Compounding my Wealth using Simple Price Action Trading on Daily Charts

What's in it for you?
A solid price action trading method including trade entry, stoploss and target profit. This method is an excellent winning edge which when combined with discipline gives amazing results. For evidence, check out the performance graph above.

Use this thread to develop your own trading skills and mindset, so that you can be profitable in the long run. This is not a Signal service so make sure you dont just copy my trades but actually learn from it and find your own trades. You wont find many other places where someone is sharing all the nuts and bolts of the trade including entries and exits, methodology and also full trade history. So all cards are on the table and there is nothing to hide. All this for FREE - not a cent required from your side.

So what do I expect in return?

 

1. Recognition – When you are impressed by my performance, make sure you vouch for me or put a note on the thread with positive comments. It will be most appreciated. I want to work for a bank or hedge fund trading currency. So when I go for that interview for a trader's role, this forex thread and my account performance will become my tools for success.
   
2. Feedback – Would love to improve my skills and any good tips/guidance from the seniors are welcome.
   
3. Participation – C'mon traders! we are all here to learn and grow as traders. So dont be a silent observer, participate and lets help each other. One of the best mantras in life is “You can get anything you want in life when you help enough people to get what they want”. This philosophy is the driving force behind me starting this thread.

******The above text was added on 20-Jul-11, original text is as under**********

What will this thread have?
My thoughts on trades that I take daily, more importantly the emotions I experience during those trades.

When setting any tasks or goals for yourself, the most important question is "WHY?". WHY tells you about the incentive and benefits of doing something. As long as you have good answers for your WHY questions, other parts of the puzzle such as HOW, WHEN, WHERE AND WHO will start showing up automatically. Your mind will work out any puzzle as long as it has strong incentive to do so. So here's my series of WHY questions.

Why did I start this thread?

1. To track my trades
2. Learn from the pros
3. Have a real public record of my progress.
4. Help fellow traders

Why do I need Wealth?

1. I believe in living life to the fullest
2. I believe in helping each and every person that comes across my path
3. I enjoy modern comforts
4. Above all I am passionate about making sure that my family is happy, healthy and has everything that they need.

Now money is not the answer to every problem in this world, but it sure can solve a majority of problems. Money can certainly provide me with everything I mentioned above. So Money and building wealth are important.... very important.

Why use Trading to build Wealth?
Because I am building Wealth using Compound Interest Principles
One of the major "AHA!" moments in my life was when I learnt the principles of compounding interest and how it works against the people who do not understand it and how it works for people who know how to take advantage of it. I happen to be the later one. Following is the formula I am using for Compounding Wealth.
Total Accumulated Wealth = C x [POWER(1 + P); N]
C: Starting Capital
P: Annual Profit Percentage
N: Number of years to "retirement age" of 65

There were 2 out of the 3 variables that I have very little influence on; I can not increase my starting capital right now and I can not change the number of years available to me.

The only part I can control right now is P, the Annual Profit Percentage. So I figured that the more I increase the P, the more Wealth I accumulate. So I have gone about looking for answers on how to increase the Annual Profit Percentage. And the best way for me to do it is by Trading well and making consistent profits.

Why Price Action?
I believe in using one's natural talents and then building a skill based on those talents. Let me explain the difference between Talent and Skill first, A Talent is something you are born with – a natural ability, a skill is something that is developed through repeated practice, discipline and perseverance. Without a doubt in my mind, skill is much much more important than talent. I am a man of many talents, however not many skills as I found out later. One of my talents is a good brain that enjoys analysis. Therefore I decided to use this talent and develop just 1 skill that will help me achieve my ultimate goal of living an abundant life and spreading abundance around. After trying a number of systems that didn't work, I finally discovered trading method that required analytical skills, was logical and worked for me. That method for me is Price Action analysis of charts.

Why Forex?
Technical Analysis (including but not limited to Price Action) works best in Forex. Period.

Why Daily Charts?

1. I want to live an abundant life.
2. I believe in spending quality time with family.
3. I believe in keeping a daytime job to pay bills, so that money in my Wealth Compounding account is not touched and it keeps compounding.
4. And most importantly, Price Action works best on Daily charts for me.

In summary, Daily charts suit my lifestyle, my personality and my future goals.

Hope you also enjoy this thread as much as I enjoy writing it. Your feedback is most welcome as long as it is constructive towards me and all members participating on this thread.



IMPORTANT: Any information presented on this thread is for general education and learning purposes ONLY. It does not take into account your personal circumstances, please do not trade or invest based solely on this information. By Viewing any material or using the information on this thread, you agree that this is general education material and you will not hold any person or entity responsible for loss or damages resulting from the content or general advice provided here. Futures, options, and spot currency trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in any material on this tread. The past performance of any trading system or methodology is not necessarily indicative of future results.

Sounds like a good plan,Best of luck!

Thanks DATrader ... do visit time and again

Noticed we live in the same city so shall listen with some interest as its good to see some fellow Melbournians

My Trading Rules:

1. Trade on daily charts
2. Identify strong Support/Resistance (S/R) areas
3. Trade only in the Trend direction (use 8 and 21 EMA as 'guide')
4. Wait for pinbars to form in confluence with S/R and trend
5. Identify the next major S/R zone
6. Check if entering this setup will give be reward:risk ratio (RRR) of atleast 2:1 or 3:1 or more
7. StopLoss (SL) is placed 5pips below the wick for going long exactly opposite for going short
8. Profit target just before the next S/R area
9. Once I am in the trade, I dont adjust my trades at all, I let the price action do its magic.
10. I am happy to take a few losses along the way, because I know I have a defined edge and my account is profitable in the long run

Logic behind my "Rules"
Two important factors for any trading method to be profitable are:

1. Probability of Win
2. Reward:Risk Ratio

Both these factors usually have an inverse relationship. Generally speaking, when you aim for higher RRR your probability of a winning trade decreases and vice versa for low RRR. So my goal has been to find an edge that gives me at least 50% probability of a win while keeping at least 2:1 or 3:1 RRR. So when I trade in the direction of the trend and I have strong pinbars in S/R region,
my belief is that atleast 50% of the time, the price will not go beyond the wick in the S/R region.

Keep in mind that a Pinbar was formed because price had gone beyond S/R region once and then reversed back within S/R region, therefore forming a pin bar with long wick. So my edge is simple, I believe price wont go back beyond the wick. Thats where I will have my StopLoss.

Once that is established, I look for the nearest strong S/R region that will be coming in the way of my trade. When in the trade I want to get out just before this S/R region arrives, so that I can take my profits safely and easily. So my Profit Target is set just before the next S/R region.

You should note that so far I have not talked about ENTRY, only discussed StopLoss and ProfitTarget. My Edge is that I believe atleast 50% of the time, my trades will hit my Target profit. All I now need is a RRR of 2:1 or 3:1 to ensure I am profitable. So my entry is simply to measure distance between my SL and TP. I then divide that distance by 3 if I am looking for 2 to 1 RRR and by 4 if I am looking for 3:1 RRR. This number is my distance from my stoploss and thats how I define my entry. If there is enough distance between SL and entry to ensure my trade has enough breathing room and still achieve a 2:1 or 3:1 RRR, then I am in.

As most senior traders will tell you that the biggest enemy for a trader is his/her emotion. They will also tell you that people get emotional once they get in the trade and risk real money. I believe that my edge is simply knowing that my SL wont be hit atleast 50% of the time, that is the reason why I am in the trade. So once I am in it, I dont adjust it. This way I still keep my edge and avoid my biggest enemy – Emotion.

Nice one Nollej... hope you find my contributions useful

and yes part of the reason I have on FF is that I enjoy friendship with like-minded individuals who share the same passion...

Interesting thread, and nice to read your honest reasons for trading, which are very similar to my own.

I don't see there being many opportunities based on your trade criteria, main problem I would guess is finding a pin where the next opposing SR level is 2R+ away from entry. How many trades do you plan on taking monthly?

Anyhow, thanks for starting the thread and I'll be following with interest.

All the best,
SG

Mate, My main focus is to take very good quality trades. You are right that there wont be as many, because my style requires a fair bit of patience. Mate If I take 4 to 5 trades each month, that is enough for me. I have uploaded my DEMO account results in my profile, you may want to check it out. I operate a real account as well which has the exact same trades, but different account balance. I am very choosy about trades, but it saves me from trouble ie draw downs.

Thanks for comments buddy, keep them coming. Thats how I will learn by answering questions similar to yours.

Cheers
JMo

Below is a good example of trade setups that I like.

How do you adjust the SL?

100m,
I dont adjust my stoplosses, have a read at my trading rules and logic in the tread above to know my reasons...

Cheers
JMo

I see,

what will you do after it's hit? will you continue to open a new trade after the prices resume the direction before last direction or continuing the last direction?

When it's hit again, how many hitting can you tolerate? Because I can't find any logic reason why you believe the number of 50%.

Good stuff... best of luck to you.

If it hits TP, I make 2:1, If it hits SL then I lost 1. Once either of them are hit, do nothing, just wait for another setup and do the same again. there is no logic in 50% winning expectations, its the minimum probability I expect based on my experience in selecting the winning trades. My actual probability is a bit better than 50%, you will see in the coming weeks when I discuss each trade as it happens.

Thanks MR. T

Good! Looking forward for more trading charts to learn 8/21 MAs and PA.

Heres a very good setup, I believe its a very high probability trade.
Why?
A pinbar rejecting-

1. Resistance at 1.6100 (big round number as well)
2. also formed in the "value" area between 8 and 21 EMA AND
3. rejecting the highs of previous 2 candles

1. My SL is 5 pips above the high at 1.6144
2. My target is around the next support area at 1.5937
3. Difference between the SL and TP is 207 pips
4. I am aiming for 2:1 RRR, so 297 pips divide by 3 is 69 pips
5. 69 pips from SL is 1.6075, thats my ENTRY

Plz be careful using my ideas as my trading profile may be very different to yours.

Very good setup, Thx

My Questions are:

1. What's your next move if your target is not achieved? Suppose: just 20 pips

2. If the prices move beyond your TP, will you still close and exit from your trade? Suppose: 320 pips