Low Risk, High Reward Trading Experiment

Quoting itme

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Hi Blondy101.

First of all, thanks for the question.

Secondly, I would like to make a clear distinction between my predictions, which are for practising my system of analysis and learning only, and my actual formal numbered trade signals, which are more carefully analysed, viable trade opportunities according to my system. Sometimes a prediction is also a viable trade opportunity, but I just don't have time to do all the analysis to define the numbers and document it on this thread.

A viable trade has to have an entry point that is met, a stop that is not met, and a target that is met. And the distance to the target from the entry should be at least five times the distance from the entry point to the stop. Each setup is different. Sometimes we can use a small stop, and other times we need a much larger one, according to the particular setup and our ever evolving system. So we never know whether we have a viable trade until the situation totally evolves. Also, the wave pattern has to represent a viable completion pattern on ALL time scales. The actual entry price, stop, and target can be estimated ahead of time, but the closer we get to the entry price, the more information we have and the better able we are to assess the situation and perfect the actual numbers.

A built in protective aspect of our system is that when a setup is not compliant due to a small reward : risk ratio, then often the price will move further in the direction of the trend, bringing it to another probable reversal value, and a price where a smaller stop is needed, and a larger reward is possible, and a much better reward : risk ratio is available, and a much more clear Elliott Wave pattern has formed.

Regarding your question about the top of this trend, I will need to do another intensive analysis to confirm the predicted reversal figures. On the face of it, however, they look plausible.

However, the fact that the market is trending steadily upward towards our target does not have any bearing on the validity of the reversal target. Sometimes the market forms a steep parabolic rise as it rises to its turnaround point. Our system involves predicting the top point of a long trend. This is considered impossible by most traders. It is like stepping in front of a speeding race car, at the exact point where it is going to come to a screaming halt. It is not an advised method of trading.

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Quoting itme

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Our approach involves accurately predicting both endpoints of major trends or swings, which is no small feat. When there is an upwards trend, we try to predict the exact top of that trend. The opposite for a downwards trend. We then advise to trade AGAINST the trend (in violation of the cardinal rule of currency trading) with a small stop. We then put our target very far away. Even if we are successful, the signals are likely to fail most of the time. But because of the high reward / risk ratios, even a few successes can result in a quite high overall performance.

When we have completed our studies and experiments, then we will decide what the next course of action will be.

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Quoting itme

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NewbieTrader101, I've heard it all before, and responded to these kinds of comments dozens of times in the past six months. I won't keep on repeating myself. I'm sorry, but you'll just have to read this thread and then form your own opinions. I am very explicit with what I'm doing. If you disagree or don't like it, then read some other thread or study another system. There are dozens of choice on this forum and dozens and dozens elsewhere. Perhaps you're right and I'm wrong. Be true to what you believe and what makes sense to you. Perhaps we can both succeed via different systems.

Regarding predicting tops and bottoms. I say - face it. Every investment decision is a prediction. The market can change direction at any time and go any distance. You can't avoid predictions, and you can't avoid trying to predict a turning point, even if only of a retracement of a larger trend. If you don't predict a reversal point, then you get in at a random time and you stand a good chance of getting stopped or margined out. So every trade involves predicting where the market will turn around - in order to avoid being stopped out. And every trade involves predicting how far it will go in the direction of of the trade.

The main difference is that I'm up front about predicting reversal points going into the trade, whereas other traders jump in willy nilly and thus need to employ large stops and then get out according to various criteria which don't involve direct predictions, and perhaps rely more heavily on statistical models.

I'm not trading. I don't have a finished trading system yet. I'm doing research. I'm getting very close though. I've just set up a pretty good system with seven computers and ten monitors to analyse and monitor the various markets and timeframes, and I'm developing systems to handle all the technical and fundamental data which is continuously streaming by. I'm testing different chart services and brokerage services. So far, there are several other traders who are learning the system I am using, or a similar one, but none of them is as proficient as I am at my particular methodology, and may never be. So for now I'll assume that I'm on my own.

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