Three-toed Sloth trading

Here's a simple plan for an unusual pair, USDSGD:

For this pair and the 15 min timeframe, I consider an S/R level to be broken if price has moved at least 14 pips beyond that level. If price reverses at least 14 pips near that level, then I consider that the level has held. For the time being, price hasn't moved 14 pips in any direction. If it moves 14 pips above the level, then I will wait for a retracement near 1.2569 and I will enter long with stop loss 14 pips. The target will be an S/R level not visible in this chart, 1.2610.

If, on the other hand, price moves below the S/R level 14 pips, then I will consider that the level has held and I will wait for a retracement close to that S/R in order to go short, with stop loss just above the previous day high. In that case the target could be the confluence of S/R level and previous week low at 1.2522, or the older S/R level at 1.2529 (on my charts, dotted levels have a lighter shade of gray the more recent they are, and a darker shade of gray the older they are).

There are many such setups in each pair and even if all the work is done by the indicator, I can't (and shouldn't) take them all. I have many ideas for refining and standardizing the selection of a trade.

I am pretty impressed by the performance of the trendlines plotted by my indi on the EURUSD today. Of course the main pivotal level for today was the 1.3233 line. And since the market was so choppy, many people didn't trade the EURUSD at all or suffered losses trading inside the war zone. But what was the risk of going long in the small 3-pip zone defined by 1.3217 and 1.3214 ? One could also wait and see the behaviour in this area and only trade after those two levels had proven their strength. With very small SL too. 7 pips would be enough (that's hindsight of course, but 20 pips would be much more than enough and that was a very rational SL).

BTW, nothing magic about these levels. They were the swing highs formed on 2012.01.31 15:30 GMT and 2012.02.02 12:15 GMT.

I think I have found an effective way to automatically plot levels, and this shows especially powerfully in some charts. For example, this 4H AUDCAD, where simply trading the touch of the two S/R levels with the suggested SL of 35 pips and a R/R of 1:1, would result in 8 wins and 2 losses, about 200 pips in one month just from one timeframe of one pair. Yeah, I know this is hindsight, but I have repeatedly seen that S/R levels are either respected in a certain period of time, or not. If you see they are respected, you can trade them again and again. If they fail, you just stay away.

I know this may sound like I'm trying to sell my indi but I'm not. I will not be selling any indicators, expert advisors, signals, teaching, services, seminars, books, videos, phone calls, video conferences, chat sessions or amazing bodybuilding secret programs

Having tried many systems and having looked at different ways of evaluating charts, I recognized many patterns in today's EURUSD. I was just glancing at the charts today because I was very busy, but even so I could see many "setups": Triangles been broken, breakouts from trendlines, enticing candle patterns, touches of MAs, pennants, wedges, butterflies, Ws, Ms, Elliot waves, pitchforks, etc. And most of them would have failed. Add to that the various news (mostly bearish for the euro, but some bullish too). The speculation about the fundamentals. The "inside" information about options expiring. The european stocks falling. Etc.

All at a time when price was just screaming ONLY ONE thing: "I am unwilling to go below 1.3215". Again and again. Simple as that.

It looks like I have well defined entries, targets and stop losses. I will further experiment with two different methods of entry: The first one will be more complicated, with higher risk and lower reward, but I expect it to have better success ratio. The second one will be simpler, worse success ratio, but much higher reward/risk. In the spirit of the second, simplest method of entry, I just got short in USDCHF with a stop loss of only 8 pips (at 0.9077, above the S/R level of 0.9065) and take profit to be determined later if everything goes well. That's a risky entry since the 0.9065 level hasn't been broken yet according to my rules, but we'll see.

I have also added some information for each S/R level (visible in the tooltip) which shows how many times in the past that level has touched body candles and how many times it has touched wicks. For example, the 1.0687 S/R level of the AUDUSD that has just been broken, so far has touched 43 bodies and 36 wicks. A very rough measure of how often it has been pierced and how often it has worked effectively as S/R.

I've been here in FF for a little more than 2 years, but I was mainly reading and posting in specific threads. Lately I've been taking a look at several forum areas and I've been astonished by many things, however one thing strikes me the most: The number of people who actually believe that successful traders would set up sites and sell education and organize seminars. It only takes simple math to show that a simple 20 pips/day would make someone soon a millionaire. Even if at a more advanced stage that person would face liquidity problems, he would be still having more than enough money, certainly much more than what any number of students would give him.

I can understand someone selling and teaching a method, admitting that himself can't benefit from it because of discipline and character problems etc.

I can understand someone selling an indicator or an expert advisor, with the premise that someone else might find it useful.

I can understand successful traders that want to help others for free.

I can also understand if a very successful trader would require a fee in order to help others. Many times, when people pay for something, are more serious about it. No trolls will join and the discussion can be more focused. BUT! That fee should NOT go in the pockets of the millionnaire instructor! He doesn't need it. He SHOULND'T need it. He should instead say "hey guys, all I want for you in order to join is to donate a certain amount to any among these well-known and respected charities, and then I will contact them and verify your donation".

But what I can't understand, is that some very rich guys would spend so much time in "helping others" for money, organizing seminars, writing books, preparing a lot of content for the web, etc. Those are not full-time traders. Those are full-time salesmen.

Opened another position with small stop loss: Short CADJPY @ 80.54 with 10 pips SL. The idea is to hedge my previous USDCHF short which has been pretty much dead for hours.

USDCHF hit SL for -8 pips. At last, after hours and hours it was a relief.
At the same time I closed the CADJPY for +19, so the hedging proved successful. One of them had to go down, it would be extremely unusual if both went up.

I may try shorting the USDCHF again at 0.9088, with very small SL as well.

Well, let's see if the pair will honor its history. I'm short at 1.0671, with 13 pips stop loss and take profit at 1.0625.

Taking another hedge trade, short EURAUD @ 1.2483 with 12 pips stop loss. Hopefully one between EURAUD and AUDCAD will hit the stop loss and the other the take profit. That's the plan, at least.

Well, the plan didn't work out. It was very good in theory, just 4 pips short. My stop loss in AUDCAD was hit, and EURAUD did reverse like I was expecting, only that when it reversed it had already hit my SL. By 4 pips.

I saw the same thing happen earlier with USDCHF: It hit my stop loss by 2 pips, and then went my way for 60 pips and is still running. At the time I said I was looking for an opportunity to re-short it, but that opportunity didn't come.

On the positive side of things, I re-entered short in EURAUD as soon as it came back down the 1.2476 level, I collected the loss from the AUDCAD trade and I believe I will also collect the loss from the EURAUD. So the sum of the day will be slightly positive. However that trade was "gut feeling" and this is not what I'm after here. I'm trying to adhere to strict rules that I can later program into an EA. So far I am very satisfied with my S/R entry levels, they couldn't be better. And the limits I have set in order to deem a level as "broken" or "intact", work very well. I also think that the exact entry point is well placed near the high/low that price made last time it visited that level. I now need to optimize the stop loss and set some re-entry rules for special cases.

I've almost finished the trendline-drawing function in my indicator and it's pretty good. It draws 1 bullish and one bearish trendline on every chart - if it can find them. Not only it will help the automatic part of the trading, I also expect that it will also make the manual trading much more objective.

I've been fiddling with the settings of my indicator for automatic plotting of S/R levels, and I think I have tweaked it to my personal preferences. I wouldn't (and couldn't) have drawn the S/R levels better myself. It's really encouranging seeing that in all pairs, price does react to levels drawn by a computer program.

Basically there are 3 major (and many minor) settings: The first one decides how prominent the levels should be in order to be plotted, the second one decides how recent or old the levels have to be, and the third decides whether wicks or close prices (or both) will be used. These values are then further processed automatically according to the timeframe and the pair. By tweaking them, it is possible to have a screen choke-full of S/R lines or have no S/R lines at all, so it is obvious that a balance has to be found. How high a peak has to be and how far in the past must have happened (depending on the timeframe) ?

Anyway, having finished with both the programming and the tweaking of the settings, I have proceeded to further testing by only placing limit/stop orders (no market orders at all). The stop loss is also predetermined (usually no more than 10-15 pips for S/R levels that range from M15 up to D1). The take profit is still discretionary to a large degree - most of the times it's about double the stop loss, but I may have trades with 1:1 R/R, or let trades run for longer (although strictly intraday for the time being).

So far it's going very well. I'm thinking about opening a live account and linking it to this journal. We'll see.

Trading S/R levels has many aspects that are confusing:

How do you decide whether to trade a reversal or a breakout at a specific level ? If price has moved on the other side of the level, how far it must have gone before you consider the level to be "broken" and start looking for retracements in order to follow the trend ? Of course this also depends on the timeframe: 50 pips will definitely shatter a M15 level but will be nothing for a W1 level.

Where exactly do you enter and what should the stop loss be ? Let's say that your analysis shows that a level will probably hold and so you decide to trade a reversal when price gets there. But if you decide to trade when price hits that level exactly, you may see price reversing 10 pips before it reaches the level. And if you decide to have a stop loss 20 pips above the level, you may see your stop loss being hit and then price going back to the direction you predicted. And if you try to enter 20 pips before the level and have a stop loss 30 pips beyond the level, then you may see price going up and down between your entry and you stop loss and taking you out many times. How does one deal with all this ?

I think the correct approach is to decide that you will have some losses where price will not favour you for just a pip or two, and this is unavoidable no matter what you will do. But in any case, it pays to plan your trade in advance, keep a relatively small stop loss and pay attention to how price has reacted in the recent past at your levels of interest. If it has reversed at price X, then plan on a trade at or very close to X. Not X-10 or X+10. And take profit well before next S/R level.

Also note this: Many times you may not be able to predict with good accuracy how price will react when it gets to a certain level, but you can predict with much greater accuracy that price WILL get there. You don't have to trade only at certain S/R levels, sometimes it is more safe to trade as price is heading towards those levels.

Here you are......
I see that you have been busy building something again. Good luck my friend.

Καλή τύχη με το σύστημα.

Thanks I notice that you never stop exploring new things yourself, even though you are already very successful. That's the spirit that will keep you ahead!

I'm very happy with the way my system is evolving, it's getting more and more mechanical. Lately I've been testing it on the daily charts. Larger SL and TP, but I can trade any pair without worrying about the spread. EURRUB is trending pretty well

(Έχει γεμίσει Έλληνες το FF... Όπως πάνε τα πράγματα στη χώρα μας, σε λίγο όλοι θα παίζουν forex )

Long time no see! Not much has changed, I'm still trading basically S/R with several twists. At the moment I have two trades open, EURGBP long (sl moved to be) and USDCHF long (about 80 pips profit locked).

Meanwhile, in the exotics department, the continued USD strength means that any longish-term trade of a USD pair will most probably have to tolerate negative swap. Of course we can go really tropical exotic, deep sun tan and all, and start looking at really weird pairs like AUDPLN (which could have potential if AUD recovers).

First column is today's relative strength, 2nd column is 5-day strength, 3rd column is 15-day strength, 4th column is 75-day strength.

EURGBP came back and hit my stoploss. Good thing I had it placed at BE, it's not like you can trust this whore of currencies, EUR, to show any character. I wouldn't be surprised if it goes back up now.

Guess who's short in GBPZAR. SL too big for my liking but this pair does move a lot. Probably the most volatile pair ? But at the same time it does trend well and steadily. As soon as I entered, price moved 100 pips against me within an hour. It took a lot of cussing to get it back down and I'm still not comfortable. But what can I say, this pair is seductive. It makes me think of the Boer Wars.

So now I'm

USDCHF -> long
GBPZAR -> short

I may take one more trade later, we'll see.

A couple of new entries according to the rules:

Closed positions
NZDJPY long: -20 pips

Open positions
USDCHF long: +200 pips
NZDJPY long: +2 pips
EURNZD short: +26 pips
GBPZAR short: -129 pips


The GBPZAR trade isn't going very well and since it was something of an "extra" anyway, I broke my own rule and moved the SL a little further so that I can be protected from one extra S/R level and the trendline. So far it looks like it worked and price has respected the trendline and the 17.875 level, but seeing the continued ZAR weakness I'm not even sure I should keep the trade if it returns back to BE. We'll see. If it does return to the opening price, I'll probably try to turn it into a "regular" trade (that is, much lower risk). Assuming of course I find a proper sl placement.