Low Risk, High Reward Trading Experiment

thats a good post itme. Anyway, any prediction for next week, want to match with mine, what will be happening in the near future, muaaaahaa..

Sunday November 5 12:00 ET

It's not clear to me what will happen next with GBP/USD. The most likely scenario is a rise to 1.9150 or higher. In this case, there will be a good opportunity to sell GBP/USD with a target about 1.8850, 200 pips lower.

If GBP/USD rises again soon, then GBP/CHF will rise to a new high between 2.3950 and 2.4000. The most probable reversal point is 2.4000 - to be achieved on Monday or Tuesday. This will present a fine opportunity to sell this difficult to trade pair GBP/CHF for a large gain from the beginning of a large corrective downwards wave C-4 at 2.4000 targeting between 2.3250 and 2.3550 .

Monday November 6 at 4:00 ET

We advised an interim exit of trade on Friday pending a Wave 4 correction.
The correction finished at .7704, 17 pips higher. That would have been the perfect price to re-sell. If that was not done, then re-enter now at .7692.
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Previous Trade Signal:

Friday November 3 at 9:00 ET

Exit Trade Signal #221 Sell AUD/USD at 1.7750 at market price of .7687

Profit is 60 pips
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Tuesday October 31 at 13:00 ET
Trade Signal #221 Sell AUD/USD at 1.7750
Stop is 1.7776
Target is 1.7540
Risk is 30 pips
Reward is 205 pips
Reward : Risk ratio is 6.8 to 1

For research purposes only.
Note: the Elliott Wave count is not clear, so this is a low confidence trade, just an experiment.

Monday November 6 at 5:15 ET

If you went short on EUR/CAD at 1.4500 as suggested, then exited at the price of 1.4350, capturing a 140 pips profit, then we recommend re-entering the sell trade at 1.4405
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Previous trade signals:

Friday November 3 at 9:30 ET

If you went short on EUR/CAD at 1.4500 as suggested, then we suggest exit now at market price of 1.4350, capturing a 140 pips profit
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Update on Trade Signal #222 Sell EUR/CAD at 1.4428
Thursday November 2 at 10:00 ET

For a currently unknown reason, we entered this short trade Trade Signal #222 Sell EUR/CAD at 1.4428 prematurely. It was subsequently stopped out by 10 pips. Further wave studies indicated the likelihood of another impulse wave up, which has subsequently occured. It is possible to short EUR/CAD at the current price of 1.4500 and make modest profits while the price declines in a Wave 4 corrective wave a-b-c. There will be another wave up after that, bringing the price up to the same price as now or a bit higher, approx. 1.4525 .

That will be the ideal time to go short with a low risk / high reward trade.
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Wednesday November 1 at 2:45 ET
Trade Signal #222 Sell EUR/CAD at 1.4428
Stop is 1.4467
Target is 1.4150
Risk is 49 pips
Reward is 268 pips
Reward : Risk ratio is 5.5 to 1

For research purposes only.

Monday November 6 at 5:15 ET

If you exited this trade in anticipation of a largish Wave 4 correction at 104.38 as suggested, then re-enter buy trade at 104.21. The price actually rose 18 pips higher than expected, to 104.56, and the correction does not appear to be as large as expected.
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Previous trade signals:

Friday November 3 at 9:25 ET

Exit Trade Signal #223 Buy CAD/JPY at 102.93 at market price - 104.38 in anticipation of largish Wave 4 Correction

Profit is 135 pips
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Thursday November 2 at 10:00 ET

As predicted, CAD/JPY came down for one more downwards wave. It is now possible to re-enter at 102.93, 67 pips lower than we advised to exit. The exit price given was 10 pips from the recent high.

Re-enter Trade Signal #223 Buy CAD/JPY at 102.93

Stop is 102.39

Target is 106.00
Risk is 64 pips
Reward is 297 pips
Reward : Risk ratio is 4.6 to 1

For research purposes only.
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Wednesday November 2 at 20:00 ET
Exit Trade Signal #223 Buy CAD/JPY at 103.60

The wave count suggests another impulse wave down, so we will exit here and re-enter lower.
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Wednesday November 1 at 3:15 ET
Trade Signal #223 Buy CAD/JPY at 103.40
Stop is 102.88
Target is 106.00
Risk is 62 pips
Reward is 250 pips
Reward : Risk ratio is 4.0 to 1

For research purposes only.

Monday November 6 at 5:30 ET

If you temporarily exited Trade Signal #224 Sell AUD/CAD at .8787 on Friday at what was then the current market price of .8680 in order to capture 97 pips of profit, then it is now time to re-enter the short position after an upwards a-b-c corrective wave, at the current market price of .8732 . Stop is now .8794

(The price fell to an interim low of .8669, then bounced up 76 pips to a recent high of .8733.)

p.s. - a little later it rose a little higher, to .8749, before turning downwards again and descending to .8694

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Previous trade signal:

Friday November 3 at 10:45 ET

Temporarily exit Trade Signal #224 Sell AUD/CAD at .8787 at current market price of .8680 and re-enter short position after an upwards a-b-c corrective wave.

Profit is 97 pips
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Wednesday November 1 at 10:30 ET

Trade Signal #224 Sell AUD/CAD at .8787
Stop is .8811
Target is .8510
Risk is 34 pips
Reward is 267 pips
Reward : Risk ratio is 7.8 to 1

For research purposes only.

Note: current price is .8772. The price of AUD/CAD may not rise again to the entry price. However, according to our trading system .8787 would have been the correct entry price.

dear itme..
where the SL itme?
thanks

Hi Waskito,

Generally, if we do an interim exit / re-enter on a trade to capture some extra profits when we anticipate a somewhat large correction, then we should re-enter and use essentially the same stop as before. In most cases the stop can be adjusted somewhat towards the target, but not too much.

Hi itme ,hope you are ok , and thank for keep going nice thread .

2 questions :
1- where can I find realtime indices for currencies.
for example USD index , CAD index , JPY index ,EUR and other indices ?
.
2- Do u use indices in your analysis ?

Thanks .
best luck.

Hello itme,

I discovered your thread a few days ago, I founded extraordinary. I´m just demo trading for now and I would like to follow your trades and see how my indicators response. Anyway, what I really wanted to ask you is waht´s the exit point for the AUD/CAD sell?

Congratulations again and thank you.

Roche

"the exit point for the AUD/CAD sell" - Roche

In this thread we are performing research, and we employ the term "target" instead of exit point.

Target is .8510

Sorry, I know very little about indices, and don't know how to obtain such charts. They are a derivative of the major currency pairs and the cross currency pairs, and being a human invention, they may not conform to our theories properly. Also, I do not know if one can trade them or not. Maybe Vantage Point uses them as one of their studies to search for intermarket relationships. I suggest you ask the people who study that software.

thanks for guidance.

hey itme, i have a question, what do you think about GBP/JPY this week?

My thoughts: GJ should go down, due to GBP which will soft next couple days and in next it will give a corection at JPY.

thanks

itme,

would you have a record of pips made and pips lost since you started posting this?

thanks

Sorry, no record of pips exists. This is research, so our harvest is in knowledge and skill. We are striving for skill in investing, so we don't measure our achievement in pips, but in win / loss ratio, reward / risk ratio, duration of trades (shorter is better), frequency of trade opportunities (more frequent is better), distribution of losses (not clustered is better), and rate of return on capital (higher is better). We don't care in the least about pips, which is where we differ from most traders.

Our goal is 50% success at trades with a minimum 5:1 reward / risk ratio, with frequency of trades approximately one every day to two days, and losses evenly distributed ( not in clusters). This will generate a rate of return of 7,300,000 % in 40 trades.

Monday November 6 at 21:15 ET

The batch entry of trades which we entered on Friday after the non-farm payrolls big move was not at the end of a trend, only the end of a smaller wave (wave 3). Some of the pairs went only in the direction of the trade. Others went into the negative, then ended in the positive. We should reverse our positions about here and continue with the larger trend.

Sell GBP/USD at 1.9015 (+32 pips) / Target is 1.8945

Sell EUR/USD at 1.2742 (+ 50 pips) / Target is 1.2672

Sell AUD/USD at .7720 (+34 pips) / Target is .7672

Buy USD/JPY at 118.00 (-2 pips)

Buy USD/CHF at 1.2526 (+24 pips)

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Friday November 3 at 8:45 ET

Trade Signal #224 Batch trade concept:

Buy GBP/USD at 1.8983

Buy EUR/USD at 1.2692

Buy AUD/USD at .7686

Sell USD/JPY at 117.98

Sell USD/CHF at 1.2555

Dear itme,

do you have the SL and target?

I am not giving the above as proper LRHR trades, but as an experiment in prediction, and a study in how the various currency pairs behave both in concert and individually. But most importantly, as a demonstration in the deceptive illusion of signal service performance.

If I was a standard signal service provider, I would claim that I had made 138 pips in the past day or two. A naive trader would imagine that they could take that information at face value, and set off to conjure up all kinds of illusions about pips per day, pips per month, rate of return on capital, etc. Ideas such as 138 pips per day, 690 pips per week, 2,760 pips per month, at ten dollars per pip = $27,600 per month earnings!

However, how large would the account have to be to secure these earnings, and what rate of return on capital would that represent, and are the spreads and interest charges factored in, and is this actually representative of a typical, sustainable performance of the trade signal service?

In fact, the rate of return even on the few signal services which are profitable is pitifully low.

The reasons are manifold:

1) usually they trade numerous pairs at the same time, so one must divide one's capital into four or five parts, and usually the bulk of one's capital is on the sidelines, waiting for the odd ocassion when there are four or five simultaneous trades in progress. The capital on the sidelines is earning 0% return on capital. The pips are only earned by a small percentage of one's capital when one does earn profit on one or two trades per day, which is the norm, which greatly diminishes one's return on investment.

2) sometimes the spreads and interest charges are not factored in, as in the above example

3) the stop size is not considered. The stop size is usually quite large, especially relative to the target size, so the reward : risk ratio is not very high. This results in a low return on capital.

Example: assume a stop size for the above examples of 75 pips. Assume a spread of 4 pips per trade. Then the reward / risk ratio of the five trades would be as follows:

GBP/USD 28:75 = .373
EUR/USD 46:75 = .613
AUD/USD 30:75 = .400
USD/CHF -6:75 = - .08
USD/JPY 20:75 = .267

Now assume a typical recommended Risk Factor of 5% applied to the above reward : risk ratios to calculate the return on capital. If in a single day all the capital was at work in winning trades, such as my example provides (even though USD/JPY roughly broke even), which is very unusual, then the total return on capital would be the average of the five above RRR's multiplied by .05 (the Risk Factor).

The total daily return on capital for this example thus equals:

(.373 +.613 + .400 + (-.08) + .267) *.05 / 5 = .01573 which is 1.57%

Remember - this assumes that on a typical day in your normal signal service all the capital would be at work, which in practise almost never happens. In fact, usually over half of one's capital (and often much more) is sitting on the sidelines unutilised. It also assumes the earning of 138 pips in an average day, which virtually no signal service offers. It also assumes no substantial losses, which virtually no real signal service can offer.

Compare that with one 5:1 Reward : Risk trade with a Risk Factor of 20% which earns 5 * .20 = 100% return on capital in roughly one, two, or several days, and sometimes only a few hours.

To add to all the above mentioned basic problems with most signal services, in many cases the trades are not tradeable in the real world for various reasons, or the trade signal "performance", if one reads the fine print, is based on idealized assumptions that are totally impractical, like exiting each trade at the perfect moment, which one only knows after the fact.

Selling GBP/USD at 1.9053 with a stop at 1.9110 and a target of 1.8925 is a fair trade with a high probability of success, though a mediocre reward : risk ratio.