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Low Risk, High Reward Trading Experiment

  • #1,361
  • Oct 11, 2006 5:09am Oct 11, 2006 5:09am
Quoting itme
Dear Nicolas,

I haven't bothered calculating the percentage of winning trades for several reasons. Mostly, because it is irrelevant to my purpose, which is to experiment and learn. Second, because it would be misleading if done crudely. I would need to distinguish between winning and losing trades according to which are consistent with my current protocol, and which aren't. There are two issues - the performance of my system, and my performance at executing my system. And my system is constantly evolving. Also there are near misses, where the stop is barely hit, or the target is almost met, or the entry is just missed, but the target is hit, and the trades where the concept is totally incorrect.

Last, and most important, if I posted the "performance" of my research project, then it might encourage people to either dismiss the concept altogether of low risk / high reward trading employing trend reversal prediction techniques, or inspire unwarranted confidence and cause people to trade these "signals" indiscriminately with real money, even though the system and my skill are still evolving.

Lastly, percentage of winning trades is only one of several criteria pertinent to the effectiveness of a trading system. Reward : risk ratio, win rate, distribution of losses, duration of trades, and frequency of trade opportunities are all pertinent. To assess the performance of a trading system, the results would need to be entered into an excel spreadsheet to compound the results. A low risk / high reward trading system can be deceptively profitable even with a quite low percentage of wins.
Hi Itme,

Can you please post some elliot wave study material....

Thanks
  • #1,362
  • Oct 11, 2006 5:22am Oct 11, 2006 5:22am
Here are some suggestions, though I cannot vouch for the results if you follow them.
However, I personally appreciate what I learned by reading and contemplating the following information.

Join Club EWI here:

http://www.elliottwave.com/club/

Then read EMH: The Long Kiss Goodbye.

here:

http://gainesville.elliottwave.com/t...228100/1261/0/

Read all the emails EWI sends you.
__

Then study and read this entire site, and watch all the videos:

http://www.mtpredictor.com/

Then you will know alot about how to trade with Elliott Waves.

Then practise, practise, practise, and be very patient with yourself.
And be very patient when you enter trades. That has been a constant
lesson for me. But when the iron is hot, don't hesitate even for a second - pounce.

You don't need to buy any software. Just study a few majors, like
EUR/USD, GBP/USD and USD/CHF. That's all.

If you have any questions, then buy or borrow a book about Elliott Waves, or find a tutorial on the internet.

Here is another two related websites that I suggest you read entirely.
Don't necessarily buy the software or subscribe to their service, but at
least read all the things they say. It is very informative and interesting:

http://www.elliottician.com
http://www.freedomthrutradingforex..../trsn_land.aspx

Be very patient and careful and practise ALOT.

Good luck
  • #1,363
  • Oct 11, 2006 5:24am Oct 11, 2006 5:24am
Quoting mandoaddam
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

i'm now in a long posetion from 1.8543 lol ????????????
itme what to do go long or short......
all my sharts said it's gona go long for good
1.8543 is low area for gbp this week, but i think not safe to buy now, cable still has to day to drop or up,...
i am stil waiting 1.8404
  • #1,364
  • Oct 11, 2006 5:27am Oct 11, 2006 5:27am
Quoting itme
Here are some suggestions, though I cannot vouch for the results if you follow them.
However, I personally appreciate what I learned by reading and contemplating the following information.

Join Club EWI here:

http://www.elliottwave.com/club/

Then read EMH: The Long Kiss Goodbye.

here:

http://gainesville.elliottwave.com/t...228100/1261/0/

Read all the emails EWI sends you.
__

Then study and read this entire site, and watch all the videos:

http://www.mtpredictor.com/

Then you will know alot about how to trade with Elliott Waves.

Then practise, practise, practise, and be very patient with yourself.
And be very patient when you enter trades. That has been a constant
lesson for me. But when the iron is hot, don't hesitate even for a second - pounce.

You don't need to buy any software. Just study a few majors, like
EUR/USD, GBP/USD and USD/CHF. That's all.

If you have any questions, then buy or borrow a book about Elliott Waves, or find a tutorial on the internet.

Here is another two related websites that I suggest you read entirely.
Don't necessarily buy the software or subscribe to their service, but at
least read all the things they say. It is very informative and interesting:

http://www.elliottician.com
http://www.freedomthrutradingforex..../trsn_land.aspx

Be very patient and careful and practise ALOT.

Good luck
Thanks a lot ITME I will study them...
  • #1,365
  • Oct 11, 2006 5:30am Oct 11, 2006 5:30am
Wednesday October 11 at 6:00 ET

Trade Signal #204 Sell EUR/USD at 1.2555

Stop is 1.2583

Target is 1.2460

Risk is 30 pips

Reward is 93 pips

Reward : Risk ratio is 3.1 to 1

For research purposes only.
  • #1,366
  • Oct 11, 2006 5:39am Oct 11, 2006 5:39am
Wednesday October 11 at 6:00 ET

Trade Signal #205 Sell GBP/USD at 1.8580

Stop is 1.8623

Target #1 is 1.8450

Risk is 47 pips

Reward is 126 pips

Reward : Risk ratio is 2.7 to 1

For research purposes only.
  • #1,367
  • Oct 11, 2006 5:45am Oct 11, 2006 5:45am
Wednesday October 11 at 6:00 ET

Trade Signal #206 Buy USD/CHF at 1.2690

Stop is 1.2676

Target is 1.2820

Risk is 18 pips

Reward is 126 pips

Reward : Risk ratio is 7.0 to 1

For research purposes only.
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  • #1,368
  • Oct 11, 2006 5:57am Oct 11, 2006 5:57am
now i like those calls....phewitt
{Link Removed}]
  • #1,369
  • Oct 11, 2006 7:01am Oct 11, 2006 7:01am
Wednesday October 11 at 8:00 ET

The following is a pure prediction trade. We could adjust the parameters as we approach the entry time. It constitutes the waves 3, 4 and 5 of an upwards impulsive five wave trend that started October 2. The current price of GBP/CHF is 2.3582 .
Trade Signal #207 Buy GBP/CHF at 2.3470

Stop is 2.3418

Target is 2.3965

Risk is 64 pips

Reward is 480 pips

Reward : Risk ratio is 7.5 to 1

For research purposes only.
  • #1,370
  • Oct 11, 2006 7:09am Oct 11, 2006 7:09am
We've seen a bit of consolidation in the GBP in the London session this A.M. We could yet see a move down in the GBP as traders may buy into a Hawkish FOMC report, but I think there is significance in the fact that traders apparently are holding their positions so far in the face of an important release.

I think a sustained break above 8600 will indicate that a serious sell off of positions is occuring prior to the FOMC minutes. It could run 50-60 pips above that if traders lose their stomach for holding profitable positions in the middle of a release. If the GBP holds below 8600, it will indicate that traders are confidant that the minutes will be hawkish and that their $ long positions will get even more profitable.

If you're interested in trading the FOMC minutes you'll need to watch the pair all morning. Based on the above, you'll know how traders who are already in the market stand. If you want to go with them, take a short position in the GBP prior to the FOMC release only if the pair is 8580 or lower. If it's gone into the mid 8600's stay away. Anything higher then the mid 8600's may be evidence that traders are selling their long positions into the rumor of a dovish release, but this is more risky in my opinion. Personally, i'm hoping to see it sitting right where it is now-8580.
  • #1,371
  • Oct 11, 2006 8:16am Oct 11, 2006 8:16am
Ok after reading Itme's trade signals I think this is going to be really interesting, because we are going to see what happens when the fundamentals are $ bullish-the money already in the market is $ bullish and EW is $ bullish. Truly a perfect storm if one exists!!
  • #1,372
  • Oct 11, 2006 9:42am Oct 11, 2006 9:42am
itme,

We have a lot of traders here that have a system or a combination of systems that they use for entries, targets, stops, etc. I obviously believe a system is paramount, as I use one myself, it keeps us focussed and our objectives realistic. The one factor that seems to be repeating itself is the fundimentals vs the technicals. Some use one over the other while others use them both. Some argue that the fundies drive the techs....probably so! However, I believe that 70-80% of the fundies are factored into the market days ahead of the announcement. For the most part the estimates are pretty close and it is only the 20-30% suprises that throw the markets for a wild ride...(this is excluding the 30 min of daytrader "craziness" around announcement time). Because the news is built into the market is why Elliot Waves are for the most part relatively accurate (70-80%) most of the time. Same with my WaveTrade. When I trade I am assuming no suprises, it is the suprise news that may take my system off the rails, but that only happens 20-30% of the time and this is why I don't factor in news into my trading, I watch it closely however for those suprises. What are your thoughts on the news being factored in?

Northpro
  • #1,373
  • Oct 11, 2006 10:15am Oct 11, 2006 10:15am
I think you're right-both factors have to be taken into consideration-that's why I think today is really intersting, because the fundamental's, techs and EW all seem to be sayin the same thing...it'll be very instructive to see what happens and I think the minutes and the market's reaction are going to really tell the tale...
  • #1,374
  • Edited 5:21pm Oct 11, 2006 2:02pm | Edited 5:21pm
Well, we had an intersting result for the FOMC minutes trade. I shorted the GBP @ 74 and got out @ 30. One trade absolutely does not make a career-but perhaps a bit of credit can be given for a correct assesment of where the market was and what the professional money was expecting the minutes to show. My opinion was based on the fact that traders had not taken the profits gained from Friday. Because they were still in the market (long the $) I assumed that they wouldn't be leaving their profits on the table to be eaten up by a dovish take on the minutes. The comments by the 2 Fed Govs last week might have been a clue and the bond market was apparently of the same thnking. Inflation bonds were showing higher rates and the rate on the 2 yr note (the most sensitive treasury) had also increased.

We'll have to see how the market shakes out from here. I don't think any major moves are going to occur between now and the London open. Perhaps profits will be taken then, maybe not. Once the smoke clears after London, another assesment can be made. No predictions here what may happen, but the temptation to take some profits will be awfully strong. I plan to watch it.

There are several important economic releases scheduled for tomorrow including jobs, trade balance and beige book. Again we will try to assess what the smart money is doing prior to those trades which will make the London session will bear close watching.

BTW-Props to ItMe for her calls on the EUR and GBP. They definately bolstered my opinion and gave me more confidence. I can't wait for the next time the fundamentals match the EW analysis!
  • #1,375
  • Oct 11, 2006 10:27pm Oct 11, 2006 10:27pm
Wednesday October 11 at 23:30 ET

This evening's positive Australian economic data sent the price of AUD/USD up to complete a compound upwards corrective wave (Wave 4) of a downwards fifth wave. This gives us the opportunity to attempt to catch the third, fourth and fifth downwards component waves of this fifth wave down. Not a great trade, but good to experiment with.

<table class="tborder" align="center" border="0" cellpadding="3" cellspacing="0" width="100%"> <thead><tr><td class="alt1">9:30pm</td> <td class="alt1" align="center">AUD</td> <td class="alt1">Employment Change</td> <td class="alt1" align="center">
</td> <td class="alt1" align="center">31.4K</td> <td class="alt1" align="center">-6.0K</td> <td class="alt1" align="center">23.4K</td> <td class="alt1" id="collapsecal_eventanalysis_2780" style="" align="center">
</td> </tr> </thead> <tbody id="collapseobj_eventanalysis_2780" style="display: none;"> <tr> <td class="alt1" style="background-color: rgb(240, 254, 237); padding-bottom: 11px;" colspan="9" width="100%">

<fieldset class="smallfont" style="padding: 4px 10px 2px; width: 70%; margin-bottom: 9px;"> <legend>Investica Analysis</legend>

Strong employment gains would increase pressure for higher interest rates.

</fieldset> <fieldset class="smallfont" style="padding: 4px 10px 2px; width: 70%; margin-bottom: 9px;"> <legend>Definition</legend>

Measures the number of new jobs created in the previous month. A rising trend has a positive effect on the nation's currency. The number of new jobs being created is one of the most important indicators of the economy's health because consumer spending, which is highly correlated with labor conditions, makes up a large portion of GDP. This report is the first of the month that relates to labor conditions, making it susceptible to big surprises.

</fieldset>




</td> </tr> </tbody><thead> </thead> </table> <table class="tborder" align="center" border="0" cellpadding="3" cellspacing="0" width="100%"> <thead><tr><td class="alt1">9:30pm</td> <td class="alt1" align="center">AUD</td> <td class="alt1">Unemployment Rate</td> <td class="alt1" align="center">
</td> <td class="alt1" align="center">4.8%</td> <td class="alt1" align="center">5.0%</td> <td class="alt1" align="center">4.9%</td></tr></thead> </table>
Trade Signal #208 Sell AUD/USD at .7465

Stop is .7493

Target#1 is .7350

Risk is 33 pips

Reward is 110 pips

Reward : Risk ratio is 3.3 to 1

For research purposes only.<!-- / message --><!-- controls -->
  • #1,376
  • Oct 12, 2006 8:49am Oct 12, 2006 8:49am
Looking at the trade balance this morning...I see that traders who have gone $ long from friday are still in the market. There has been some minor consolidation in the EUR and GBP, but the $ bullish positions have held thru London and early NY. The Fed minutes have had an impact, of course, in strengthening the sentiment.

We may have a situation similar to yesterday before the FOMC minutes announcement: Traders are holding their profits in the face of an important ecomonic announcement. You may want to hold right along with them. Short the EUR with about an 8 pip stop.

14.45 EDT Quite a bumpy ride with the EUR and GBP after the TB number, but we have indeed seen a fascinating result. The trade bal widened ($-) when a more narrow number was expected. We did see the EUR and GBP spike up about 20 pips or so after the number was released. That's when things got very interesting.

Why did the EUR and GBP retrace to pre-release levels? Well consider this scenario: Traders have been $ long since last Friday and have remained so this week as we have not seen the profits made since then taken out of the market to any significant degree. When the TB was released and some $ shorts got into the market-the traders who have been $ long since last friday bought more $'s, in support of their $ long positions. The $ bulls are controlling this market right now.
  • #1,377
  • Edited 9:51am Oct 12, 2006 9:28am | Edited 9:51am
Thursday October 12 at 10:30 ET

The small upwards Wave c of the corrective Wave 4 trend in AUD/USD (which according to EW Theory was inevitable) received a medium sized boost from the favorable employment data yesterday, exacerbating the upwards wave, causing our stop to be hit. It carried AUD/USD higher than the first likely reversal value, and then past two more values to the fourth which is a very high probability reversal value of .7509. As Newstrader says below, the dollar currencies move in their own sphere independent for the most part from the European and Asian currencies. It is common for one of the dollar currencies to rise while GBP and EUR are falling relative to the USD. This accounts for the large swings in EUR/CAD, EUR/AUD, AUD/JPY, etc.

As reason and previous experience indicates, the likelihood of success of this re-entry trade is higher than the previous, initial trade, and it is a better trade in terms of reward: risk ratio also. The entry price is higher, the upwards trend is larger, increasing the probability of reversal; and also the potential earnings are larger, improving the reward : risk ratio, even though the stop size is larger.

Re-enter Trade Signal #208A Sell AUD/USD at .7506

Stop is .7541

Target#1 is .7350

 Risk is 40 pips

Reward is 151 pips

Reward : Risk ratio is 3.8 to 1

For research purposes only.

_________________________________________________

Previous trade signal:

Wednesday October 11 at 23:30 ET

This evening's positive Australian economic data sent the price of AUD/USD up to complete a compound upwards corrective wave (Wave 4) of a downwards fifth wave. This gives us the opportunity to attempt to catch the third, fourth and fifth downwards component waves of this fifth wave down. Not a great trade, but good to experiment with.

<table class="tborder" align="center" border="0" cellpadding="3" cellspacing="0" width="100%"> <thead><tr><td class="alt1">9:30pm</td> <td class="alt1" align="center">AUD</td> <td class="alt1">Employment Change</td> <td class="alt1" align="center">
</td> <td class="alt1" align="center">31.4K</td> <td class="alt1" align="center">-6.0K</td> <td class="alt1" align="center">23.4K</td> <td class="alt1" id="collapsecal_eventanalysis_2780" style="" align="center">
</td> </tr> </thead> <tbody id="collapseobj_eventanalysis_2780" style="display: none;"> <tr> <td class="alt1" style="background-color: rgb(240, 254, 237); padding-bottom: 11px;" colspan="9" width="100%">

<fieldset class="smallfont" style="padding: 4px 10px 2px; width: 70%; margin-bottom: 9px;"> <legend>Investica Analysis</legend>

Strong employment gains would increase pressure for higher interest rates.

</fieldset> <fieldset class="smallfont" style="padding: 4px 10px 2px; width: 70%; margin-bottom: 9px;"> <legend>Definition</legend>

Measures the number of new jobs created in the previous month. A rising trend has a positive effect on the nation's currency. The number of new jobs being created is one of the most important indicators of the economy's health because consumer spending, which is highly correlated with labor conditions, makes up a large portion of GDP. This report is the first of the month that relates to labor conditions, making it susceptible to big surprises.

</fieldset>











</td> </tr> </tbody><thead> </thead> </table> <table class="tborder" align="center" border="0" cellpadding="3" cellspacing="0" width="100%"> <thead><tr><td class="alt1">9:30pm</td> <td class="alt1" align="center">AUD</td> <td class="alt1">Unemployment Rate</td> <td class="alt1" align="center">
</td> <td class="alt1" align="center">4.8%</td> <td class="alt1" align="center">5.0%</td> <td class="alt1" align="center">4.9%</td></tr></thead> </table>
Trade Signal #208 Sell AUD/USD at .7465
Stop is .7493
Target#1 is .7350
Risk is 33 pips
Reward is 110 pips
Reward : Risk ratio is 3.3 to 1

For research purposes only.
  • #1,378
  • Oct 12, 2006 9:30am Oct 12, 2006 9:30am
Trade Signal #208 Sell AUD/USD at .7465

Stop is .7493

Target#1 is .7350

Risk is 33 pips

Reward is 110 pips

Reward : Risk ratio is 3.3 to 1

For research purposes only.

The fundamentals that apply to EUR/USD & GBP/USD may not apply at times to this pair and the NZD/USD pair. You have the carry traders here to take into account; the capture of the interst rate differential controls a lot of what happens here...
  • #1,379
  • Oct 12, 2006 11:27am Oct 12, 2006 11:27am
I cannot personally vouch for the methods, the teacher, or anything else, but here is some info nevertheless that might interest some aspiring trend reversal traders:

"Futures Trading Summit Nov 15 - 17 in Las Vegas:
8:00 – 9:30 a.m.
Trading Stock Index and Currency Futures using Gann and Objective Elliott Analysis
Presenter: Andy Bushak, Professional trader (over 20 years)

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Session topics include:

 

  1. Specific Trend and Counter Trend Strategies
  2. Effective applications of Gann analysis. It’s not just about price and time – it’s also about “reading the bars.” Learn how to read buying and selling behaviors
  3. How to trade each phase of the market: Trend, Counter Trend and Trading Range
  4. How to detect future market direction with basic Elliott and Gann techniques
  5. Why risk and money management are as important to individual traders as they are to professionals
  6. How to set risk to one bar and how to go risk free as soon as possible
  7. Road maps for current futures markets

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If you cannot watch the simulcast during this time - still sign up and you will receive the taped archive of the event.

http://www.fts.cme.com/index.html

  • #1,380
  • Oct 12, 2006 12:48pm Oct 12, 2006 12:48pm
Thursday October 12 at 1:45 ET

Regarding Trade Signal #206 Buy USD/CHF at 1.2690 , upon further study we discovered that we placed our stop in the wrong location, which caused this trade to be stopped out. The stop should have been at 1.2664. The low was 1.2676. We should therefore still be in this trade. Therefore, we shall re-enter at 1.2692 or so, which is close to our original entry price.

Re-enter Trade Signal #206 Buy USD/CHF at 1.2692

Stop is 1.2664

Target is 1.2820

Risk is 32 pips

Reward is 124 pips

Reward : Risk ratio is 3.9 to 1

For research purposes only.
<!-- / message --><!-- controls -->

____________________________________________

Previous trade signal:

Wednesday October 11 at 6:00 ET

Trade Signal #206 Buy USD/CHF at 1.2690
Stop is 1.2676
Target is 1.2820
Risk is 18 pips
Reward is 126 pips
Reward : Risk ratio is 7.0 to 1

For research purposes only.
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