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Trading spot fx euro using price action


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Trading spot fx euro using price action

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  #1 (permalink)
London, UK
 
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I started system trading in 2010 but I want to learn to trade by hand and eye too. So I'm going to launch headlong into it - price action will be my method and the spot Euro will be my market.

As a mechanical trader, I thought previously that discretionary traders were missing out and holding themselves back and just hadn't seen the true advantages of mechanised trading. I mean, with mechanical systems you can deploy your system against multiple markets with finely tuned money management settings derived from careful analysis of backtested results. You can remove emotion from the equation and your system will do exactly what you intended to do with no psychological hang-ups. You don't even have to sit in front of the screen watching it all the time either, it carries on 24 hours a day.

So mechanical trading has got to be a better option that disretionary, right?

Then I read more and more about trading, trying to glean ideas that I could turn into systems. What I do essentially when writing a system is to find patterns in the market that repeat themselves, but of course they've got to be patterns that can be easily programmed. All these discretionary traders with their screenfuls of indicators could be mechanised quite successfully because the rules were relatively objective.

But every month or perhaps six months even I was told or heard someone say, just watch the market and it will start to reveal itself to you as you build up screentime. This just didn't compute - literally

So I realised that the mind was really doing way more than a simple computer program could ever do for these traders. I read stuff like Blink by Malcolm Gladwell, Zen in the Markets by Toppel and the Tao of Trading by Koppel. It made sense that the mind assimilates huge amounts of information and recognises things that the traders actually aren't even necessarily conciously aware of which allows them to turn a profit between their entries and exits. They might say "I did this because the market did that" but their version of events I think is a heavily edited down version, without mention of 2, 3 or perhaps even half a dozen other events.

That's the theory I'm working on and I hope that my experience in mechanical trading will help me learning price action trading, and hopefully assuming I get any good at it, I hope my price action trading will help my mechanical trading.

I decided on Al Brooks' Price Action Bar by Bar, and the Lance Beggs/Your Trading Coach as my source of teaching.

I settled on spot forex EUR/USD as my target market since I'm based in London and so it gives me the choice of sessions to trade in and generally a really tight spread and minimum slippage because of the volume.

Looking over this forum I guess it's fair to say I'll be in a minority trading PA on forex, since Crude and the emini S&P are so popular, but I figure the diversity can only be beneficial.

I already got some good advice from my first thread asking about price action and I read every post on both the Elusive Price Action and the Price Action Bar by Bar book threads. It's also interesting reading other people's journals and I hope I can pay something forward whenever I get the chance, assuming I've got at least a quantum of good advice to give.

I figured maintaining a journal is a top priority and I'll be posting my charts here daily. I'd also like to make use of @ Bacon's idea about using a decision matrix as a tool to keep track of the success or failure of any particular trading technique - see "alternative journaling tool decision matrix", although now that I've started putting in some screentime, I realise I've a way to go before I can define any technique that I want to use rigidly enough.

I'm starting out with Al Brooks's H1s and L1s in trends and the amount of decision-making for what is to my knowledge the simplest price action approach, well it's phenonemal. My first session today (not even trading sim, just looking at potential trades) resulted in 4 pages of notes, most of which I can hardly understand now afterwards.

So I hope I can make this interesting for everybody who decides to have a read of this journal so that it's not purely a cut-and-dried record of my struggle to make sense of price action and the gyrations of the currency market. Feel free to post your comments and questions - I'm only keeping this journal publicly for one reason, and that so that people will read it and knowing that will hopefully help keep me on the straight and narrow.

Just one more thing - a huge thank-you to Big Mike for putting this whole community together in the first place.

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  #3 (permalink)
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This is the chart I marked up for today.

I actually didn't watch that much of it coming over the wire live, I started this afternoon and had to stop at 5:30GMT+1

I stepped through it bar by bar and managed to spot about 5 trades I could have made using the simple H1s after a retrace in a bull trend or L1s after a retrace in a bear trend.

I've marked the entries at the signal bar - the H1 or the L1 - although I would have entered on a stop a pip beyond the bar's high or low.

I think I discovered way more questions than I found answers to in this session (if any at all) - hopefully tomorrow will help me focus on what I need to know most so I can aim towards getting some kind of decision matrix going.

If the chart is too wide then just shout - my laptop has that screen size so it makes sense for me, but I guess not everyone is going to be able to see it all.

I see people embedding their charts in their text - would somebody be good enough to tell me how you do that?

Thanks

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You can embed your charts using photobucket or any image uploading service.
Use the supplied in photobucket and paste it here.

Looking forward to your journal!

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  #6 (permalink)
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I sat down in front of the chart at 12pm today and ended at 3.

The first question I asked myself was how to start. I figured I'd go back to the beginning of the session (10:00pm yesterday London time) and step through the bars. It would definitely be interesting to find out whether there's any kind of 'opening range' behaviour in the EUR/USD as is talked about for the S&P. I guess I need to look through the Lance Beggs material for that.

Second question was, how do I know whether it's trending? I'm just looking at the EMA(20) so I figure I'll use that until I see reason to change. I guess a rule to be consistent by would be to say that it is trending when there are three consecutive trend bars in the same direction totally clear of the EMA, i.e. not touching it.

Then came the question of how big to make the stop. Yesterday I was using 10 points and it seemed too small - but yesterday was a range day really in my simple assessment. Whatever. I'll use 15 points today. Following Brooks, I'll put my initial stop a tick below the signal bar at entry. The signal bar is massive, then I'll put the stop at most 15 points from the entry.

I'll also use 15 points for the target.

I toyed with the idea of going in against the trend if the H2 or L2 fail, because a failure seems to be a good signal in Brooks's methodology. I think it's a bit beyond me right now though, so I'd best stick to with-trend only trades.

But then if H2 or L2 fail, do I want to look for H3 and L3? Or shall I conclude that it's descended into chop and wait for another push and retrace to create a new H1/L1? Perhaps if it's a long way from the trend line then I should consider the trend to be strong still and I should look for an H3 or L3.

The H1/L1 failures are insteresting just one their own - I think the best way to identify an H1/L1 failure is to see whether the potential entry bar puts in a tail below the low of the signal bar. Or just to say the signal bar must be a trend bar in the right direction. Not a doji. But then how big is a doji body allowed to be in forex?

I couldn't decide whether to use targets or trailing stops because I didn't want to get whipsawed too much, hence targets would be good, but I don't want to miss any runners, so I want to use trailing stops - so I decided to use both, which is definitely part of the Brooks methodology anyway, so that suits me.

But the big question with the runner trade is when to exit. Do I put a trailing stop on it from break-even? Or let it run until I finish for the day? Or just until the next swing / end of intraday trend? And what's that? A reversal bar? A microtrend line in the opposite direction? Or do I stay in until it hits the EMA again? Or until I get an opposing entry signal? I guess I'll find out what's best soon enough.

Moving the initial stop up to break-even wasn't as obvious a no-brainer as I thought it would be. If the entry bar is a bull bar then great, the market will be a way away from break-even at the close of the bar. But if it isn't so clear cut. I decided it was bad news to try to move the stop to b/e if b/e was anywhere inside the bar that was closing when I would do it if it was a big bull bar (for a long).

I'm also very tempted to take multiple signals and add to positions but I think that's being a bit optimistic. I figure I should better wait until I can handle single positions efficiently - even if 5 mins sometimes seem quite a long time.

A question the mechanical trader in me keeps asking is, how long is the market going to stay in one type or mode before it sheds that behaviour and starts acting differently? With my systems I'd say it's a two week cycle.

Enough for now.

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  #7 (permalink)
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I thought yesterday the EUR/USD trended up the whole time I was watching - obviously a trend day I thought compared to the day before which seemed to be more chop. But I just opened up the chart today and saw that the Euro trended all the way back down again after I finished yesterday and formed a doji on the daily chart.

On the daily chart, both Tuesday and Wednesday have the same sort of doji, but behaved differently. Or maybe it's my perception. A complete beginner's perception compared to someone with a day's experience.

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  #8 (permalink)
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Just completed my watching-the-Euro London morning session and found that Big Mike has posted a great video showing the application of range bars and higher highs and lower lows (HHs and LLs) to yesterday's Euro, on the Elusive Price Action thread - this is a major alternative approach to using 5 min bars and H1s and L1s and perhaps I should run NinjaTrader's market replay of the day's chart at the end of the day for a while, learning the two methods in parallel to see if I develop a preference for one or the other.

I need to get my day planner working better if I'm going to trade 4 hours a day because at the moment I'm letting too much other stuff take priority and every day so far I've done more stepping thro the chart quickly to catch up than actual chart watching live.

I think the most I learnt today was how to annotate my chart better in NinjaTrader, and I discovered I shouldn't do it live while NinjaTrader is auto-scaling the y-axis. It got badly messed up when the Euro tumbled badly today (pretty much right on cue as Bike Mike forecast in his video, barring a retrace first - kudos! From 1.4900 to 1.4600) - but I rejigged all the boxes and here it is.

One of the issues that coloured my thinking the whole time was wishing I had got in earlier, feeling regret at seeing big bars develop and go by without being in. I guess tthat's normal though and hopefully it won't have any ill effects.

I did find it made me feel limited by all my rules, e.g. don't get in on a trend unless there are 3 consecutive trend bars in the right direction away from the EMA on the right side. But then that is pretty random - I made it up because I just haven't read anything yet in Brooks to tell me how to identify the trend. It doesn't have any of the convincing arguments about other traders, or bulls vs bears, it's just the number of bars that I thought would define a trend without filtering out too many opportunities.

The problem is with bars like the super-bear bar at 186 at the start of the NY session.

Bar 185 was a news bar. I don't know what was said but it was obviously US$-positive. Initially though the market shot up 20 points within a few seconds and then just stepped off a cliff only a few seconds after that.

I couldn't see any price action signals and I was wondering how to play the double bottom at 1.4805 and then the double zero at 1.4800 when the market made such thoughts irrelevant by ploughing through down to 1.4700. The market dithered around 1.4700 and then again at 1.4600 - I guess I'm just dreaming to think I could tackle action like that at my level of experience.

Positive from today?

I think using 15 points as a stop and target worked out OK. Probably got something to do with the average range of the 5 min bar which is around 10 points.

Otherwise actually I found it a bit frustrating and would have lost money if I'd actually been trading. I guess I made a few technical mistakes which is good to learn from.

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  #9 (permalink)
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Using small stops and targets you'll miss a lot of big moves, at least that's my experience. But that's ok, don't need to catch them all. Position yourself to take advantage of what you can and try not to get discouraged when you get out and miss a larger move. To me that's just comes with the territory of using small stops. Although I have been working on staying in longer.

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  #10 (permalink)
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Trankuility View Post
Using small stops and targets you'll miss a lot of big moves, at least that's my experience. But that's ok, don't need to catch them all. Position yourself to take advantage of what you can and try not to get discouraged when you get out and miss a larger move. To me that's just comes with the territory of using small stops. Although I have been working on staying in longer.

Yes I can see that, you're totally right. I'm trying to apply the dual exit methodology, one scalp and one runner. A 15 point target for the first half of the lots, and then a rnnner for the second half and it's that runner that I'm hoping will catch mammoth moves like that on the Euro yesterday afternoon (you can see the first bar on my chart there, but it carried on down all afternoon).

I have a ton of unknowns to fill in on running trades. Hitting targets is a no-brainer, but letting something run, well I know I know next to nothing about how to exit. At least they are known unknowns, I don't want to speculate on the unknown unknowns

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  #11 (permalink)
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As you gain experience you'll have a better idea of when price will go further. You'll start noticing patterns in the price movement and also how price is behaving during those times and you'll know that there's a good chance it will run. So really, just keep getting that screen time in and make sure to watch price move and it will come to you.

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  #12 (permalink)
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As you gain experience you'll have a better idea of when price will go further. You'll start noticing patterns in the price movement and also how price is behaving during those times and you'll know that there's a good chance it will run. So really, just keep getting that screen time in and make sure to watch price move and it will come to you.

You mean the way the ticks appear and move on the screen, as opposed to the way the bars lie?

So far this my first week, each day I'm going over 4 hours of the market playing catch-up on what I feel I should be watching from a start time of 8:00am UK time, so in reality I only watch the market heartbeat for about an hour, the first 3 hours or so are not live, reading books, articles, figuring out what the latest bar means (just pressing the right arrow to move forward).

I hope this will change next week or the week after as I progress up the learning curve and have less hoops to jump through getting into this new phase of work.

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  #13 (permalink)
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You mean the way the ticks appear and move on the screen, as opposed to the way the bars lie?

In my experience it's a combination of both those, plus some other things, like the speed of the price movements. I wasn't looking for it but at some point I started seeing price behave in a certain way and I'd feel strongly that it's about to pop, and most of the time I'd be correct. I imagine this started coming about because I would watch price with an open mind and ask myself constantly, "How can I exploit this movement?" Might be different for others but that's how it was/is with me.

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  #14 (permalink)
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Got a bit wrapped up it in all today and ended up with a chart with comments on that was so long I had to save the image in 3 seperate files. I know it makes it hard for people to follow what I was doing but still just for the record I'm uploading it. I hope it gets uploaded at least in chronological order.

I was indecisive about what to do regarding HH/LLs or H1/L1s. My plan had been to do a NT market replay of yesterday's EUR/USD to test HH/LLs and 10 point rannge bars but I ran out of time and decided to follow today's action using HH/LLs and range bars instead.

This defeats the object which was to compare the two methods, but hopefully over the weekend I'll get the chance to do market replays of both Thurs and Fri.

Unintentionally because I've been putting myself under a bit of time pressure to get stuff done, I launched into the trading session today and only realised half way through that the 10 range bars are actually 5 point range bars because Ninjatrader is set to work with half ticks.

That meant that it took me a long time to get from session start to the live bar when catching up. Hence the long long chart.

Essentially though I liked HH/LLs a lot compared to H1/L1 and 5 min bars, it was just all a bit simpler. Maybe it was just the day itself and I should reserve judgement until I've done the market replays over the weekend.

Still not happy about defining the trend, it helped to realise I should be looking at the bigger timeframes, (thanks Big Mike in that video you did) so from the daily and the hourly chart, I defined the trend as down, a significant retracement going on at the moment in the general long term up-trend.

Still I would love to get some kind of 'opening range' theory as for S&P. Need to read more.

With the range bars and the HH/LLs, I found I was regularly revising what was what, dropping the previous HH or LL count in favour of another one if it made more sense for the current bar.

I determined to make the entry rules simple like for 5 min bars: enter long only for HH/HLs, and vice versa.

enter short for LH/LLsk only.

I didn't stick with the higher time frame trend.

To enter, wait for 3 good trend bars after the swing point to be sure of the signal. i.e. the HH or the LL is the first trend bar. If it doesn.'t look good, wait for another.

Again the target exits were easy and letting the second lot run normally ended in B/E since I didn't know when to bail out.

Pulling up the stop from below the entry to break-even was slightly ambiguous to define. I decided only to do it when the next bar had closed above the close of the entry bar and even then only when it wasn't too close (ill defined)

I can see that trading for real would have got really hairy around 9:30 London time - I got confused enough what to do next just reading the chart in simulated step-forward mode. The market was again having difficulties working out if it wanted to break below 1.4500, it did a couple of time but came back each time in a display that was about as indecisive as my own.

Hope the charts make sense, have to go now, dinner calls.

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  #15 (permalink)
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Just going over the day, I had 3 times as many short trades as long trades, maybe this was a reflection of the higher timeframe down-trend.

I had 8 trades altogether, 2 long and 6 short.

Of the 8 targets, 6 were hit, 2 hit initial stop. Of the 8 runners, I only took profit on 1 and the rest were either initial stop-outs or B/E.

I guess it would have been profitable even taking into account spreads, slippage and commission.

I get the idea though that it was a great day for trading, so maybe on any other day it wouldn't have been as good.

I see Big Mike's done a sequel to Thursday Euro action on the Elusive Price Action thread - I'm going to do the NinjaTrader market replay of Friday trading with H1s and L1s and 5 min bars, to see how it compares and then doubtless I'll have another hundred questions on the whole subject. In the meantime though it's Saturday morning and my time is not my own, there's a whole list of chores to take care of and the list's not getting shorter on its own

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  #16 (permalink)
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This is probably not a good idea but I had only 1 hour just now and I thought I'll try following the market to see what I can do.

The main deal was, I figure, I've only got one hour so I really want to make a trade - which was not the way I should be looking at it.

Sure enough I managed to get myself in on a trade (ok, a paper trade) which broke my rules and of course turned bad.

I actually decided I would jump in half way through a bar - with hindsight I was obviously desperate to make a trade despite telling myself at the beginning not to make a trade unless it was begging me.

The Euro looks like its high time frame retracement is over and that it will resume its bull trend, so that's another reason I shouldn't have gone short.

The first reason I saw I'd missed was that the entry bar was on the trend line - just - but my rules say No. It must be completely away from the trend line.

I was busy looking for other signals as well as H1s and L1s, so I was very distracted. Not sure whether to read more Al Brooks or concentrate on what I've got.

I have to take care of some other matters now and I'll work out what to do next.

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  #17 (permalink)
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I figure that the simplest definition of a trend is what a child would say if you asked one to look at a chart. I can't remember where I heard that, probably the Market Wizards, but it occured to me now that these are the lines I should be thinking along.

Looking back at the chart for earlier today, I can see the trends, particularly the bull trends, start below the EMA and end above it, so instead of rigidly sticking to a relatively random rule of not entering a position until there are three clear bars on the correct side of the EMA denoting strength, I'm going to loosen off that rule for trades in the direction of the higher time frame trend.

So if today is the second day of the renewed bull trend for the Euro after a retrace, then I'll allow myself to go for any bull trend trades regardless of the EMA, but I won't touch short trades unless the market is well below the EMA, i.e. according to my rules it showed 3 bear bars clear below the EMA.

Maybe that makes sense in the long run, maybe it won't. I think it's better to go along refining the rules I'm using rather than trying to take on five new types of signal and miss the stuff I'm meant to be concentrating on.

One signal I do want to use though is the reversal bar, which don't seem so frequent at all, but I'll leave out stuff like double top twins (up/down) etc.

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Only done 3 hours, from 11am, the second half of the London morning session through the first hour in NY.

Reason being, I want to run through the same period using HH/LLs and range bars and time as always is limited. Didn't help that I wasn't organised enough to start at 8am when I intended, but I'm still fighting to stop this disorganisation being a feature in my schedule.

Anyway, checking the higher time frames, on the daily chart the Euro is still in a bear reversal, or perhaps even it can be called a new trend now since it's broken any trend lines I could draw on the bull trend. Or maybe it's just daily chop!

On the hourly chart it looks choppy for real, although better said perhaps we have clear bear trends seperated by choppy retracements - too choppy and long to call flags or trends themselves.

On the 5 min chart I'm always a bit out of my depth when starting. At 11am, the market was in a retracement and gave me a potential L1 to think about but since it was such a clear bull trend bar, I didn't think of trying to take it and wasn't given the opportunity to anyway.

The next 6 bull bars made me think I'd have to restart my H1/L1 count but I have no clear idea of whether to or not, confusing, since a potential L2 appeared which would have been a good 15 pip scalp.

I'll have to re-read the rules on H1/L1s and H2/L2s to work out what to do about that.

I put more annotations on the chart after that point which looks better than my previous charts because I could expand the x-axis to show only a few hours and not a whole day as I've done before.

I think today was good experience of a ranging market, although I'm not sure it can be called 'choppy'.

I made up my mind beforehand to look for reasons not to take trades, to counter-act my desire to dive into trades. I don't think I was seriously tested though - I paper-paper-traded the extra trades I wanted to do, so I didn't put them on the chart but I followed them in my mind. A bit of cheat since I'm not sure I could do that if I was trading live - e.g. I saw an up/down/up which would have been a good trade, and a reversal that would have failed, a break-out of the range that looked like it was going to fail at 2pm when I stopped.

Only saw one real L1 that I would have traded and it slam-dunked my stop.

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This time I'm replaying the same session as this morning and using range bars instead of 5 min bars.

I'm using 5 pip ranges and a 10 pip target with stop placed according to the signal bar.

This time instead of just doing it in my head and annotating the chart, I used the chart trader to simulate entries and exits. It was a lot more realistic and I obviously need an ATM to place the initial stop and targets for me, and making them OCO since I wasted a lot of time doing that.

So the result - it was hard. Even with the benefit of knowing more or less what it was going to do, although I tried to ignore that.

Plus I made a lot of mistakes because I rushed it and ran the market replay on fast forward a few times when I shouldn't have.

I think the lesson of this story is that I should have only entered on the bull trends once the market had passed the previous HH, or for bear trends vice versa. The losses would have been smaller and a couple would have been winners, instead of just the one. If I had managed to take it.

As I said, I was rushing it with market replay on fast forward so I had several technical mistakes, including leaving a stop in place which made me miss a probably winner at the exact same spot.

Thinking about it more, I guess I didn't discover anything conclusive to make me choose this HH/LLs with range bars vs. 5 min bars.

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This makes it look easy.

I'll have to sit down again and look at this and ask myself if I seriously ever could trade this perfectly.

Or whether I'm fooling myself about hindsight here.

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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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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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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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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.

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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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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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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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Adamus, can you define what is this L1/H1 pattern ?

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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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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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Using raw H1/L1 patterns means not using an EMA to define the trend but instead, doing it by eye. It's interesting to observe myself and my decision making process as I move through the data. I generally ask myself the following in order:

(1) is there an undeniable, strong trend with a series of consecutive trend bars?

(2) is there an obvious series of higher high and higher lows (or lower highs and lower lows)?

(3) which way has the market moved in the last two hours?

(4) from the most recent highest high or lowest low today, has it obviously reversed from there, i.e. 100 points?

(5) failing all that, and unless I can truly say the market is going nowhere, I generally just take the first signal, whether it's an H1 or an L1, and expect lots of chop.

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Adamus View Post
Using raw H1/L1 patterns means not using an EMA to define the trend but instead, doing it by eye. It's interesting to observe myself and my decision making process as I move through the data. I generally ask myself the following in order:

(1) is there an undeniable, strong trend with a series of consecutive trend bars?

(2) is there an obvious series of higher high and higher lows (or lower highs and lower lows)?

(3) which way has the market moved in the last two hours?

(4) from the most recent highest high or lowest low today, has it obviously reversed from there, i.e. 100 points?

(5) failing all that, and unless I can truly say the market is going nowhere, I generally just take the first signal, whether it's an H1 or an L1, and expect lots of chop.

I've just invented an even simpler method for detecting the trend, so this can go in at number (5), bumping the current rule (5) down to (6).

(5) with the chart set to auto-scale, is the price in the top half of the screen or the bottom half of the screen?

Sometimes I wonder when my family and friends think I do really clever stuff, if I told them the truth, they probably wouldn't believe me.

Just in case any readers here are wondering, I am also making a bit of progress beyond this bull trend / bear trend question. More soon, for sure - although I might start a new competition thread to teach the world how to spot H1s and L1s.

This is definitely the emoticon for this situation:

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As part of my training in Price Action Trading, I'm going through a program of sim trading using the last year of data from EUR/USD. The first step is to sim trade my primary PA pattern totally naked - so that is the H1 / L1 entry pattern.

I'm using fixed 15 pip targets and stops and no runners or other MM strategy to give me my P'n'L.

The definition of H1 and L1 requires you know where the trend is going, which is why I defined the 6 points in a previous post which identify the trend direction.

In Al Brooks's Reading Price Charts Bar by Bar, he talks about H1 and L1 a lot, but I have to admit I still haven't managed to read even half the book so I know there is more in there than I've found out so far.

Getting around to doing stuff is my Achilles heel.

I'm good at going over the charts. I sit down and mark up a week at a time before I allow myself a break - it takes about an hour and a half.

The first result is that it makes me good at deciding whether we're in a bull or a bear market. Following my 6 rules above is no more than a guide - if I did the same period again tomorrow, I might make the exact opposite decisions about market direction. It's incredibly subjective. That for me as a computer programmer whose mindset is boolean - everything is black or white - is hard training.

While I think it's good in a big way in one respect, this is also potentially counter-productive because I never decide that the market is sideways, since the whole exercise is to identify H1s or L1s, and there's no pressure in this bit of the exercise to abstain from trading or even make a profit.

Hopefully though when I decide I need to identify sideways markets, it will just slot in to the decision making without throwing a spanner in the works.

Now I'm picking out the H1 and L1 signals quickly, and not getting 'analysis paralysis' trying to judge the market direction, I'm asking myself more and more questions about the actual H1 and L1s. Like whether just half a tick difference is enough to count, or small enough to ignore. And like a sudden doubling of volatility, or the time of day, or the frequency that they appear - sometimes it's every other bar 10 times in a row.

Next Monday is a bank holiday in the UK and we're going down to the coast - if the weather is anything like it is now (thunderstorm), hopefully but don't tell my other half - I'll get through a lot of Al Brooks.

And I need to. There's a lot more to H1 and L1 than just being the first bar back in the direction of the trend.

I keep using "H1 and L1" but of course if you have an H1 and it's not taken out, then you get an H2, and an H3. I believe Al Brooks counts right up to H5 and gives them different meaning, but that is something buried deep in Reading Price Charts that I haven't got to yet.

Here's a chart I'm putting up just for the record. Green dots are H1s, red diamonds are L1s. This was not 'perfect trading' - this was done against the right-hand side bar by bar, so I'm looking for a continuation of a bull all the way down that bear at the start of the session. Learning learning learning.

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The best way to learn a new language is total immersion - you pick up the words and the accent and the sentence construction just by osmosis.

I think the testing I'm doing is similar - total immersion while testing H1/L1 - but I'm worried because the process is totally subjective. Picking the H1s and L1s isn't at all subjective - it's deciding whether it's in a bull or a bear that is so tricky. I only want H1s in a bull, and in a bear I'm only looking for L1s, and it's the bull/bear decision that's so subjective.

I know I've defined how I'm going to identify the trend, but each of my six trend definitions is open to interpretation and putting them all together often makes me feel like a blindfolded monkey with a dart in my hand.

For instance, I think the variable y axis scaling could easily be influencing my decisions, so I'm going to turn that off and adjust my chart axes by hand from now on.

I'm accumulating a stroke for each win or loss on a simplified decision matrix. Up until now I have only recorded wins or losses for entered trades, so the 'avoided' and 'misshapen' parts of the decision matrix haven't come into the mix yet. This is probably just as well with the uncertainty I've got over ID'ing the trend. I doubt it's worth recording this stuff until I'm happier about my consistency re the trend.

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I've been allowing myself too much leeway when it comes to deciding if the market's heading up or down. I guess I thought it was a lot simpler than it was, but it's really difficult being consistent when deciding if the market has just started going sideways, or maybe has started up or started down.

Since my profit targets and stops are rigid at 15 points away from entry each, that more or less defines the distance I need to look back to work out which direction the market is heading.

I think there's got to be a magic number for how far the market has come before I can trust it to give me a good shot at going another 15 points. At this point, I have no real idea. I guess it's knowledge that only comes with experience and varies from day to day, with the volatility, how quiet the market is, that kind of thing.

So right now, I'm refining my set of rules on trend direction like a primitive flow chart - if you answer yes, that's your trend identified:

(1) is there a series of consecutive trend bars trailblazing the trend up and down the screen?

(2) is there an obvious series of swings, higher highs and higher lows (or lower highs and lower lows)? For now I'll be content to take the swings in the direction of the trend, not the retraces.

(3) from the highest high or lowest low on the chart (I see about 20 hours on the 5 min bars but that's a random choice which I need to justify), has it obviously reversed from there, e.g. 100 points?

(4) is the market obviously up or down in the last two hours?

(5) with the chart set to auto-scale, is the price in the top half of the screen or the bottom half of the screen?

(6) failing all that, it looks like the market is going nowhere, so just take the first signal, whether it's an H1 or an L1, and expect lots of chop.

I'm going to concentrate on applying this more consistently.

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(4) is the market obviously up or down in the last two hours?

I'm removing this step. It's not helpful. It's covered by (1) and (2) anyway.

I don't feel happy judging anything on 2 hours, it has to be at least 4 hours to make a trend obvious, unless it's obvious already because of a large number of big trend bars have appeared - or even just one massive trend bar with 10 times the 5 mins ATR - basically a big 2% move will do it.

I keep looking for breaks of trend channels (I think that's what Al Brooks calls them) to judge whether a new direction is established or not. I don't know whether I should be doing this or whether it's something I should be doing without having to think about it - otherwise it would have to be a step to put in my flow chart.

Another thing I notice is when I decide to go with a new trend, the first trade (H1 or L1 entry) usually fails, and it's better to carry on and take one last trade in the old direction despite the appearance of the new trend. It's a weird feeling to fade the new trend right after making a decision on its new direction. I guess it's a function of uncertainty that all market participants are feeling, leading to volatility that takes out my stop. And then the trend carries on as I correctly identified.

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Just wondering what to do after exiting a trade. Sometimes there is a signal bar on the previous bar and I could use it to enter another trade.

At what point though do I consider that the signal failed?

My obvious options are either (a) the signal never fails, it stands until superceded by a better signal, or (b) it fails when the price moves the wrong way past its opposite extreme.

e.g. on the attached chart, all red diamonds are L1s. I would have entered short on bar 163 after the previous L1 signal.

Just a few ticks below the stop, another L1 is formed (bar 175).

On bar 177, price breaks above the high of the L1, so I could say it failed.

If I keep it though, after getting stopped out of the ongoing trade at bar 177, the market plunges down past the signal which I could take as an entry.

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Forgive me if you have already covered this, I have only briefly scanned your recent posts. However I do recall that Mr Brooks did recommend that new traders stick to H2 and L2 entries as these have a higher probability of succes.

By the way Camp Freddie sends his regards

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Forgive me if you have already covered this, I have only briefly scanned your recent posts. However I do recall that Mr Brooks did recommend that new traders stick to H2 and L2 entries as these have a higher probability of succes.

By the way Camp Freddie sends his regards


He probably does, but somehow I settled on H1s and L1s - and forex, not the Emini. So some of his setups probably aren't the best for me due to the forex / emini differences.

I'm not actually trading the H1 / L1 setup right now - I'm practicing on past data, going over 2010 at the moment. So far with the hardcore pure H1 or L1 setups and nothing else, it looks like you get 50/50 win rate using fixed targets and stops - which are also not Brooks - he recommends stops a tick under the signal bar and I don't recall his a favoured exit method.

I picked up a lot of Brooks stuff reading the threads here on futures.io (formerly BMT), watching the webinars and reading his Futures Mag articles and while I'm seriously sticking to the book, I don't remember well where or when I picked up the different setups or patterns.

For instance in one of the first charts in your first PDF, he says beginners should stick to trading failed breakouts of microtrendlines which are H1s and L1s - although I assume he means you trade the first tick of the failure rather than waiting an extra bar to take the H1 or L1 signal.

So that's something I'm going to add, as well as the H2 and L2 setups you mention.

I figured I would read more about H1s and L1s in the book, but I haven't got past chapter 1 yet. Tell you the truth it's difficult keeping focus, something I'm working on extra besides this price action business.

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Every day almost 99% of the time the EUR/USD turns into the twilight zone when the NY session starts to wind down. It shuffles backwards and forwards making a whole ton of H1s and H2s (or Ls) right through until about 6:00AM London time.

I guess technically they go H1, H2, H3, H4, H5 but I'm not sure about the official Al Brooks approach yet. Must be buried somewhere later in the book.

I'll never be trading this but it's interesting. If a signal actually turns into an entry, the trade can last for ever, often with the market bumbling along just above the stop for bar after bar, or under the target and then swinging back to take out the opposing exit.

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Every day almost 99% of the time the EUR/USD turns into the twilight zone when the NY session starts to wind down. It shuffles backwards and forwards making a whole ton of H1s and H2s (or Ls) right through until about 6:00AM London time.

After saying that based on sim trading May to July 2010, I'm now seeing some days where the market is alive in the Asian session as though it was London or New York. Maybe this is just the August holiday season effect.

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My year of sim trading May '10 to April '11 has got as far as Sept.

I'm sim trading the EUR/USD using solely the Al Brooks H1 and L1 pattern - so nothing else at all, no MA, nothing. This gives about 3, 4 or 5 signals per entry, and about 5 to 10 entries per day. Many of the signals, perhaps half, come during the quiet, choppy Asian session.

I've got a few points here I want to make so I remember them better and so anyone who wants can add their 2 cents.

I'm not making such good progress through the Al Brooks book. The "Price Action" chapter is so concentrated, it's like eating an elephant. I have picked up a few things, but I'll have to write them up seperately to drill them into my memory. The one thing that is very relevant to using H1s and L1s is the microtrendline breakout failure. I didn't read it in the book so far but I picked it out of one of his articles.

Here's a chart displaying a microtrendline break failure. It's like a corollary of an H1 or an L1, but you have to watch the microtrendline at the other end of the bar - i.e. if you are watching out for L1s in a bear trend, then you're watching the lows for a higher low, after which the next lower low will be your L1. But the microtrendline though is drawn downwards on the highs, so you're watching for a break above it which might fail.

H1s and L1s can appear after only two bars - think of a massive bear trend bar followed by a small inside bar just above its low, followed by the L1 with its lower low.

However drawing a microtrendline generally requires a few more bars, so microtrendline break failures will generally appear less frequently. I haven't practiced spotting them but I assume they will appear a lot less often.

Essentially the microtrendline break failure results in an H1 or an L1 - and using it as a signal will result in an entry on the H1 or L1 bar, i.e. earlier.

I could use this as a positive filter to cut out the majority of H1s and L1s.

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  #43 (permalink)
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More miscellaneous points:

- it took a while to figure out that an H1 or an L1 are quickly invalidated but if not invalidated, they can stand as good signals regardless of the number of bars between. Having said that, I rarely see more than 5 or 10 bars in between and it is basically only a consistent, well formed rally of trend bars that will leave an H1 or L1 hanging. Otherwise they are quickly superceded by the next H1/L1 or they result in an entry.

- I often wondered whether I could take an entry signal that occurs just before the previous trade exits. It was simple logic really which says the signal can be valid still and result in a re-entry, but it's rare.

- when it comes to determining the trend direction, within my time frame at least, time is irrelevant! Trying to base a decision on the last 2 hours or 4 hours or 12 hours never really results in a decent decision compared to the decision I can make just looking at the number of ticks that the market has moved. I'll need to revise my little "which way is the trend" flow chart.

- runners, i.e. a second lot left to run or hit break-even can be a big winner if I simply exit the runner at the end of the bar. Some of these EUR/USD bars are huge and my 15 point target is puny in comparison. One bar I saw was 80 points. In 5 mins. More testing further down the line. But really what is the downside to using a runner like that? Transaction costs, slippage and a bit more effort managing the trades.

- sometimes having 15 points targets and stops seems real Captain Caveman. I don't know which measure it would be best to keep my eye on, but it's worth thinking about adapting the 15 points to something bigger when some measure of ATR indicates so - I don't know which - daily, hourly, 5 mins?

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- I often wondered whether I could take an entry signal that occurs just before the previous trade exits. It was simple logic really which says the signal can be valid still and result in a re-entry, but it's rare.


Just to qualify this, it's only entry signals in the opposite direction that can still be valid because an H1 or L1 entry signal when you are in a trade already will have passed while you are in the trade - if that sounds like I'm stating the obvious, I am but the decision logic is slightly different when you are trading real time. At the moment I am sim trading past data so I am not watching the bars form, I see each bar as a finished article bam bam bam so I made the mistake of thinking I would take a signal after exiting, although in real time I wouldn't get the chance. Clear as mud? My pleasure. I don't know how to clarify that more.

Maybe the chart shows it better. The last L1 signal can't be taken while still in the trade, so you have to wait for the next signal. Sim trading shenanigans.

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I'm refining my set of rules on trend direction like a primitive flow chart. This is my current best analysis. Go through the questions until you answer "yes", or you reach the end, meaning there is no trend.

(1) is there a series of consecutive trend bars trailblazing the trend up and down the screen?

(2) is there an obvious series of swings, higher highs and higher lows (or lower highs and lower lows)? For now I'll be content to take the swings in the direction of the trend, not the retraces.

(3) from the highest high or lowest low on the chart (I see about 20 hours on the 5 min bars but that's a random choice which I need to justify), has it reversed from there by a number of points that you'd say constituted a new trend direction on your time scale?

(4) with the chart set to auto-scale, if the price in the top half of the screen or the bottom half of the screen, does it look like it's trended to where it is from the other half?

(5) are you sure that there's no horizontal channel, because if there isn't, there must be a trend moving the market beyond the possible horizontal restrictions.

(6) failing all that, it looks like the market really is going nowhere

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I finally got too frustrated with my 'rules' for trend definition. It's the point where the trend evaporates and whether another has formed that is just pure quicksand.

I figure I'm not making it easy for myself because I'm demanding some trend definition - either up or down - without allowing for a sideways market.

This probably stems from my lack of patience. If there's no trend then the trend-based setups I'm looking for (H1/L1s) won't appear. It's a subconscious belief that I need as many trades as possible, a belief I'm struggling to replace with the idea that I should sit back and wait for the good ones.

I just tried sim trading a week of EUR/USD using HH/LLs to define the trend. I'd mark up the HHs and HLs in a bull trend, taking H1 signals. If an LL or LH appeared, I would suspend the signals, and if a second then appeared, I'd flip into a bear trend and start taking L1s.

And vice-versa.

The only way to do that without going nuts is to take a HH and then wait for the HL, ignoring the highs unless it put in a LH. And then wait for another HH.

It's not perfectly objective but it could be - there are some situations where you have to make your mind up on the fly or invent a few little extra rules.

The result is that the defined trends are a lot lot shorter than before, and there are a lot less signals - but it doesn't look like the signals are any better than before.

Chart attached. Green up triangles are HH/HLs, red down triangles are LL/LHs. Green dots are H1s, red diamonds are L1s.

So the end result is, yes it solves the frustration with the subjective decisions about trend direction, and I could probably make it into an indicator because of its objective nature, but it doesn't seem right as a tool for price action trading - it feels like a scatter gun approach and it often feels too random. If I was going to use it, I think I'd switch to range bars (see BM's vid on the 'Elusive' thread) - the charts would look a lot prettier.

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That post above is all just part of my continuing Year of H1/L1s and the week of using HH/LLs proved no good, but now I'm not moving back to freestyle trend definition as I've done for 2010-05-01 to 2010-10-22 - I'm going to drop in the 20EMA onto my chart and see how that goes - at least for a week, perhaps for the rest of the test - thanks to Mr @ Bacon for the timely nudge in that direction on the 'Elusive' thread.

It would destroy my first six months' decision matrix, but that was a degenerate tool where I was only marking wins or losses - since I was correcting my mistakes as I went, so there was no 'Avoided' sector, and with H1/L1s there's no 'Misshapen' sector.

For the record, the first six months ended 910 wins to 880 losses, i.e. scarcely discernable profit - although that is irrelevant, this is just a baseline for future testing. I expect with the 20EMA this might improve a little, but I'm not going back over the first six months again, I'm just ploughing on.

My hope is that the 20EMA will remove some of the frustrating subjectivity around whether we're trending or not.

The rules around how to use it:

(1) market above the EMA and not touching - bull trend
(2) market below and not trending - bear
(3) market touching - sideways

I suspect I'll start getting frustrated by the lag in the EMA suspecting the trend is changing when the market and the EMA are converging, but hopefully the testing will give me a good handle on it.

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Using the 20 EMA as the trend definition is not the piece of cake I thought it would be.

I've only done 2 weeks so far but the win:loss ratio is really bad. I don't know if there's something different about these weeks. There is more volatility, maybe that's the issue. 15 points both risk and reward doesn't look very clever at the moment.

A lot less signals, which is expected since I introduced the "no trend" state for bars over the 20EMA.

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I'm still ploughing through 2010/11 sim trading H1s and L1s although it's going quicker now. It's taking about an hour per week and I've just got to Christmas so there's still a way to go.

From September to December the Asian session overnight came alive, often looking just like a London or NY session. This is in stark contrast to May to August when the Asian session was 99% range-bound in a little range until the London session opened.

The Asian session still does go dead though, creating quiet periods with poor signal strength and presumably purely random results - not something I can verify right now.

I picked up somewhere that the Asian session's range can create useful S+R levels for the rest of the day but I haven't looked into it further - something to put on the to-do list. There seems to be a fairly frequent big move at 6 to 7 AM as London opens - most of which are fake it in one direction and turn around after 30 mins and go all the way back and more.

I'm also seeing dead periods in the middle of the London session which surprised me. The signals in the dead periods increase in frequency and I guess (again) are completely non-predictive.

I also need to figure out how to spot range days early, since the signals should be faded on those days. Generally speaking though I only see them after it's mostly past.

Fortunately I think I now know a good or a bad H1 / L1 when I see it. The bad ones are the one bar affairs when you don't even get to anticipate it, it just happens. I'll post some charts hopefully to demonstrate but I have to remember to save the examples when I see them.

OK here's a chart attached - look at the last bar - it's technically an L1. It doesn't look good, there's hardly a retrace to speak of and I'm beginning to think I'll avoid them when they don't have a HH as well as a HL. (It turns out that signal is never triggered anyway).

However on the bull trend several bars beforehand, there's a pretty much perfect H1, with retrace, a LH and a LL on the bar preceeding the H1. I don't think I'd look for anything better - apart from more profit perhaps.

Basically for a good H1, you need to see a bar with a LH and a LL, not just a LH as Brooks defines it. Plus they seem to be better if they're good trend bars in the right direction. This is something for testing though, I'm only assuming here.

These are all things I'm going to use when running over the whole year again after I'm through with this first run. That, and changing the exits to Brooks-style stops 1 tick below the signal bar, and then also using a runner as well as a target.

I've got my work lined up nicely.

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Hello,

this looks interesting. I'm simming the 6E market like you. I mostly trade the setups of Lance Beggs on the 3 min chart.
One point I found it is very important to recognize a trade which is going to fail.

My rule ( which is a subjective rule) is that on the 3 min chart, my trade has to move some points in 3 1 min bars ( or ofcourse 1 3 minute bar) , or else I will scratch the trade immediately. Let's say within 4 1minute bars you should be able to move your SL to entry.

This is because when this happens 8/9 out of 10 times the market will not move in my expected direction.

This approach saves a lot little losses, because if the trade will not go my way quikly, I can scratch the trade with -1/-2 pip loss per contract, instead of losing e.g. -7 pips per contract. So 1) my losses are smaller and 2) losing is less demorilizing
The 1/2 times it does run after I scratched I don't care. That was not my trade. It is important not to eat your hat when this happens

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Hello,

this looks interesting. I'm simming the 6E market like you. I mostly trade the setups of Lance Beggs on the 3 min chart.
One point I found it is very important to recognize a trade which is going to fail.

My rule ( which is a subjective rule) is that on the 3 min chart, my trade has to move some points in 3 1 min bars ( or ofcourse 1 3 minute bar) , or else I will scratch the trade immediately. Let's say within 4 1minute bars you should be able to move your SL to entry.

This is because when this happens 8/9 out of 10 times the market will not move in my expected direction.

This approach saves a lot little losses, because if the trade will not go my way quikly, I can scratch the trade with -1/-2 pip loss per contract, instead of losing e.g. -7 pips per contract. So 1) my losses are smaller and 2) losing is less demorilizing
The 1/2 times it does run after I scratched I don't care. That was not my trade. It is important not to eat your hat when this happens

Hi, glad to meet someone doing roughly the same thing. I subscribe to Lance Beggs's blog and it's v. interesting, but I haven't bought his e-book on PAT yet - too much on my plate with Al Brooks still, and actually I'd rather have a real book rather than a PDF - but I do plan on getting it soon. Do you recommend it? I mean, obviously you're using Lance Beggs methods, but would you say the e-book's definitely the way to go?

I like that Lance Beggs approaches PAT as a complete business and personal enterprise, not just as a method of technical analysis - I mean, I think these non-trading details are v. important, especially when you haven't thought about them before.

I too like you think it is important to ditch a trade if it doesn't feel right - simming with hard 15 point stops doesn't allow for that though and fixing the issue is an item high up on my list. Of course though on the plus side there are numerous occasions when a hard stop allows the market to make good and come back to hit the target. I haven't tested the expectancy of that yet, but I want to know if it's a net winner as a strategy.

The number of times I'm simming a trade and it's heading the wrong way and I know it's going to hit the stop, that's a frequent occurence. I try to figure out why I think I 'know' but as yet I haven't put my finger on it. I guess it could be something as obvious as the trend but I like to think my intuition sees more than that.

Your exit rule looks like a timed stop. Do you use it at the end of the bar only? I would assume you'd be looking to enter at the close of strong bars going in your direction already. You need a bit of momentum if you're going to scratch all the trades that go against you a little.

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Step one - mission accomplished.

I sim traded the whole year of 24 hour days on 5 min bars from May '10 thro April this year, all sessions on the EUR/USD.

At the end, today, after working out all the minor details of how to sim trade and how best to learn from it, it's taking me about 50 mins to sim trade a whole week. I'm glad to know I can do it without going nuts. I've also got a fairly good idea of what I will get out of it in terms of knowledge and experience. This is definitely the way to go for me now to refine my PAT strategy. I can't see a better way of doing it, despite the cost in terms of time required.

One slightly disappointing feeling though - I'm pretty sure I haven't seen everything the EUR/USD is about - I know I'm going to sit down when I go live and see it do stuff I've not seen in testing.

Now I've got to work out what I'm going to test next - and from where I'm sat at the moment, I'm spoilt for choice with the array of different price action formations to include on top of H1s and L1s and the old 20EMA.

With a wide range of different shapes and guises that an H1 or an L1 can appear as, it seems to me that many of their occurences are actually random and don't have any causality. It wasn't possible to judge that during testing, I could only hope to pick up an impression as I went along, but I didn't - I wasn't going slow enough to take each trade and carefully consider it - I figured it would have to be tested on its own. It was only 3/4 of the way through the test that I realised that the weak H1s and L1s could be recorded on the decision matrix seperately - stupid me. But by then it wasn't worth going back to start again.

The whole result showed a win rate of 50:50.

It was seriously annoying to sim trade though the Asian session, since the session often only has a narrow channel, but the H1s and L1s signals keep coming.

I'll post up a few charts with different "quality" H1 and L1 signals, to go over what I'm talking about, for the record. I mean "quality" as in appearance rather than profitability.

So I came out of this with a great knowledge of the EUR/USD's general price action, which is good, but I now see the work is not even half done, which is a bit of a disappointment. It's obviously going to take longer to home in on a profitable setup, but at least the ground work is there now.

Besides posting some charts later with more details about H1s and L1s, I'll also make another post with a list of the options for the next generation setup I'll test.

In the meantime parallel to this, in case any readers out there are wondering why my progress is on the slow side, I'm also keeping a couple of mechanical trading systems running and re-writing the NT7 strategy for one of them to allow me to see comprehensive results across all the currency pairs I trade it on - one of the major omissions of NT7 strategy testing and running is that it doesn't give you total account drawdown for a run on multiple instruments - unless you code all instruments into one strategy, which is what I'm doing.

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Hi Adamus,

Spotted your journal thread and thought 'hey that sounds a bit like me'. So I'm saying hello. (not read all your thread yet).

I trade spot forex (15 min charts), I use NT7 (MBT data), I use a rule based discretionary system heavily influenced by price action set-ups.

I started my trading business full time February this year, so looking at nearly 5 months blood, sweat and tears so far (yes lots of tears!). I've given myself a dealine of December to reach consistent profitability. Not there yet, but getting closer every day.

I'd be keen to bounce ideas around seeing we are doing similar things in the same time zone.

Let me know if you are interested.

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Interesting thread and I wish you the best of luck on your journey. I susspect you are going to have to work through the following issues.

trading 1 market you are going to need several trade setups as just 1 setup will either be too infrequent or be frequent but with a poor r:r

this will be especially true depending on the hours you can trade





Adamus View Post
Step one - mission accomplished.

I sim traded the whole year of 24 hour days on 5 min bars from May '10 thro April this year, all sessions on the EUR/USD.

At the end, today, after working out all the minor details of how to sim trade and how best to learn from it, it's taking me about 50 mins to sim trade a whole week. I'm glad to know I can do it without going nuts. I've also got a fairly good idea of what I will get out of it in terms of knowledge and experience. This is definitely the way to go for me now to refine my PAT strategy. I can't see a better way of doing it, despite the cost in terms of time required.

One slightly disappointing feeling though - I'm pretty sure I haven't seen everything the EUR/USD is about - I know I'm going to sit down when I go live and see it do stuff I've not seen in testing.

Now I've got to work out what I'm going to test next - and from where I'm sat at the moment, I'm spoilt for choice with the array of different price action formations to include on top of H1s and L1s and the old 20EMA.

With a wide range of different shapes and guises that an H1 or an L1 can appear as, it seems to me that many of their occurences are actually random and don't have any causality. It wasn't possible to judge that during testing, I could only hope to pick up an impression as I went along, but I didn't - I wasn't going slow enough to take each trade and carefully consider it - I figured it would have to be tested on its own. It was only 3/4 of the way through the test that I realised that the weak H1s and L1s could be recorded on the decision matrix seperately - stupid me. But by then it wasn't worth going back to start again.

The whole result showed a win rate of 50:50.

It was seriously annoying to sim trade though the Asian session, since the session often only has a narrow channel, but the H1s and L1s signals keep coming.

I'll post up a few charts with different "quality" H1 and L1 signals, to go over what I'm talking about, for the record. I mean "quality" as in appearance rather than profitability.

So I came out of this with a great knowledge of the EUR/USD's general price action, which is good, but I now see the work is not even half done, which is a bit of a disappointment. It's obviously going to take longer to home in on a profitable setup, but at least the ground work is there now.

Besides posting some charts later with more details about H1s and L1s, I'll also make another post with a list of the options for the next generation setup I'll test.

In the meantime parallel to this, in case any readers out there are wondering why my progress is on the slow side, I'm also keeping a couple of mechanical trading systems running and re-writing the NT7 strategy for one of them to allow me to see comprehensive results across all the currency pairs I trade it on - one of the major omissions of NT7 strategy testing and running is that it doesn't give you total account drawdown for a run on multiple instruments - unless you code all instruments into one strategy, which is what I'm doing.


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rassi View Post
Interesting thread and I wish you the best of luck on your journey. I susspect you are going to have to work through the following issues.

trading 1 market you are going to need several trade setups as just 1 setup will either be too infrequent or be frequent but with a poor r:r

this will be especially true depending on the hours you can trade

Thanks Rassi. I agree. Those are issues that I have considered. Brooks's H1/L1s are currently my only signals, but I hope that other signals will become obvious candidates for me as I progress through the learning material. But right now I'm only at the stage where I am looking for additional price action formations that strengthen H1/L1s.

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mokodo View Post
Hi Adamus,

Spotted your journal thread and thought 'hey that sounds a bit like me'. So I'm saying hello. (not read all your thread yet).

I trade spot forex (15 min charts), I use NT7 (MBT data), I use a rule based discretionary system heavily influenced by price action set-ups.

I started my trading business full time February this year, so looking at nearly 5 months blood, sweat and tears so far (yes lots of tears!). I've given myself a dealine of December to reach consistent profitability. Not there yet, but getting closer every day.

I'd be keen to bounce ideas around seeing we are doing similar things in the same time zone.

Let me know if you are interested.

I am absolutely interested. Fire away.

Talking about time zones, that means sessions, and I am aiming to trade 4 hours a day but I haven't decided which session yet. Sim trading 24x5 gave me a good idea of the different sessions, and it's clear I'm not going to try trading the Asian session. I momentarily thought about trading from 6:00AM to 10:00AM because there does always seem to be plenty of market movement at that time. It would be difficult to fit in with my current personal timetable right now though.

I also think that I should avoid trading through the lunchtime period, although that idea is based on only very thin evidence, plus the big non-farm payroll days reach their climax at 13:30GMT.

What are your trading hours?

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Quoting 
One slightly disappointing feeling though - I'm pretty sure I haven't seen everything the EUR/USD is about - I know I'm going to sit down when I go live and see it do stuff I've not seen in testing.

Hi Adamus

I had similar thoughts until going live (real money) 16 June. The only situation I worry about now is the kind of move EUR/USD made during the Greek vote today (as you may have noticed it dropped ~100 pips in about 20 seconds). I suspect one's stop would have slipped seriously if one were on the wrong side of that. I wasn't in the market because paper trading taught me not to be during events like that, even though I was expecting any move would likely be to the downside since all the good news seemed already baked in It seems the first lesson live trading tries to teach is have the courage of one's convictions.

B.

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Adamus View Post
Thanks Rassi. I agree. Those are issues that I have considered. Brooks's H1/L1s are currently my only signals, but I hope that other signals will become obvious candidates for me as I progress through the learning material. But right now I'm only at the stage where I am looking for additional price action formations that strengthen H1/L1s.

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.

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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.

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bnichols View Post
Hi Adamus

I had similar thoughts until going live (real money) 16 June. The only situation I worry about now is the kind of move EUR/USD made during the Greek vote today (as you may have noticed it dropped ~100 pips in about 20 seconds). I suspect one's stop would have slipped seriously if one were on the wrong side of that. I wasn't in the market because paper trading taught me not to be during events like that, even though I was expecting any move would likely be to the downside since all the good news seemed already baked in It seems the first lesson live trading tries to teach is have the courage of one's convictions.

B.

That would be them Big A***d Bars!

You don't say whether you intend to learn to trade those BABs - I certainly do - and I think the way to learn is to ratchet down your leverage to 1/2 or 1/4 of normal and then just learn! See what it does to you. I guess it's like being in a tumble dryer.

I say that with mixed feelings because i know my main motivation for it is purely the adrenalin. Bring on the non-farm payrolls, Greek votes, etc etc

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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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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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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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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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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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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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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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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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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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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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Finally made it over the brow of the hill in my struggle to digest Reading Price Charts Bar By Bar.

Chapter 2 just gave me mental paralysis everytime I tried to read it. My solution was to go through it sentence by sentence ("Reading Al Brooks Sentence by Sentence") making sure I understood it and looking everything up in the book, on the web, on futures.io (formerly BMT) before I moved on.

I also made notes in the form of a wikipedia article - Price action trading - Wikipedia, the free encyclopedia - which was really difficult because it had to be structured in a proper 'encyclopedic' way, so I really had to think about the introduction and the section titles.

More here on the book thread.

As far as my trading progress is going, now that I've got through the quicksands of chapter 2, progress will speed up. I'm looking forward to finding more about H1s and L1s and trends generally in the next couple of chapters and maybe then I'll have enough to go on to start another sim trading test run.

I've got a lot to choose from to put on my decision matrix just to improve the H1 / L1 setup that I'm concentrating on now:

  • test Brooks exits one tick below entry for initial stop
  • let one lot run after reaching the profit target
  • variations of H1/L1 to filter for / avoid
    • countertrend bars = bad with-trend signals?
    • maybe single bar pullbacks before an H1/L1 should be considered a seperate type of setup from multi-bar pullbacks. Single bar pullbacks are v. useful for entering strong trends but a killer on quiet days.
    • does microtrendline break make H1/L1 better?
  • don't use an H1/L1 signal if it's not triggered (choose):
    • immediately
    • within 2 bars
    • within x bars
    • if market crosses EMA
  • choose a trading session (definitely not the Asian session which is the doldrums for the /$)
    • 95% of days see good movement at 06:00 or 07:00 GMT - maybe that's the time to start my trading day
    • sometimes the Asian period was tradable and looked just like the London / NY sessions
    • need to define market characteristics of the quiet Asian session periods - e.g. extended runs of v. small bars
  • try to spot trading range days in the making, because they seemed to be rubbish days for H1/L1 trend continuations - whipsaw city.
  • was my test period comprehensive enough? it felt like a year of two distinct parts - May through August was distinctly different, more laid back than Sept through April.
Other things I'll need to keep an eye on in testing to try out later:

  • second or third leg of trend
  • approaching round numbers
  • support and resistance levels
  • longer timeframe trend as a filter on top of EMA
  • double tops / bottoms & double top / bottom twins
  • reversal bars
  • opposite twins / up-down & down-ups

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Wow, did you write the whole wikipedia page?
It seems that you really go deep in it, good! You have a very thorough and structured approach.

Btw, how do you perform your backtesting? I mean, do you use some software?

The way I did test "the setups" was just looking and studying the charts of the past 6 months, and asking myself the following questions:
-When will the setup most likely fail? How do the failures look?
-When wil the setup most likely succeed? How do the succes trades look?

And next, which I consider very important:
-How do I recognize when I'm in a trade which will fail?
I do this by looking how the succes trades "look like". For example I found that in most setups (trading 3min chart) I could:
- put my SL at entry after 3 1-min candles ( some sort of time-stop)
-just simple trail the timeframe candles. E.g. trail the lows of the (3-min)candles when positioning long.
-when a candle forms which is showing incoming counterpower, the move will likely be over. E.g. when long
and a shooting star, candle with uppertail, dark cloud cover, bearish engulfing forms -> put SL under this
candle or immediately take profits.
Sometimes price will go just 1 pip under such a candle, trap shorts and moves again higher. So you can also choose to trail the candles with a 2-3 pip Stoploss.
- strangely enough, when a trade will " jump" at my entryprice instead of " gradual moving "
( you must see this realtime) succes changes will be lowered.. I think maybe this is because it is a stoprun.

Greetings!

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I think 95% of the wikipedia article to date is my work. Going into Brooks's book thoroughly is a really good way to learn it.

For the backtesting I'm doing, I'm just going forward bar by bar using the right arrow key on my laptop and scoring the results on a decision matrix. It took ages just to do one run from May 2010 to end of April 2011 on a 5 min timeframe. I'm just about to start another bactest with more rules for the setup.

When I start, I'm going to mark the trades on the chart quickly and try to complete the backtest as soon as I can, and then go back over the trades to examine what they look like in the same way as you.

Thanks for the info - I will watch out for those occurences while testing and if they seem to be valid for me, I'll incorporate them on the 3rd test. I have already noticed that I seem to know what will happen next in some situations - although it's not an infallible intuition - without realising what it is that tells me so unless I think about it. Generally speaking it seems to be good when the market acts in a regular fashion! Nothing more complex than that.

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As far as my trading progress is going, now that I've got through the quicksands of chapter 2, progress will speed up. I'm looking forward to finding more about H1s and L1s and trends generally in the next couple of chapters and maybe then I'll have enough to go on to start another sim trading test run.

I've got a lot to choose from to put on my decision matrix just to improve the H1 / L1 setup that I'm concentrating on now:

  • test Brooks exits one tick below entry for initial stop
  • let one lot run after reaching the profit target
  • variations of H1/L1 to filter for / avoid
    • countertrend bars = bad with-trend signals?
    • maybe single bar pullbacks before an H1/L1 should be considered a seperate type of setup from multi-bar pullbacks. Single bar pullbacks are v. useful for entering strong trends but a killer on quiet days.
    • does microtrendline break make H1/L1 better?
  • don't use an H1/L1 signal if it's not triggered (choose):
    • immediately
    • within 2 bars
    • within x bars
    • if market crosses EMA
  • choose a trading session (definitely not the Asian session which is the doldrums for the /$)
    • 95% of days see good movement at 06:00 or 07:00 GMT - maybe that's the time to start my trading day
    • sometimes the Asian period was tradable and looked just like the London / NY sessions
    • need to define market characteristics of the quiet Asian session periods - e.g. extended runs of v. small bars
  • try to spot trading range days in the making, because they seemed to be rubbish days for H1/L1 trend continuations - whipsaw city.
  • was my test period comprehensive enough? it felt like a year of two distinct parts - May through August was distinctly different, more laid back than Sept through April.

My original plan involves taking only signals where the market is trending strongly enough that the bars don't touch the EMA, however Brooks flags up the price action for H2s and L2s around the EMA as good signal material.

When the H or the L signal bar or its immediate prior bar (actually he might mean 2 or 3 prior bars but he doesn't specify) is on the EMA, this is - quote - particularly reliable - unquote. I wonder if that applies in the EUR/USD as well as the Emini.

One caveat that throws a bit of ambiguity into Brooks's message is that the description is in the middle of his text about H and L counts in non-trend days, so whether it applies to my favourite - H and L counts in trend pull-backs, I'm not sure.

This is typical RPCBBB Brooks mystification at its worst. He's describing H and L counts in the chapter on pull-backs, but with regard to trading range days and not pull-backs at all anymore, and to add spice to the mix he is counting Hs and Ls on two charts simultaneously, not just the Emini, but also the SDS which is the inverse of the Emini. I suppose I shouldn't complain - if you can't stand the heat, you'd better get out the kitchen. To mix my metaphors, I feel like the Sorceror's Apprentice.

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I'm looking at p128 now in RPCBBB and Brooks is talking about variations of Hs & Ls.

He really likes H2 & L2s. Everything has got to be twice, otherwise he doesn't trust it, if it only happens once. He hasn't given it a name, so I'm going to. I'm calling it his "two attempts rule". As he says almost every section, when something has happened twice (an attempt to go lower or higher), if it doesn't succeed, then the market's liable to go the other way. He refers to it as 'second entry' sometimes, or confirmation.

So in this section, he describes how to spot 'missing' H1 and L1s in the chart, which you want when you are watching an H1 or L1 build, since then that would make your H1 or L1 actually an H2 or L2 and would give it more reliability due to the two attempts rule. The hidden H1 or L1 that you find would also represent the seperator between two legs down in a pull-back, the end of which is the ideal point to get back in on the original bigger trend.

He also uses his other favourite maxim - if something looks similar enough to your chosen Brooks pattern, then the market will probably behave as if it *is* your chosen pattern.

These are the rules, and this is how to bend them....

Anyway, he's talking about bar 2 in his chart from his book, attached. I assume that's not breaking anybody's copyright.

In words, what's he saying is that a bull bar in a bear pull-back is good enough for an H1 when you need it, even if it doesn't make a higher high than the previous bar.

In other words, he's looking inside the bars while they're building and seeing the price action on a shorter time scale. This is going to be fun testing. I think it might slow me down a bit too. I'm going to have to think

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Brooks made me have a lot of thinking too

Always wanted to test H2 / L2, will do that soon.

Even more powerful but less frequent is Failed H2/L2.

I find failed patterns even more powerful.

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Brooks made me have a lot of thinking too

Always wanted to test H2 / L2, will do that soon.

Even more powerful but less frequent is Failed H2/L2.

I find failed patterns even more powerful.

Yeah, but when? If you're in a pull-back, it seems you need good evidence that it's going to continue pulling back more, not just a failed H2. And where do your entries, targets and stops go?

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I consider the Failed H2/L2 as a reversal pattern.

Let's try to simulate a failed H2 with a EUR/USD example from tonight.

1/ The trend is up above EMA20 like our dear Brooks or above TL as in my example.

2/ You have a pull back, price starts to trade below previous bars low.

3/ The high is higher than previous bar, you have a high 1, 1st possible entry in previous trend: 1st blue arrow.

4/ High1 fails to make a new high, the price continue to pull back below the low of your setup bar.

5/ The high is higher than previous high for the second time, you have a high 2, or simply a 2 legs pull back within EMA, very good entry within the current trend: 2nd blue arrow.

6/ Now either it makes a new high (it doesn't) or the trend might be over and you can look for a signal to go short . You can enter either on a failure to make a new high (1st red arrow) or on a trendline / previous pivot low break out (2nd red arrow)

The main idea from Al is: "When the market tries to do something twice and fails both times, it is a reliable signal it will likely succeed in doing the opposite"

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Alright I'm with you on the logic, but for my newbie tastes, the trading range in-between is too many bars afterwards for me to remember - I would take your first sell signal as a failed break-out.

I would have got stopped out 3 bars in after the H2 for 4 ticks.

There's not much warning that you should have avoided the straight H2 buy. What would have made you think it was good to short?

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No warning, the H2 was a decent Long when it happened (maybe the previous bar was a strong red trending bar, but it's subjective...)

It is a good short when you see LHs after the H2 and a lack of follow up instead of a strong push to a HH.

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  #81 (permalink)
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Now that I've learnt the material on counting highs and lows in the chapter on pull-backs, I'm not going to restrict myself to just H1s and L1s.
  • Setups
    • variations of H/L count to filter for
      • only go long above the 20 EMA
      • only go short below the 20 EMA
      • rebound off the EMA after an extend push above/below it
      • in a good trend, take H1/L1s
      • in a poor trend or trading range, wait for two legs and take H2/L2+
      • after a microtrend or trend line break on the main trend, take any because break-out failures are good
      • double tops / bottoms in pull-back
      • reversal bar in pull-back
      • up-down & down-ups in pull-back
      • double top / bottom twins in trend
    • variations of H/L count to filter against
      • a H/L bar that is countertrend in weak trends
      • preceding double tops / bottoms in trend
      • reversal bar in trend
      • up-down & down-ups in trend
      • trend channel line overshoots in trend
    • ditch H/L signal if it's not triggered during this pullback
    • be very careful if the daily and hourly charts don't display a clear trend, maybe avoid trading until the market gets away from the 6AM Open
    • be more careful when the trend has already put in two legs, even more after 3 legs
    • beware resistance approaching round numbers and big pushes after them
    • daily and hourly trend line S/R
    • swing highs & swing lows and highs and lows of previous day are S/R
  • Execution
    • session: 6am -> 9pm London time (for backtesting, I'll shorten it for live trading obviously)
    • Brooks entry 1 tick above / below signal bar
    • Brooks exits one tick below / above signal bar for initial stop
    • move it to break-even when the 15 pip scalp target is hit
    • let one lot run to the end of the bar after reaching target
    • trail stop one tick below / above 2 bars back
That is my trading plan. Now to test it. I'm going to backtest starting a year ago. The temptation to leapt right in with both feet and trade today with the market volatility and the non-farm employment is huge, but fortunately I'm feeling sensible.

So I need to create some decision matrices to record the performance of this price action.

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Adamus View Post
be more careful when the trend has already put in two legs, even more after 3 legs

I think you were asking about the EU specificities in an other thread.

One is that trends in the FX market tend to last much longer and to be much more explosive (good break out instrument).

2 or 3 legs doesn't mean the trend will lose strength.

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Yes, one of the pitfalls of learning to trade forex from an index trader.

Fortunately I'm only testing, but I can still mess up the test by putting too much stuff in it.

I can ditch 'number of legs' from my trade plan and I'm sure I'll still find it challenging to assimilate.

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on the same subject, since you seem to have a bit of experience here, what do you think about trend channel line overshoots? Are they good counter-trend signals in forex as well as stock indices? Brooks seems to give them a cast iron guarantee as a reversal signal.

On another subject, what do you make of the current EUR/USD action? I can't see a way into the current rally, unless is was through the failed break-out of the inside bar after the non-farm employment bar.

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Still a beginner at this game but I've spent almost a year trading Brook's method day in, day out on the EUR/USD.

Finally I gave up discretionary trading and I now try to automate strategies.

Channel Overshoots are very nice but this is a counter trend setup and I prefer putting all my efforts on with trend entries for the Euro.

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Still a beginner at this game but I've spent almost a year trading Brook's method day in, day out on the EUR/USD.

Finally I gave up discretionary trading and I now try to automate strategies.

Channel Overshoots are very nice but this is a counter trend setup and I prefer putting all my efforts on with trend entries for the Euro.

I'm only taking with-trend entries too - no intention of trying to stretch myself by launching into counter-trend trading as well. In that context, let me rephrase my question: would an overshoot put you off an ensuing with-trend entry?

I'm curious to know why you are concentrating on mechanisation now. I do a lot of it, but I see both styles of trading as possible, in fact complimentary. I hope to get some serendipity out of discretionary trading to boost my mechanical efforts.

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Nothing should prevent you to take a with trend entry, not even an overshoot.

If you enter at the right place, you should be able to get out at a small loss.

Totally agree, both styles are possible and complementary and I think you could even be much more profitable as a discretionary trader IF you can let your emotions out of the way - which is very very difficult when you trade 8 hours a day everyday.

Everyone has to find his own way, I think I 've (almost) found mine

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I only plan to trade 4 hours a day by hand. I'll be concentrating on the mechanical systems for the rest of the time. More or less.

I'll be interested to see what you're up to on that front.

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I abandoned that test outlined above. While I'd put it together with what I thought was a decent level of structure, I couldn't stick at it without constant nagging doubts that I was missing something. I think it was the large chunk of time I was about to invest made my subconcious complain. I don't think the test I'd planned contained enough of the 'right stuff' from the bigger picture that I've built up of the field of price action trading.

Trying to concentrate was failing and I ended up reading lots of stuff to add to wikipedia Price Action Trading article. I bit the bullet and paid Lance Beggs the approx USD$200 for his YTC Price Action Trader e-book/course and was instantly hooked. This was what I'd really been looking for.

I've more or less finished reading it all now, approx 16 MB of PDF - and I've torn up my previous test. I'll outline here the new techniques and analyses as I start and progress. It looks as if it's still fertile ground for big tests, decision matrices and a systematic approach, in fact even more so since Lance Beggs's material emphasises structure on every page.

I've put out a call to see if other people are at the same level with YTC Price Action Trader and want to form a study group:

ytc price action trader getting going

I also discovered this interesting looking thread, which I'm posting here to remind myself to read later:

Traps and failures

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Hi Adamus

I will be really interested in your discoveries. I too am struggling to be profitable and would like to have a mechanical (as opposed to descretionary) trading strategy on a longer period chart.

So I am reading with interest - thanks

Daniel

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diverdan View Post
Hi Adamus

I will be really interested in your discoveries. I too am struggling to be profitable and would like to have a mechanical (as opposed to descretionary) trading strategy on a longer period chart.

So I am reading with interest - thanks

Daniel

Hi Daniel,

I'm still sitting on the fence regarding the best approach to mechanical trading. I think your focus on long term systems is good. Ideally you would find 3 or more systems that are as uncorrelated as possible, and trade them on as many different markets as possible with low bet sizes, which for me would rule out futures and restrict me to forex and maybe some of the indices and some cash instruments on oil, metals, etc.

That strategy would be slow to profit in the short term but once you achieve a certain level, if your systems are good enough and you don't take money out, you get to the point where you can start compounding your profits and that is something worth aiming for.

That's one of the other reasons why I want to trade manually - so that I can earn my living from it, and leave the profits from the systems alone.

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The YTC PAT material from Lance Beggs contains a fairly comprehensive description of how a trader should self-train from start to finish, so I'm following that approach. I'm glad of the structure, basically, since focus was always one of my weak points - or better said, developing focus in a new area for me has always taken frustratingly long, so I'm happy to adopt a programme when it's put on a plate for me.

The learning and testing methodology is not quite the same as what I was doing earlier. Instead of going over a year's worth of past data marking up the trades I would have taken, the first stage in this approach is to go over the past data just marking up the S/R and the setup areas where the trading takes place, trying to identify the market strength and weakness, and concentrating on what other traders would be doing in those areas.

There are five setups that are known by their abbreviations:

  1. TST - the TEST of a support or resistance by a weak market, expected to reverse
  2. BOF - Break-out failure through S/R and back again
  3. BPB - Break-out Pull-back through S/R and weak pull-back and then away
  4. PB - Pull-back in a trend
  5. CPB - Complex pull-back in a weaker trend, 1,2,3 legs reverse, back and reverse before continuing
I'm going to start posting my screen shots with the mark-up for the last trading day. So at the moment there are no trades on here, and I suspect since I'm new to this, quite a few of the setup areas would not have lead to trades because the market moved too quick in reality (as opposed to hindsight).

I got in touch with a few other YTC PAT readers, so if you're reading this, don't hesitate to comment. In fact that applies to anyone.

I stepped down from the 5 min chart to the 3 min chart this week. Maybe I'm listening to one of my little psycho-weaknesses here, because I love to have more trades, but my excuse is that I don't think I had a great reason to be on the 5 min charts when Lance is writing the whole time about 3 min charts. The 5 min chart is a definite habit for me from reading so much Al Brooks.

My work-rate at the moment is pretty slow. I'm having trouble getting through a week of past data per day, but hopefully that will speed up a little. So I'm trying to get through 5 days of past data, plus today too. At this rate it's going to take me 52 days to get up-to-date, which takes me to the 2nd week of October. That's not including the breaks I know I'll take. Let's hope things speed up.

Still haven't settled on a session to trade yet. I'm testing from 06:00 London time through 16:00 - that's a 10 hour shift which is obviously not possible in real life.

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Great post Adamus!

I looked up the same chart and posted it here under how I view it / which possible setups I saw.
PS I know it is hard to sit on your hands and just study 100 old pricecharts, but it is worth it.

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Nice, thanks.

How do you see trapped traders in there at 08:00? This is one of the parts I find difficult.

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Basically it is just a tip of price under/above a SR-line, swing high/low, ledge of trading range. You could also see it as a BOF. It is also a place where a lot of people put their stoplosses.
The first chart is 3min chart, second the 1 min. Blue line represents a resistance line ( not exact all times but it does represents a resistance zone imo)

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I'm restricting myself to an hour per day from now on to ensure that I get my six days covered in the time available. Here's is what I saw in yesterday's action.

I'm still a bit in the dark trying to identify what other market participants are doing, but I figured I need to watch for three things:

  1. what are the traders who are in drawdown hoping for?
  2. what are the traders in profit targetting?
  3. the traders who are regretting missing the last good entry - where will they try again?

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Yesterday's chart which I just marked up.

It doesn't feel good. I don't think I can blame the feeling on the narrow trading range that continued until late afternoon. Without sim trading it's just an estimate but I think most of the setups would have led to losses yesterday.

Emotionally, it's difficult to work out what the issue is. Maybe I just need some caffeine.

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Hey Adamus,

I marked up you chart with some comments.

Btw 1, do you like this or should I not do it again?
Btw 2, don't take my comments too seriously. Although I studied and practised Beggs a lot, I'm (unfortunately) not a million dollar trader

Cheers

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Zwaen View Post
Hey Adamus,

I marked up you chart with some comments.

Btw 1, do you like this or should I not do it again?
Btw 2, don't take my comments too seriously. Although I studied and practised Beggs a lot, I'm (unfortunately) not a million dollar trader

Cheers

Sure I like it, it's just the kind of collaboration I'm looking for. You're welcome. It's definitely an insight to find out what other traders are thinking when we're trying to do the same thing.

I'd argue with you about the S/R losing their validity.

As far as my experience goes, support and resistance don't lose their validity through just one market action - I'd say it would take a whole day of the market just ignoring the S/R level for me to delete it from the chart.

The way I see it, if the market starts interacting with the S or R level, then it's valid. On any given day with a given S or R level, the market could do one of several things:

  1. ignore it and push straight through without even a minor PB
  2. break-out, show a weak PB - great!
  3. break-out weakly and fail - also great!
  4. not break-out, just TST it - this I find tricky - what if it then breaks out?
  5. doesn't get close enough for a setup before reversing
So I'm just learning them. I haven't got to the point where I wished I knew how strong the S/R level is. I mean, I don't even have any decision making process to judge how the strength or weakness of an S/R level will affect an entry.

I guess I sound a bit stupid here, but what difference does it make? (apart from a simple correlation: strong S/R = less of (1) above, more of (5) and vice versa).

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Sure I like it, it's just the kind of collaboration I'm looking for. You're welcome. It's definitely an insight to find out what other traders are thinking when we're trying to do the same thing.

I'd argue with you about the S/R losing their validity.

As far as my experience goes, support and resistance don't lose their validity through just one market action - I'd say it would take a whole day of the market just ignoring the S/R level for me to delete it from the chart.

The way I see it, if the market starts interacting with the S or R level, then it's valid. On any given day with a given S or R level, the market could do one of several things:

  1. ignore it and push straight through without even a minor PB
  2. break-out, show a weak PB - great!
  3. break-out weakly and fail - also great!
  4. not break-out, just TST it - this I find tricky - what if it then breaks out?
  5. doesn't get close enough for a setup before reversing
So I'm just learning them. I haven't got to the point where I wished I knew how strong the S/R level is. I mean, I don't even have any decision making process to judge how the strength or weakness of an S/R level will affect an entry.

I guess I sound a bit stupid here, but what difference does it make? (apart from a simple correlation: strong S/R = less of (1) above, more of (5) and vice versa).

And it also makes me thing, how are you going to measure the strength or weakness? Just give it a crude "strong" or "weak"?

I could go with that.

However in all the material from Lance that I've read, unless I've forgotten it or I missed it, he doesn't actually worry about the strength or weakness of the S/R level. That would fit in with his keep-it-simple approach.

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