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Psych Levels, Pivots, and Trendlines - Resurrected

  • #101
  • Aug 14, 2008 10:52am Aug 14, 2008 10:52am
Quoting eyevoltage
Hi folks.
For the benefit of Ed and maybe others on here, I just thought I'd post this chart from this morning, to show some examples of candlestick movements.

Cable this morning. As you can see, price was ranging through the night, with the odd half-hearted breakout here and there. Then, at 7.15gmt, a harami formed. A harami is a small candle that forms sort of "inside" the range of the previous candle. (Harami is Japanese for "pregnant".....I guess you can see the significance!) A harami is a candle reversal signal, and once it's formed, we have to wait for a confirmation from the next candle. Indeed, the next candle confirmed nicely, and led to a potential 30-odd pip move.
Number 2 pin-points 3 dojis which have come at the bottom of a move. Dojis aren't reversal signals as such, but rather provide you with a "watch closely" notice. Dojis signify indecision, and three of them one after the other tell you that there's a LOT of indecision! There was no indecision with the fourth candle, which rose, with authority, to punch through the .00 psych line. Number 3 just signifies a small consolidation period before price resumes its movement north. Number 4 shows you that price has hit the .50 psych line, and we then have a "dark cloud cover" candle, or a "bearish piercing pattern", with a very bearish upper shadow. This is another significant potential reversal signal, but like all other patterns, needs a confirmation from the next candle. So far, as I type this, price is just moving sideways in another consolidation.
I've just used these as examples. I didn't take any moves upwards, as price is below the Pivot Point, so short trades should be the order of the day.
I hope this info helps in some small way.

Thank you So much for your wonderful instruction here, because this is quite helpful. Please keep it up, if you don't mind. This is the way I can understand what to look for, how to get into the moves and where to take profit. Appreciate what you put into this thread a lot!
  • #102
  • Aug 14, 2008 11:26am Aug 14, 2008 11:26am
Quoting MDenise
Thank you So much for your wonderful instruction here, because this is quite helpful. Please keep it up, if you don't mind. This is the way I can understand what to look for, how to get into the moves and where to take profit. Appreciate what you put into this thread a lot!
Thank you for your kind comments. I've learned so much on FF from other people, and it feels good to be able to give something back.

Cheers for now.
  • #103
  • Aug 14, 2008 11:27am Aug 14, 2008 11:27am
Quoting toddanderson
cant you just post the ebooks or rapid share them

sure, how? I'm computer illiterate.
  • #104
  • Edited 1:32pm Aug 14, 2008 1:24pm | Edited 1:32pm
I've been hanging out at the EURUSD thread.

It's like a soap opera over there.

Anyhow - You guys have eyevoltage and I've been following his analysis and recommendations. He's got a very good grasp on this

If your new at this please check out my site. (Not selling anything and there are no advertisements - totally free)

http://www.thefxpivotpoint.com/Videos.htm

Download and watch the Pivot Point System under Getting Started.

There are other videos under each month where I walk through my thought process and then show you my results.

Why only 3 months?

I'm lazy and it was a lot more work than I imagined.

I'm going to post so random thoughts today.

Please feel free to fire off questions.

If I'm not around EV should be able to help.

Thanks.

Mike
  • #105
  • Aug 14, 2008 1:31pm Aug 14, 2008 1:31pm
If you haven't read these - please do.

I compiled them after writing down my trading thoughts over a 10 month period.

I began keeping a journal after I blew up my second account in 2003.

10 Steps



1) Knowledge Acquisition Great traders are voracious learners. Most professional occupations have a learning curve. Doctors, lawyers, criminals, etc.. often study years to refine their craft. Novice traders often believe they are immune to such time intensive studies. Don't fall prey to such ignorance - study the markets, put in serious chart time, read and learn from those that are winning.
2) Money Management This one is simple. Trading more then 2-5% of your account on any one trade is account suicide. Let's assume you start out trading a $1000.00 mini-account. Your system has a 30 pip stop loss. The maximum you should risk on any one trade is a dollar per pip. The market will forgive a lot of things - bad trades, bad days even bad weeks but without the capital to withstand the drawdown your trading career with be short lived.
3) Simplistic Strategy Have you ever noticed Forex scam sites often provide a unique system that only they have? Additionally - these systems are only known by a hand full of successful traders. Your system should do just the opposite. I use pivot points, psychological levels and trend line breaks because large institutions follow these levels. As a retail trader your goal should be to pick up the pennies in front of the steam rollers. Keep Occam in mind when adopting any trading system. Leave the over complicated systems to the guys at Long Term Capital.
4) Trade During Prime Time One of the biggest benefits of the currency markets is its hours. It's open 24 hours a day 5 days a week. This is great for trend analysis but not for trading. Don't let these extended hours fool you. Only the biggest players trade during the prime hours... so should you. Keep in mind that only 14% of all trades occur outside of non-financial institutions. That's where the retail trader lives. Since we only trade the EURUSD we only trade between 2:00am and 11:00am EST. This time period covers the European open and close, the open of the US session and the overlap between the US session and the European session.
5) Follow Your Trade Plan You don't know where the market is headed. Don't guess. Hope isn't a strategy. Once you adopt a trading strategy that fits your trading style stick to it. Leave your ego at the door when you begin your trading day. This is one of the most difficult things to overcome. The old adage plan your trade and trade your plan is very important. When you trade outside your plan you will lose.
6) Double Your Demo Account Almost every Forex trading platform offers demo accounts. When you can double your demo account you are ready to trade real capital. Additionally - after your double your demo account trade the first few months of you real capital using micro-lots where each pip equals a small dollar amount. This will help ease the emotional impact of trading real capital.
7) Trade with the Trend All those little axiom's about the trend exist for a reason - the trend is your friend... trade with the trend until it bends... trade the trend or lose in the end - you get the idea. These exist for a reason. They are true. Use long term trend analysis to determine market direction. When you trade with the trend your chances of success are greatly enhanced.
8) Set Realistic Expectation What's realistic? If you can return 5-8% a month you are doing great. While this may seem like a relatively small goal very few traders can achieve this month after month. If you set unrealistic goals - say 20% a month you better be sitting beside John Arnold because that's about the only way your going to see that kind of return.
9) Post Trade Analysis When the trading day is over take a few minutes to analyze what happened. Did you follow your trading plan? Was your analysis accurate? Why? Why not? At the end of the week spend some quality time looking over the trades you placed during the previous week. How many trades did you take? Are you over trading? Many traders find it advantageous to keep a journal of their trades and their thought process for taking or not taking the trade. In a very short time you will see patterns emerge that will aide you in fine tuning your trading.
10) Predetermined Profit Targets and Stops Setting your stop loss is a must. Intra-day traders usually use a 20-40 pip stop. After you've adopted a system and spent hours watching the chart you will know where your stop should be. Once you've settled in on a stop never move it. One more time - never move your stop! Remember that capital accumulation is secondary to capital preservation. On the other side of the equation set profit targets prior to entering your trade. Utilizing pivot points will always provide you with realistic profit targets.
  • #106
  • Aug 14, 2008 1:35pm Aug 14, 2008 1:35pm
Myths

1) The more complicated the trading system the better chance you have at succeeding.

Just the opposite. The simplest solution is often the most effective. Any time you add another item or variable you introduce another point of failure. Keep Occam in mind when developing a trading strategy.

2) The more I learn the more I earn.

Learning is never a bad thing... however... there's no such thing as a PHD in trading. Once you developed a system that works stick to it. Read and learn for the sake of personal gain. The Holy Grail of trading doesn't exist so you can stop searching for it.

3) Mathematicians and people with science acumen make better traders.

Do I have a great example of this flawed logic. Long Term Capital. Trading is as much about emotion as it is about logic. Emotion can't be quantified. If this statement had any validity there would be a lot of MIT graduates on the Forbes list.

4) You win more often by listening to analysts comments.

There are some very good analysts in the Forex world. However NONE of them know where the market is going. Trade based on a trading plan that you've tested and are comfortable with. If you find your trading decisions are being altered by reading analysts comments then stop reading them.

5) Trading is exciting.

Only in the movies. Sitting for hours watching charts and reading economic reports - I can hardly contain myself. If you experience the same rush from trading as you do from gambling then you are probably gambling.

6) Great traders are born with an innate trading skill.

 This sounds absurd but there are a lot of people who truly believe certain people are born traders. The last time I checked geneticists have yet to uncover the enigmatic trading gene. This nonsense undermines the hard work successful traders put in to winning.

7) After each loss I double up on the next trade. After losing 3 in a row my odds of losing on the next trade are minimal.

Nope. Doesn't work that way. If you flip a coin 100 times the 101 flip is still 50/50. Trading a small percentage of your account on each trade is the only way to survive your systems drawdown. Don't fall prey to the gambler's fallacy.

9) All Day traders lose money.

 You will see this one everywhere. Price action is the short term is unpredictable. Studies have proven it doesn't work. Spreads make it impossible to win. Support and resistance are meaningless. Day traders don't make as much. The list goes on and on. Yet every day a small percentage of traders beat the market. If one person can be successful at day trading then so can two. Don't let others project their inadequacies on you.

10) Stops tighter than 40 pips will result in failure.

Your stop should be based on your system. Be cautious of anyone issuing absolutes - especially in the trading world. The time frame you are trading should determine your stop. Longer term traders will naturally have wider stops.

11) Price action in the short term is random.

Who defines short term? If you have any evidence that price is random on any time frame please forward it to me. The information needs to be quantifiable and longitudinal. It's important to point out that we don't have empirical evidence to support our claim either - however - if you look at price action on a 5 sec time frame or a 4 hour time frame similar patterns emerge. If one pattern can be seen on a very short time frame then by definition random can no longer apply.
  • #107
  • Aug 14, 2008 8:54pm Aug 14, 2008 8:54pm
Quoting toddanderson
cant you just post the ebooks or rapid share them
you can pm me for any books
  • #108
  • Aug 15, 2008 2:07am Aug 15, 2008 2:07am
A nice quick trade:
Short @ 50 after the retracement (=s/r-level)
Exit @ 39.
Wanted to close it @ S1, but i couldnīt close the trade as quickly as Euro moved back up 3 pips.
Attached Image (click to enlarge)
Click to Enlarge Name: eu.gif Size: 16 KB
Donīt live for working, but work for living.
  • #109
  • Aug 15, 2008 2:36am Aug 15, 2008 2:36am
The second one:

Hmmm, i think i saw something like this just a few minutes ago...
Attached Image (click to enlarge)
Click to Enlarge Name: eu.gif Size: 16 KB
Donīt live for working, but work for living.
  • #110
  • Aug 15, 2008 3:10am Aug 15, 2008 3:10am
Quoting matsf
The second one:

Hmmm, i think i saw something like this just a few minutes ago...
That second one in particular was tailor-made after that shooting star on the .50 psych line! Nice one.

What were you doing up at that time of the morning anyway?
  • #111
  • Aug 15, 2008 3:20am Aug 15, 2008 3:20am
For me it was 8.30 am, so not soooo early.
I live in Germany, so thatīs no prob.
Donīt live for working, but work for living.
  • #112
  • Aug 15, 2008 3:37am Aug 15, 2008 3:37am
And again the euro:
Short @ S1,
exit @ SP.
Attached Image (click to enlarge)
Click to Enlarge Name: eu.gif Size: 15 KB
Donīt live for working, but work for living.
  • #113
  • Aug 15, 2008 3:51am Aug 15, 2008 3:51am
Quoting matsf
For me it was 8.30 am, so not soooo early.
I live in Germany, so thatīs no prob.

...........get these bloody specs changed!! I thought the time on your post was 03:00, mate!

Another nice trade, though. Well done!
Cheers
  • #114
  • Edited 6:32am Aug 15, 2008 4:17am | Edited 6:32am
For those interested in Candlestick reversals, here's one from Cable a short time ago. Actually, it's a "two-in-one" situation, because there's a "bullish piercing pattern" that formed from a "tweezer" situation. If you look at the two candles, side by side, on the S2 line, you'll see that both lower shadows match each other, creating the "tweezers", which is usually a good sign of a reversal. The "bullish piercing pattern" reinforces the probability of a nice upwards move, especially as in this case, where the whole thing centres around S2, the .20 psych line and a fib-line.
Attached Image
  • #115
  • Aug 15, 2008 6:56am Aug 15, 2008 6:56am
Quoting eyevoltage
...........get these bloody specs changed!! I thought the time on your post was 03:00, mate!

Another nice trade, though. Well done!
Cheers
Catching up on reading. MATSF, those were great illustrations of easy pips. I was having a problem finding them on my chart for a while, until I realized that your bottom-line timeline is different from mine. I think mine shows GMT and yours shows GMT+1. Illustrations like the ones that you and EV are posting will surely help us.

I gotta tell ya, after hanging out on EUR/USD for the past few weeks, I hope no one finds us over here. I really appreciate the small population on the thread and the fact that you are all so serious but friendly about your business.

Not doing much except hanging out with my daughter today. I'll check in from time to time probably, but have a great weekend all.

Ed
Up or down, gimme a ticket
  • #116
  • Aug 15, 2008 7:08am Aug 15, 2008 7:08am
Thanks SpecialEd for the kind words...

My time zone is GMT+2, just for info. (with DST On)
Donīt live for working, but work for living.
  • #117
  • Aug 15, 2008 7:13am Aug 15, 2008 7:13am
Thanks MATSF. Is that what shows on the bottom timeline of your Metatrader 4 program?
Up or down, gimme a ticket
  • #118
  • Aug 15, 2008 7:21am Aug 15, 2008 7:21am
Yes, itīs now 14:21 here in Germany.
Donīt live for working, but work for living.
  • #119
  • Aug 15, 2008 1:16pm Aug 15, 2008 1:16pm
Quoting eyevoltage
For those interested in Candlestick reversals, here's one from Cable a short time ago. Actually, it's a "two-in-one" situation, because there's a "bullish piercing pattern" that formed from a "tweezer" situation. If you look at the two candles, side by side, on the S2 line, you'll see that both lower shadows match each other, creating the "tweezers", which is usually a good sign of a reversal. The "bullish piercing pattern" reinforces the probability of a nice upwards move, especially as in this case, where the whole thing centres around S2, the .20 psych line and a fib-line.
I assume that this works with bearish piercing pattern after tweezers formed also, huh?
Up or down, gimme a ticket
  • #120
  • Aug 15, 2008 1:58pm Aug 15, 2008 1:58pm
This question is for Acumen. I've felt really good lately about your refusal to trade against the bias (over/under daily pivot). It greatly reduces the number of bad trades, and associated risk. But I thought of something today and wonder how you handle it.

Do you ever sense a retracement and go ahead with a buy order? If so, what criteria do you use to confirm for yourself that a retracement is underway?

Thanks,
Ed in the Old Dominion
Up or down, gimme a ticket
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