Low Risk, High Reward Trading Experiment

Hello Itme,

from what i get is it that this thread is going to be discontinued?

in any case i think you have done a great job and ive learnt and also extracted alot of knowledge plus trading ideas from it.

you work and contribution must be commended.

Thanks
Ahmed

It's good to hear that this has helped others also. I have felt that the concepts are important, though the application is an ongoing challenge and quest for most of us at this time. But at least having a clear intent is a good foundation for success.

Tuesday October 10, 2006 at 5:30 ET

Dear Smooth Operator,

Thanks for all the comments and questions. I wish I had gotton back to you earlier, but I have been busy. I expected GBP/USD and EUR/USD to go down another time in a fifth downwards wave of the current wave which I believe is the fifth wave of a larger trend. I was planning to advise exit of the long GBP/USD position when the upwards "abc" corrective fourth wave was finished at 1.8700, but I missed the chance to make that call. It now descended to 1.8577, which I believe may be the bottom, hitting our stop in the process. This would be a good time to buy GBP/USD with a stop at 1.8539 and a target at 1.9050, over 400 pips higher.

Trade Signal #202 Buy GBP/USD at 1.8577 or as low as possible

Stop is 1.8539

Target is 1.9050

Risk is 53 pips
Reward is 468 pips
Reward : Risk ratio is 8.8 to 1

For research purposes only.

how about eurusd? I think it is bearish now, will finish big wave 3 at 1.2400 level. Why cable is going up so fast than eurusd?

Hi Itme,

Can you please post some Elliot Wave Documents to study..IF you have some..

Thanks

How long do you think it will take to reach the 1.9050 level? Several hours, days, or weeks?

IMHO after closing below 100MA (yesterday) the path to 1.8177-1.8130 is open.

Trade Signal #202 Buy GBP/USD at 1.8577 or as low as possible

Stop is 1.8539

Target is 1.9050

Risk is 53 pips
Reward is 468 pips
Reward : Risk ratio is 8.8 to 1

We have a very exciting set up here ItME-a real battle between the fundamentals and EW. The fundamentals are stong and getting much stronger for $ strength, while your EW analysis says the above. Should be fun to watch.

The fundamentals are $ bullish-so much so that with all the $ long money in the market from Friday-we've seen only further $ strength, as traders who got long Friday are reluctant to close their positions and take profit. Now, we could see some profits taken as there is no news being released today, absent any sudden surprises. We'll see how the FOMC minutes and mortgage apps come out tomorrow. If there is further $ strength demonstrated there as I believe there will be, ItMe you won't see 1.9 in the GBP for a very, very long time. I havn't discussed all the fundamentals here but they are in my thread "$ for the week of 10/9"

This trade has already been stopped out, unless, of course, the stop was revised.

Not sure about that-the indication was to buy as low as possible so maybe the stop level IS that point....

Trade Signal #202 Buy GBP/USD at 1.8577 or as low as possible

Stop is 1.8539


It has to be stopped

Tuesday October 10, 2006 at 12:00 ET

Adjusting stops

Sometimes we experience a double top or double bottom over a period of significant time, or a triple top or bottom, and the stop needs to be adjusted a small amount, not enough to significantly alter the reward : risk ratio and risk factor. We have a "stop adjusting procedure" for this which we have explained in our thread.

There have been a few times where we were on the wrong side of the market and tried adjusting our stop quite a bit rather than revising our analysis and admitting general failure of the previous analysis. Once or twice this may have been meritted by the circumstances. But generally this caused problems for our risk factor and degraded our system, so we have eliminated making large adjustments to our stop value from our protocol.

___________________________________

Regarding our Trade Signal #202 Buy GBP/USD at 1.8577 or as low as possible - this trade was stopped out. When we look back, we made an error in executing our system. Why - tiredness perhaps. Definitely lack of clarity of mind. Prejudice concerning previous viewpoints that we carried over from last week. Lack of faith in our targetting system. And impatience. We knew the price could go lower. We didn' t have strong evidence that it was about to reverse. We shouldn't have entered the trade. The stop was not in a very secure place.

The error - There was a major support at the price we bought at, but this should not have influenced us so strongly. This is not our protocol. In terms of Elliott Wave, we were in the fifth wave down of this swing, but still only in the process of a Wave 4 correction on a smaller time frame, so we shouldn't have placed the entry where we did - at the bottom of the small Wave 3 - which assumed a failed fifth wave. This is an invalid assumption.

Did I somehow not recognise this obvious wave count? I remember recognising that we were in the Wave 4 correction, and thinking that it would just come down to create a double bottom. I was wrong, and shouldn't have assumed that the fifth wave would be a failed wave. As suggested above by SmoothOperator, I should put my wave count into the trade signal so that there is a clear record of my wave count at the time of the trade signal.

Second error - our targetting values (points of high reversal probability) were at 1.8530 (which is where it got down to so far) and 1.8490 (which is where it is probably heading for). The value of 1.8490 (or slightly lower, factoring in overshoot) is a particularly high likelihood reversal value. So ideally, to generate the safest trade signal, this should have been the entry point of the long trade based on a prediction. At the very least, the stop should be placed well below this number. Ideally, the trade signal should be based on a combination of a predicted reversal with a confirmed completed Elliott Wave count - which we didn't have at the time of entering this trade signal, and still don't have.
________________________________________________________________

Previous trade signal:

Tuesday October 10, 2006 at 5:30 ET

Dear Smooth Operator,

Thanks for all the comments and questions. I wish I had gotton back to you earlier, but I have been busy. I expected GBP/USD and EUR/USD to go down another time in a fifth downwards wave of the current wave which I believe is the fifth wave of a larger trend. I was planning to advise exit of the long GBP/USD position when the upwards "abc" corrective fourth wave was finished at 1.8700, but I missed the chance to make that call. It now descended to 1.8577, which I believe may be the bottom, hitting our stop in the process. This would be a good time to buy GBP/USD with a stop at 1.8539 and a target at 1.9050, over 400 pips higher.

Trade Signal #202 Buy GBP/USD at 1.8577 or as low as possible
Stop is 1.8539
Target is 1.9050
Risk is 53 pips
Reward is 468 pips
Reward : Risk ratio is 8.8 to 1

For research purposes only.

Our Trade Signal #201 Buy USD/CAD at 1.1202 from yesterday narrowly missed being triggered, then proceeded to the target. The price descended to 1.1210, 8 pips short of our entry price of 1.1202. We knew there was a good chance our entry price wouldn't be hit, but we put it in a conservative place to improve the chances of winning the trade, and to improve the reward : risk ratio if the entry price was met.

In spite of the fact that this trade signal was not triggered, I consider it a good trade signal in principle. If entry points and targets are set at conservative values, we may not be able to benefit from every potential trade opportunity, but the ones we do participate in will be on our terms - which are parameters of success.

____________________________________________

Previous trade signal:

Monday October 9 3:15 ET
Trade Signal #201 Buy USD/CAD at 1.1202
Stop is 1.1179
Target is 1.1315
Risk is 26 pips
Reward is 108 pips
Reward : Risk ratio is 4.1 to 1

For research purposes only.

There were several factors playing against your trade today ItME-1st the fundamentals and 2nd, the timing.

The fundamentals are too strong for any sustained move up in the GBP, or in the EURO for that matter. I've outlined them alll before. As a matter of fact-with all the profit available to the traders who shorted the GBP or EUR on Friday-it's evident that these traders are still very bullish and don't want to get out of their positions. It they weren't-you would have seen profits taken in London this morning, when in fact, traders continued to long the $. But this leads me to #2-the timing. These traders who are in long positions are not going to start unwinding them in the middle of the NY session where everyone can see what they're doing. If the profit taking comes-it'll come just prior or sometime in the London session, but absent any unscehduled fundamental data-nothing really is going to happen between now and then.

Thanks, Newstrader, it is very interesting and helpful to understand and confirm why and when the price patterns move as they do. An enlightened and conservative combination of technical and fundamental analysis is likely to constitute the most successful trading system. The demands are probably too much for one person, but a team of competent analysts working in harmony could probably perform at a high level.

Thanks ItME-a competent group of analyists working together would probably be a good thing-but I'm not sure how much "harmony" you'd see...actually you'd probably see a lot of cussing and food fights...lolololol

Hi Itme,

In view of the failure of this trade and your explainations, perhaps your closure of this experiment is premature. At this stage in the experiment, you must be fine tuning your system to eliminate the such failure factures as tiredness and poor interpretation of data.

This is a non-confrontational observation (unlike Jacko). I genuinely commend the bulk of this thread and admire the self-criticisms but I also feel that this experiment is not complete.

Please excuse me if my English is not correct!

I think the experiment is really about to begin.

The past few days we have heard there was an end coming, but really I believe what is being said is that the beginning is about to start.

Most individuals on this thread have become dependant upon the signal experiment and not upon independant trading strategies.

We will soon see the end of what we think is a great thread, but actually we are seeing the beginning of a new thread, and that is your money for their information!

Monarch

Hey all just jumped on this thread and read some of the recent comments, trying to go long when the market is clearly going down is suicidal ive done that and i have lost a couple of live accounts and thousands of dollars doing so... ;-). If your going long you need some clear signals before doing so, not just because price has reached a certain level.

Even if you do go long how far will price go and why, where is the nearest resistance, has the market topped out look at the weekly and daily is it bullish or bearish at the hard right edge?

The goal is to anticipate the trend and stay with it until ur target is reached or ur taken out with a profit or loss. The key is to learn why u lost, and NOT make the same mistakes. Fear and greed are your 2 greatest enemies in trading. Fear of losing, of not pulling the trigger. psychology and ego play a big part in trading.

Dear all,
I think all of us had the common idea that $ is still bullish (without any valid reason for me..apart of market sentiment..I still wonder who is the market.. ) but the fact is that me and many other I guess, Itme also, were expecting a wave up before going down again.
I was expectng the pound to go to 1.8720 first and the eur to 1.2650 first.

This didnt happend , and I wonder where the so called 'retaracemts' or back waves have gone...in the last period.

I trade since only 8 months, but I must say that in 8 months I keep seeing the market changing his behaviours, continuosly..

I cant say that economical, geopolitical, or what ever factors change so quickly like the market behaviour does, and this is telling me a lot.

To support itme, any system will ever work 100%, especially if the market keeps changing his rules so often.

Forget to be able to always predict the market movements because is just impossible.

I dont know if forex is so changeble since his start, but I must say that rules for me change too quick to be normal. If rules changes, and the market is made from offer and demand of traders, its hard to believe that traders keep changing their way of trading, otherwiese what is experience and wise ?

comment are appreciated