go live or bust ... diary of an fx live-trader-wannabe

PREFACE

for those of you looking for the "holy grail" ... you won't find it here. this journal simply memorializes my trading journey and can be very hodge-podge at times (instead of creating a whole new thread devoted to whichever way the forex wind is blowing me at the time). in other words, my point was not to attract a "cult-like-following" (like some threads out there), but to force myself to acknowledge, pay-attention-to, and at times "confess" what i am doing w/ my trading so that i may one day find a balanced, consistent, and disciplined approach to trading the markets.

however, if you are looking to learn something, might i recommend you head over to the following threads (this list is not all inclusive as there a dozen more i am probably missing that should be on this list)

http://www.forexfactory.com/showthread.php?t=155393 [H.Reardon "can small accounts ..."]
http://www.forexfactory.com/showthread.php?t=39514 [PeterFM Help for Newbies]
http://www.forexfactory.com/showthread.php?t=6948 [Diallist Info for Beginners]
http://www.forexfactory.com/showthread.php?t=3156 [Diallist 5 Steps Thread]
http://www.forexfactory.com/showthread.php?t=27286 [Jacko]
http://www.forexfactory.com/showthread.php?t=56907 [No Free Lunch]
http://www.forexfactory.com/showthread.php?t=14630 [Phillip Nel 4hr System
http://www.forexfactory.com/showthread.php?t=11854 [Phillip Nel 5min System]
http://www.forexfactory.com/showthread.php?t=26205 [Cornflower]
http://www.forexfactory.com/showthread.php?t=2331 [James16 Chart Thread ... 1st hundred posts for starters ...]
http://www.forexfactory.com/showthread.php?t=163012 [Trend Line breaks]

BACKGROUND

i started studying the forex in 2005/2006. in 2007, i took a 3-year hiatus from my career (realistically a J.O.B.) and began studying and trading the forex full-time (demo, live, demo, live, ... you get the picture). during this time, as like most students of the forex/traders, i was self-taught; meaning i studied charts, indicators, etc. from many sources (books, E-books, forums, websites) for hours on end. a real eye-opener came when i read "Bird Watching in Lion's Country" ... my husband also attended a seminar in 2010 and that is when it all turned the proverbial corner.

WHERE I AM AT TODAY:

after years of demo trading a variety of systems on a variety of time frames, i have been trading live ... but, i am back to work at my J.O.B. also. i continue to endeavour to journal my way through my trading, but the J.O.B. gets in the way.

i started my journaling journey in the midst of studying James16 methodology (with my own spin). i believe that my lack of success with it was due only to lack of patience and discipline -- thus leading me down other paths. presently i am trading price action on E/U 5 min (a montage of a variety of styles - discussed in this thread) and another method (which i might like to call, "casino style" -- that will not be discussed in this thread).

DISCLAIMER

it should go w/o saying, but just in case ... this is not a trading signal service so don't expect to get rich blindly following anything i do.... ... cuz this ain't the holy grail ... what i have now come to understand is the holy grail of trading is being disciplined which stems from having a simple system that is followed mechanically (i.e., create a simple system ... the entry being the "edge" & keep emotions in check to "let profits run" ... the "expectancy") ... and quite frankly, any system will do (and if you want to know what i think ... on any time frame) ... jumping from system to system is probably not the answer to becoming a successful trader, but managing emotions & risk is likely the winning ticket.

good luck in your own trading journey.

THOUGHT PROCESS BEHIND MY TRADING METHOD

j16 really took what he learnt from pring and others and presented it in a very simple, price-action-for-dummies fashion. the concept that i picked up on the most from j16 was that price action is gleaned from the bars (candles) themselves, but trades should not be placed off of them blindly -- they should be traded for a "reason" -- typically the reason is trend/momentum or support/resistance. additionally, pring discusses using volume to confirm whether to enter the market. however, volume is hard to assess in the forex, b/c each broker is different. that's what got me thinking about and getting back to using the ADX to help me w/ my decision to enter off PA signal. i tried fibs, TL's, and MA's to determine trend and s/r, but, IMO all of those tools are very subjective. again, it's just my opinion, but b/c i struggle w/ discipline in my trading, i also struggled w/ the subjectivity of those tools ... (for instance, fibs could be drawn from several different swings to effectuate s/r to confirm the trade; TL's can create a trendline or diagonal s/r (pring) from many different price zones; and MA's can be adjusted to 20, 30, 50, 100 -- you name it, eventually i could find the magic number to justify entering the market off the PA. for me, i needed something that was as constant as possible --- hence, my use of pivots (which i also used to assist me w/ my BWILC trades).

SUMMARY OF TOOLS I USE TO ANALYZE WHETHER TO ENTER THE MARKET

Time Frame: daily charts only. i don't have the patience for smaller TF's and not much more for higher TF's ... just me.

Price action signals: (i have very specific criteria for PA signals before entering the market and b/c i sometimes waste a lot of time constantly going back to the same charts and recreating each set-up as further study and back-testing, i might post some charts of some past PA set-ups that worked or didn't work per my rules to give me a quick point of reference when i get stuck)

1. Pin bars (and proxy pins)
2. 2-day reversal patterns (Pring - also review Mbqb's posts on j16)
3. 1-day and 2-day outside bars
4. inside bars
5. double bottoms/tops

Sentiment: (or trend or bias) i determine this using weekly and monthly pivots. when the weekly pivot is above the monthly pivot, bias is bullish; when weekly is below monthly, bias is bearish. i no longer bother w/ R1, S1, etc. levels. i also assess whether trend is strong or losing momentum (becoming exhausted). the best way i have found to help me make this assessment is via Wilder's ADX. if PA requires that i enter the market only w/ the current trend/sentiment, but momentum is exhausted, i pass on the trade.

ADX: this is a comprehensive indicator that helps to analyze momentum, volatility, and trend strength/weakness in the market. much can be learnt about this indicator on the internet, forums, books, etc. for my purposes, and in general, if the ADX is above 60 or falling from 40/50 levels, the market is becoming exhausted or is already exhausted. i also analyze DM+/DM- for additional confirmation. in some cases i will trade PA using Wilder's DM crossover/extreme point rule.

Support/Resistance: i use weekly support/resistance levels (and some general fundamentals ...)

MM/RRR/Manual Trailing Stops: i only risk 2% of my account per trade. that is regardless of whether the stop-loss required for the trade is 100 pips, 200 pips, or 500 pips. i take 1% off if/when my trade reaches 1:1 (props to Peter Crown's DIBS). i enter the market using a percentage of the range of the PA and use a percentage of it too for my SL (i had a really convoluted way of coming up w/ the percentage and the funny thing was later i stumbled across information that it was something related to Gann math -- really proved to me that old school methods for trading the forex are good enuf). 1:1 is the difference of that range. my stops for the entire 2% are manually trailed in stages of where price closes. i modified my fib tool to help me keep track of where to move the SL. (i have experimented w/ many styles of trailing stops -- SAR, s/r, Bollinger bands, but i didn't have enuf gamble in me to ride out the drawdowns).

Emotion/Discipline: if my trade doesn't work even though i followed my trading plan/rules ... to quote Peter Crown ... "so what." if the rules keep me out of a potential profitable price move ... "so what."

Putting It All Together: ... to be continued ...

Hey Grinder best of luck buddy will be lurking

having you as one of my lurkers is a definite privilege.

p.s. ... haha, i don't think im a "buddy" ... more of a dame ...

EURAUD pin bar on 9/16/08 that i passed on per my rules. pin bars can be fickle and must be regarded very suspiciously unless all the planets align. this is stressed mucho on the j16 site. before trading a pin bar, i first assess the reliability of the pin itself. it's only a pin bar worth "considering" if:

1. the close of the pin is w/in 25% of the lower range of the bar (for bearish signals) (i make an exception here if it's a close call, but only if criteria 3 is met);
2. the open of the pin is w/in 50% of the lower range of the bar (for bearish signals);
3. the "nose" (wick) of the pin is beyond 50% of the left eye.

4. for counter-trend pin bars, the nose of the pin must bounce through or off of resistance (support for bullish pins of course) AND the closing price of the pin must close below the resistance level (otherwise, price is again supported ... doh!) ...

therefore, if criteria 4 is not met, pins should only be traded w/ the trend and ONLY IF price action momentum is not exhausted (use ADX).

this EURAUD pin bar sure was tempting wasn't it? however, it did not bounce off resistance -- it's at a highest high right here ... and any resistance was below it ... i.e. support. this pin bar/price action should only be traded w/ the trend (weekly over monthly = bullish bias) according to my rules and i have no signal to do it on the 16th ... RESULT = PASS

now, in case of operator error ... ouch! i screwed up and traded contrary to the rules ... (or, let's say there was some s/r factors backing up my decision to enter the market) my additional rules for entry covered my butt and kept me out of the zero-sum mess this ended up being for some traders i know that were in this trade (price hit the opposite side of the pin stopping many out before it could start traveling short) --- my modified fib tool has been drawn on the chart showing where i would have placed my entry and SL. if a pin does not trigger by NY closing bell the following day, i am looking for a new price action set-up and simply toss this one in the muck. [entry and SL are indicated by the red lines ... 17534 & 18229 respectively]

this is one of those pins i keep running across as i am scanning my charts for set-ups and keep wondering why i didn't trade it cuz it looked sooooooo nice.

to follow: subsequent price action that i used to enter a pending short order in this same currency.

same chart for EURAUD, but different price action. 9/18 & 9/19 create a 2-day bearish outside bar. i trade these as continuations and as early signals of reversals. these are a personal favourite of mine to trade as they have proved themselves to have decent reliability. as long as the price closes below the low of the bar (candle) being "engulfed" (in candlestick terms) ... i place a pending order according to my "percentage of range" rule of thumb and corresponding stop loss. as an added bonus, the closing price also made it past the weekly s/r levels that kept me out of trading the pin bar ... (attention should be paid to the ADX in terms of whether exhaustion is present or if we might be trading against a very strong trend)

other outside bar trades

i traded the USDCAD using a 2-day bearish outside bar a few days ago and the GBPUSD bullish 2 day bars a few days before that. i have pending order on the USDJPY (closed above s/r) using 2-day outside bars and another pending order to reenter the GBPUSD long (closed above s/r & bearish momentum exhausted) using a single outside bar (after i let emotions to run my trade of the bullish 2-day bar from last week --- canceling the order b/c a fake pin bar appeared --- groan). i made the same mistake w/ the EURUSD and i will review this in a separate post b/c it will definitely be something i will need to study over and over again.

as stated in the first posts, discipline has been my downfall in trading ... this post outlines a sequence of PA where my lack of discipline interfered w/ potential profit-taking (in demo terms ... pip-making). it will also outline my ADX strategy for assessing exhaustion.

DRAGONFLY DOJI ON 9/11/08

i didn't trade off this price action bar, but the next day, i did some research into this bar pattern and learned that in candlestick world it signals a "turning point" in the market ... this gave me a lot of confidence for the 2-day outside bar trade (see below).

2-DAY OUTSIDE BAR FORMED 9/11/08 & 9/12/08

i entered this trade using the 2 bars as the range for entry and stop loss. it was kind of up and down, but under my rules, i was going to see a trade through using my entry/exit rules, not my emotion ... then i saw the pin bar on 9/18/08 ... poof all of my rules out the window. b/c i didn't have my rules and trading plan written down (you know ... they were all "upstairs" tap tap tap), i used emotion to adjust my stop loss on the existing long trade (moving SL to the break of the low of the pin bar). now, im out of the profitable trade and sweating a bad, unprofitable one (see below).

PIN BAR OF 9/18/08

quickly walking thru my criteria of whether the pin bar in and of itself is tradeable ... 1) did not close w/in lower 25% of the bar (close call here so will see if 3rd criteria met); 2) open is w/in lower 50% of the bar; 3) nose is sticking out more than 50% past the left eye (1st criteria is forgiven)

price action signaling continuation of the present bearish sentiment (weekly under monthly) ... but, is the momentum exhausted? yes! why? the ADX is falling after rising past 50 level. that's all there is ... no trade. (if i still wasn't convinced, the DM- (bears) fell below 25 level and the DM+ (bulls) was rising and crossed the 15 level (breakout potential indicated).

p.s. ... i do not rely on the 4th criteria when the pin signals a continuation move, but 4th criteria is interesting here: nose bounced through resistance, BUT ... could not close below resistance (either 4365 or 4310) ... instead it's sandwiched in there at 4348!!!

other note to self ... shorting this was contrary to general fundamental shift that was occurring at the time.

and another note to self: this pin bar followed a 2nd outside bullish bar ...

was this pin tradeable under my rules? NO!! not even a close call for me. so instead of locking in 40+ pips at this stage of my trailing stop system, i ended up negative on the outside bar trade and im negative on this one ... kicking myself just a little ... the learning continues.:nerd:

2-day reversal patterns are usually true to their name ... that is, they typically indicate a reversal ... therefore, when trading them with the trend, ADX momentum analysis MUST BE DONE ...

NZDUSD (1st chart)
2-day reversal pattern on the NZDUSD from 9/11 & 9/12. was counter-trend, met my rules for pattern formation (25% & 50%) ... i have now locked in 30 pips and counting. okay, good for me, but then ....

GBPJPY (2nd chart)
2-day reversal pattern on GBPJPY from 9/12 & 9/15, but signaled a continued price move in direction of trend/sentiment. therefore, momentum/exhaustion analysis was required, ... but not done ... had i followed my trading rules/plan, i would have analyzed exhaustion potential and i would not have taken this trade and i would not have lost 2% of my demo trading account ...

briefly, at the time i was deciding to enter the market or not, it was clearly shown the ADX had risen above 60 level AND had begun to fall ... no brainer ... no trade. ugggh (DM- also showed bears were losing strength and bulls were gaining, but truly superfluous in light of the ADX).

thank you ghous! [see j16 chart thread]

this bearish pin bar meets all 4 of my criteria: 1) close beyond 25%; 2) open beyond 50%; 3) nose beyond 50%; 4) price through weekly resistance and back down closing below it ... this is counter-trend so no exhaustion analysis required. (regardless, ADX shows bulls are exhausted and losing strength ... good stuff!!) --- fyi, the prior bullish pin did not meet my criteria for entry ...

going for this one. good luck me (and ghous!) ...

p.s. comparative swissy fundamentals to US make this a nice wager win or lose.

entered an order for the EURUSD bullish pin bar which has been triggered. i followed my trading rules as follows: 1) close w/in 25%; 2) open w/in 50%; 3) nose rule is not met (but not mandatory if 4th criteria met); 4) price bounced through support and closed above it. t/f can trade counter-trend & exhaustion not relevant, but is present (see prior posts). also, today the DM's should close as crossed over, so if price breaches today's high (EPR), my trade should really shape up nicely (aside from my blunder --- see paragraph below)

this got me back into the good trade off the 2-day bullish outside bar i was in prior to me playing the bearish pin (like a real bonehead) - phew! [but, i just screwed up creating a limit order for the 1:1 order at 4961, sooo i won't be collecting 1% at 1:1 as i hit "market" tab by mistake ... UGGGH --- i've added a preference on oanda to confirm reversal orders, hopefully i will pay attention!! --- double UGGGH. okay, no worries, i am still trailing the remaining 1% and another lesson learned. thank god for demo trading]

p.s. my GBPUSD, USDCHF, USDCAD, & NZDUSD trades are all going smashingly. [note to self, update status at closing bell]

p.p.s. my USDJPY & EURAUD orders did not trigger so they were canceled.

originally, i had pending orders placed on the GBPCHF & EURCHF (2-day outside bars). after ghous pointed out the potential USDCHF trade, i decided to cancel my pending orders on them b/c the USDCHF trade seemed better b/c 1) swissy fundamentals stronger than EUR, GBP, or CHF and t/f i would be trading against that sentiment and regardless and 2) i didn't want to trade against the correlation (CHF bulllish against one, but bearish against the others). turns out, neither the EURCHF or GBPCHF orders would have been triggered.

here's one of those pins i keep looking at and wondering why i didn't trade it so im posting it here so i can stop re-re-re-re-analyzing why!

1) didn't close w/in 25% (forgiven b/c criteria 3 is met); open w/ 50%; 3) nose beyond 50% of left eye; 4) didn't bounce off or through weekly support (and couldn't even close above resistance!) ... since the 4th criteria isn't met, this can only be traded w/ the sentiment -- which is bearish. this is not a bearish pin ... result = NO TRADE. also, would be against my current bullishness on the CAD against the USD. my entry system would not have covered me on this one and would presently be in the red had i traded it anyway despite the rules not being met.

EURGBP: 2-day bullish outside bar
EURCHF: IB (short)
GBPCHF: RP (short)
USDJPY: RP (short)

waiting for closing bell.

RP indicating further price action short. it is w/ the present trend/sentiment. exhaustion analysis: ADX is technically falling, but not from 40/50/60 levels; DM- is above 20; DM+ is not below 10, but it is falling. my conclusion -- momentum is not exhausted (& bears are not as strong as, but stronger than, bulls).

s/r analysis (bonus) ... my rules for entry put me into this trade after price breaks through 10495 support level ... after that, next support level at 10376 --- which if it can break and close below that level, will give me a breakeven trade and i'll be freerolling. US gov't goofy socialist fundamentals create resistance for price to go up. all in all, i like this trade. (good luck to me)

(cut and paste from my chat w/ trading partner)

EURCHF: play IB's w/ the sentiment which is short; also, this is an RP (shy 2 pips at present -- and price is testing 5876) which is always another good sign for this pair to go short ... PA signals short --- momentum is not exhausted for the shorts, corresponds w/ the swissy traveling short; bears still have the trend on their side and the bulls have gained some strength, but haven't taken over. furthermore, my entry short will put me in only once price has broken through weekly support at 5825, which then provides clear sailing for a while. (good luck to me)

dg just pointed out price action in the hourly which is setting up nicely and correspondingly w/ the daily clues; to wit, price just broke thru demark supply line (short) and also, there was some good indications on the ADX w/ the momentum just about to break thru the bull line.

GBPCHF: similar RP pattern, but bear momentum is shot and this runs contrary to a pretty strong bullish pound sentiment. passing for these reasons -- although ADX will close giving a Wilder crossover signal ... if it runs down ... i guess i just have to rely on my "so what" rule.

Here are some articles you might want to read, just in case. (Whenever I find reprints from magazines like "Active Trader" and "Futures," I pass
them on to members of the forum.)

I hope they're useful.

thank you so much!!! i just glanced at them and plan to read them when i get back from my hike today ...

cheers and good trading.

p.s. i too love that post from Peter Crown.

(copy paste from chat w/ dg)

2-day bullish outside bar; price bounced right off support level and may or may not close above monthly pivot. bullish trend did enter a slowdown, but the bears couldn't retain their momentum. bulls are attempting to enter a breakout. this isn't the most compelling of trades, but it does fit the plan. euro isn't the strongest out there right now, but euro policy seems better than the current stance from UK on their ideas (or not to strengthen pound).

dg just pointed out the weekly ... and boy, i am not convinced to enter the market long here after looking at that chart.

typically, i love these 2-day outside bars, but the EURGBP can be a tricky little demon and once i enter this trade, i am going to run right into weekly resistance which won't be swell since my trailing stop method won't get my trade to break even until it breaks through these areas of resistance (8033 was a price level that continued to be tested)

im breaking the rules and passing on this trade ... following a philosophy found in ghous's signature, that im better off to be wishing i was in a trade, than wishing i was out of a bad one (or something like that). [search for ghous profile if interested ...]

USDCHF: trailed stop; 34 pips profit locked in on 2% risked
EURUSD: trailed stop; 42 pips profit locked in on 1% remaining (due to operator error ... )
USDCAD: trailed stop; 29 pips profit locked in on 2% risked
GBPUSD: trailed stop to 50% of range; risk is reduced to 1%
NZDUSD: price didn't close higher than friday ... no change in TSL

came across this too ... posting it here so i remember to read it.

http://www.bkforexadvisor.com/freere...ort_index.aspx