Low Risk, High Reward Trading Experiment

Sorry, bg4xtrader, but if I thought that GBP/USD would be dropping 250 pips, then I wouldn't say "GBP/USD will be rising strongly".

Tuesday February 27 at 4:50 ET

Re-enter Trade Experiment #350A Buy GBP/JPY at 234.90

Stop is 234.34

Target is 240.10

Interim target is 239.50

Risk is 65 pips

Reward is 511 pips

RRR is 7.9 to 1

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

For research purposes only.
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Previous Trade Signal:

Monday February 26 at 11:30 ET

Trade Experiment #350 Buy GBP/JPY at 236.10 (in the future)
Stop is 235.59
Target is 240.10
Interim target is 239.50
Risk is 60 pips
Reward is 391 pips
RRR is 6.5 to 1

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

For research purposes only.

Wave hypothesis : Wave 5 up of Wave 3.

Hi itme,
I really want to say thank you to you, i am a beginner in trading forex, and last few months, i have search so many system but i have lose $1500. Luckily I have read your thread "The Basics of Elliott Wave Theory", and i try to learn eillott wave! I read the books and usually i will refresh your thread, and see your comment, comparing your wave count and mine one, and you know what, this month i have earn 200 pips , i've never try this before, i think it's a good start for me, i want to tell you how happy i was and how i love your thread! Hope you will continue this thread forever, LOL.

********thank you very much***********

p.s. sry for my english, is not my mother lanaguage!

Itme, do you believe your wave count for the GBP/JPY is still valid? It has dropped quite a bit past your entries and stops, so I am wondering if you think this is an extension or a negation of your wave count. Thanks in advance.

Hai Itme,

Haven't seen your EW reading for EUR/USD lately. I'm reading it as a completion of major wave 5 and expected range 1.3262 -1.3280. May I have your comment on this, pls ?

Happy Pipping

Aside from the fact that GBP/JPY is an inherently challenging currency pair to predict because it, in my opinion, has very idiosyncratic behavior, it is a great argument for pair specialisation. In general, the great difficulty of consistently winning at Forex trading (or trading in general) means that whatever strategy we settle upon, we should attempt to specialise in it and refine our ability as much as possible over the long term.

This general concept applies to which currency pairs one chooses to study. From my point of view, GBP/USD, EUR/USD, USD/CHF, USD/CAD and AUD/USD, though each very unique and distinct, are more similar to each other. On the other hand, USD/JPY, EUR/JPY and GBP/JPY are qualitatively different in the type of patterns, the proportions of the waves, timing and time cycle patterning than the previously mentioned group. When one mixes Elliott Wave and other types of analysis between the two groups, then it is easy to make errors by assuming that what is true or probable for one group is true or probable for another.

The Elliott Wave count my above GBP/JPY trade experiments above were predicated on has been invalidated by the size of the recent downtrend.

Tuesday February 27 at 13:15 ET

GBP/USD behaved exactly as we predicted, though we didn't do a post here, rising in general from 1.9600, whilst gyrating with the various economic announcements today. Usually, a strong rise in GBP/USD causes a larger rise in GBP/JPY. Sometimes, however, a strong move in USD/JPY overwhelms the GBP/USD move and directs the motion. This is what has been happening, as USD/JPY dropped strongly today, pulling down GBP/JPY in spite of the rise in GBP/USD.

The result is that GBP/JPY dropped very strongly and has reached a very high probability reversal value according to my system at 233.00. The Elliott Wave pattern is also a viable completed 1-2-3-4-5 or A-B-C. Also, GBP/JPY has met and touched a lower trendline since 1/8/2007. This is at the very least a high probability bounce point, which will allow the stop to be adjusted to a break even or small risk after a sizeable upwards retracement. The time of day also favors a reversal now.

p.s. - GBP/JPY just dropped further to 232.62 on a drop in GBP/USD. USD/JPY looks as if it has finally reached it reversal value. There is a chance we may squeak through and avoid hitting our stop, which is very close.

p.p.s - we should have switched to a caution mode if we had checked in with the fundamentals and realised that several things were afoot in the world that made the carry traders nervous. A 9% daily drop in the Chinese stock market, an assassination attempt on Cheney, and escalating tensions between the USA, Iran, Russia and China among them. Then we would wait for a confirmation of trend reversal instead of presuming to predict it. Predictions of reversals of ultra strong movements is exceptionally difficult, or at least requires a different set of constants and criteria than under normal conditions. GBP/JPY fell so far to 230.80, and could even go further down, but probably not before there is a large retracement.

Re-enter Trade Experiment #350B Buy GBP/JPY at 233.00

Tuesday February 27 at 4:50 ET

Stop is 232.49

Target is 238.50

Interim target is 236.35

Risk is 58 pips

Reward is 326 / 541 pips

RRR is 5.6 / 9.3 to 1

Confidence level: good
Accuracy: high
Reward / Risk Ratio : very good

For research purposes only.

Wave hypothesis: Wave 3 upwards of a WAVE 5 up. Alternatively, Wave 1 up of a WAVE 5 up. Alternatively, Wave C upwards of a Wave B up of a large downwards correction.
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Tuesday February 27 at 4:50 ET
Re-enter Trade Experiment #350A Buy GBP/JPY at 234.90
Stop is 234.34
Target is 240.10
Interim target is 239.50
Risk is 65 pips
Reward is 511 pips
RRR is 7.9 to 1

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

For research purposes only.
__________________________________________________ ______________
__________________________________________________ ______________
Previous Trade Signal:

Monday February 26 at 11:30 ET

Trade Experiment #350 Buy GBP/JPY at 236.10 (in the future)
Stop is 235.59
Target is 240.10
Interim target is 239.50
Risk is 60 pips
Reward is 391 pips
RRR is 6.5 to 1

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

For research purposes only.

Wave hypothesis : Wave 5 up of Wave 3.
__________________

Thanks for writing, carforum. I'm very happy that your month was good. Your approach is what I hope others will also do. Pay attention to the market, form your own assessments, and don't make the mistake of thinking that my trade experiments are some miraculous winning trading formulas. That is not my intention here, though some of the trade formulas do work, others don't because they are primarily experiments. I am often wrong here. But the general methodology is sound if you are very hardworking and careful. In essence, identify high probability entry set-ups and entry prices where you can limit risk and maximize potential reward. Of course, it is much better to trade in the direction of established strong trends and stay in the trade as long as possible.

It is wise of you to study the basic principles. Once you understand some of the basic principles of wave science, then strategise like a military general so that every move is very carefully thought out. Then even if your wave count is incorrect, you can still make profits. And when you are wrong, then the losses will be small compared to the earnings when you are correct. If you are not sure, then just trade in a practise account and make notes of your lessons learnt in a journal so that you don't repeat the same errors twice.

hi itme
where's this dragon heading - gbpjpy
it looks like some one open the door and forget to close it

i have a point want you to till me if it's rong
I see it will retrace from 230.63

Hundreds of billions of dollars in carry trades may be triggering protective strategies. A runaway freight train of sorts. However, at least a strong retracement is due at about the present price of about 231.00, and on down into the region you refer to, at about 230.50. We may have found the bottom already.
We shouldn't have bought into this trend. If we had studied the fundamentals more carefully, or at all, then we would have avoided standing in front of this particular freight train. There has been a long period of investor confidence, and a variety of factors have shaken that confidence today.
See the following, which is but part of the story:
Dollar Action Mixed Weak Durable Orders, Highest Level Of Confidence In Over 5 Years

Tuesday, 27 February 2007 16:53:58 GMT

Previous Articles

1. Feb 26 - Malta's Euro Application and Hawkish ECB Comments Helped to Boost Euro
2. Feb 23 - US Dollar Faces Many Risks in the Week Ahead
3. Feb 23 - Dollar Sells Off As Caution Rises
4. Feb 22 - Dollar Passivity Unsettled By Geopolitical Speculating
5. Feb 19 - Euro Gains on Strong Economic Data
6. Feb 19 - Dollar Stumbles on Data
7. Feb 16 - Euro Furthers Strength on Weak US Economic Data
8. Feb 15 - Dollar Collapses Under Data Downpour
9. Feb 14 - Euro Breaks Out After Bernanke Comments
10. Feb 14 - Dollar Pummeled Since London Open With Help From US Data And Bernanke

Written by John Kicklighter, Currency Analyst

The data dam burst Tuesday morning in the New York session, leveraging FX volatility with market movers like durable goods and consumer confidence. However, the blunt force each release typically inflicts on price action was controlled by orchestrated release times. Though the technicals, EURUSD blew through 1.32 resistance early in the London session on a 90-point peak-to-trough rally to 1.3250. The same dollar slide moved USDCHF through 1.23 with authority and leaving the pair to form a temporary base around 1.2205. Missing out on much of the action, GBPUSD marked its biggest move in an 85-point upward swing to 1.9675 in the European hours. Finally, the biggest hit the dollar received Tuesday was in USDJPY. The pair plunged 200 points from yesterday’s New York session close around 120.65 as flight to safety in the emerging markets found a prime buy in the Japanese currency. [USD/JPY plunged over 300 pips from the previous NY close by the day's end.]

Though the full US economic calendar was promising volatility for the majors, an anti-dollar bias was spreading long before New York capital markets range their bells. In recent days, the UN’s pressure on Iran for its uranium enrichment program and the steady rise in sub-prime mortgage defaults has kept the bearish wave close at hand. The gloomy sentiment quickly turned to full-blown dollar selling after the media reported a possible attempt on US Vice President Dick Cheney’s life in Afghanistan. According to officials, a bomb was detonated at the main gate of a US army base where Cheney was staying. After 30-tumultuous minutes, the market settled down after it was announced that the Vice President was flown out of Afghanistan and that he was never in serious danger.

With the unexpected flight to safety in the overnight, the mood had already been set.

When the first indicator came across the wires, cautious traders found themselves on the right side of the trade. Bookings for durable goods dropped 7.8 percent in January. While the headline number was only a three-month low, the figure excluding the transportation complex felt the biggest drop since June of 2002. Through the month, commercial aircraft orders dropped 54.6 percent while those for vehicles slipped 5.1 percent. These volatile numbers aside, the most concerning drop was the 17.3 percent slide in business equipment, the biggest in three years. This perhaps shows the slump in manufacturing is spreading as firms attempt to burn off inventories and cut spending to preserve earnings.

While bears would have been more than happy to keep shorting the greenback as long as liquidity supported it, the data took a considerable turn for the better a little later in the session. Existing home sales through January unexpected surged 3.0 percent to an annualized 6.46 million pace. Statistically, this was the biggest monthly increase in two years; but more importantly it signifies a considerable pick up from September’s low. Since previously owned homes account for 85 percent of the overall market, the indicator is one of the best signs that the worst housing slump in 15 years has reached its low. The other pleasant surprise was the Conference Board’s Consumer Confidence Survey. Contradicting the slip in the University of Michigan’s sentiment read for the same period, the Conference Board’s indicator reported the highest level of optimism in five and a half years. With employment and wage growth trends still well intact, pessimists are becoming harder to find.

However, despite these two strong indicators there was still reason for caution. Coming in under the radar, the Richmond Fed Index came in at -10; which is a reminder that the risk for Thursday’s ISM report is to the downside.

Macro indicators had their place in the benchmark equities declines Tuesday, but the market was already on its way following the biggest drop in Chinese stocks in over ten years. By 16:05 GMT, the NASDAQ Composite paced the move with a 1.65 percent slide to 2,463.16. By the same time, the S&P 500 was off 1.18 percent at 1,432.20 and the Dow lost 1.1 percent to 12,492.95. The dour sentiment certainly took hold of the Dow components. GM shares dropped 3 percent to $32.95 while Alcoa’s sank 2.8 percent to $34.38. Worsening the tech slump, Apple shares dipped $2.09 or 2.4 percent after delaying the launch of Apple TV.

http://www.dailyfx.com/story/currenc...598873992.html

Tuesday February 27
All Day EUR German CPI m/m (p) http://www.forexfactory.com/images/m...act_medium.gif 0.4% 0.5% -0.2%
2:00 EUR German Import Price Index m/m -0.7% -0.2% -0.3%
4:00 CHF Consumption Indicator 1.951 1.896
4:00 EUR M3 Money Supply y/y 9.8% 9.7% 9.8%r
4:00 EUR German Retail PMI 45.0 43.9
4:30 GBP BBA Mortgage Approvals m/m 37.8K 40.0K 45.5K
8:30 USD Durable Goods Orders m/m http://www.forexfactory.com/images/m...act_medium.gif -7.8% -2.4% 2.8%r
8:30 USD Core Durable Goods Orders m/m http://www.forexfactory.com/images/m...mpact_high.gif -3.1% -0.2% 2.6%r
10:00 USD Consumer Confidence http://www.forexfactory.com/images/m...act_medium.gif 112.5 109.0 110.2r
10:00 USD Existing Home Sales http://www.forexfactory.com/images/m...act_medium.gif 6.46M 6.25M 6.27Mr
10:00 USD Richmond Fed Index -10 -2 -11
16:45 NZD Building Consents m/m 3.9% __________-4.9%
18:30 JPY Manufacturing PMI 53.0__________53.4
18:50 JPY Industrial Production m/m (p) -1.5% -1.8% 0.9%
18:50 JPY Retail Sales y/y -1.8% 0.2% -0.2%
18:50 JPY Large Retailers' Sales y/y -0.40% -1.0% -2.4%
19:30 AUD Construction Work Done q/q 4.3% 1.5% -2.1%

Tuesday February 27 at 20:15 ET

Trade Experiment #351 Sell USD/CAD at 116.77

Stop is 117.11

Target is 115.50

Risk is 39 pips

Reward is 122 pips

RRR is 3.1 to 1

Confidence level: good
Accuracy: high
Reward / Risk Ratio : very good

For research purposes only.

Wave hypothesis: Wave 3 down.

Wednesday February 28 at 10:15 ET

USD/CAD has risen unexpectedly, right to a high probability reversal price, forming a complete A-B-C wave pattern, and created a system compliant low risk / high reward trade opportunity.

Trade Experiment #351A Sell USD/CAD at 117.25

Stop is 117.51

Target is 115.50

Risk is 31 pips

Reward is 170 pips

RRR is 5.5 to 1

Confidence level: good
Accuracy: high
Reward / Risk Ratio : very good

For research purposes only.

Wave hypothesis: Wave 3 down.
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Previous Trade Experiment:

Tuesday February 27 at 20:15 ET

Trade Experiment #351 Sell USD/CAD at 116.77

Stop is 117.11

Target is 115.50

Risk is 39 pips

Reward is 122 pips

RRR is 3.1 to 1

Confidence level: good
Accuracy: high
Reward / Risk Ratio : very good

For research purposes only.

Wave hypothesis: Wave 3 down.

Two experienced elliotticians - Elliott Wave International and ElliottExchange - warned me the day before yesterday that a major stock market correction was imminent. They were both smack on. Chalk one up for Elliott Wave theory....

http://www.forexfactory.com/showthre...ced#post230329

Wednesday February 28 at 10:15 ET

USD/JPY has completed an upwards corrective A-B-C wave pattern, come to a high probability reversal value, and created a system compliant low risk / high reward trade opportunity.

Trade Experiment #352 Sell USD/JPY at 118.80

Stop is 119.21

Target is 117.00 / 116.50

Risk is 30 pips

Reward is min. 176 pips

RRR is min. 5.9 to 1

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

For research purposes only.

Wave hypothesis: Wave 5 down.

Itme,

Was the recent high of 1.5498 for EUR/CAD a good reversal value?

Yes, bg4xtrader, the 1.5500 region is a good reversal value. There may be one more pulse upwards for EUR/CAD from its current high of 1.5494, though there may not be. Even if there is one more pulse, it could be a failed wave. Entry at 1.5515 would be ideal. I would put a stop at about 1.5556. This looks like a good trade. USD/CAD seems set up for a big decline, while EUR/USD seems to be engaged in a Wave 4 correction of its uptrend, and may have to go down again in a Wave C before it continues upward.

Economic reports came back under the spotlight today, as the fourth-quarter U.S. Gross Domestic Product (GDP) was revised lower to 2.2 percent from the originally reported 3.5 percent. This adjustment was on par with Street expectations. Elsewhere, January new home sales dropped 16.6 percent, marking the broadest percentage decline in 13 years.

Crude futures closed in the black for the sixth consecutive session; it was black gold's longest winning streak in eight months. The April contract rose 33 cents during the session, adding half a percent to $61.79 per barrel, the highest settlement price for a front-month contract since December 22. In its last day of trading, the March RBOB gasoline contract rose 3.15 cents to $1.8476 per gallon. During February, gasoline futures have spiked 23 percent higher amid refinery glitches and heightened demand. Oil futures rose 6.3 percent in February.

Elsewhere in the world of commodities, gold and silver futures finished south of the breakeven mark, reacting to a steep sell-off in electronic after-hours action on Tuesday evening. April gold futures plunged $14.70 to $672.50 an ounce, while May silver lost 45.5 cents to $14.325. Platinum, meanwhile, managed modest gains on the day, while palladium was virtually unchanged.

What target you think ? 1,5300 / 5250 / 5200 ?

Thursday March 1 at 2:45 ET

USD/CHF has seemingly completed an upwards corrective A-B-C wave pattern, came to a high probability reversal value, and thus created a system compliant low risk / high reward trade opportunity.

Trade Experiment #353 Sell USD/CHF at 1.2205

Stop is 1.2251

Target is 1.2100 / 1.1910

Risk is 50 pips

Reward is min. 295 pips

RRR is min. 5.9 to 1

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

For research purposes only.

Wave hypothesis: Wave 5 down.