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Karmo's trading strategy trading GBP/JPY

  • #1
  • First Post: Edited Oct 29, 2008 12:22am Aug 18, 2007 7:57am | Edited Oct 29, 2008 12:22am
Hi all,

I'm going to explain the strategy I use to trade GJ and I'm going to be posting my weekly/daily analysis of this pair.

I don't use anything fancy, I use some basic stuff that most traders use and some common sense

The indicators I use are:

  1. Fibonacci retracement levels
  2. Trendlines/Channels
  3. 5 period simple MA
  4. Candlestick patterns
  5. Support/Resistance levels
  6. Momentum

As you can see it's all simple and basic stuff except maybe for the fibonacci retracement, because every trader could use it differently. If you have any doubts about any of the stuff I use, either ask or just do a simple google search and you'll find plenty of information about them.

Using the fibonacci retracement on different timeframes (1H, 4H, Daily, Weekly) is very important, because sometimes some of them overlap and that tells us where we might find strong support/resistance. I'll post some examples.

If you have been following my posts on Auslanco's thread, you will know that we use the 5SMA for a good entry point when a retracement occurs (Thank you Auslanco).

Most of the time, I trade based on the 4H chart, but I keep an eye on the daily chart and sometimes the weekly chart. I use the 1H chart for a good entry point. Any TF less than 1H has a lot of noise and it is very risky trading GJ on very small TF's.

Using stop-loss, I always wait for my trade to go in my direction for about 50-100 pips before I move my SL and lock in a very small # of pips (10) and then just let it run until it reaches my TP, this way I don't let a winning trade turn into a losing one, and if my SL gets hit, no worries coz +10 is way better than anything negative

Momentum & 5sma
Before using the Momentum indicator and 5sma, you must have auslanco's QQE indicator. I'll explain how to catch a retracement in this following example:
When QQE 4h is crossed upwards, and QQE 1hr is crossed upwards, and the Momentum at the beginning of the next 1h candle is pointing downwards, price will usually retrace to 1hr 5sma, it's that simple.

QQE and Gann hilo can be found here http://www.forexfactory.com/showpost...&postcount=654

Trade what you see, not what you think.
  • #2
  • Aug 18, 2007 8:08am Aug 18, 2007 8:08am
Here's a chart showing the monthly chart, I've drawn 2 trendlines that shows us a nice channel, this past week price got very close to the lower trendline and it bounced back up. I have also drawn a monthly fibo retracement, we will have to wait until the end of the month and see where we close, but you get an idea of where the monthly fibo levels are

http://img149.imageshack.us/img149/5391/monthlynx1.gif
Trade what you see, not what you think.
  • #3
  • Aug 18, 2007 8:21am Aug 18, 2007 8:21am
Monthly = Green fibo levels
Weekly = Blue fibo levels

Looking at the weekly chart now, we can see the price opened the past week just below the 23.6% fibo and went through the 38.2%, 50% and touched the 61.8% but it came back and closed just above the 50%. Plus you can see the 23.6% monthly fibo and the weekly 50% fibo are very close to each other, this should be a good support level. The candle has broken and closed below the weekly lower trendline.


http://img441.imageshack.us/img441/6870/weeklyfp7.gif
Trade what you see, not what you think.
  • #4
  • Aug 18, 2007 8:32am Aug 18, 2007 8:32am
Daily = Pink fibo levels

If you look closely, you can see how the price went to the next daily fibo level after it broke and closed well below a level. we had a full retracement on the daily chart this past week. The last candle we have on the daily is a hammer/pin-bar/doji, whatever you want to call it.., price tried to break the weekly fibo's but it failed and it closed just above the 50%. To me this indicates that price will go up to the 231-232 area to test the fibonacci levels we have there.. we'll know next week

http://img250.imageshack.us/img250/6053/dailyhh8.gif
Trade what you see, not what you think.
  • #5
  • Aug 18, 2007 8:41am Aug 18, 2007 8:41am
to thank you for your kindness and thoughtfulness in ths new thread teaching your method of trading the gbp/jpy. Thank you so much!!
  • #6
  • Aug 18, 2007 8:52am Aug 18, 2007 8:52am
Actually i was waiting to see if karmo will post any more.. heee...

Learnt alot from the way you interpret fibo retracements and so on by just looking at the charts above..

Thanks & Keep up the good work bro~
  • #7
  • Aug 18, 2007 9:07am Aug 18, 2007 9:07am
4H = Black fibo levels

Don't get confused with all the colorful lines, if you are then open up your chart and just plot 1 fibo at a time and look how price bounced off the fibo levels.

I drew this fibo retracement level after I saw it not being able to test the low again, we can see how the price went and tested the 23.6% the first time and failed, but it broke it the 2nd attempt and went straight to the 38.2%, where it was rejected and came back to the 23.6%, It is going to test the 38.2% another time.. next week. We are also in a small downtrend channel.

http://img515.imageshack.us/img515/2043/4hzm3.gif
Trade what you see, not what you think.
  • #8
  • Aug 18, 2007 9:08am Aug 18, 2007 9:08am
Quoting karmostaji
Monthly = Green fibo levels
Weekly = Blue fibo levels

Looking at the weekly chart now, we can see the price opened the past week just below the 23.6% fibo and went through the 38.2%, 50% and touched the 61.8% but it came back and closed just above the 50%. Plus you can see the 23.6% monthly fibo and the weekly 50% fibo are very close to each other, this should be a good support level. The candle has broken and closed below the weekly lower trendline.


http://img441.imageshack.us/img441/6870/weeklyfp7.gif

The chart you posted here illustrates the reason I've never used Fib.

By picking a different swing low to draw the fib from, you can make the retracement be anything you want it to be.

Maybe you have an objective set of rules for making the choice. That would be good.
  • #9
  • Aug 18, 2007 9:11am Aug 18, 2007 9:11am
First of all, a big HELLO to everybody coz as you can see this is my first post in FF.

To be honest, I was waiting for a personal thread like that by this great trader and person like Karmo.

I'm watching,reading and trying to follow for some time the other thread (Auslanco's...) but only as a guest.Without participating or even replying to anything.

I believe that I'm not ready yet to participate coz I need to learn more and more things about that wonderful world...The ''world of FOREX''...

I wish some day to become a trader like u guyz!!!

Keep up the good work and I wish to everybody a mountain of pipz...!!!
Vivere pericolosamente...
  • #10
  • Aug 18, 2007 9:11am Aug 18, 2007 9:11am
Quoting joiedevivre
to thank you for your kindness and thoughtfulness in ths new thread teaching your method of trading the gbp/jpy. Thank you so much!!
Quoting intelmaster
Actually i was waiting to see if karmo will post any more.. heee...

Learnt alot from the way you interpret fibo retracements and so on by just looking at the charts above..

Thanks & Keep up the good work bro~
You are most welcome guys & gals , hopefully we all can learn from each other, that is why we are here
Trade what you see, not what you think.
  • #11
  • Aug 18, 2007 9:13am Aug 18, 2007 9:13am
a very good starting broo
keep it up bro
  • #12
  • Aug 18, 2007 9:15am Aug 18, 2007 9:15am
Quoting billbss
The chart you posted here illustrates the reason I've never used Fib.

By picking a different swing low to draw the fib from, you can make the retracement be anything you want it to be.

Maybe you have an objective set of rules for making the choice. That would be good.
I said in my first post that every trade could and will draw his fibonacci retracement different. I use the monthly/weekly just to get an idea of where price might be heading, I mostly concentrate on the daily and 4H charts since I trade everyday.

I draw my fibs from the top of a bear run until it stops and retracement starts, and from the bottom of a bull run till it stops and starts to retrace. You'll know more what I mean when I post my 4H charts everyday.
Trade what you see, not what you think.
  • #13
  • Aug 18, 2007 9:17am Aug 18, 2007 9:17am
Hi Karmo,

Very good charts and I see your calls are very accurate on the Ausco thread.

Now I did post on the mentioned thread that I blew my account last week, however prior to this 2000 pip drop I used exactly your method to treble my account from January this year to July 20th as I was following the daily chart trend.

So I know your system works I can prove that.

The BIG question is which timeframe to use to determine the trend. This is absolutely crucial as the reason I blew my account was that all the strong Fib retracement levels on the Daily Charts never held. Ok my Money management could have been better so lesson learnt, however I would have still had a large drawdrawn at best.

I took a wild punt on Friday and made 900 pips from the low because we hit the Weekly trendline channel. Now if I was looking at a weekly timeframe I probably would have doubled my account instead of blowing it.

SO HOW OR WHICH TIMEFRAME DO WE USE FOR THE TREND BECAUSE IF ITS NOT KNOW YOU CAN HAVE TWO CONFLICTING VIEWS ON DIRECTION... THIS IS HOW I BLEW MY ACCOUNT

Regards
Dave

PS To all newbies... If you follow the trend (what is it? + use multiple fib levels) you can make some serious money
  • #14
  • Aug 18, 2007 9:22am Aug 18, 2007 9:22am
Quoting fourxtrader
Karm,

I certainly appreciate this. I came from a candlestick world of trading years
ago and when forex came along I have used the 4XME software. They say
there is no need for chart analysis. I never agreed. Your discussions on fib
and trend lines has captured my attentions and a discovery that the 4XME
sofware is not complete without chart analysis.

With 4XME, I still love how it gives smooth wave patterns to trade from or
skewed unreadable pattern to run away. It gives buying and selling patterns,
momentum and S/R.

I still don't quite understand the full value of the moving average as it fully
relates to your method or Aus's. In time, perhap you could share further?
Why the 5 rather than other time frames or even using it with longer time
frames for crossover?

Thanks again for all that you do. I'll be a regular here as well as at "A"'s.

Dr. D.
Hi fourxtrader,

Regarding your question about the 5SMA, this was never part of my method until I came across Auslanco and his method, as he says that it is the 'true price', since I started using the 5SMA to enter the market, it has given me a much much better entry price than I would of entered before. Whenever a retracement starts, watch how price reacts to the 5SMA on every TF, from 5mins to 1H, price keeps testing the 5SMA on every TF until one of them supports/holds, but most of the time it will retrace to the 1H SMA, and it depends on how strong the current movement is.

If I didn't answer your question, please do ask me again.
Trade what you see, not what you think.
  • #15
  • Aug 18, 2007 9:26am Aug 18, 2007 9:26am
This is what I am waiting for Karmo. Many thanks to you and keep posting bro.
  • #16
  • Aug 18, 2007 9:29am Aug 18, 2007 9:29am
Quoting rumbey
Hi Karmo,

Very good charts and I see your calls are very accurate on the Ausco thread.

Now I did post on the mentioned thread that I blew my account last week, however prior to this 2000 pip drop I used exactly your method to treble my account from January this year to July 20th as I was following the daily chart trend.

So I know your system works I can prove that.

The BIG question is which timeframe to use to determine the trend. This is absolutely crucial as the reason I blew my account was that all the strong Fib retracement levels on the Daily Charts never held. Ok my Money management could have been better so lesson learnt, however I would have still had a large drawdrawn at best.

I took a wild punt on Friday and made 900 pips from the low because we hit the Weekly trendline channel. Now if I was looking at a weekly timeframe I probably would have doubled my account instead of blowing it.

SO HOW OR WHICH TIMEFRAME DO WE USE FOR THE TREND BECAUSE IF ITS NOT KNOW YOU CAN HAVE TWO CONFLICTING VIEWS ON DIRECTION... THIS IS HOW I BLEW MY ACCOUNT

Regards
Dave

PS To all newbies... If you follow the trend (what is it? + use multiple fib levels) you can make some serious money
Hi rumbey,

What is the trend? well, it depends on which timeframe you are looking at, there are so many trends within trends. I recommend looking at 2-3 different timeframes rather than just one TF. Like I said in a post above, I use the weekly/monthly fibonacci levels to have an idea of where price might go. The daily fibo's didn't hold but the weekly held, where we also had a trendline there as well.

I'm sorry to hear about blowing up your account, but a question came to my mind, were you not using a 'stop-loss'? Trading GJ and without a stop-loss, it will turn into a disaster. Money Management is very very very important as well. Don't worry I blew up my first account trading this beast also, so you're not alone.
Trade what you see, not what you think.
  • #17
  • Aug 18, 2007 9:43am Aug 18, 2007 9:43am
Thanks Karm. I have been having a difficult time in applying FIB's to my charts. Now I have an idea. In applying a FIB's to weekly and daily, how do you determine which high / low's to apply them to?
Humble Lifetime Member
  • #18
  • Aug 18, 2007 9:48am Aug 18, 2007 9:48am
Quoting karmostaji
Hi rumbey,

What is the trend? well, it depends on which timeframe you are looking at, there are so many trends within trends. I recommend looking at 2-3 different timeframes rather than just one TF. Like I said in a post above, I use the weekly/monthly fibonacci levels to have an idea of where price might go. The daily fibo's didn't hold but the weekly held, where we also had a trendline there as well.
This was my problem. As the price retraced on the daily the trend was still UP on the daily therefore you look for a retracement off the fib lines to go LONG. My stop is usually 200 below, but on several occasions because the fib lines are approximate areas or support/resistance I let the losses run too much. Then the same on the 50% and the 61.8%.

Because the trend is still UP its very dangerous to SHORT the market although looking back its clear but as we all know its not at all clear at the time you are trading.

Ironically, when I posted I was long last week everyone was saying that the trend is DOWN, but is it? Maybe I need to trade the 4hr and just keep an eye on the other timeframes.. How do you determine the EXACT trend?

So how do you determine if you are going to go long or short just by looking at the fibs.

Presently you could draw fib lines from the low to high AND high to low. Which fibs will you TRUST because they conflict unless you know the overall trend direction... Are you clear what I am trying to say?

Dave
  • #19
  • Aug 18, 2007 10:39am Aug 18, 2007 10:39am
Wow. Great stuff. Karm.

Jim
Indicators show the past. Price Action "Indicates" the future.
  • #20
  • Aug 18, 2007 10:58am Aug 18, 2007 10:58am
Quoting Petter
First of all, a big HELLO to everybody coz as you can see this is my first post in FF.

To be honest, I was waiting for a personal thread like that by this great trader and person like Karmo.

I'm watching,reading and trying to follow for some time the other thread (Auslanco's...) but only as a guest.Without participating or even replying to anything.

I believe that I'm not ready yet to participate coz I need to learn more and more things about that wonderful world...The ''world of FOREX''...

I wish some day to become a trader like u guyz!!!

Keep up the good work and I wish to everybody a mountain of pipz...!!!
Hi Petter,

Welcome to FF and to my thread, it's great to have you with us

Good luck
Trade what you see, not what you think.
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