Old Fashioned Trading - Aimed at First - Two Year Traders

Follow on from Post # 39

I entered on the engulfing candle from the round number. Stop loss was under the round number, and the target was the next 500 pips, took partial at ADR/6. I rode out the wicks, inside bar stuff, which is probably position averaging. In my hesitant past, I would have exited here, but this is a good sign; it means the Whales are here.

The best place to enter would be the last engulfing candle after the hammer, but on the London open, it's a bit risky, but London doesn't manipulate gold USD that often. However, occasionally, it will drive down a 'tent peg' with a mallet and might catch your face and take your stop. You just have to re-enter if that happens, don't dwell on it, it's a part of trading.

When you have a spare moment, go through your platform's previous history and look for this; you will see this pattern over and over. It's a common impulse start. Also, a pennant pattern. (see post #10)

https://www.investopedia.com/terms/p/pennant.asp

Couple of weeks ago stared to use volume profile again.
Different timeframes ( 60min vs 15min ) different story ( inside candle breakout vs pennant breakout ) but same result.

I use a small part of the volume profile. I do look at daily and weekly profiles, but it's mainly direction check, moving away from volume - more like vwap trading. Of all indicator type systems, strategies that feature or incorporate volume are the best, in my opinion. Yes, so many different ways, it took me a long time to find something I liked.

You are right - volume is quite important, specially vertical volume = volume profile.
Move down from POC-VAL zone to VAH-POC zone.

More Fundamentals - zzz

Lots of important news yesterday - Trying to highlight how a small knowledge of world affairs gives you an edge. It may be slight, and the same results can be achieved from technical analysis, but not stress free. From news, there was only really one outcome for yesterday closing price- gold increasing in value. You have to be careful with anticipated bias, and this is essentially what this is doing, but it helps relieve stress.

FOMC press conference



4:30 minutes to 5 minutes

There are a few sentences to highlight "Risks to inflation are up, risks to employment to the downside" | "a challenging situation; there is no risk-free path" | "Navigate the tension between inflation and employment" | "A framework calls for a balanced approach" | "Accordingly, we have taken a step towards a more neutral policy stance".

Neutral is the key bit of language, it's hands off, we may not cut further, this will be the reason the DXY was strong yesterday and the US treasuries. Normally, Gold is inverse correlated to US Treasuries.


US Tarriff meeting with China 30/05/25

There was a slight reduction in tariffs, China will resume soybean imports, and more controls to stop illegal Fentanyl precursor exports. A reduction in rare earth export controls. This was not good news, and markets viewed this as a pause with no outcome. Markets had received news on the run-up that negotiations were going well, and an outcome was expected. As always, it's an outcome different from expected that triggers the markets to react with volatility.

The US is resuming Nuclear weapon testing. The US hasn't detonated a nuclear warhead since 1992. Russia hasn't detonated a nuclear warhead since the end of the Soviet Union. This is in response to Russia test-firing a long-range nuclear-powered cruise missile. Putin is also discussing Poseidon nuclear-powered, nuclear warheads capable, 20 metre long, and 100 metric ton torpedos. This torpedo is designed to destroy Gerald R. Ford-class and Nimitz-class aircraft Carriers.

Gold generally reacts well to doom and thermonuclear bangs. This type of news, its uncertainty, and nuclear warhead detonating, which is different than test-firing missiles, is a major escalation. World tension is increasing, heading for a cold war, at the same time hostile relations with China, and gold will be bullish for the day or longer. However, there was no futures gap with the news. Gap is the main immediate reaction to overnight news, and what you should look for; some of this news was released during market trading hours.

If you get anxious reading this type of news. Cuban missile crisis was the closest we came to nuclear war. This is nothing new and nowhere near the scale of danger of that crisis in 1962.

sources
https://www.reuters.com/world/china/...ns-2025-10-30/

https://www.reuters.com/world/us/liv...de-2025-10-30/

https://www.reuters.com/business/fed...ut-2025-10-29/

https://www.theguardian.com/world/20...clear-disaster

Not in any way related, looking for an excuse to link a Rockwell B1 Lancer Heavy Bomber 7:54 mins (RAF Fairford)

Month End

I don't trade on month-end because of previous experience. I take the day off to review trades, if I need to, alter code, training day, statement forward to accountant for tax, and general boring admin stapler stuff.

Day is usually a terrible ranging day because of the same reasons I've just listed for what I do; banks do the same. Some desks freeze positions and enforce 'risk freeze'. Traders are approaching monthly targets, some will have surpassed, and why risk with a bonus payment imminent?

Financial balance sheets. With it being a Friday and a month-end, in the afternoon, getting closer to close, desks will freeze and close positions. U.S. Treasury desks close open positions, and this is responsible for a rangy, wick-infested, horror show for Halloween because of the flow of money or lack of flow. US Treasuries dominate the month-end balance sheet and the dollar becomes King again from the money flow through finance.

So, I don't trade.

Quarters and year-end are others:

1. Q1: Ends March 31
2. Q2: Ends June 30
3. Q3: Ends September 30
4. Q4: Ends December 31

I've had a good week, no losses, and it has been a long time since a 100% week. I don't think writing this textbook has had an effect, I will be interested to see next week. This week is just a good week for this type of strategy. It works best with lots of pullback, and the way I take partials at ADR/6, it's hard to be a loss. When it's a really strong lazy trend, it's not great, and it's weakness. Also, it's crap when ranging; stochastic wipes the floor with it.

Example New York Midnight & 'POC'

Example of what this strategy is trying to achieve. It's in a pullback, although minor, but there is a break, near the bottom of the Asia range. The bearish engulfing (dark red) is a good candle with no wick. If 'POC' and volume weren't a feature here, this may be a loss and certainly a trade I don't want to be in.

POC hasn't moved from the top of the session, due to a lack of acceleration and parabolic distribution. Volume hasn't increased either; the tick volume is not greater than its long-term average, delta is increasing, but the fast average is less than the slow volume average. New York's midnight price level is where it stopped, and that has played a role in displaying too.

The fib value of 0.67, 61% area, is the pullback from the bullish move, but it can't really be used as a rule to discredit a bearish pullback move. If a reversal it will probably react at a few of these levels 50%, 61%, 70%, 79% & 100% on the way down anyway.

Also, due to POC not moving with acceleration, I'm not interested in the opposite bullish direction; it's currently looking like a typical month-end. Return to mean and arse about.

Edit: NO 4-hour imbalance FVG - this is a marker for ranging, return to mean corrective rather than impulse wave behavior and a big Nope.

AB=CD Pattern

First real touch on topic of harmonic patterns.

Harmonic patterns are with corrective waves, rather than impulse waves. Gold, is currently trending but is possibly heading to a ranging scenario, and these become frequent.

First image is bearish and the second Bullish, after pennants, these are the easiest to spot. The AB length is equal to the CD length; these are tradable, and you enter at D and can be traded down to A. BC leg must be between 61.8-78.6% of AB. They are high-reliability reversal patterns. If I notice these, I wait for confirmation, a break, and a pullback, and then I know this is a high-probability trade. I often increase my risk a bit higher, but I'm quick to halve this risk with ADR/6 or similar; it's not guaranteed to get to A.

On an image from my chart, the entry had just happened (break and pullback), the stop loss above A

At the beginning (post#2), when I talked about training hours, this is how I would gauge and measure your progress. Once you start spotting harmonics, you are close to becoming competent. The next pattern you will start to spot will be Gartley; you may be able to or have already spotted these completed. To spot these in the process of forming, for me, it was well over 1000 hours and I would say you are at rank of 'Corporal' .

https://harmonictrader.com/harmonic-.../abcd-pattern/

There's always some type of war or military activity every circa 21 years - What's happening now is we are repeating a key significant point in that cycle - hence all the increase in rhetoric and hype around the world

Usually results in USA boots on the ground - but everything since Ukraine qualifies - getting Interesting

Great thread by the way - I couldn't be hassled with the commitment factor of starting one here, look forward to reading

I've been thinking about writing this for some time; commitment was what I was worried about. I have in the past dropped projects, and I wanted to make sure I definitely want to do this and that I will see it through to the end. It's evolved a bit into a more complete textbook-style manual. I'm enjoying it, and what I mentioned on the first page about writing a book on the 'Internal Combustion Engine' during a school summer holiday. 30-degree summer in the UK, and I spent nearly the entire 6-week holiday inside writing and drawing engineering diagrams of engine parts. I do have form for this type of obsession, glad you're enjoying it.

Nothing wrong with obsessions - Mines geometry and cycles within the markets, a 15 year ongoing project, that has consumed a lot of hours

My eldest son did similar with designing cars! Then as he got a little older, that led to airplanes and he now has a job I'm not allowed to talk about on fighter jets

Healthy obsessions are good

I worked in automation, I've worked in petrochemical and aerospace, Airbus, Westland Helicopters, a base in Lancashire, Blackpool area and Barrow-in-Furness, which sounds the same as your son. I miss parts of the detailed side of engineering. Boredom has a lot to do with this thread; there is only so much internet and Netflix that I can watch in a given week.

I'm a Kendal lad! So know those areas well - miss-spent youth around those areas in my teens in the early 90's and especially with the rave and club scene - Live in Suffolk now (since 1996) - funnily enough one of my neighbours down here is from Barrow-in-Furness, he's a retired engineer

It's a boring job once you master it - repeat, repeat, repeat

Probably one of the nicest parts of the country, Suffolk, I'm outside the Manchester area. Rave, that's a word I've not heard in a while. I remember going to a barn, these illegally arranged things that everyone seemed to know about, and before the internet. I was right out of my depth, but I tried anyway. Imagine a cringe episode of Inbetweeners, and it would be about right, similar to the naked boat ride episode.

LOL - there were a lot of raves, never did drugs, just loved the music, that type of music just resonates with me

Manchester, Blackburn, Blackpool, Wigan and Liverpool were the capitals for proper house and techno music apart from obviously London/Birmingham

Manchester had the Hacienda nightclub which was ace - I used to leave the house Friday Afternoon and get back in Sunday

To this day as I've worked from home on the markets I still bang out the tunes from YouTube - reliving the good old days lol

You used to have a huge number of females at raves and clubs, that and the music were the draw for me

Yeah, we don't have half as much rain and drizzle down here and the sun definitely shines a lot more, when In grew up in Kendal I didn't realise the sun was actually in the sky all the time, I thought it only came out on special days lol - no hills though! But we do have a great coastline with great fish and chip shops and cafes

I remember one Saturday being in Preston and to kill some time, went to the footie, bought the ticket on the gate, grabbed a drink and pie and noticed one player running rings around everyone on the field - David Beckham on loan from Utd - My mates are UTD fans and I told them to wait until he came through the ranks into the 1st team - funny how something's in life remain as permanent memories, as I can't for the life of me remember the rest of that weekend

I remember my Dad saying something similar to what I'm about to say but it was better in those days, the music, the cars, the football, the lifestyle, no beep beep phones, comedy was better, movies were better think its a part of getting old fartish but can't really think of anything that's better, maybe the internet and access to data but I was moaning about that a second ago.

I once had a job in Suffolk (2002-2003ish). Working for Claudia Schiffer & Matthew Vaughn in their Stanningfield mansion Coldham Hall. Rock 'n' roll days. It's a small world.

Yeah I was thinking about that the other week - probably a generation thing, as one goes through life hitting key ages

Yeah my kids don't believe my stories of my childhood and teens, because the game had changed when they went through theirs

If you get chance, have a look at research from Elliott Wave International - I last looked back in the 2010's and it was available, I have a load of it on my bookshelf still (its got to be significant for it to remain on my bookshelf) - they often do analysis on markets and compare it to generational "events" such as the free loving 60's which was coming in off multi-year stock market rallies, then the 70's and the mood had changed because the stock market stalled etc

Really Interesting and it's applicable, because its a consequence of mood etc, as you see certain world and life events happening along with stock market positions etc

Not advocating EW as a method, as they've been pushing for a wave 5 of 5 of 5 since 1986 and it still hasn't arrived, but their research on life events and mood is pretty Interesting

Have a good weekend

Isn't it - I'm Halesworth, never really ventured down that way, too close to Essex lol!

My Job at the time was Norwich, so opposite direction

I always wondered where she lived - now I know

Money Management

I've probably left this a bit too late to discuss; it's a huge subject, a difficult topic to approach, and topics within topics, a never-ending combination of outcomes, quite boring , and a video is not suitable. However, I think the exercise below highlights the issues.

Disclaimer: From my experience, it's this topic that usually starts Forex Factory catfights. This is my opinion, it is based on facts, but my opinion of it is not fact; this is not the best and only way.

Alongside psychology, for me, this is the next topic in line of importance; it's this and solely this that will keep you profitable and allow you to be a professional gambler.

After a period of time, this becomes obvious, but if you are under 6 months, then you may have picked up some bad habits. If you have blown an account already, it will be due to this or psychology.

If you go from the turtle traders example from the reality TV show (post #14). Turtle traders originally, money management was the majority of their training time; they had selected the desirable psychology trait individuals from a rigorous selection process. The original Turtle Traders generated a combined profit of over $175 million during the five-year experiment. It's mastering this that makes you a boring risk management qualified 'Captain' .


The website linked is a way for you to visualise the effects. Click on the linked website, open it in a new window, which is probably best.
https://coghlancapital.com/trade-return-calculator/

Enter the following:

Balance 1000 | Typical Risk 2.5 | Risk:Reward 2 | Win/Loss 50 --- Press Calculate.


First thing you will notice, the numbers are surprisingly good. Press calculate several times and observe the randomness. The average is approximately what I have shown, the numbers will be slightly different from what you see (first image below). Calculation is always over 100 trades. Intraday strategy will be roughly 10-15 trades a week, depending on trading hours in a given week and insomnia. In 10 weeks, 2 1/2 months | Return On Investment (ROI) ~100-300%

The random number effect and what you are seeing is from two of the above values in combination with another. The randomness is not great if you are planning this full-time, the effect you are seeing to ROI is from drawdown and the RNG from consecutive losses and how long it takes to recover.

Now pick any value, change to any number, press calculate once only, it's up to you which, what did you notice?

If you picked the Typical Risk amount first - stay behind, I need a word.

Balance
Now go through each value, but put them back to what I suggested first. Change Balance first, 10000 | 50000, press calculate.

This is great, balance amount, capital size doesn't have an effect on ROI, so trading is open to all pocket sizes.


Typical Risk
Now try Typical Risk, go back to 1000 for balance. Change to 5.0 | 10.0, press calculate a couple of times.

What did you notice? Occasionally, you will get a low ~200%, but most of the time ROI is way, way higher. I had to press the button nearly 20 times to get an example of what will eventually happen (see second image). You will have a bad run from a 50% win rate and go into a drawdown, because you are risking so much of your capital, and the amount of money and the number of trades that are required to recover are increasing. If you have a bad run, and this drawdown continues to increase, you will enter a point where it is difficult to recover, and what is known as the 'risk of ruin'. Also, in this example, it is only over 100 trades; it is trading like a computer; if n is greater than 100, if you bring psychology into this, and with emotional attachment to money, this is how accounts are blown fast!

With a 50% Win Rate, typical 100 trades, you will see 5-6 losses in a row, sometimes a rare bad run of 8-9 consecutive losses. It's this, in combination with Typical Risk, that contributes to your risk of ruin.


Risk:Reward
To see this through to completion, reset Typical risk to 2.5, do the same for Risk:Reward change to 3 | 4, press calculate several times.

You will notice the numbers are becoming more stable, with less RNG effect because you are winning more and more each time, and from the compounding effect, the numbers are less random. I believe 4 to be the sweet spot.

Enter 5, press calculate. This is Apollo, burn, baby, burn to the moon. This is why we like Risk:Reward so much, the win rate is still average at 50%, balance is an average 1000, and risking the default 2.5% with a Risk:Reward 5:1, after 2 1/2 months of your life, ~40000% ROI | $1,000 to nearly $50,000 account balance, from tossing a coin, 100 times.

Typical risk and Risk:Reward, and in combination with Win Rate, it is these two values that I mentioned earlier, that are responsible for the random number effect 'RNG'.


Win Rate
Reset Risk:Reward to default 2 and change Win/Loss 66 | 75, press calculate several times.

The variance is less and more stable than before, not as profound as Risk:Reward effect. It has a more dominant RNG effect but no real compounding effect. With intraday, the 15-minute, and with a high win rate, it's difficult to get a consistent Risk:Reward of 5:1 that completes before the end of the day. Sometimes, you can get 4:1 off the round number and news event trades. The little and often style of take profits that I do? It's tailored with these numbers in mind. Order block, breaker block style trading will get you 4:1 and above, but will often take you into the next day and beyond to finish a trade.

From the simulator, testing time, I often can't get more than 2:1, or if I do, it adversely affects my win rate, because stop loss/take profit is so closely tied to win rate (see post #16). My strategy is to go after and target a high win rate, 70%+, R:R 2, and a higher than default risk, but reduce this risk as often as possible, This also, happens to suit my psychology.

This also needs to be tailored to you, if you can handle the psychology, open a second isolated account, if you can afford to risk $50-100 each week as a fun game, you can go 5:1, Equity Risk 4%, hedge around round numbers, target news, gamble, some weeks it will really pay big, sometimes a loss by Monday lunch time.

I believe with a win rate over 70%, it's sensible to increase Typical Risk. I think 4% is the sweet spot, and with this, I mean equity risk, not account risk. The calculation is slightly different for both. I'm only adding to what I have open. If you will only ever have one trade open at a time, use the account balance as a risk calculation. Equity risk is safer, and it prevents you from adding to risk if you are in negative equity, but in that position, you shouldn't be opening a new dollar trade.

Equity allows you to take advantage of a high probability trade when you have a high equity unrealised gain from your first trade. You can take advantage, but you have to neutralise the risk, with at minimum breakeven on your first. Ideally, the unrealised equity needs to be protected with the stop on the first brought forward to match the new stop value, and maybe take a partial from the first. You should also look for pip spacing between trades.

Intraday, I think, from the protection against compounding drawdowns, I believe % equity is better.

The other aspect of risk, where I mention the dollar trade. Having multiple positions, GBPUSD, EURUSD, XAUUSD, you are exposed to the same dollar risks, and you are not 2.5% you are 7.5% exposed to dollar risk. You can hedge this, but I have no experience with this, and why I'm exclusively XAUUSD.

I'm simplifying the topic a little bit here, but I'm trying to poke with a stick (you need to be honest with yourself). How many trades in a given week do you open without calculating a position size? Since, win rate, a coin toss is all that is required, from your beginning trading journey and interest in the subject, compared to the time you have spent searching for indicators, how much consideration have you placed on this subject, what I have outlined above? Ignoring the fact that most YouTube strategies mention a R:R, which is the most profitable, a strategy or the money management of a coin toss?

Or, does any strategy really matter? Are they comparable? Find a technique that you like and build a strategy with its purpose in mind, suitable for your psychology, test, adjust, and progress from there; it will always be a more successful and a more strategic use of your time.


A brief outline example of what I do:


Disclaimer Again: My way is not the best and only way, but it's hard to approach this without giving an example of what I do.


A trade in line with the 1-hour trend direction, I trade with 4% equity risk.

In any given week, I average 10-15 trades a week, usually 1 or 2 of them are 4:1 trades, 78-82% typical win rate, with Highs of 100 and Lows of 72 this year.

A trade against trend, I'm not particularly confident with, Risk down to 2-2.5%.

ADR/6, 25% partial will usually halve my initial risk if I take 25% at double my stop loss pip value (initial risk sizing).

With impulse moves, I'm usually under maximum risk for 15-30 minutes.

News trading 2-2.5%, I'm aggressive with stops, take profit the next round number. It's news trading where I blew my first account. (My position sizing was 20%)

A round number, high probability setup to the next 500, R:R 4, I usually go 4% risk, either with or against the trend. Sometimes I will go to 5%, but I haven't for a long time; I think once this year.

As a final rule, depending on last week's performance, I limit the number of trades per day. A maximum of 2 successful full target trades, not ADR/6 partial, allowed per day. If last week's performance I'm happy with, then no restriction on frequency. After last week's behaviour, it's a way of disciplining myself. I can pay all bills, save, nothing is compromised, but it's a slight punishment.

Over-trading, I've never had a problem with; it was hesitancy for me. Intraday, you shouldn't be trading more than 1-2 per session from 15 minutes and none after the first 3 hours of a session, wait for the next open. An hour before London opens, you are usually ok, but I wouldn't trade 1 hour before New York opens. You are asking for a punch to the face, literally. Ooh, think you're tough, do you? Come on, punch me in the face, I dare you!

From this, you can see I'm risk-averse, from playing with the calculations and possible combinations, I believe a full-time occupation is best this way. I am a risk taker in life decisions, but not with trading. I have a problem with drawdown, and I avoid it.


In my opinion, you can only increase Typical Risk over 2.5%, with a win rate over or close to 70%, maybe 66% but it's pushing the draw down with R:R 2. If you take swing trades, you have a lot of options, but the bigger stop and sizing with this usually equalizes the gains over intraday and with how long it takes to realise these gains.

Another Disclaimer: Over time, I've increased my risk to 4%, because I track my performance: Don't go straight to 4% after reading this.

And You!, who I said stay behind afterwards. I know you're not listening to this, but don't go straight to 4% or 10%. You need stats from your performance, don't shortcut, guess it. How many times do you want to be punched in the face?