Low Risk, High Reward Trading Experiment

dear itme..
thanks for your signal i trade with gbp jpy, what price the target today(this week)?
thanks

you can upload your picture at http://imageshack.us

Hi, i'm new to the thread and new to Eliot wave trading. As you can see by my name, i'm basically a fundamental trader, however, i'm very interested in following your analysis and learning all i can about Eliot Wave analysis. The first thing i want to do is to wish you further good luck; the second is to look at the site you recommended. Thanks

Hi Itme,
I hope this will be of interest to fellow new traders who follow this thread.
I have been following your experiment for some time and used the recommendations to trade on a demo account with some success.
Analysis of some of the failed trades that should not have been stopped out revealed a simple error that other new traders may make - I used the reommended stop but failed to include the spread.
My dealer quotes all prices at their bid rate. A sell trade will be quoted at the higher ask rate. So, if a pair is currently quoted at 100.00, the sell trade will start at 100.02, the ask rate. If the suggested LRHR stop was 100.10 (a risk of 10 pips), I would be stopped out at 100.08!
It may only be a small difference but, in several demo trades, that was the difference between being stopped out or making a sizeable profit.
The dealer I am currently with has quite large spreads on some of the less common pairs and this could significantly jeapordise a trade.
I now check both the suggested stop point and the risk factor to ensure I dont make this mistake again. Thanks for your thread.

Hi Scott,

With the greatest respect, a discussion of Elliott Wave theory would bore me to tears. I have read far too many forum discussions and analyses of Elliott Wave than I wanted to and have come to the basic conclusion that NO-ONE has been able to empirically prove that it is profitable "BEFORE the event" strategy. (If anyone wants to start a thread with empirical proof, accompanied by an audited Trading Statemnt, over a period of say one year then the thread would be worthwhile).

The reason I posted in this thread is that, albeit the fact that it is a trading journal only, I would have thought that providing some sort of analysis of 180+ trades would be necessary to keep track of the strategy's progress.

Since there was no analysis undertaken by itme, (nd he seemed not to want to analyse the results of his own system,)I took it upon myself to have a look at his progress. From this I was able to determine that his profitability was actually declining over time.
Actually, his losses were mounting. Thatis why I suggested that perhaps he was leading into a blind alley.

I assumed that, since he has been working so hard that he has had little time for sleep, that maybe my analysis would be of assistance in preventing him from wasting his time on a strategy that was going backwards.

It reminds me of the anecdote about a woodchopper who came across a younger woodchopper who was furiously trying to chop down a tree with a VERY blunt axe. The older woodchopper said to the youngerwoodchopper "why don't you stop for a minute and sharpen the axe?"
To which the youger woodchopper replied "I don't have the time"


Jacko

I was just trying to help.

itme,
Thanks for the good signal #193 GBP/JPY, it took a couple of days of waiting, but now is on it's way down making some great pips.

Also, do you run any signals for the CAD/JPY - it looks to be topping out around the 106.36. This will be the second visit to the top this month for this currency. It has not reached this point for a few years running.
Thanks for the signals.

Monarch

The fact is that based on a 25% risk factor, the rate of performance on my first 39 trade signals was 15,000 times return on capital, even though only about 30% of the trades were winners. No one has disputed this figure. These trade signals were generated over a period of seven days. Many of these trade signals were stopped out by between zero and 5 pips, which is a very near miss. The targets were then hit. Many of these trade signals were completely system non-compliant. - and thus not a true measure of the trading system I am developing, but of my capacity to implement it. In spite of there being many near misses and totally junk signals, the performance was higher than any other methodology I have ever heard of.

1) The performance of a trading system should not be assessed based on the number of pips made or loss, but on the rate of return on capital. That is a major theme of this thread.

2) The performance of a trading system should be assessed over the long term, not an arbitrary short period.

3) The performance of a trading system should be assessed based on trades that conform to the trading system, not on those that are non-compliant.

4) Until the period of research and experimentation is over, the trading system is not finalised, so it is impossible to assess it performance.

To assess the rate of return on a low risk / high return trading system over the long term requires inputing the data into a spread sheet and calculating the compounded rate of return. Unless Jacko has done this, any assertions that he might make regarding the performance of the posted trades lack credibility.

Thank you, FXFrancais, for making a very important point about factoring the spreads into the stop values and limit values. Many people don't understand this vital point.

Here are some more comments I made about using my experimental trade signals in a live trading program:

http://www.forexfactory.com/forexfor...tem#post102700

Comments I made long ago:

<table class="tborder" id="post60408" align="center" border="0" cellpadding="6" cellspacing="1" width="100%"> <tbody><tr><td class="thead"> 05-23-06, 15:59 <!-- / status icon and date -->
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</td> <td nowrap="nowrap" valign="top"> Join Date: Aug 2005
Posts: 858


</td> </tr> </tbody></table> <!-- / user info --> </td> </tr> <tr> <td class="alt1"><!-- message, attachments, sig --><!-- icon and title --> How to employ this information
<hr style="color: rgb(209, 209, 225);" size="1"> <!-- / icon and title --> <!-- message --> Though we don't advise anyone trading these signals until we get the many bugs out of our system, but we do recommend looking at these situations we point to in the light of your own trading system to see whether they consist of valid trade opportunities.

In addition, each of our trade signals is, in effect, the prediction of a trend of at least 100, and up to 500 pips.

We are confident in saying that in every case, there exists at least a distinct possibility that the predicted trend will occur.
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Dear fbd83 <table border="0" cellpadding="0" cellspacing="6" width="100%"> <tbody><tr><td nowrap="nowrap">
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</td></tr></tbody></table> " I have a simple question, when doing a wave is it best to draw the lines yourself or can I use an indicator like zigzag? Thanks in advance"

I cannot comment on any zigzag indicators, because I haven't used them, except to say that I would be incredulous if any software could be better than a skilled Elliottician at counting or identifying wave patterns. Elliottician.com's refined trader software is based on sound principles, and produces alot of useful information, but it is frequently wrong about the wave count.

That being said, a good piece of software that has been exhaustively backtested and refined would probably be better at counting waves than an inexperienced, untrained, or incompetent wave analyst.

Itme, congratulations for your tremendous work and signals. You said your journal works for you but it also has been extremely useful for many of us.
This week I'm over +400 pips profit, and a big part of this is thanks to your journal.

Thanks again for your enormous effort and for sharing your trading system with us.

Best wishes,

Pablo

Thursday September 28 at 18:30 ET

A very strong downwards move on USD/CAD on September 27 at 14:30 ET went 9 pips past the stop of 1.1097 in our Trade Signal #190 Buy USD/CAD at 1.1132. We believe that it will come down one more time at least to 1.1086 or further, where we can re-enter this trade. The price may descend further, however, to as low as 1.1045.

Trade Signal #190A Buy USD/CAD at 1.1086

Stop is 1.1039

Target is 1.1300

Risk is 50 pips

Reward is 210 pips

Reward : Risk Ratio is 4.2 to 1
_______________________________________________________

Previous comments and trade signal:

Tuesday September 26 at 6:30 ET

I believe that USD/CAD began an "ABC" upwards corrective wave on September 1st. The "A" wave (1-2-3-4-5) climbed from 1.1032 to 1.1293 and then changed direction on September 20, starting an "abc" B wave down. This B wave was recently completed today at a price of 1.1130. We are now heading up for the C Wave (1-2-3-4-5), targetting about 1.1300 or higher.
__________________________________________________ _____________

Friday September 22 at 5:30 ET
Trade Signal #190A Buy USD/CAD at 1.1132
Stop is 1.1097
Target is 1.1300
Risk is 39 pips
Reward is 164 pips
Reward : Risk Ratio is 4.2 to 1

For research purposes only.

The USD/CAD go up if breakout 1.1125/35, today GBP/USD down strong probabily DOLLAR go Down friday, this is end of week, month ant quartely, very volaty tomorrow.

Hi itme

Thankyou for a great thread and a very big effort on your part. Any current thoughts on the GBP/USD ?. I am over 100pips up on your last advise and considering TP before the week end!. Also as a newbie introduced by a E wave friend, I am interested to know if you think that the news is having more effect this year than normal ?( have read many commets like "its all fundimentals this year"). Keep up the great work!

Pipnic

Hi Pipnic,

You are welcome. I'm glad you can benefit in some way from my thoughts and ideas. Regarding your comments:

"Thankyou for a great thread and a very big effort on your part. Any current thoughts on the GBP/USD ?. I am over 100 pips up on your last advise and considering TP before the week end!. Also as a newbie introduced by a E wave friend, I am interested to know if you think that the news is having more effect this year than normal ? ( have read many comments like "its all fundamentals this year")."

GBP/USD is likely to to descend a bit more, probably to 1.8690, then do a fairly large, long, complex upwards wave four "abc" correction, then descend all the way to 1.8600 or below within the next week. It should go down from the current price area at about 1.8775 in a five wave set to a point around 1.8690 ( a guess) before a major retracement. If I am wrong, then it may still double bottom at 1.8725, so you could exit your short trade there and take profits, which would be a conservative play.

I don't know if news is having more or less effect than before. I don't notice any difference between charts (price movement patterns) from this last year or previous years when I do backtesting and practise wave counting, so I doubt that it is. I've noticed that people form all kinds of imaginative opinions about things that can't really be supported by evidence to compensate for the fact that their analytical models are virtually empty of merit. They talk about when movements occur in relation to markets opening and closing, to days of the week, hours of the day, weekends, etc. Our research indicates that the market keeps moving constantly day and night, 365 days a year, without ever stopping, and that the endpoints of trends happen at all times of the day, on every day of the week, including Sundays and holidays, but they happen slightly more frequently at certain times compared to others, but not enough to draw any meaningful conclusions that could allow one to trade simply based on time of day, etc. in the style we are interested in.

Anyone who would make comments like "its all fundamentals this year" is basically admiting that their technical models don't work, which is true in many (or most) cases.

hi itme...

what do you recomendation on GBP/USD, USDCHF, euro usd, GBP JPY, today?
what price and stop loss to enter?
thanks

Hi Waskito,

My strategy is to try to identify the endpoints of the trends that are about 100 to 500 pips in length. Having entered the trade, we hold on and either hit the stop or hit the target. Duration of the trade is from 18 hours to a week.

I don't generate trade concepts or experiments on every currency pair every day, because there aren't opportunities which fulfil our system criteria each and every day, or else I am not available to recognise the trade opportunity and enter the trade, since I'm not being paid to do this work, and occasionally I need to sleep and perform other activities than watching charts, scanning 20 currency pairs, identifying potential trade opportunities, and then performing hours of analysis to confirm the opportunity, and if there is one, painstakingly calculating the entry price, stop and target, recording all this information and posting it, then monitoring all the active trades and adjusting the stops and targets where necessary, and on top of that responding to dozens of questions like yours as well as private messages.

But once in a while I notice what seem to me like good re-entry opportunities to jump into an ongoing trend when the reward : risk ratio is still favorable, at what I hope is the top or bottom of a corrective wave.

Friday September 29 at 4:00 ET

Adjust target for Trade Signal #191B Re-entry opportunity to sell GBP/CHF to 2.3295

_____________________________________________________


Previous trade signals:

Tuesday September 26 at 7:00 ET

Trade Signal #191B Re-entry opportunity to sell GBP/CHF at 2.3570
Stop is 2.3616
Target is 2.3265
Risk is 61 pips
Reward is 290 pips
Reward : Risk ratio is 4.7 to 1

For research purposes only.

Note: GBP/CHF rose to 1.3610, missing our stop, but not by much. I erred by mistaking a nearly complete single five wave upwards component wave for the entire upwards five wave set. This is a classic error in Elliott Wave counting.
_________________________________________

Thursday September 21 at 11:45 ET
Trade Signal #191A Sell GBP/CHF at 2.3770
Stop is 2.3792
Target #1 is 2.3210
Risk is 37 pips
Reward is 545 pips
Reward : Risk Ratio is 14.7 to 1

For research purposes only.

Friday September 29 at 4:30 ET

EUR/CHF is headed for 1.5970, 100 pips higher than its current price, which will complete a long uptrend that began on May 17. This would be an opportunity to short it and to hold a position trade from the very endpoint of a weekly trend.

Friday September 29 at 4:30 ET

Adjust target for Trade Signal #190A Buy USD/CAD at 1.1086 to 1.1200. This is an interim target. We can re-enter to capture the next phase of the trend after a bounce.

____________________________________________________________

Previous comments and trade signal:

Thursday September 28 at 18:30 ET

A very strong downwards move on USD/CAD on September 27 at 14:30 ET went 9 pips past the stop of 1.1097 in our Trade Signal #190 Buy USD/CAD at 1.1132. We believe that it will come down one more time at least to 1.1086 or further, where we can re-enter this trade. The price may descend further, however, to as low as 1.1045.

Trade Signal #190A Buy USD/CAD at 1.1086
Stop is 1.1039
Target is 1.1300
Risk is 50 pips
Reward is 210 pips

Reward : Risk Ratio is 4.2 to 1
__________________________________________________ _____

Tuesday September 26 at 6:30 ET

I believe that USD/CAD began an "ABC" upwards corrective wave on September 1st. The "A" wave (1-2-3-4-5) climbed from 1.1032 to 1.1293 and then changed direction on September 20, starting an "abc" B wave down. This B wave was recently completed today at a price of 1.1130. We are now heading up for the C Wave (1-2-3-4-5), targetting about 1.1300 or higher.
__________________________________________________ _____________

Friday September 22 at 5:30 ET
Trade Signal #190A Buy USD/CAD at 1.1132
Stop is 1.1097
Target is 1.1300
Risk is 39 pips
Reward is 164 pips
Reward : Risk Ratio is 4.2 to 1

For research purposes only.

Friday September 29 at 4:30 ET

Trade Signal #181C Sell EUR/CAD at 1.4125

Stop is 1.4156

Target is 1.3950

Risk is 41 pips

Reward is 165 pips

Reward : Risk Ratio is 4.0 to 1

__________________________________________________________

Previous trade signals:

Wednesday September 27 at 12:45 ET

Two successful trades, one a re-entry of the other: The target for the two trades shorting EUR/CAD of 141.20 was met at 17:30 September 25 and surpassed by a mere 8 pips. It's a good thing we revised the target, as we would have fallen short of the original target of 141.00
_________________________________________

Adjust target on Trade Signal #181A Sell EUR/CAD to 141.20 <hr style="color: rgb(209, 209, 225);" size="1"> <!-- / icon and title --><!-- message --> Tuesday September 26 at 8:30 ET

Adjust target on Trade Signal #181A Sell EUR/CAD at 1.4342 to 141.20

Also adjust target on Trade Signal #181B Sell EUR/CAD at 1.4322 to the same value

__________________________________________________ ___________
Thursday September 21 at 14:45 ET

Since exiting our short EUR/CAD trade the price did indeed follow a five wave pattern up to our precise target of 1.4342 at 13:00 ET on September 20, about ten hours after we exited the sell trade. According to our system, this would have been the time to sell as follows:

Trade Signal #181A Sell EUR/CAD at 1.4342
Stop is 1.4374
Target #1 is 1.4100
Risk is 42 pips
Reward is 232 pips
Reward : Risk Ratio is 5.5 to 1

__________________________________________________

Thursday September 21 at 20:00 ET

The current price of EUR/CAD at 1.4322 is probably the top of an upwards complex "abc" corrective wave, and thus a viable entry point.

Re-Entry Opportunity Trade Signal #181B Sell EUR/CAD at 1.4322
Stop is 1.4362
Target #1 is 1.4100
Risk is 52 pips
Reward is 212 pips
Reward : Risk Ratio is 4.1 to 1

For research purposes only.

Note: we were a little early in this entry. A more complete "abc" pattern subsequently formed, with a high slightly higher at 1.4335