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Trading spot fx euro using price action
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Trading spot fx euro using price action

  #191 (permalink)
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Thursday's chart 2011-10-13

Looks like I'm skimping on the notes when I mark up these charts. Mental note to improve that. Each setup I mark up should include not just the type (BOF, CPB etc) but also whether it looked good on the lower time frame chart, whether the stop run materialised, and whether retraces or spikes made it tricky.

You can discover what your enemy fears most by observing the means he uses to frighten you.
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  #192 (permalink)
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Zwaen View Post
Yes this is indeed difficult. There are several facors at play ( as I see it):

How strong is the SR support resistance Level?
-how many times SR support resistance Level has been tested?
-how was the prior reaction to the SR support resistance Level?
-is there any confluence in SR support resistance Level? For example pivots or 30 minute SR support resistance Level, and fibonacci and or Volume profile
-Unknown factors

How is the trend/strength reaching the SR support resistance Level?
-how is the slope and " slope of the slope" ( 2d derivative) of the trend?
-is the trend getting " old" or relatively new ?
-What kind of news is driving the trend?
-Is the higher timeframe trend supporting or not?
-several other factors I can't think of now

Then we can look at the reaction of the trend or move reaching the SR support resistance Level?
-How does price " penetrates" the level ( or even can't ). How many points?
-are the candles large or smaller?
-is the reaction the the level fierce/medium/weak?

Then we can look at the reaction to this reaction ( pullback and trend continuation and retest of SR support resistance Level):
-is this reaction stronger or weaker than the previous downleg? ( if weaker, possible 123 pattern )
-will price come above prior rosshook point? By how far?

When the reaction on the reaction on the reaction ( we are at a 123 pattern now) fails a possible 123 patterns or 2B pattern can develop( variations of a double top/bottom). When the reaction on this pattern fails we can say congestion formed. But even then, our congestion can look like another perfect pattern on another timeframe.

I think it is this why these patterns are difficult to automate, while our mind can ( with experience) easily compare all these variables at work to "anticipate/quess" the most expected outcome.

But I think constantly comparing previous legs with the current leg can give you clues of the future direction. Constantly identifying strenghts and weakness can show where price most likely will go

Thanks. Great post. I think you have probably defined 75% of the factors there - the rest are included in your 'unknown' factors. Constantly working with that list should become a subconscious task. This is why this training I'm putting myself through is worth it - according to the theory.

I certainly need to work on the S/R level characteristics. I pay very little attention to them. I also have no news input at all. I tried setting up Reuters over Interactive Brokers but failed to find the up-to-the-minute feed, and then of course there's twitter - which is no doubt where that post about a British bank rating downgrade came from.

You can discover what your enemy fears most by observing the means he uses to frighten you.
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  #193 (permalink)
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Yes in time it is easy to process, but it takes time and experience, and a lot trail and error, and analyzing charts while drinking coffee.
Today good example of shifting-strenght/weakness analysis on 6E.

See chart. First, bias is bearish. Then new strenght comes in in bullish direction. Next, a weak bearish pullback, leading to a possible entry in bullish direction ( 123 bottom pattern).

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  #194 (permalink)
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Zwaen View Post
Yes in time it is easy to process, but it takes time and experience, and a lot trail and error, and analyzing charts while drinking coffee.
Today good example of shifting-strenght/weakness analysis on 6E.

See chart. First, bias is bearish. Then new strenght comes in in bullish direction. Next, a weak bearish pullback, leading to a possible entry in bullish direction ( 123 bottom pattern).

What are those two blue h-lines? I can't see any S/R or pivot points there*. If not S/R, aren't you trading YTC PAT today? I thought you needed them even for BPBs. Or have you reverted completely to trading PBs? That would make sense because it doesn't seem logical for a YTC PAT trader to be so focused on which way the trend is going. It's just a bias to get you in at a stall, isn't it?

* I was compensating for the difference between 6E and $EURUSD.

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

Last edited by Adamus; October 14th, 2011 at 11:03 AM.
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  #195 (permalink)
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Hey Adamus,

about the SR lines, yes they weren't there at the time of the possible setup. It's just that I posted this setup in hindsight,
with the SR at 3735 an the SR at 3770 made AFTER the setup, see the 30 min and you see the SRlines. So they had nothing to do with strenght/weakness analysis and weren't there at that time

About trading. I wrote about investigating the setups. What I did was investigating 6 months of 6E data and finally came up with 4 different kinds of Pullbacks ( including BPB which I see as the same " family"). Now I investigated these setups I wanted to trade them.

I wanted to start 2 weeks ago and have seen my setups " come along" but didn't dare to enter the trades.

Now I recognize I suffer from this problem, afraid of pulling the trigger.
So I read about this subject on the internet and some threads on futures.io (formerly BMT), and created a BIG post-it on my screen with texts like these:
-The max drawdown should be xxx $ ( calculated from backtesting sheet), if this is reached I stop trading. This amount isn't that much. You must emotionally accept this ( relative little) loss.
-Becoming a trader is more important than losing the xxx$
-It's the batch-size which counts, so only look at performance at end of the month
-If a few losing trades come along, relax, a winner will be around the corner. If I get a big winner, relax too, because there will probably come a few losers also.

Next, because we want to enter when the pullback " looks weak" I think this is too much a non-rule
based approach( for me).
The problem is not that I cannot see weakness, but that there is always an excuse to not enter. A trade will NEVER look perfect. This is the uncertainty we have to become used to. So what I've planned (tomorrow saturday) is to " Quantify" the weakness I'm looking for in a few rules and then just execute it, because I really want to start trading real money monday!( angry on myself because not daring pulling trigger) (This being said, the rules will offcourse not be too rigorous causing never to enter)

I will also make a few posters of " goodlooking" setups and " badlooking setups" which I hang upon my wall behind my pc to print these in my brain.



Last edited by Zwaen; October 14th, 2011 at 11:25 AM.
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  #196 (permalink)
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Zwaen View Post
Hey Adamus,

about the SR lines, yes they weren't there at the time of the possible setup. It's just that I posted this setup in hindsight,
with the SR at 3735 an the SR at 3770 made AFTER the setup, see the 30 min and you see the SRlines. So they had nothing to do with strenght/weakness analysis and weren't there at that time

About trading. I wrote about investigating the setups. What I did was investigating 6 months of 6E data and finally came up with 4 different kinds of Pullbacks ( including BPB which I see as the same " family"). Now I investigated these setups I wanted to trade them.

I wanted to start 2 weeks ago and have seen my setups " come along" but didn't dare to enter the trades.

Now I recognize I suffer from this problem, afraid of pulling the trigger.
So I read about this subject on the internet and some threads on futures.io (formerly BMT), and created a BIG post-it on my screen with texts like these:
-The max drawdown should be xxx $ ( calculated from backtesting sheet), if this is reached I stop trading. This amount isn't that much. You must emotionally accept this ( relative little) loss.
-Becoming a trader is more important than losing the xxx$
-It's the batch-size which counts, so only look at performance at end of the month
-If a few losing trades come along, relax, a winner will be around the corner. If I get a big winner, relax too, because there will probably come a few losers also.

Next, because we want to enter when the pullback " looks weak" I think this is too much a non-rule
based approach( for me).
The problem is not that I cannot see weakness, but that there is always an excuse to not enter. A trade will NEVER look perfect. This is the uncertainty we have to become used to. So what I've planned (tomorrow saturday) is to " Quantify" the weakness I'm looking for in a few rules and then just execute it, because I really want to start trading real money monday!( angry on myself because not daring pulling trigger) (This being said, the rules will offcourse not be too rigorous causing never to enter)

I will also make a few posters of " goodlooking" setups and " badlooking setups" which I hang upon my wall behind my pc to print these in my brain.


Hi Zwaen, even though you are further ahead than me, can I give you advice? If you are afraid of pulling the trigger, then trade smaller lot sizes. Swop over to forex and trade 25 grand per trade instead of 125 grand on the future.

Secondly, always having an excuse not to enter means that you haven't practiced enough. There are always a lot of factors to take into account - you listed them all yourself in a previous post - and your subconcious should be able to filter through them automatically and you have to trust the resulting small voice telling you what to do. If you don't have a small voice, you need to grow it some more with sim trading, right? Or are you saying that you know all this and you have an extra problem driven by fear after you've made your first decision?

You can discover what your enemy fears most by observing the means he uses to frighten you.
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  #197 (permalink)
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Friday 2011-10-14

Trends, reversals and setups for Friday 2011-10-14.

This is one of the last of my current phase of training. Tomorrow will be my last day and then onto the next stage, finally. It was so tempting to rush through the 100 charts and get this stage "done", but I managed to keep myself on the straight and narrow (and slow) path - trying to analyse them too quickly just means I don't learn anything.

So here is Friday's chart.

You can discover what your enemy fears most by observing the means he uses to frighten you.
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  #198 (permalink)
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Adamus View Post
Hi Zwaen, even though you are further ahead than me, can I give you advice? If you are afraid of pulling the trigger, then trade smaller lot sizes. Swop over to forex and trade 25 grand per trade instead of 125 grand on the future.

Secondly, always having an excuse not to enter means that you haven't practiced enough. There are always a lot of factors to take into account - you listed them all yourself in a previous post - and your subconcious should be able to filter through them automatically and you have to trust the resulting small voice telling you what to do. If you don't have a small voice, you need to grow it some more with sim trading, right? Or are you saying that you know all this and you have an extra problem driven by fear after you've made your first decision?


Hey Adamus, thanks for your sound advice. I remember Big Mike saying first practise 1 month sim, then 1 month 1$ /pip, next month 2$/pip etc which I also found a very good idea.
In the weekend I tried to break the qualitative rule in some quantitative rules, which worked and suddenly I felled relief ( bit difficult to say in english). So I feel much better now and feel better about taking the trades.

So you move to the next stage, interesting!You are going to sim-trading now?

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  #199 (permalink)
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Zwaen View Post
Hey Adamus, thanks for your sound advice. I remember Big Mike saying first practise 1 month sim, then 1 month 1$ /pip, next month 2$/pip etc which I also found a very good idea.
In the weekend I tried to break the qualitative rule in some quantitative rules, which worked and suddenly I felled relief ( bit difficult to say in english). So I feel much better now and feel better about taking the trades.

So you move to the next stage, interesting!You are going to sim-trading now?

First up, if you break the system down into quantifiable rules that you could use to program a computer, then you might have a great trading strategy/mechanical system, but you won't get the consistency that discretionary traders get, I'm sure.

Did you read this quote from YTC PAT which quotes SMBTrading's blog


Quoting 
Lastly, these patterns are most useful if you own them and make them your own. I have trained traders in the past and one of the exercises I had them do was literally to find several hundred examples of support / resistance both holding and failing on daily charts, and then to examine price action on intraday charts around those levels. You really do have to see many hundreds of patterns before you are comfortable with all the variations of holding and failing (and then failures of failures). I do not believe it is constructive, or even possible, to catalog all of the possible variations, but intuition will slowly grow from repeated exposure. Be aware that there is a tremendous difference between understanding patterns and trading, and this is but one of many important elements of price action.

Do you see the relevance?

Secondly, I'm not sim trading yet. I have to sit in front of the live screen for 10 sessions doing no trading, just analysis as I did for the charts - i.e. the same as I have been doing but without hindsight.

You can discover what your enemy fears most by observing the means he uses to frighten you.
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  #200 (permalink)
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Adamus View Post
First up, if you break the system down into quantifiable rules that you could use to program a computer, then you might have a great trading strategy/mechanical system, but you won't get the consistency that discretionary traders get, I'm sure.

Did you read this quote from YTC PAT which quotes SMBTrading's blog



Do you see the relevance?

Secondly, I'm not sim trading yet. I have to sit in front of the live screen for 10 sessions doing no trading, just analysis as I did for the charts - i.e. the same as I have been doing but without hindsight.


That is a good article, in my memory i read it indeed 4-5 months ago.

The " rules" I have made for myself are also somewhat discretionary, and not programmable I think( I am no programmer). These rules are based on observation and then " testing" on historical charts.

I think what I call " quantifying" isn't what you mean by " quantifying" :-)

So for example, if I would make some " rules " for a test of support ( go long at support) in accordance to the article, the rules could have been:
-take entry directly IF price reaches level not too hard ( not too hard= mental picture)
-take entry only IF signalbar forms and enter above this candle ( signalcandle=hammer, piercing, bullcandle etc)
-take entry ONLY if price moved fast earlier from support
-take entry ONLY if this is the 1st test.
-When in trade, bounce should move at least about xx points in y bars ( mental picture) because I want strong reaction.
-After this reaction retrament may only be about max 70%
- IF price stalls for about 4 bars after entry -> prematurely exit trade
etc

For the pullbacks I have some rules for example:
-slope on pullback must be decreasing ( increasing slope is NoGo) due to overlap candles / decreasing range candles
-Maximum of 2 tails against my postion
-retracement maximum 70%
-Need signalcandle
-1 doji is not good signalcandle ( unless slope is very weak) but 2 doji's is also oke
-need minimum about 10-15 pips room till hook
etc ( ofcourse these are by far not all rules because I think structure is more important then entry )


Last edited by Zwaen; October 18th, 2011 at 08:04 AM. Reason: typos...and I believe there will be more than I see ;-)
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