Exactly, PV…and I am sure the big majority of people that come here, whether passive or active participants, are in the same position: trading short term with limited capital.
And I am sure that the big majority would also agree that the fundamentals affecting relative currency values do not change on the same short term basis that most are trading on (excluding news/release trading).
For these reasons, I agree with you that in our world it is far more relevant and meaningful to analyse price movements on a technical basis on the assumption that the price is always the “net result of price after fundamentals and all other variables have been factored in”
Just as a sportsperson could hardly participate in a sport that does not interest them, I cannot trade something that does not interest me as a topic - but my actual trading decisions are always based 100% on my chart information, not my view or opinions.
This underlines the critical value of understanding what one is doing when assembling a technical trading method/system/approach - it is the core basis on which we achieve success or failure. it is the life blood of our trading.
This was why I thought it would be good to share experiences and knowledge about this in the same way that fundamentalists can argue the implications of this that and the other ubtil the proverbial cows come home.
We started a little bit down this road on the Crude Oil thread, but there is obviously only a very small group of participants there, this being a forex site, which is why I thought to bring this over here. I am always willing to be open about what I am doing and why, but a discussion requires participants otherwise it is a dialog!
We are in the summer holidays season now and discussion is generally quite sparse here at present. If there is no interest here right now then that is ok with me, we can try again in the autumn…maybe
I have a similar “problem” but from different reasons! I have talked about this before. I have always been a short-term trader, taking only high quality signals off short-term charts. My objective has always been capital building and not income earning. I would never want to trade for a living, that is not a lifestyle that appeals to me one bit. I like to be able to choose when to trade and when not to. Therefore my TFs have always been 15m to 1H max and trades almost always intraday.
However, for some time now I have fancied the idea of also running some positions on a longer duration - but I came up against an unexpected problem!
Although I can easily set up my entries for these longer term positions, I am finding it almost impossible to stay in them because of my previous trading habits. I know that I should ride out the smaller fluctuations that occur on these types of positions but as soon as I see an obvious pullback on the 15m chart and my position is in profit then I cannot sit and just watch it and I close it out - usually only to see it later rise grandly way beyond my close out level. Funnily enough, if these short term pullbacks happen when the trade is in minus then I can sit with it until it either comes right again or hits my long term stops. This is not good R/R tactics! So I am really still trading short-term even though i call these my “long term” positions! Kind of quirky, but I think I am a short term trader whether I like it or not!
I’m kind of accepting that and continuing with my usual “tried and tested”. The only noticeable difference is that I am tending more towards the “set and forget” approach even to my short term trades rather than monitoring them from a close distance. Yesterday, I bought a EURUSD trade and even left it to go and mow the lawn…wow!
In fact that would have been another interesting topic to discuss here: what types of TA are better suited to medium/long term and what suits short-term better - but, well never mind!
Yeah, it’s good to think of the market as a whole, back up I mentioned that Eur/Usd was setting up for a BO, but that the selling on Eur/Gbp was holding it up, well yesterday that selling came to a halt, on hr1 oscillators were indicating that a bounce would happen yesterday morn at the DB.
The bounce duly occurred and then today in Asia the BO on Eur/Usd followed.
FA on the Euro and USD gave the direction, TA on Eur/Gbp gave the timing.
That’s is (or at least should be) really interesting for those developing trading methods to hear about. It shows that the right TA really does give good signals concerning both direction and, even more important, timing.
What I think is also significant here is that we can see the same result but through entirely different sets of components. You are looking at a longer term follow-through based on an expectancy derived from your appraisal of Fundamentals - but using an oscillator on a shortish TF to time your “pounce”
I am not especially looking at EURGBP for trading at present, but I do keep an eye on it and I also saw the same set up based 100% on a set of indicators only. I post it here only to add some degree of authenticity to my post. I took a very quick in/out trade looking for a rise to a previous S/R line and high. My trade lasted less than 15mins and earned a pitiful 8 pips (I’m not too proud to admit that! ), but I tend to do a large size on my intentionally short “scalping” type trades, so I am happy with that. My entry decision was based entirely on a positive RSI, positive band, and price above the Daily pivot line.
If one looks at the subsequent move, your approach has seen an excellent and very sharp move to the upside - sufficient to place a stop at the entry level and have a “free” ride for whatever else might be coming.
So I think it is useful to see how different approaches can work to the same result and therefore emphasising the validity of developing one’s own tailor-made method rather than just off-the-shelf try-it-and-see.
The only regret I have here is that there really is little point in just me and you sharing these things, which are already familiar and utilised, which were really only intended to enourage Newbies to look into these issues in greater depth, but no-one seems to be interested except you and PV. But I have to ask myself, though, am I especially surprised at that?
Here are some questions/comments that may be of general interest to others about charting:
The first thing I noticed was that your charts are very simple and clear. Many Newbies (I think) end up adding all kinds of indicators and lines, hoping to get a complete, verified and 100% definitive signal when to enter and exit trades. But this usually ends up doing the opposite and only provides a mixture of contradictory signals. I think we soon learn that it is better to have only a few basic chart tools that we fully understand, and then concentrate on improving our own interpreting of these rather than simply adding more things to the chart. In chart construction, rarely is quantity superior to quality! I think your divergence reading is a good example of that interpretive skill.
You mention two types of common chat patterns HS and DB. Reading these is a very established and enduring technique. Nowadays, it seems, there are also automated pattern recognition add-ons. How significant are such patterns in your own analysis? Which patterns have you found to be most reliable?
You mention a weekly ref. Therefore I assume you also see value in considering multiple TFs. But weekly =>Hourly combination is rather wider than the standard coupling of, say, daily=>hourly. Again, without the specifics of your particular methods, what are the principles behind your use of muliple TFs? Personally, I find this extremely important. For example, by only trading 15m signals that are in synch with the 1Hour chart, I can avoid a lot of false signals and it gives a much better conception of what is the real underlying trend situation.
One common issue for me with MTF is whether to place both sets of indicators on the same chart or keep them on separate charts . Both ways have their own advantages and disadvantages. For example on your charts above you have placed an equivalent weekly line on your Hourly chart. The benefit is that it is a constant reminder to watch this level and easy to see a close through it. The disadvantage is that it loses its visual definition that is obviously apparent on the weekly chart. I include quite a lot of higher TF data on my lower TF charts, but it is always a compromise between comparative clarity and obstructive clutter and lost detail.
A more minor point: I am also interested in how people set up their basic chart configurations. The same components can look so different depending on the choice of colours and line configurations. Whilst this is not a factor in selecting trade entries, etc, I am sure it plays a major role in perception of signals and as a comfort factor when looking at charts for long periods. Your background is dark, which seems very common. Personally, I prefer a light background because otherwise the contrast is too strong for me - but then colours also tend to be muted. It is something that is worth experimenting with to find the right blend that is not too exhausting to look at but still provides sufficient clarity.
Thanks again for the input and, yes, adding charts and pics is very easy with this new format!
Yes Manx, weekly, daily and hr1.
Weekly on Eur/Gbp e.g. that yellow line proved to be support for the leg up today (it was resistance yesterday but very weak, you could sense that price was going to breach with gusto.
I just see H&S etc but for me the biggie are the DB’s and DT’s.
One thing worth mentioning, I notice that Tom Dante had a discussion last week on this very issue - B/E stops.
A lot of people use them on a breakout, I don’t because I’m using FA for direction, I notice that anyone who had a B/E stop on Eur/Usd on the recent breakout will now be flat, worse still they’ll have missed out on today’s action.
Have to confess I had never heard of Tom Dante before (I don’t follow other sites at all). So I took a look at his site and seems he has some interesting things there about some general issues even if they are a bit dated now (I mean the free educational stuff).
Unfortunately he has a tendency to use bad language, probably picked that up in his days as a prop, maybe it’s ok in a closed trading room environment but times have changed - sites like BP and others don’t allow rubbish language which is good.
Interestingly Eur/Usd and Eur/Gbp is posting a bull flag right now, maybe guys who have missed out or stopped on b/e will be tempted on Monday morning if there is a push up early.
I’d be just a little reluctant, Jpy is showing some strength even against Eur so this could be a time when the saying ’ do not chase’ would be apt.
Hey Manxx !
Well, I guess I need to get off my butt and let you know how I feel about the topic.
This thread caught me from the beginning. Very interesting!! I mean, are you kidding me? Every trader HAS to go down this road, of figuring out their way, method, system. But, I do get what you’re saying, which is, why will some newbie traders just copy and paste, pull the trigger when told, and magically think that they will rake in the money.
You know Manxx, I am really glad when I hear the old saying ’ 90% of all new traders won’t make it '. You know what I’m talking about. That really makes me feel good to know. Cause I surely wouldn’t want some dummies taking my money and eventually getting rich by just being lucky. I mean, who do they think they are? They can come on into the money central of the world, play the simple game of guessing up or down, and think that they can compound what little money they have??? Well, I’m glad it just doesn’t happen. I take much comfort in knowing that something so seemingly simple actually ends up being the hardest venture. They actually do not realize you have to earn it. It comes with a price. Which is money, time, experience, and knowledge. And a lot of all of that!
Look Manxx, I have reread this thread over and over. There seems to be nothing more central for a serious new trader than this. Finding each one’s own method/system, and whether it is effective enough. In fact, everyone does, whether they know it or not, come up with some kind of system. And Manxx, your here wanting to delve into that. I appreciate it.
It was wonderful to here the Godfather’s fundamental factor in his trading. That was awesome! Thanks.
It was wonderful to here your explanation of the 3 ducks method. And how there is really only one component in the system. Man, you did such a good job on explaining that system.
I believe all we really need to do is keep asking these 6 questions. Who? What? When? Where? Why? How? And further more, continually asking those questions till you find your true answers. For instance, the Why? That needs to be asked to the answers to the What, When, Where, and How.
Manxx…those questions asked over and over will eventually reveal some interesting truth to peoples method. I’m sure, if the truth comes out, that the bottom line for a lot of new trader’s, will be “Why? Because so-and-so said it would work”. We need to be answering “Why? Because I tested it, recorded it, known that it happened in the past, and it should happen again in the future”.
What I’m talking about here is the different components that go into our method/system. I like what you said…[quote=“Manxx, post:26, topic:107339”]
But the whole point of this thread was to try and probe into what actually makes a strategy good. It is very easy to say that we need a good strategy, but it seems most people agree that a strategy should be personal and not just an off-the-shelf “try it and see” - and when it doesn’t work just go and get another one and try that.
[/quote]
So your asking “What works?” And why?
Good stuff Manxx. I understand where your coming from. Let me explain some of my thoughts about why I do what I do.
To start, I believe in the daily time frame. Sure, that does belong to the swing trader, given that trades last for days to even weeks at a time. But, besides that, this is my logic. If you look at the market, the forex, all you see is a continuous flow. Where is the beginning? Where is the end? On the charts themselves, it’s endless. Someone can always zoom on out farther and say some trend started earlier. Everything can possibly be so subjective. It’s very hard to be able to come to a consensus of what all the players are thinking, I think. If we all knew where a beginning, a middle, and an end of something would be, then we can have a great advantage. But, in my mind, I think this one principle, no one can really deny. A day. There is a beginning and an end of a day. I believe this is the most fundamental, taken for granted, beginning and end of anything. What else is there that compares to that? Ok, how about a week? Month? Year? Yes, they all have a beginning and an end. But a day, I believe, is the most closely monitored time frame in our human minds. There’s more of a realization of the beginning and end to a day than anything else. Sure, in the markets, the money managers see the end of the week for importance. We all know that profit taking occurs then. Same goes for the end of the month, called ‘end of month play’. Books are balanced out then, no doubt. Also end of the quarter. For their statistics purposes. And so on. But, I happen to believe ‘a day’ holds some very high importance. Everyone has said things like; ‘it’s a new day’, or to a friend at work ‘What’s new? Oh…same *** different day’, or even in a religious setting ’ This is the day that the Lord has made’. Etc…Etc…Etc… I’m just given out the reasons why I think that we, as humans, fundamentally put a ‘day’ as the most important time span. Everyone does go to sleep, and wakes up to something new. It all starts all over again. What else in life can compare to that? (In regards to a beginning and an end). In any case, I believe it. And in the market, that’s why I take most stock in what happens in an entire day. Everybody in the world has their chance to trade and make their moves in a days time. Asia starts it all off. A lot of times they take cues to what happened during the US session. They will follow, but not always. Then comes the European sessions. They surely take cues to what Asia has done. They are definitely bigger and throw more weight into what they want to happen. We all know that London is the financial capital of the world. So we should be aware of that. Then the US wakes up and I’m sure they want to know what Europe thinks. They both tangle together for a few hours until the UK calls it a day. Then the US ends out a day of moving money around. It’s all interconnected. But, fundamentally, it starts all over again.
My only point here is this. I, myself, place high importance on the open and close of price for a day. And for the reason of wanting to know where price wants to go, for the future. And speaking of that, I believe in the trend. I believe that humans are creatures of habit. And it shows by doing something over and over again for some length of time. Called a trend. But, when I really think about it, I need something to tell me that price is trending. The question I had was, “How do I know if it’s trending?” The component of my trading method that tells me when something is trending is my 8 EMA, 21 EMA crossover system. I like it for the reason being that since price moves in such erratic back and forth fashion, why not get the average. A daily end price average. A short term one and a longer term one. I guess it’s like getting an average from an average. In any case, this tells me if a pair is trending. The crossover. Sure, the entries and exits are tricky. But, I use this component for trend telling only. My aim is to get in as close to the crossover as possible, and exit at the back crossover. That requires certain techniques.
But, that would be interesting to talk about also. What and How many other ways are out there to tell you if something is trending.
Ok Manxx, I hope I gave you/us some more things to talk about in here.
Talk to me.
Have been reading your journal, I enjoy your PMA (positive mental attitude) not only to trading but also to life - very refreshing to read.
Also it’s good to see someone thinking ‘in the zone’ and always asking the number 1 question - why?
Zeroing in on that question, why is price moving in the direction right now.
You mention trend, but maybe trends are fleeting, the right now, the zone, the thinking, the attitude is more important.
For example - right now Gold is being bought (evidence XAU/USD d1), USD is being sold (evidence USDX d1) Euro is being bought (evidence EURX d1)
Coupled with that Yen is being bought (evidence Eur/Jpy d1… no new high despite the Euro buying / + Usd/Jpy d1)
The ‘why’ in all that needs thinking, is there a risk on feeling or not, why is Euro being bought, has the French election result played a role, are the polls on the upcoming German election having a bearing, is the Euro seen as a risk on or off.
Once again as I sit down to run yet another back test and while that happens I am drawn back to this thread to see if there is an answer. To date it’s disappointing to see just a handful of regulars have joined in the debate yet none have even come close to offering some sort of answer. I’ll give it a go from my perspective.
First the big question asked. IMO a method/system is a series of actions/procedures/protocols, predefined, that work as part of a mechanism to accomplish a task. In our case the task being the actual act of speculating. To any person that has not read this document Original Turtles Rules (PDF Download) I believe there is no better example to use as a template for understanding what a method/system is and developing ones own. Remembering that I am proponent of self propriety based systems.
So based on this template our method/system must included detailed breakdowns of the following subjects.
Markets - What instruments am I going to trade. For myself it’s the EURUSD. One pair. Others trade a basket. I notice you have been in contact with @NormanA on this thread Considering the Higher Frame Candle - with Statistics. I could not begin to image trying to understand the price action of 12 pairs. Others target indices, metals, energy and or soft commodities. Does not matter but we define those instruments here.
Money Management - How do we control risk on our trading? How do we protect our capital. Not just this “only risk 1-2% on each trade” bull. We all know there is no surer way to blow an account than to follow this rule.
Entry Conditions - When do we choose to enter a market and why. Are these decisions based on mechanical rules or experience (discretionary decisions)?
Stop Out - How and why do we get out of a losing trade. Equity locked up in a losing trade is money we can’t trade with. Another opportunity will coming along and we need the free equity to trade it.
Exit Conditions - How do we close out a winning position. Again equity locked up in a winning position is money we can’t trade with. How do we realize our profits?
Trade Tactics - How do we manage our trade. What contingency plans do we have in place to manage our trade when things run “out of the norm”
The are many many “systems” out there, few are complete.
I think this is a great analogy. And I am immediately drawn to compare two segments from the British show “Top Gear”. Celebratory Laps and Fast Laps. In celebratory laps you have a number of variously skilled drivers completing a lap in the same car. The results vary and are directly proportional to skill. So you could say the driver is must important. The same IMO applies to speculating. Given a good complete method we would see various results dependent on the skill of the trader.
Next we have fast laps. Here a very good driver test various cars and naturally enough the high end vehicles preform better. Again speculating would replicate this fact. A season trader would get the best performance out of a quality system. So now we could argue that its the car not the driver that yields performance.
There is one major factor missing in all of this. And that’s environment. All these tests are done in a controlled environment. What if we took these vehicles off the race track and moved them onto a rally course. Would we see the same performance???
In forex we call this environment market conditions and its the great disclaimer. We’ve all heard the talk about trading trend based systems in ranging markets and vise a versa. Its the best way to explain when things don’t work and a great way we don’t have to take responsibilities for our decisions.
I don’t think anything can compensate for a lousy system. Although I believe a season trader can get “better” results from one.
As we grow as a trader it’s fair to say that in the beginning we system bounce. Moving from one style to another. I think we must in order to understand ourselves and how pips can be extracted from the market. As we system bounce we learn what works and way and what doesn’t. Because of this I believe that as we get more seasoned we are more capable to making a lousy system work. Why, because we end up refining it based on our experience
So I come to the conclusion it’s the trader. A system is only as good as the trader trading it.
Which is easier to improve, neither. I believe the two form a symbiotic relationship. The system makes a trader but only the trader can improve the system.
However a method/system is only part of picture. It takes a strategic trading plan to fully engage in the act of speculating. A plan that could take years to develop and even longer to implement. But that’s a whole new and different story!
Bob, in my opinion this was maybe one of your best, if not the best post I have seen here from you!
You have raised so many of the issues that I had in mind when thinking of starting such a thread - and each one could be a thread of its own! These are all major things that any Newbie - and also us more seasoned traders (no matter how profitable or not, as the case may be) should have worked through and resolved.
But there is no sign of any great interest in doing that here - which kind of kills the enthusiasm a bit!
Amongst the many points that you mention these are surely two that hit the nail:
And I hope your latest back testing proves to be fruitful
), but I tend to do a large size on my intentionally short “scalping” type trades, so I am happy with that. My entry decision was based entirely on a positive RSI, positive band, and price above the Daily pivot line.
