# Potential swing trades



## bowman (19 May 2009)

The DOW rally last night was what I was looking for. Not sure how sustainable it is but it's got to be good for a few 5-10% swing trades at least.

I just have to narrow it down to the most likely opportunities, but I have a ton of possibilities:

ALZ ARU BMN EHL EWC GIR ICN JML MCR MRM MTN NOD PAN PEM PNA PSA TAP.

To name a few.

For what it's worth, I dug up this old swing chart set up which I haven't used for ages and only ever used loosely anyway. These days I mostly get by with the Stochastic.

The trrigger is:
1. 10 day SMA is above 20 day SMA, are above 50 day SMA

2.   3 day MA of the  Force Index is below zero
    13 day MA of the  Force Index is above zero

3. D+ is greater than D-

4. ADX is above 25


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## bowman (21 May 2009)

CMW is finding support on the 38% Fib retrace.


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## bunyip (21 May 2009)

bowman said:


> CMW is finding support on the 38% Fib retrace.




According to my chart, CMW has exceeded 38.2% retracement of the uptrend from 18/2/09 to 6/4/09, and now looks like finding support at the 50% level.
However, the daily chart shows the stock to be technically in a downtrend......lower peaks and troughs, moving averages are flat to falling except for the 50 MA which is yet to react to the stock having changed direction.
DMI confirms the early stages of a downtrend....-DI is above +DI, ADX is at a low reading.
I'd be looking elsewhere for a stock that's strongly uptrending.
ARU is more the sort of trend that lends itself to profitable swing trades. And if there's one thing I've learned about trading, it's that you greatly stack the odds in your favour if you trade in stocks or markets that are strongly uptrending.

I note you're using ADX on a setting of 20 rather than the more common setting of 13 or 14. ADX is frequently slow to recognise a new trend even on a setting of 13. A setting of 20 makes it slower still. Have you thought of going for a lower setting?
I see ADX as being useful only if you can scan for it to help you find strongly trending stocks. An ADX scan is not possible in some software, although it is in mine. If you can't scan for ADX then I'd suggest you might as well just eyeball the chart to assess trend strength, rather than using ADX for this purpose.


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## bowman (21 May 2009)

Hi bunyip

The settings on that chart are from an old swing trading system I bought ages ago.

I never really followed the entry rules to the letter and as I said in my original post nowadays I mostly get by with the stochastic  and a dash of gut feel.

I gave up totally mechanical trading quite a while ago.

I do a bit of scanning now and then but mostly I keep extensive watchlists - I think you need to look at as many charts as possible, as often as possible.

Took a small position in CMW this morning at .58 and I'll see how she goes.

Cheers


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## bowman (21 May 2009)

Hmmm...you're probably right about the Fib retrace.

My charting program  is behaving in a curious manner.

I have it installed on two puters and while I used the same points on both to get the fibs, I am getting different results.


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## bunyip (21 May 2009)

bowman said:


> Took a small position in CMW this morning at .58 and I'll see how she goes.
> 
> Cheers




Bowman

Just wondering.....what was your setup or reason for buying CMW this morning?


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## bowman (21 May 2009)

bunyip said:


> Bowman
> 
> Just wondering.....what was your setup or reason for buying CMW this morning?




1. Reversal hammer candle yesterday.
2. The fib retrace support - which I'm now confused about as per explanation above.
3.Oversold stochastic
4. RSI turning up
5. Buy side was building - off screen seller evident today


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## bunyip (21 May 2009)

Here's a swing trading system that's just about as simple as it gets.
Some software can find for this setup by scanning for two or three lower lows or lower closes.

If you wish to use an indicator to pick these trades, you'll find that a 3 period CCI falling below zero tends to correspond with the TKO signals. CCI scans are easy to set up in some software.
Click on the chart to enlarge it.


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## bunyip (21 May 2009)

bowman said:


> 1. Reversal hammer candle yesterday.
> 2. The fib retrace support - which I'm now confused about as per explanation above.
> 3.Oversold stochastic
> 4. RSI turning up
> 5. Buy side was building - off screen seller evident today




Thanks for the explanation, Bowman.
It's always interesting how different people see different setups in stocks.
My take on CMW would have been that the stock appears to be in a new downtrend, therefore I wouldn't entertain the idea of buying it. 
I'd suspect that any upward move off the Fib level and the Hammer would likely prove to be just a brief counter-trend rally that quickly runs out of steam, then the stock would resume its downtrend.


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## bowman (21 May 2009)

Thanks bunyip, I like the look of that. I have a decent watchlist of trending stocks (although many of them swung up on tuesday) so I will have a good look tonight.

.


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## stevo58 (21 May 2009)

Hi Bunyip,

I'm long time lurker of these forums and always pretty impressed with your posts and comments on trading when going back through the archives. They've certainly given me quite a few ideas to pursue.

Anyway, just out of curiosity do you actively trade Landry's TKO setups noted in your last post? It looks a little similar to one I've read about from Carter's Mastering The Trade.

Looks such a simple setup but simple invariably works.

Thanks, 

Steve


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## bunyip (21 May 2009)

stevo58 said:


> Hi Bunyip,
> 
> I'm long time lurker of these forums and always pretty impressed with your posts and comments on trading when going back through the archives. They've certainly given me quite a few ideas to pursue.
> 
> ...




Steve

The TKO is one of the setups I use on daily Forex charts. I've used it on stocks too but I stopped trading stocks a few years back after I discovered currency trading.
I only use the entry part the TKO system, not the exit part. I've found better ways to exit. Try a crossover of two moving averages as your exit signal.....5 EMA of the close, and 6 EMA of the open. I think you'll find this does a pretty fair job of keeping you in for the duration of the trend and taking you out when it's run its course.
Alternatively, instead of bailing out on the crossover you can move your trailing stop up close to the price action once the two EMA's cross. That way you're still in the trade if it runs further, or you're taken out with some profit if price heads south.
Like everything else it sometimes works wonderfully well and other times not so good. 
Entries are pretty simple, exits are always the tricky part. Nobody seems to have found the perfect exit strategy and I doubt if anyone ever will.


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## stevo58 (21 May 2009)

Agreed nothing ever appears to be perfect when considering exits. I use a 6 bar count back as a trailing stop for my stock trades which works pretty good. But I still managed to get stopped out of WFMI at 15 whilst entering at 12. Stock is now 22+. Nevermind, I'll keep searching and testing various exit strategies, the 6 bar count back has still managed to captured a couple of 5R trades so happy to use that for the time being.

Thanks for highlighting the Landry setup.

Steve


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## bunyip (21 May 2009)

Steve

I know of Guppy's countback line - it's one of the indicators in my software but I can't make much sense of it any time I've tried it on my charts.
Maybe I just need to research it properly.

The attached chart shows how the crossover of the 5 EMA of close and 6 EMA of open could have been used to squeeze a bit more profit out of your WFMI trade.


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## stevo58 (21 May 2009)

Hi Bunyip,

6 bar count back trailing stop differs a little from Guppy's in that it simply takes the low of the 6th bar (high or low) whereas Guppy takes the third lower low in his count back. 

My apologies, I was at work and got my numbers a little wrong, just checked and I was in at 14 and out at 17. So could have squeezed a bit more out using your EMA crossover. Certainly food for though pardon the pun. Will run it back through my previous trades and see how I would have gone. 

Just out of curiosity why did you make the transition from stocks to FX? Does FX offer more trending environments?

Thanks again,

Steve


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## bunyip (21 May 2009)

stevo58 said:


> Hi Bunyip,
> 
> 6 bar count back trailing stop differs a little from Guppy's in that it simply takes the low of the 6th bar (high or low) whereas Guppy takes the third lower low in his count back.
> 
> ...




Steve.....Do you mean the trailing stop goes under the low of the sixth last bar? I'm thinking that maybe I've misunderstood you?
I'll be interested to hear how the two exit system compare on your past trades.

Yeh, the better trending characteristics of FX are probably the main reason I made the transition.
You'll be aware of how choppy stocks were until the last few months when they started heading north. The FX trends were magnificent during those months of extreme volatility in the stockmarket.
FX is one of the best markets for technical traders because of the way it forms and responds to standard technical analysis patterns and setups. 

The limitation of FX compared to stocks is that there are only a dozen or so FX pairs that are worth trading. I follow just eight pairs myself.
Still, over the course of a year there are many dozens of trade setups available from daily charts....more than enough to offer plenty of trades.
Intraday FX traders of course have many more trade setups.


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## weird (21 May 2009)

bowman said:


> Hi bunyip
> 
> The settings on that chart are from an old swing trading system I bought ages ago.




Is this SST or Elder ?


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## stevo58 (21 May 2009)

Yes I mean the trailing stop gets placed under the low of the sixth bar back and so on.

Okay heres a comparison of the exits of 3 winners I've had

CCE - Entry 12.15

6 Bar Exit - 16.99
Bunyip Exit - 17.20

LEAP - Entry 31.89

6 Bar Exit - 36.7
Bunyip Exit - Would still be in trade at 39.84!

SNX - Entry 15.82

6 Bar Exit - 18.8
Bunyip Exit - 19.3

Looks like I could have squeezed a little more from my trades using your exit criteria!

I will have to look at FX at some point, currently spent a lot of time learning about position sizing, risk and the psychology of trading and well aware of the challenges ahead. I am minorly profitable in the stock markets at the moment and will continue to work at this. If I can get this working, will try and explore FX then. Being a Pom, I keep an eye on the GBPAUD pair from time to time which is currently drastically against  us (England), looks like its about to pop one way or the other. But even so prices have been fluctuating in the 1.95 - 2.05 area, must have been some great swing trading opportunities there.

Thanks,

Steve


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## nomore4s (21 May 2009)

Steve, maybe as well as trying to improve your exits you need to look at having a re-entry method?

This is something I'm trying to develop atm, as on review of a lot of my trades I'm getting stopped out by a few cents only for the trade to then move in the right direction.  The re-entry won't be under the same set up that triggered the original trade but more of a general entry based on the original pattern holding up.


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## stevo58 (22 May 2009)

Thats a very good point. I did try on a couple of trades but got burned so its an issue I need to face up too. If I had just jumped straight back on a couple of trades then would have reaped some good profit. 

Thinking aloud, if theres a convenient spot to place the stop and the entry falls within risk criteria then there would be no reason not to re-enter. Just need to develop a mindset that its a new trade. I'm also trying to come up with a way to pyramid or scale into the winners. Was going to try it this week but the markets have since turned sharply against and knocked out these positions.

Will keep working.


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## bunyip (22 May 2009)

nomore4s said:


> Steve, maybe as well as trying to improve your exits you need to look at having a re-entry method?
> 
> This is something I'm trying to develop atm, as on review of a lot of my trades I'm getting stopped out by a few cents only for the trade to then move in the right direction.  The re-entry won't be under the same set up that triggered the original trade but more of a general entry based on the original pattern holding up.




In their book 'Computer Analysis Of The Futures Markets', LeBeau and Lucas outline a strategy for re-entering after you've been prematurely stopped out of a trend.
It's simply to wait for a day on which 3 period RSI climbs back above the 50 level, then you buy above that day.
Here's a WFMI chart to show some examples.


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## bunyip (22 May 2009)

stevo58 said:


> Yes I mean the trailing stop gets placed under the low of the sixth bar back and so on.
> 
> Okay heres a comparison of the exits of 3 winners I've had
> 
> ...




Thanks Steve - an interesting comparison between the two exits. 

The GBPAUD is one of the choppier currency pairs and not one I'd recommend for swing or any other kind of trading. There are smoother trending pairs available.


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## stevo58 (22 May 2009)

bunyip said:


> In their book 'Computer Analysis Of The Futures Markets', LeBeau and Lucas outline a strategy for re-entering after you've been prematurely stopped out of a trend.
> It's simply to wait for a day on which 3 period RSI climbs back above the 50 level, then you buy above that day.
> Here's a WFMI chart to show some examples.




Thanks for that, another interesting concept. Certainly could have got a little more out of that WFMI trade using the 3 period RSI method. I will run that past some of my old trades as well and do some more testing. Would be great to add a re-entry method to the arsenal.

Regarding Forex, any good books you would recommend? Or can I simply adapt current Technical Analysis techniques I've already learnt?


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## bunyip (22 May 2009)

stevo58 said:


> Thanks for that, another interesting concept. Certainly could have got a little more out of that WFMI trade using the 3 period RSI method. I will run that past some of my old trades as well and do some more testing. Would be great to add a re-entry method to the arsenal.
> 
> Regarding Forex, any good books you would recommend? Or can I simply adapt current Technical Analysis techniques I've already learnt?




Steve....I haven't read a single Forex book. Any TA techniques applicable to other markets should also be applicable to FX.
On the PPS Trading System thread I've given some examples of applying that system to FX. Also there's a FX thread on here somewhere (can't think of the name of it) where I've posted some FX charts. 

Generally speaking, if you can find entry setups in stocks, you'll find them in FX too.


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## stevo58 (25 May 2009)

I remember reading that thread a while back, will seek it out again. Really quite like Arnold's book and it does form the basis of a lot my current stock trading along with some volume analysis. When I get some time I'll sift through some currency charts and test out some real time PPS setups along with the TKO on paper.

Thanks again Bunyip, great to gain some insights into your methods.


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## stevo58 (26 May 2009)

Hi Bunyip,

I see what you mean about currencies. I decided to have a quick scan for potential TKO setups and found a great little example in the USDCAD. Okay its all great hindsight trading but shows how effective the system can be, its a little like the Traders Trick Entry. I've noticed there might be a pull back forming now so might be another chance to enter.

With the 6 bar trailing stop would still be riding this one with a paper gain of 1092 pips. Is this the kind of entry you would be looking for?

Thanks,

Steve


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## bunyip (26 May 2009)

stevo58 said:


> Hi Bunyip,
> 
> I see what you mean about currencies. I decided to have a quick scan for potential TKO setups and found a great little example in the USDCAD. Okay its all great hindsight trading but shows how effective the system can be, its a little like the Traders Trick Entry. I've noticed there might be a pull back forming now so might be another chance to enter.
> 
> ...




That's right Steve, that's a good example of a TKO entry. Each one of those pips (I call them points) is worth $10 CAD if you're trading one full contract.
Check out some of the other pairs and you'll find other recent TKO's.

USDCHF May 7 & 18

USDJPY May 19

NZDUSD May 18

GBPUSD May 14 (up 670 points so far in 7 trading days)

EURUSD May 18 (up 450 points in 5 trading days so far - $10 USD per point). This one is interesting in that the TKO showed up at an old resistance level that acted as a new support level. See attached chart.

I can see you switching over to the FX camp before long!


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## bunyip (26 May 2009)

bunyip said:


> EURUSD May 18 (up 450 points in 5 trading days so far - $10 USD per point). This one is interesting in that the TKO showed up at an old resistance level that acted as a new support level. See attached chart.




Forgot to attach the chart - here it is. Click on the chart to expand it.


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## stevo58 (27 May 2009)

bunyip said:


> That's right Steve, that's a good example of a TKO entry. Each one of those pips (I call them points) is worth $10 CAD if you're trading one full contract.
> Check out some of the other pairs and you'll find other recent TKO's.
> 
> USDCHF May 7 & 18
> ...




Yeah, I spent a lot of my weekend going over FX charts with the TKO and PPS setups in mind and was certainly an eye-opening experience. I've always viewed FX with a little trepidation, not sure really why that was the case but I can see now that FX offers up several trends. 

I currently trade the US markets and while there are no absolutes, have found that many individual stocks closely mirror the overall market averages. Of course there are exceptions but there is a feel one is trading one instrument. I spend hours over the weekend and every night scanning through charts to find PPS setups which is fine but there is a suspicion that the success of a breakout is dependent on the averages. I certainly feel there is immense opportunity to be had there but as you say there are some great trends to ride in FX in not such correlated markets plus its easy to monitor and manage 10-12 ccy pairs. 7 such setups in May providing opportunities as you've highlighted.

I will open a demo account with Oanda and paper trade these strategies for a few months and if successful could well be making the switch to the FX camp!


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## bunyip (27 May 2009)

stevo58 said:


> Yeah, I spent a lot of my weekend going over FX charts with the TKO and PPS setups in mind and was certainly an eye-opening experience. I've always viewed FX with a little trepidation, not sure really why that was the case but I can see now that FX offers up several trends.
> 
> I certainly feel there is immense opportunity to be had there but as you say there are some great trends to ride in FX in not such correlated markets plus its easy to monitor and manage 10-12 ccy pairs. 7 such setups in May providing opportunities as you've highlighted.




Steve

Yeh, between PPS and TKO setups you should find plenty of profitable opportunities in FX.
As you say, there are definite advantages in the light workload of following only a dozen or less pairs.
Fifteen minutes a day is about all it takes, half an hour at most.

This AUDUSD chart might interest you.

Cheers
Bunyip


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## stevo58 (27 May 2009)

bunyip said:


> Steve
> 
> Yeh, between PPS and TKO setups you should find plenty of profitable opportunities in FX.
> As you say, there are definite advantages in the light workload of following only a dozen or less pairs.
> ...




Thats another beauty, its good point you make about adding to the position. TKO seems to be tailormade for pyramiding opportunities. You can really turbo charge your trades by using it. I'm certainly looking forward to playing around with these concepts in FX. Going back to stocks for a quick second, could also use the TKO to pyramid the winners there as well.

I have just read about another trailing stop which is calculated by taking the 10 EMA then subtracting the value of 50% of the 14 bar ATR for long setups. Will try and code this and check it out along with the PSAR trailing stop you mentioned. Of course nothings ever perfect but if we can extract as much as we can from the trade then all the better.


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## Chorlton (27 May 2009)

bunyip said:


> Here's a swing trading system that's just about as simple as it gets.
> Some software can find for this setup by scanning for two or three lower lows or lower closes.
> 
> If you wish to use an indicator to pick these trades, you'll find that a 3 period CCI falling below zero tends to correspond with the TKO signals. CCI scans are easy to set up in some software.
> Click on the chart to enlarge it.




Hello Bunyip,

Can I ask what is the max number of bars that can occur after the TKO bar (without them exceeding the high of the TKO bar) before you decide that the set-up has failed?


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## bunyip (27 May 2009)

Chorlton said:


> Hello Bunyip,
> 
> Can I ask what is the max number of bars that can occur after the TKO bar (without them exceeding the high of the TKO bar) before you decide that the set-up has failed?




No specific number of bars. Dave Landry suggests in his swing trading book that the retracements to the TKO should not go beyond the 20 day EMA, otherwise you have to suspect that the trend may be in question. 
All the same, there are many good TKO trades from retracements that briefly breached the 20 EMA.

During strong trends, the TKO's tend to be found in shallow retracements that stop well short of the 20 EMA.


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## bunyip (27 May 2009)

stevo58 said:


> I have just read about another trailing stop which is calculated by taking the 10 EMA then subtracting the value of 50% of the 14 bar ATR for long setups.




Bit of complexity involved in that one Steve. Maybe too complex perhaps?


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## stevo58 (28 May 2009)

bunyip said:


> Bit of complexity involved in that one Steve. Maybe too complex perhaps?




Yes you're probably right there, no point complicating a simple system with a complicated exit strategy. 

One other quick thought when going through the FX and US stock charts last night. There are a number of PPS setups each day in the US markets yet these are to some degree as I mentioned earlier, governed by the overall market trend. I guess similar setups in FX as well as the TKO aren't subject to such restrictions so one can sit tight and wait for the setups to present themselves. I'm a little guilty of overtrading atm in the US markets, which I do need to work on. 

On a sidenote, I've noticed USDJPY and one another might be setting up for a TKO tonight. Will check when I get back home.


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## Chorlton (28 May 2009)

bunyip said:


> No specific number of bars. Dave Landry suggests in his swing trading book that the retracements to the TKO should not go beyond the 20 day EMA, otherwise you have to suspect that the trend may be in question.
> All the same, there are many good TKO trades from retracements that briefly breached the 20 EMA.
> 
> During strong trends, the TKO's tend to be found in shallow retracements that stop well short of the 20 EMA.




Hi Bunyip,

So if I understand correctly once the TKO Bar appears Buy and Stop Loss orders are placed and these then remain active until either (i) price falls below short-term EMA (in this case 20), or (ii) the Buy Order is activated?

Thanks....


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## bunyip (29 May 2009)

Chorlton said:


> Hi Bunyip,
> 
> So if I understand correctly once the TKO Bar appears Buy and Stop Loss orders are placed and these then remain active until either (i) price falls below short-term EMA (in this case 20), or (ii) the Buy Order is activated?
> 
> Thanks....




When you find a TKO bar during a pullback within an established uptrend, you place a buy order slightly above the TKO bar and an 'if done' stop loss order slightly below the same bar.
If your buy order is not filled and tomorrow price goes below the TKO bar, then you have a new TKO bar and you lower your buy order to just above the top of this new TKO. 
Same story if price makes another lower low next day - you have another bar that's taken out the low of the previous two days, in other words a TKO bar, and you lower your buy order to just above this latest TKO.
If the retracement continues below the 20 EMA without filling your buy order, you might want to think seriously about whether you persist in chasing this trade, or look elsewhere for another opportunity.
If the retracement seriously breaches the 20 EMA, then I'd definitely abandon the trade and I'd look for the next opportunity elsewhere.
You can use a bit of judgement when the pullback gets to or near the 20 EMA. If the daily ranges are shrinking then it's a sign that the retracement might be fizzling out, in which case you might want to allow some leeway with the 20 EMA rule. It's not set in concrete, just meant as a general guideline to alert you that maybe the trend is getting weary when the retracements start getting deeper.
It's pretty common for retracements to end at or near the 20 EMA. In fact some traders make a stand alone trading system by trading bounces from the 20 EMA. Larry Connors and Linda Bradford-Raschke outline such a system in their book 'Street Smarts'.

 Of course the same rules apply in reverse when you're using TKO setups to go short from rallies during downtrends.


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## beamstas (29 May 2009)

What does the 20 day EMA signify?


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## Chorlton (29 May 2009)

bunyip said:


> When you find a TKO bar during a pullback within an established uptrend, you place a buy order slightly above the TKO bar and an 'if done' stop loss order slightly below the same bar.
> If your buy order is not filled and tomorrow price goes below the TKO bar, then you have a new TKO bar and you lower your buy order to just above the top of this new TKO.
> Same story if price makes another lower low next day - you have another bar that's taken out the low of the previous two days, in other words a TKO bar, and you lower your buy order to just above this latest TKO.
> If the retracement continues below the 20 EMA without filling your buy order, you might want to think seriously about whether you persist in chasing this trade, or look elsewhere for another opportunity.
> ...




Hi Bunyip,

Thanks for the clarification. The fact that you lower your entry point for each subsequent TKO bar makes more sense as it obviously allows for a tighter entry.

I actually do something similar for exactly the same reasons.

Thanks Again for the reply & Good Trading......


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## bunyip (29 May 2009)

Sometimes there are several TKO's offering on the same day.
Candlestick analysis can be helpful in choosing the best prospect.


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## bunyip (29 May 2009)

beamstas said:


> What does the 20 day EMA signify?




The 20 EMA often acts as support and resistance and is watched by a lot of traders, many of whom look to short rallies to the 20 EMA during downtrends, and buy dips to the 20 EMA during uptrends.
It probably becomes something of a self-fulfilling prophesy in much the same way as Fibonacci retracements do.
There are quite a few trading system that are built around using the 20 EMA as a reference point.

Mind you, there are still plenty of good trades from retracements that go nowhere near the 20 EMA.
The trick with any retracement is to trade them in the direction of the trend so that your profit potential is magnified.


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## bunyip (29 May 2009)

stevo58 said:


> Yes you're probably right there, no point complicating a simple system with a complicated exit strategy.
> 
> One other quick thought when going through the FX and US stock charts last night. There are a number of PPS setups each day in the US markets yet these are to some degree as I mentioned earlier, governed by the overall market trend. I guess similar setups in FX as well as the TKO aren't subject to such restrictions so one can sit tight and wait for the setups to present themselves. I'm a little guilty of overtrading atm in the US markets, which I do need to work on.
> 
> On a sidenote, I've noticed USDJPY and one another might be setting up for a TKO tonight. Will check when I get back home.




Looks like the USDJPY has decided not to give us a TKO after all eh Steve!

You're right about the overall market influencing stocks. FX doesn't have a higher order 'overall market' as such. 
Sitting tight and waiting for the setups to come to you is the way to go. Patience is a virtue - I always do better when I wait for the setups to show up, rather than chasing around looking for trades that aren't there.


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## stevo58 (30 May 2009)

bunyip said:


> Looks like the USDJPY has decided not to give us a TKO after all eh Steve!
> 
> You're right about the overall market influencing stocks. FX doesn't have a higher order 'overall market' as such.
> Sitting tight and waiting for the setups to come to you is the way to go. Patience is a virtue - I always do better when I wait for the setups to show up, rather than chasing around looking for trades that aren't there.




Nope it didn't but the EUR/USD and USD/CHF did. Do you think its dangerous trading correlated markets like this? Okay its only demo but I'm on both at the moment and will manage the trade as per the rules and trade what the market throws up. I really do like this TKO setup and will continue to test. I've read so many books now and I'm coming about turn to keeping it simple, stupid, focussing on price action and trending with the trend.

On a sidenote I did notice the USDJPY has formed a Head and Shoulders top pattern and prices have been rejected by the neckline. If they continue to strongly reverse off could be another TKO setup around the corner.


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## bunyip (31 May 2009)

stevo58 said:


> Nope it didn't but the EUR/USD and USD/CHF did. Do you think its dangerous trading correlated markets like this? Okay its only demo but I'm on both at the moment and will manage the trade as per the rules and trade what the market throws up. I really do like this TKO setup and will continue to test. I've read so many books now and I'm coming about turn to keeping it simple, stupid, focussing on price action and trending with the trend.
> 
> On a sidenote I did notice the USDJPY has formed a Head and Shoulders top pattern and prices have been rejected by the neckline. If they continue to strongly reverse off could be another TKO setup around the corner.




Actually I was wrong - the USDJPY did form a TKO but not one that would have been of interest to me, for the reasons stated in my last post.
I see what you mean about the H & S pattern etc. If it falls away from that neckline then retraces back in that direction briefly, it could chuck up a TKO worth taking an interest in.
I'm reluctant to go searching for patterns like Head & Shoulders etc because firstly, they're very subjective, and secondly, they add what I consider an unnecessary element of complexity to trading.
I remember Daryl Guppy's comment that Head & Shoulders are one pattern that gives technical analysis a bad name because they're so subjective that traders who go looking for them tend to find them everywhere, even where they don't exist. Just his comments, not mine, but I do always try and keep my analysis super simple by trading only during strong trends, use a couple of simple patterns and setups as entry signals, endeavour to make my wins much bigger than my losses by letting profits run but getting out of the losers pretty quick.

EURUSD and USDCHF are strongly correlated, one goes down while the other goes up, same story for some of the other pairs - I only trade one or the other for my initial entry, but not both at the same time.
But I will sometimes get into both of them but at different stages. If I take a position in one, it goes my way and there's another setup in that pair a few days or a week later, the mirror image of the setup will often appear in the other pair that's correlated. So I'll take a position in the other pair, rather than pyramid my position in the first pair that I'm already in. But I won't enter both of them at the same time for my initial entry.

Yeh, EURUSD and USDCHF offered a couple of handy TKO's that were ideal opportunities for adding to existing positions. These TKO's formed during nice shallow pullbacks that stopped well short of the 20 EMA, which is typpical of how price action behaves during strong trends.
I would have liked these TKO's to be smaller range days so that entry and stop loss could be closer together, but in all other respects they're classic TKO setups.
One day you'll have to shout me a beer for telling you about this TKO setup!

I'm sure you've seen that USDCAD had another big bearish day on Friday - I believe you're paper trading this one too? - it's been an absolute dream trade for anyone who went short early in the downtrend. Big trends like this are one of the outstanding  features of the Forex markets.


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## stevo58 (31 May 2009)

bunyip said:


> Actually I was wrong - the USDJPY did form a TKO but not one that would have been of interest to me, for the reasons stated in my last post.
> I see what you mean about the H & S pattern etc. If it falls away from that neckline then retraces back in that direction briefly, it could chuck up a TKO worth taking an interest in.
> I'm reluctant to go searching for patterns like Head & Shoulders etc because firstly, they're very subjective, and secondly, they add what I consider an unnecessary element of complexity to trading.
> I remember Daryl Guppy's comment that Head & Shoulders are one pattern that gives technical analysis a bad name because they're so subjective that traders who go looking for them tend to find them everywhere, even where they don't exist. Just his comments, not mine, but I do always try and keep my analysis super simple by trading only during strong trends, use a couple of simple patterns and setups as entry signals, endeavour to make my wins much bigger than my losses by letting profits run but getting out of the losers pretty quick.
> ...




Haha yeah I think I owe you a few beers for that one as do the other people monitoring this thread! System simply defines the intermediate trend, offers a low risk entry and is an ultimate example of KISS. Not to keep harping on about it but the other benefits I see are that it makes the process of trading boring  (a good thing) and it prevents one of my current achilles heel of overtrading. Funnily enough I've found the research of Technical Analysis to be quite exciting, reading the different books, scouring the forums for different ideas but am aware that this doesn't not equate to profitable so scaling back to something simple and boring appeals greatly in the grand scheme of things. More and more I'm being attracted to this FX game.

I hear what you're saying about the USD/JPY chart, certainly wouldn't use the Head & Shoulders pattern as a signal to enter the trade but it does look like there will be a shorting opportunity if prices rollover and if we see a little pullback.  I guess its all about letting the trade come to us rather than chase.

As for that USDCAD trade, well that was a case of me looking back through the charts and finding a great example of the TKO so not on the paper trade. Have you managed to catch a piece of that one? I think it stands at 1428 points now for a month and a halfs work! Obviously its not totally fool proof, when is anything? But trading with the momentum of the trend, if you get filled, often gives you a chance to get the stop to breakeven, thats all  the opportunity I'm looking for.

Yep I owe you quite a few beers Bunyip.


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## bunyip (31 May 2009)

stevo58 said:


> System simply defines the intermediate trend, offers a low risk entry and is an ultimate example of KISS.
> 
> Funnily enough I've found the research of Technical Analysis to be quite exciting, reading the different books, scouring the forums for different ideas but am aware that this doesn't not equate to profitable so scaling back to something simple and boring appeals greatly in the grand scheme of things. More and more I'm being attracted to this FX game.
> 
> ...




Yeh, Landry's TKO really is a KISS system in the true meaning of the word.
I've swapped quite a few emails with Dave Landry over the last few years and have gained plenty of insight into his trading ideas and general trading philosophy. All of his setups and ideas have simplicity as the key element.

Like you, I've found Technical Analysis to be a fascinating journey of discovery. After 15 years in this game, 13 of them studying TA, I still get enjoyment out of researching different TA ideas.

I got aboard USDCAD but my entry was later than optimal, due to the fact that I was touring around northern NSW in late April. Still sitting on a tidy profit though which hopefully will get even bigger. And I'm in a couple of others that are putting a smile on my face, so no complaints.

On the subject of exits, here's a chart showing how DMI can be used to take swing traders out if momentum starts fading, or keep trend traders in for bigger gains if the trend continues.


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## stevo58 (1 June 2009)

bunyip said:


> Yeh, Landry's TKO really is a KISS system in the true meaning of the word.
> I've swapped quite a few emails with Dave Landry over the last few years and have gained plenty of insight into his trading ideas and general trading philosophy. All of his setups and ideas have simplicity as the key element.
> 
> Like you, I've found Technical Analysis to be a fascinating journey of discovery. After 15 years in this game, 13 of them studying TA, I still get enjoyment out of researching different TA ideas.
> ...




I read about ADX before but have never tried to incorporate it into one of my trading strategies. When reviewing some of my old US trades over the weekend was thinking how one could tighten stops when a certain profit target is reach, say at a 3R or a 5R level. Maybe this is something that help that process. 

I'm not keen on taking profit off the table as invariably could ride the big winners with only half of the position on. But say if using my 6 bar trailing stop, if the ADX trends lower could then tighten stops by implementing a 3 bar trailing stop instead. Might be worth further investigation. I think we will always be searching for the perfect exit strategy!

I've downloaded all the FX data now. Looking at the EUR/USD charts, looks like the EUR had a 5 year bull run against the USD. I bet you took several chunks out of that one. As you say, the EUR looks to be a great currency trendwise to trade. 

What markets does Dave Landry prefer to trade? Will try and look up one of his books.


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## bunyip (1 June 2009)

stevo58 said:


> I read about ADX before but have never tried to incorporate it into one of my trading strategies. When reviewing some of my old US trades over the weekend was thinking how one could tighten stops when a certain profit target is reach, say at a 3R or a 5R level. Maybe this is something that help that process.
> 
> I'm not keen on taking profit off the table as invariably could ride the big winners with only half of the position on. But say if using my 6 bar trailing stop, if the ADX trends lower could then tighten stops by implementing a 3 bar trailing stop instead. Might be worth further investigation. I think we will always be searching for the perfect exit strategy!
> 
> ...





I posted that DMI info for interest only, not because I use it myself - I don't, except I've stared looking at it as a possible exit system.....the never-ending and probably futile search for the perfect exit strategy. But heck, if I don't investigate things I don't know what works and what doesn't.

Your idea of using the ADX as a trigger to tighten stops from 6R to 3 or 4R could have some merit. I've done lots of work with trailing stops but I keep coming back to the crossover of those two EMA's that I mentioned earlier.

I wasn't aware that the EUR had 5 year bull run against the $USD. Yeh I've bitten a chunk or three out of it but they weren't all on the long side - there were some mighty impressive EURUSD downtrends as well, including a 3700 point bear run between July and October 2008. 
Swing trade or trend trade or whatever,  the EURUSD provided a real banquet for anyone who traded with the trend while those who traded against the trend would have been lucky to pick up a few scraps by comparison. 
The EURUSD is probably the most stable trender of them all, but there are quite a few others that are not far behind.

Last time I spoke to Dave Landry he traded stocks exclusively. I mentioned currencies to him - he said he's traded currency futures but not Forex.
I'll post another of his systems on here shortly, one that was in one of his swing trading books. Dave is not actually a real swing trader in the true definition of swing trading...he likes to hang on to at least half his position in the hope of catching really big trends, and quit the other half early for relatively small profits so that he's at least covered his costs and made a few quid as well if the trend fizzles out and turns against him.


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## bunyip (2 June 2009)

Here's the '2/20 EMA Breakout System' from the book 'Dave Landry On Swing Trading'.
I'm not real keen on it myself but thought I'd post it just for interest.


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## stevo58 (2 June 2009)

bunyip said:


> I posted that DMI info for interest only, not because I use it myself - I don't, except I've stared looking at it as a possible exit system.....the never-ending and probably futile search for the perfect exit strategy. But heck, if I don't investigate things I don't know what works and what doesn't.
> 
> Your idea of using the ADX as a trigger to tighten stops from 6R to 3 or 4R could have some merit. I've done lots of work with trailing stops but I keep coming back to the crossover of those two EMA's that I mentioned earlier.
> 
> ...




I got the tightening stops idea from Tharp's books. From memory, I think he severely tightens stops when a 3R target is reached on a % from the price basis. I think this could strangle a few winners so my thinking would be to switch to a 3 bar trailing stop instead. That said if we were in a bull market the full exit criteria would probably need to stay implemented but in more volatile times something more creative might be required. Certainly looking forward to getting stuck into Currencies and testing a few exit strategies there. Finding a robust exit strategy spanning different market conditions is definately a massive challenge.

Thanks for the next Landry strategy, it didnt stand out as much as TKO setup you posted but will run it through a few charts. I guess if we can just find a good edge and wait for the opportunities it presents then thats half the battle. I have two breakeven paper trades at the moment with the TKO so very happy and will continue to scour for setups. Looks like the AUD is having a nice time against the USD as well at the moment.

Just out of curiosity, do you ever trade pullbacks to round or Fib numbers when pairs are trending strongly, I know thats very similar to the TKO but it looks like theres often support at these levels and it keeps one in line with the overall trend.

Thanks,

Steve


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## bunyip (2 June 2009)

stevo58 said:


> I got the tightening stops idea from Tharp's books. From memory, I think he severely tightens stops when a 3R target is reached on a % from the price basis. I think this could strangle a few winners so my thinking would be to switch to a 3 bar trailing stop instead. That said if we were in a bull market the full exit criteria would probably need to stay implemented but in more volatile times something more creative might be required. Certainly looking forward to getting stuck into Currencies and testing a few exit strategies there. Finding a robust exit strategy spanning different market conditions is definately a massive challenge.
> 
> Thanks for the next Landry strategy, it didnt stand out as much as TKO setup you posted but will run it through a few charts. I guess if we can just find a good edge and wait for the opportunities it presents then thats half the battle. I have two breakeven paper trades at the moment with the TKO so very happy and will continue to scour for setups. Looks like the AUD is having a nice time against the USD as well at the moment.
> 
> ...




AUDUSD is going very well and is showing a nice profit for me.

Fib retracements.....yes they happen all the time and quite often after a pullback to a Fib level you'll get a reversal signal such as one of the candle reversal patterns like a Hammer or Shooting Star, Harami (Inside Day), or Engulfing pattern.
I'll trade the Fib retracements but although they're common, there are plenty of other pullbacks that don't go to the Fib levels, but are still good trades.
The Fib levels are so close together that a pullback is bound to go to or near one of them.
I'm a bit dubious about retracements beyond the .618 level - that's a fairly deep retracement and makes me suspect that the trend might be in question.


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## stevo58 (3 June 2009)

bunyip said:


> AUDUSD is going very well and is showing a nice profit for me.
> 
> Fib retracements.....yes they happen all the time and quite often after a pullback to a Fib level you'll get a reversal signal such as one of the candle reversal patterns like a Hammer or Shooting Star, Harami (Inside Day), or Engulfing pattern.
> I'll trade the Fib retracements but although they're common, there are plenty of other pullbacks that don't go to the Fib levels, but are still good trades.
> ...





Well theres opportunities to be had all over the chart you posted. Another night of whipsaws in the US but 2 nice FX trades on paper, if only I could reverse them! Sorry don't mean to delve too much into your trading strategies but do you use a whole range of discretionary ones or just a couple of dedicated setups? I certainly like the idea of Fib retracements on a trending pair or any pullback really. I was reading about this interesting strategy on one of the other sites called the anti hedge. Idea is that you buy a pullback in an established trend, if you're stopped out you wait for prices to reverse say 50 or so points then put in a new limit order where your stop was. The idea is that the trend will come to the rescue and reverse the loss you incurred. Nice simple and effective idea.

Well, I spent all of 3 minutes going through the FX charts this evening and determined no trades to be had. This thread has been a real eye opener for me. It goes against the human psyche really in that you feel guilty for only doing a few mins work, that you should do more work in order to be more profitable. Starting to find that isn't the case with trading! As I'm in a full time job, the appeal of FX is certainly becoming stronger.


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## bunyip (4 June 2009)

stevo58;443520 
Sorry don't mean to delve too much into your trading strategies but do you use a whole range of discretionary ones or just a couple of dedicated setups? I certainly like the idea of Fib retracements on a trending pair or any pullback really.

Well said:
			
		

> That's OK Steve, I don't mind sharing my strategies. I trade just a few dedicated setups, all of them based on pauses or pullbacks during strong trends. I've covered most of them in this thread....PPS patterns, TKO's, reversal candlestick patterns after a retracement, Inside Days after a retracement to Fib levels or to old support or resistance levels. (I've attached a chart showing the Inside Day setup.)
> A couple of setups I haven't mentioned are double Inside Days and small sideways consolidations of a few days - once these pausing patterns break out in the direction of the trend they can make some very impressive moves.
> 
> I just keep doing basically the same thing over and over again, all of it based on very simple setups that can be identified in just a few minutes a day.
> ...


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## bunyip (4 June 2009)

stevo58 said:


> Sorry don't mean to delve too much into your trading strategies but do you use a whole range of discretionary ones or just a couple of dedicated setups? I certainly like the idea of Fib retracements on a trending pair or any pullback really.
> 
> 
> Well, I spent all of 3 minutes going through the FX charts this evening and determined no trades to be had. This thread has been a real eye opener for me. It goes against the human psyche really in that you feel guilty for only doing a few mins work, that you should do more work in order to be more profitable. Starting to find that isn't the case with trading! As I'm in a full time job, the appeal of FX is certainly becoming stronger.




Not sure what happend to that last post, my post seems to have got mixed in with yours rather than being separated from it. I'll re-send to see if I can improve things.

I don't mind sharing my strategies, Steve. I trade just a few dedicated setups, all of them based on pauses or pullbacks during strong trends. I've covered most of them in this thread....PPS patterns, TKO's, reversal candlestick patterns after a retracement, Inside Days after a retracement to Fib levels or to old support or resistance levels. (I've attached a chart showing the Inside Day setup.)
A couple of setups I haven't mentioned are double Inside Days and small sideways consolidations of a few days - once these pausing patterns break out in the direction of the trend they can make some very impressive moves.

I just keep doing basically the same thing over and over again, all of it based on very simple setups that can be identified in just a few minutes a day.
The main thing is having the patience to sit and wait for the setups to come to you. If that means no trades for a month, then so be it.......better not to trade than to chase half-baked setups because you're getting bored.

Yeh, you almost feel guilty of not working hard enough to deserve the results you get. But this really is one of those games where the simpler you keep it, the less work you have to do and the more profitable it becomes. I've got quite a few mates in the trading game - all of us have come full circle from accumulating the knowledge that enabled us to do complex analysis, finding that complexity adversely affected our results, and finally coming back to simple basic strategies that work.

The big FX trends currently in progress will come to an end, probably sooner rather than later, currencies might muck around for a short time with no clear direction, then the whole process will start all over again with more good trends. Or maybe new trends will start as soon as the current trends end. I don't know - I don't _need_ to know - I'll just trade it as it comes.


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## stevo58 (4 June 2009)

bunyip said:


> Not sure what happend to that last post, my post seems to have got mixed in with yours rather than being separated from it. I'll re-send to see if I can improve things.
> 
> I don't mind sharing my strategies, Steve. I trade just a few dedicated setups, all of them based on pauses or pullbacks during strong trends. I've covered most of them in this thread....PPS patterns, TKO's, reversal candlestick patterns after a retracement, Inside Days after a retracement to Fib levels or to old support or resistance levels. (I've attached a chart showing the Inside Day setup.)
> A couple of setups I haven't mentioned are double Inside Days and small sideways consolidations of a few days - once these pausing patterns break out in the direction of the trend they can make some very impressive moves.
> ...




Great post. I'm not an avid poster when it comes to forums but I'm glad I did do here. Its not the strategies I'm enjoying reading about (well I do like the TKO) but the psychology. Must get pretty boring waiting for those trends to reverse but simple and boring are major assets of this game which I'm starting to learn. 

I was whipsawed out of a few positions overnight in the US and therein lies the problem, theres no discernible trend going on at the moment. The breakout hasn't followed through, then we have the individual stocks offering up their own nuances. So probably the sensible thing would have been to sit out this period and wait for a trend to establish itself. I look at the EUR/USD chart you posted and followed it back a few years and there are trends jumping out all over the place. Looks easier to trade just a few instruments so when my final positions are closed out, I'm going to give FX a try and learn to be patient. 

Thanks again Bunyip, many good lessons in this thread.


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## bunyip (5 June 2009)

stevo58 said:


> Great post. I'm not an avid poster when it comes to forums but I'm glad I did do here. Its not the strategies I'm enjoying reading about (well I do like the TKO) but the psychology. Must get pretty boring waiting for those trends to reverse but simple and boring are major assets of this game which I'm starting to learn.
> 
> I was whipsawed out of a few positions overnight in the US and therein lies the problem, theres no discernible trend going on at the moment. The breakout hasn't followed through, then we have the individual stocks offering up their own nuances. So probably the sensible thing would have been to sit out this period and wait for a trend to establish itself. I look at the EUR/USD chart you posted and followed it back a few years and there are trends jumping out all over the place. Looks easier to trade just a few instruments so when my final positions are closed out, I'm going to give FX a try and learn to be patient.
> 
> Thanks again Bunyip, many good lessons in this thread.




Steve

I've found Forex to be a good market to trade - I really hope it treats you well. 
The main points to remember are....

* The trend is your friend - no trend no trade, no exceptions. 

* Control you losses with stops and conservative money management. Don't risk more than 2% risk of your account per trade, 1% would be even better until you find your feet.

* Let the profits run. You'll always give back some profit at the end but you'll miss out on much more if you don't stick with the trade while the trend continues.

* Pyramiding can enormously magnify your profits during big trends. Once your stop is at break even, look for other setups to add to your position - you'll find lots of them.
But don't add to your position until all your stops on previous positions are at break even or better.

* Be patient and wait for the setups to come to you. If there are no setups then there are no setups, and you won't do yourself any favours by trying to find them where they don't exist. Better to sit and wait for the next trends to develop. Fortunately you don't have to wait too long for trends in Forex.

You might find the attached chart of interest - it shows the first Forex trade I ever did back in September 2004.
I watched the AUDUSD make the transition from downtrend to uptrend, watched the 10, 20, 30 Moving Averages roll over from bearish configuration to bullish configuration, saw the first pullback take place but I wasn't convinced at that stage that a new uptrend was established. The market moved up more than 300 points from the bottom before there was another brief pullback that culminated in a Hammer. I bought just above the Hammer and after a bit of a shaky start, the trend really built up a head of steam and the trade worked out very well for me with 600 points profit.
I clearly remember feeling immense impatience to get in and trade the damn thing after it had risen more than 300 points and I still didn't have a position. Somehow I controlled my impatience until I thought the time was right.....it's never an easy thing to do.

Once I got into that trade and had moved my initial stop to break even, I saw a short entry setup in USDCAD which was heading downhill while the AUDUSD was heading north. I went short in the Canadian and pulled a 600 point profit from that one as well.
After two decent winning trades in quick succession I was starting to feel like a real pro. I got overconfident and took a number of trades without really waiting for the right setups to present themselves.....paid the price for my foolishness by copping a number of confidence-sapping losses!

Anyway Steve, I hope you enjoy the journey and become a real Forex pro.
Contact me by PM if I can help in any way.  I won't tell you if you should be buying here or selling there, but more than happy to help with pretty much most other queries you might have.

Cheers
Bunyip


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## Chorlton (5 June 2009)

bunyip said:


> Steve
> 
> I've found Forex to be a good market to trade - I really hope it treats you well.
> The main points to remember are....
> ...





Hi Bunyip.

As Stevo has already mentioned, there are many good points throughout this thread (especially in the post above) and consequently I'd also like to say thanks for openly sharing your experience and thoughts.....

I'm even now tempted to enter the forex arena myself ;-)

All the best,

Chorlton


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## bunyip (5 June 2009)

Chorlton said:


> Hi Bunyip.
> 
> As Stevo has already mentioned, there are many good points throughout this thread (especially in the post above) and consequently I'd also like to say thanks for openly sharing your experience and thoughts.....
> 
> ...




Cheers Chorlton, good of you to say so - I'm pleased you found something of value in what I posted.

While Forex is the best market I've traded, I want to make it clear that it's no pushover. 
You get your losses as well as your wins, trades that frustrate you as well as those that leave you feeling elated. If you can win half your trades you're doing well. The trick is to ensure that your average win is much bigger than your average loss. Hence the strategy of trade with the trend, cut your losses fast but let your profits run. If you can do that then a win rate of 50% is more than adequate to make you very profitable.

If you're going to try Forex then I'd suggest trading a demo account first for several months, then if successful you can start trading with real money. I suggest initially trading the smallest position size your broker will allow, which is one mini contract with most brokers. One mini carries a point value of 1 unit of the back currency per point, as opposed to 10 units per point for the full contract.
By 'back currency' I mean the second currency of the quoted pair. In USDCAD for example, the US $ is the front currency and the Canadian $ is the back currency.
So one mini contract of USDCAD is worth 1 Canadian $ per point of gain or loss, while a full contract is worth 10 Canadian $ per point.

It's handy to have a currency converter so you know the size of your stop loss or your profit in the currency of your own country. The Universal Currency Converter is available at http://www.xe.com/ucc/

Good trading
Bunyip


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## bunyip (6 June 2009)

As a point of interest...
Dave Landry will be giving two presentations as a guest speaker at the ATAA National Conference in Melbourne, October 23 - 25, 2009.
Details below.


*Dave Landry - The Best Patterns to Capture Trends*
In this presentation, Dave will show you why you should trade trends, how to recognise them, and some of his favourite patterns to capitalise on the three phases of a trend. But a pattern in itself is useless unless it's applied properly. Therefore he will show you when to use each of the patterns. Further, he will touch upon important concepts such as money management, traders psychology, how to find the best setups, and discretionary techniques so that these patterns can be applied in the real world.

*Dave Landry - Entering New Trends Early*
Trends don't last forever. Eventually they exhaust themselves and quite often, a new trend emerges in the opposite direction. However, established trends can often last much longer and go much further than most people anticipate. Therefore, trying to buy a market because it's 'low' or short a market because it's 'high' is a loser's game.
The good news is that markets leave clues that a trend is turning. Dave will show you how to recognise these clues and capture new trends early with his favourite trend transition patterns.
He'll also show you how major bull and bear markets all begin with easy to recognise transitional patterns.


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## stevo58 (7 June 2009)

bunyip said:


> Steve
> 
> I've found Forex to be a good market to trade - I really hope it treats you well.
> The main points to remember are....
> ...





Hi Bunyip,

Just lost a fully written reply on this site so hear it goes again. Thanks for the offer to help, will be good to have someone of your experience to bounce the occasional idea off. I won't be treating the task of trading FX lightly, its been great to get a few ideas of this thread and have some more ammunition for the toolbox when I do eventually start. Quite happy to identify a trend, wait for a pullback and jump on via a continuation pattern or a TKO bar. I spent quite a while over the weekend going through some of my US stocks traded over the last few months and identified quite a big mistake I was making. Trading FX to a degree will help eliminate this and looking forward to a more patient demeanour when approaching the charts.  

Well both trades I initially had on paper were stopped out at breakeven so learned quite a valuable lesson. Which is to close out positions before a big news event like NFP.  Saw 300 points of profit dissolve to nothing in just over an hour. There are a few setups out there so will jump back on given the opportunity. When I do start will keep the capital at risk on each trade to a bare minimum whilst I find my feet, market will always be there. Hopefully when I do start I can experience similar success like you first AUDUSD trade, only need a few of them a year to make a difference.

Is there a fee to attend Dave Landry's presentations or do you have to be a member of the ATAA? I think I will be back in the UK when they are on but if not would be keen.

Thanks again for all the advise offered up in the thread. Will let you know how I go in my first few tentative steps in FX. I've gained a new perspective on trading here.

Steve


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## bunyip (8 June 2009)

stevo58 said:


> Hi Bunyip,
> 
> Just lost a fully written reply on this site so hear it goes again. Thanks for the offer to help, will be good to have someone of your experience to bounce the occasional idea off. I won't be treating the task of trading FX lightly, its been great to get a few ideas of this thread and have some more ammunition for the toolbox when I do eventually start. Quite happy to identify a trend, wait for a pullback and jump on via a continuation pattern or a TKO bar. I spent quite a while over the weekend going through some of my US stocks traded over the last few months and identified quite a big mistake I was making. Trading FX to a degree will help eliminate this and looking forward to a more patient demeanour when approaching the charts.
> 
> ...




Steve

Unfortunately the ATAA conference comes with a rather brutal entry fee of $780 for ATAA members, or $980 for non-members, which I imagine will be too expensive for quite a few people. 

Non farm payroll figures can work for you or against you when you're holding open positions. Many trends last long enough to take in at least one NFP announcement.....you may be prematurely exiting a big trend if you automatically close your trades before the NFP figures come out.
I know you can always go back in again but physiologically it's harder to re-enter than to stay in the trade.
Might be worth considering a middle of the road strategy of tighten your stop prior to NFP....you'll preserve some profit if the figures work against you, or you'll still be in the trade if the figures work in your favour.

Good trading
Bunyip


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## stevo58 (9 June 2009)

bunyip said:


> Steve
> 
> Unfortunately the ATAA conference comes with a rather brutal entry fee of $780 for ATAA members, or $980 for non-members, which I imagine will be too expensive for quite a few people.
> 
> ...




Ouch, yeah thats a bit too much for me, maybe one day if I can become more profitable. Are you going to go to this one?

I'm not too disheartened about the breakeven trades, there will be times when it goes in my favour and that 300 points could be profit. That said it can't hurt to tighten stops if a major fundamental event is happening. I'm not good with the fundamentals but trying to improve this aspect of my trading knowledge, so I can keep my ear to the ground so to speak.

Now patiently waiting for the next setup, I'm sure one is just around the corner.


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## bunyip (10 June 2009)

stevo58 said:


> Ouch, yeah thats a bit too much for me, maybe one day if I can become more profitable. Are you going to go to this one?





No Steve, I won't be at the ATAA conference. I attend the Trader's Expo in Brisbane each year as it's within driving distance for me. I've heard plenty of speakers over the years, including most of those who will speak at the Melbourne conference. Probably wouldn't pick up much that I haven't already heard.


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## bunyip (17 June 2009)

Steve, Chorlton & others

As an alternative or an addition to trading Forex from end of day charts, you can intraday trade without gluing yourself to the screen like many intraday traders do.
Apart from my trading from daily charts, I also have a dabble from 15 minute and 30 minute charts. 
I've got my laptop set up on a small table on wheels that's just the right height to wheel in over my knees when I'm sitting in my TV chair.
I follow 15 minute charts, also I look at 30 minute charts every half hour. I don't sit with my eyes glued to the screen - every 15 minutes I look at the screen for a minute or so to see if my setups are there - if they're not, I close the lid of the computer so I'm not tempted to watch the screen, and I open it again and look at the charts when the next 15 minute period rolls around.
Rare is the night when there are no setups before bed time, but if there are none then I go to bed at my normal time. Gone are the days when I'd sit up most of the night watching the screen.

I look for only three setups...

1. Brief consolidations during established trends....go short below the consolidation if the trend is down, or buy above the consolidation if the trend is up.
2. Brief rallies culminating in Shooting Stars as shorting signals during downtrends, and brief pullbacks culminating in Hammers as buy signals during uptrends.
3. Bullish Engulfing patterns after pullbacks during uptrends, Bearish Engulfing patterns after rallies during downtrends.

My stops average about 20 points and are moved to break even after the trade gains 20 points. Thereafter I use 20 point trailing stop with a 10 point step. IG Markets have the facility for setting this trailing stop.
The moving averages I use are the same ones I use for daily charts....10, 20, 30 EMA's to show the shorter term trend, 65 EMA to show the longer term trend.

The trailing stop has a number of benefits.....
*It takes the guesswork out of where to exit.
*It progressively locks in profit as the trend moves in my favour.
*It allows me to go to bed and let the trade take care of itself.

Typical of exit strategies, the trailing stop exit sometimes works great and captures a big chunk of the trend, other times not so great - overall it's probably as good as most other exit strategies I've used.

My three setups show up frequently among the six pairs in the two timeframes I follow. Best of all, it takes only 1 minute or so to eyeball the charts every 15 minutes to identify the setups. 
It's a low key way of intraday trading that eliminates the need to sit with my eyes glued to the screen following shorter time frames. I used to do that once upon a time but I found it was a very tiring and draining way of trading.

I can trade from the comfort of my recliner in the family room while I'm watching TV, and it requires very little time watching the screen - this allows me to have normal interaction with my family while I'm trading.
I'm finding this to be quite a lucrative and mentally stimulating addition to my trading from daily charts.

Below are a couple of charts showing the setups I trade.
The last chart is tonight's trade on GBPUSD that I entered from a Bullish Engulfing pattern. It was still in progress when I did the screen capture. It has subsequently been closed out by my trailing stop for 30 points profit.

Cheers
Bunyip


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## stevo58 (18 June 2009)

bunyip said:


> Steve, Chorlton & others
> 
> As an alternative or an addition to trading Forex from end of day charts, you can intraday trade without gluing yourself to the screen like many intraday traders do.
> Apart from my trading from daily charts, I also have a dabble from 15 minute and 30 minute charts.
> ...





Thanks for that Bunyip, funny you should bring this up as I've been looking at trading the odd setups during the London and maybe the US opens whilst waiting for valid setups for a longer term positions. One thing I found out is that metatrader can be downloaded with data free for the lower time horizons which is a massive plus. 

Another thing I've had a bit of joy with is trading pin bar setups, (definition - bar opens, creates a long nose before returning to a spot near the open for a close). Its basically a fake out manoevre but extremely effective and from what I see pretty rare. If the nose protudes into a minor support/resistance level providing confluence even better. There is a great thread on this over at Forex Factory, if the TKO bar is also a pinbar then we have a very good setup.







These setups are extremely rare on intraday so something I have been trying with a little success are 1-2-3 setups, not as aggressive as yours but looking for the first swing in the London session to see if I can bag some points. I reduce risk per trade on these setups and usually looking to take no more than 2 setups. I'm with you Bunyip don't want to be glued to the screen all night!!! For this setup I look for an obvious trend, identify the swing high, wait for the retracement and enter 2 pips above the swing high. Stop below the retracement. I will obviously sacrifice more points using this though hoping to ride the momentum of a rubber band snap back effect. Quite excited about the possibilities here and your post offers similar good ideas that can be meshed into something.






The big issue I'm having not only with these intraday setups but with longer term setups is the exit strategy. So far on the intraday setups I'm using an aggressive 20 point trailing stop (similar to you) which works okay but tends to be whipsawed at a breakeven heavily. Not too concerned at the lower time frames here but have given back a lot of open profit on the 3 TKO daily timeframes I've traded so far. The last one GBPJPY was heavily in profit which was all back eradicated last Friday using my 6 bar stop. Stop was at breakeven was is good though is a bit galling to see 300-400 point moves reduced to nothing. I've never been a fan of taking partial profits so will keep looking for ideas and try your crossover theory again over these previous setups. Another idea might be trailing stops using previous resistance come support zones to lock in profit.

Either way I'm a convert to the FX world and have you to thank for it Bunyip.


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## bunyip (18 June 2009)

stevo58 said:


> Thanks for that Bunyip, funny you should bring this up as I've been looking at trading the odd setups during the London and maybe the US opens whilst waiting for valid setups for a longer term positions. One thing I found out is that metatrader can be downloaded with data free for the lower time horizons which is a massive plus.
> 
> Another thing I've had a bit of joy with is trading pin bar setups, (definition - bar opens, creates a long nose before returning to a spot near the open for a close). Its basically a fake out manoevre but extremely effective and from what I see pretty rare. If the nose protudes into a minor support/resistance level providing confluence even better. There is a great thread on this over at Forex Factory, if the TKO bar is also a pinbar then we have a very good setup.
> 
> ...




The so called 'pin bar' appears to be basically a Hammer if the tail is pointing south, and a Shooting Star if the tail is pointing north.
Hammers and Shooting Stars after retracements are quite common on 15 minute charts if you follow six pairs. 
They don't always protrude into an old support or resistance area, but they're obviously an even better setup when they do.

You'll find that you'll frequently give back an annoyingly large portion of your gain irrespective of what exit strategy you use.
This can lead you to a never-ending quest to find the 'perfect' exit system.
Now I don't worry too much about giving it back, I know that some trades will yield big results, some will yield only a little, and some will be losers. 
I work on the theory that the small winners cancel out the small losers, and the odd big win is where the real money is made.

Even a modest average weekly profit of 40 points can produce impressive results.
Lets say you start with an account of 2 grand US, trading 2 mini contracts with a 20 point stop - you're risking 2% of your account per trade.
A weekly profit of 40 points X 2 contracts = $80 US per week = 4% weekly return on your trading account.
Providing you maintain 40 points average weekly profit, your account will be up 50% in 3 months, at which time you can increase your number of contracts by 50%, from 2 to 3 without exceeding 2% risk of your account. 
Keep increasing your number of contracts in proportion to the increase in the size of your trading account, and you'll more than double your trading account every six months.
Keep doubling your account every six months and - well, you do the figures - suffice to say there's a lot of money to be made.


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## bunyip (19 June 2009)

Here's an exit strategy from Bill Poulis, an American who sells a highly priced Forex course. I didn't buy it but in his promotional information he gave out a few tips about what was in the course, including this exit strategy.


*Bill Poulis exit strategy.*

Longs...
Exit half your position at a target calculated by adding 5 days average true range to your entry price.
Calculate the true range of the setup day and the prior 4 days, add the five figures together, and divide by 5.

True range of a day is the greatest of the following.....
1. The range of the day.
2. The days high less the previous days close.
3. The days low less the previous days close.

Exit the remaining half on a trailing stop 0.1% under the low of the last three days.

Reverse the rules for shorts.


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## stevo58 (19 June 2009)

bunyip said:


> The so called 'pin bar' appears to be basically a Hammer if the tail is pointing south, and a Shooting Star if the tail is pointing north.
> Hammers and Shooting Stars after retracements are quite common on 15 minute charts if you follow six pairs.
> They don't always protrude into an old support or resistance area, but they're obviously an even better setup when they do.
> 
> ...




I've always used bar charts until recently so am trying to get better with Candlesticks, these pinbar/ shooting star setups are pretty effective. Certainly building an arsenal to attack the FX markets with, just need to stay consistent and take the setups when they come. Sooner or later I'm going to catch a big trend, just need to make sure I have an exit strategy to capitalise fully. Thanks for the additional exit information, it will come, I guess I should never be discouraged by a break even free trade. 

I like the idea of a couple of quick trades during the London and NY opens. Currently only using 0.5% risk on these type of trades at the moment and am up 10 points through this strategy for the week so far. Hopefully one day I'll be able to return 40-60 points a week using this strategy, again in all in good time. Obviously would really like to grow an account and its great to hear from someone who has succeeded with this. Its good to know I'm on the right track, just need to practise a bit longer then its all systems go. Overall I'm down about 2% of the account but have left a lot of points so far on the table. Absolutely love doing this though.

I've been on the lookout for a trade this evening but nothing has slapped me around the face so far. How long have you been trading these kind of short term trades? Does the 1-2-3 strategy sound okay to you?


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## bunyip (20 June 2009)

Steve

Your 1 - 2 - 3 system might be OK. Test it over a couple of months and see how it goes.
An alternative would be to buy above the first bullish bar after the pullback....a smaller stop would be required and you'd be getting in right where the retracement ends and the trend resumes, which means that more of the trend is still in front of you.

I've been backtesting such a system on a dozen or so daily charts going back 18 years for most pairs and 10 years on the Euro crosses, using the Bill Poulis trailing stop as an exit. It's a work still in progress but results look impressive so far. 

Below is a 1 - 2 - 3 system that's a bit different to your's.
Click on the chart to expand it.


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## bunyip (20 June 2009)

Below is a chart of AUDUSD showing a number of technical features that frequently show up in Forex charts.


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## stevo58 (22 June 2009)

bunyip said:


> Steve
> 
> Your 1 - 2 - 3 system might be OK. Test it over a couple of months and see how it goes.
> An alternative would be to buy above the first bullish bar after the pullback....a smaller stop would be required and you'd be getting in right where the retracement ends and the trend resumes, which means that more of the trend is still in front of you.
> ...




This is great stuff as always Bunyip. Of course the 1-2-3 system is just as well played out on the daily charts as well! So looking at your charts, would you place your stop under the last swing low or always wait for the pullback before entering? That AUD/USD chart shows just two trades which would have made my year! 

I see on the second setup a TKO opportunity to pyramid as well.  A lot is dependent on the demoing but if things go to plan, I might even bump risk up to 2-3% a trade for the longer term opportunities (I currently operate at 0.5% in stocks). I'm in a drawdown at the moment so will try for 2-3 profitable months before going live. 

I'm also trying to improve my price action skills as well as I look at your charts and see how much you can gain by having an idea where the higher probability lies in regards the current trend when a price pattern forms. Again, referring back to your AUD/USD chart on the first setup, once you see the hammer (pinbar in my lingo) at point 1 of the second setup, well you can tighten trailing stops. 

I'm also working on a discretionary system to tackle ranging periods as well. Again forward testing is key here for me on demo. If I have success will post my findings here. Its basically based around price action (Bearish, Bullish Engulfing and IB patterns) around major (Monthly, weekly, daily) support resistance zones. Hardly ground breaking stuff but simple. That said there always seems to be a trending currency pair to take advantage of.


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## Chorlton (22 June 2009)

stevo58 said:


> I like the idea of a couple of quick trades during the London and NY opens. Currently only using 0.5% risk on these type of trades at the moment and am up 10 points through this strategy for the week so far.




Hi Stevo,

Can I ask how you are only risking 0.5% of your account size on these trades?  How close are you placing your stop?


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## Chorlton (22 June 2009)

bunyip said:


> You'll find that you'll frequently give back an annoyingly large portion of your gain irrespective of what exit strategy you use.




Hi Bunyip.

Can I ask how many contracts you trade at any one time on a particular pair and if this number varies then what rules do you use to determine the number of contracts?


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## Chorlton (22 June 2009)

Hi All,

I have a couple of very basic question regarding FX, which hopefully someone can quickly answer for me.

1. Firstly. what does the value of 1 pip equate to?  My understanding is that a Pip equates to the smallest price change that can occur. Is this correct? 

2a. How many decimal places are normally used to represent a currency pair as I've noticed on the charts posted here that the FX rates can be anything between 1 and 4 decimal places?   Would I be right in assuming that this is dependant on the currency pair being quoted, and if so then this would also mean that the value of a Pip will differ depending on the currency pair being traded? Have I understood this correctly?

2b. If the number of decimal places does vary depending on the currency pair, then is this number of decimal places "standard" across all brokers?  I ask as I read somewhere that different brokers could implement different decimal points compared to another broker for the same currency pair !!??!!

3. Using the chart shown in Post 69, the high @ Point2 is approximately at 0.835 and the low @ Point 3 is at 0.800. How many pips difference would that be?   Would I be right in assuming it is simply 35 pips?


Many Thanks in advance,

Chorlton


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## Grep (23 June 2009)

Hi Bunyip,

My first post here on this forum.
Thank you for the excellent series of posts on this swing trading method.


Just a question if I may, I have just re read my copy of Landry's book that describes his TKO pattern.In it he uses a reading of above 30 on a 14 period ADX to qualify trend strength. I note on your charts that you don't do this.I am right in saying that you basically eyeball the three moving averages to determine trend strength ?


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## bunyip (23 June 2009)

Couple of good 1   2   3 trades currently underway on 15 minute charts.


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## bunyip (23 June 2009)

Grep said:


> Hi Bunyip,
> 
> My first post here on this forum.
> Thank you for the excellent series of posts on this swing trading method.
> ...




Hello Grep

Welcome to the forum.

I no longer use ADX 14 - it's slow to react - too much of the trend gets away from you before the ADX wakes up and signals 'strong trend' by rising above 30.
I find the three moving averages do a better job. Like Bollinger Bands, they contract when the market becomes directionless, and expand when the market starts trending.
The more daylight (space) between the averages, the better the trend.

Dave Landry told me in email correspondence that he too has abandoned ADX for the same reasons.

Cheers
Bunyip


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## bunyip (23 June 2009)

Chorlton said:


> Hi Bunyip.
> 
> Can I ask how many contracts you trade at any one time on a particular pair and if this number varies then what rules do you use to determine the number of contracts?




Chorlton my friend - some information is classified!

Early in my trading career an older experienced trader told me you shut yourself in your office, you study your charts, you don't listen to the financial news or read the financial pages, you don't tell anyone what you're trading or how much you're trading or what your profit or loss is. You adopt a lone wolf approach to trading, and you'll trade a lot better as a result.
Well I can't claim to follow his advice exactly, but for the most part I do.

Regarding what rules I use to determine the number of contracts......I look at the size of the stop loss, then decide how many contracts I can trade without exceeding 2% risk of my account.
Example...An intraday trader with $1000 USD in his account - if he trades 1 mini contract with stop of 20 points or less, he's within his 2% risk parameters (20 points X $1 per point per mini contract = $20 = 2% risk of his trading account.

If he has 10 grand in his account, and his stop is 20 points from entry, he can trade 1 full contract - his risk would be 20 points X $10 per point = $200 risk = 2% of his 10 grand account.


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## bunyip (23 June 2009)

Chorlton said:


> Hi All,
> 
> I have a couple of very basic question regarding FX, which hopefully someone can quickly answer for me.
> 
> ...




1. That's correct...a pip/point/tick is the minimum price movement that a currency pair can make.

2a. Most pairs are quoted with 4 decimal places, even though the price scale on the right of the chart may show less than 4. When you put your cursor over a price bar, a data window pops up showing 4 decimal places. On a quote screen they also show 4 decimal places.
Those with 4 decimal places are...USDCAD, GBPUSD, USDCHF, EURUSD, AUDUSD, NZDUSD, EURGBP, AUDGBP, AUDEUR.

The Jap crosses are quoted with two decimal places...AUDJPY, USDJPY, EURJPY.

The 'front currency' is the first of the pair being quoted, the 'back currency' is the second of the pair. 
Example... USDCAD - $USD is the front currency, Canadian $ is the back currency. 

*Contract values...*
A full contract is valued at 100,000 of the front currency. Example....EURUSD - one full contract is valued at 100,000 Euros. 

A mini contract is one tenth the size of a full contract, and is worth 10,000 of the front currency. Example...USDCHF - one mini contract is valued at $10,000 US.

*Pip values...*
For the Japanese Yen crosses, a pip is valued at 1000 Jap Yen for a full contract, and 100 Yen for a mini contract. 

The other currency pairs are valued at 10 of the back currency per pip for a full contract, and 1 of the back currency per pip for the mini contract.
If the AUDJPY pair moves from 75.76 to 75.77, that's a 1 pip move upward. If EURJPY moves from 133.33 to 133.13, that's a 20 pip move down.
If USDCHF moves from 107.75 to 107.76, that's a 1 pip move upward. If the contract moved from 107.98 to 107.12, that a move downward of 86 pips.

2b. The number of decimal places is standard across brokers. However, there seems to be some difference in how they express a quote. Some will quote the AUDJPY at say 75.66, while some will leave out the decimal point and simply quote it as 7566. It seems that you have to know to insert the decimal point yourself.
In fact I've seen IG quote a pair both ways - sometimes as 7566, and sometimes as 75.66

It sounds confusing, and it can be, but as you become familiar with currencies you get to know how to interpret the various ways of expressing quotes.

3. Post 69 shows a chart of AUDUSD. This pair is quoted to four decimal places. Therefore a price of .835 is actually .8350. And a price of .800 is actually .8000
The difference between .8350 and .8000 is 350 pips.
If this pair moved from .8350 to .8850, that would represent an upward move of 500 pips.

As I said earlier - It all seems confusing at first, but when you involve yourself with currencies you soon learn how to interpret the various quotes and contract values.


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## bunyip (23 June 2009)

stevo58 said:


> This is great stuff as always Bunyip. Of course the 1-2-3 system is just as well played out on the daily charts as well! So looking at your charts, would you place your stop under the last swing low or always wait for the pullback before entering? That AUD/USD chart shows just two trades which would have made my year!
> 
> I see on the second setup a TKO opportunity to pyramid as well.  A lot is dependent on the demoing but if things go to plan, I might even bump risk up to 2-3% a trade for the longer term opportunities (I currently operate at 0.5% in stocks). I'm in a drawdown at the moment so will try for 2-3 profitable months before going live.
> 
> ...




Steve

If you want to trade the 1  2  3 setup by the book, you'd follow the rules and put your stop below Point 3 of a bullish 1  2  3 pattern.
Bear in mind though that this stop can be quite large, meaning that you'd need to cut back the number of contracts to stay within your chosen risk parameters. Either that, or bend the rules by using a smaller stop.

Alternatively, if you lean towards a more conservative approach then you'd wait for the first pullback or pausing pattern after price moves above Point 2.

I advise against bumping the risk up to 3% until you prove conclusively to yourself that you're consistently profitable.

Good luck with developing your system for trading ranging markets. 
But when you have a market like FX that trends more often than not, I see no need to mess around with ranging markets. They're difficult to trade and they have smaller profit potential.
A good trending market like FX gives you plenty of trend trades over the course of a year.


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## Chorlton (23 June 2009)

bunyip said:


> Chorlton my friend - some information is classified!
> 
> Early in my trading career an older experienced trader told me you shut yourself in your office, you study your charts, you don't listen to the financial news or read the financial pages, you don't tell anyone what you're trading or how much you're trading or what your profit or loss is. You adopt a lone wolf approach to trading, and you'll trade a lot better as a result.
> Well I can't claim to follow his advice exactly, but for the most part I do.
> ...





Hi Bunyip,

Apologies for the probing questions as it wasn't my intention for you to divulge any "specifics" about the way you personally trade.

I asked in response to your previous comment about giving back too much profit once in a trade. If you were trading multiple contracts for example then one solution may have been to trade one contact using a target stop of say 2-3x your risk, while attempting to let the other 1-2 contracts capture as much of the trend as possible. In combination with adjusting your stop to break-even at the appropriate time one may be able to achieve a free-trade and at the same time capture some of that initial trend.

Just a thought......

Chorlton


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## Chorlton (23 June 2009)

bunyip said:


> 1. That's correct...a pip/point/tick is the minimum price movement that a currency pair can make.
> 
> 2a. Most pairs are quoted with 4 decimal places, even though the price scale on the right of the chart may show less than 4. When you put your cursor over a price bar, a data window pops up showing 4 decimal places. On a quote screen they also show 4 decimal places.
> Those with 4 decimal places are...USDCAD, GBPUSD, USDCHF, EURUSD, AUDUSD, NZDUSD, EURGBP, AUDGBP, AUDEUR.
> ...





Hi Bunyip,


Thanks for the detailed reply. You've cleared up a lot of my initial confusion.... 


Kind Regards,

Chorlton


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## bunyip (24 June 2009)

Chorlton said:


> Hi Bunyip,
> 
> Apologies for the probing questions as it wasn't my intention for you to divulge any "specifics" about the way you personally trade.
> 
> ...




I don't mind detailing my trade setups and strategies or my risk management etc. But I won't divulge specifics about my position sizes and I rarely mention how much profit I've made.
Even if I made 100 grand in a week, you wouldn't get to hear about it.

You're quite right.....trading multiple contracts gives you the ability to be quite inventive in the way you exit, by taking profit on part of your position while letting the rest run in the expectation of bigger gains.

To do this with IG you'd need to place multiple entry orders to allow yourself to bail out in stages once certain profit targets have been met.
If you bought four contracts in the one order, then attempted to bail out of one or two of them, you wouldn't be able to do it. But if you bought four contracts via four different orders, you can quit them one at a time if you wish.
Entering multiple orders is no problem when you trade from daily charts and you have all the time in the world for placing orders. Different story with intraday trading when the market is moving fast and you barely have time to enter one order, let alone several, before your entry price is reached.


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## Grep (24 June 2009)

bunyip said:


> Hello Grep
> 
> 
> I find the three moving averages do a better job. Like Bollinger Bands, they contract when the market becomes directionless, and expand when the market starts trending.
> ...




Hi Bunyip,

Ok sounds fair enough.I like the bollinger bands analogy.Also fits in with Landry's 'Bow Tie' pattern, the one when all of the MA's cross near a trend change point.

I am a complete convert to only trading with the main trend in your chosen time frame.Many hours of backtesting has proven this to me.


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## Grep (24 June 2009)

Chorlton said:


> Hi Bunyip,
> 
> If you were trading multiple contracts for example then one solution may have been to trade one contact using a target stop of say 2-3x your risk, while attempting to let the other 1-2 contracts capture as much of the trend as possible. In combination with adjusting your stop to break-even at the appropriate time one may be able to achieve a free-trade and at the same time capture some of that initial trend.
> 
> ...




I am not sure if this is a good idea.Getting smaller while your position moves in your favour is cutting your profit.

I try to get my stoploss to breakeven as soon as I can, then look to add.
This way you can maintain a constant initial risk while building a larger position size.

Mind you, a gap against you  brings tears, but no risk, no reward.


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## stevo58 (24 June 2009)

Chorlton said:


> Hi Stevo,
> 
> Can I ask how you are only risking 0.5% of your account size on these trades?  How close are you placing your stop?





Hi Chorlton.

Sorry for the late reply, work has been manic this week. I use Oanda as a broker for its capabilities for one to use odd lots as a position size. Just makes it easier to practise Fixed Fractional position sizing. You can size the positions on a contract basis as Bunyip outlines but coming from a stock background it prefer to size positions this way for the time being. Alex Douglas wrote a good spreadsheet to size such positions and this has been replicated in the website below, makes the whole process a lot easier if you've spotted an opportunity on the lower timeframes and you need to move quickly to place the trade.

http://www.forexcalc.com/forex_risk_calculator/

Hope this helps.

Steve


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## Chorlton (24 June 2009)

stevo58 said:


> Hi Chorlton.
> 
> Sorry for the late reply, work has been manic this week. I use Oanda as a broker for its capabilities for one to use odd lots as a position size. Just makes it easier to practise Fixed Fractional position sizing. You can size the positions on a contract basis as Bunyip outlines but coming from a stock background it prefer to size positions this way for the time being. Alex Douglas wrote a good spreadsheet to size such positions and this has been replicated in the website below, makes the whole process a lot easier if you've spotted an opportunity on the lower timeframes and you need to move quickly to place the trade.
> 
> ...




Hi Steve,

Personally at this stage (whilst getting experience with FX) I would like to have the flexibility of still being able to take a particular trade set-up while placing the stop at my choice of level AND still maintaining my level of risk, so I too would prefer to use Fixed Fractional Positing Sizing.

The ability to only trade contracts/mini contracts meant this could not really be achieved so knowing that Oanda offers this is great news. I'll go and check them out.....

Many Thanks for the reply....

Chorlton


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## stevo58 (24 June 2009)

bunyip said:


> Steve
> 
> If you want to trade the 1  2  3 setup by the book, you'd follow the rules and put your stop below Point 3 of a bullish 1  2  3 pattern.
> Bear in mind though that this stop can be quite large, meaning that you'd need to cut back the number of contracts to stay within your chosen risk parameters. Either that, or bend the rules by using a smaller stop.
> ...




Hi Bunyip,

Well the EUR/USD was kind to us last night, didn't get as much as I hoped but a couple of opportunities a week is all you need. I'd never risk 3% on these kind of setups but will consider them on the A+ setups. First comes the forward testing and if I can't replicate success in demo then I've got buckleys when I go live. When I do go live I will start with a smaller % of capital and if that works will move to the full alotment. I'm still in a drawdown at the moment but it will come, I had a go at the USD/CAD trade short this week which didn't work out, loads more trades to come.

You're dead right about just waiting for the trending opportunities and the A+ setups, some of the trends have been unbelievable this year. Just need to identify one, wait for a low risk entry and ride it. Trading is simple, we make it hard. Maybe thats what I'm doing thinking about trading ranging markets, leave alone and wait for the trends in open blue sky. That said, I would like a ranging tool for the arsenal and if I can't make it work in demo then I will fully jettison the approach, us human beings are curious beasts by nature! I'm simply researching an approach using price action near major Support/ Resistance levels - simple for a simple mind like mine.

I'm having quite a bit of joy with the 1-2-3 approach but trading short term certainly stirs up its own set of emotions. Quite incredible how the markets come to life during the London open. Might drop down a timeframe to 15 mins like yourself just makes it easier to manage the trade. So far the results have been good but am very aware its early days.  

All the best,

Steve



Grep, 

Welcome to the forum. Good thread going here, listen to Bunyip, the guy has several good theories with which to approach the markets. Thats what attracted me to the thread in the first place. 

Thanks,

Steve


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## Grep (24 June 2009)

stevo58 said:


> Hi Bunyip,
> 
> Grep,
> 
> ...




Steve, thanks for the welcome.
Yes I agree, its pretty clear to me that bunyip knows what he is talking about.

(Also long  EUR/USD and CHF/USD ,daily bars, futures contract)


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## bunyip (24 June 2009)

Grep said:


> I am not sure if this is a good idea.Getting smaller while your position moves in your favour is cutting your profit.
> 
> I try to get my stoploss to breakeven as soon as I can, then look to add.
> This way you can maintain a constant initial risk while building a larger position size.
> ...




Yeh, that's my approach too......get the stop to break even, then look for further setups to add to my position. 
I don't like the idea of reducing my exposure by quitting part of my position just when the trade is moving in my favour.

Forex rarely gaps - when it does, the gap is usually between Fridays close and Mondays open. Fortunately the gap is usually in the direction of the trend, so if you trade with the trend you can actually benefit from the gaps in Forex. But gaps are, as I said, quite rare in FX pairs.


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## Chorlton (24 June 2009)

Hello All,

For all those that trade FX using *Daily* charts could someone clarify a few points for me please.

(i) As FX is a 24hr Mrkt, what time/timezone is used to determine the  *Open* of each *daily* bar and is the same time/timezone used by all providers? I have read that in the case of Oanda this time is 00H00 New York Time but have been unable to find out about IG Mrkts and other Brokers just yet.

(ii) Depending on your own graphical location compared to the timezone used by the broker to determine the Open for each Bar, how does this affect ones strategy if it is based on Daily bars?

For example, assuming that (i) I was using Oanda (which uses 00H00 New York Time) and (ii) I lived in Australia, then the last Daily Bar that I would see on my Oanda's Daily chart would be different to the current "latest" prices. Consequently, if ones strategy was to buy at the next open following a trade set-up then potentially this price level may have already been breached, which would affect your entry point.


Apologies for the questions but as I'm in the process of opening an account I thought I would clarify some concerns in the meantime.


Many Thanks in advance,

Chorlton


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## bunyip (24 June 2009)

Here's a swing trading system that uses candlestick reversal patterns exclusively for snaring some decent moves in the Forex market.
A candlestick pattern is comprised of two or more candles, however I'll stretch that definition to include single candlesticks.
There's a lot of misinformation printed about candlestick reversal patterns. Every candlestick book or candlestick website you look at will show you a trend that magically reversed direction after the appearance of a candle reversal pattern. 
The fact is that candle reversal patterns are far more reliable as trend continuation patterns rather than as trend reversal patterns. 
This system uses them only as trend continuation patterns. Therefore, a trend must by established when the candle reversal pattern shows up. The slope of 10, 20, & 30 EMA's show the direction of the trend.
Knowing where to look for certain patterns is just as important as knowing how to identify the pattern itself. The most reliable candle reversal patterns occur after there's a brief pause or a brief retracement during the trend.
The appearance of the candle reversal pattern shows that the pause or retracement is finished and the trend is about to resume.

My eyes glaze over when I read that there are more than 50 recognised candle patterns - I'd run myself ragged if I searched for 50 different patterns, many of which are very subjective and have questionable reliability.
In keeping with my preference for simple, bare bones trading strategies, this system focuses on just six of the most reliable candle reversal patterns. In fact there's really only three, since the first three are simply the mirror image of the second three.
All of them are easy to recognise and are quite reliable when used according to the system.

The six candle reversal patterns are....

*In downtrends...*
Bearish Engulfing pattern
Shooting Star
Gravestone Doji

_*In uptrends...*_
Bullish Engulfing pattern
Hammer
Dragonfly Doji

Once  a candle reversal pattern shows up after a pause or retracement during the trend, an entry order is placed a few points on the trendward side of the pattern, with an 'if done' stop loss a few points on the opposite side of the pattern.

As a profit-taking exit, the system trails a stop  0.1% above the high of the last 3 candles (for shorts), and 0.1% under the low of the last three candles (for longs).
In keeping with a true swing trading system, this exit strategy does a handy job of keeping you in while the trend moves in your favour, and taking you out as the next swing starts moving against you.

The system is simple and logical, and follows the three tenets of profitable trading...
1. Trade with the trend.
2. Limit your losses.
3. Let your profits run.

It produces both winning and losing trades. Stop losses control the losers so they don't turn into massive losses. The winners are sometimes small and sometimes big. Overall,  the average winner is significantly larger than the average loser. On end of day charts it produces plenty of trades over the course of a year if you follow 8 to 12 pairs. On intraday charts of 15 minute timeframe, it averages at least a couple of trades most nights if you follow six currency pairs.

To best illustrate the system, I've given only examples of trades that produced good profits. Of course, not all of them work out so well, and some of them actually lose. But as long as you win more pips than you lose, you have a profitable system.
A picture is worth a thousand words - the charts below show the workings of the system.


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## bunyip (24 June 2009)

Chorlton said:


> Hello All,
> 
> For all those that trade FX using *Daily* charts could someone clarify a few points for me please.
> 
> ...





To be honest I really don't know the answers to your questions. 
All I can tell you is that my end of day data is available for download at around 8 - 8.30am each day. 
Price usually has not reached the level of my intended entry by the time I download and place my entry order.


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## Grep (24 June 2009)

Chorlton said:


> Hello All,
> 
> For all those that trade FX using *Daily* charts could someone clarify a few points for me please.
> 
> ...




I dont know how they work out the open close times either.

I place stop entry orders so the market has to move to my entry price from wherever it is when I place the order.I couple that with an 'ifdone' stoploss order.Many times I never get filled because the market turns and moves away from my stop entry price.

All this basically means that I don't have to worry too much about open/close times and prices. I wouldn't get too hung up on the exact price you enter on. I concern myself with handling the trade once its on,particularly if its losing money !


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## Chorlton (24 June 2009)

bunyip said:


> To be honest I really don't know the answers to your questions.
> All I can tell you is that my end of day data is available for download at around 8 - 8.30am each day.
> Price usually has not reached the level of my intended entry by the time I download and place my entry order.






Grep said:


> I dont know how they work out the open close times either.
> 
> I place stop entry orders so the market has to move to my entry price from wherever it is when I place the order.I couple that with an 'ifdone' stoploss order.Many times I never get filled because the market turns and moves away from my stop entry price.
> 
> All this basically means that I don't have to worry too much about open/close times and prices. I wouldn't get too hung up on the exact price you enter on. I concern myself with handling the trade once its on,particularly if its losing money !





Thanks for the replies Guys....


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## stevo58 (25 June 2009)

Chorlton said:


> Hello All,
> 
> For all those that trade FX using *Daily* charts could someone clarify a few points for me please.
> 
> ...




Hi Chorlton,

I like your name, takes me back to kiddies tv in the 70s. There is a little problem here as I see you've realised with EOD data incorporating the FX world. Markets open at 05.00 am aussie time (NZ Open), I know as I have to cover them for my job. 

One thing I've learnt is that a lot of people discount this time in their analysis and refer to it as a Sunday bar and concentrate on the London open as the start of the week.  So if you were looking to trade a Bullish Engulfing pattern then you would take Fridays bar as the benchmark to compare with the Tuesday bar. I'm not saying this is right but a lot of people appear to follow this thinking which lends it some credibility. A lot of the liquidity comes onto the market from the London open so in my mind its a good way to start the working week. If you are going to use MT4 as basis for your data and charting then there are different versions which cover different time periods. I think its Alpari that covers the London open and can be downloaded free. Sorry, you're using Oanda of course, not thinking, I use Aplari to scan for daily and 15 min setups and Oanda to demo trade. 

Theres no easy solution to this and I understand your concerns but unfortunately we have to live with the bogus Sunday bar which often misleads. Also data on a Friday afternoon (EST) can be slow and liquidity drains from the market. 

As I mentioned I use the UK open as the benchmark but I guess we all have to find the methods that suit. I know this doesn't totally answer your questions but its my line of thinking.

Thanks,

Steve


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## bunyip (25 June 2009)

Grep said:


> (Also long  EUR/USD and CHF/USD ,daily bars, futures contract)




Grep....Do you trade currency futures?


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## bunyip (25 June 2009)

stevo58 said:


> Hi Bunyip,
> 
> Well the EUR/USD was kind to us last night, didn't get as much as I hoped but a couple of opportunities a week is all you need. I'd never risk 3% on these kind of setups but will consider them on the A+ setups. First comes the forward testing and if I can't replicate success in demo then I've got buckleys when I go live. When I do go live I will start with a smaller % of capital and if that works will move to the full alotment. I'm still in a drawdown at the moment but it will come, I had a go at the USD/CAD trade short this week which didn't work out, loads more trades to come.




Win some, lose some.
Your timing was a bit unfortunate with USDCAD Steve, since you came in near the end of the trend. 
That pair is now in the early stages of a new uptrend and there should soon be opportunities on the long side if the trend keeps going.
Patience is the name of the game.....sit and wait for the setups to come to you. When they do, stack the odds in your favour by controlling the losses and letting the profits run. 
It's difficult *not* to make money if you keep doing that consistently.


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## Grep (26 June 2009)

bunyip said:


> Grep....Do you trade currency futures?




bunyip,

Yes, well CFD's over the futures contract, not the spot market.
Thats why the CHF quote is the other way around.

Why futures and not spot, well I have the historical data for futures and I also use Amibroker for charting and backtesting so its just easier to trade the futures contract at this time.

It also trades 24hrs (well its about 23 hrs I think).


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## Grep (26 June 2009)

stevo58 said:


> I'm still in a drawdown at the moment but it will come
> 
> Steve




I am used to that. I have just closed out my 23 loss in a row.(CHFUSD Trade)
This has produced a drawdown of 5.34 percent.This is a longer than usual run of losses for me.Around five or so losses in a row is more normal.Average win percentage is about 40%.

I am ruthless with stops.If a trade doesn't start working for me right away, it gets the flick.It gets maybe two days,three if I am in a good mood and if its not in profit, its closed. If it is in profit, move stop to breakeven.

I get a low winning percentage, but my win/loss ratio is  big.Two or three winning trades will erase that drawdown and hit new equity highs.


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## stevo58 (30 June 2009)

bunyip said:


> Win some, lose some.
> Your timing was a bit unfortunate with USDCAD Steve, since you came in near the end of the trend.
> That pair is now in the early stages of a new uptrend and there should soon be opportunities on the long side if the trend keeps going.
> Patience is the name of the game.....sit and wait for the setups to come to you. When they do, stack the odds in your favour by controlling the losses and letting the profits run.
> It's difficult *not* to make money if you keep doing that consistently.





Hi Bunyip,

Yeah no big deal really. I seem to have been a little late to the party on a few of the recent trends and there appears to be some consolidation at the moment. The fact is that I've only taken a couple of losses and had a number of break-even trades, well I'm pretty sure I'm gonna capture a trend shortly which should pay for all. I'm currently in the EUR/JPY, was up about 1R but prices are consolidating again, stop is at breakeven so a free trade, if we can get above the resistance at the 136 level we're away. I suppose good trends don't look back.

Thanks for the candlestick charts, after reading Nison's book well you're dead right we only need to concentrate on a couple of patterns and not their proximity to Support/Resistance levels. A nice say Shooting Star pattern onto a resistance level looks to be a great setup. Also a Shooting Star as the TKO bar is the one I'm looking for. Like you say most of this game is patience, waiting for the A+ setups. Looking for the inevitable breakout and pause to get the equity curve going.

Hi Grep,

Good to hear that things are working. 23 losses in a row, that is impressive. But like you say killing those losers skews the average loss so when the winners come around all is paid for. Are you trading a totally mechanical system? What sort of time frame do you use?

Cheers,

Steve


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## Grep (1 July 2009)

stevo58 said:


> Hi Grep,
> 
> Good to hear that things are working. 23 losses in a row, that is impressive. But like you say killing those losers skews the average loss so when the winners come around all is paid for. Are you trading a totally mechanical system? What sort of time frame do you use?
> 
> ...




Its not a mechanical system.I look for patterns based on the PPS system, which is a book that I read many years ago.I only trade futures so its pretty easy to scan the 30 odd markets that I trade for setups.Takes about 10 minutes or so to do manually.I trade daily bars end-of day only.This is why I was attracted to this thread.

I have been a long time lurker on this forum, but its all really about stocks and I gave up on trading stocks with daily bars.

I have done a lot of computer backtesting of various mechanical systems for futures, but none of them really appeal to me.In fact most of them have really struggled over the past few years,but trend following is like that.

I think I see what you mean by skewing the average loss.Of those 23 losses, quite a few were break even or near break even trades so no big deal.I have a no risk trade running on the EUR/USD now ( theoretical no risk, a gap might spoil my day !)My win/loss ratio is more important to me than my win percentage, although it can get frustrating at times.

I am contstantly tracking my expectancy and  performance ratio (win % * win/loss , Kennith L Grant, Trading Risk,Enhanced Profitability Through Risk Control ) These are the things that are important.


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## bunyip (1 July 2009)

Grep said:


> Its not a mechanical system.I look for patterns based on the PPS system, which is a book that I read many years ago.I only trade futures so its pretty easy to scan the 30 odd markets that I trade for setups.Takes about 10 minutes or so to do manually.I trade daily bars end-of day only.This is why I was attracted to this thread.
> 
> .




So Grep, is PPS the only system you trade?

On this forum is a thread called 'PPS Trading System by Curtis Arnold' - worth a look if you haven't already seen it.


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## sammy84 (1 July 2009)

Sorry I thought I should stop lurking on this thread as well. This is my favourite thread on ASF at the moment. I have just read Dave Landry's book, it was good read, thanks for putting it out there bunyip. I currently also trade Curtis Arnold's PPS system, using it primarily on stocks. I am however looking at testing Dave's TKO system. I'm also currently looking at using the TKO in conjunction with PPS to provide more pyramid opportunities, as with PPS sometimes pyramid chances can be few and far between. I'll let you know how it goes


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## bunyip (1 July 2009)

sammy84 said:


> Sorry I thought I should stop lurking on this thread as well. This is my favourite thread on ASF at the moment. I have just read Dave Landry's book, it was good read, thanks for putting it out there bunyip. I currently also trade Curtis Arnold's PPS system, using it primarily on stocks. I am however looking at testing Dave's TKO system. I'm also currently looking at using the TKO in conjunction with PPS to provide more pyramid opportunities, as with PPS sometimes pyramid chances can be few and far between. I'll let you know how it goes




G'day Sammy

Which one of Landry's books did you read?


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## sammy84 (1 July 2009)

The one you mentioned earlier in this thread. 'Dave Landry on Swing Trading'. It was a good read, kept it simple and straight to the point. I am exploring alot of his ideas, however I am also trying to minimise his use of indicators and MA's, they seem a little over done on occassions


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## bunyip (1 July 2009)

sammy84 said:


> The one you mentioned earlier in this thread. 'Dave Landry on Swing Trading'. It was a good read, kept it simple and straight to the point. I am exploring alot of his ideas, however I am also trying to minimise his use of indicators and MA's, they seem a little over done on occassions




From memory his only indicator was ADX. He no longer uses it, reckons (correctly) that it's too slow to recognise a decent trend.


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## sammy84 (1 July 2009)

bunyip said:


> From memory his only indicator was ADX. He no longer uses it, reckons (correctly) that it's too slow to recognise a decent trend.




Ok that helps, because from what I read he was using the ADX as a pre-cursor to defining the trend, and thereby whether to take the trade. I have never looked at the ADX with great detail so it threw me off a little. I also find his 3 MA's a little clumsy, maybe its just me getting my head around it. Nonetheless it is a great book and a true proponent of the KISS principle


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## Grep (2 July 2009)

bunyip said:


> So Grep, is PPS the only system you trade?
> On this forum is a thread called 'PPS Trading System by Curtis Arnold' - worth a look if you haven't already seen it.




Hi Bunyip,
Well I do trade a long term weekly bars system on stocks in my SMSF, but that has hold periods of many months and its completely mechanical,long only.

In my day to day trading yes PPS is pretty much it, however I also look for breakouts from tight congestions of a range which isn't really part of PPS.

I have read through the old PPS thread on this board, pretty interesting.It seems as though its a method more popular than I thought.


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## bunyip (2 July 2009)

Grep said:


> Hi Bunyip,
> 
> 
> In my day to day trading yes PPS is pretty much it, however I also look for breakouts from tight congestions of a range which isn't really part of PPS.
> ...




But aren't these tight consolidation patterns part of PPS? Or are we talking about two different patterns?

Curtis Arnold calls them rectangles, defines them as having at least four points, with five to seven points not unusual.

He trades them as trend continuation patterns. His research found that.....

* Downtrends contained 59% of rectangles - 75% of which were followed by a continuation of the downtrend.

* Uptrends contained 41% of rectangles - 86% of which were followed by a continuation of the uptrend.

I've found them to be good patterns in Forex. But I don't get too particular about the definition.....any tight consolidation pattern of three to seven days of sideways price action is good enough - they're likely to be followed by a strong surge in the direction of the trend.


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## Grep (3 July 2009)

bunyip said:


> But aren't these tight consolidation patterns part of PPS? Or are we talking about two different patterns?
> 
> Curtis Arnold calls them rectangles, defines them as having at least four points, with five to seven points not unusual.
> 
> ...




Hi Bunyip,

Its been a long long time since I read the book ! so I stand corrected.
I do remember that it was the triangle pattern that I began with and his trade management methods that really got me interested.Many of these simple patterns are mentioned in a lot of TA books, however PPS really makes the difference in the trade management of them.

I agree that I also dont get too worried about getting exact patten formations and the tight ranges,congestion patterns that you posted are the sort of thing that I am talking about.


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