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Learning price action - how long, how many hours per day, how many pips
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Learning price action - how long, how many hours per day, how many pips

  #11 (permalink)
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Fwiw, this is my goto chart, Images | ChartHub.com.

The range is specific to the instrument but on ES I will use 3-5 ticks pending volatility, and on currencies it's usually 5t-10t.

I find price action trading much more reliable than any of the indicator-based stuff I have done in the past. Just my 2 cents. Everyone has their favorite styles, but for me my best results come from combining location and context via volume profile analysis and basic price action analysis (not strictly Brooks PA). Market Structure+Location+Trigger is 10% of it, the other 90% is mental.

Guess while I'm at it Ill add one more I wrote up earlier today, http://i.imgur.com/mcdpp.jpg.


Last edited by cleon; March 24th, 2011 at 10:53 PM.
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  #12 (permalink)
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cleon - it all looks interesting but I can't tell much with the little knowledge I gained so far. You first chart didn't actually have any notes - or did I miss them somehow? Your gold chart was a lot more informative but I'm missing basic knowledge like even what an ABC is.

You can discover what your enemy fears most by observing the means he uses to frighten you.
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  #13 (permalink)
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Adamus View Post
cleon - it all looks interesting but I can't tell much with the little knowledge I gained so far. You first chart didn't actually have any notes - or did I miss them somehow? Your gold chart was a lot more informative but I'm missing basic knowledge like even what an ABC is.

I did not annotate that first chart. It's just from something I did earlier that I re-posted here for reference. The #1 and #2 are just pullbacks, with the #2 being a much higher probability trade. I don't have the profile up at the time but if you were to add it, it was one of my favorite trades. B profile ABC pullback to dVAH into a major pivot (in this case PDL).

But I don't want to get into all of that. The ABC is a very simple 2-legged correction in a 'trend'. Just google it with the word 'trade' and you'll have more info than you need. Was just pointing out that I really have come to appreciate the power of simple price action and basic pivots (PDR, OP, and VAs - the latter of which i know are controversial).

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  #14 (permalink)
Breathe the body deep.
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I trade based on trend, momentum, and price action. I use a 3 range chart.

Cory mentioned making $100 a month. He's right. If you can consistently make $100 a month, then you can just ramp it up to trade larger/use more leverage to attain a larger profit. Of course, that's if you don't have a negative reaction to making just a large jump.

The questions you're asking can't be answered in a definitive sense. No on knows how certain it is for you or anyone to make $3k a month, within 3 months, without being consistent prior. Can it be done? Of course. Is it likely? Not at all.

Maybe you should slow down, take a step back, and trade small. Build up gradually. Based on your post it doesn't sound like you're emotionally stable enough to make profits consistently...yet

You sound intelligent, so I'm sure you can do it. Just seems like you're rushing it too much and gonna blow your shit up!

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  #15 (permalink)
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$100 a month

When you say making a $100, what you mean all depends on the lot size you are talking about. You might mean $10K lots - but my account at IB only allows $25K or greater.

I've got a sim account for my first foray, and after that, starting small is in the plan - but I mean $25K. If everyone cries "less!" and I really can't hack it at $25K then I'm going to have to open another account somewhere else.

Re sounding intelligent but emotionally not stable enough - yes, I realise my avatar and tag line and general writing style probably give a certain impression - but how do you measure that other than in the markets? I can look in the mirror but I don't see any gauge of emotional stability in the reflection.

You can discover what your enemy fears most by observing the means he uses to frighten you.
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  #16 (permalink)
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Adamus View Post
When you say making a $100, what you mean all depends on the lot size you are talking about. You might mean $10K lots - but my account at IB only allows $25K or greater.

I've got a sim account for my first foray, and after that, starting small is in the plan - but I mean $25K. If everyone cries "less!" and I really can't hack it at $25K then I'm going to have to open another account somewhere else.

Re sounding intelligent but emotionally not stable enough - yes, I realise my avatar and tag line and general writing style probably give a certain impression - but how do you measure that other than in the markets? I can look in the mirror but I don't see any gauge of emotional stability in the reflection.

$25k lots in FX are $2.5 a pip. Assuming you have an IB account with $10k you can safely risk $100-$200 per trade (1-2%). Assuming your strategy allows for your stops to be less than 40-80 pips you can trade this size just fine.

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  #17 (permalink)
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This spawned more questions than I can count

At the moment I'm dividing my time between reading up on price action and trying it out on sim.

My first trial trading with the trend buying into HHs and HLs or selling LHs and LLs was all wrong.

I started off with an 8 tick range chart on GBP/USD.

I was suckered into entering too late every time almost and managed to make a loss being mostly short despite the pound sinking 50 ticks.

Using the same technique to exit was an even worse idea.

I figure I committed every newbie trading error in the book so it's a bit difficult to know if I can get any benefit from this session.

I guessed my tick range was too small and I tried upping it to 21 but had no better joy.

All the LHs and LLs seemed to interspersed with HHs and LLs that broke the pattern so I shouldn't have made 90% of the trades I took. I thought I could see smaller patterns inside the bigger pattern but I guess I was kidding myself.

I was trying to see the 'pace' of the market but I was just not getting it.

I just ended up with a load of question. Maybe GBP/USD is no good for PA trading. Maybe IB's tick data is too heavily processed, filtered or whatever. Maybe I should have used 200 tick ranges. Maybe I do need volume and the book from an exchange (which aint gonna happen in 4X) to get some high probability signals.

You can discover what your enemy fears most by observing the means he uses to frighten you.
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  #18 (permalink)
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Adamus View Post
At the moment I'm dividing my time between reading up on price action and trying it out on sim.

My first trial trading with the trend buying into HHs and HLs or selling LHs and LLs was all wrong.

I started off with an 8 tick range chart on GBP/USD.

I was suckered into entering too late every time almost and managed to make a loss being mostly short despite the pound sinking 50 ticks.

Using the same technique to exit was an even worse idea.

I figure I committed every newbie trading error in the book so it's a bit difficult to know if I can get any benefit from this session.

I guessed my tick range was too small and I tried upping it to 21 but had no better joy.

All the LHs and LLs seemed to interspersed with HHs and LLs that broke the pattern so I shouldn't have made 90% of the trades I took. I thought I could see smaller patterns inside the bigger pattern but I guess I was kidding myself.

I was trying to see the 'pace' of the market but I was just not getting it.

I just ended up with a load of question. Maybe GBP/USD is no good for PA trading. Maybe IB's tick data is too heavily processed, filtered or whatever. Maybe I should have used 200 tick ranges. Maybe I do need volume and the book from an exchange (which aint gonna happen in 4X) to get some high probability signals.

You actually aren't as far off as you think. GBPUSD (or any market that moves) on virtually anytime frame works. 21 tick is fine.

Couple of tips:

1) Only trade pullbacks
2) Wait for a new trend cycle (i.e. after a HL/HH & LL/LH is broken) - watch Mike's video and look at the charts that Bacon or I posted
3) The 3rd push in any trend cycle is often the last (I don't trade after the 2nd push)

Here are the trades I would have taken on your chart:

1) Sell at 11:37 on the pullback of the first break of a consolidation (hard to say but that is what it looks like it possibly is on the far left of your chart) cover on 3rd push at 11:44
2) Buy at 11:50 (about where you bought) cover 11:54 on a failure to pull a new higher low
3) Sell at 11:57 on the the first pullback after HL/HH & LL/LH is broken) cover on the 3rd push which isn't on your screen

Keep in mind this isn't a 1 day exercise. Do this exercise and post your results here for a month. Do it every trading day and I am very confidence you will see what PA is about.

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  #19 (permalink)
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I think Cory nailed it (the view from 30000 feet -- "...as long as it takes to make $100 / month").

My bread & butter spot Forex 2-hour-bar bot pays the bills, but having grown weary of watching it blithely ignore hugely profitable & hugely costly short term moves I'm learning how to discretionary trade 1-10 minute bars partly to see if I can pass on the knowledge on to the bot, but also for fun & profit.

As a bonus I get to compare notes with 2 of my kids who have just begun short term discretionary spot Forex trading (both of whom have already blown up at least one account). One kid was margin called 4 times over approximately one month before he finally wiped himself out. Up to that point he insisted paper trading didn't provide a legitimate learning experience. What I heard was, "I'm in a hurry to get rich and am therefore going to skip the learning process". What he's coming to grips with now is if he can't skip the education maybe sim trading can reduce the cost of tuition, although he still refuses to bother with a trading journal--still refuses to accept there is no shortcut.

Some general observations from my own brief (1 or 2 month) direct exposure to short time frame spot Forex trading, all of which is common knowledge and/or applies to discretionary trading in general:

- IMO reading is necessary, but book learning doesn't seem to sink in until we've made every mistake the book warned us about for ourselves (in my case, several times). In other words, there is no substitute for actually trading any new instrument or new time frame to learn it, during which time strict money management is imperative (e.g., base stops on price pattern but don't risk more than 2 - 8 % of the account on any trade; no obvious price-based stop in the 2 - 8 % range = don't take the trade).

- Popular wisdom suggests it takes 10,000 hours to master anything and I'm beginning to believe this applies equally to short time frame spot Forex, less any general trading experience going into it.

- the shorter the time frame the more erratic spot Forex becomes. It can (rarely) move 30-50 pips in a few seconds, against you in which case stops can slip badly as easily as in your favour. In any event you need to stay focused to detect any subtle precursor shift in sentiment & be super quick to react. Coming from hands-off longer time frame bot trading this can take a little getting used to.

- Price can reverse abruptly & massively. At first (and perhaps always) never jump in to a fast moving position if it's a move you haven't anticipated & thought hard about, unless you're prepared to exit just as rapidly, especially if it's a continuation of a trade you just got out of and especially of the sort that occur when London and New York go on/offline. Pullbacks can be calmer & may be less risky to trade in the direction of the overall trend, but even so, after large sudden moves if it does go against you get out ASAP--more than likely it will not come back and you will be free to take the opposite trade if a setup occurs.

- a corollary of the the last point is that if one does manage to enter an abrupt price move there is a good chance one will enter at the precise point price flattens, tying up capital.

- spot Forex seems to establish (& respond to) support / resistance levels including pivots like other instruments, and sometimes (often?) things like Fib levels, but I'd throw away any other indicators even if as a bot trader this might be hard to do--IMO price action and pattern is all that matters. As with discretionary trading any instrument job 1 may be learning to spot S/R prices in all that noise and across a number of time frames. The time consuming part is acquiring a feeling for the probabilities -- what price is most likely to do in the vicinity of S/R in a particular context, including various markets open/close.

- After a month or so manually trading short term spot Forex and several hundred paper trades I still have a compulsion to try to catch falling knives (or "rising arrows" I suppose), more than likely for the rush--same with anything new I suppose since in theory I ought to know better. Like most newbies I can often pick the price where something is going to happen spot on, and as usual with newbies more often than not what happens is the opposite of what I expect. Therefore after losing a small fortune (on paper) averaging the position up or down I'm experimenting with losing a fortune doubling up on the stop quantity. Eventually the inclination to throw the dice will pass (let's call it the Monte Carlo approach to the learning process ) and IMO it's a simple fact of trading life--necessary to flush any tendency to gamble out of one's system before trading any new instrument or time frame with real money.

Good luck !

Edited to add: When profitable I aggressively manage stops based on recent price action when nearing what I perceive to be completion of price action, whether or not price is near my target. In other words, when I'm profitable I prefer to get stopped (sometimes manually closed when the gut assures the next movement is against us and will continue to be against us) at my price choice if it looks like price is not going to reach the target.


Last edited by bnichols; April 2nd, 2011 at 01:05 AM. Reason: in trading it's "gamble", not "gambol"
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  #20 (permalink)
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Thanks for the good wishes. I hope my luck holds too. Having kids involved in the same business must be partly great and partly a nightmare. I guess you just can't tell them anything, as in the rest of life. I don't even give my kid pocket money yet so it'll be a while before she's trading thankfully!

I find being an automated trader first has taken away any compulsiion to gamble already - I know from a million backtests that the outcome is purely a question of edge. But that doesn't mean I'm not going to be prone to making the same mistakes as you but for different reasons.

Jumping on to the big moves that appear out of nowhere is something I'm sure I'm doing because I'm just afraid I missed the signs. Looking back there are no signs but it's going to take me a while to get used to seeing those moves come and go without being aboard.

As far as the HH/LH and LH/LL price action yesterday watching the EUR/USD after the non-farm payrolls, all the biggest moves marched away in the new direction without making any new HH/HL or LH/LLs. Pretty frustrating.

You can discover what your enemy fears most by observing the means he uses to frighten you.
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