P2: A batch of FX market trades

[aus_trader]

Well I had a look at both sources of information posted via links by andymac and all I can say is really good resources.

I've come across Elliot waves before but not been shown a simplistic way to apply it to trading such as in the article and also Peter Castle's 52 week highs system has really surprised me. I've seen these type of systems before with names along the lines of All-Time-High / Blue-Sky breakout trading systems but I thought like most people as mentioned:

this is so simple i think most people refuse to believe it can work.

I will put some effort into testing it out going forward because there seems to be a positive outcome.

 

[andymac]

SUNDAY.......?????? is the way to describe my view for this sunday. so caution will be the way forward this week. 2 charts.
Firstly usd index daily showing the 5 wave move up of several months and what is now a reasonable A-B-C correction down to .38r of the move up. Just looking at the chart it looks like a topping pattern from june until now, there is a head and shoulder top but not really a very symmetrical one. Overall i am still looking for a larger pullback towards 50-62%, however a new high from this position would not be unusual , so, sit and watch until it becomes clearer.
AUD - last week i was looking for 1 more wave up to 1.23ext. i nearly got it, but not really. it was made on FOMC news and was a very quick spike but more importantly in Elliot terms it does not count as 5 waves up if you look at the internal wave on smaller timeframe charts. Although a new hi was made it is actually an "expanded flat" abc. These occur quite often especially on individual stocks. So we have a large ABC up and then what i have now marked as another small abc correction down to 50%. From here it could go anywhere. the first ABC up can be followed by another leg up or it can be the complete correction and the smaller abc down can morph into the start of the next big leg down, so again sit and watch. no help to anyone
As an aside i watch the USD index as the other currencies and commodities pairs are all measured against the US dollar but that does not mean they always move in opposite directions all the time. On friday evening the US dollar was up as was AUD and GOLD while Euro was mostly down. I always take note when AUD or Gold want to go up, when theoretically they might be going down.

 

[sasch]

My advice to a new trader would be don't micro-manage.
Let the trade go and trail the stop using an objective rule and plan to add to the trade at set intervals.
I've noticed than when I'm prepared to add to a trade I'm less likely to take profits quickly because I'm preparing for a larger move. Some of these 4hr swings go for quite some distance.

Thanks for providing some more information on your trade management.

I would be interested in your results, if you extended the hold time using your system. Not sure if you have a rule about holding overnight with 4T/4B? As you have noted, the 4hr swings do carry on for a long time, especially if they also coincide with the longer term trend.

For example: Instead of trailing a stop actively, move it to break even when the trade moves to +2R, then leave it for the day, and overnight at this level. I imagine it would be too expensive to let the trade run to -1 R, as there would be many stop outs. So, ideally we would want to move to break even, and look at a minimum of 5R, even looking at 10R+ over a couple of days if there was a strong trend (Trump jumping on Twitter again).

Only moving the stop the next day to logical level based on resistance/support.

Downsides - Use of guaranteed stops overnight to avoid nasty surprises - slightly more expensive.
- Overnight holding costs/interest charges.
- Psychological - Forgoing short term profit.
- getting stopped out of more trades.

Positives, - catching daily trend and large return.
- forcing us to stay in trade longer to capture bigger returns.

 

[sasch]

Sasch - in relation to your 2 questions for Peter above, very interesting topics, especially the second one which i always battle with.
i believe anyone can enter a trade on just about any pretence and be right about half the time, which if you think about it is as often as most really good experienced traders are right. It is all about making a better profit on your good ones than you lose on the other half. everybody i have ever read or talked to can tell you about how much they have left on the table. so i have to accept that WILL happen.
the problem i have is when one really goes my way i keep finding supposed "good" technical reasons why it will go further and then all of a sudden you have bugger all.

I can identify with this, as I have tended to micro manage individual trades, rather than look at the bigger picture and considering the impact of a series of trades together. Rather than trying to make as much as possible from one trade, look at the overall portfolio return. I.e. - instead of trying to achieve +2 to 3R on one trade, be happy with a couple of +1R trades and a break even trade. Peter is able to demonstrate this quite well in his trade samples, which really helps.

So i will be looking forward to the results of Peters latest mission.
Interestingly i have learnt from him last few months and have been just taking a set profit target, maybe 2r but lately just a set dollar amount in relation to my acct size. when a trade hits my pre-determined profit target i just take it and be happy with that. and that seems to be working better for me.

So back to your first question - and remember i trade shorter time frames for a shorter period of the day than Peter, probably watching my trades more closely - so my initial stop doesn't really matter to me, it is wide, previous swing hi or lo, just so i don't get tipped out quickly. I do my work at the start of my trading period and leave orders in the market, until they are triggered. THEN i almost always start aggressively chasing stops up to break even or better. i have a lot of small losses and small profits and the occasional good profit, i think it is the big losses that can kill me.

Great to hear that you are making progress! Thanks for the insight here.

 

[aus_trader]

G'day all ASF members,

I don't have a forex thread and I know a lot of members watch Peter2's threads. So I thought to post a warning message about a Forex broker to stay well clear of. I don't normally like to make any noise if the company is reasonable in their conduct but this one is not and when I received the below email that just pushed me over the edge to warn people:



Also I was constantly called up to place trades even when I didn't want to so they could earn their commissions. So do your research and find a good broker and stay as far away as you can from ForexCT.

 

[peter2]

"Do you feel lucky, punk?"



A break-down from the Aussie session has produced three consecutive winners as the US markets dropped from their open.

 

[peter2]

Clint's setup worked out OK. This is a fav intra-day setup for me in a strong trend.
Sold 2882, iSL 2888, risk 6pt, T1 2876, T2 2870

Bought 2873, +9/6, Result +1.5R

Happy to get this while I was out. Hoping for an up day in the US session after three down days.
I have to adjust my template for DST as I just realised the US open is an hour later. D'oh.

 

[peter2]

Similar setups and moves in DAX and FTSE.


I'd not trade all three at the same time but two of them is OK.

 

[peter2]

Latest 4hr bar just closed. Let's see if there's anything interesting.
Strong: JPY, GBP, USD
Weak: AUD, NZD
News: GBP GDP Wed (tomorrow) is important.

EU short setup/triggered last bar.
EG nice ORB short, tempting, but very volatile.
GBPCAD long is tempting.
USDCAD long missed it, setup/triggered last bar.
NZDUSD may be oversold after huge move down last week.
Gold setup/triggered last bar.

Most of the action (movement) is in the indices as I've already posted. US open very soon. Bye.

 

[peter2]

Very choppy first hour in the US markets. No day trades for me. The market has now gone higher. I hope it doesn't reverse in their afternoon as I'd like to see some buying in the ASX.

Follow up on the four trades that setup /triggered while I was out and I'd mentioned in the prior post (in case there's someone looking at the charts).
EU short: trend is down, retracement has rallied ~50% of the move down (=setup)
The trigger to short is below the last bar up. Price did get to +1.5R but if you're not happy with that as a target, then you're probably stopped out at BE as price did reverse quickly.
USDCAD long: trend is up, pull-back is shallow, the trigger is the up bar that turns the trend back to up. Buy the open of the next 4hr bar. This trade started well but price did reverse quickly. This should have been BE result since the trade started well.
NZDUSD short: retracement setup at the EMAs, trigger below the lows of the dojis. Another BE result as the USD weakened quickly. I didn't like this setup too much as price has moved so much last week.
XAUUSD short: bread and butter pull-back setup (doji at EMAs), trigger below doji. This trade did get to +1.5R and I'd be happy with that but if you're not another BE result if you'd moved the exit to BE after the trade started well.

Note: All four trades have the USD in them so they're highly correlated. My limit is two highly correlated trades at a time.

ps: All four trades may be still open if you'd not moved your iSL to BE. Prices have not traded back to the iSLs.

 

[sasch]

Wow, 87% long positions, they are optimistic!

 

[peter2]

When Alice followed the white rabbit into the hole, she fell a long, long way.

I've just entered a similar rabbit hole and I hope I don't fall as far. I've made a 12 mth commitment to develop automated trading systems.



There's going to be a lot to learn, a lot to define, a lot of development, a lot of testing and a lot of perseverance.

I'm going to start by trying to automate the methodology outlined in this thread for the 4hr charts. System 4B looks for certain bar patterns and System 4T defines the trend and I look for low sized risk setups to get into the trend. Both systems won't be easily defined and collated into single automated systems (or EAs). It will require a number of systems (or a portfolio of systems) to replace my discretionary style.

Converting my discretionary trading ideas into objective rules based systems is going to be my biggest challenge.

I'll post aspects of this work as I go. I'll continue to post occasional setups and trades.

 

[fiftyeight]

I've just entered a similar rabbit hole and I hope I don't fall as far. I've made a 12 mth commitment to develop automated trading systems.

What has inspired this leap in this rabbit hole?

What program are you planning on using?

 

[aus_trader]

Converting my discretionary trading ideas into objective rules based systems is going to be my biggest challenge.

Yes Peter, this is the tough bit and it's tough to tell a program to look for the type of visual clues that we take for granted in manual trading. Things like increased volatility in the market that you can usually identify with one look that may prompt you to stay out, clear identification of trending market as oppose to sideways grind and lack of movement during anticipation of major news announcements etc need to be clearly defined i.e. quantified in order to put if/while conditions around them.

I can see you have thought this through though, hence the longer time frame you have in mind. Try to get the core system of just the trigger for breakout or pull back automated first, that way it's still useful and if the market conditions are not good then EA auto trading can be off until conditions are just right. So initially it can be semi automated i.e. a manual/auto hybrid system. Anyway, really looking forward to your progress...

 

[peter2]

I knew someone would ask. Fair enough.

I've been considering this for a few years, but I've been very reluctant to start knowing how much work is required. I'll have to reduce my trading time in order to get this established. I'm not happy with this, but once it's established it will save me time.

You would think that looking for trades on a 4hr chart 4 times/day across 20 markets would be easy to establish and maintain. I haven't done a good job with this and I'm thinking that some automation might help. An initial step might be getting the EAs to start the trades, place a SL, PT and alert me that a trade has started which I can then manage.

I'm going to use software commercially available from TradeView Investments. The software creates MT4 coded EAs that can be run on an MT4 chart.

 

[peter2]

A current example of a routine System 4T trend trade that I'd like to automate soon.

T17: XAUUSD (Gold) long: System 4T trend UP,
B 1195.5, iSL 1191.5, risk 4.0, T1 1199.5, T2 1203.5
Targets not used as the market sentiment is irrational and gold can spike $20 - $50. Or it used to.
This trade was closed as price fell back to T2. Result +2R.



I need to define the initial BO of a range, the shallow pullback and then use the BO as the trigger.
Easy to see on the chart but difficult to define for a computer to trade.

 

[Triple B]

How would the trend line be defined? I suspect this is why many would use MAs to define a trend line.
ould you draw a slanted trend line manually and then have the algo recognise it?
Next target may be the daily 200ma at about $1250??

 

[captain black]

I've been considering this for a few years, but I've been very reluctant to start knowing how much work is required. I'll have to reduce my trading time in order to get this established. I'm not happy with this, but once it's established it will save me time.

Good move Peter. I went down the same path a couple of years ago automating my short term futures trading. I was already familiar with Amibroker and Python with most of my setups already coded so half of the work was already done.

One of the benefits is that it takes an active time consuming occupation (discretionary trading) and turns it into a mostly passive income source that only requires occasional monitoring. I use python scripts to send alerts to my home server and android phones for various events (eg. system trading outside certain parameters, unusual price activity etc.)

Getting your setups converted to code can take some out of the box thinking but I've read enough of your threads to know that's something you specialise in.

 

[peter2]

@captain black Thanks for posting. The "out of the box" thinking is what I'm concerned about. My initial trading education was based on classic TA and their indicators. I'm using more price structure and price action in my trading now. The indicators have only minor confirmation roles.

Coding impulsive and corrective swings in the market will be my biggest challenge along with trade management logic. I can skew the results in my favour in real time but can I code this?

 

[peter2]

From the rabbit hole:
There's a lot to learn about the functionality of the software and how to assemble the coded blocks. I thought I'd start by coding the candle patterns from System 4B. I started with the pinbar and you can see (pic) that the EA finds them and starts a trade, places a SL at the low of the previous bar and targets 200p.


I've also spent some time researching the frequency of this pinbar (as I've defined it). Interestingly the frequency in the twelve markets that I scanned is similar. Daily ~1 pinbar every 2 months, 4Hr charts ~3/mth

Across 12 markets I can expect to see 6 PBs on the daily charts and 36 PBs on the 4Hr charts. In total this one pattern will provide ~40 trades / month.

Note: The definition of the pinbars is very basic and doesn't use any filters like; volume, short term, longer term trend, location (S/R, other levels), break-out, trend change etc. More research is required to see if any of these filters would improve the probability of a winning trade.

As an initial step I could let the EA run on a few markets and then manually manage the trades that are started by the EA.

ps: @CanOz I know you'll have a chuckle at this. I did so many MT4 scans across lots of markets that my CPU ran out of storage. I'd created 120GB of files in 1 hr!