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Trading spot fx euro using price action

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  #21 (permalink)
 Trankuility 
California
 
Experience: Intermediate
Platform: FxTrade/Ninjatrader
Broker: Oanda/MBT
Trading: Eur/Usd
 
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Yeah, bar type I think is just user preference. I use range bars because it's easier for me to see the movements and I like how clean it looks. But if time-based bars, or any other type, are good for you then go for it.

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  #22 (permalink)
 Adamus 
London, UK
 
Experience: Beginner
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Yesterday was an up day, but the daily chart still looks like it's a bear trend.

The hourly chart said the same.

Didn't start til almost 13:00 London time, so this was the NY open. I am not being radical enough with my daily planning - need for a tactical strike.

2 wins, 2 losses.

I didn't play the runner today, I'm not going to try trading that until I've sorted out the simple stuff, and got myself an ATM strategy for NT7 that helps.

A couple of questions cropped up that bear thinking about.

Should I allow myself to count HLs and HHs (or LHs and LLs) when they occur on consecutive bars? They look unconvincing. Maybe I should award them a half point towards my estimate of the trend's strength, but I can't use them for entries - I'm not quick enough for a start. Well maybe I could, I ain't that slow.

The entries are troubling me too. Don't know whether to enter on a half-pip beyond the last HH or LL or on the close of the bar beyond it?

Also today seemed like waves going down with 15 to 20 mins retraces, so I could see the last LL on the previous bear and I figured, I'd better wait for the new bear to break below that before trading the new bear. Then I figured, let me put a stop below it, and just get in without the LH/LL in the current bear. So I figured that's an entry on the higher 'range-frame' if you like (I would say time frame but it's range bars not time bars).

I'll be interested to see what I missed when I look at the chart again later and try to put 'perfect trades' on it.

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  #23 (permalink)
 Adamus 
London, UK
 
Experience: Beginner
Platform: NinjaTrader, home-grown Java
Broker: IB/IQFeed
Trading: EUR/USD
 
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Frustrated Incorporated.

Let's see if I can make any sense of the four hours I just spent in front of EUR/USD.

It looked like a down trend on the hourly and the daily charts.

Remembered from somewhere I should be checking the forex calendar for news events - had one today at 13:30 London time with US retail sales and PPI - not exactly non-farm payroll though.

So although we're in a downtrend, most of the down bars in the last week have been in the late UK / US session. In fact almost all of them. I say this because I think that my trading window is not ideal. I should either trade earlier or later, but not half in the UK morning session and half in the US session. Don't know if that''s a big issue, but getting the ball rolling for 9:00am instead of 11:00am definitely is an issue. I think I'll try it though.

The commentary on the chart says a lot. Made several gross technical errors, including talking on the phone and executing an entry.

Noticed that I'm still getting sucked in to jumping into trades on big trend bars. Thought I'd recognise it if it happened again but I was too late when I did.

I'm also hesitating about stop size and target size which I should have decided upon before the session.

And again, I also moved one of my stops which just goes to show I had only a tiny idea of what I was meant to be doing.

I think I probably made 1 good trade out of 4, which was a loser though. I can't think of any excuse except that maybe there wasn't that much on offer with the limited price action arsenal I'm able to deploy.

Started looking stuff up in the Al Brooks book and realised I have to read it seriously from cover to cover to have any chance of making progress here.

I'm still undecided on the choice between the 5 min bars and the range bars. Today was difficult, no doubt, and I think I might do better at this point with range bars, but my gut feel tells me I will be happier mastering the 5 min bars despite my fear of their complexity.

So the positives?

I know I need to get myself together and get more of the Al Brooks material under my belt, and I've got to start trading at 9:00 London time instead of faffing around and starting off at 11:00 without even reviewing yesterday or putting two thoughts together about the day.

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  #24 (permalink)
 Adamus 
London, UK
 
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Much happier with myself today.

First of all I managed to start at 9:00 and secondly I wasn't sucked into doing anything stupid by the big rally that was in progress. Lovely fat bull trend bars etc.

On the higher time frames, things still looked bearish though, despite the slight bull bar yesterday.

I figured yesterday's 20 pip targets and stops were unwarranted and went back to 15 pips.

On the downside, I missed the first trade because the H1 at 9:10 finished at its high (almost) and the bulls kept on driving up leaving me no time to put a stop entry order in. Of course I was being disciplined and didn't just leap in with a market order without a second check - I figured there would be more chances - Sod's Law was enacted though and the bull run halted.

Then came a long slow decline leaving me wondering at 12:30 whether I should not bother trading the European lunch hour. It turned out interesting though since I had time to figure out trading the channel that formed. I think I did it right but as yet I haven't read much about channels.

Since I'm quite satisfied with myself, I figure I should look for some criticisms.

I still need to prepare better. I should open the 5 min chart last after checking the higher time frame charts and looking over my journal and reviewing my trading rules.

I also need to concentrate on watching the ticks, I've got a bad habit of getting distracted and missing whole bars. When I am watching, I know I'll be able to pick up experience with this stuff, I just need to stop my patience running out.

I also think I need to work on relaxing my 'definition obsession' about every half pip move on tiny bars, and follow the Al Brooks quote "if it looks like a good pattern, it probably is a good pattern".

I also realised that three's a hell of a lot of information just below the surface regarding the order flow, and how it manifests itself in terms of the bid/ask spread, the order book, and volume, none of which I can keep a good handle on. However I did get some very interesting info from @bnichols on Learning Price Action... I'll need to start a thread on that, or find an existing one, to see what experience other people have got in this area.

You can discover what your enemy fears most by observing the means he uses to frighten you.
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  #25 (permalink)
 Adamus 
London, UK
 
Experience: Beginner
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Broker: IB/IQFeed
Trading: EUR/USD
 
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My work schedule got slightly derailed by infection I picked up from my little girl, which meant I had to go to the doctors this morning and miss 1 1/2 hour trading time but despite the shortened hours it was good. Well, what does good mean when you're sim trading, I mean 'still interesting'.

I also didn't get time to read more Price Action Bar by Bar - when I tried, I started hallucinating and woke up 5 hours later. Admittedly I did have a fever but I've heard the book can have that effect.

I did check out a volume indicator - jtRealStats - but didn't think I could do much with it. Maybe it's the crap forex version of 'volume' that my forex feed provider puts together with an undefined formula, or maybe I just don't know enough about the simple price bars on the chart to be able to pick up any extra info from volume yet.

Whatever, I checked over the charts and it looked like this euro retracement downwards is still happening. Barring an initial post-Far Eastern-opening dive, the Euro was pretty bullish. Other than that though I forgot to do any pre-session checks, but I've got an excuse, I'm ill - or presumably recuperating. I forgot to check my rules, which I hadn't written out yet as intended and I didn't check the news calendar either. I did a bit of cursory checking of the left hand-side of the chart for support and resistance, but that was a result of looking at the price action unfolding. So basically I'm developing some bad discipline here.

I also picked up the phone which cost me 8 simulated pips. Bad, bad, bad.

From the stops and the market movement, I am beginning to wonder whether I should stick to Al Brook's initial stop on the opposite end of the signal bar, or whether I should go with a fixed stop as far away as the target is. His initial stop is possibly only suitable for indices trading where I believe there is less retracement than in forex. I think moving the stp to breakeven should also be done later than Brooks does it. Another thing to watch out for.

So the main thing to do now is to write my rules up so far, and see whether it adds up to something I can do some big tests on over a year's worth of data with decision matrix score cards.

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  #26 (permalink)
 Adamus 
London, UK
 
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Bit of a different day today, could hardly pull myself away from the screen.

My mouth hurts like hell. The infection I picked up from my kid is some kind of virus that my doc won't give me a definite diagnosis for since apparently there's no cure for it and it's going to go away whatever. Checking on the internet on some US websites like wrongdiagnosis.com it looks like I've got Hand, Foot and Mouth disease which means I'm either a cow, a pig or a toddler. But I can't eat, I need some way of getting food into my stomach without having to put it in my mouth.

Anyway, today: didn't do so well on my starting time discipline, got distracted with domestic chaos. Otherwise looking at the longer time frames, the daily chart says it's still down, and the hourly chart has now got what looks to me like a clear channel going down since the big drop at the start of the month. Plus, the top of the channel is now just above 1.4200 so the round number will made things more interesting.

When the London time 11:00AM bar reached the channel ceiling, it then looked for a long time like it could turn into a break-out. Following @Big Mike and @Bacon's standard advice, I kept going over the charts thinking, well what could make me doubt this bear channel I see? How many seperate pieces of evidence were there that it might break-out? I could only find 2 - first there was some bearish news (German / Euro sentimennt was down below expectations) but the market refused to fall - 2nd, the market ploughed up thro 1.4200 like it was taking off. I figured for it to be a break-out and make me change to long trades, I wanted to see an hourly bar finish above the channel. Which didn't happen this morning.

I was also able to start writing down some rules. After today, I am convinced I should just leave my initial stop where it is and exit my trades based on the target being hit or some other signals telling me to bail.

I also had to think about second entries when a position is still on and I guess I have to work out my preference here. I can either: (1) just shift my fixed stop and target to bracket the new entry signal; (2) add to my position without altering the exit locations; (3) add to my position and move either the target or the stop or both as I think best; (4) treat the new entry as a seperate trade; or lastly, (5) ignore the signal.

I think I'll go with either 4 or 5 depending on how manic it is.

By the way if anyone is reading the charts and hates them because they're impossible to follow, let me know. I don't have an objective opinion on that, since I marked them up. They look fine to me

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  #27 (permalink)
 Adamus 
London, UK
 
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I am going to make a deliberate step backwards at this point and pull back from live simulated trading, to take my knowledge of H1/L1 entry methods and test it against a year of historical data.

I've got a learning process - for want of a better description, it could easily be called a tutorial or a programme - thanks greatly to @ Bacon on An Alternative Journaling Tool and despite the huge huge amount of time required (that is rarely quantified elsewhere, except perhaps as 10 thousand hours) I think it's got all the hallmarks of an effective investment of time.

I'll put my knowledge of H1s & L1s through the mill going over the past year of the Euro/USD, at first just with minimal rules - no MA, no filters, no other signals what-so-ever. I've already done a week and since that week was 2010-05-03 to 07, the conditions were like nothing I've experienced in the last month in 2011. I should get at least some exposure to most market types this way.

Plus then I can do the operation again adding in negative filters, and then positive filters, and then both.

I expect there will always be something interesting to throw into the journal here too, although I suspect I might come to point where I am an "H1/L1 bore".

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  #28 (permalink)
 trendisyourfriend 
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Adamus, can you define what is this L1/H1 pattern ?

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  #29 (permalink)
 Adamus 
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trendisyourfriend View Post
Adamus, can you define what is this L1/H1 pattern ?

It's right out of Al Brooks's Reading Price Charts Bar by Bar.

A picture would be easiest here. If you want, check out any of the marked-up charts I've put on this journal - I normally put a little H1 or L1 above/below the bar to mark it.

If you have a trend, say upwards, then it retraces back down, at that point as soon as you've got a bar which doesn't have a higher high, then you've got a retrace, even if mini in size. Then you watch for the H1 which is the 1st bar where the high is higher than the previous bar. You also get H2 for the second, H3 for the third etc.

It's a signal bar. You put your buy stop a tick above the H1 and hope to get filled and taken into the ensuing continuation of the rally.

L1 is the mirror image for bear trends and shorts.

Am I boring you yet?

Al Brooks defines it further by saying that the H1 must clearly break the retracement's microtrendline. That helps identify entries better when the retracement's messy and ill-structured.

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  #30 (permalink)
 Adamus 
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I can get through this relatively quickly. I just tested a week on the 5 min chart from 2010-05-09 to 2010-05-14 and it took me 1 hour 30 mins. In theory, I might be able to handle doing 3 sessions like this per day. It's quite intense work.

The first thing I had to do was define when an execution would have happened or not.

With a Buy Limit, I'm not giving myself the execution unless the market goes through the price plus spread (i.e. 1 pip). My charts all show the bid.

For Sell Stops, the price just has to touch the price for the execution.

On Sell Limits, the price must go through by half a pip.

On Buy Stops, the price has to touch 1 pip below the price. Well, it depends on the spread. Could be half a pip. Call it a full pip as for Buy Limits.

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