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Learning From Unsuccessful Mouteki Trades - The Search for Filters...

  • #101
  • Oct 5, 2006 12:47pm Oct 5, 2006 12:47pm
Thanks MNFX. I think whatever we can do to tweak the system using only price as our indicator can serve only to improve an already awesome system.
I still have much to learn about price action.
Quoting MNFX
Looks like a valid set up to me!
I fully understand your pov on the two different kind of tl breaks.
Mouteki said he uses price action only as an indicator. In your present loonie short there is possibly a 1-2-3 forming with the 2 at the 2nd tl point. 1-2-3, H&S, Candle patterns are all price action indicators. I ahve noticed that on some (not all) of Mouteki's very successful trades many of these other price action indicators are present.
Thoughts?
  • #102
  • Oct 5, 2006 12:52pm Oct 5, 2006 12:52pm
Quoting Horace Kent
Thanks MNFX. I think whatever we can do to tweak the system using only price as our indicator can serve only to improve an already awesome system.
I still have much to learn about price action.
As i mentioned it before in another thread, the thing is, mouteki works our patience does not. i did the same thing, put the trendline no the chart, entered a position for short, but upps its going upwards. what now, pull the stopp trigger, maybe, or just wait. i had to wait almost one week but got out with positive pips instead of 20-50 minus pips.

think about it
  • #103
  • Oct 5, 2006 12:58pm Oct 5, 2006 12:58pm
First of all I want to put myself into context in this thread. I am relatively new to trading FX ('been trading Emini's for a few years, looking at FX seriously for 3-4 months. It's PA is driven by factors MUCH different than the indexes!), and very new to the Mouteki system.
From what I've seen with the Mouteki system, I am very impressed!! He's really had a significant insight and is extremely generous for sharing his info here. I'm grateful.

As for filters...
First and foremost is trend. To accurately ID a trend one must look at the next higher TF. I have never seen a trend measurement work well on the TF used for entries (in this case the 4 hr. TF). My personal rule; trends are ALWAYS defined on the next higher TF. This is not to say that trends don't form on the entry TF. But typically there will be several machinations as the trend on the daily TF gradually yeilds to the new trend on the 4 hr. TF.

For convenience, and since Mouteki's strat is oriented around the 4hr TF, I use a daily chart to ID trends. Additionally, of all TF's used by traders, daily TF's are no doubt one of the most common.
The "next higher" TF always helps to put things into a context. Just as the ripple on the ocean is in the context of the wave, the wave in the context of the tide, and the tide in the context of a tsunami, looking to the next higher TF is a must when establishing the probability of a long or short position being successful. Going with the bias of the next higher TF will always increase your chances of success as well as your potential R/R ratio.
If looking for ways make your Mouteki trades HP (High Probability), it would be beneficial to first ID the bias of the daily charts using whatever trend analysis you prefer (seems every trader prefers a different method of trend analysis in my experience). Once this bias is established, look for DS extremes on your 4 hr chart AGAINST the daily bias. This set up is referred as a "Slingshot" as per the dacharts.com gang and is the core of my trading. Additionally, a fib on the 4 hr. that is signaling in the direction of the daily bias is highly complimentary. If you get both (a countertrend DS pullback @ a fib. - see #2 below), take it was a wink and a nod from the market ;-)
I provided a few examples. The first is a daily chart of the EUR/USD. I use this to establish bias. The PA in the blue box meets my definition of a bear trend.
Next, if you reference the DS (blue osc. line) on the 4hr. chart, you will see that the DS is overbought on both set ups, in spite of the bear trend on the daily chart. This is a bang up set up. Additionally, the #2 short was at a fib on the 4 hr. Both of these delivered Mucho Pronto!!!

(Again, the jist of what I'm suggesting is that trend/bias must be established on the next higher TF, or else you're truly trading in the dark, not knowing the context of the market.) I urge you to evaluate for yourselves to decide if what I'm suggesting stands up to both logic as well as your backtesting.
-Daniel
Attached Images
  • #104
  • Oct 5, 2006 1:03pm Oct 5, 2006 1:03pm
Quoting Wallboroff
i had to wait almost one week but got out with positive pips instead of 20-50 minus pips.

think about it

This is what I struggle the most with.
  • #105
  • Oct 5, 2006 1:23pm Oct 5, 2006 1:23pm
Horace, re the CAD Short, I think we're on the same page. It looks like you entered on the bar I mentioned, but:

a) you entered late, which I didn't know
b) the first image you posted showed that bar as having moved down 6 pips from the Open, so had you entered on the Open, then at the time you took the image you would have been in profit.

I guess by the time you entered, and the delay between taking the image, and completing your post, your trade went negative. So yes, the entry was valid.
  • #106
  • Oct 5, 2006 1:37pm Oct 5, 2006 1:37pm
Having read the threads and seen the examples, I really like this system alot because of its simplicity.

I see 2 possible problems why some people are having problems with it.

First of all, people should not expect to win every trade. Even if you're just 50% right, you could still make alot of money if you take 1:2 or 1:3 risk reward ratio. And the person who suggested a set 30pip stop and TP at 40-50 pips is more than likely wrong. Each currency pair has different volatilities and you can't use 30 pips as a mechanical method. By placing your stoploss according to the percentage and levels stated by Mouteki, you're taking into account the most recent volatility level of the pair.

Second (and possibly the biggest problem), you have to make sure you're drawing the correct trendline in the right direction. I see alot of charts posted here that have the trendlines drawn in and the lines are almost horizontal. The definition of a trend is price moving either up or down in a sustained manner over a period of time. A horizontal trendline means that price has stopped trending and is in a consolidation mode. These trades could go either way.

I also like the filter where the bar that opens past the demand/supply line should trade over or under the previous breakout bar before you enter. You may lose some pips. But if your target is let's say 100 pips, who cares if you give up 10-20 pips?
  • #107
  • Oct 5, 2006 1:54pm Oct 5, 2006 1:54pm
Quoting Menchifus
Having read the threads and seen the examples, I really like this system alot because of its simplicity.

I see 2 possible problems why some people are having problems with it.

First of all, people should not expect to win every trade. Even if you're just 50% right, you could still make alot of money if you take 1:2 or 1:3 risk reward ratio. And the person who suggested a set 30pip stop and TP at 40-50 pips is more than likely wrong. Each currency pair has different volatilities and you can't use 30 pips as a mechanical method. By placing your stoploss according to the percentage and levels stated by Mouteki, you're taking into account the most recent volatility level of the pair.

Second (and possibly the biggest problem), you have to make sure you're drawing the correct trendline in the right direction. I see alot of charts posted here that have the trendlines drawn in and the lines are almost horizontal. The definition of a trend is price moving either up or down in a sustained manner over a period of time. A horizontal trendline means that price has stopped trending and is in a consolidation mode. These trades could go either way.

I also like the filter where the bar that opens past the demand/supply line should trade over or under the previous breakout bar before you enter. You may lose some pips. But if your target is let's say 100 pips, who cares if you give up 10-20 pips?
Spot On! You forgot one other thing though..people are just too damn impatient!! Once the trade has been placed LEAVE IT ALONE!! Let it run to it's stop or target, or if your system so desires, take off pips at a certain level.

Either way..fire and forget peeps!

Just my $0.02
  • #108
  • Oct 5, 2006 1:56pm Oct 5, 2006 1:56pm
Cool. Thanks. Sorry about the confusion. Should have mentioned the late entry.

PS: It's only down 5 now.
Quoting trader416
Horace, re the CAD Short, I think we're on the same page. It looks like you entered on the bar I mentioned, but:

a) you entered late, which I didn't know
b) the first image you posted showed that bar as having moved down 6 pips from the Open, so had you entered on the Open, then at the time you took the image you would have been in profit.

I guess by the time you entered, and the delay between taking the image, and completing your post, your trade went negative. So yes, the entry was valid.
  • #109
  • Oct 5, 2006 1:58pm Oct 5, 2006 1:58pm
Quoting Zuke
Spot On! You forgot one other thing though..people are just too damn impatient!! Once the trade has been placed LEAVE IT ALONE!! Let it run to it's stop or target, or if your system so desires, take off pips at a certain level.

Either way..fire and forget peeps!

Just my $0.02

Fire and forget. Not doing this is why what it is 90 or 95% of forex traders fail. Getting scared. Perfect post.
  • #110
  • Oct 5, 2006 1:59pm Oct 5, 2006 1:59pm
Hi Wallboroff,

You're so right. I remember posting somewhere, that the average Mouteki trade took 40 hours to hit target (based on the slides provided). Patience and discipline are key to this method.
Quoting Wallboroff
As i mentioned it before in another thread, the thing is, mouteki works our patience does not. i did the same thing, put the trendline no the chart, entered a position for short, but upps its going upwards. what now, pull the stopp trigger, maybe, or just wait. i had to wait almost one week but got out with positive pips instead of 20-50 minus pips.

think about it
  • #111
  • Oct 5, 2006 3:25pm Oct 5, 2006 3:25pm
On the subject of filters I noticed something on Mouteki trades.
I switched to a 1 hour chart and I use the candle that is higher than the previous 8 and post 8 candles to find the 4 hour trendline. I end up with the same trendlines but see a lot more detail of the price movement.

My point: sometimes when the price breaks a trend line it comes back "inside" the trend lines and other times it comes back to touch the trend line then continue on it's way away from the trend line. This wasn't noticable with the 4 hour chart but on the 1 hour you can see it clearly.

I don't have a chart handy but look at the EUR/GBP this am at 8,9,&10 on a 1 hour chart. It comes back to touch the trendline before continuing away.
Other times price action breaks the trend then goes back "under it"

I'll try to post a chart later.
  • #112
  • Oct 5, 2006 7:26pm Oct 5, 2006 7:26pm
Quoting Horace Kent
Hi Wallboroff,

You're so right. I remember posting somewhere, that the average Mouteki trade took 40 hours to hit target (based on the slides provided). Patience and discipline are key to this method.

So if the average Mouteki trade is 40 hours long, then we are making multiple buys and sells along the way still with the current price action going on and constant new breaks of s/d lines? Or are we constantly modifying the original trade thats supposed to be 40hrs long? Please clarify with your thoughts on this...

Hopefully filters will defintely help with potential fakeout breaks...

Eggyj
  • #113
  • Oct 5, 2006 7:38pm Oct 5, 2006 7:38pm
http://img175.imageshack.us/img175/8919/jpylj1.jpg
any filter to avoid this failure?
  • #114
  • Oct 5, 2006 7:43pm Oct 5, 2006 7:43pm
Hi eggyj,

You don't have to take more positions with subsequent breaks. You don't have to move your price projection either. Mouteki states that is one possible way to trade the system, but you don't have to. You can wait until your initial trade is 'over' before entering a new trade. Hope this helps.

Quoting eggyj
So if the average Mouteki trade is 40 hours long, then we are making multiple buys and sells along the way still with the current price action going on and constant new breaks of s/d lines? Or are we constantly modifying the original trade thats supposed to be 40hrs long? Please clarify with your thoughts on this...

Hopefully filters will defintely help with potential fakeout breaks...

Eggyj
  • #115
  • Oct 5, 2006 7:43pm Oct 5, 2006 7:43pm
The next candle after the breakout candle did not drop below the breakout candle.
  • #116
  • Oct 5, 2006 7:46pm Oct 5, 2006 7:46pm
B i n g o B i n g o B i n g o

and bingo was his name-o


Quoting MNFX
The next candle after the breakout candle did not drop below the breakout candle.
  • #117
  • Oct 5, 2006 8:25pm Oct 5, 2006 8:25pm
Here is the filter I may use in the future. I doesn't happen on all posotive trades but I'm noticing it more and more.
The Price came back to the trend line and was rejected. Great place to get in!!
Attached Image
  • #118
  • Oct 5, 2006 9:11pm Oct 5, 2006 9:11pm
Quoting FiboFan
Here is the filter I may use in the future. I doesn't happen on all posotive trades but I'm noticing it more and more.
The Price came back to the trend line and was rejected. Great place to get in!!
Fibo, what do you mean? How would you know it was rejected at that time, since it would be near the line?
  • #119
  • Oct 5, 2006 9:20pm Oct 5, 2006 9:20pm
since the 1st candle that opened below the trend line didn't go below the bottom of the candle that broke the trend line I waited till it closed to make sure it didn't go back above the trend line. After it closed and I noticed the reject it was a great opportunity to go short.
Keep in mind that is a 1 hour chart I used to put my 4 hour trend line on. It sounds complicated but allows me to see more price action detail.
  • #120
  • Oct 5, 2006 9:22pm Oct 5, 2006 9:22pm
Quoting FiboFan
since the 1st candle that opened below the trend line didn't go below the bottom of the candle that broke the trend line I waited till it closed to make sure it didn't go back above the trend line. After it closed and I noticed the reject it was a great opportunity to go short.
Keep in mind that is a 1 hour chart I used to put my 4 hour trend line on. It sounds complicated but allows me to see more price action detail.
I see what you are saying now. Did the trade go all the way, or in that situation did you shoot for a smaller amount of pips?
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