Low Risk, High Reward Trading Experiment

Hurray! Someone finally posted a chart for a change.

Thursday February 1 at 15:30 ET

Trade Experiment #336 Buy NZD/USD at .6800

Stop is .6748

Target #1 is .7100

Risk is 56 pips

Reward is min. 296 pips

Reward / Risk Ratio is min. 5.3

Confidence level: good
Accuracy: fair
Reward / Risk Ratio : good

For research purposes only.

Wave hypothesis : Wave 5 up of a large trend that began September 2001.

I do not trade this pair but wanted to show the alternative view. I always attempt to see more clarifications if it is an impulsive or corrective move when the evidence is available. Therefore the very same picture could actually indicate that the last move up is not Wave c of Wave 4 but rather Wave 3 of Wave 1 up

Just an alternative view. Your orriginal counts have better likelyhood but you should not ignore the possibility in case it goes opposite.

Hope ITME does not mind

Since we're posting charts

In case you find some spare time Itme, it'd be appreciated if you could take a look at these gigantic EJ counts. Some stuff lines up semi-ok, other is a bit more of guessing. Yen crosses are a total mess to count IMHO, but I guess we'll get more clues as we proceed. I can't make up my mind whether we will shoot to new highs or move down quite a bit next - my main question is - if that last real high we made was a 5 - then what did we complete with it? And are we in an ABC correction or in a bigger wave degree or what...

Here are the monsters.

BTW that comment is supposed to say "12345 a bigger wave?" not a bigger wave 5. Currently labeled it as a 3.3 or C to complete the big 3.

http://img529.imageshack.us/img529/8...ejcountrj9.gif

http://img144.imageshack.us/img144/7...aterphaes2.gif

Regards

Is there a typo here? Do you mean .6800 entry with .7100 TP?

Yes, Moonchild, you're absolutely right. Thanks.

Thank you, Itme, for your comments, and thank you, Seeking Light (and others), for your comments and charts. I do apologise if I was confused and/or confusing re the degree of the wave count or otherwise. I was quoting my own journal notes of your journal notes, Itme, from 24th Jan, and referring to the reversal from the larger W3 high at 241.50 of the GBP/JPY. (Can't access your post now, not easily, anyway, now that the "search thread" tool has been deleted.)
I gather from the recent posts from the 2 of you that the W4 down to which I was referring was the larger degree, and the W4 up, of lesser degree and part of the "C" wave still to be completed, is the one to which you are now referring. I hope that is not obfuscating even more - the important bit is that you have answered my question and clarified the current wave count. Thank you again, both of you - I don't want to waste anyone's time, but I do appreciate your sharing of analysis and ideas.

I give my respect to all wave counters here, and also to GBP/JPY for being so difficult to be wave-counted lol (it's a real monster).
I'm not sure whether current wave C downwards since 240.03 has finished or not, but I see a full 5-wave sequence from 240.03 to recent 236.32 bottom (this sequence has an extended wave 5). Does that mark the completion of wave C, or just subwave 1 of it? We'll know it later.
Just remember the rules for wave count: wave 2 can't penetrate the start of wave 1, wave 4 can't penetrate into wave 1, wave 3 can't be the shortest.
Just my opinion because I might be wrong too. Good luck in counting.

Friday February 2 at 0:00 ET

Change entry price for Trade Experiment #335 Sell GBP/JPY at 237.80 to 238.30 from 237.80.

Change stop to 239.11.

New risk is 90 pips

New reward is 246 pips

New RRR is 2.7

For research purposes only.

Wave hypothesis : Wave 5 down of a larger Wave C of an even larger Wave 4. (Traex, I see a 1-2-3 where you see 1-2-3-4-5, but it's messy!)
____________________________________________________
____________________________________________________
Previous Trade Experiment:

Thursday February 1 at 14:15 ET

As SeekingLight asserts above, GBP/JPY has seemingly completed an upwards fourth wave correction.

Trade Experiment #335 Sell GBP/JPY at 237.80
Stop is 238.26
Target is 235.25
Risk is 55 pips
Reward is min. 246 pips
Reward / Risk Ratio is min. 4.5

Confidence level: good
Accuracy: fair
Reward / Risk Ratio : fair

For research purposes only.

Wave hypothesis : Wave 5 down of a larger Wave C of an even larger Wave 4.

GBP/JPY will rise to hit our entry price on a short trade (above) of about 238.30 - 238.80. (The current price is 237.60) Actual was 238.50, previous to NFP report, 238.79 after report.

USD/JPY will rise to about 121.10. (The current price is 120.70) Actual: 1.2111 before NFP report

GBP/USD will fall to 1.9620 (The current price is 1.9680) Actual: 1.9642 before NFP report

EUR/USD will fall to 1.2990 (The current price is 1.3020) Actual: 1.3011 before NFP report

USD/CHF will rise to 1.2465 (The current price is 1.2435) Actual: 1.2450 before NFP report

USD/CAD will rise to 1.1830 (The current price is 1.1785) Actual: 1.1842 before NFP report

NZD/USD will fall to .6774 (The current price is .6820) Actual: .6775 before NFP report

After that - 8:30 USD Nonfarm Employment Change http://www.forexfactory.com/images/m...mpact_high.gif 146K 167K

Need I say more!!!!!!!!!!!!! OK - I will. Based on the wave patterns, the data should favor the European currencies, and be deleterious to the USD, but without too much impact.

Well itme... I must say I HAVE THE EXACT SAME ENTRIES!!!

itme
on 1st sentence it should say "GBP/JPY will rise to hit our entry price on a short trade (above) of about 238.30" based on your previous post (#2812)...if i read it correctly

Thanks, Blondy101. I corrected that. I think I need a short (or long) vacation! My mind is wandering apparently!

Itme, at least 1 of your predictions (GBP/USD, GBP/JPY, or USD/JPY) will be wrong 100% sure, because with GBP/USD at 1.9620 and USD/JPY at 121.10, GBP/JPY must be 1.9620 x 121.10 = 237.60 (far under prediction).

Good point. However, I can still be correct in such predictions because the extremities are not all reached at the same time. Temporal shifts / phase displacements introduce another variable. GBP/USD has descended already to 1.9645, and bounced up to 1.9690. GBP/USD may have bounced up more than it otherwise would have due to a 4:30 ET data release:

Fri. 2/2 4:30 GBP Construction PMI http://www.forexfactory.com/images/m...impact_low.gif 57.9 57.0 57.5

It will probably come down again, but it might not. USD/JPY has risen to 121.03, close to our target (7 pips short). GBP/JPY has risen so far to 238.17. GBP/USD could fall to our target still, then rise strongly while USD/JPY stays up. So GBP/JPY could reach its target after GBP/USD falls to 1.9620 and rises strongly due to the NFP at 8:30 ET.

USD/CAD has already risen to 1.1825, 5 pips from out target. USD/CHF only rose to 1.2450, 15 pips short of our target, then dropped to 1.2412. EUR/USD has been flat.

Well, we hit that elusive 1.3055. Perhaps we will get to our downwave 5 after all on the back of pro dollar revision? Counts are totally borked inside this madness for me, but if that high we put in holds who knows.

"Benchmark revisions to NFP data to the year ending March 2006 added 754K; also Nov. Jobs are revised higher to 196K from 154K, so the historical revisions are very positive and the risk is that this seeps into price action and the dollar rebounds after the initial wave of disappointment."

Please name the currency pair! We can all figure out its EUR/USD, but still...!
Anyways, you make a good point. The combination of the current figure, with the past revisions, with the anticipation of future revisions, creates a convoluted logic of response, it seems, which makes this announcement the hardest to trade.

8:30 USD Nonfarm Employment Change http://www.forexfactory.com/images/m...mpact_high.gif 111K 146K 206K

"WASHINGTON (AFX) - The nation's unemployment rate climbed to a four-month high of 4.6 percent as somewhat cautious employers added fewer new jobs to their payrolls in January. Wage gains were even more modest.

The newest report on the economy, released Friday by the Labor Department, suggested that the jobs market got off to a slower start in 2007 yet still remains in decent shape. The more subdued job growth -- 110,000 positions -- is consistent with the expectation that growth in the economy as a whole will moderate this year.

The tally of new jobs added last month fell short of economists expectations for a gain of around 150,000 positions. Analysts also had said they anticipated that the overall unemployment rate would have held steady at 4.5 percent, the rate that was registered in December."
_____________________

The result?

As predicted above: "Based on the wave patterns, the data should favor the European currencies, and be deleterious to the USD, but without too much impact."

A 45 pip upwards spike in EUR/USD, up to 1.3064, creating a completion of the final (fifth) upwards wave of the intermediate trend (Wave B up of a downwards Wave 4, or else Wave 1 of a new Wave up - a Wave 3 that has a high upside potential).

A 65 pip upwards spike in GBP/USD, up to 1.9745, creating a completion of the final (fifth) upwards wave of the intermediate trend (Wave B up of a downwards Wave 4, or else Wave 1 of a new Wave up - a Wave 3 that has a high upside potential).

A 52 pip downwards spike in USD/CHF, down to 1.2376, creating a completion of the final (fifth) downwards wave of the intermediate trend (Wave C down of a downwards Wave 4, or else Wave 1 down of a new Wave down - a Wave 3 that has a high downside potential).

A 47 pip downwards spike in USD/JPY, down to 1.2064, creating a Wave C down of a small downwards Wave 4, of an upwards B Wave, part of an upwards Wave 4 (intermediate size) of a large downwards Wave 1. Either that, or the latter mentioned downwards wave is a large Wave C that may be about to complete with one more downwards wave 5.

A 24 pip downwards spike in USD/CAD, down to 1.1811.

Then the rebounds from the initial announcement spikes (that produced their movements over a 3 to 8 minute duration), was much larger and longer lived than the original spikes:

EUR/USD: down 106 pips

GBP/USD: down 109 pips

USD/CHF: up 102 pips

USD/JPY: up 71 pips

USD/CAD: up 59 pips

_______________________________________

Fri. 2/2
4:30 GBP Construction PMI 57.9 57.0 57.5
5:00 EUR PPI m/m 0.0% 0.0% 0.0%
8:30 USD Nonfarm Employment Change 111K 146K 206K
8:30 USD Unemployment Rate http://www.forexfactory.com/images/m...act_medium.gif 4.6% 4.5% 4.5%
8:30 USD Average Hourly Earnings m/m http://www.forexfactory.com/images/m...act_medium.gif 0.2% 0.4% 0.4%
10:00 USD Consumer Sentiment (r) http://www.forexfactory.com/images/m...act_medium.gif 96.9 98.0 98.0
10:00 USD Factory Orders m/m http://www.forexfactory.com/images/m...impact_low.gif 2.4% 1.6% 1.2%

Yea, also waiting to see whether or not we will get a confirmation of the B ends / tops and move down to see the Cs formed on EURUSD and GBPUSD...

Realized a bit late that I had to update the waves for GJ in order to get them to line up with the last moves. Currently waiting for confirmation by a move back inside the range of my marked a to see whether or not we finished the c up or not. Hit a TL and FE 100 target, possibly completing a corrective move up. If not, then we might be bound for the strong wave target at 161.8%. I think this weekend is G7, too?
Currently totally lost on the count I'm sorry to say. The double bottom suggests we might still be trapped in some flat wave or some such. Really not an expert here. I much prefer to just view all of "this range" as some obscure wave and wait for a fake break on a C completion wave to then ride the way back on a PA setup, to possibly get the next real impulse wave.
Still working on simplifying all of the process and getting at least close to a proper proportional count on stuff.


All these news and rate decisions are not helping either I'll assume

Sorry if it's getting a bit much from me.....I'm tired and had too much market in front of my eyes I think...

Thanks for your late in the week ruminations, SeekingLight. I think you can't properly count waves on the scale you're examining with more than a 1 hour candlestick. With 3 hr or 4 hr timeframe the details of the internal wave patterns are obscured. It all becomes too blurry I feel.

I use a 3 hr / 40 day chart to get a partial glimpse at the larger, encompassing pattern, supplemented by a 1 day / 10 year chart and the 1 month / 30 year chart to see the larger picture. You really need at least a 1 year perspective and a 1 hour / 30 day perspective to come up with a viable wave count. Sometimes, to clarify the internal wave count, I need to look at the 5 minute chart also.

By this time in the week my brain is usually semi-comatose, so I set the charts aside and wait as long as possible to take a fresh, close look. Doing things to clear the mind and refresh the soul is the order of the day.

[quote=itme;54852]Cautionary message:

We encourage our readers to invest carefully and to utilize the information available at the web sites of the large Forex brokerage firms. We encourage you to get personal advice from your professional investment advisor and to make independent investigations before acting on information that we publish. We do not in any way warrant or guarantee the success of any action which you take in reliance on our statements.

___________________________


The impossible takes a few weeks to achieve

Dear traders,

As we have tried to make clear throughout this thread, we are not providing a signal service to anyone, either free or for a charge.

We are in the process of performing an experiment employing two very complex analytical models, which we are in the process of learning and familiarising ourselves with.

We are attempting to generate tradable signals which provide a healthy rate of return. 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.

The results of the first 39 trades were promising. (In spite of only about 30% successful trades, 15,000 times multiplication of capital based on a 25% risk factor). We have not yet analysed the performance of the subsequent trades.

We will post them here when we have completed our detailed analysis. Our impression is that the results are somewhat consistent with the earlier set.

Note that we are attempting the near impossible - accurately predicting both endpoints of trends. To do this even once is a virtual miracle. To do it repeatedly is the "Holy Grail" of the entire investment community, which consists of literally millions of professional traders working full time for decades both independently and for a myriad of corporations and financial institutions.

The implications of perfect success would be that we could more than double our capital daily. If this is achieved, if we started with $10 K, then we would earn all the money in the entire planet in about 5 weeks.

So please indulge us. The near impossible we can do quite fast, but the impossible takes a little longer.

I assure you that we are learning alot each and every day.

In the meantime, treat each of our trade recommendations with a healthy amount of skepticism.

If there is any aspect of our approach that makes sense to you, then we encourage you to apply it in your own trading system.

If our trade recommendations help people to identify and confirm good trades themselves, then we will be happy to have helped out.

For the present, you should not trade our signals with real money. It is still too early on in the experiment.

About 24,000 people have visited this thread since it started five weeks ago in a humble start in the classified section. About 1,000 different new people visit this thread each day. I assume that they are finding some value here.

I think that what they like is that we are trying to predict the swings in the market, not just scalping a few pips here and there. The other important contribution we are making is to emphasise the importance of the reward : risk ratio as a vital factor in a trading program. The third good thing about our thread is that we are quite organised and systematic in the way we present our trade signals.

Note that none of the three things that I think are attractive about our thread involves being correct in our trade signals. Even if we were never successful in a single trade prediction , I still think that the three above factors make our experiment helpful. But the fact is that occassionally we are correct in our trade signals. Whether this is just blind luck, or the result of a robust system, only time will tell.

We welcome your comments and suggestions.

Best regards,

Itme

_________________________________________________





Itme:

Just wondering if you have come to any conclusions with
this experiment. Enjoying it immensely.