Strat's PASR Long Term, Stress Free Trading
Back to square 1 – THE BEGINNING!
I have closed my private website and divulged myself of ALL commercial interests related to trading and have no further interest in promoting or pursuing commercial related activities on here or anywhere else.
With the agreement and co-operation of Forex Factory (thank you, Twee), we are returning to the TRADING SYSTEMS forum as originally started on February 27, 2009.
Although the thread has a new name “ Strat’s PASR Long Term, Stress Free Trading ”, the system, strategy and methodology IS THE SAME.
My "old" original thread is at https://www.forexfactory.com/showthread.php?t=155459
Those wishing to copy posts, attachments and links from that thread should do so before it disappears into oblivion.
My PASR strategy is very successful and profitable and has produced many CONSISTENTLY PROFITABLE traders who are now full time and trade for their living. HOWEVER, it has not been done overnight, nor has it been a “GET RICH QUICK” strategy. These CONSISTENTLY PROFITABLE traders now trading for their living, have taken on average, over 3 years to reach that status. These traders have READ, LEARNED and UNDERSTOOD, spent thousands of hours on thousands of charts and practiced over and over and over and…………………
My mission, as it always has been from the beginning, is TRADERS HELPING TRADERS.
I will help all those who are GENUINELY interested in trading for a living but will ignore all those looking for shortcuts or who will not READ and UNDERSTAND and PRACTICE the strategy.
After over 9 years on here and a similar time on my private website, I have learned that giving signals, announcing trades, showing my personal trades is only for those with a “Get Rich Quick” mentality.
We learn by doing and making mistakes – we do NOT learn by copying others’ trades/signals.
Although I have mellowed and become more tolerant over the years, I will not enter into, or entertain, any arguments or negative” discussions. Such posts and posters will be immediately ignored.
Strat's 5 Steps to becoming a consistently profitable Forex trader from experience.
STEP 1 – Not knowing what the hell you are doing!
You have read and heard that forex trading is a “Get Rich Quick” or at least, a fantastic way to make easy money from all the Marketing Promotions (SCAMS) you see and read out there – you know, the ones with a handsome $millionaire guy with his arm around a drop dead beautiful busty blonde in a short skirt leaning on his red Ferrari outside his 12 room mansion overlooking the Pacific Ocean.
So, you jump in at the deep end (read trade) with both feet and subsequently drown – because you couldn’t swim! (Couldn’t trade). Bad luck – it won’t happen next time you think. PRICE only goes up or down so what’s the big deal, how hard can it be? Anyone can do it – right?
When you jumped in at the deep end, you didn’t know that you couldn’t swim (trade). You then realise you haven’t got a clue what the hell you are doing. You take lots and lots of trades all with huge RISK. Those trades go AGAINST you so you have the bright idea to REVERSE and trade in the opposite direction only for PRICE to turn back again………and again………..and again….and again……..and again etc., etc.
You will probably get one or two right “eventually” but at what cost of LOSING the rest? However, this is the TRADING DEVIL telling you that it really is this simple and so you start to trade more, RISK more and LOSE more money.
Then you read something about Money Management and “Doubling Up” which you believe is the missing piece to your trading jigsaw. So you start trying to recover your LOSSES by doubling up on them each time you trade. You may be lucky doing that one time but in the end you will LOSE twice as much money! You still don’t get that you know diddly squat about how to trade forex so you continue to trade until eventually the Market sucks you in and blows you out in bubbles wiping you out and taking ALL your money!
Then comes the next step:
STEP 2 – Not knowing that you don’t know what you don’t know or, to give it a fancy name, Conscious Incompetence
This is a light bulb moment when you realise there is a lot more work involved in trading than you first thought and that you might have to start reading, learning and understanding about trading. You finally accept that you can’t make a profit trading forex.
Problem solved – buy “Get Rich Quick” trading systems, ebooks, software, join public forex Forums – search for the MOTHER of ALL HOLY GRAIL systems from all corners of the Earth.
Before you know it, you are an “expert” in trading systems and start HOPPING from one method and system to another day by day, week by week, month by month, year by year never trading one long enough to give it AND YOU, chance to SEE it is profitable.
Each time you find an indicator with more flashing lights and bells and whistles than the last one you will believe that THIS is the ONE to make money for you. You will mess with Fibonacci, support and resistance, supply and demand, Pivots, Fractals, Divergence, Price Action, ADX, RSI, MACD, CCI, DMI etc., etc., and everything you can get your LOSING hands on hoping that the next “thing” is what works. You will be such an “expert” with your “indicators” that you will start to pick tops and bottoms trying to trade when PRICE reverses. Losing trades won’t matter because you will always add to them because NOW you know you are RIGHT!
Eventually, after more LOSING, you will subscribe to a “live chat room” which you are led to believe is full of Professional Traders trading for their living. You still don’t understand what the hell they are doing so you ask numerous “newbie” questions to the point that everyone ignores you. Then you start not believing what they are doing and the profits they are making and doubt their abilities because, after all, you know as much as them and they must be lying about how much they are making. If I’m doing what they are doing and I’m LOSING how can they be winning? Finally, someone takes you under their wing and gives you good advice but by now you are a stubborn idiot and ignore that advice and continue trading your way because you believe you know better.
You then read about signals and signal services so you pay for that but, that doesn’t work either. Then you decide to stump up $thousands to attend courses held by those “famous” $multi-millionaire traders. But it all goes in one ear and out the other because, stubbornly, you know it won’t work and you really know best.
This goes on for years and years because you are now ADDICTED to trading and you are sure you can beat this thing. Eventually, you either give up or you TROLL public Forums still searching for the MOTHER of ALL HOLY GRAIL systems.
Statistics show that 60% to 75% of new traders give up after 3 to 6 months. Another 15% continue in the hope of becoming $millionaires only to wipe out their account. The remaining % stubbornly continue for around 3 years without success with a very small part of that % eventually moving on to being consistently profitable.
Your addiction to trading takes you into Step 3
STEP 3 - The “Eureka” Moment
At the end of Step 2 you realise that if trading really was easy, we would all be $millionaires!
You begin to realise that success in trading is more about “YOU” and that “YOU” could make money with a really simple moving average system. You realise that Money Management and Trading Psychology really has a BIG PART to play in being profitable at trading. You buy, read and listen to everything you can find on Trading Psychology, and, what do you know, they are talking about YOU! Light bulbs flash at the speed of light and your Trading Brain kicks in to tell you that being profitable in trading is all about YOU and not the system, method or whatever. It’s no wonder you can’t find anything that works for you.
You FINALLY realise that, just like Dr Joe, the NASA Rocket Scientist, who planned spaceship trajectories and moon landings, YOU cannot accurately predict what the Market will do either in the next 5 minutes, the next day or the next month. Then you realise that NO-ONE else can either! So since THEY can’t, YOU stop listening to them or reading others who think they can.
Knowing that it is now YOU who is responsible for your profitability and not the system or method, you find one of your systems or methods that has a good record of winning and you feel comfortable with and FOCUS 100% on it upside down and inside out until you completely UNDERSTAND it. You FINALLY stop looking at other threads and systems because now you HAVE found the HOLY GRAIL which YOU now know is who stares back at you when you look in the mirror. Then, you paper trade it because you know that Broker demos are highly manipulated and encourage you to win. Then you move onto trading LIVE with your REAL, hard earned money. You don’t get angry when you lose because you know it is just the cost of doing Business. You now know your method so well that if you exercise correct Money Management practices your winners will be much greater than your losers.
Next, you start looking at your trading results in a different way. You are no longer concerned with daily or weekly performance because now you know losing trades do not make a poor system and so move onto monthly performance. Then you finally realise you have an “edge” that you have heard others talk about but more important, know that “”YOU”” are the edge! Then you start to go over proper Money Management, Leverage, Risk, Trading Psychology etc., but this time, you finally UNDERSTAND it and it soaks into your sponge of a trading brain. Then you smile when you think back to when you didn’t understand it because now you know you were not ready then, but you are now. Then you sit back and accept that all this happened because you finally realized and accepted that it was not about the system or method but YOU.
Step 4 – Walking on Water
Now you are taking trades when you SEE your system set up. You let your winners run and cut your losers early. You take the losses on your chin and just move onto the next trade. You know that YOU and your system make more money than it loses. You go from breaking even to making a few pips profit to making THOUSANDS of pips profit and think you are now the World’s Best Forex Trader. Then you start to lose focus and stop paying attention to everything that got you to where you are at this point and start taking trades that aren’t there. Then you start losing more than you are winning and your confidence begins to suffer. This makes you think the Market has changed and your system is no longer suitable for it so you begin to doubt it. Then you lose confidence in it. Then your profits and performance begin to spiral down out of control. Then someone tells you that you are trying to “Walk On Water” and that the last guy who tried that got hung and nailed on a cross. You finally wake up and realise that you had forgotten that your performance is all about YOU, not the system or Market so you beat yourself up and go back to Step 3
Step 5 - Autopilot
Eventually, you avoid Walking on Water again and get back to profitable trading and then move on to Autopilot trading. You have become Consistently Profitable and you are now trading at an unconscious level or “In The Zone”. You ignore “noise” on all trading forums because you have mastered your emotions and are in total control.
You are now a “Star” to others and help them with their trading and questions. You don’t want to pass on your “secrets” because you are frightened of them misusing them. You then become a “Mentor” to many and freely pass on your advice although you know most of it will be wasted on “Get Rich Quick” newbies. Some though stick at it and listen to you and will get to where you are at but most, 95%, will never get past Step 2
Trading then becomes boring for you just like everything you do that has no challenges. You begin to spend more time helping others reach your trading status to relieve the boredom. This helps you because they ask you things which you do by instinct or now take for granted so it refreshes you and your memory.
You get to the point that, when once you were proud of telling anyone that you are a consistently profitable forex trader, you don’t even care or bother now since it’s just a job like any other – except on your terms..
Statistic say that only 5% who attempt Forex trading make it. My experience is around 2%
Ability is not the reason for success in trading. It is drive, dedication, perseverance and the way you treat, access and process new information and knowledge. More than anything, it is about YOU. YOU as a person and YOU as a trader. Trading reveals more information about you and your personality than any test I know.
The losers are the “Get Rich Quickers” with “blinkers” who couldn’t see the obvious when it was staring them in their face, by not accepting new information.
Being a consistently profitable trader is no different from being a successful heart surgeon or a top prosecuting lawyer – both require that you do an apprenticeship of learning and understanding. How long that apprenticeship is depends on the individual and how soon he realises that it is about HIM and not the system. On average this is taking around 3 years.
Many don’t believe it will take that long and go back to Step 2 and go round and round in circles until eventually they disappear up their own chuff!
How many thousands and thousands of hours studying thousands and thousands of charts would you study if you knew, from proof, that there was a $million a year job at the end of it?
Here also is THE PATH as used and taken from my now expired private website and is now FREE for all. Thank you to Tetulla for posting this
For those on the sidelines wondering whether to invest their time in learning and applying PASR in their trading, consider these posts from a Series 3 and 7 Licensed Professional Trader:
October 19, 2017
My PASR method works on any freely traded financial instrument on any time frame.
It HAS to and does, because it is based purely on the energy and emotions (fear and greed) of the buyers and sellers otherwise known as PRICE ACTION.
There are students of PASR who trade Crude Oil, Gold and E-Minis and students who profitably trade M5, M15, H1 and H4 time frames. Indeed, on my BootCamp exercise, even M1 was traded profitably.
The choice of instrument and time fame is purely personal depending on the individual’s mentality, personality, characteristics, adrenalin, health, time and freedom.
Here is a short video explaining the basics of PASR:
This whole thread IS The Path of Learning.
The Path of Learning takes you through the following progression:
The very first thing we have to do is learn basic PASR. This involves learning and UNDERSTANDING exactly what PASR is.
We then have to learn how to IDENTIFY accurate SR levels to SUIT our particular trading style.
We then have to learn the basic price reversal candles – Hammer, Shooting Star, BUOB, BUEB, BEOB and BEEB, nothing else. At this point we have to learn the classical definitions of these candles. Do NOT think about or study other candles or patterns as they are NOT reliable and/or consistent for PASR trading.
We then put this all together to do SIMPLE yet very profitable trading:
Trade from support to 1st resistance and resistance to 1st support.
At this stage, you would “paper” trade or demo trade to exercise the technical content i.e., make sure your understanding of basic PASR is correct.
Doing this will bring up many doubts on SR levels and candle types etc. This is part of learning and a stage where every doubt and question must be resolved. How long this takes is up to the individual but there is NO time constraint – you learn within your own time frame.
When you have a very high success rate of doing this, you move in to REAL trading. You open an account with REAL money and trade the smallest lot size your broker offers.
This will OPEN a whole new world of “little men in your head”, “the man in the mirror” and “gremlins and demons” in you. You will learn the importance of a believed, trusted and accepted PLAN. You will go through grief and pain UNTIL you learn to CONTROL your emotions.
Again, how long it takes to master and control your emotions is up to the individual. You will continue to trade until you get to the point that you feel you can “walk on water”. Despite anything written on here, you will go through this emotion and do it. After you have been eaten up, chewed and spat out in little pieces you will learn that you are NEVER in CONTROL of your emotions and you ALWAYS have to be ON GUARD.
As you continue to trade in this manner, things that were difficult to see will become clearer and more obvious.
We will move from trading classical candle shapes, sizes and patterns to “SEEING” who and what is behind the candles, groups of candles, waves of candles etc.
We will learn to recognize market behaviour by eyeballing a chart rather than in depth analysis of a chart.
In short, we will be developing our “feel” for the market. This is a very, very personal attribute. Some get it early, for some it seems to take forever while for others, they NEVER get it.
At this point, we move into other strategies and techniques.
Quick refresher on the Power of Time Frames
1) We take our direction from the BIG BOSS
2) We take our direction (and sometimes trades) from the BOSS
3) We time and initiate our trades on the Worker
So, when we do an analysis of a pair or any financial instrument for that matter:
We identify our SR levels
We find out where the BIG BOSS is relative to ITS trend AND where it is headed in the SHORT TERM relative to ITS SR levels
Knowing the direction of the BIG BOSS, we review the BOSS. If the BOSS is fighting the BIG BOSS, it will be very difficult to trade so we WAIT until the BOSS aligns herself with the BIG BOSS.
With the BIG BOSS and BOSS now in harmony (both moving together in the same direction) we drop down to the Worker.
We wait for the Worker to give us PASR in the direction of the BIG BOSS and BOSS. Rewarding and stress free trades come when we time the Worker JUST TURNING into the direction of the BIG BOSS and BOSS at PASR (as shown on the attached chart)
The MOST REWARDING and STRESS FREE trade comes when you can time the Worker turning into the direction of the BIG BOSS at THE SAME TIME as the BOSS turns into the direction of the BIG BOSS.
It sounds SIMPLE and it really is that SIMPLE but to make it stress free we MUST trade with PASR. Trying to guess trades is the best known way to blow an account.
WAIT until you SEE all the above happening.
We TRADE TO LIVE. We are NOT like others who LIVE TO TRADE.
We know that our Health is ALWAYS more important than our wealth.
We know trading is NOT a "Get Rich Quick Scheme".
We know trading is a serious business and WE treat our trading as a SERIOUS BUSINESS
We understand we have, like any other profession, to put in the thousands of hours studying, learning and practicing our methods and techniques.
We understand there is NO SHORTCUT to becoming successful and profitable traders.
We understand that successful and profitable trading is 95% psychology and 5% technical skill. We know who and what we have to control.
We need PATIENCE to wait for and "SEE" opportunities
We need DISCIPLINE to act and trade on such opportunities
We are PLANNERS – We always PLAN each and every trade and then Trade the PLAN without exception.
We are BELIEVERS. We believe in ourselves and our PLAN.
We believe in the Holy Grail. We know what the Holy Grail is. We have found the Holy Grail and our search for trading enlightenment is over.
We can only take what the market gives us - we do "NOT" force the market.
We understand that PRICE is Lord, King, Queen and Country.
We ACCEPT losses as the cost of doing business
We are PROFESSIONALS and PROFESSIONALS look for a reason NOT to take a trade
We are NOT Amateurs. Amateurs manage money by taking RISK. PROFESSIONALS manage RISK by taking money.
Belief Statement from a professional CME Floor Trader
For those of us that are battling our psyche, emotions, the little man inside our head and the guy in the mirror when we are trading, I use a Belief Statement I got from a professional CME Floor Trader. I read it before each trading session and find it particularly calming after having a couple of losing trades or when I reach my maximum allowable loss.
I made the mistake of questioning the $1 million target and was very quickly rebuked as "not having the confidence or belief in myself" so I just read it as copied:
I am a professional trader. My job is to take risk. If I manage my losses and let my profits run I will be successful. Because I am a professional trader, I will forgive myself easily for making mistakes and move on to new opportunities. I feel great that I have the discipline to control my emotions and the patience required to be a professional trader. I am a professional trader and will make $1,000,000 by year end. I will achieve this by following my trading plan, setting achievable goals, and controlling my emotions. I am confident and believe in my own ability to be consistently profitable because I AM a professional trader.
Another of my posts:
I hope I'm not flogging a dead horse but from my post #1532 I wrote about how reducing my lot size from $10/pip to $1/pip removed my fear of losing.
It's those gremlins, demons, inside all of us that want us to make a killing to better our standard of living. By following the gremlins and demons we trade $10/pip hoping to get $1000 from a 100 pip move. Unless we have a $50,000+ account, this is way too much for our "real and logical" emotions to handle when the trade turns into a 40 or 50 pip loss.
We have to fight those gremlins and demons and not let them interfere with our logical and "real world" thinking. As others have said, drop down to a $/pip level that is comfortable for you to accept WHEN YOU LOSE. The trick is to base it on LOSING and not WINNING. Forget about thinking how much you will win and instead focus on how much you will lose. Doing this controls your losses and you will find the winners just take care of themselves.
I was told this a long time ago and rejected it - it's taken me 9 or so years (and many $thousands lost) to finally realise and accept this and put it into practice. After doing this, I was finally able to treat my trading as a business - some you win, some you lose and after a loser, just quietly move on to the next trade.
Also, with a lower $/pip, you can put on multiple trades. Bank a third after say 20 pips and move the rest to break-even. This way you make 20 pips no matter what the rest do. If all goes well, bank another third after say 50 pips and then trail the final third.
Don't be an idiot like me, Spitfire, and wait 9 or so years, DO IT NOW!
Hope this helps.
Professional Traders vs Amateurs
Here's a quote from the book, "Techniques of Tape Reading" , by Vadym Graifer and Christopher Schumacher - "Professionals take a trade when they are comfortable with the risk, while amateurs do it when they like the potential profit."
And one from February 5th, 2009:
The best indicator I have is between my ears. Indicators can only tell you what happened in history, they cannot forecast or predict future moves, not even any of the fancy black boxes.
Hope this helps.
And from February 9th, 2009:
Back to trading psychology
From all the communications sent to me, there seems to be a common trait among many traders. I won't take up valuable space on here but will try to summarise as follows:
Measure your risk BEFORE even thinking about a trade. Amateurs only think of how much they can make. Professionals only think of how much they can LOSE. Pretend you are a millionaire with a $1million trading account instead of an amateur with a $pauper account. Millionaires are the most tight, stingy bastards I know. They will not part with the smell off their own sh*t!!!!!
Thinking this way changed my trading.
Only trade when everything lines up AND you have all the variables on your side giving you the LOWEST RISK. If everything is not lined up - easy - NO TRADE. If in doubt, STAY OUT.
Never ever forget the # 1 rule in trading - Capital (account) preservation.
You will NEVER, EVER miss a good trade - there is always another being set up RIGHT NOW.
Hang on to your hard earned money, even if its money you have said you can afford to lose. Lose it, and you have to take money from a place that you can't afford to lose to replenish your account if you want to continue trading.
I see so many over trading and blowing their wad. Go out and buy Playstation or Wii
I trade TO LIVE, the losers LIVE to trade.
What do you do?
And another from February 19, 2009:
While everyone seems to have fallen asleep here, I thought I would share my experience with the "latest and greatest, award winning" indicators.
I was sent (sarcastically, I think), several links to the very latest indicators available which I normally would just delete but seeing as I had Time on My Side (Rolling Stones), I took a look.
They look so colourful and fancy now but STILL, all they are doing is painting a very beautiful picture of what happened in the past.
I haven't seen one that gives even the remotest indication of what to expect on the next bar.
I did a test and found the most obvious price action bar I could find which turned out to be a hammer at the end of a 3 week daily downtrend from which a 4 month uptrend erupted in a 1367 pip move, and ran most of these "award winning indicators" on it.
The best squiggly line I could find, triggered a "long" 20 days later and then it REVERSED in the middle of the trendiest part of the up move for only 420 pips! I think my one legged blind old man with asthma would have known not to get out at that point!
I really admire the traders who are profitable using indicators for they are far more clever than I.
Well, I gave them my best shot but now they are Gone, Gone, Gone (Robert Plant & Alison Krause - see I'm getting very modern and up to date now!).
Rock n Roll,
Since this post, I was told that "Indicators can only show history - the future is mystery"
And one from February 22, 2009 (Almost up to date now):
To the struggling guys
My trouble and strife was sent this by one of her "negative" friends:
Due to recent budget cuts and the cost of electricity, gas and oil, as well as current market conditions and the continued decline of the U.S. economy, The Light at the End of the Tunnel has been turned off.
We apologize for the inconvenience
My simple response to this is:
Life isn't about how to survive the storm,
Robert the Bruce tried seven times before he defeated the English; Lincoln tried even more times before he became a successful politician and President.
Jim of James 16 blew something like 37 accounts and well into $six figures before he successfully traded for a living.
Learn from your mistakes and keep persevering. Determination and perseverance win out in the end.
March 1st, 2009
I like your idea of trading around swing points of resistance and support.....i have been doing similar thing lately.i take points off the 4hr chart which are basically the previous high, low and pivot of previous week....
But a caution and a question,
price tends to hover around this points for awhile before finally making a move which could be really huge........the question part, how do we determine when to trade at this point with less whipsaws?
your opinion will be highly appreciated.
If you are getting whipsawed on H4 then move up a time frame which will keep you out until the momentum is in the direction of your trade.
I'm not looking to get in at the top or bottom - I just want the "meat" in the middle of a trend - this is the safest with the lowest risk.
Rock n Roll,
Thank you for the PMs on indicators and price action. Rather than answer individually, I will do it through this post, if I may.
I’m not here to fight with anyone over whether to use indicators or not for we have a larger fight with the market makers than amongst us little guys. I respect the traders who can make consistent profits with indicators as it is something I have tried and cannot do. If anyone has an indicator that produces CONSISTENT profits then, please, show us the way.
In the meantime, I will continue with what works for me: raw price action using price, volume, S&R, momentum, exhaustion, cycles, time, harmonic analysis, market sentiment with a splash of funny mentals thrown in.
With regard to my transition from having indicators up the ying yang on my charts to now with just volume and the 20ema and the 50sma, I need to share my experience with an old time trader, Dr. Joe, which will also show how stubborn I was.
Back in the early 90s when I was getting really serious with my trading, I was buying signals via fax. In those days there was no email and no computer trading and we had to either plot our own charts or buy them from a charting service. We then had to calculate our own indicators and then hand draw them on our charts. This really helped in understanding what indicators did (take the data from “n” days ago) and how they worked.
One time I faxed my questions back to the signal service and the reply I got back was that I had sent it to the wrong number. Also written on my fax was that I was wasting my money on signals and to contact Dr. Joe. After a few fax exchanges, he sent a handwritten fax saying something like “trading is easy, you don’t need nuthin fancy (he was a good old Texas boy) just buy when it’s going up and sell when it’s going down, that’s all there is to it”.
Dr. Joe used to work for NASA as a nuclear physicist on the Space Program and was a Professor, PhD with just about every physics and maths qualifications there are or you could think of. He got fed up of the bureaucracy and politics at NASA and as a part time investor in stocks , decided to go full time as, in his own words, “the price cycles are just some sort of fancy sine waves with decay and acceleration distorting them and should be real easy to plot and forecast.”
Well after over 5 years doing triple integrated, double differentiated Fourier transforms, harmonic frequency analysis, fractal filters and theorems and goodness knows what else that, although I have a PhD, just ran circles around me. He said he got so frustrated that although he could plan and predict space craft trajectories, orbits, landings etc, he could not forecast even one bar of prices into the future. Not one to quit, he decided that there was some external force that he was not taking into consideration and the only place it could be was on the trading floor where the action took place.
Through his connections, he eventually got an invitation to the Chicago Mercantile Exchange (CME) and was shown the futures or commodities pit (can’t remember which). His sole purpose of going there was as a spy or detective to find out exactly how things worked so that he could write it into his software. He told me he was “amazed and dumbfounded” at what he saw and heard which forever changed his life. (I had all this written up in my trading notes in my files but I can’t find them so I’m using this post to “replenish my notes”).
He arrived at the pit before opening time and saw all the floor traders congregated together in a meeting. He saw this as strange as he thought they were out and out competitors with each other.
What he saw in the first 15 to 30 minutes he would never have believed even if his best friend had told him. At the open, the overnight trades, which were long positions, were put through but he detected the traders entering them were giving signals to the other traders. After the orders were put through there was “nothing” – they just waited to see how the market reacted to those orders.
He then observed what he thought were illegal practices but later learned it to be what actually goes on each and every day. During this “dead” time, the floor traders were reviewing their orders in the pipeline and then on a given signal, a group started selling followed by another group. Then when a certain lower price had been reached, another signal was given and the same groups then bought back amongst themselves. He later learned this was called “Running the Stops” and what they had done was found out where all the orders were, which were below lows, swing lows and elsewhere, and just driven the price down to fill them and take them out so that they had a clean order sheet! Not satisfied with that, they then collectively took the price back to where it opened!
After this and now with the market moving, orders started to come in and when a large order came in from a bank, fund or other large institution, the trader with the order gave a signal before entering it. After entering it, the traders went quiet again. They were looking to see how the market reacted to that order. When they saw more buy orders coming in, they just bought more and more and kept on buying until a signal from a trader that he had a large sell order. Again the sell order was entered and the traders went quiet as they waited for a reaction from the market. He learned that the floor traders were waiting to see whether the sell order was going to be accepted as profit taking or full blown shorting. He said this went on all day long with the floor traders just “piggy-backing” on which ever way the market moved. He said he could see no skills or qualifications (other than being a whore – a very rich whore, he said) whatsoever in what the floor traders did.
On his way back to Houston, he thought about how to use what he witnessed to HIS advantage.
His first action was to throw out all his indicators, forecasts and technical analysis. He told me that there is no analysis, indicator or other program now or in the future, that can analyse or predict human behaviour and specifically, human emotions. He had seen for himself that there was nothing technical or logical in how the floor traders (now better known as Market Movers) traded and therefore any analysis or thinking from “off the floor” was an absolute waste of time.
His second action was how to beat “those whores” on the floor as he called them. He said he thought over just about every scenario imaginable and just as he was running out of ideas, it came to him. If you can’t beat, them join them although as a very devout and God fearing Christian, he didn’t think it was ethical. Unable to find another alternative, he decided he had no options left but to try and do, “off the floor” what they did on the floor.
From this came his very simple method:
Buy when it goes up and sell when it goes down.
He went on to make $millions doing this and I subsequently learned he passed away a very rich and contented man knowing that he had beaten the “whores” at their own game.
I learned all this in a few telephone conversations with him but he lost his patience with me when I still questioned his method. He wouldn’t answer my calls so I reverted back to faxes. Again, I can’t remember it word for word but I sent a simple fax saying:
“How do you know when to stop buying?”
On the same fax was his handwritten reply, “When it stops going up.”
So I wrote on it, “How do you know when it stops going up?”
His handwritten reply, “When it starts going down.”
So I wrote on it, “How do you know when it stops going up and starts going down?”
His handwritten reply, “When people start selling.”
After going round like this in riddles, I pleaded with him to “just give it to me straight”.
He sent a fax saying this would be his last communication with me and that if I didn’t understand how to buy when it goes up and sell when it goes down, I had no business trading.
His final paragraph was one which I ignored, like everything else he told me, until a couple of years ago when I realized what a dumb, stupid, arrogant, stubborn idiot I had been:
He said I would only be wrong twice using his simple method:
“Once when you buy at the top and once when you sell at the bottom.”
I just ignored this as a smart – ass answer but still tried to do what he said. Unfortunately, and as Sod’s law dictates, I tried to do it in a consolidation and lost on every trade which had me buying when I should have been selling etc.
I tried and lost again and then eventually lost my way in the quest for the Holy Grail in Indicator Land.
Now, with all my experience and thousands of lost $ behind me, the light came on!
My understanding of what he was telling me is this:
Buy when prices are moving up. Buy each retrace/dip. Keep buying until the last retrace becomes a trend change which is the one trade you lose on.
Sell when prices are moving down. Sell each retrace/rally. Keep selling until the last retrace becomes a trend change which is the second trade you lose on.
I have not traded like this as I have my own method/style now but on the look backs I have done it works very well. Obviously, the trendier the price, the better it works.
In my later communications with other floor traders, I told them about Dr. Joe and what he told me, and asked them if it was true. As you would expect, each and everyone vehemently rejected it as absolute rubbish.
Sometimes I wonder if old Dr. Joe was smoking something but then when I see those long legged neutral dojis before a significant move, I know he was right.
Thank you, Dr. Joe
Rock n Roll,
For those posting and PMing me wanting to know what my method/strategy is and where is it posted, I think within these first 4 pages it is pretty obvious.
My method is very basic and simple:
Price Action at Support & Resistance
The key is to know what Price Action IS and what it DOES at Support and Resistance.
Compared to other Price Action traders, I know I over analyse the charts too much but I have to use my hard earned and learned education somewhere!
I use raw price action using price, volume, support and resistance, momentum, exhaustion, cycles, time, harmonic analysis, elliott wave (only when I can figure the damned thing out!), market sentiment all with a splash of funny mentals thrown in.
After recalling my Dr. Joe experience, which I had chosen to ignore, I am now questioning myself as to why am I analysing so much on something over which I have no control. From now on, I will start to drop out some of the extranneous stuff and see what effect it has on my trading. I suspect (deep inside I know) I will just end up with price action, volume and support and resistance. Anyway, we are all here to learn.
What is important is not to use any one aspect of my method in isolation. For example, it would be foolish just to use Price Action without Support and Resistance. Next it would be foolish to use both of them without knowing where we are in the big picture etc.
My method/strategy will all be revealed here in this thread over time and in and among trading discussions and opportunities.
For those looking to find an entry and exit indicator of some sort then sorry, this is not for you. To be really profitable trading, there is NO shortcut or substitute to learning the basics and what I will post here is starting with the basics through where I am today.
Like every other successful and profitable trader, I have developed what works for me and I am not perfect. In fact, I am far from perfect, I get many of my analyses wrong and make many wrong trades. As we have read and heard over and over, the trick is to limit your losses so that your wins are always far greater. I accept that I will be wrong and I accept that I will have losses. The next trick is to move on. Forget your losses, just treat them as history and part of your learning curve.
Unknowingly, I think I have just written my first lesson!
Also, my style of teaching is like my humour - weird! So again I apologise for it right now. I was never spoon fed anything and had to learn the hard way so don't expect to be given everything on a plate. I will say or post something to stir up your imagination and thinking and provoke questions.
For those reading this thread who know far more than I, please feel free to question anything I say or do. I am still learning and open to any suggestions (Yes, Mrs Robinson!).
And, for those looking for the Holy Grail, I know what it is!
And for those wanting to know why I end my posts with "Rock n Roll"; as soon as I write that it takes my mind off trading and reminds me of the good times I had and that there are far more important things than price bars on a chart!
Rock n Roll,
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Quoting Baba G
still in,yep agree with your levels.Im on a free trade so hopefully the retrace is over.My plan is to see if i can get a bit of this trade into the next leg down.we shall see fingers crossed but no loss whatever so its good.Lets get some more bars in out there.G
Did anyone take note of this?
My goal, and the purpose of starting this thread, is not to just trade the 1 day, 3 day or 1 week moves for 100 to 900 pips or so, but to find AND trade the long term trends.
Since I haven't found out how to identify a trend before it starts, all we can do is get in at the safest, lowest risk point and ride it out with fingers crossed and prayers prayed for planet alignment that it will turn into one of those mega - trends.
This is exactly what Baba G is saying and doing in his post.
This requires a totally different trading mentality than the H4 and below traders. We have to BELIEVE that we got our plan right and be prepared to sit it out until it tells us we are wrong. Most of the time we will get it wrong and either get stopped out at break even or for minimum % risk. The few times that we get it right make up for those wrong times a thousand times over. I won't blind you with pips but if you compound and add on to those trends we saw in EURUSD, EURGBP, GBPUSD, AUDUSD, to name but a few, from June last year to the end of the year, you would have made your yearly salary several ten times over.
To further show the potential, professional trader friends of the guys from another forum, made over $six figures millions selling GBPUSD from 2.1 down to 1.5. They are the exception but nevertheless, in relative terms, identify the potential.
One way to do this is to trade multiple lots. If you can't afford multiple lots then reduce your $/pip so that you can. Once the strategy and trade is planned, then trade the plan with 3 lots. How you manage 3 lots or other multiples is up to the individual trader. There are as many ways to do this as there are traders - it all depends on your risk aversion.
Take note of Baba G - he was in at the very beginning with Jim of James 16 and now, two years later, in addition to trading his own accounts, trades for others using nothing other than price action with support and resistance. From rank amateur to professional trader - an inspiration to us all. Thank you, Baba G.
Rock n Roll,
I bet that caught your attention!
I have never been able to do this so when I saw "How to identify a trend before it starts" in the promotional materials sent to me by email a couple of weeks ago, it got my attention.
The wheels of my mechanical logic started turning. "How to see something that isn't there!" Impossible is my first reaction but then I go back to physics which tells me, "Energy can neither be created nor destroyed only transposed from one form to another".
Does this mean that there is something in price and time out there that we have all been missing that this well known trader has found? Does it mean that this is a ssh, secret, known only to a few? W.D. Gann certainly found out a lot - much more than he disclosed in his writings - it is known in the Gann circles that he used planetary alignment in his analyses. Or is it just another scam to get money out of our pockets to pay for "so called successful traders" to live. If it was so powerful and such a secret, why would anyone want to share it?
By the way, in my search for the Holy Grail, I have spent $tens of thousands on financial astrology including being a member of Welles Wilder's Delta Phenomenon. They were all as much use as a crack in a glass eye!
Most traders concentrate and focus on price but that is only half the puzzle - the missing half is time, which has fascinated me from day one of my trading career. There are traders out there, Larry Pesavento is one, who trade on time alone. I think it's because I did my thesis on Harmonic Frequency Vibration and Resonance that pushes me into time cycles etc.
Anyway, I wandered off topic. What I'm doing now is looking at the guarantee on this book to see if I can return it for full payment if it turns out, like most others, to be a waste of a tree.
No, I'm not still looking for the Holy Grail as, in my earlier posts, I said I had found it. I am just looking for ways to improve, if possible, what already successfully works for me. I'm still learning and will be until I meet Buddy Holly!
Rock n Roll,
'I just want the 'meat' in the middle of the trend'. I think I just had an "AH HA' moment, thanks to that statement. That makes a lot of sense to me.
But how do you personally discern, first that momentum is in the direction of the trade, and what boundaries your going to institute as your quote unquote 'meat'.
For example you made a call that you would short the EUR/GBP at 0.8920, with a TP of 0.8770. Im supposing this is what you would consider the meat of the trend. How did you come up with those two points, and what is your stop loss?...
You worry me, my friend - ""Im starting to understand your thought processes"" - nobody, not even my trouble and strife for over 45 years can understand me or my thought process!
Seriously though, these are all what I hope to expand on in later posts in fact I just did one earlier on about early trend recognition.
""But how do you personally discern, first that momentum is in the direction of the trade, and what boundaries your going to institute as your quote unquote 'meat'.""
Let me just whet your appetite to get your creative juices flowing. See attached chart.
We don't know where the start of the next trend is so all we can do is trade the immediate opportunities. On Oct 21 08 we bought 3 lots on price action at .7784 and got out on 2 lots on price action on Oct 28 08 at .7984 for 200 pips. We left 1 lot running now at BE at our entry .7784. Nothing yet to tell us about trend except the shooting star on Oct 24 was a new high (but bearish). We sold 3 lots at .7984 on Oct 28.
The inverted hammer bouncing off the Weekly 50 (OUR BOSS) raised the red flag and stops were pulled in to the top of the inverted hammer. The next day, Oct 30 saw the sellers give their all to drive the prices lower but they couldn't get past the Weekly 50 - the second test. This was the sign to abandon all shorts so we got out the next day at .7840 for a small 144 pip profit.
On Oct 31 we had a sign that a trend was forming - can you see it?
On Nov 03 we bought boatloads (sorry Mr. MM) at .7940 with a SL at ?
When we saw the high of the shooting star at .8193 taken out on Nov 12, we knew we were in fat city!
From then on it was just a case of managing the position and adding and compounding like it was going out of style.
So, the "meat" is after the first confirmation of the trend. Finding the end of the "meat" is a little more difficult but still relatively easy depending on your greed for profit.
If you apply old Dr Joe to this, you can see that it works really well.
Hopefully that will get you thinking but I'm hoping, if there is sufficient interest, to go into this and other "stress free" trading methods later.
Now, understanding the above, can you answer yourself on my EURGBP trade?
Another point, a trade is put on as part of a plan (PLAN THE TRADE). Once the trade is entered, the trick is to TRADE THE PLAN. If you are trading the Daily chart, then TRADE THE DAILY chart - forget about how many pips you are up or down, your plan takes care of that. So many traders try to trade the Daily with a H4, H1, M15 or M5 mentality and then wonder why it doesn't work!
Enough for now, Manchester City against Aston Villa is live on Fox Sports so I have to go.
Rock n Roll,
Attached Image (click to enlarge)
Thanks for your guidance, I'm following along.
In regard to ol doc Joe's strategy personally I think its easier said than done.
How would you know when the trend ends? what if their is no discernable trend and you keep switching between buying and selling till you no longer have any money left to buy or sell?
what if you buy on a decline in an uptrend and the price goes further south and you buy some more and it goes down still some more and you realize its a trend change (everything looks great in hindsight doesn't it). Well it...
I hope you're not!
How would you know when the trend ends?
I'll give you the answer Dr. Joe gave me - When it stops going up!
what if their is no discernable trend and you keep switching between buying and selling till you no longer have any money left to buy or sell?
By the way, it's not possessive so it's there, not their.
If you are switching between buying and selling especially until you have no money left then you have no business trading.
You are taking things in isolation. I posted somewhere that we trade price action at support and resistance. This, along with the direction from the higher time frame, guides us in our trades. Also we manage our trades once in a position. If we have put on a trade that we can't afford to lose, then again, we have no business trading and are just fodder for the big guys.
what if you buy on a decline in an uptrend and the price goes further south and you buy some more and it goes down still some more and you realize its a trend change
Unless the brokerage houses put a fake move on, it rarely happens to me the way I trade. Go back to Post # 26, I think it is. I trade on momentum not on guesswork. I only want the market to fill my order if it moves in my direction.
On a dip in an uptrend and IF price action was at support and everything else was lining up, I would place a buy order several pips ABOVE the high of the preceeding bar - if price doesn't go up, I don't get filled.
What I'd like to say if I may is that trading really isn't simple, if it were simple 90% wouldn't fail assuming the majority ie 90% are capable of successfully accomplishing simple tasks. If you find the majority unable to successfully do something what does it tell you .... it tells you what you thought to be simple is actually not so. SIMPLY because most people haven't been able to do it.
You are welcome to say anything you like as long as it is either constructive or funny.
After having been through the trading wringer and been spat out in tiny little pieces with all my fancy indicators stuck up where the sun don't shine, I feel qualified to say that it is the trader himself that decides whether it is simple or complicated. It was innately complicated and stressful for me BEFORE the light went on and until I found out it was I that was making it complicated.
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