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4 Hour Strategy (MACD)

  • #101
  • Feb 1, 2007 10:07am Feb 1, 2007 10:07am
Quoting Al1nn
Phillip,

Thanx for sharing your strategy. It looks very interresting , but since forex is quite new to me.Can some1 plz tell me what 200EMA, 8SMA, etc??????
200 Simple moving average.
21 Exponential moving average
  • #102
  • Feb 1, 2007 10:10am Feb 1, 2007 10:10am
Quoting turk87
Where would you put a stop philip?

How about 1.340?
I'm looking at shorting this one soon, it still hasn't formed the round top...
As it is a strong resistance they might tend to pierce it and then bring it down and that is exactly what happened. That is where shooting stars come from. 38 pips stop minimum is what I would have used.
  • #103
  • Feb 1, 2007 10:17am Feb 1, 2007 10:17am
Much like the other users I have to commend you on the quality of your report, and thank-you for sharing it. However, myself being a mostly fundamental trader I find it hard to appreciate these systems. I am a firm beleiver that it's the news which shapes the markets, not charting trends/patterns.
I am Canadian!
  • #104
  • Feb 1, 2007 10:18am Feb 1, 2007 10:18am
Quoting fjfx
Hi Phillip

Firstly thanks for a great system. Extremely detailed. Shows
you've given it a great amount of thought.

I've got a question about setting stop loss.

I can't find it written in your article, except for Page 15 where you wrote
"Stoploss have to be inside the breakout otherwise it can be triggered
and then sometimes it can be very big ...."

Can you share where/how you set your stop loss? Or at least your
thought process? Should it be the last low/high (then you combine
it with money management to enter the corresponding no of lots?)


STOPLOSS


I haven’t discussed the field of stoplosses in the PDF document as it is not a matter of pattern and or standard way. There are no definite rules as to where stoplosses should be placed.
This is the major cause for people loosing money. If stops wont be hit nobody will loose money. I just feel that to little time is spend on discussing stoplosses. We very easily come up with a strategy in detail but not a stoploss strategy. I have done the same giving very exact instructions in the PDF document as to the entries and profit targets but nothing on stoplosses. The question is now----- WHY??????.
I deliberately did not give any details as to stoplosses as that depends on each individual’s profile. For some people a 20 pip possible loss is just to much to handle while other’s can handle 50 pips. The question is how much capital do you have. If you risk 50 pips how much in percentage is that of your total capital. For anyone to expect trading over a long period of time it is of essential importance to risk as little as possible of capital. The excepted rule is not more than 3%-5% of capital.

If your capital is $1000 then your stoploss should not be more than 3% of that which equal $30 or about 3 pips.. Now that does not make sense on a leverage account. That is why trading a mini account(1 pip = $1) with $1000 makes it ten times better and the 3% risk now remains 30$ but it now becomes 30 pips. Some have it that 5% on a system that gives 65+% correct deals is also acceptable. Thus we can risk between 30 and 50 pips on a mini account of $1000 capital and will have a chance to trade over an extended period of time that when we hit that 3-5 losses in a row we will not be wiped out and will still have capital to recover.
Now comes the question of where to set my stoploss when the MACD gives a signal. If your profile (3%-5% of capital) only allows you a 40 pip stoploss and the most resent low/high or two to three bars back or the trendline is more than that away you simply skip the trade. I have given a way to enter at three different levels to reduce the amount of pips risk in the PDF document. You can use that to make a 50 pip risk to about 35 pips overall. That is also done just to make sure that you stay in the business in the future.
One does not necessary have to have all your capital in your account with your broker. You might have $10000 capital of which $3000 is with your broker and the rest in your own bank account. You can than calculate your risk on $10000 as long as that money is available for the Forex. The moment you use of that money ( for personal use) your risk in terms of pips reduces as well because your capital is less.
When the MACD gives a signal it all depends how far away is the support and resistance levels. If it is more than your risk profile just let it passes by. This is how I do it. My risk profile allows for 50 pips max but I don’t like using more than 43. I don’t use equal numbers as you will notice how many times it exactly test those levels. I uses 23,28,33,38,43. Put your stops below the resent support/resistance.
The problem with most people is that they cannot afford 3 to 4 losses in a row as it will wipe them out. Any system has it bad patches. The MACD I believe can and will give 3 losses in a row sometimes. That means 150 pips could be on the cards. Can you still go on after such a loss. If not I suggest you save money till you can survive such a run of bad deals. I have made provision for 200 pips loss in a bad run.
Hope this helped in any sense.
Phillip




Sorry 2nd question. In the detailed examples of MACD,
you tend to look out for recurring patterns. Does it mean you
rarely take a signal if the MACD simply does a "V" top or "V" bottom?

An example of what I am referring to if your Figure 3 on Page 3 of your article. The fourth "L" (long) if a V bottom. It definitely doesn't qualify as a rounding bottom.

Care to elaborate, please. Many thanks in advance.

That is high risk trades but normally with great profit. As the moves are normally fast I set my stoploss tight at max 23 pips waiting for the price to pierce a little back into the previous candle to give me that extra ten pips on the stoploss or so.
  • #105
  • Feb 1, 2007 10:30am Feb 1, 2007 10:30am
Quoting Canadian_MAF
Much like the other users I have to commend you on the quality of your report, and thank-you for sharing it. However, myself being a mostly fundamental trader I find it hard to appreciate these systems. I am a firm beleiver that it's the news which shapes the markets, not charting trends/patterns.
I went both ways in my trading path of almost 10 years. First fundamental and then technical. What I find was that there are some sort of a link between the two. People act upon information and most definitely on their interpretation of that information. It is not so much the info as the interpretation thereof that brings action according to the interpretation. I found that certain technical indicators are actually based upon this interpretation of info. Moving averages are just smoothing out the actions or movements based upon the interpretation of the information. The shorter the period the most resent info are carrying the weight and the longer the period the more and broader info are involved. That is why I don't trade crossovers of moving averages but rather studied the movement around(support and resistance) this moving averages. To me I don't see the price or value of a currency but to me it is the actions of people based upon their interpretation of information they have. Thats why one are bying and one are celling at he same time. Different strategies also play a roll. To study fundamentals surely does have its place but for me I don't have the time nor the resources to do it. And then I will have to predetermine how are the people going to interpret it to try and predict the price movement and when will I enter en where will I exit a trade.I will rather watch the severity of the fundamentals reflected in the currency movements(actions of the people based upon their interpretation of the info) and base my involvement on that through a tested strategy. I am using two short term moving averages, one medium term and one long term moving average as guides as to the direction of movement. Along this different paths of actions I make my decisions. It is not only the MACD that I amwatching. That only tells me to pull the trigger. The support and resistance levels tells me what people are expecting and what people are willing to pay for the information they have. Humans have the tendency to react the same under certain conditions and that is what support and resistance is telling me.
Good luck to you as fundamentals surely is very good as to longer term expectancy and accumilation and adding to positions.
  • #106
  • Feb 1, 2007 10:31am Feb 1, 2007 10:31am

STOPLOSS


I haven’t discussed the field of stoplosses in the PDF document as it is not a matter of pattern and or standard way. There are no definite rules as to where stoplosses should be placed.
This is the major cause for people loosing money. If stops wont be hit nobody will loose money. I just feel that to little time is spend on discussing stoplosses. We very easily come up with a strategy in detail but not a stoploss strategy. I have done the same giving very exact instructions in the PDF document as to the entries and profit targets but nothing on stoplosses. The question is now----- WHY??????.
I deliberately did not give any details as to stoplosses as that depends on each individual’s profile. For some people a 20 pip possible loss is just to much to handle while other’s can handle 50 pips. The question is how much capital do you have. If you risk 50 pips how much in percentage is that of your total capital. For anyone to expect trading over a long period of time it is of essential importance to risk as little as possible of capital. The excepted rule is not more than 3%-5% of capital.

If your capital is $1000 then your stoploss should not be more than 3% of that which equal $30 or about 3 pips.. Now that does not make sense on a leverage account. That is why trading a mini account(1 pip = $1) with $1000 makes it ten times better and the 3% risk now remains 30$ but it now becomes 30 pips. Some have it that 5% on a system that gives 65+% correct deals is also acceptable. Thus we can risk between 30 and 50 pips on a mini account of $1000 capital and will have a chance to trade over an extended period of time that when we hit that 3-5 losses in a row we will not be wiped out and will still have capital to recover.
Now comes the question of where to set my stoploss when the MACD gives a signal. If your profile (3%-5% of capital) only allows you a 40 pip stoploss and the most resent low/high or two to three bars back or the trendline is more than that away you simply skip the trade. I have given a way to enter at three different levels to reduce the amount of pips risk in the PDF document. You can use that to make a 50 pip risk to about 35 pips overall. That is also done just to make sure that you stay in the business in the future.
One does not necessary have to have all your capital in your account with your broker. You might have $10000 capital of which $3000 is with your broker and the rest in your own bank account. You can than calculate your risk on $10000 as long as that money is available for the Forex. The moment you use of that money ( for personal use) your risk in terms of pips reduces as well because your capital is less.
When the MACD gives a signal it all depends how far away is the support and resistance levels. If it is more than your risk profile just let it passes by. This is how I do it. My risk profile allows for 50 pips max but I don’t like using more than 43. I don’t use equal numbers as you will notice how many times it exactly test those levels. I uses 23,28,33,38,43. Put your stops below the resent support/resistance.
The problem with most people is that they cannot afford 3 to 4 losses in a row as it will wipe them out. Any system has it bad patches. The MACD I believe can and will give 3 losses in a row sometimes. That means 150 pips could be on the cards. Can you still go on after such a loss. If not I suggest you save money till you can survive such a run of bad deals. I have made provision for 200 pips loss in a bad run.
Hope this helped in any sense.
Phillip
  • #107
  • Feb 1, 2007 10:54am Feb 1, 2007 10:54am
I've picked a nice resolution to the question of stoplloss and risk management elsewhere in this forum.

The idea is to express your max allowed loss in $, like for $5000 account 3% risk your max acceptable loss would be $150.
Now lets say you have a trade and want to put stoploss at 30 pips.
at $10 a pip on a standard account you may lose $300 on 1 lot. now divide your stoploss by 1lot loss (150/300) you come up with 0.5. you can buy 0.5 lots.
Next trade your stop loss is at 75 pips. So that's $750. Divide 150/750 you get 0.2. So you buy 0.2 lots.
This way in both cases you max loss is about $150. Of course, if stoploss is so great it gives a value below a minimum lot allowed then you need to follow Phillip's advice and bypass the trade.
  • #108
  • Feb 1, 2007 10:56am Feb 1, 2007 10:56am
Quoting irusoh
I've picked a nice resolution to the question of stoplloss and risk management elsewhere in this forum.

The idea is to express your max allowed loss in $, like for $5000 account 3% risk your max acceptable loss would be $150.
Now lets say you have a trade and want to put stoploss at 30 pips.
at $10 a pip on a standard account you may lose $300 on 1 lot. now divide your stoploss by 1lot loss (150/300) you come up with 0.5. you can buy 0.5 lots.
Next trade your stop loss is at 75 pips. So that's $750. Divide 150/750 you get 0.2. So you buy 0.2 lots.
This way in both cases you max loss is about $150. Of course, if stoploss is so great it gives a value below a minimum lot allowed then you need to follow Phillip's advice and bypass the trade.
Thank you. That just said it all.
  • #109
  • Feb 1, 2007 11:16am Feb 1, 2007 11:16am
I am posting an exercise over a very difficult period and I want you to look at it and pick the deals that there is. I have picked 23 deals. I will post the deals the same time in 24 hours time and then I will post a discussion on all 23 deals 48 hours later so that you can see how I go about in doing those deals. After that you will exactly know how I do it and what you must look at and for.
Attached File(s)
File Type: pdf Presentation1.pdf   26 KB | 8,780 downloads
  • #110
  • Edited 2:16pm Feb 1, 2007 2:04pm | Edited 2:16pm
Philip, at first your target was 1.30000, it didn't make it that far down as i'm sure you know.

I"m confused, it looked fairly round to me, and comparable with your other buy signals.

So how does it look to you now? It looks bullish to me now, I wouldn't short it...

So you are more weary when it doesn't form a complete round top? If its more V shaped you don't like it? A perfect example, USD.JPY how would you interept that macd?

Thanks.
  • #111
  • Feb 1, 2007 6:19pm Feb 1, 2007 6:19pm
Quoting flytox
The value of "1" could not be another thing than simple, even if it is exponential (exp of 1=1). So it's ok for you.

lol you are right. I should sleep a little more!

Mario
  • #112
  • Feb 1, 2007 6:24pm Feb 1, 2007 6:24pm
Quoting Phillip Nel
It did not make a round top as it came to far down.I took the trade as it came down at 1.3028 with first target at 1.3010. If you entered at 1.3030 three to four candles back your first profit taking should have been at 1.3005-1.3010 and then the rest set at breakeven.

I was only waiting, for a candle to form, that I forgot to check if it is still a round top. lol Good lesson!

Now, this part is confuzing me: "If you entered at 1.3030 three to four candles back your first profit taking should have been..."

There is no reason to enter short 3 of 4 candles earlier. Correct?

Mario
  • #113
  • Feb 1, 2007 6:40pm Feb 1, 2007 6:40pm
I think is what happened with the EUR/USD is that if you would have (and I did) get in on and short on the 2nd down candle after the initial rise, then if you would have been moving your stop to try and get to break even as quickly as possible (I didn't) you could have come out clean or taken a few pips because it went down slightly after that candle.

It didnt' go down enough for me to move my stop and the next candle shot up way past the resistance line, took out everyone's stops and then returned to it's normal level. Now it's just in somewhat of a consolidation pattern waiting for a break out I guess. The ma's still look like good profit can be taken... but at this point it's a risky trade.

If you look back to the last time it hit the same resistance line (on the 22nd), the way we were all thinking would have worked GREAT and taken a lot of pips by shorting and riding it down almost 100pips.

My 2 cents....
DireXiv Make it happen, no one else is going to do it for you...
  • #114
  • Feb 1, 2007 9:39pm Feb 1, 2007 9:39pm
Quoting Phillip Nel

STOPLOSS





I haven’t discussed the field of stoplosses in the PDF document as it is not a matter of pattern and or standard way. There are no definite rules as to where stoplosses should be placed.
This is the major cause for people loosing money. If stops wont be hit nobody will loose money. I just feel that to little time is spend on discussing stoplosses. We
Phillip

Yes, I know setting stops is more an art than an exact science, especially with some of the big boys often doing stop hunting.
Anyways, thanks for letting me understand your thoughts on how you
do things.
  • #115
  • Feb 1, 2007 9:45pm Feb 1, 2007 9:45pm
Quoting irusoh
I've picked a nice resolution to the question of stoplloss and risk management elsewhere in this forum.

The idea is to express your max allowed loss in $, like for $5000 account 3% risk your max acceptable loss would be $150.
Now lets say you have a trade and want to put stoploss at 30 pips.
at $10 a pip on a standard account you may lose $300 on 1 lot. now divide your stoploss by 1lot loss (150/300) you come up with 0.5. you can buy 0.5 lots.
Next trade your stop loss is at 75 pips. So that's $750. Divide 150/750 you get 0.2. So you buy 0.2 lots.
This way in both cases you max loss is about $150. Of course, if stoploss is so great it gives a value below a minimum lot allowed then you need to follow Phillip's advice and bypass the trade.
Well said! Actually that's exactly how I do it. But, what you shared
is more on money management, which is of utmost importance! However,
how do you come up with "30 pips" or "75 pips" is still the trickest question.

I'm sure you'll agreed with me that numerous times your stops got hit, before
the price reverses and continues in your expected direction. Aggravating!!

My conclusion for setting of stops is partially art/experience
and partially science (recent highs/lows).
  • #116
  • Feb 1, 2007 9:54pm Feb 1, 2007 9:54pm
In trading GBPUSD sometimes a 35 pip SL the way to go or even 65 SL is the way to go. Depending of supports and resistence. This may sound funny but I never set anything more then a 35 SL until a couple of months ago and noticed I kept getting knocked out of trades that were going in my direction. So I started looking close at supports and resistence and upped my SL with discretion of course. I also found a 35 pip trailing stop that moves every 10 pips did not bring the results I wanted either.
  • #117
  • Feb 2, 2007 1:34am Feb 2, 2007 1:34am
Quoting Phillip Nel
I am posting an exercise over a very difficult period and I want you to look at it and pick the deals that there is. I have picked 23 deals. I will post the deals the same time in 24 hours time and then I will post a discussion on all 23 deals 48 hours later so that you can see how I go about in doing those deals. After that you will exactly know how I do it and what you must look at and for.
Hi Phillip,

that's a great idea, thanks for taking the time to do that! I'm sure it will help!
  • #118
  • Feb 2, 2007 3:38am Feb 2, 2007 3:38am
Just curious if anyone is trying to play non farm payroll at 8:30? What are you thoughts and how are you planning the trade. Or are you sitting out the trade and calling it a week since it's friday?

Phillip - great exercise thanks for putting it together. I'm very curious to see how I come out in relation to your picks.
DireXiv Make it happen, no one else is going to do it for you...
  • #119
  • Feb 2, 2007 4:52am Feb 2, 2007 4:52am
Here are the deals I got on the exercise as well as commentary about the EurUsd deal yesterday.

Look at all those deals and see which ones you would have taken and which ones not. Look at the support and resistance around the MA's as well as the trendlines. Very interesting. I will post the discussions the way I would have done it in 24 hours time more or less. Hope you learn something out of this.
Attached File(s)
File Type: pdf Exercise MACD.pdf   83 KB | 7,827 downloads
  • #120
  • Feb 2, 2007 4:59am Feb 2, 2007 4:59am
Quoting DireXiv
Just curious if anyone is trying to play non farm payroll at 8:30? What are you thoughts and how are you planning the trade. Or are you sitting out the trade and calling it a week since it's friday?

Phillip - great exercise thanks for putting it together. I'm very curious to see how I come out in relation to your picks.
Will definitely not trade it on the MACD strategy. Might do it on the 5 min chart with a different strategy. This is gamble money. Win or loose. Only 2 chances.
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