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strat Oct 19, 2017 7:09pm | Post# 1

Strat's PASR Long Term, Stress Free Trading
 
2 Attachment(s)
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..

SUMMARY

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?

Strat

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

https://web.archive.org/web/20120603...rning:overview

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:

Click to Enlarge

Name: Professional Series 3 Licenced Trader1.PNG
Size: 15 KB

Click to Enlarge

Name: Professional Series 7 Licenced Trader1.PNG
Size: 23 KB

Welcome!

Strat
October 19, 2017

strat Oct 19, 2017 7:23pm | Post# 2

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:

http://www.screencast.com/t/c7h0VTMRT

strat Oct 19, 2017 7:24pm | Post# 3

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.

strat Oct 19, 2017 7:24pm | Post# 4

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.

strat Oct 19, 2017 7:25pm | Post# 5

Strat's Mantra:

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.

strat Oct 19, 2017 7:26pm | Post# 6

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:

Quote
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.
Unquote

strat Oct 19, 2017 7:27pm | Post# 7

Another of my posts:
Hey Spitfire,
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.

strat Oct 19, 2017 7:28pm | Post# 8

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."

strat Oct 19, 2017 7:29pm | Post# 9

And one from February 5th, 2009:
Hello Stuart,
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.

strat Oct 19, 2017 7:30pm | Post# 10

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?

strat Oct 19, 2017 7:31pm | Post# 11

And another from February 19, 2009:

Indicator update
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,
Strat

Since this post, I was told that "Indicators can only show history - the future is mystery"

strat Oct 19, 2017 7:31pm | Post# 12

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,
But how to dance in the rain.



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.

strat Oct 19, 2017 7:33pm | Post# 13

March 1st, 2009
Quoting Pro
Hello Strat,

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,
Strat

strat Oct 19, 2017 7:34pm | Post# 14

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,
Strat

strat Oct 19, 2017 7:35pm | Post# 15

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,
Strat

strat Oct 19, 2017 7:36pm | Post# 16

Since I will be posting everything I know here, I need to post the US Government Disclaimer to protect both myself and Forex Factory.

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CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.

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strat Oct 19, 2017 7:39pm | Post# 17

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,

strat Oct 19, 2017 7:40pm | Post# 18

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,
Strat

strat Oct 19, 2017 7:41pm | Post# 19

Quoting BWise
'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,
Strat
Attached Image (click to enlarge)
https://www.forexfactory.com/attachm...1&d=1365564028

strat Oct 19, 2017 7:43pm | Post# 20

Quoting fugly
Hi Strat,

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...
Hello fugly,

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.

strat Oct 19, 2017 7:45pm | Post# 21

Hello tgs,

Cycles and frequency analysis fascinate me so I try to include it in my trading. Unfortunately, I can't find any proven software for forex so I have had to cobble my own.

That being the case, it's very experimental right now and as I said before, I'm not sure it has value or is worth the effort. There are also 2 types of cycles - price cycles and time cycles and because I can't find any time analysis software, I am only doing price cycle analysis which is no better really than the myriad of indicators already out there.

As I write this, I can hear old Dr. Joe saying "you don't need nutin' fancy" and remember that he spent over 5 years trying and therefore think I'm wasting my time but what the heck, I've got to do something during the day otherwise the trouble and strife will have me doing household chores and jobs - I need her to think I'm busy!

If you go on the web for a search, be very, very careful and wary of what is out there. Most are scammers trying to sell "junk" while others put up a fancy site with chart examples showing how powerful their indicator/software is - I can do that also - I could put up a chart showing how great my experimental cycles are BUT what they won't show you is that a couple of weeks later, as the market decides to do a 7/9th cycle followed by a 4/7th cycle, their indicator/software is about as useful as rocking horse sh*t!

Cycles are as frustrating as Elliott Wave, except to me, they look better.

The cycle analysts I have the most respect for are:

Walter Bressert and John F. Ehlers

If you find anything useful, keep me in the loop

Rock n Roll,
Strat

strat Oct 19, 2017 7:46pm | Post# 22

"Consistent losers do almost anything to avoid accepting the reality that, no matter how good a trade looks, it could lose. Without the presence of an external structure forcing the typical trader to think otherwise, he is susceptible to any number of justifications, rationalizations, and the kind of distorted logic that will allow him to get into a trade believing that it can't lose, which makes determining the risk in advance irrelevant."

... Mark Douglas, Trading in the Zone: Master the Market with Confidence, Discipline and a Winning Attitude

strat Oct 19, 2017 8:03pm | Post# 23

  1. Richard McCall, The Way of the Warrior-Trader
  2. Brett Steenbarger, Enhancing Trader Performance
  3. Brett Steenbarger, The Psychology of Trading
  4. Mark Douglas,Trading in the Zone
  5. Richards J Heuer, Jr, Psychology of Intelligence Analysis


Brett Steenbarger, The Daily Trading Coach: 101 Lessons for Becoming Your Own Trading Psychologist


strat Oct 19, 2017 8:05pm | Post# 24

The MA's are very powerful and I use them both in isolation and in combination with all my other stuff.
They tell you the trend in two time frames, where prices are in relation to the trend, the strength of the trend, are invaluable as support and resistance AND especially when they are in confluence with support and resistance levels and can give us an idea when to expect the rubber band move to come into play.
The cross of MA's, although never used as a trading signal due to the lag, is also very informative. Their slopes provide valuable information as they do when they "trap" prices between them.
Since they are also used by banks, funds, hedge funds, trading houses and large institutions they become "self - fulfilling" much like Fib levels and retracements.
Hope this helps.
Rock n Roll,
Strat

strat Oct 19, 2017 9:19pm | Post# 25

With regard to stop loss, if that is how Trader Dante did it for his method then he must know it works for him. There are as many ways to set up your Forex ATM machine as there are traders. I cannot comment on what works for one method compared to another. The way I trade, Price Action using Support and Resistance, I would be stopped out on most trades if I did what you suggest. Since I'm trading reactions to Support and Resistance, my stops have to go either above/below Support and Resistance or at swings. For me, they have to be away from the noise of all the time frames below the Daily. This is all part of the PLAN. If you have done your analysis correctly then you will set stops according to that and let the market work it out for you. There are no emotions. You either believe in yourself and your plan or you will never make it in this business. When I place my stop loss, I EXPECT the MMs to run the stops and clean everyone out BUT I believe in my plan and let it run accordingly. I also don't put in hard stops.

I only read a post about a week ago on FF about a guy that was complaining that he set his stop and the market came back and took him out only to turn around after a further 20 pips and go in the direction of his trade. It will ALWAYS do that if you put your stop in front of resistance and support. Support and Resistance are proven areas in history where buyers have bought and sellers have sold.

One more thing, if you take a piece of method A, and a piece of method B with a squirt of method C, it won't work. A method is an all embracing strategy.

Time difference. I was going to go into a long disertation of time frames but it will not serve any point. The time is set based on the data feed from your broker. Yes different brokers wherever they are in the world have different time feeds. This means that what may appear as a hammer on my data may not be a hammer on someone with a different time data feed. It is not worth worrying about because at the end of the day we are all trading PROBABILITY and things like this, always average themselves out. You should not worry about what is happenning on a different time data feed because you cannot trade that. You can only trade the data presented to you by your broker.

Only control that which you have the ability and resources to control and ignore anything you cannot control.

Damn! I've just written that and realised why the trouble and strife is always asking why I ignore her! Need a new plan for that!

Hope this helps,

Rock n Roll,
Strat

strat Oct 19, 2017 9:20pm | Post# 26

Patience and waiting for the trade to come to us is the difference between winning and losing (read amateurs and pros). The "dead area" (trapped between support and resistance) is where most traders lose their money. We may not make many trades (and I don't want to) but the ones we make have a higher percent of success with usually a higher Gladys Knight count.

Rock n Roll,
Strat

glyder Oct 19, 2017 9:21pm | Post# 27

A new thread ! Good to see we’re back Strat. And already plenty to read!

strat Oct 19, 2017 9:22pm | Post# 28

Anyone that knows me knows that I am a rebel, non-conformist and a non conventionalist (among many other derogatory words the trouble and strife calls me).

That being the case, I will probably stir up a can of worms, open pandora's box (anyone seen inside pandora's box?) etc., by saying:

I am only interested in the CLOSE of a candle. I do not care where it started, where it's been, how far it's gone or why it went there, only where it ended up.

I do not use highs and lows for any of my analysis - not even for trend lines.

Feel free to disagree with me - I don't care! If you saw my charts you would see that prices stop on, or very near, my support and resistance lines as if they had run into The Great Wall of China. That is why I don't care if the rest of the trading world disagrees with me.

My method for determining support and resistance also takes the time element out of the equation. This means that I can accurately predict the price, at some point in time, within a small percent, at which buyers will buy and sellers will sell.

For those getting ready to ask which indicator do I use to do this, it is the one between my ears.

For those who think I am full of the proverbial horse manure, and again, I don't care if you do, let me show you an example using USDJPY.

If my light had gone in 1995, I would have known that the price of 94.21 would act as support and resistance in October 2008 through February 2009.

See attached Weekly and Daily charts.

I have not shown how I identified 94.21 but all will be revealed in good time. Suffice it to say, everything you need is staring at you on that Weekly chart.

Rock n Roll,
Strat
Attached Images (click to enlarge)
https://www.forexfactory.com/attachm...1&d=1365564516

strat Oct 19, 2017 9:25pm | Post# 29

Thanks for the questions.

I may have over simplified things with my comments about the close. The close, in my opinion, is the most important level on a candle. I do not use tails or wicks for trend lines or any of my analysis. So, on a down trend line, I draw the line through the open but again, that is over simplifying it.

Trend lines are NOT an exact science and there is no right way or wrong way to draw one. The trend lines that I draw work for me because it is part of my overall analysis. If you are just drawing trend lines in isolation, they may not be giving you the information you want.

In certain cases when there is lots of volatility, I will draw an "average" trend line just by eye balling the bars and drawing the line that has the most touches to it.

Although the close is the most important, the other 3 levels also have their use in telling us what went on in that 24 hour bar.

Fibs, like trend lines are very subjective with regard to where you take the swing from and whether to use the tails and wicks or not depends on the volatility of the pair being measured.

What you have to remember is that trend lines, fibs, support and resistance are not exact. That is why you will see us say 1.3650ish. There is no rule that says price has to be "spot on" with any of these - just pretty close will do the trick.

With regard to the points from where to draw your fibs, the general rule is from swing to swing. When that swing has produced it's retrace, rally or whatever the move, then move on to the next swing. Don't worry about getting the exact points right because what you will find is that if you draw your fib and it shows the retrace at 50%, then move your points and you will see that it is now at 38.2% or 61.8% - a level where you should be taking notice anyway.

Finally, as more and more traders are using fibs, they are becoming more and more self fulfilling.

Did you really ask this question "What about setting your S/L? Do you set it above/below the CLOSE of a recent swing high/low?"

If I am long, and identify a swing low to place my SL, why would I want to place it near the close? Think about it. On that bar that produced the swing low, what did the sellers do? Where did they take price? I want to place my SL away from the noise and action of that important turning point. Also, if that swing low bounced off support, I will put my SL below and away from the noise around that support. Does that answer your question? If not, ask again.

"Does it affect how you see price action?"

This is a "how long is a piece of string" question. Everything you see on the charts affects price action - not just pieces of it in isolation, but all of it lumped together. I'm not sure that is the answer you are looking for so if it isn't, please re-phrase the question.

Hope this helps.

Rock n Roll,
Strat

strat Oct 19, 2017 9:26pm | Post# 30

Only 5 months in Forex and you are already well on your way, Dan, congratulations. The one most important thing that you have done is recognise what does NOT work for you and are now trying to find that style and time frame which DOES work for you. I see so many wannabe traders plugging away losing hundreds of pips doing something in a time frame that OBVIOUSLY doesn't work for them yet they persist in throwing their money away. I did it and it took me longer than 5 months to change.

It breaks my heart when I see people losing money as fast as it can be printed. There was one guy in a chat/live trading room with a young wife and family who was not only losing hundreds of pips but posting and telling everyone about it. Everyone but him could see that it wasn't working for him yet he blindly turned up day after day to throw his money away.

I was near to tears thinking of his situation and I couldn't take it anymore so I sent him a PM PLEADING with him to STOP everything. Finally, after a couple of PMs, he saw the light and stopped, much to my relief.

If this guy is up to it, I would like him to come on here and describe his emotions, what was going through his mind, what kept him doing something that everyone knew didn't work for him, why he did this etc. This will be so important for others in, and those who will be, in this position. If he doesn't want to do it under his own handle, he can send it to me and I will post it anonymously.

Although I don't understand it, it is something I did and had to work my way through it (over $200K lost later). This is the psychology aspect of trading controlling us. It is said that trading is 10% method and 90% psychology. Controlling your psychology aspect (or the man in the mirror in my case) is critical to your success as a trader. Although I thought I had mine tamed, it came back and let me know it was still there in my "quickie" USDJPY trade.

When something is not working for us after we have given it a good try, we need to stop and ask "WHY?" How many of us have traded with something that does not work and asked "WHY ISN'T IT WORKING?" We just keep plugging away and HOPE that our "LUCK" will change. Hope and luck are not included in the recipe for trading success.

I like to use a car analogy to describe this. When you start your car in a morning it usually starts on the first crank. What do you do when the day comes and it doesn't start on the first crank? You give it another crank and it still doesn't start. Since it has always started on the first crank, you should now be thinking "something is wrong with the engine". Well we give it a third crank and it still doesn't start and now it becomes a battle and you keep cranking away until you have a dead (flat) battery. So now you have two problems - the engine AND battery. This is exactly the trading scenario. Cranking away is each losing trade and the flat battery is an empty and lost account!

Now to your trades. First, nobody knows where a pair will go. There are lots of people who THINK they know but the market will do what IT wants to do regardless of what we THINK. Even trading the Daily you have to be on your toes and keep an OPEN MIND.

I think 1.3500 is ambitious, AT THIS TIME for GBUSD (but I'm no expert). Before it gets there it has to go through major support at 1.3650 and again at 1.3550. Yesterday's bar was rejected/bounced off by the 1.3650 - what is this telling us? Are there any sellers at 1.3650? What happens at support and resistance?

"Will it bounce back to 1.5000?"
Bloody hell, Dan, that is one hell of a bounce! I hope I never get caught in one of your bounces! Before it gets to 1.5000, there are several layers of resistance holding it down.

Then I get to your last sentence and I take back everything good I said about you!

"Maybe i'll just wait and see what Nicola does, always a winner!"

Dan, you will never, EVER, get your Aston Martin thinking like this! First of all Nicola (elitejets) is NOT ALWAYS a winner - NONE OF US ARE!

Have you asked her if she can be your signal service? If you do, I hope she says NO!

If you are on here, then you should be here to learn and understand and trade for yourself. Trading on someone else's beliefs is the ROAD TO RUIN!

If you are not sufficiently confident in placing trades based on your own analysis then DO NOT TRADE! Take your time and learn what you need to become a successful trader. The market will still be here when you are good and ready.

Think again about your chat/live trading room experience. Did it work for you then taking other people's trades?

I've fallen off my soap box again!

Rock n Roll,
Strat

strat Oct 19, 2017 9:28pm | Post# 31

I struggle with getting SL to break even also. It's a toss up between hanging in for a longer move or getting out with some profit. I try to look at where the next roadblock (support/resistance) is and work back from there. It also depends where you are in the trend (or not in a trend).

From the trading psycho view, it is always best to grab some profits while you can and not let a profit turn into nothing, or worse, a loser. However if you do screw up and end up with nothing or a loser just take it on the chin and move on to the next trade. The absolute worse thing you can do is mull over it and think what might have been -forget it, let it go and move forward.

Rock n Roll,
Strat

strat Oct 19, 2017 9:31pm | Post# 32

Glad you're here Honest Bill - we'll get you sorted out - don't worry. Might not be this month or next, but we'll do it.

Now one very important point - As I have told all the others asking for my help, the brain is a very complex, yet simple organ, it cannot handle learning two ways of doing the same thing at the same time and just fries itself. I know I have lost $tons trying to do it. Either trade what you have already or drop everything and open your mind to new ideas and methods.

Your confusion is because you are doing a strategy that does not require you to watch price action and is reliant on squiggly lines. You are getting torn between the two methods.

It is difficult for me to know exactly what is needed because I did it the other way round. I went from Daily price action to M15 and M5 using a proven strategy to get some action (stress and pressure) and very quickly came back to the real thing.

I know you are in contact with Nicola and really, because she has been in exactly your situation, best knows how to help you so I am asking Nicola if she can help through this thread and I will give my input as needed.

With so many people wanting information and answers, I have become disorganised in laying out this thread so I'm going to tell you what you probably don't want to hear and that is go back and re-read the whole thread again. But don't flash read - after reading each post, give yourself a test - ask yourself if you understand what was written, can YOU use it, how would YOU use it. By asking yourself these questions, you will learn so much more. As you do this, write down what you don't understand and then ask the questions.

Your request to put up a chart and show examples is exactly what I will NOT do at this stage. Why? Because that is the easy way out and more important, will not help you with this method. This is not like the Pimp Strategy or indeed any other requiring you to blindly follow a squiggly line. You have to learn what each single price bar is telling you, then what a group of price bars are telling you, then what a swing is telling you, etc, etc ALL within the boundaries of support and resistance.

I know you want it all in a couple of hours but this is a lifetime learning process and don't worry, Bill, you are in at the beginning, we are only at 18 pages BUT until you get over your reliance on squiggly lines and open your mind to reading and understanding price charts, you will be forever fighting within yourself.

Like I have said in other posts, the first thing to do is learn BASIC price action from Jim and Mike (mbqb11 Resident Elmer Fudd) at James 16. No need to read current posts just the first 200 or so pages.

Whether you read Jacko or not is up to you. He trades the 50% fib retrace in the direction of the trend on the Daily but has since dropped down to H4 supposedly because of volatility but I think he has chickened out. However, he has an uncanny sense of reading EURUSD and the funny mentals and can do what we do without all our hard work.

But first you have to decide what your style and time frame is - squiggly lines with stress and pressure or emotion and indicator free trading.

Until you sort out your internal confusion Bill, no-one here can help you.

I'm sorry this is not the answer you were looking for.

Rock n Roll,
Strat

strat Oct 19, 2017 9:38pm | Post# 33

tgs, I still get caught out in the same dilemma HOPING it is going to turn into a big trend. Did I write in an earlier post that "HOPE" was not an ingredient in the traders' success recipe? If I am "hoping" for more that means GREED has raised it's ugly head again. Another session in front of the mirror for me and Mark Douglas's book.

You, as are everyone else on here, are entitled to your opinions as long as they are positive and constructive so no problem on the MAs. Before you continue with their rejection though, watch how we use them, what they tell us and the benefits they give us. I have had them on my charts since the first chart I looked at in 1982.

Yes, they lag and yes they are indicators of price history BUT we are not using them in any way shape or form to generate signals as you are probably more familiar with. I have some pretty good MA systems which are very profitable UNTIL they hit the dreaded consolidation and just like everything else in consolidation, (in my opinion), are useles. We also never use them in isolation. They are used as part of our total package in our decision making process.

Again they are almost self fulfilling because just about every bank, institution, trading house, fund uses them to generate ORDERS especially the 20. Get your charts out, put on a 20 and you can see support and resistance but not only that, the elastic band strategy coming in to play. There is a guy on a Forum somewhere that I read, that trades on nothing but how price is attracted to and rejected by the 20.

Also, you would be AMAZED at how LITTLE traders at these places know. They are basically clerks that place orders (HUGE orders) when an alarm comes on telling them an MA has been hit or crossed or whatever but they have the prestige of being called Merchant Wankers.

Spot on analysis with OZ, I agree on an upcoming trend change and was waiting to announce it in my End of Week analysis.

Rock n Roll,
Strat

strat Oct 19, 2017 9:40pm | Post# 34

As I’ve posted before, one of the benefits for me in starting this thread is that of unlocking the annals (I almost wrote “anus”) of my mind to re-call the wealth of trading experiences and knowledge I have accumulated in my quest to trade for a living.

The recent posts on moving averages and bank traders have hit my “Memory Recall” button on the Merchant Banker experience I had back in 1996/97.

When I was “working” for a living, I had many overseas projects and one of them was for a large US Engineering & Construction company building the grass roots refinery for Reliance in Jamnagar, India. We were based in Mumbai (Bombay) for almost a year, living out of the Oberoi Hotel and on this occasion, our son, Ryan, was visiting with us for a couple of weeks.

Ryan is a very friendly character and makes friends real easy and one night, long after me and the trouble and strife had gone to bed, there is a telephone call, “Hey, Dad, you gotta come down to the bar quick!” I looked at the clock and it’s after 11:15pm. “What the hell for? it’s too late” was my reply. “There’s this guy that works for Hong Kong something banks that trades millions of dollars in futures”, Ryan said. Well I was out of bed and into the bar quicker than a hooker can drop her drawers!

Ryan introduced me to what’s his name (I can’t remember his name) and we shook hands. Sweaty hands and a handshake like that of a vicar or limp fish didn’t go well with me. He was English, in his early thirties, over cocky, over arrogant, over good looking and over paid and spoke very posh like they do with plums in their mouth. “Bastard”, I thought as he gave me his card. “Something something, Merchant Banker with Hong Kong something Bank”, I read on his card. In my rush to get down there, I had left everything in the room and couldn’t give him my card, so I told him I was a Project Manager working on the Reliance refinery.

Since this was about as much interest to him as the flight of the lesser spotted bumble bee, I thought this is going to be a short meeting so I just jumped in and asked him what a “Merchant Banker” does. Big mistake! He told us he traded millions of dollars at a time, made millions of dollars of profit for the bank and himself, had a penthouse suite over looking Hong Kong harbour, lived the life of the rich and famous and portrayed a “royalty” of Hong Kong image. When he eventually paused in his obvious attempt to intimidate me, I did my “How do you do it then?” routine. Well, stumbling for words took the wind out of his sails and we were back on a level playing field again.

“Martini and vodka”, he said when I got the waiter over to get our drinks. Ryan and I ordered our usual pints of beer as real men do. I told him I also traded futures and that so far, I had done nothing but lose. “You’ll never win,” he said, “we eat private traders for breakfast and spit them out in bits after”, he said in his best Prince Charles accent. Now I’m thinking “OK, smart arse, I don’t need to be told that by you” . So, in my usual blunt and tactless way, I said “OK, clever clogs, tell me how you do it?”. “Can’t do that old chap, it’s proprietary, a bank secret!”. My one word answer of “BOLLOCKS!” seemed to un – nerve him and Ryan looked at me as if to say “You won’t get anything out of him talking like that!”. He waffled around for ages about how good he was, the women he could get and the money he made, but nothing on how he ACTUALLY did it. I quickly realized that I had to work on him like the women my mate and I would chase on our “bachelor” Friday nights out – lace them with liquor before moving in for the “kill”. The waiter brought another round and Ryan realized my game plan and joined with me to triple team him.

After several rounds of drinks and us “buttering him up” telling him how good he was, he started to laugh and loosen up. “Game on”, I thought. I told him I had lost a ton of money the previous year on the Yen (another horror story to be revealed later) and he said he and his bank made millions and millions on that (yes, I thought, with my thousands as well). I told him I was using the Stochastics and MACD for my signals but so far I couldn’t make money with them. “What do you guys use?” I asked. Then he told us the REAL story!

He was one of 20 traders working for his bank and he worked in the futures section trading the deutsche mark and US$. (Only two currencies!) There were other traders who traded two currencies each of the other currencies. It was an open office with each trader having his own cubicle and computer with monitors all around the office. He had real time charts with a monitor for each currency and he spent his day reading reports on the economies of the countries for the currencies he traded. He would attend weekly internal meetings where each Head Trader would discuss the futures and commodities outlook for his section.

When it came to actually trading, he would wait for his computer to sound an alert, at which point, he would drop everything and look at what the alert was for. The bank’s software on currencies (not sure about the other futures and commodities but suspect it was the same) was programmed to trigger an alert at each cross of a 10, 20, 55 moving average. He would then see which cross was triggered, and get out his manual which told him how many $millions were allowed to be traded on that particular cross. Based on what his current exposure was (risk), he would decide how many millions to trade and THEN, take it to his Section Head or Head Trader. It was the Head Trader who made all the decisions! He would adjust the $value or just approve it as it was. The Head Trader then told the Merchant Banker to place the order for $X millions at which point, the Merchant Banker wrote up the paperwork and sent it on to their trader in the Pit. Trading over until the next alert!

When asked how they knew when to take profits he said it was usually when alerts triggered. When asked about the cross back down in a whip saw like situation he said it was no different to any other alarm. Just take the cross and the situation to the Head Trader who would review it and make a decision.

When asked about the impact of loading and unloading such high $ amounts on to the market at one time he said it wasn’t done all in one block. The Pit Trader had a system for spreading the orders such that the market (but not the other Pit Traders) could not see what they were doing.

When it finally came to profit taking, he would get his alert and take it to his Head Trader who would make the decision and instruct the Merchant Banker to close the orders. Again, he would issue the paperwork and send it to the Pit who would gradually unload it in the same manner as before.

As regards education and training in technical analysis, this Merchant Banker had an economics degree and no education in technical analysis at all other than what he had picked up by working for his bank. When asked why he didn’t have any, his cocky, arrogant, drunken response was “Why, I don’t need any, I can make millions doing what I do without it”.

When asked what qualifications a Head Trader needed he said it was “Just five years working for the bank as a Merchant Banker!”.

Having had my way with him, I couldn’t wait to get him out of my sight so the waiter brought the bill over, left it on the table, at which point Ryan and I stood up to leave. “Hey, aren’t you getting the bill?”, stumbled out of his mouth. “F**k off,” I said, “With all the thousands you stole from me, you can pay it!”

I guess this is the only time I beat a Merchant Banker!

Maybe now you will understand my dislike for Merchant Wankers!

As an epilogue, Ryan saw him the next day and said he looked “very poorly”. He should have drunk beer like real men!

And so began my not so profitable but very frustrating experience in moving average cross over systems

Rock n Roll,
Strat

strat Oct 19, 2017 9:43pm | Post# 35

Quoting Toddfx
BOSS 20 is the 20 period sma, right? I searched this thread but just want to make sure.

http://i43.tinypic.com/znv3hx.gif
We have a 20ema and a 50sma which tells us about the Daily and on the same chart we have a 100ema and a 250sma which tells us what the BOSS is doing.

The 100ema on the Daily chart is the same as a 20ema on the Weekly (20(daily) x 5 (days in a week) = 100)
The 250sma on the Daily chart is the same as a 50sma on the Weekly (50(daily) x 5 (days in a week) = 250)

In each case, the 20 is more powerful than the 50

Hope this clarifies it

Rock n Roll,
Stra

strat Oct 19, 2017 9:43pm | Post# 36

The guy who put up the re-painting HMA and Semafor crap made me think. There is only ONE WAY to read price action and that is with reading what the price bars tell you.

For those of you on here, who are pretending to read price action but have still got a squiggly line at the bottom of your charts, this is for YOU.

As long as you have an indicator underneath your price bars, you will NEVER, EVER learn price action. That squiggly line will still DOMINATE your sub-conscious and fool you into a false sense of security. I know, because I have done it and failed at it.

The only way you are ever going to learn to read price action is to strip everything off your charts except PRICES whether it be OHLC bars or candles.

Yes, it will be ONE HELL OF A SHOCK, but it will FORCE you into looking at the OHLC/candles more AND support and resistance. It won't come easy but if you are DETERMINED and PERSEVERE, you will get there.

If you take the easy way out, and refer it back to a squiggly line below the prices, then that is what you will end up doing for the trest of your trading career.

From now on, anyone who posts a chart with anything on it except maybe volume and wants an opinion on it, then they can go and whistle "Dixie".

Rock n Roll,
Strat

strat Oct 19, 2017 9:45pm | Post# 37

Quoting Toddfx
"The guy who put up the re-painting HMA and Semafor crap made me think. There is only ONE WAY to read price action and that is with reading what the price bars tell you."

I was the one who posted a chart with the 3 Level ZZ Semafor....
The 3 Level ZZ Semafor keeps repainting and repainting highs and throwing out it's stupid "3" until EVENTUALLY it is a swing high - It is an indicator painting past history using moving averages - see below for copy of first lines of program:

3_Level_ZZ_Semafor.mq4 |
//+------------------------------------------------------------------+
#property copyright "asystem2000"
#property link "asystem2000@yandex.ru"

#property indicator_chart_window
#property indicator_buffers 6
#property indicator_color1 DimGray
#property indicator_color2 DimGray
#property indicator_color3 DimGray
#property indicator_color4 DimGray
#property indicator_color5 Lime
#property indicator_color6 Red



extern bool Sound.Alert = false ; // TRO
extern string Sound.File = "ahooga.wav" ; // TRO

//---- input parameters
extern double Period1=5;
extern double Period2=13;
extern double Period3=34;
extern string Dev_Step_1="1,3";
extern string Dev_Step_2="8,5";
extern string Dev_Step_3="13,8";

Yes, my method uses moving averages but NOT to tell ME when we are at a swing high - I can do that far better with the indicator I was born with - my eyes and brain.

If you ever read anything posted on this thread you would know that I acknowledged that Volume posted by the brokers is SAMPLING volume. You should have also noted that I said I use it to confirm PRICE ACTION. You should have also noted that I don't give a rat's ass what YOU think!

Next question?

Rock n Roll,
Strat

strat Oct 19, 2017 9:46pm | Post# 38

Quoting Baba G
Strat i was just gonna start throwing in charts with the M.As on and sort of say "well?" when a bit of price action showed up.In fact what do you think the best way is?This is what i know of M.A.s James 16 base and price actions at those levels.I gave up on "touch" entrys as i would have to change mi pants everytime i filled a ticket mostly on "instant exe" both my order and my bowls with it.So i gave up on that bit but i marveled when we got a bit of on trend price on a "first time back" (SEE USD/CAD DAILY ZOOM RIGHT OUT YOULL SEE) and...
I thought you already had a cherry on your cake!
I don't use moving averages for signals only price action at support and resistance. They are there to give us additional information on price.

Rock n Roll,
Strat

strat Oct 19, 2017 9:48pm | Post# 39

The first thing, after identifying a trade MUST ALWAYS BE - WHAT IS MY RISK? Remember my earlier posts about millionaire and professional traders? The ONLY thing they care about is how much they can LOSE. Amateurs and all other traders think just the opposite - how much can they make.

When professionals PLAN THE TRADE, the very first thing that goes down on their sheet of paper is HOW MUCH WILL I LOSE? Their whole plan is predicated around LOSING. If they are not comfortable with the amount they WILL LOSE, they will either reduce their positions (lower $ per pip) or NOT TAKE THE TRADE. They don't concern themselves with winning because they are successful traders, know it's all about probability, and will come out winners in the end (total number of trades).

When they are comfortable with HOW MUCH THEY WILL LOSE, they go ahead and place the trade. This IMMEDIATELY takes all decisions and emotions away from you on this trade leaving you with a STRESS FREE TRADE. You then TRADE THE PLAN by letting the market either (i) take you out (stop loss hit) or (ii) put you in profit. Once in profit, your plan should tell you when to take profits, go to break even etc. It may not have hard numbers but just something like take profit at 50 pips on the first contract, bring rest to break even at 100 pips or take profits at first S&R, second S&R etc.

If you feel the need to interfere with your Plan then you have not planned it correctly. Once in a trade with a plan - just let it go and do it's thing! If you plan it correctly, those demons, goblins, voices inside your head, man in the mirror no longer have a base on which to trick you on.

So back to this trade. If you had a sell stop in place below the 97.52 support line, say 97.42, did you measure your RISK? Where did your SL go on such a move? If you did it correctly, your SL should have gone ABOVE THE SWING HIGH at say 99.23. That is a 181 pip SL! That is HUGE!

Would you have been prepared to LOSE 181 pips? That is the FIRST question you should have asked yourself. If not, then either adjust your $/pip or do not take the trade.

Now for those who are going to tell me they dropped down to H4 to identify a smaller SL, then at that point, they were no longer trading the Daily. You cannot trade a time frame with a shorter time frame's S&R. There are 6 H4 price bars within one Daily price bar and if you set a SL from H4 then it would be hit within that Daily price bar.

If we managed our trade correctly, we should have taken profit when it hit support again at around 96.20, so we did make 132 pips. For those who do the Risk to Reward ratio, this was lousy.

Now that huge down bar was not the normal range for this pair and we should expect the elastic band theory to take place after it completed. If you are not familiar with the elstic band theory, take the elastic waist band in your under pants or knickers and pull it out as far as it will go. Then let it go! This is also true for the distance price is away from the 20 - the further it is away, the more likely the elastic will pull it back.

That being the case and since we all know what to do when price hits support, it provided another magic trade PROVIDING you knew where to put your SL. If you did know where to put your SL then you are back at the beginning of this post because it is another HUGE SL

So, since no-one came even close to this, tells me you are all acting like rank amateurs.

You will NEVER make serious money at this UNTIL you turn your logic upside down, forget about profit and CONCENTRATE on HOW MUCH YOU CAN LOSE.

I promise you with 100% certainty that if you do this, you will turn your trading career around BIG TIME!

So what are you going to do with this new found information?

Rock n Roll,
Strat
Attached Image (click to enlarge)
https://www.forexfactory.com/attachm...1&d=1365565161

strat Oct 19, 2017 9:51pm | Post# 40

Everything is not always as it seems!

With the recent posts and some of the PMs I am getting, it’s time I posted the true story of my mate, Bond.

Bond was down in Tijuana, just over the US-Mexican border from San Diego and met a girl in a bar (as is his want!). He said she was a cracker, drop dead gorgeous and gave her a 9 out of 10 and that was before he had a beer. As he usually does, he got her into his room and while he was “checking out” the real estate of his catch to line her up for the “kill”, his hand came across……………………………………………………the meat and two potatoes!

Yes, it was a guy dressed up as a girl! He couldn’t believe it as everything else checked out great! He was devastated! He had never been tricked like this before. It took him ages to get over this, well the rest of the week anyway. He has never forgotten this and it has forever changed the way he approaches women.

Instead of drowning them with charm as he used to do, the first thing he asks when he meets a woman now is “ Are you really a woman – are you 100% female?”

What has this to do with trading? Absolutely everything!

As can be seen from some of the recent posts, we are learning price action specifically hammers. Notice I did not say “learned” – we are all learning and we never stop learning.

For some people, the very fact that they have “learned” certain candles can indicate price reversals, seems to make them feel as if they have found the Holy Grail and can walk on water. (This is NOT the Holy Grail, but I do know what it is). They then look at charts and see these candles everywhere! This happens every time. Worse still, they trade on them and then when they lose on it, go around bad mouthing price action!

So, as I learned this the hard way, and Baba G too and I’m sure many others, (loss of money), let’s see if we can stop it happening again.

With regard to shooting stars at the end of an uptrend and hammers at the end of a downtrend, they will jump out at you if they are the real thing. What is happening now is that you are “searching” for them and trying to make every bar look like one.

Now that you have dipped your toes in the water, go back and re- read all about them again. It is a known and proven fact that our subconscious learns from repetition so the more times you read it, the more you will learn and understand. Pay special attention to position or location. These type of candles mean different things in different positions in a chart and sometimes mean nothing at all.

While you are doing that, think about what the market is doing when it produces a “real” hammer or shooting star. Think about what it is trying to tell you. I’m not going to tell you that yet as I want you to study and work it out for yourself.

Then, when you see what looks like a hammer or shooting star, remember Bond. Ask yourself if it meets ALL the criteria, “is it really a hammer/shooting star?”.

Before anyone posts that they took trades and were successful on what appeared to be these type of bars but were not really (look a likes), then yes, it does happen. They also fail, and fail pretty bad as well. It all comes down to your risk tolerance. I want to encourage you to only trade “classic” price reversal bars as these are the safest ones with the lowest risk.

Are they perfect? No, nothing in trading is perfect. There have been classic reversal bars which have failed also but not with the same frequency as “look a likes”. Why do they fail? There are many reasons I suppose but what I always think is that after the classic reversal bar closed and gave us our set up bar, something in the market changed between the close of our set up bar and the new bar printing making price continue with the prior trend.

There are also several ways to trade the price reversal bar but I’m only going to discuss the safest and lowest risk (for me). After you see the price reversal bar and thought of Bond, this then becomes your “set up” bar. If it really is a hammer (don’t get fooled like Bond did!), enter a buy stop order about 10 pips above the high of the hammer. The amount of pips above the high will depend not only on the pair but on the current volatility of price action. (Below the low on a shooting star). If it is not a reversal, your stop order should be far enough away so that you are not filled. However, it will not stop you getting filled if the brokers and MMs go on a Stop Run.

Another thing is not to worry or beat yourself up if you miss one. There is always another one being set up somewhere.

So, think like Bond from now on and remember that everything is not always as it seems.

Rock n Roll,
Strat


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