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Trading spot fx euro using price action

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  #61 (permalink)
 Adamus 
London, UK
 
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mokodo View Post
Hi Adamus,

Great news, thanks for accepting the invite. If our chat imposes too much on your thread we can PM or even start a new thread (maybe others can get some value out of that - or possibly not!).

I can initiate trades 7.15 - 15.15 GMT. I have a time based exit if a trade isn't performing (but hasn't hit my stop) after 4 hours, so even if I get a signal and enter at 3.15, I know that I can be away form the screen 7.15 latest. I also have a rule that says I don't enter once a pair have travelled more 80% of their last 14 day ATR, so I take most trades before 2ish.

I'd be interested in reading up on the price action system you are using? Can you point me in the right direction?

My system is pretty straight foward, buy a higher low after 2 higher highs (reverse all that for shorts). I time in on the dip using a MACD indicator and exit on a 10/30 EMA cross if at my pc, or trail a 2ATR stop if away.

Screen grab attached of a near perfect set-up.

Blue circle shows the entry. ZigZag line indentifies the higher low in the trend and the large blue dot is the signal that MACD has turned (with enough momentum to suggest the next leg will at least get going). Yellow lines are the EMAs, looking to cross soon. This signal was 15mins outside my window yesterday so couldn't take it.

OK let's see how it goes. If it goes totally off-topic for my journal and looks like a lengthy discussion, a new thread would be called for I guess.

Just to say, I'm actually going on holiday tomorrow for 10 days, so I'll only have reduced online time, but I hope to carry on researching & learning the price action stuff.

My system is totally simple as it is, and I'm only practicing it in sim - it's not tradeable as it is, way too primitive and undeveloped, let alone profitable. Look at the thread summary which I put in earlier. H1s and L1s a la Brooks.

Brooks wrote a lengthy and indigestible book on price action, and that's what I'm currently on. It's like trying to eat an elephant. I'm making notes and putting them wikipedia, I hope to do a lot more of that while on holiday. Check out the first post on the journal - I think it's a good description.

So with your setup, once you have a signal, how do you enter? Presumably once the higher Low is posted at the end of the bar, you enter at the market?

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  #62 (permalink)
 Adamus 
London, UK
 
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rassi View Post
Also i have just seen what a h1 / l1 is, be aware your success trading this kind of system will hinge entirely on how you manage your winners.

I imagine nearly all your profits each week will come from a handfull of trades, the rest will be losses / be / small gains. You HAVE to maximise your winners and be brutally clinical in your trade management.

All the best.

You don't think a fixed profit target would cut it?

I am also looking at the idea of offloading half on a fixed profit target and letting the rest run with a trailing stop, but I haven't tested that yet.

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  #63 (permalink)
 Zwaen 
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Hey Adamus,

Lance's stuff is imo the best material I ever encountered. But that could also be personal.
If you really want to learn it you will have to read it more then once, really study it, study hundreds of old charts, and simming a lot before you get a "feel". But you will improve and become an adult ( not chasing indicators, and be able to remove the crutches )

The 3 bar rule is in essence a time rule indeed. It isn't statiscally backtested, but more from experience. Also, the 3 bars are ofcourse a guideline, since hard rules do not apply to trading.
I sim the 3 min chart eurodollar now. The best entries really "pop" a couple of pips after your entry-> Stoplosses getting hit and a bit emotion. Sometimes your entry immediately goes against you. But it is just experience that if after 3 1-min bars my position is not in profit yet, the chances the position wil end in profit becomes very small, say 10%.
So if after 3 1-min bars my position is in profit, I will move my stop to BE=entry( or 1 pip below).
If my position is in loss, say -3 pips, I have to exit immediately ( which is difficult, for feelings). Sometimes I don't exit and usually the 3 pip loss will become -10 pips( the hard stop) loss.


I've read Brooks also a while ago.
I had to translate the whole book in my own language/own words before I could understand it.
But I had the impression that the theory of Brooks is only good for the emini's, despite he says different in his book. I don't like the es because of the small movement, but thats always personally.
The guideline's of Brooks I see all the time, for example, "if the market fails to do something twice.." ( imo the 123 pattern of Ross is also a second failed attempt ).
One of the best advices from Brooks is to just focus on only the best setups and then on increasing size.( CH 15)
One of my learning objectives is to just focus on the setups of Lance which "look good" and only taking that trades. Having patience.

I heard Brooks will write 3 books with clearer language?

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  #64 (permalink)
 Zwaen 
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Something else to consider:
When I enter, and after my entry a candle forms which shows "danger" -> my stoploss goes under/above this candle.

It's best to show an example:
Suppose you went long above the doji A.
Then when candle C forms, with the uppertail, I will put my stoploss under this candle as soon as the candle closes. Or I put my stoploss on BE(entry), it depends on the situation. Either way, I feel no need to stay in this trade anymore



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  #65 (permalink)
 Gary 
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Zwaen View Post
Hey Adamus,

Lance's stuff is imo the best material I ever encountered. But that could also be personal.
If you really want to learn it you will have to read it more then once, really study it, study hundreds of old charts, and simming a lot before you get a "feel". But you will improve and become an adult ( not chasing indicators, and be able to remove the crutches )

The 3 bar rule is in essence a time rule indeed. It isn't statiscally backtested, but more from experience. Also, the 3 bars are ofcourse a guideline, since hard rules do not apply to trading.
I sim the 3 min chart eurodollar now. The best entries really "pop" a couple of pips after your entry-> Stoplosses getting hit and a bit emotion. Sometimes your entry immediately goes against you. But it is just experience that if after 3 1-min bars my position is not in profit yet, the chances the position wil end in profit becomes very small, say 10%.
So if after 3 1-min bars my position is in profit, I will move my stop to BE=entry( or 1 pip below).
If my position is in loss, say -3 pips, I have to exit immediately ( which is difficult, for feelings). Sometimes I don't exit and usually the 3 pip loss will become -10 pips( the hard stop) loss.


I've read Brooks also a while ago.
I had to translate the whole book in my own language/own words before I could understand it.
But I had the impression that the theory of Brooks is only good for the emini's, despite he says different in his book. I don't like the es because of the small movement, but thats always personally.
The guideline's of Brooks I see all the time, for example, "if the market fails to do something twice.." ( imo the 123 pattern of Ross is also a second failed attempt ).
One of the best advices from Brooks is to just focus on only the best setups and then on increasing size.( CH 15)
One of my learning objectives is to just focus on the setups of Lance which "look good" and only taking that trades. Having patience.

I heard Brooks will write 3 books with clearer language?

Hey Zwaen,

I am guessing you missed the Al Brooks webinar here on futures.io (formerly BMT) yesterday? Was good! He does have 3 new books, but they won't be released until November this year. You can view the webinar, which also included some information on the new books here:
Webinar: Al Brooks on Trading Price Action, plus Q&A

Gary

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  #66 (permalink)
 Adamus 
London, UK
 
Experience: Beginner
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Zwaen View Post
Hey Adamus,

Lance's stuff is imo the best material I ever encountered. But that could also be personal.
If you really want to learn it you will have to read it more then once, really study it, study hundreds of old charts, and simming a lot before you get a "feel". But you will improve and become an adult ( not chasing indicators, and be able to remove the crutches )

The 3 bar rule is in essence a time rule indeed. It isn't statiscally backtested, but more from experience. Also, the 3 bars are ofcourse a guideline, since hard rules do not apply to trading.
I sim the 3 min chart eurodollar now. The best entries really "pop" a couple of pips after your entry-> Stoplosses getting hit and a bit emotion. Sometimes your entry immediately goes against you. But it is just experience that if after 3 1-min bars my position is not in profit yet, the chances the position wil end in profit becomes very small, say 10%.
So if after 3 1-min bars my position is in profit, I will move my stop to BE=entry( or 1 pip below).
If my position is in loss, say -3 pips, I have to exit immediately ( which is difficult, for feelings). Sometimes I don't exit and usually the 3 pip loss will become -10 pips( the hard stop) loss.


I've read Brooks also a while ago.
I had to translate the whole book in my own language/own words before I could understand it.
But I had the impression that the theory of Brooks is only good for the emini's, despite he says different in his book. I don't like the es because of the small movement, but thats always personally.
The guideline's of Brooks I see all the time, for example, "if the market fails to do something twice.." ( imo the 123 pattern of Ross is also a second failed attempt ).
One of the best advices from Brooks is to just focus on only the best setups and then on increasing size.( CH 15)
One of my learning objectives is to just focus on the setups of Lance which "look good" and only taking that trades. Having patience.

I heard Brooks will write 3 books with clearer language?

Hi Zwaen

thanks for the recommendation - I look forward to reading Lance. Hopefully it won't be as heavy going as Brooks. I hope that Brooks's 3 new books will flow a lot easier. I am always jumping around in his current book because he throws concepts in to the early chapter without any explanation, so it's necessary to read on until that concept comes up with an explanation, and then go back to reread the part before.

I would wait a little after his new books come out to see what the reveiws are like. It might be the case that they are longer versions of the old book without any improvement in reading flow. But hopefully they will be really well edited.

I find I have to study Brooks' material to the same intensity that you recommend studying Lance. I can't really see any other way of doing it though, so I'm not surprised.

You do mean you trade the Euro/USD forex? The way you said it, it sounded at first glance like you trade the Eurodollar futures on the CME - the STIRs.

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  #67 (permalink)
 Zwaen 
Netherlands, Blaricum
 
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Hey Adamus,

in my opinion Lance is a lot easier to read then Brooks. Lance provides the building concepts to you, and some patterns which build on these concepts. Then, when you fully understand the concepts ( I mean not knowing mentally which is easy, but knowing them by heart/feel ) you can look at charts and make you own rules based on the concepts. Let's say for example a simple pullback. The pullback must show weakness, but what is weakness? When you look at old charts you will see in which ways you can spot the weakness, and also when you have to let the trade go by, because to much countertrend strength is shown.

But I must say, the more books you read, the more overlap which encountered, the more confidence one can get because if all the "good" traders say some general concepts work, the more one can gain thrust in them. Next, you look at hundreds of charts to see that the concepts work ( offcourse not always but most of the time). Then you go to sim and do everything wrong and throw away all the principles you learned away. Then slowly - but faster when you do not have profitable setups /knowledge of setups - you can learn to modify your behaviour to only take the good setups.

Btw I'am still simming the 6E futures ( eurodollar currency futures).
I encountered the strange phenomenon that I have very strong feelings when I sim. I think it is because when I sim I'am very serious and not just playing a video game. I think it's because I spend 1,5 year to reading books and analyzing price action, and was very confused and angry to myself that I just threw all I learned away when trading in sim-mode, and just went trading with my emotions as guiders. Despite all my efforts learning the good setups. Despite reading books of Douglas and Steenbarger. In my opinion, when you do sim, you have to be extremely serious or else it is a waste of time. And I think it can even be damaging if you just play around, because you will train your brain to do the wrong things.
The most changelling thing is to really follow concepts, but doing is more difficult because you have to deal with your reptile brain instincts.

(Btw excuse for probably bad english grammar, always been more a beta-guy)

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  #68 (permalink)
 Adamus 
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Zwaen View Post
Hey Adamus,

in my opinion Lance is a lot easier to read then Brooks. Lance provides the building concepts to you, and some patterns which build on these concepts. Then, when you fully understand the concepts ( I mean not knowing mentally which is easy, but knowing them by heart/feel ) you can look at charts and make you own rules based on the concepts. Let's say for example a simple pullback. The pullback must show weakness, but what is weakness? When you look at old charts you will see in which ways you can spot the weakness, and also when you have to let the trade go by, because to much countertrend strength is shown.

But I must say, the more books you read, the more overlap which encountered, the more confidence one can get because if all the "good" traders say some general concepts work, the more one can gain thrust in them. Next, you look at hundreds of charts to see that the concepts work ( offcourse not always but most of the time). Then you go to sim and do everything wrong and throw away all the principles you learned away. Then slowly - but faster when you do not have profitable setups /knowledge of setups - you can learn to modify your behaviour to only take the good setups.

Btw I'am still simming the 6E futures ( eurodollar currency futures).
I encountered the strange phenomenon that I have very strong feelings when I sim. I think it is because when I sim I'am very serious and not just playing a video game. I think it's because I spend 1,5 year to reading books and analyzing price action, and was very confused and angry to myself that I just threw all I learned away when trading in sim-mode, and just went trading with my emotions as guiders. Despite all my efforts learning the good setups. Despite reading books of Douglas and Steenbarger. In my opinion, when you do sim, you have to be extremely serious or else it is a waste of time. And I think it can even be damaging if you just play around, because you will train your brain to do the wrong things.
The most changelling thing is to really follow concepts, but doing is more difficult because you have to deal with your reptile brain instincts.

(Btw excuse for probably bad english grammar, always been more a beta-guy)

Great post. I love it when people are doing exactly the same as me but have a completely different spin on the situation. I haven't read Steenbarger but I have read Douglas and he is for me the God of Psychology. I've met a few people who have read him and still can't get a handle on their emotions. But I wish you success in finding your own way to deal with yourself. I am intrigued though - if you find sim trading so intense, are you sure that you will be able to handle real trading? Or do you think it's just a step further down the road you're walking now?

By the way, your English is fine. Apart from the title of the future you are trading - the 6E: it's either Euro currency futures, or if you trade forex instead of futures, its Euro/USD or Euro/Dollar but Eurodollar futures confuses the issue - that's ED on the CME. But in the forex world nobody pays much attention to it.

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  #69 (permalink)
 Zwaen 
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Hey Adamus,

about the emotions and simtrading. I think I do experience a lot emotions because there is really something at stake for me while training on the sim. This because 4-5 months ago I quit my job for learning to become a trader, or at least learn a lot and trying again a few years later. I have 2 accounts, one for trading and another one for living. I decided to do this because I really want to trade for my living and the progress of learning while working fulltime was slow, to my opinion. But this also means that once my account for living expenses will be empty, I need to eat my trading account, and thus cannot trade real money anymore and have to find a new job. But I learned a lot the last 4 months.

When I started simming about 2-3 months ago I wasn't aware off the impact of emotions on trading. Now I'm somewhat used to some of them and hopefully the progress - dealing with your emotions while trading - will be speeded up a little bit when I will be trading real money. The last 2 weeks I'm finally making positive ( balance ) weeks. But there would have been a lot more money in my sim-trading account when I didn't sell my shorts last friday to fast, instead off just trailing them according to my rules. Why did I sell my shorts too soon? I was too much focussed on ending the week with a positive balance instead of just following my rules. There they are again, emotions ..another wrong behavior characteristic I have to get used to dealing with


How is your progress with Brooks going?

Kind regards

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  #70 (permalink)
 Adamus 
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OK, I know exactly what you mean then, because that's what I did. I quit working as a software developer in 2008 with about 100K in my account and now I've 'eaten' most of that - paid a lot of it to my landlord as well. But I managed to implement 2 trading systems and to discover immense amounts about trading, e.g. I need to teach myself to trade price action manually and since you ask, it's going really slow. Been on holiday and didn't find more time than required to keep my trading systems running and read my emails. But I'm back now and looking to get up to speed.

Looking back now on those first 6 or 12 months after quitting paid work, I would have done a lot different, but you can only tell that from the vantage point of experience. I needed more focus than I had, I wasted so much time. That's one of the dangers of working for yourself though.

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