Low Risk, High Reward Trading Experiment

Hi AndyDoc

You can breath now

I wanted to get the signal out while the price was at the entry price, because it probably wouldn't stay there for long. I just noticed this opportunity, and it seemed to pass all tests. It's not a great reward : risk ratio, but not too bad either.

Thanks

Note: adjust stop on this trade to 222.06

We were correct earlier in our prediction when we stated "an upwards second wave should carry the price back up to 222.00 to 222.10" , as the price rose to 222.02.

Technically, our entry price should have been the current price which is 221.88. So we entered this trade prematurely at 221.67, which means that the stop has to be higher, and the risk higher.

Wednesday September 27 at 6:15 ET

Trade Signal #195 Sell GBP/JPY at 221.67

Stop is 221.92

Target is 217.90

Risk is 34 pips

Reward is 368 pips

Reward : Risk ratio is 10.8 to 1

For research purposes only.

We stated earlier this morning: "Note that the price of GBP/JPY rose this morning to a high of 221.78, and then proceeded down to a recent interim low of 221.41. We expect the price to proceed somewhat further down to about 221.35, then an upwards second wave should carry the price back up to 222.00 to 222.10, which will provide a second entry opportunity for a short trade near to the recent high. "

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itme,
Do you have any signals for the AUD/JPY?
Thanks alot.
monarch

Hi Monarch,

No, I have been ignoring that currency pair. I am trying to concentrate on just a few, and do a better job of analysing them. There are so many currency pairs, and so little time. If you see a potential endpoint of a trend, or a currency pair that has been rangebound for a week or more, then please let me know.

It looks like AUD/JPY is about to start the fifth wave downwards of a fifth wave. The dregs of a trend. Target is not much below 87.00

I appreciate your quick reply.

Wednesday September 27 at 7:15 ET

Re-entry opportunity Trade Signal #183C Sell GBP/USD at 1.8913

Stop is 1.8954

Target #1 is 1.8720
Target #2 is 1.8580
Target #3 is 1.8500

Risk is 44 pips

Reward is 190 / 330 / 410 pips

Reward : Risk ratio is 4.3 / 7.5 / 9.3 to 1

For research purposes only.

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Previous trade signal:

Friday September 22 at 4:45 ET

Trade Signal #183B Sell GBP/USD at 1.9056

Stop is 1.9087

Target #1 is 1.8700
Target #2 is 1.8580
Target #3 is 1.8500

Risk is 34 pips

Reward is 353 / 473 / 553 pips

Reward : Risk ratio is 10.4 / 13.9 / 16.3 to 1

For research purposes only.

Itme,

Would you then recommend lowering the stop on the original GBPUSD to 1.8954 thus locking in a nice bit of early profit?

Andy

Wednesday September 27 at 13:30 ET

Trade Signal #194 Sell EUR/JPY at 148.92 seemed like a good trade at the time, and there was a viable wave count to support a finished uptrend, however, we bent our own rules.

The most likely reversal point was (and is) 149.37 (which was just met) and a possible reversal point is at 149.09. So the trade recommendation below does not comply with our basic trend reversal analysis system. The best and most conservative play would have been to set the entry level at 149.37, or at least 149.09. The indicated sell price of 148.92 is too early, and the stop, in consideration of all the above, needs to be adjusted to 149.53
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Previous trade signal:

Wednesday September 27 at 5:30 ET

Trade Signal #194 Sell EUR/JPY at 148.92
Stop is 149.32
Target #1 is 147.65
Risk is 43 pips
Reward is 125 pips
Reward : Risk Ratio is 2.9 to 1

For research purposes only.

Hi Andy,

Regarding your question:

" Would you then recommend lowering the stop on the original GBP/USD to 1.8954 thus locking in a nice bit of early profit?"

In the terms of reference we are currently operating under, that is not something that we would undertake at this time. That doesn't mean that it wouldn't be an excellent idea. But if we modified the original trade by moving the stop forward, then we could prevent it from realising its full potential by getting stopped out prematurely. The re-entry trade could fail, but we don't want to induce an unecessary failure in the original short GBP/USD trade as well due to a spike caused by an announcement or other factor that temporarily caused a retracement of this trend.

To simplify our challenge, we are looking for the combinations of entry price, stop and target that will produce winning trades. The idea of adjusting stops more than a few pips is quite problematic, and we are giving it alot of thought. Adjusting stops forward to trail the profits is a complex issue that is fraught with risk. It implies that the target may not be hit. We believe in our targets, and want to hit them. Thus exiting the trade before the target has been met can only reduce the effectiveness of our trading system.

We have reason to believe that it is possible to generate at least 50% winning trade formulas as fixed formulas with reward : risk ratios of at least 3 : 1. This would constitute an effective trading system. Further enhancement would improve its performance. If we add the complexity of trailing stops, then there will be alot more study and analysis to determine whether this modification will either enhance or degrade performance of the trading system. Our focus has always been on determing the endpoints of the trends. Determining the precise path between endpoints is another and possibly more complex task that we have not studied yet, so we don't really know whether adjusting stops could improve system performance.

Wednesday September 27 at 14:45 ET

Upon further consideration we believe that the current price of 105.80 is a possible reversal point for this upwards trend. Thus:

Exit Trade Signal #189 Buy CAD/JPY at market price of 105.80

This gives us a successful trade with 202 pips of profit and a reward : risk ratio of 4.4 to 1

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Previous trade signal:

Thursday September 21 at 4:45 ET

According to our trading system there was a very good buy opportunity on CAD/JPY when it fell to 103.68. The target of this trade is 106.25, and possibly 106.75. For this to happen, USD/JPY must rise strongly, or USD/CAD must fall strongly. We didn't notice it at the time, but we will record it here retroactively in order to see how it progresses and to test our system.

Trade Signal #189 Buy CAD/JPY at 103.68
Stop is 103.32
Target #1 is 106.25
Target #2 is 106.75
Risk is 46 pips
Reward is 247 / 297 pips
Reward : Risk Ratio is 5.4 / 6.5 to 1

For research purposes only.

Hi Itme, I just have a question. When do you think the downtrend in GBP/JPY will take place?

Thanks.

Pablo

Wednesday September 27 at 22:30 ET

Trade Signal #195 Sell GBP/JPY at 221.67 <hr style="color: rgb(209, 209, 225);" size="1">Note: adjust stop on this trade again, this time to to 222.47

At 6:20 ET today we adjusted the stop to 222.06. According to the most recent configuration, the stop needs to be adjusted upwards again. The price will rise one more time, probably to 222.32, then start going down strongly again.

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Previous trade signal:

We were correct earlier in our prediction when we stated "an upwards second wave should carry the price back up to 222.00 to 222.10" , as the price rose to 222.02.

Technically, our entry price should have been the current price which is 221.88. So we entered this trade prematurely at 221.67, which means that the stop has to be higher, and the risk higher.

Wednesday September 27 at 6:15 ET

Trade Signal #195 Sell GBP/JPY at 221.67
Stop is 221.92
Target is 217.90
Risk is 34 pips
Reward is 368 pips
Reward : Risk ratio is 10.8 to 1

For research purposes only.

We stated earlier this morning: "Note that the price of GBP/JPY rose this morning to a high of 221.78, and then proceeded down to a recent interim low of 221.41. We expect the price to proceed somewhat further down to about 221.35, then an upwards second wave should carry the price back up to 222.00 to 222.10, which will provide a second entry opportunity for a short trade near to the recent high. "

Wednesday September 27 at 23:00 ET

Adjust stop Trade Signal #194 Sell EUR/JPY to 149.81 <hr style="color: rgb(209, 209, 225);" size="1"> <!-- / icon and title --> <!-- message -->Previous trade signals:

Wednesday September 27 at 13:30 ET

Trade Signal #194 Sell EUR/JPY at 148.92 seemed like a good trade at the time, and there was a viable wave count to support a finished uptrend, however, we bent our own rules.

The most likely reversal point was (and is) 149.37 (which was just met) and a possible reversal point is at 149.09. So the trade recommendation below does not comply with our basic trend reversal analysis system. The best and most conservative play would have been to set the entry level at 149.37, or at least 149.09. The indicated sell price of 148.92 is too early, and the stop, in consideration of all the above, needs to be adjusted to 149.53
__________________________________________________ ________

Even earlier trade signal:

Wednesday September 27 at 5:30 ET

Trade Signal #194 Sell EUR/JPY at 148.92
Stop is 149.32
Target #1 is 147.65
Risk is 43 pips
Reward is 125 pips
Reward : Risk Ratio is 2.9 to 1

For research purposes only.

do you have any signals with CADJPY

"do you have any signals with CADJPY"?

When this currency pair has clearly completed an upwards "abc" pattern, starting on September 21, then it will be time to short it down to 103.70 or so. This could be several days from now.

dear itme

thanks itme, i would like to receive your entry signal its cad jpy
thanks

Itme:

I thank you for the info on Elliott Wave International. I have been wanting to learn more about how to identify and use waves. I wish you much success in your experiment.

Thursday September 28 at 1:30 ET

Re-enter Trade Signal #176C Sell EUR/USD at 1.2732

Stop is 1.2764

Target #1 is 1.2600

Risk is 34 pips

Reward is 130 pips

Reward : Risk Ratio is 3.8 to 1
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Previous comments, predictions, and trade signal:

EUR/USD prediction as of Wednesday September 27 at 3:00 ET

We stated at 11:00 ET yesterday morning something that turned out to be both "precise and correct":

"(By the way, I believe that EUR/USD just hit the bottom of its current wave at 1.2661, and is due for a fairly large "abc" corrective wave. I studied the 30 year chart, the ten year chart, the 40 day chart, the 30 day chart, the five day chart, the one day chart, and the tick chart to arrive at that conclusion, which I believe is both precise and correct.)"

We earlier predicted a reversal into an upwards "abc" bounce wave "at 1.2677, 1.2660, or 1.2630". The reversal point was, in fact, exactly 1.2661.

We believe that EUR/USD has now completed the "ab" part of the upwards corrective wave, and is due now to ascend to between 1.2700 and 1.2747, after which it will reverse direction and proceed down to about 1.2600 or lower.

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Possible exit targets for short EUR/USD trade <hr style="color: rgb(209, 209, 225);" size="1"> Tuesday September 26 at 6:30 ET

Depending on the strength of the EUR/USD downtrend, and the results of the data releases at 10:00 ET this morning, EUR/USD could do a major bounce upwards starting at 1.2677, 1.2660, or 1.2630. We advise exiting at one of these places and waiting to enter another short trade after a sizeable "abc" corrective wave pattern is finished.
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Friday September 22 at 4:30 ET

Trade Signal #176B Sell EUR/USD at 1.2830
Stop is 1.2851
Target #1 is 1.2600
Risk is 23 pips
Reward is 228 pips
Reward : Risk Ratio is 9.9 to 1

For research purposes only.

Hi itme,

considering you started out with a target of 125 pips and your stop now being 88 pips large, doesn't this defeat the core concept of LOW! risk and high reward trading and shouldn't acceptance of defeat and a new entry at a better price be a better approach rather than adjusting the stop 1-3 times?
Getting stopped once for 20-30 pips and re-entering 100 pips later seems to make more sense than perpetually widening the stop until you could have just as easily closed and reopened 3 times when you do get stopped out.
It's just a thought, since I've witnessed this widening of stops myself as one of the most grave mistakes one can make, totally ruining risk/reward in the long run this way. (You yourself posted you were/are bending your own rules)
No offense meant.

SeekingLight