Low Risk, High Reward Trading Experiment

I recommend ONLY entering trades at the CORRECT TIME. To do otherwise is to accept substandard and non-optimal reward : risk ratios. It is difficult enough to trade profitably, without deliberately performing sub-optimal actions.

GBP/JPY may fall again to a good entry price. If not, I suggest scouting around for another trading opportunity, waiting for a better price, waiting on the sidelines, or reading a good book.

In this case, if one entered the trade even 10 pips too late, at 1.2410, then the reward would be 10 pips less, and the risk 10 pips greater. The reward : risk ratio would then be downgraded from to 4.0 to 2.8 .

Thank you for your reply... I anticipated that answer.....

hi when is the next entry point for usd/chf...

Thanks for your very precise trade .
As matter of fact I 've counted Cad/jpy in following way .
am I right?

{image deleted - please repost 600x600 max}

I have been trying the following on a demo account. When reading the recommended trade, the price often graduates towards the stop soon afterwards before (sometimes) going in the recommended direction. So, I do not enter at the recommended point but about 5 to 10 pips short of the stop ( depends on recommended risk value) and this has (a) increased the risk/reward possibility and (b) given the chance to exit early for same reward. It has worked!!!! (Although I never ride all the way to the given target, my demo account is a simultated mini account and money management is tight just now). If the recommended trade is already heading towards the target, I just watch what happens

Dear oedipean,

I agree with your wave count, with the exception of the first small red numbers, which I located in slightly different locations. What type of charting software do you use? I like the colored bands of color.

The larger scale wave count is also very important when recognising a low risk : high reward trade setup.

1) trading without a system

2) not following one's system

3) trading with a system that doesn't work

4) entering into a trade without a pre-determined stop or exit strategy

5) not adhering to one's stop or exit strategy (changing one's trading plan), based on the assumption that eventually the market "has to turn around" , or because one doesn't want to take a loss

6) Exiting a winning trade out of fear of losing what one has made.

For a long time I was an extremely efficient losing trader. My accounts went down so fast that it amazed me. My virtual accounts would go from $50,000 down to zero in record time!

I figured that if I created a software package to reverse all my trades behind the scenes, then I would become a super successful trader. I envisioned seeking out the worst traders in the world, and harnessing their negative capability with my trade reversal software, sticking them in a room and telling them to do their very best, and then sitting back watching the profits roll in.

I still think it is a very good plan.

The reason is that the logic of the typical trader is the exact opposite of what it should be. They enter a buy trade at exactly the moment that they should be entering a sell trade. When they see the market raging off in one direction, they enter a trade in that direction. But by then the trend is over, and they immediately go into losses. And then they hold onto their losing trades until they become huge. Meanwhile if they happen to get into a winning trade, then they exit their winning trades as soon as they are up 5 or ten pips.

A perfect system for liquidating accounts!

So people should do the exact opposite of what they usually do. But this goes against their naive logic.
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Thanks, FXFrancais, for your comment above. This is a useful comment by someone actually trading incorporating some aspect of the contents of this thread into their trading methodology. FXFrancais apparently takes note of our trade signals, but doesn't accept them as finished products, but rather as inputs into his own trading system which is adapted to his own knowledge and approach.

Monarch, FXFrancais and others pay heed to our research, and then apply the information to their own trading system. FXFrancais took note of a typical behaviour of our trading experiment, namely the frequency with which the price moved close to our stop before reversing. Another interesting observation that some people may have noticed is that our second entry attempt after a failed trade is more likely to succeed than the first attempt, and our third attempt is more likely to succeed than the second. Another observation is that trades more often travel 100 pips than hitting our target when the target is much further away.

As those who have read this thread know, we are learning and experimenting, and creating experimental "trade signals" as part of our research and skill development. The process is slow and painstaking, but enjoyable and fruitful for us. We have always discouraged people from "believing" in our "trade signals" because we have not yet finalised our trading system nor clarified all the subtleties of our model and neither have we developed the requisite skill to employ it effectively. But at the same time, we know that our model has a great deal of merit. However, the "devil is in the details" in our situation.

Generating a profitable trade signal is a challenging task, because #1 and most important, one must have a general idea of what the market is likely to do, which in our case is estimating the turnaround point of larger trends. Secondly, one must be able to accurately determine the best entry point, stop and target, each of which is a formidable task to accomplish even once, let alone time and again.

So once again we re-iterate: exercise great caution in this market. Never become complacent. It is extremely difficult to predict the reversal points, let alone predict accurately. Do not believe in the accuracy of anyone's trade signals. Make your own independent determinations. Take responsibility for your own trades. This is a project in development, and we certainly haven't ironed out all the bugs yet.

If someone were to trade these experimental signals, we suggest entering at a more favorable price than indicated, placing the stop at a safer place than indicated, and exiting at a safer place than indicated. Not only that, but consult an announcement calendar, and pass your trade through the filter of another trading system if possible.
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Wednesday November 8 18:30 ET

Trade Signal #230 Buy GBP/USD at 1.9035

Stop is 190.14

Target is 1.9130

Risk is 25 pips

Reward is 91 pips

Reward : Risk ratio is 3.6 to 1

For research purposes only.

Hi,

Question stupid......

Wednesday November 8 14:30 ET

ET = gmt + ????

Thanks,

It really doesn't matter what ET is in GMT. All that is is the time the signal was given. However,it is GMT-5 I believe.

andersenws

Hi,

It is important for me therefore I am in GMT-2 (Brazil).
Thanks,

i dont agree with this one. i think gbpusd will go down as for heading wave A. But who knows, with interest rate statement today, it will be a spike up

Thursday November 9 at 00:00 ET

Agreed, Kenario, I think GBP/USD will go down again to about 1.9000 or 1.8965, or even 1.8935 to complete its present downwards corrective wave before it rises again to above 1.9100, if it does so.

Therefore:

Exit GBP/USD at market price of 1.9050

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Wednesday November 8 14:30 ET
Trade Signal #230 Buy GBP/USD at 1.9035
Stop is 190.14
Target is 1.9130
Risk is 25 pips
Reward is 91 pips
Reward : Risk ratio is 3.6 to 1
For research purposes only.

However i am looking to enter short a bit higher, maybe area of 1.9075(small wave C)

Please see attachment

http://img170.imageshack.us/img170/6360/gbppi1.th.png

Hi Kenario,

Thanks for the chart and input. I agree, a rise of GBP/USD to 1.9075 is quite possible, which could be a good short opportunity depending on the EW count at the time. I agree with your small white a , b, c's, but think that the big steep upwards 1-2-3-4-5 which tops at 1.9123 may actually be an ABC, and that we may be involved in a downwards 1-2-3-4-5 now which is a "C" of a large downwards ABC corrective wave.

Hedy, I think you got confused about the time because I made a mistake in my time, which I corrected. If I make a mistake, then there will be a discrepancy between the time I type and the time that the forum tags the journal entry with. Just refer to the forum time. It is sometimes not exactly correct, but it is always roughly right, and is given in Eastern or New York Time.

I heard that your people recently re-elected a populist president or prime minister. Is that correct?

thnaks for your guide.
Dear itme Its MTP . but counting is done manually .

Thursday November 9 3:00 ET

Trade Signal #231 Sell GBP/USD at 1.9073

Stop is 1.9106

Target is 1.8950

Risk is 37 pips

Reward is 119 pips

Reward : Risk ratio is 3.2 to 1

For research purposes only.

Thursday November 9 3:00 ET

Trade Signal #232 Sell EUR/USD at 1.2787

Stop is 1.2806

Target is 1.2720

Risk is 21 pips

Reward is 65 pips

Reward : Risk ratio is 3.1 to 1


For research purposes only.

Note how these two equivalent trades in GBP/USD and EUR/USD have an almost equivalent Reward : Risk Ratio. Usually the ratio is quite different between difference currency pairs even for a near identical trade.
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