Low Risk, High Reward Trading Experiment

Wednesday November 15 at 7:30 ET

Trade Signal #242 Sell USD/CAD at 1.1405

Stop is 1.1423

Target is 1.1340

Risk is 22 pips

Reward is 61 pips

Reward : Risk ratio is 2.8 to 1

For research purposes only.

This may be the beginning of a Wave 4 downwards. This trade is not a system compliant trade, in that it is a corrective wave and it has a relatively low reward : risk ratio. However, we include it in order to test our model.

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p.s. - It is not clear to me on what basis I generated the above trade signal. The high probability reversal prices are at 1.1417 and 1.1426. That means that the entry price should have been at one of the above figures, and the stop should have been at 1.1451. So the above trade is not system compliant for several reasons. The highest price reached so far is 1.1427.

Wednesday November 15 at 7:30 ET

The current price is 2.3558.

This Trade Signal #233B Buy GBP/CHF at 2.3580 would have been stopped out by 1 pip when the price fell to 2.3548, except that our stop adjustment procedure would have lowered the stop to 2.3543 and allowed us to squeak by. The price then rose to 2.3643, 63 pips above our entry price, when USD/CHF rose strongly, which would have been an excellent exit price that someone studying the Elliott Waves on the 1 minute chart might have discerned, and then the price of GBP/CHF fell to 1.1953 when GBP/USD fell strongly.

We expect GBP/USD to rise strongly, which could propel GBP/CHF up to a conservative target of 2.3650, or an ambitious target of 2.3685. The original target of Target is 2.3730 is not likely to be met before the price goes down to a new low to finish off the downtrend.
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Previous comments and trade signals:

Tuesday November 14 at 5:15 ET
Trade Signal #233B Buy GBP/CHF at 2.3580
Stop is 2.3549
Target is 2.3730
Risk is 46 pips
Reward is 135 pips
Reward : Risk ratio is 2.9 to 1

For research purposes only.

Note: due to the fact that the reward : risk ratio for this trade signal is not very high, and the trade is counter-trend (Wave 4 upwards), this is not an advised trade, just a research study.
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Delay re-entry of long GBP/CHF trade in case it goes further south

After buying GBP/CHF according to Trade Signal #233A Buy GBP/CHF at 2.3630 the price rose to 2.3729, and we advised a temporary exit at 2.3724 to capture 80 pips of profit. The price has since fallen 72 pips to 2.3652.

After reviewing the situation it looks like there is a chance that GBP/CHF has not finished its downtrend yet, and may fall once more in a fifth and final wave to a new low at about 2.3565. We could re-enter our buy trade at about 2.3650, but this would be a little bit risky. There will be a better entry position for a low risk / high reward buy trade if the price falls to about 2.3565.
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Temporary Exit of Trade Signal #233A Buy GBP/CHF at 2.3630

Friday November 10 16:45 ET

We believe that USD/CHF is due to fall quite strongly about now (current high about 1.2417), bringing down GBP/CHF. Therefore we advise temporary exit of GBP/CHF long trade at 1.3724 to capture 80 pips of profit.
Re-enter long position following completion of A-B-C corrective downwards wave.
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Friday November 10 2:00 ET
Trade Signal #233A Buy GBP/CHF at 2.3630
Stop is 2.3597
Target #1 is 2.3865
Risk is 48 pips
Reward is 220 pips
Reward : Risk ratio is 4.6 to 1

For research purposes only.
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Comment on Trade Signal #233 Buy GBP/CHF at 2.3666
The trade concept Trade Signal #233 Buy GBP/CHF at 2.3666 was predicated on a failed fifth wave down. This turned out not to be the case, as a fifth wave materialised, carrying the price down to 2.3643 - precisely our stop [img]images/smilies/mad.gif[/img]. The problem is that I didn't calculate the most probable reversal values, and it turns out that 2.3643 is the most probable reversal value exactly [img]images/smilies/frown.gif[/img] . So, in a conservative strategy, we would not enter a trade before the most probable reversal value is reached, and furthermore, we would never place a stop precisely on a most probable reversal value, but 10 to 15 pips on the far side of it [img]images/smilies/smile.gif[/img] .
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Thursday November 9 12:00 ET
Trade Signal #233 Buy GBP/CHF at 2.3666
Stop is 2.3634
Target #1 is 2.3840
Risk is 47 pips
Reward is 160 pips
Reward : Risk ratio is 3.4 to 1

For research purposes only.

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EUR/CAD impending trade opportunity

<hr style="color: rgb(209, 209, 225);" size="1">On November 13 , 2006 I said " According to my analysis, if EUR/CAD rises to between 1.4645 and 1.4665 from its current price of 1.4555, and finishes a small upwards five wave pattern (starting at 1.4518), then it will possibly be a good short for a Wave 4 corrective wave down to about 1.4350."

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As of Wednesday November 15, this is the situation:

The price subsequently rose to 1.4631, close to the target entry price, then fell to 1.4550. The price may rise again to between 1.4645 and 1.4665 after it falls to about 1.4535, and present a good low risk : high reward opportunity to short this volatile pair. The current price is 1.4605, and appears poised to fall.

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dear itme
how about GBP JPY itme
thanks a lot
waskito

dear itme
how about GBP JPY itme
thanks a lot
waskito

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GBP/JPY has fallen this morning to 222.48, which appears to be the low for this downwards trend which took it down 280 pips from its recent high of 225.28. It is now headed back up to about 225.00 again as GBP/USD rises strongly.

The current price is 222.68

Wednesday November 15 at 10:00 ET

Trade Signal #243 Sell EUR/GBP at .6787

Stop is .6802

Target is .6680

Risk is 18 pips

Reward is 94 pips

Reward : Risk ratio is 5.2 to 1

For research purposes only.

This may be the beginning of a Wave 5 downwards.

Wednesday November 15 at 10:15 ET

Trade Signal #233C Buy GBP/CHF at 2.3520

Stop is 2.3494

Target is 2.3730

Risk is 40 pips

Reward is 196 pips

Reward : Risk ratio is 4.9 to 1

For research purposes only.

________________________________________________

Previous comments and trade signals:

Update on Trade Signal #233B Buy GBP/CHF at 2.3580 <!-- / icon and title --> <!-- message -->

Tuesday November 15 at 7:30 ET
The current price is 2.3558.

This Trade Signal #233B Buy GBP/CHF at 2.3580 would have been stopped out by 1 pip when the price fell to 2.3548, except that our stop adjustment procedure would have lowered the stop to 2.3543 and allowed us to squeak by. The price then rose to 2.3643, 63 pips above our entry price, when USD/CHF rose strongly, which would have been an excellent exit price that someone studying the Elliott Waves on the 1 minute chart might have discerned, and then the price of GBP/CHF fell to 1.1953 when GBP/USD fell strongly.

We expect GBP/USD to rise strongly, which could propel GBP/CHF up to a conservative target of 2.3650, or an ambitious target of 2.3685. The original target of Target is 2.3730 is not likely to be met before the price goes down to a new low to finish off the downtrend.
______________________________________________

Tuesday November 14 at 5:15 ET
Trade Signal #233B Buy GBP/CHF at 2.3580
Stop is 2.3549
Target is 2.3730
Risk is 46 pips
Reward is 135 pips
Reward : Risk ratio is 2.9 to 1

For research purposes only.

Note: due to the fact that the reward : risk ratio for this trade signal is not very high, and the trade is counter-trend (Wave 4 upwards), this is not an advised trade, just a research study.
________________________________________________

Delay re-entry of long GBP/CHF trade in case it goes further south

After buying GBP/CHF according to Trade Signal #233A Buy GBP/CHF at 2.3630 the price rose to 2.3729, and we advised a temporary exit at 2.3724 to capture 80 pips of profit. The price has since fallen 72 pips to 2.3652.

After reviewing the situation it looks like there is a chance that GBP/CHF has not finished its downtrend yet, and may fall once more in a fifth and final wave to a new low at about 2.3565. We could re-enter our buy trade at about 2.3650, but this would be a little bit risky. There will be a better entry position for a low risk / high reward buy trade if the price falls to about 2.3565.
______________________________________________

Temporary Exit of Trade Signal #233A Buy GBP/CHF at 2.3630

Friday November 10 16:45 ET

We believe that USD/CHF is due to fall quite strongly about now (current high about 1.2417), bringing down GBP/CHF. Therefore we advise temporary exit of GBP/CHF long trade at 1.3724 to capture 80 pips of profit.
Re-enter long position following completion of A-B-C corrective downwards wave.
__________________________________________________

Friday November 10 2:00 ET
Trade Signal #233A Buy GBP/CHF at 2.3630
Stop is 2.3597
Target #1 is 2.3865
Risk is 48 pips
Reward is 220 pips
Reward : Risk ratio is 4.6 to 1

For research purposes only.
_____________________________________

Comment on Trade Signal #233 Buy GBP/CHF at 2.3666
The trade concept Trade Signal #233 Buy GBP/CHF at 2.3666 was predicated on a failed fifth wave down. This turned out not to be the case, as a fifth wave materialised, carrying the price down to 2.3643 - precisely our stop [img]images/smilies/mad.gif[/img]. The problem is that I didn't calculate the most probable reversal values, and it turns out that 2.3643 is the most probable reversal value exactly [img]images/smilies/frown.gif[/img] . So, in a conservative strategy, we would not enter a trade before the most probable reversal value is reached, and furthermore, we would never place a stop precisely on a most probable reversal value, but 10 to 15 pips on the far side of it .
__________________________________________________ ___

Thursday November 9 12:00 ET
Trade Signal #233 Buy GBP/CHF at 2.3666
Stop is 2.3634
Target #1 is 2.3840
Risk is 47 pips
Reward is 160 pips
Reward : Risk ratio is 3.4 to 1

For research purposes only.

EUR/JPY descended to 150.53 yesterday at 12:00 ET as predicted, and is now on the rise in its Wave 5, targetting 151.75 to 152.50. At the top will be a good low risk / high reward opportunity to short this pair.

The low price of 150.53 at the bottom of a clear A-B-C downwards corrective wave would have been the perfect time to exit this Trade Signal #235 for 81 pips of profit:

Thursday November 9 12:30 ET

Trade Signal #235 Sell EUR/JPY at 151.37
Stop is 151.61
Target is 149.40
Risk is 26 pips
Reward is 175 pips
Reward : Risk ratio is 6.7 to 1

For research purposes only.
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Previous comments from November 11:

EUR/JPY Elliott Wave analysis <hr style="color: rgb(209, 209, 225);" size="1"> <!-- / icon and title --> <!-- message -->
Tom, thanks for your comment. In the following comment, which of the eight or so different scales of waves are you refering to?

"New to the Elliot Wave theory but am wondering is the Eur/Jpy beginning wave 4 down then wave 5 up. Or is it just a small retracement on wave 3.

Thanks, Tom"

I suspect that you are refering to the trend that began on November 2. We may have reached the top of that trend, but a careful study suggests that we are trading wave 4 down, and that the reversal price will be about 150.50, followed by another upwards impulse wave - Wave 5 up to a new high at about 152.50 or so.

On the other hand, Wave 3 may not be finished, and this will then be a smaller retracement, which may not go down much further than we have already witnessed. The conservative trader might want to exit their position and wait for a clarification of the wave count, and another better entry opportunity higher up, or at the bottom of a large correction. We should monitor this situation carefully.

Itme,

I'm a new trader and have become very interested in learning the Elliot Wave. Can you recomend a text or two to get me started? Thanks.

pretty nice thread !!!
thanks so much for sharing your trading strategies, they're very profitable

Some philosophical / scientific reflections:

In the words of Jose and Miriam Arguelles from their book Mandala: <o></o>

<o> </o>"The actual ritual process is only a prelude. Whether destroyed or placed on the wall the Mandala is only a reminder of the on-going mandalic process potential in every living organism, and which relates every creature to the larger web of reality. If the ritual of the Mandala can, in any way, make this truth a living reality within the boundaries of the everyday, then it shall serve its function. <o></o>

Revealed in the deceptively simple pattern of the spider web is not only the spider's nature, but the eternal web of creation. To articulate and express this web, to let its filaments shine in the morning light of renewed consciousness, to understand the immeasurable and limitless domain which it encompasses, is to pass beyond the restricting border-worlds of birth-and-death. <o>

</o>The spider, the butterfly, the flower and the tree, the snake, the lizard, the squirrel and the bear- these are creatures whose perpetual generation spreads beyond the span of the memory of man. And man remembers not his origins, except through dream and vision, and only then as metaphors spawned from a source beyond reckoning. Unless a man dwells in the conscious precincts of the source, his actions will be like a blind man thrashing in the night, and whether he hits or misses his mark will be a matter of continual debate. <o></o>

The ritual of the Mandala as devised by the Tantric Yogis of India and <st1:country-region w:st="on">Tibet</st1:country-region>, or the Medicine Men and Shamans of the <st1lace w:st="on">New World</st1lace> is a means by which men might recover some sense of that life-renewing source. Chaos is, and order is, and both exist simultaneously one within the other. It is only a shift of consciousness that sees in each a reflection of the other. It is this leap- silently and like a prayer- which makes for the vision of wholeness. And it is the vision of wholeness that heals and is self-healing. To live mandalized is to see in chaos the light-shafts of order springing forth from the midnight center, and in every moment and space of time to recognize that it is ourselves we meet mirrored fourfold in the center of every deed. <o></o>

To actualize the Mandala is to leave the world of fragmentation and alienation, and pass into another dimension of being, knowing and doing. All new knowledge comes in the form of an initiation; in restoring to him the means to the source of the vision of the whole, the ritual of the Mandala may give man the knowledge necessary to make the next evolutionary step. For man must now find in himself the vision to go beyond the world he has created if he is to escape the fate of previously extinct species, and transfigure himself once more into the image of the divine purpose."<o></o>

And I thought I was an idealist....

So Itme, is there really no such thing as nihilism?

And what do you say to the argument that our minds are programmed to find order and patterns in everything, whether or not there really is a pattern?

I do think there is some mysterious pattern to life, but I don't think we're able to fully comprehend it, no matter how hard we try.

Thursday November 16 at 4:00 ET

Re-entry opportunity Trade Signal #240 Buy GBP/USD at 1.8850

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Previous trade signal:

Wednesday November 15 at 5:45 ET
Trade Signal #240 Buy GBP/USD at 1.8850
Stop is 1.8809
Target is 1.9150
Risk is 44 pips
Reward is 297 pips
Reward : Risk ratio is 6.8 to 1

For research purposes only.

We believe that this will be Wave B up of a downwards corrective Wave 4. Note that there is another very high probability reversal value at about 1.8820. The very conservative trader should wait in hopes that the price will descend to this level and enter there with a proportionately lower stop. Given that GBP/USD frequently travels long distances and overshoots our estimated reversal values, it is not too farfetched that it could reach this lower price. Also, the time of day is somewhat early for a reversal of the trend.

p.s. - GBP/USD subsequently fell to 1.8836, still clear of our stop, but 14 pips past our entry price. This may be the turnaround point.

EUR/CHF update for Thursday November 16 at 4:00 ET

EUR/CHF has risen to 1.5995 as predicted, and appears poised to rise once more to the top of the final fifth wave of the fifth wave at about 1.6010 or a bit higher.
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Previous comments:

EUR/CHF update for Monday October 16 at 6:00 ET <hr style="color: rgb(209, 209, 225);" size="1">EUR/CHF rose to 1.5961 on October 13, coming within 9 pips of our predicted turnaround point. That would have been a good short opportunity. The EW pattern is somewhat strange right now, but our prediction for EUR/CHF of September 29 is seemingly still valid:

EUR/CHF prediction - finishing fifth wave <hr style="color: rgb(209, 209, 225);" size="1"> Friday September 29 at 4:30 ET

EUR/CHF is headed for 1.5970, 100 pips higher than its current price, which will complete a long uptrend that began on May 17. This would be an opportunity to short it and to hold a position trade from the very endpoint of a weekly trend.

CAD/JPY update for Thursday November 16 at 5:00 ET

As predicted earlier CAD/JPY declined further, reaching 103.07 so far, and is likely to fall further to 102.50 to 102.75 before a good low risk / high reward opportunity to buy it emerges.

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Previous comment and trade signal:

Comment on failed Trade Signal #228 Buy CAD/JPY at 103.85 <hr style="color: rgb(209, 209, 225);" size="1">The trade signal #228 buying CAD/JPY was based on an impossible wave count. We said at the time "In terms of Elliott Wave, this is estimated to be the third impulse wave of a large upwards fifth wave." The problem is that there had only been a 1-2-3-4-5 downwards wave at the time of the entry, which constitutes an A of an A-B-C downwards corrective wave. There was still an upwards B and a downwards C to go before we should have entered that buy trade. We identified the bottom of Wave A to the precise pip at 103.85, but didn't keep track of the Wave Pattern properly. The long trade which we entered was only the B wave which only went up 87 pips to 104.72. We should have exited the trade there and reversed.

The price has since fallen 137 pips to 103.35, and it is still possible for the price to fall a little more before the long trade entry price is reached.
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Tuesday November 8 at 00:45 ET
Trade Signal #228 Buy CAD/JPY at 103.85
Stop is 103.54
Target #1 is 105.70
Target #2 is 107.30
Risk is 41 pips
Reward is 175 / 335 pips
Reward : Risk ratio is 4.3 /8.4 to 1

For research purposes only.

In terms of Elliott Wave, this is estimated to be the third impulse wave of a large upwards fifth wave.

Practice Makes Perfect Championship

--------------------------------------------------------------------------------

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http://www.fxsol.com/

They dont support MetaTrader by any chance?

Thanks for the heads up.

Man strives to cognize the reality of the universe, and for this he possesses the ability to reason. He has come to the correct conclusion that thought is energy, and this shows that valid research will bring tangible results. Man follows an intensively scientific path, and providing that the science is pure and unprejudiced, there are no notions, however lofty, that are not compatible with scientific methods.

Science is the foundation for the future success of humanity. But this statement must be understood correctly. Scientists regard themselves as bearers of knowledge, but we must recognize that few of them understand the significance of the improved knowledge that will exist in the future.

We should not divide science into materialistic and idealistic, or supermundane and mundane. The key requirements for scientific progress must be known - open-mindedness, the love of truth and creativity. These are only possible through the expansion of consciousness The acquiring of knowledge cannot move forward without the inspiration of the primary force. Thus, one can observe diligent scientists who skillfully collect significant materials but do not know how to assemble them into a beautiful discovery. On the other hand, one can see scientists who even with limited means are able to succeed and introduce useful innovations.

Humanity proceeds by the way of scientific theory, but progress is too slow, and ignorance impedes any acceleration. It is time for outworn concepts to fall away, otherwise self-important innovators will prove in the end to be the most obstructive.

We must be careful not to become victims of limited, backward definitions. Subservient science and blindness prevents pseudo-realists from attaining that for which they are striving. Precisely like the Pharisees of old, they conceal fear before admitting that which is already obvious to others. We do not love the ignorant, and we do not love cowards who in their terror trample the possibilities of evolution.

Extinguishers of fires, haters of the Light, are you not all alike, from whatever side you come crawling! You wish to put out the flame of knowledge; but the ignorant community is a prison, because community and ignorance are incompatible. It is necessary to know. Believe not, but know!

Without attentiveness the laws of the Universe cannot be studied.

Thought is like lightning, and not knowing where a thought originates, you are unable to transform it into words. A thought may strike your consciousness, but without the process of thinking, it will remain unrevealed and lie ungerminated, like a seed in infertile soil. Such dried up thoughts sadden the Universal Thinker, who sends these salutary signs through space. Centuries may be needed for the proper growth of a seed of thought.

In schools the art of thinking should be studied above all. One should be trained in the art of constant thinking and learn to be ashamed of thoughtlessness. Man is unable not to think, but there is a great difference between harmonious, disciplined thinking and the oscillations of chaotic thoughtlessness, which not only influences man, but space itself.

How long will it be before man emerges from the waves of chaos?

Hi Itme,

I am really quite impress with your work. I studied Computational fluid mechanics and thought it is very impressive of you to apply certain wave theorem into trading. I personally had not been able to achieve that. but i am using genetic algorithm and machine learning to predict and enhance trading for equity.
Please keep it up, strive on.
In my heart, i still think trading risk can be significantly reduced by using scientific method.
Cheers for the love of science and universe.

Thanks, CKalee.

The best traders that I know all have an engineering background. Their instinctive and cultivated faith in the principle of natural law equips them to discern the organisational principles behind market behavior.

The markets are like all other phenomena - two dimensional manifestations of three or four dimensional vortices. Fluid Mechanics is able to explain the patterns we see. It takes a very dedicated, well disciplined and creative mind to discover the equations of the market, but it has been done.