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Author Topic: My Method  (Read 415 times)

Offline aicohn

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My Method
« on: November 06, 2016, 12:39:59 PM »
This is a combined tutorial and trade journal for "the holy grail" I think I've come into.  I will post my trades as I close them (good, bad, and ugly).  I've traded roughly 6 years and have consistently lost until just recently.  During that time, I traded every EA indicator, and marketplace trading system known to man on lower timeframes with little success.  In exasperation, I put up naked H4 charts, went back to what I consider "first principles" and found success.  What I've found that seems to work, I will in general terms outline below.  But first, there are some precepts the reader must accept that I've learned and come to strongly believe over years of hard experience.  If you do not accept these, then move on; if you insist on continuing to trade a 5 minute chart obscured by 15 different indicators and choke on what I'm about to say, that's what makes a market.  I'll be glad to eat you for lunch!  ;-)

1) Trading in lower timeframes is a sucker play:  Banks and funds don't do this.  Why would you think you can outsmart them?  Technical indicators tend to be much more failure-prone in lower timeframe charts.  For these purposes, I define anything under a 4 hour bar as a lower timeframe.  Typically banks and funds are going 8hr bars or longer.  4hrs is my favorite timeframe.  I get lots of trades there.

2) Technical indicators are a tool used to confuse the gullible: They lag.  They repaint.  Moreover, I've never found a moving average, MACD or stochastic I can take home and eat.  Why would any be preferable to plain old price?

3) For a successful trading method you need three things:

a) some sort of method to give you a solid statistical edge.  if you can find something that will even give you 60% winners, you'll make a whole lot of money at this.  you should be able to explain it to somebody who knows nothing in two or three sentences.  otherwise, you have no idea what you're doing.  if you think there's a method out there to give you 90% or 95% winners without exposing you to a reward:risk ratio that's totally unacceptable, I have a bridge to sell you as do most of those who hawk eas and indicators in the forex world.  it's just not reality.

b) a solid reward:risk ratio on any trade you do take.  if a trade doesn't give me at least 2:1 i'll generally pass.  if you can find something that's 5:1 or 10:1, which isn't that uncommon, you should leap at the chance.

c) risk management.  this is important to make sure you don't win 10 trades in a row only to lose it all on one horrendous loser.  also, it makes your account equity much more stable.  if you risk say 2% per trade, you'll be slowly building your account using the miracle of compound interest while making it pretty unlikely you'll be looking into the hole of rebuilding from a 25% loss.

That said, my trading method (paragraph a above) can be summed up as: "examining price action at support and resistance levels using japanese candlesticks and trading accordingly.  my favorite supports and resistances are trendline breaks.  i will never enter on a break, but rather wait for a retest.".

I risk 2% per trade, though I may go lower at iffy times.

I stay out when I have CB actions affecting one of the component currencies, avoid trading during NFP regardless.

I will not take a trade where the reward:risk is not at least 2:1.

And that's it.  What follows will be a journal of my trades as I close them.
« Last Edit: November 06, 2016, 02:08:49 PM by aicohn »

Offline aicohn

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Re: My Method
« Reply #1 on: November 06, 2016, 01:12:31 PM »
Trade #1.  This one arrived with the 4 hr bar that closed 90 minutes after the NFP announcement.  In truth, I'd been watching this pair since it broke a long downtrend line (not shown).  You will notice a "hammer" candlestick (green rectangle) showing nice rejection of lower prices right at the support of a rising trendline.  A conservative target is at 1.4531 as shown (red line) with even higher prices possible.  Risk is below the bottom of the hammer and lower trendline (1.4424 or so).  I used KL effortless risk manager (available in the MT4 marketplace) to map out a position size to yield 2% risk for my account.  This met my criteria and I entered with close of the candlestick.  Immediately, thereafter, it was off to the races, and having achieved most of my target within 30 minutes and the dive boat awaiting (I'm on vacation on Grand Turk Isle) I elected an early exit.  I achieved almost twice my risk at that point.  Completed trade result shown at bottom.

« Last Edit: November 06, 2016, 01:56:59 PM by aicohn »

Offline aicohn

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Re: My Method
« Reply #2 on: November 07, 2016, 12:57:31 PM »
Lest it go unsaid anybody with half a brain will be finding something else to do (other than forex) the next couple days, because of the US elections. Liquidity is either going or gone, spreads are widening, market participants are backing off.  And technical setups will have a remarkable tendency to backfire.  I, for one, am staying out.

http://www.zerohedge.com/news/2016-11-06/aint-another-brexit-traders-scramble-hedge-trump-victory

Waiting for the dust to settle sometime Wednesday.
« Last Edit: November 07, 2016, 01:18:29 PM by aicohn »

Offline aicohn

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Re: My Method
« Reply #3 on: November 13, 2016, 02:30:15 PM »
Trade #2 (Long NZDUSD)

Long standing up trend.  Hammer candlestick at lower trend channel support.  Entered with 2% risk.  Promptly broke support.  Oh well...


Offline odysseus11

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Re: My Method
« Reply #4 on: December 30, 2016, 10:47:56 PM »
are you still trading this?
never fails to amaze me how many people are all looking for the same thing - an edge.

Lot of truth in what you said generally, though to me your system is just more tossing darts at a dartboard.

realize this: if you **werent** just tossing darts, you wouldnt have to be concerned as much with reward:risk

You could easily just stick to something looser, say 1:1 and be fine. If you require 2:1 or better, then you dont have an edge, you are using math to try and ensure success.  That only works as a wagering strategy, and wagering strategies are only necessary when gambling.

Good luck.
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stop gambling. start trading.