# Forex help



## andrew100 (5 August 2008)

hi,

I've just started to look into forex, I have $5000 to start with, how many pip should I aim for if I would like to make about $100 / week?

I would like to trade in a AUD pair or should I trade in a different pair?

Thanks for your advice in advance.

Andrew


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## BentRod (6 August 2008)

Have you tried demo trading yet Andrew?

It doesn't sound like you have. I recommend trading on demo for a while first before committing your $5000.



> I would like to trade in a AUD pair or should I trade in a different pair?




Some like to trade the currency of their own Country,eg- Aussies trade the AUD, Kiwi's the NZD etc, I have no idea why?

Seems a bit silly to me. Look at the charts and trade whatever pair you want. 
Watch the spread if you are not using futures though, big spread=big commish.


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## BentRod (6 August 2008)

Andrew,
            I just noticed the other thread you started:
https://www.aussiestockforums.com/forums/showthread.php?t=11793

Do some demo trading first Mate.
http://www.alpari-idc.com/en/metatrader4/open-demo-account.html


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## andrew100 (6 August 2008)

Thanks Bentrod for your reply,

I just want to gauge how much I able to make before I invest some time.

I read on another forum that someone had a $3200 account and they were able to make about $100/ wk with 50pip. I not sure where that forum was.

But I also worked out that 1 pip is worth about $0.1, which if I make 50pip I only make about $5.00.

Is this correct?

Yes, I am a newbie, thanks for any advice you can provide.

Andrew


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## caribean (7 August 2008)

Hi Andrew, welcome, have a good look at this forum, there's been plenty of times when questions like yours have been answered, i think Tayser has given
some detailed explanations before.
Forex provides (through some brokers) extreme leverage, probably more than
any other instrument, so bang for buck is the least of your worries.
However, it appears you'll need to understand the concept of leverage/margin
first.
It's a long road ahead, if you're serious, do not start with a real account yet...just in my opinion.
Good luck.


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## lesm (7 August 2008)

andrew100 said:


> Thanks Bentrod for your reply,
> 
> I just want to gauge how much I able to make before I invest some time.
> 
> ...




Andrew,

Standard Contract ($100,000), 1 pip = $10
Mini Contract ($10,000) 1 pip = $1
Micro Contract ($1,000) 1 pip = $0.10

Not all fx brokers offer the ability to trade in micro lots.

How much you make or lose will depend on your ability as a trader, but it will require an investment of time either way. There are no quick/easy wins in this or any business without some level of effort being applied.

You may wish to consider focussing on the major currency pairs, as a starting point, such as aud/usd, eur/usd, gbp/usd, etc. Focussing on one or two currency pairs initially may not be a bad idea, as it will assist you in gaining an understanding of their individual behaviour/characteristics.

The overall characteristics of the pairs will behave differently during each of the four(4) major sessions each day, as well as when the sessions overlap. Starting from Sydney on Monday morning (AEST) through Tokyo, London and then New York, where it finally closes on Saturday morning (AEST).

SOme other links have been provided to you previously, as well as a suggestion to look through the forum for fx related threads that will provide you with additional information.

Cheers.


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## Underpants Gnome (9 August 2008)

Hi Andrew, just keep in mind that $100 is 2% of $5000 and that 2% per week is 100% a year. I recently read in a SmartInvestor CFD lift-out that "the best leveraged traders in the world can earn consistent returns of 60 per cent a year and more, but this isn't a realistic goal for the inexperienced". So don't be discouraged, but make sure you're setting achievable goals or else you might be disappointed (despite doing well).

I haven't started trading myself but I've been using an IG Markets demo account for a few months now while I'm still learning. I really recommend doing that. Also a great site I've found is www.babypips.com. I find I keep going back to the "School" section and it makes more sense each time.

Have fun!


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## lasty (14 August 2008)

Andrew,

A very high percentage of traders lose their money in FX in the first 6 months simply because they start off with a low base.
Minimum amount is at least $20,000 before contemplating.

Secondly if you want to play FX stick with your home base currency ie AUD/USD and look no further.
Why? Because FX is not 100% charting.There is a fundamental component as well.All Australian economic data is released whilst you are awake.You get a better feel of what is going on in your country than say Europe when you are asleep.

Thirdly
The major banks in Australia predominantly play in AUD, NZD, AUD/NZD, AUD/YEN.
Very few with the acception of the foreign banks dable (position) in EUR/USD.
Now if they dont do it and they have more technology,contacts etc than you will ever have, what makes you think you are better?


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## bvbfan (15 August 2008)

Assuming you trade a $50000 position with leverage thats probably about $500 in margin.

1 pip in this instance is $5 so you'd need to make 20pips net a week.

If you stick to one currency I think its achievable and a good way to learn

*BUT ALWAYS HAVE A STOP LOSS IN PLACE*


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## lasty (15 August 2008)

My point about $20,000 minimum is that most ECN's are 50:1 leverage.
Its best if you open 2 accounts with different brokers.
1 being ECN and the other fixed spread.
Just incase one broker has tech problems and trust me they do.
Even the powerhouse interbank brokers like Reuters and EBS have hiccups.
Its all about Risk management.


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## professor_frink (15 August 2008)

lasty said:


> ...................
> 
> Thirdly
> The major banks in Australia predominantly play in AUD, NZD, AUD/NZD, AUD/YEN.
> ...




Why would someone that trades the Euro consider themselves better than than our local banks?


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## BentRod (15 August 2008)

> Minimum amount is at least $20,000 before contemplating.




I Don't see why?

As Lesm pointed out above micro accounts can trade even as low as 10 cents a pip.


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## lesm (15 August 2008)

Included below is a table showing the Barclay Trading Group's currency trader rankings for June 2008.

Reproduced from Currency Trader Magazine, August 2008. So, the big boys do it better than the little boys


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## lasty (15 August 2008)

BentRod said:


> I Don't see why?
> 
> As Lesm pointed out above micro accounts can trade even as low as 10 cents a pip.




Because ECN's wont let you on for less than that as most are 50:1 and minimum 100k tradeable amounts.

If you like paying spread then sure go with the MM's.


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## lasty (15 August 2008)

professor_frink said:


> Why would someone that trades the Euro consider themselves better than than our local banks?




The likes of Deutsche,Citi and RBC in Sydney are the acceptions.
The rest would have very little positions in it.
Its a difficult market in this time zone to make money in the Euro.


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## lesm (15 August 2008)

lasty said:


> Because ECN's wont let you on for less than that as most are 50:1 and minimum 100k tradeable amounts.
> 
> If you like paying spread then sure go with the MM's.




The face of the ECN's has been changing for some time now. You can now open a retail account with number of ECNs with as little as USD$400 at 100:1 MBT or HotSpot Fxr USD$7,500 at 50:1. Both offer trading in micro lots for retail traders. There are other fx providers, such as IB, Dukaskopy, Alpari, etc., in this area, as well.

With an ECN you need to take into account commission + spread, where the spread is a variable spread and not fixed. Dependent upon the commission charged and the average spread costs there are a number examples on Fx fora that demonstrate that some ECNs can actually be more costly than a fixed spread MM through time.

A number of the ECNs that are targetting retail traders are quite good at advertising their minimum spread, but do not necessarily publish their average spread over a period of time. IB and Hotspot on average appear to have the tightest spreads.

Like anything it is about buyer beware and understanding what the real differences, including the advantages, disadvantages and costs are, between MMs and ECNs, rather than loose generalisations.

Cheers.


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## andrew100 (18 August 2008)

Thanks everyone for your reply,


I have been to babypips and went through the school, although I might need to go through a few more time to make it stick.

I have started a demo account with GFT and planning to play around with it.

I have considered increasing my account to $10,000, I not planning to use leverage, is this a good idea? 

Leveraging is like borrowing money and I only want to deal with money that I can afford.

Thanks again for all your input.

Andrew


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## tayser (18 August 2008)

GFT are going to be ringing you on a weekly basis starting in two weeks wanting to get you to open a live account.

And yes, you should be using leverage.  Being scared of borrowing money is the wrong attitude, you should be using leverage from the start in a demo and learning how to use it effectively when there's no monetary risk to you.


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## lasty (18 August 2008)

lesm said:


> The face of the ECN's has been changing for some time now. You can now open a retail account with number of ECNs with as little as USD$400 at 100:1 MBT or HotSpot Fxr USD$7,500 at 50:1. Both offer trading in micro lots for retail traders. There are other fx providers, such as IB, Dukaskopy, Alpari, etc., in this area, as well.
> 
> With an ECN you need to take into account commission + spread, where the spread is a variable spread and not fixed. Dependent upon the commission charged and the average spread costs there are a number examples on Fx fora that demonstrate that some ECNs can actually be more costly than a fixed spread MM through time.
> 
> ...




Yes thats why you have to be choosy on who you pick.
In quiet markets fixed spread will be 2 pips but the likes of hotspot or IB it could be 1/2 pip.]
In busy markets the fixed spread will be 2 pips and the ECN maybe 4pips but you have a chance to close that by offering or bidding inside the market spread. however I have noticed in busy markets that a fixed 2 pip spread is like playing lotto. The price jumps around very fast and is hard to hit. So the spread theoretically widens.
Remember the MM is there to make money on your spread.They arent a charity and will do their best to ensure they make it.The ECN is there to make money on brokerage only.


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## CanOz (18 August 2008)

As in any instrument there are many ways to trade it. 

If you have a 10,000 AUD account you could trade 10,000 lots and be close to 1:1 leverage (minus some FX differeces). 

If your scalping you need leverage, but if your trading reversion to mean, you may be interested in capturing larger moves. If so, less leverage can be better on a smaller account.

I traded Dirk DuToits 4x1 strategy for a while and while i broke even in the end, it was the leverage that made me realise that i don't have the stomach to take much of a loss. With IB you can only trade 30,000 lots as a minimum, and that was also my account size, but i couldn't handle being -600 or more in the red on a trade and waiting for it to come back to mean.

Trading FX is a great way to learn Macro Economics too, if you use the fundamental picture as part of your edge.

Dirk's ebook is here:
http://www.dayforex.com

While i subscribed to his forum for a while i was a bit turned off by the cost, and the quality of the site. His reversion to mean system is quite good IMO, and i will definitely trade it again someday when i have the time.

Cheers,


CanOz


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## bunyip (18 August 2008)

Most Forex traders are intraday traders working from live charts. My opinion is that end of day charts are far easier and more profitable.

* It takes no more than 15 minutes a day to analyse ten or so currency pairs from daily charts.

* Daily charts give you the opportunity of cutting your losses short but letting your winners run to figures that are many times your initial risk. You might use an initial stop of 100 pips from entry, and get a profit of 300 to 1200 pips or more.......many times your initial risk. It's very hard to do this with intraday trading. 

* Trading from daily charts allows you to utilise one of the most profit-enhancing of all trading strategies - pyramiding. You can add to your position as the trend runs in your favour. Or once your trade has run far enough to allow you to move your stop to break even, you can enter trades in other pairs as the opportunity arises.
Intraday trading is much less conductive to pyramiding.

* Trading from daily charts eliminates the need to sit in front of your computer at night, watching the screen. Our night is the European and American business day when most of the currency trading action takes place. Even if you can't look at your daily charts until you come home from work, that's usually OK.....there's usually not much movement during our day anyway.

*Trading from daily charts allows you to easily monitor 10 or so currency pairs. More pairs means more trading opportunities. Intraday, you just don't have the time to monitor that many pairs.

Australian traders are naturally drawn to AUDUSD and AUDJPY. These are OK, but there are other pairs with smoother trends and bigger runs.
The ones I follow are...
AUDUSD
USDCAD
USDJPY
USDCHF
EURUSD
GBPUSD
EURJPY
AUDJPY
AUDEUR
NZDUSD (only recently added this one after noticing that it's put in some good trends and it has a reasonably tight spread, haven't actually traded it yet)

When choosing which pairs to trade, take into account firstly, their 'trendiness' (how well they trend), and secondly, their spread. I won't trade anything with greater than a 5 pip spread between bid and ask. Remember that spread is commission in disguise. The higher the commission, the more it chews into your trading profits.

If you're going to trade from daily charts, I'd suggest that 10 grand is a comfortable amount to have in your trading account. Using a stop of around 100 pips from entry, and trading one mini contract, your potential $100 loss represents just 1% of your trading account, which is ideal. You could get away with a $5000 account, in which case you'd be risking 2% of your account. This is still acceptable, but on some trades you might want to use more than 100 pip stops, which means you'd be violating the 2% rule.

If you trade from end of day charts, look also at 2 day charts and 3 day charts. 
Sometimes a valid trade setup will show up on one time frame but not on the others. 
Following three different time frames gives you more trade setups to choose from.

Put a longer term moving average on your daily charts, such as 50 EMA, and only trade in the same direction as the slope of that moving average. This is in line with Elder's Triple Screen system that says look at a 13 week Exponential Moving Average (EMA) on the weekly chart to identify the longer term trend direction, then go to the daily chats and find trade setups that signal entries in the direction of the weekly trend. 13 week EMA converts to 65 day EMA (13 weeks multiplied by 5 trading day per week).
I've found that the 65 day EMA is slightly too long for daily Forex charts....50 EMA is better.

As for the news - I completely ignore it when trading from daily charts. I'm a technical analyst working from the premise that the charts give me the information I need to trade profitably. Seems to be working well enough so far.


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## CanOz (18 August 2008)

Great post Bunyip!

I like that your system uses basically no leverage. I could easily cope with the losses and 100 pips would miss most moves from news. 

Thanks for sharing that, have you got any trade stats or is this something that you have just recently started to trade?

Cheers,


CanOz


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## bunyip (19 August 2008)

CanOz said:


> Great post Bunyip!
> 
> I like that your system uses basically no leverage. I could easily cope with the losses and 100 pips would miss most moves from news.
> 
> ...





I had my first Forex trade in 2004, from memory. AUDUSD it was, and I was delighted to nail a 600 pip profit. And at about the same time I had another nice trade of 600 pips or so in USDCAD. I was starting to think I had the game sewn up until I hit a bit of a rough patch with a run of losing trades caused mainly by inexperience.
Took a while to sort things out and learn what to do and what not to do. Matter of fact I'm still learning, still making a few mistakes here and there, still increasing my knowledge and honing my technique.

As for stats, I have my trading results on record, but I also have a policy of never ever ever divulging my trading results. When I started trading about 12 years ago an experienced trader told me 'win, lose or draw, you never talk about your trading results. Not even if you're making massive returns.'
I took his lesson to heart, and I've never discussed my trading results with anyone except a couple of close trader friends with whom I swap notes.
Suffice to say that trading FX from end of day charts can be very profitable if you stick to the basics such as trade with the trend, cut losses fast and let profits run, use stringent money management rules, etc etc.


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## peter2 (19 August 2008)

*Bunyip*: I totally agree with you on trading the daily charts. There have been some really large moves in many of the currency pairs recently. Most of the daily scalpers will have missed these opportunities to earn many hundreds of pips. It pays to keep your eyes on the larger timeframes. 

AUDUSD (-1000 pips), EURUSD (-1100 pips), GBPUSD (- 800 pips), USDCHF (+700 pips), USDCAD (+500 pips)

GBPJPY (-800 pips), EURJPY (-500 pips), AUDJPY (- 600 pips)

GBPAUD (+1000 pips, the spread sucks, but the move was big.)

Your money management is sound. While trading the daily charts, it is possible to start many trades that are highly correlated to the one currency, the USD. The recent USD strength created large moves in at least 5 major currency pairs, AUD, EUR, GBP, CHF and CAD. A trader needs to be mindful of portfolio heat in these circumstances, 5 x 2% is risking 10% of the account on the USD strength (long USD). 

The recent strength in the JPY (or weakness in the others) created moves in the GBPJPY, EURJPY and AUDJPY pairs, 3 x 2% = another 6% at risk.

Each trader needs to determine their own maximum portfolio heat.


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## bunyip (19 August 2008)

peter2 said:


> *Bunyip*: I totally agree with you on trading the daily charts. There have been some really large moves in many of the currency pairs recently. Most of the daily scalpers will have missed these opportunities to earn many hundreds of pips. It pays to keep your eyes on the larger timeframes.
> 
> AUDUSD (-1000 pips), EURUSD (-1100 pips), GBPUSD (- 800 pips), USDCHF (+700 pips), USDCAD (+500 pips)
> 
> ...




There's been some big movers alright Peter, a real smorgasbord of trading opportunities. 
Point taken that 5 trades with a 2% risk on each trade equates to 10% of your capital at risk, which is far too much in my view. I should have clarified that I won't risk more than 2% of my account at any time. If I get into a trade, I won't take on a second trade until my stop loss on my first trade has been moved to break even.
And I won't take on a third trade until the stop loss on my second trade has also been moved to break even.
Under favourable market conditions, this strategy allows you to have multiple trades open together, but without risking more than 2% of your trading capital at any given time.

How long have you been trading Forex?


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## andrew100 (19 August 2008)

Bunyip, thanks for the great post.

I'm just a bit confuse about the different charts you are talking about.

1. end of day charts; are charts that you have put together with end of day data of the particular currency and so you will trade on their trends the next day.

2. live charts;  live data that you continuosly receive.

3. daily charts ??? is this the same as end of day charts?

Apologise for the basic question.

Andrew


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## CanOz (19 August 2008)

bunyip said:


> As for stats, I have my trading results on record, but I also have a policy of never ever ever divulging my trading results. When I started trading about 12 years ago an experienced trader told me 'win, lose or draw, you never talk about your trading results. Not even if you're making massive returns.'
> I took his lesson to heart, and I've never discussed my trading results with anyone except a couple of close trader friends .




Hey, thats fine i understand. I was really interested in a W/L rate, trade frequency, and maybe a max DD that you might have had. I'm more just curious whether or not it is something i could trade or not, knowing what i'm comfortable with.

One thing i noticed or didn't notice much of when i was trading FX were obvious patterns on the EOD charts. The charts seem to be really "thick" with allot of overlapping bars/candles...they just look different. Is it more S&R that you use?

Looking at the charts again, significant low and highs seem like potential trade points.

I'll try and post a chart....on the other hand i guess the entry is not that important, theres plenty of congestion patterns, its just a matter of hanging onto to those winners and....well you know the rest.

Cheers,


CanOz


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## bunyip (20 August 2008)

andrew100 said:


> Bunyip, thanks for the great post.
> 
> I'm just a bit confuse about the different charts you are talking about.
> 
> ...





No problem with basic questions, Andrew....no question is too basic when you're learning.

Live charts......the data is unfolding on your screen. The price bars are forming and changing right in front of your eyes. You might have your timeframe set at 30 minute bars, meaning that each bar or candle on your chart represents half an hour of price action. Each bar will form and change over a period of half an hour, then a new bar will start to form.

Daily charts and end of day charts are interchangeable terms....each bar on your chart represents 24 hours of price action. 

Each day I download the daily Forex data into my charting software. It's usually available about mid morning Australian time. Or if you use the free charts supplied by a Forex broker, they're updated automatically each day.
I look for clearly defined upward or downward trends on daily charts, then focus on identifying temporary retracements against the trend. Temporary retracements soon end, and the main trend resumes. This is simply supply and demand at work.
If you become skilled at identifying these points where the main trend resumes after a brief retracement during an established trend, you have an ideal entry point. If you add the essential ingredients of cutting your losers quickly but sticking with your winners for the duration of their trends, you have yourself a simple, effective and profitable trading system that will harvest many nice profits from the Forex market year after year.


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## CanOz (20 August 2008)

bunyip said:


> No problem with basic questions, Andrew....no question is too basic when you're learning.
> 
> Live charts......the data is unfolding on your screen. The price bars are forming and changing right in front of your eyes. You might have your timeframe set at 30 minute bars, meaning that each bar or candle on your chart represents half an hour of price action. Each bar will form and change over a period of half an hour, then a new bar will start to form.
> 
> ...




Bunyip, may i ask who your broker is? And the minimum lot size etc.

Also, you don't need to be too fussy about the spread with EOD correct?

Cheers,


CanOz


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## bunyip (20 August 2008)

CanOz said:


> Hey, thats fine i understand. I was really interested in a W/L rate, trade frequency, and maybe a max DD that you might have had. I'm more just curious whether or not it is something i could trade or not, knowing what i'm comfortable with.
> 
> One thing i noticed or didn't notice much of when i was trading FX were obvious patterns on the EOD charts. The charts seem to be really "thick" with allot of overlapping bars/candles...they just look different. Is it more S&R that you use?
> 
> ...





Maximum drawdown.....that's something I've never taken any notice of - I just get in and trade and as long as my account is going steadily upward, I'm happy.

Winning percentage....roughly 50%, but that doesn't mean I lose 50% of my trades as well. Some of the non-winners are break even results due to moving my stop to break even, then getting stopped out.
Percentage of winning trades is not near as important as ensuring that your average winner is substantially larger than your average loser. 

Not sure what you mean about the lack of obvious patterns on EOD charts...I see them all over the place. They're not there every single day like they are on intraday charts, but over the course of a year I'd suggest that EOD charts will offer you more trade setups that you can utilise.

I don't take much notice of support/resistance. I just like to see the emergence of a new trend. When that happens, it won't be long before you're presented with a suitable entry setup to put you into that trend. 
Here are some recent examples from daily charts......

EURUSD 31/7/08 was a Shooting Star after a brief rally. At this stage the downtrend was new but nevertheless clearly established, so the Shooting Star was a legitimate signal to go short. The trade then proceeded to run more than 900 points in the next couple of weeks, and the downtrend is still intact, meaning that it has the potential to run further. (the word 'pips' always sounds silly to me...I prefer to use 'points' or 'ticks')

The mirror image of this pattern can be seen in USDJPY when it formed a Hammer on 1/8/08 after a brief pullback during an established uptrend. This was of course a legitimate long entry signal.

NZDUSD.....During an established downtrend, two consecutive small range Inside Days formed on July 25 & 28. All markets alternate from high volatility to low volatility and back to high volatility just like night follows day. The strong downtrend (high volatility) of this pair was followed by the pausing pattern (low volatility) of the dual Inside Days. This pattern, when formed during a strong trend, frequently precedes a return to high volatility, i.e. a strong resumption of the trend. This is exactly what happened in this case.
'High volatility' simply means strong price movement. It can be wildly choppy price action, or it can be consistently strong price action in one direction, such as during strong trends.
Trading this dual inside day pattern is pretty simple.....put your entry order just below the first of the two Inside Days, set your 'if done' stop loss order on the opposite side of the pattern, or a set number of points from entry if you prefer. If the trend resumes as you expect it to, you're in the trade and your stop loss is automatically placed, no matter if you're asleep in bed at the time, or on the golf course or out in your boat fishing or whatever.

USDCAD This strongly uptrending pair came to a temporary halt when price went sideways on July 29, 30, & 31. A few days of sideways action during a strong trend is usually followed by a strong resumption of the trend, which is exactly what happened in this case. By placing a buy stop order above the sideways pattern, and an 'if done' stop loss order 100 points or so from entry, you position yourself to catch the trend resumption if it occurs.

I've only mentioned two candle reversal patterns, Hammers and Shooting Stars. Note that I'm using them as trend continuation patterns, not trend reversal patterns. There are of course other candle reversal patterns such as Haramis and Engulfing patterns. They can be used in exactly the same way as the Hammer and Shooting Star examples I've given.

I'd disagree that the entry is not that important. In my view your entry is extemely important, as that's the starting point of your trade. A timely entry just as the trend is resuming strongly can make all the difference between a great trade and a mediocre result. 

All the standard chart patterns also lend themselves well to Forex trading from daily charts......triangles, rectangles etc. They can give good entry signals when they occur during strong trends.
You'll note my continued reference to strong trends. In my view, you greatly improve your odds if you insist that a decent trend is established before you act on an entry signal.

 There's nothing complex or fancy about the trade setups I've mentioned.They're nice and simple.....just like a good trading system should be.


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## bunyip (20 August 2008)

CanOz said:


> Bunyip, may i ask who your broker is? And the minimum lot size etc.
> 
> Also, you don't need to be too fussy about the spread with EOD correct?
> 
> ...




My broker is IG Markets.
As far as I know, their minimum lot size is one mini contract. I'm sure you know what a mini is, but for those who don't, a mini Forex contract is 10 grand and a standard contract is 100 grand. This means you're trading 10 grand or 100 grands worth of the currency, as the case may be.

Spread size is not near as critical with end of day trading as it is with intraday trading. 
For an intraday trader aiming to capture 20 point moves, a 5 point spread is a significant bite out of his profit.
For an end of day trader who might reasonably expect to snare moves of several hundred points, a 5 point spread is insignificant.


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## lesm (20 August 2008)

bunyip said:


> My broker is IG Markets.
> Spread size is not near as critical with end of day trading as it is with intraday trading.
> For an intraday trader aiming to capture 20 point moves, a 5 point spread is a significant bite out of his profit.
> For an end of day trader who might reasonably expect to snare moves of several hundred points, a 5 point spread is insignificant.




Bunyip,

You have made a good point above with respect to spread. For the longer term fx trader an extra pip here or there, or the width of the spread, lessens in significance in the bigger scheme of events.

One aspect you didn't mention previously with longer term fx trades is with respect to the interest received when you are interest +ve in terms of the interest rate differential between the currency pairs traded. The converse is also true where interest is paid when you are interest -ve.

This adds up through time and hence why some longer term traders try to be interest +ve whenever they can and receive the extra amount based on the swap rate.

Mongoose has made reference to the above points over on reef a few times.

Can,

Long time no see. Think I read somewhere that you had been making more headway on the trading front. Keep up the positive work.

Cheers.


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## bunyip (20 August 2008)

My first attempt at posting a chart here....let's see how it works out!


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## bunyip (20 August 2008)

Here's an example of how candle reversal patterns can be used as trend continuation patterns.


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## bunyip (20 August 2008)

Pausing patterns during strong trends are often followed by explosive moves in the direction of the trend.
By placing an entry order just outside the pausing pattern, you give yourself the opportunity of getting a timely entry if the trend resumes.
The breakouts from these patterns will sometimes put your trade hundreds of points in profit in just the first day or two.

After breaking out above this three day pausing pattern, the USDCAD ran up more than 450 points in the next eight trading days.


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## CanOz (20 August 2008)

Great posts Bunyip...and if you can get away with a stop of 100 pips then you R/R is well worth while and should lead to a postive expectancy no worries.

I love those little consolidation pattens. 

I think i'll try and demo account after harvest is over.

*Lesm*, how are you anyway. Yes, we're doing ok now thanks. Its bit a bit choppy trading the US but i think we may have ourselves a trend there again.

I have also got myself a fully portable version of Firefox complete with its own proxy!!!! ha ha ha ha ha! I may be back for good now

Cheers,


CanOz


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## tayser (20 August 2008)

an even easier thing to do:  get a metatrader demo, look at your pairs at about 7:05am AEST (when New York closes and a new daily candle starts) and apply something like Guppy's Trend Trading system executing on which ever broker you wish.  MBT is a true blue ECN which has extremely elaborate order types and only costs you $400USD to open an account.  1:100 leverage (cant change the leverage and all the buying power readouts reflect that so if you want to place a trade with effectively no leverage (miniumum is 1000 lots ($0.10USD a pip)) you need to calculate it yourself).


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## CanOz (20 August 2008)

tayser said:


> an even easier thing to do:  get a metatrader demo, look at your pairs at about 7:05am AEST (when New York closes and a new daily candle starts) and apply something like Guppy's Trend Trading system executing on which ever broker you wish.  MBT is a true blue ECN which has extremely elaborate order types and only costs you $400USD to open an account.  1:100 leverage (cant change the leverage and all the buying power readouts reflect that so if you want to place a trade with effectively no leverage (miniumum is 1000 lots ($0.10USD a pip)) you need to calculate it yourself).




Thanks Tayser, appreciate the advice. Will look into this for sure. I guess i need to try the pattern system in demo and see how i feel about it. I think if i'm patient and let trades come to me i could manage something like this, or my GF could...i think having a few systems is the way i will go and FX has a place for sure. 

You only scalp correct?



Cheers,


CanOz


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## tayser (20 August 2008)

yep.  I prefer to be in and out of the market in seconds and just take 10 or so a day - it's pretty simple, take $500 multiply by 2% per day and let it compound.  

As a starting reference, 2% of $500AUD is $10AUD, which is 8-9 pips on EUR/USD - using 10,000 lot ($1USD pips) or roughly 30-35% of the available buying power using 1:100 - i.e not leveraging yourself to the t1ts.

(pip value is USD and as AUD/USD is currently 0.8690 meaning every $1USD is worth $1.15AUD - you're getting a nicer payout or you just require less 'work' to get your 2% a day)

doesn't mean I won't look at longer term trades in future however.


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## bunyip (20 August 2008)

In addition to daily charts, follow 2 day and 3 day charts if you want more trade setups.


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## bunyip (20 August 2008)

If you want to get a bit more 'high tech' in your analysis, you'll find that Forex responds quite well to Fibonacci retracement levels.


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## bunyip (28 August 2008)

Here's another simple system suited to trading Forex and just about any other market......the Triple Screen System outlined by Alex Elder in his book 'Trading For A Living'. 
Of the various entry setups I use to find Forex trades, the Triple Screen setup is probably the one that shows up most often. The reason it gives so many signals is simply that it enters from temporary retracements within established trends. And retracements during trends are common....it's a rare trend that goes from start to finish without the price action moving temporarily against the trend at least a couple of times.

The three 'screens' or filters in the TS system are....
1. *First screen......Identify the trend on the weekly chart.*
(Elder gives a number of options for identifying the weekly trend, the simplest of them being the slope of a 13 week Exponential moving average.)

2. _*Second screen....Go to the daily charts to find retracements against the weekly trend.*_
(Elder uses a momentum based indicator for this. He mentions a couple of them, but the one I personally use is CCI (Commodity Channel Index) on a setting of 3. This common indicator is available in all decent charting software. When there's a retracement during an uptrend, CCI gives a buy signal by falling below zero. When there's a rally during a downtrend, CCI gives a signal to go short when it rises above zero.)

3. _*Third screen...Price action must confirm the indicator signal.*_
(In other words, the uptrend must resume. You don't go long just because the indicator is giving a buy signal....sometimes price will keep falling irrespective of the buy signal. The trick is to wait for the price action to confirm the indicator signal, then go long. This means you don't buy unless price action starts rising. However, you can anticipate the rising price action by putting a buy order above the second last candle, once the CCI drops below zero. This will put you into the trade automatically if the trend resumes, as you expect it to do.  
Or if the price decline continues, you can lower your buy order each day to just above the second last candle.
The stop loss is placed just below the most recent low.

I've made a few minor changes to the Triple Screen system. Rather than identify the trend by looking at the slope of a 13 EMA on the weekly chart, I decided to use the slope of a 65 day EMA on a daily chart. (13 weeks X 5 trading days/week = 65 days) I found that 13 week EMA and 65 day EMA closely duplicate each other.....both will be rising, falling or flat at more or less the same time.
Then through trial and error I shortened the 65 day EMA to 50 EMA to make it more responsive to trend changes in Forex.
I added 7, 14 & 21 EMA's, perhaps unnecessarily, but I like them as a handy quick reference guide to show when a market has started trending strongly. 
The CCI is not mentioned by Elder, but it's my preferred indicator after having conducted extensive testing on a number of indicators.

The moving averages and the indicators are not essential. You can simply eyeball a bare bar or candle chart to see when there's a good trend underway, wait for a retracement against the trend, then put your entry order on the trendward side of the market. 
But my personal choice is to use a few moving averages and an indicator....I find they make my analysis quicker and easier.

For short entries into downtrends, the above rules are simply reversed.

The Triple Screen system trades with the trend, enters at strategic times during the trend, lets profits run and cuts losses short. Its objective is potentially big profits from the winners, while ensuring that losses are kept small on the trades that don't work out. It achieves these objectives very well.

A picture is worth a thousand words....the chart below shows how the Triple Screen system gave a timely entry into the sort of trade that traders dream about.


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## el_colorado (29 August 2008)

Definitely going to try this one out on the demo bunyip


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## tech/a (30 August 2008)

> A picture is worth a thousand words....the chart below shows how the Triple Screen system gave a timely entry into the sort of trade that traders dream about.




Selective bias.

There are countless examples of failure of analysis.(Triple screen).
CCI is only conforming to price action in hindsite.
Many "signals" beyond those shown in your chart---why stop buying?
In walk forward analysis which DONT you take?

Its far too slow in my opinion.


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## bunyip (30 August 2008)

tech/a said:


> Selective bias.
> 
> There are countless examples of failure of analysis.(Triple screen).
> CCI is only conforming to price action in hindsite.
> ...




_*Selective bias. *_
Meaning, I presume, that I've selected a perfect example of this system. Yes, that's exactly what I've done...the purpose being to show the workings of the system. Not all of them work out this well. Some of them fail.

_*There are countless examples of failure of analysis.(Triple screen).*_
Sure there are examples of where these trades don't work out, just as there is in every other trading strategy. I've openly stated that I win only about half of my trades. No problem...strictly control the losses, let the winners run for the duration of the trend. Far bigger average winner than average loser.

_*CCI is only conforming to price action in hindsite.*_
CCI responds to price action. How quickly it responds depends on what setting you use. On a setting of 3 it's quite responsive and it does a pretty good job of alerting you when a stock or market starts retracing against the trend. Not that you need it - dispense with the CCI if you like and just eyeball the chart to see for yourself when the retracements are happening.
CCI and other indicators come into their own when you want to find countertrend retracements in a watchlist of hundreds of stocks. Any decent charting software can scan for CCI crossing above or below the zero line.

_*Many "signals" beyond those shown in your chart---why stop buying? *_
Why indeed....did I say I stop buying? I've shown other buy signals that turned up later in the trend.....good places to pyramid the position. In an earlier post I referred to pyramiding as 'one of the most profit-enhancing of all trading strategies'.

_*In walk forward analysis which DONT you take?*_
I assess each trade on its merits. There are subtle visual clues as to whether a retracement is coming to an end, or is likely to continue further. I don't propose to go into details here.

_*Its far too slow in my opinion.*_
Then don't use it. Maybe your sense of urgency is greater than mine. I'm not in any rip tearing hurry to get in when I see a new trend get underway. I don't feel any great sense of urgency to board the train. I'd rather sit back and wait for the trades to come to me. I don't care if the trend runs a while before it pauses or pulls back to give me one of my entry setups.
Triple Screen is just one of the many methodologies for entering trends after temporary retracements against the trend. Elder didn't invent the strategy of trading from retracements....it had been used by many traders for decades before he came on the scene. All he did was add specific rules to a proven strategy, give it a name, then market it via his books and trading workshops.
My strategy for years has been to enter trends after countertrend retracements, and also after consolidation patterns during the trend. New trends usually pause or pull back not long after they begin, giving you a timely entry point. Some of my entries are from Triple Screen, sometimes from candlestick patterns, sometimes from rectangles and triangles, sometimes something else.
You can do very well with a strategy that enables you to take hefty bites out of trends. That's my objective on every trade.
It's been working for me for ten years so far.


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## bunyip (3 September 2008)

For budding Forex traders, here's another entry strategy that has worked well for me.


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## CanOz (3 September 2008)

Bunyip, how do you trail the stop?

Cheers,


CanOz


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## bunyip (4 September 2008)

CanOz said:


> Bunyip, how do you trail the stop?
> 
> Cheers,
> 
> ...



Ah...a very good question and one that I've been expecting, since I've said little or nothing so far about exits or how to trail the stop.

This chart tells the story.


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## CanOz (4 September 2008)

Thanks Bunyip, pretty much explains it. I might have to try this me thinks, what with no trade on in equities at the moment.

Cheers,


CanOz


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## bunyip (5 September 2008)

CanOz said:


> Thanks Bunyip, pretty much explains it. I might have to try this me thinks, what with no trade on in equities at the moment.
> 
> Cheers,
> 
> ...




Yeh, give it a whirl and see how you go. If you can trade equities you should be also able to trade the Forex markets....they're smoother trending, rarely gap, and rarely give you any slippage on your entries and exits. And they tend to trend more often than not.

If I can offer a couple of snippets of advice......

* Trade very small to begin with, no matter how much money is in your trading account. 1 mini contract would be perfect to dip your toe in the water. 

* Make sure your trading account is sufficiently funded. If putting your stop in the correct technical position causes you to risk more than 2% of your trading account, your account is too small. 1% risk is even better. If you risk 6 or 7 or 10% of your account on each trade, three or four losing trades in a row will severely dent both your trading account and your confidence, possibly causing you to abandon what is a profitable system.
Compare this to risking just 1% on each trade. Four or five consecutive losing trades won't have much effect on your trading capital, and if your trading capital stays intact then your confidence will stay intact as well. With your confidence intact, you'll ride out a few losing trades no worries and stick with your system until the good trades arrive.

* Don't discount the importance of a timely entry. The idea that entries are not particularly important is a complete fallacy. Once a new trend gets underway, there's no urgency to get in. It doesn't matter if the trend initially runs a few hundred points and you're missing out on the profit opportunity. 
Patience is the name of the game....sit back and wait for the trades to come to you, wait for the right setup to appear. 
The market has to comply with your wishes, not the other way around. How do you make the market comply with your wishes? You don't....you just refuse to trade it unless it does comply. In other words....no setup, no trade. 
You greatly increase your odds of success if you wait for a trend, then enter from one of those patterns which signal that a momentum surge is imminent. The charts I've posted on this thread show those patterns.

You may have heard of Linda Bradford-Raschke...she's one of the traders featured in Jack Schwager's 'Market Wizards' books.
Linda was asked in an interview_..."How important is market timing in your analysis?"_
Her reply was.... _"Very important. It helps determine how much you want to risk and it helps determine the degree of follow through.
If your timing is such that you are hopping aboard right when there is an increase in momentum, then you have greatly increased the probability of follow through in your direction."_

* Don't decide when to get out of a trade....let your stop make that decision for you. Trail the stop according to your rules - let it take you out of the trade when the time comes. This is the only chance you have of riding those really big trades for the duration of the trend.


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## el_colorado (5 September 2008)

Like the advice there.  How would you advise we calculate how large our trailing stops should be?  I know some like to use the preceeding day's high/low depending on the trend and other's the base it off the ATR of the currency that they are trading.  I guess it's just a matter of keeping it close to the fire but not too close as to be stopped out. Would be very interested in your thoughts regading the matter.


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## bunyip (5 September 2008)

el_colorado said:


> Like the advice there.  How would you advise we calculate how large our trailing stops should be?  I know some like to use the preceeding day's high/low depending on the trend and other's the base it off the ATR of the currency that they are trading.  I guess it's just a matter of keeping it close to the fire but not too close as to be stopped out. Would be very interested in your thoughts regading the matter.





I don't have hard and fast rules with regard to calculating how far away the stop should be. As a general rule I use a figure of 20 points above each lower peak (in a short trade) and 20 points under each higher trough (for a long trade). But I'll vary that figure at my discretion, e.g. if the trend is really stepping along with big range days then it's reasonable to give it a bit more room by keeping your trailing stop out a bit wider. 
I think the important thing with trailing stops is to trail them at technical levels, i.e. at swing points in the market. Swing points are important during trends because they show where market sentiment changed, and the main trend has resumed. In theory, once the trend resumes, the market shouldn't come back to these swing points again during the trend. So (again in theory) swing points are good guidelines as to where to trail the stop.
I wouldn't be willing to claim I've found the perfect trailing stop mechanism, but what I use seems to work ok most times. 
I'm still learning in this game, just like we all are. After 4 years or so in the currency markets I'm still finding out new things.


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## el_colorado (5 September 2008)

Thanks Bunyip.   Can't help but smile when I hear experienced traders like yourself say that they are still learning and I look at where I'm at. : Guess that's part of the fun of trading.


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## bunyip (6 September 2008)

This information in this Forex chart will be well known to established traders, but may be useful to beginners.

It shows  how old support levels, once broken, tend to become new resistance levels. This is known as the 'change of polarity' principle, and I first became aware of it after seeing it in one of Steve Nison's book on Japanese candlestick charts.
Also, this chart shows how a confluence of technical signals can add to the credibility of a trade setup. 

This chart is from 1977...31 years ago. Popular opinion says the markets are changing all the time, and you have to adapt to the changes by constantly updating and changing your trading strategies. 
My research debunks this theory......the very same trends, patterns, support and resistance levels, retracements, and every other technical feature you can think of, can be seen in every chart of every market in every timeframe in every year going right back to the 1920's. I know this because I've studied charts, thousands of them, across a wide variety of markets going back a long, long way, and all of them showed the very same features and trade setups that we see in today's charts.
And so they should......price movements on a chart are caused by human nature, and human nature doesn't change.
I'm trading from the same strategies I've always used.....they work as well today as they ever did.


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## bunyip (12 September 2008)

Some amazing trends are currently in progress in a number of Forex pairs. 
This chart shows an unusual mid week gap in the big-trending EURUSD. 
Usually the gaps, which are rare, occur between Fridays close and Mondays open and tend to be in the direction of the trend, which works very much in favour of trend-riding traders.


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## BentRod (12 September 2008)

Which chart is that Bunyip?

Euro Daily?

I can't find any gap.


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## bunyip (12 September 2008)

BentRod said:


> Which chart is that Bunyip?
> 
> Euro Daily?
> 
> I can't find any gap.





EURUSD daily.

Looks like my data is at fault. I just checked out another data source and it shows no gap. 
I'm waiting for a call back from my data supplier.....they're about to get their ear chewed!


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## BentRod (12 September 2008)

ah.

No wonder I was confused.


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## CFD (14 September 2008)

Some nice posts (and charts) there bunyip, good stuff.


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