Low Risk, High Reward Trading Experiment

Wednesday October 18 at 13:45 ET

On Monday October 16 at 5:00 ET when the price was about 104.70 we entered the prediction trade signal Signal #210 Buy CAD/JPY at 104.15
The price subsequently fell to the predicted entry price on October 17, and continued on past that price to 103.72, 6 pips past our stop. However, at the time the entry was triggered the stop should have been adjusted to 103.59 according to our system. Furthermore, an Elliott Wave analysis indicates that the downwards trend was not yet complete at the predicted entry point, and that another impulse wave was indicated. The next high probability reversal target should then have constituted the entry point. That point was at 104.90, which would have been the optimal entry point according to our system, with the stop at 104.59 or even lower. So we are technically still in this long trade, which has risen so far to 104.74, but we entered at a sub-optimal price, 25 pips higher than we would have entered had we monitored the situation at the time of entry and made the correct determinations.

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Previous trade signal:

Monday October 16 at 5:00 ET
Trading Wave 5 up:
Trade Signal #210 Buy CAD/JPY at 104.15
Stop is 103.78
Target is 106.40
Risk is 47 pips
Reward is 215 pips
Reward : Risk ratio is 4.6 to 1

For research purposes only.

Dont get to COCKY MR.monarch for those who are surely will get burned You made a nice call on this one for 60 pips. Thats ur style of trading 20 to 60 pips. But I personally tade a little longer term so tend to look for longer moves with greater return and less risk. Its fine to trade the mini waves if thats ur style of trading congrats on this one. LOL But myself ITME and Nortpro like longer moves. We shall see what will happen. With this one
Keep in mind you had alot of news that helped today on this one which caused over extension on this wave.http://www.forexfactory.com/forexfor...ons/icon12.gif

I apologize if I came across cocky, it was not my intention at all. I only stated that if I were to trade upon someone else's word, than I would be basically "trading for you." Sorry if you took offense to my response. I agree with what you said about the GBP/USD going North, I will make my pips along that way also.

I trade a target if 100 pip gain, which may not be the same amount you trade for, but it could accomplish as much depending if I put 25-50 Lots per trade on it.

I have read your thread and respect your opinion on FOREX.

I do recall you being the one to come into itme's thread saying:
Take ur pips now because this baby is gonna keep going up the rest of the week. We are in 1 wave on daily chart GBPUSD should go to 1.9050http://www.forexfactory.com/forexfor...ons/icon12.gif
If I made decisions upon someone elses thoughts of where they thought the market was going, I wouldn't be an independant trader, only a dependant follower.

Good Trading to you,

Monarch

Well put Monarch

Good trading to you as wellhttp://www.forexfactory.com/forexfor...ons/icon12.gif

Hi itme, Are you sure about sell position in AUD/USD? It formed a bullish engulfment pattern yesterday.

Wednesday October 18 at 20:15 ET

Re-entry opportunity #205C Sell GBP/USD at 1.8695

My second trading partner who I trained but who lives in another city came for a visit today. We analysed the GBP/USD together and recognised a re-entry opportunity at 1.8695 using our Q-E Trading System. He entered it into his trading station. I will record it here as part of our test of the trading system. This is not a similar trade to our usual trades in this experiment, because it is a high precision entry trade with a smaller target. In this case we are trading Wave 4B down, with an expected target of about 1.8550 - 1.8600. But we didn't enter at the top of this wave at 1.8738 either, which is optimal, but got in at the top or beginning of the fifth downwards wave of part "a" of the downwards Wave 4B (which consists of "abc"). We don't have a reliable means of predicting the target ahead of time, so we will have to monitor the market and wait for the "abc" pattern to unfold.

The trading partner I refered to above reports that he is now able to enter and win trades with a 2 to 10 pip accuracy now about 80% of the time, the result of over 1 year of practise. He employs a 25 pip stop, and has recently won 12 trades in a row, which is excellent. Like my other trading partner, though, he isn't entirely clear about the targetting system, and often exits the trades prematurely.

We also recognised the top of the recent upwards trend in the EUR/USD at 1.2543. He entered a short trade at that price in that currency pair also.
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Previous trade signals:

Wednesday October 18 at 3:45 ET
Trade Signal #205B Sell GBP/USD at 1.8742
Stop is 1.8773
Target #1 is 1.8450
Risk is 35 pips
Reward is 288 pips
Reward : Risk ratio is 8.2 to 1

For research purposes only.

p.s. - after a nap, I woke up to check this "trade" but the price had not risen to hit our entry price. After checking why, I found that I had made a miscalculation. The most probable reversal value in this situation according to our system is 1.8736, not 1.8742 which I employed as an entry price yesterday. And the price rose to exactly 1.8736. So chalk one up for our trend reversal prediction methodology, zero for operator accuracy. I was giving more emphasis to the Elliott Wave than I should have. The fifth micro-wave upwards was a failed wave, which is what I thought it seemed to be when I did my wave count. However, out of fuzzy logic I assumed it would come up one more time a little higher than the Wave 3, which it often does, but sometimes doesn't. In this case it didn't, indicating a bearish bias.

The price of GBP/USD has subsequently fallen to 1.8663, 73 pips below what our entry price should have been. Our Wave Count puts us in the third leg (down) of the first downwards wave of the fifth larger downwards wave of the "b" leg (down) of an upwards "b" wave that started December 28, 2005, part of a larger downwards "B" wave that started, coincidentally, December 15, 2004.
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Tuesday October 17 at 6:00 ET

Trade Signal #205A Sell GBP/USD at 1.8675
Stop is 1.8705
Target #1 is 1.8450
Risk is 35 pips
Reward is 220 pips
Reward : Risk ratio is 6.3 to 1

For research purposes only.
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Thursday October 12 at 22:15 ET

Adjust stop on Trade Signal #205 Sell GBP/USD at 1.8580 to 1.8665
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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.
<!-- / message --><!-- edit note -->

<!-- / icon and title --><!-- message -->Thursday October 19 at 3:40 ET

The wave count refered to in the previous chart turned out to be erroneous
in as much as we felt that the upwards "abc" was complete, whereas in fact only the "a" was complete. Also, another aspect of our analysis which identifies probable wave perimeters suggested that the upwards wave was incomplete. Though we didn't specify a stop above, the stop would have had to be placed 15 pips above one of our main probable reversal prices at 1.8722 - namely at 1.8737, and possibly higher.

Re-entry opportunity #205D Sell GBP/USD at 1.8724

Hi itme,
I very strongly suggest you use fib lines as exhaustion points to take profit/partial profit. Either download the MT4 1h-Vegas-Tunnel indicator and for cable use risk level 2 or 3 I believe with Fib lines 144 and 233 pips away from the tunnel or get the 4h-Tunnel and use the 233 and 377 fib lines (risk model 3 on mine). You can find the documents and files here.

These are high probability exhaustion/reversal points as they mark a certain distance from a "tunnel" made by an average.
They work quite well unless the trend is really strong or overextends and they make sure you don't exit too premature. I can only recommend looking into this, it's as simple as putting one on an MT4 chart, adjusting the risk level to "wrap in" price properly and verifying yourself that it works just by looking at it
Just an idea, it sure does work fine in my opinion

Also, if I may, you might want to look into price action analysis as you sometimes took trades early against formations that suggested a higher price (AUDUSD short I believe was an example when price action had formed a double low with a higher close=>bullish formation and you tried to go against it). I don't want to change your trading style but enhance it

Hope this helps.

Best regards,

SeekingLight

I would think GBPUSD still going further up to retest 1.9100 because the expectation of Pound interest rate increase on November. However, the ride up will be a lot of noise due to expectation of Dollar interest rate increase. Since everyone are convinced that the US economy is improving therefore they will be probably no Dollar interest rate increase. I think we will see Pound dropping on November when the actual interest rate is released. This is just a newbie speculation on fundamental point of view.

I think a good trader MUST NOT trade what 'he thinks', but to be a good trader you MUST trade what you see.

I dont care about expectations, and all the bullshit that economist, fed, boe, ecb put on the table.
They are worst then kids. Everything they say today is the countrary of what the said yesterday and also different of what the will say tomorrow

I trade with other 3 traders, much more experct then me, that make business on forex, they tought me to trade what I see, stay out from news, which fortunatly I 'used' until was a good way to add extra money to your account , and I cant miss to say they still help me a lot and gave me very good materials.

But I repeat, trade what you see, which anyway, is what is really happening

Trucco, thanks for the tips. I try to figure out why on some occasion that even the best technical signal like Elliot Wave fail to predict the movement such as GBPUSD at the moment. Therefore I resort to fundamental reason. May I know which time frame is the best to trade what you see? and which technical indicator do you use?

Hi Itme,

What is the Q-E system, seems it has been doing well for your partner, how can I get it?

Are you still in the short EUR/USD trade? I see it trading above 1.2627 and looks like it is heading to 1.27.

Hi AbgZuhaini,
Thanks for replay.

I dont know if Elliot Wave are the best indicator because I dont use it.
I dont think there is the best or the worst, the good or the bad indicator.
It would be probably too complicated to explain what I use to trade, and I think the persons which tought me wouldnt be very happy to disclous their job.
but for instance this morning, where many people were saying to go short or stay short, I saw the pound long, for many reasons: indicators I use, last days behaviours, time of reactions etc. ( you can see on my thread).
I also fail, often, Im not a perfect trader at all, and probably I would be a bad one if nobody tought me or gives me often hints on what to do.

I just see day every day more that when you stuck with one idea and you dont change it, you keep loosing.
Is better to trade what is happening and dont have many ideas of what will be.

If for instance you think now that the pound will go to 1,90 because 2 boe members votes were positive to hike, or for any other reason you find valid to think it will go to 1,90, you risk to keep going long, when maybe what is happening is telling you that its time to restart the short.
I made many times this mistake in the past.


Ofcourse Im aware of what is happening apart of the price action and indicators, but I try to trade what I see.

Hope I could answer you

Since there are EW models employed I wanted to ask...
I only know a very, very simplified model, but would it go a little bit like in the attached chart?

Just curious since the FE projection from the 1-2-3 really caught the top by a couple of pips of the 261.8% overextension

Here is our Elliott Wave count for GBP/USD. Once the uptrend, which is the "c" of the Wave 4 upwards "abc" is complete, then we will have Wave 5 down. This will be a good low risk / high reward trade. The time is probably in the next 24 hours, maybe tomorrow morning.

http://www.comteche.com/free-image-h...s/96l03496.gif

the numbers at 4:30 am are bad for GBP. Then wave will work, but not b/c of TA but b/c of fundamentals

by my wave count it shouldn't goto 1.2700 because that would put wave 4 into parameters of wave 1. And that shouldn't happen.

is this your same wave count Itme?

Friday October 20 at 2:00 ET

Our prediction:

EUR/USD will rise in a fifth wave of this strong upswing to a height of between 1.2675 and 1.2710. The rule about the fourth wave overlapping the first wave is just a guideline which the forex market doesn't respect all the time. The same with all the other "rules". The real world is messy, and those untidy economic data releases, the frequently over-exuberant trader psychology, plus a variety of other technical factors like major support and resistance lines tends to upset the ideal world of pure Elliott Wave theory (or other idealised technical patterns) fairly often - distorting, compressing and stretching the wave forms, disguising the underlying reality unless you are very perceptive and familiar with all the tricks the market plays.

My wave count:

http://www.comteche.com/free-image-h...s/ibp26665.gif

Seeking Light:

An impulse trend consists of five subwaves: Waves 1,2,3,4 and 5
An impulse trend is followed by a corrective trend consisting of three subwaves: Waves A, B, and C

This same pattern repeats at all levels of magnitude in a fractal design.

That pretty much sums it up.

The basics anyways.

Your wave count for the big picture disagrees from mine. Your a is where I put 1. b is 2. c3 is 3. 4 is 4, and 5 is 5. 1-2-3-4-5 = C. b is 1 of 1-2-3-4-5

Good morning Itme et al.

There is a confluence on the Cable @ 1.8851/4.

According to Joe DiNapoli, this is almost impenetrable at first and mostly the trade will stall and reverse here.

Best wishes.