the fastest way to choose. Whatever the top few are…
I just finished my trading. It didn’t go well. It actually left me in a self-deprecating mood.
Very frustrated. I got about 1/4 of the way through my work, when I felt like just closing my laptop. So, basically JPY is still dropping and JPY crosses are going up.
There was a sign yesterday, but I allowed my desperation to not see it.
I suppose that’s the best way to say it. Or maybe it’s just something that I had to learn. If that’s the case, then it’s a fair mistake.
Right now, I’m just writing through my emotions. I’ll think more logically later. Right now, I’m just venting my frustration. My emotions were somewhere between going back to bed without finishing, and punching my laptop.
I didn’t do either. But that’s how I was feeling. I just took a long break and watched a movie for a bit.
My desperation to not miss out on the eminent reversal didn’t allow me to see that price was likely to keep going up.
I reversed my positions to buy, but now I have a wide SL so the profits will be much much smaller. Two-thirds smaller. That’s a lot.
The good thing is that I’m learning. I took some notes in my little notebook. I think I should make a diagram for myself.
It could be like a ¨if you see this, then go long¨, or ¨if you see this, go short¨. However, I can’t write instructions for every single scenario.
Now, here’s the contradiction. I’ve said that I’ve seen the same patterns over and over in charts. So, if that’s the case (and it is), then why couldn’t I write instructions for such limited scenarios?
Which is it? Limited scenarios, or infinite scenarios?
Limited scenarios. However, the paranoia makes me think there are infinite possibilities. No two consolidation periods are the same. No two trades are exactly the same. (But the signals before the move usually are. It’s the candles in between that offer infinite scenarios, and these mixed candles leading up to the signal are what create confusion for me.)
Why do I say that, yet also say that there are limited entry signals? Because I’m misreading the entry signals in real time. My desperation will see a false entry signal and think ¨Is this it? Is this a signal? Is it about to reverse? Well, what if it does and I miss it? What if tomorrow I see a big candle and I missed it?¨
However, when I backtested, at the beginning and end of swings, I see the same signals. I think my problem is that I’m jumping the gun out of desperation.
I’m still trading what I want, and not what the market is telling me. There are always clues. I just refused to read them as they were. I read them as I wanted to read them.
And it’s frustrating.
To anyone reading this, please just keep in mind that I’m just venting.
What’s frustrating is that I feel like I’m always two or three steps behind what the market is doing. I need to be no more than one step behind. Preferably I’d rather be one step ahead.
If it does X, I’m doing Y, and as a back up I’ll place an order over there. I’m not expecting to be a psychic, but I want to read the clues as I know I can. But read it in real time, not after the fact.
I’m gonna work on that diagram and set some guidelines for myself. I think this will help me remember what I should do.
At times like this, I remind myself that one of my rules is ¨no quitting¨. Stay focused. Stay determined. If I wanna turn the market into an ATM like I know I can, then I can’t keep doing the same thing. My decisions are failing me. I’m failing me. I’m not quitting. I have to stick with it, and make the changes that the market is showing me I have to make.
Right now, is really one of those times that I feel like walking away from trading for a while. But, I’m gonna stay in the fight. I continued reviewing my charts and finished my work.
I really didn’t want to though.
I’m gonna keep studying. I just have to be desperate enough to not be desperate.
I’m gonna take a step back and reduce my lot size for a little while, for all but maybe two or so trades.
I’m gonna go back to 0.01
Also, I’m do some work in demo.
We’ll see.
Hey man! I feel your frustration!
I think your idea about the diagrams is a valid. I am about to do the same for myself.
The way I have approached it though is a little different. I am trying to “master” one scenario at a time.
I have a rules based strategy and therefore it makes it much easier to know when to enter and when to stay out.
Currently I am backtesting and forward testing (on a very small live account) this strategy. Once I am done backtesting at least 1 years worth of data for all 9 pairs on my watchlist I will analyse and review the data I have collected. I will then make tweaks if necessary and backtest the same again. This is when I will comfortably say I have an edge in the markets with this strategy.
I already have a trend reversal strategy in mind that I want to implement to work hand in hand with my trend continuation strategy. However, I will start testing this when I am through “mastering” the trend continuation entry.
I know I say this now and in a few months I will be adding/ taking away from this rule based strategies. But like you said, I am also determined to win and therefore we will keep going until we know the charts like the back of our hands we can confidently extract profits from the markets!
Have you come across SMC? If so what are your thoughts?
