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  • #4,761
  • Oct 26, 2008 5:03am Oct 26, 2008 5:03am
Hi everyone,

after I got some really useful answers from aSandman, Smittens and BRV about correctly setting stop-losses, I was thinking, if a pip-by-pip trailing stop loss would also qualify as a valid method for managing the trades?

Also, Lumesh said in his post that:
Quote
\"btw i don't know about you but on moneymanagement part i remember that the pdf file suggested to put SL to BE when 20 pips in profit....IMO this way you just get stopped out most of the time....what i do is close for instance half at 20 pips and hold my SL at -20 pips...this way i'm BE but my trade has more room...that is important in bigger TF especially...(adjusting your MM accordingly of course)\"
This is consistent with a 40 pip TSL strategy. A few months ago I was using a 50 TSL for my trades and it worked very nicely, but my winning percentage was smaller, since I wasn't focusing on S&R as much (I was more focused on trendlines).

So, what do you guys and gals think? Would TSL fit to this method or are we better by adjusting the SL's manually?
  • #4,762
  • Edited 6:52am Oct 26, 2008 6:40am | Edited 6:52am
Quoting smittens4212
Hey hendrix,

Let me give you an example: let's say we identify a strong resistance level on the EURUSD at 1.3550 (just for example), and price approaches it. We have a limit order set at 1.3550, and it's filled, while price moves to say 1.3560. We experience a 10 pip drawdown before price moves to 1.3530, and we move our stop to break even. Here is the key-- price has a tendancy to retest towards a high or low (not always of course), in which case it will blow by our stop-loss, only to find that resistance again and eventually move in our favor.

What I now do is watch price action-- using the same example as above, perhaps instead of setting my stop to breakeven, I may move my stop to just outside of 1.3560. If THAT gets hit, to me that says it's better that I got out of the trade at a 10 pip loss that was probably a bad trade and may end up breaking upwards while still allowing for the trade to move back in my favor if it only gets back to breakeven, instead of getting out at breakeven and missing out on a potential trade.

Another issue is consolidation, but it should be pretty obvious what's going on there. In the case where I enter a trade that I thought would be a good level and it begins to consolidate-- bouncing back and forth between profitable and losing, I'll usually set my stop loss to outside of the range it's trading in, which is usually defined by some sort of pattern, whether it's just a sideways channel, a pennant, etc. I had a trade like this last night and when I identified a pretty solid pennant it was trading in, I set my stop outside the north side of it as I was in a short. The trade eventually broke the lower TL and then I adjusted my stop appropriately. I also think this is a good method for staying in trades that stall when they're 40+ pips in the green. Basically you want to identify if what's happening is just some short term consolidation where the trade will bounce back and forth in a range (I use the 5 and 15m chart), or if it's an actual solid reversal where you should exit your trade.
Hi ya Smittens4212,

I was wondering if we could go back to this post again as I am having the same questions as Hendrix as i was wondering what you are saying on the middle paragraph about retesting the low or high before carrying on with it's move in your direction hopefully, are you basically saying maybe place the stop at the high of the 1st bar or 2nd Bar before as your stop if going short and opposite if going long?

Also with consolidation I was wondering as I mainly only trade off the 5min charts it can easly kick me out of these stops of 20 - 30pips when it becomes like so but I was wondering you said that you can easily notice when it is doing this how can you see it properly before constantly being stopped out..would it be a certain TF you are looking at to notice this?

Also the post above Hendrix posted i was thinking of a similar way of trailing the stop and wondering if it would be another idea for a good stop?

Thank you for any help you could give me on this Smittens4212..

Sorry for asking so much as my first post in this thread....

And I want to thank BRV for this excellent informative thread as well BRV and your web site is well appreciated to ..

Adrian
  • #4,763
  • Edited 11:58am Oct 26, 2008 9:29am | Edited 11:58am
Ok first possible trade right here on 15m Geppy. Price is channeling up in a possible bearish flag on 1m/5m timeframe towards resistance @ 154.40/45 and a descending 1h TL. We have perfect confluence right there if price gets there without breaking the narrow 1m/5m green uptrend channel ( possible bearish flag formation).

Ill be definetly looking into this one ;-)
Attached Image (click to enlarge)
Click to Enlarge Name: !geppy_15m_sell_271008.jpg Size: 78 KB
  • #4,764
  • Oct 26, 2008 10:25am Oct 26, 2008 10:25am
Excellent thread you've got going here BRV and thanks to all the regular contributors for keeping it going as well.

Thanks for the superb blog also - an absolute must read every day.

It can't be coincidence that professional traders such as yourself and Jacko don't have charts loaded with just about every indicator known to man as you see in some systems.

Keep it simple and learn how to trade price action at key levels - it's the only way in my opinion.

M
  • #4,765
  • Oct 26, 2008 10:37am Oct 26, 2008 10:37am
hi all,
please ao can i get the rudiment of support and resistance trading methods...
  • #4,766
  • Oct 26, 2008 10:48am Oct 26, 2008 10:48am
Quoting albashir
hi all,
please ao can i get the rudiment of support and resistance trading methods...
Hi Albashir,

Certainly you can .... just go to Post #1 of this thread and read all the posts via the links ....all will be revealed!

There is a lot of reading (also download BRV's PDF) but it is WELL worth it.
  • #4,767
  • Oct 26, 2008 11:47am Oct 26, 2008 11:47am
Quoting belekas
Ok first possible trade right here on 15m Geppy. Price is channeling up in a possible bullish flag on 1m/5m timeframe towards resistance @ 154.40/45 and a descending 1h TL. We have perfect confluence right there if price gets there without breaking the narrow 1m/5m green uptrend channel ( possible bullish flag formation).

Ill be definetly looking into this one ;-)
Hi Belekas,

Do you mean a bearish flag actually ? This looks like a textbook bearish continuation flag, which will most likely be rejected of the confluence price level and proceed to its southbound direction.

Just my 2 cents. Please feel free to correct/reject my point of view as we all here try to contribute.
Thank you Malcolm, Belekas, Jim, raczekfx and Ryanmcd !
  • #4,768
  • Oct 26, 2008 11:58am Oct 26, 2008 11:58am
Yes that was my mistake. Sorry, my head still not working after the weekend ;-) Its a bearish flag of course. Lets see how this plays out if price gets to the resistance area. Ill be watching closely and if price continues to channel up nicely as seen in my post i will have my sellimit placed at the confluence point (resistance and descending 1hr TL + UTL of the possible bearish flag formation on 5m/15m). If the plan comes out as expected and that 5m/15m formation is a real bearish flag we have a possible target of half the flag poles lenght, thats around 2000/2=1000 pips.

Quoting djambazov84
Hi Belekas,

Do you mean a bearish flag actually ? This looks like a textbook bearish continuation flag, which will most likely be rejected of the confluence price level and proceed to its southbound direction.

Just my 2 cents. Please feel free to correct/reject my point of view as we all here try to contribute.
  • #4,769
  • Oct 26, 2008 1:29pm Oct 26, 2008 1:29pm
Quoting hendrix
Hi everyone,

after I got some really useful answers from aSandman, Smittens and BRV about correctly setting stop-losses, I was thinking, if a pip-by-pip trailing stop loss would also qualify as a valid method for managing the trades?
Hi hendrix,

I occasionally use a trailing SL, it's definitely a tool to consider depending on the trade. It's great for keeping you in the beginning of a trade (say the first 100 pips or first 2-3 hours), because price has a tendency to move fast in the beginning of a move with smaller consolidation.

I think the biggest downfall of the trailing SL is when you are looking for big trades. The longer you are going to be holding a trade, the wider consolidation can be and the greater the chance of getting a small reversal can be before we return to the original trend.

This chart should be a pretty good illustration of what I mean-- a static stop-loss or trailing stop of 50 points would get you knocked out of both of these consolidation ranges. It's a bit of a dilemma though, and how you want to respond to it will vary on what you are trying to get out of it. You'd have to be willing to give almost 70 points back on the 2nd consolidation range I marked up, but in return if you did hold out, you would've been able to squeeze another 250 points out of the trade.

There's many ways you could approach this. Like I've said, I tend to watch price action, establish a range, and set my stop-loss outside of that. If the range gets broken, to me that signals that it could be the end of that run and we're in for a reversal. Of course it's happened many times before where the range gets broken only for it to reverse a little while later and continue on with its move. In that case, you'd be looking for a place to re-enter if that is your style. Personally once my trade gets broken like that, if I've already secured a good number of pips I leave it alone unless there's still a ton of room left for it to run.

These consolidation ranges aren't the only place where you can work with moving stops, either. In the chart I provided, you could ignore the 2nd consolidation range I illustrated and just place your stop above 1.2841, which was local support turned resistance. Now you're getting into an 85 point stop-loss though, which might be too large for some to swallow.

Quoting aarangio
I was wondering if we could go back to this post again as I am having the same questions as Hendrix as i was wondering what you are saying on the middle paragraph about retesting the low or high before carrying on with it's move in your direction hopefully, are you basically saying maybe place the stop at the high of the 1st bar or 2nd Bar before as your stop if going short and opposite if going long?

Also with consolidation I was wondering as I mainly only trade off the 5min charts it can easly kick me out of these stops of 20 - 30pips when it becomes like so but I was wondering you said that you can easily notice when it is doing this how can you see it properly before constantly being stopped out..would it be a certain TF you are looking at to notice this?
aarangio, the basic idea is to give it a few bars to establish the high, and when you feel that some sort of consistent range has been set, place your stop outside of it. You have to be willing to give it time and just be patient and watch the price action. Sometimes the range can be an upwards channel, sometimes it's a pennant, etc. I look for the basic technical patterns.

Hopefully the chart I provided is helpful to understand everything I've said.
Attached Image (click to enlarge)
Click to Enlarge Name: stoplosses1.gif Size: 19 KB
  • #4,770
  • Oct 26, 2008 1:55pm Oct 26, 2008 1:55pm
I think I understand the SR and bucket methods given the substantial examples and evidence in this thread - thanks BRV and everyone else who has contributed. What I am currently in need of is a good set of fundamental rules to follow (this is in reply to "Measure twice, cut once, ..." blog entry).

So far I have the following to check for GBP/USD:

1. SR
2. Bucket formation
3. News events of the day
4. Bloomberg currency news
5. Reuters currency news
6. FT currency news

Is there anything else I should add to this list?

Many thanks in advance for anyone who contributes to this list.
  • #4,771
  • Oct 26, 2008 2:17pm Oct 26, 2008 2:17pm
The chart is your bible. Trust your chart and lines. I ignore the news completely just dont enter a position if news are near-term.

Quoting Wilko
I think I understand the SR and bucket methods given the substantial examples and evidence in this thread - thanks BRV and everyone else who has contributed. What I am currently in need of is a good set of fundamental rules to follow (this is in reply to \"Measure twice, cut once, ...\" blog entry).

So far I have the following to check for GBP/USD:

1. SR
2. Bucket formation
3. News events of the day
4. Bloomberg currency news
5. Reuters currency news
6. FT currency news

Is there anything else I should add to this list?

Many thanks in advance for anyone who contributes to this list.
  • #4,772
  • Oct 26, 2008 4:34pm Oct 26, 2008 4:34pm
Quoting belekas
The chart is your bible. Trust your chart and lines. I ignore the news completely just dont enter a position if news are near-term.
Definitely trust your technicals, but I think you will be a dramatically better trader if your trade bias is fundamental while your execution is technical. It definitely allows you to be most dynamic and adaptable to what is going on in the market. You don't want to be fading support UJ when equities are screaming downwards (I use this example a lot because it's probably the most simple illustration of how fundamentals and technicals can interact).

Wilko, I think that's a fine list. Just have a good idea of what is going on in the markets, and you'll be golden. Don't make things too complicated, sometimes if I try to look at too much stuff at once I get too many contradicting ideas in my head and my trading falters as a result.
  • #4,773
  • Oct 26, 2008 4:40pm Oct 26, 2008 4:40pm
Thank you for your advise mate, but im doing alright

Quoting smittens4212
Definitely trust your technicals, but I think you will be a dramatically better trader if your trade bias is fundamental while your execution is technical. It definitely allows you to be most dynamic and adaptable to what is going on in the market. You don't want to be fading support UJ when equities are screaming downwards (I use this example a lot because it's probably the most simple illustration of how fundamentals and technicals can interact).

Wilko, I think that's a fine list. Just have a good idea of what is going on in the markets, and you'll be golden. Don't make things too complicated, sometimes if I try to look at too much stuff at once I get too many contradicting ideas in my head and my trading falters as a result.
  • #4,774
  • Oct 26, 2008 4:51pm Oct 26, 2008 4:51pm
Heh, glad to hear it. Don't get me wrong, I can't stress how important charting and technicals are, just saying that I think keeping fundamentals in check gives you the complete package.
  • #4,775
  • Oct 26, 2008 5:08pm Oct 26, 2008 5:08pm
Quoting smittens4212
Hi hendrix,

I occasionally use a trailing SL, it's definitely a tool to consider depending on the trade. It's great for keeping you in the beginning of a trade (say the first 100 pips or first 2-3 hours), because price has a tendency to move fast in the beginning of a move with smaller consolidation...
Smittens, hi!

Thanks for the comprehensive post! It's a very good read.
  • #4,776
  • Oct 26, 2008 6:38pm Oct 26, 2008 6:38pm
Hi ya Smittens4212,

Thank you muchly for the in depth explaination, it has been very useful in clearing up some thoughts that i was having about using stops..much appreciated ..

Adrian
  • #4,777
  • Oct 27, 2008 3:04am Oct 27, 2008 3:04am
Quoting smittens4212
When I trade the UJ at night (again, I try to follow the markets during the US session but I work full-time, so I'm usually only able to get maybe 1-2 trades during the during the week at best), I don't have access to a Nikkei chart, and literally just rely on a delayed price quote. Of course the UJ follows equities, but the correlation isn't 1, so often times you can see equities drop and UJ still rise, and this is when I look to short-term resistance (or long if it's actually near it) for a fade, and support for a breakout, because this is when you're going to see a very effective trade turning point (when fundamentals are going one way, and a technical trade presents itself that follows the fundamentals). I know the fade is the 'trade du jour' in this thread, but given the current market volatility, breakouts have been awesome plays on the UJ when equities are falling. So I definitely disagree that the fall is already priced in, you just need a technical opportunity to enter. I posted a trade a few pages ago on the EURUSD that followed this gameplan exactly; Nikkei was dropping, EURUSD was approaching short term support, I played a breakout that in total by the end of the run could've been worth 300+ pips, and nearly 500 if you caught it at the local resistance it bounced off before I got in.

Of course equities can and do turn around, but I've yet to have a serious problem with this. The worst I've had is to lock in break-even (I haven't had one trade following equities turn on me before I had 40 pips and set stop to BE). Recently, US equities have been reversing drops or accelerating small gains into big ones at around 2-3PM. Fortunately I'm not trading at that hour usually, but if I was, I would just be very aware of that, and just follow the numbers. If the DOW is at -400 at 2PM and starts creeping towards -300, you'd be a fool not to monitor any JPY shorts because it's really possible the market could end up +100 by 4pm. Of course the opposite can happen too, and the DOW could go from -300 to -600 in the blink of an eye.

If you are trading the US session, marking up the DOW/S&P would definitely be helpful, but I don't think it's 100% necessary. You can get a decent idea of the market flow just by watching the numbers and the trend, and this alone has been enough for me sometimes.
Im a little behind here on other posts but you caught my attention with a couple things: trading breakouts and you said it with two words: "decent idea"....thats all you're really looking for - and following the trend, like you were saying.

After that post I made on Friday I got a lot of concerned emails, particularly from newer traders asking about more specifics on what exactly to be looking for, this that, etc.....far too much for me to easily sum up in one reply, but smittens I mean that's basically it: just have a clue about the major markets, look at possible breakout points on this and support/resistance etc etc; just to get a general guage of overall conditions.

And just flip through the news, google anything you dont know. Become an information machine reading through as much stuff as possible without your head exploding......I recommend Bloomberg and IFR because they're on point most of the time and they're free. Not a lot of big secrets here and you dont need an MBA or a CFA to figure it out.
  • #4,778
  • Oct 27, 2008 3:07am Oct 27, 2008 3:07am
Quoting smittens4212
When I trade the UJ at night (again, I try to follow the markets during the US session but I work full-time, so I'm usually only able to get maybe 1-2 trades during the during the week at best), I don't have access to a Nikkei chart, and literally just rely on a delayed price quote. Of course the UJ follows equities, but the correlation isn't 1, so often times you can see equities drop and UJ still rise, and this is when I look to short-term resistance (or long if it's actually near it) for a fade, and support for a breakout, because this is when you're going to see a very effective trade turning point (when fundamentals are going one way, and a technical trade presents itself that follows the fundamentals). I know the fade is the 'trade du jour' in this thread, but given the current market volatility, breakouts have been awesome plays on the UJ when equities are falling. So I definitely disagree that the fall is already priced in, you just need a technical opportunity to enter. I posted a trade a few pages ago on the EURUSD that followed this gameplan exactly; Nikkei was dropping, EURUSD was approaching short term support, I played a breakout that in total by the end of the run could've been worth 300+ pips, and nearly 500 if you caught it at the local resistance it bounced off before I got in.

Of course equities can and do turn around, but I've yet to have a serious problem with this. The worst I've had is to lock in break-even (I haven't had one trade following equities turn on me before I had 40 pips and set stop to BE). Recently, US equities have been reversing drops or accelerating small gains into big ones at around 2-3PM. Fortunately I'm not trading at that hour usually, but if I was, I would just be very aware of that, and just follow the numbers. If the DOW is at -400 at 2PM and starts creeping towards -300, you'd be a fool not to monitor any JPY shorts because it's really possible the market could end up +100 by 4pm. Of course the opposite can happen too, and the DOW could go from -300 to -600 in the blink of an eye.

If you are trading the US session, marking up the DOW/S&P would definitely be helpful, but I don't think it's 100% necessary. You can get a decent idea of the market flow just by watching the numbers and the trend, and this alone has been enough for me sometimes.
And like EUR just broke through 2 big support levels tonight. Common sense tells you not to buy it at these levels in this kind of obscene downtrend. Instead, use them to your advantage and sell breakouts. 1.2500 and 1.2460 are what Im talking about. Easy money.

I say ALWAYS check the news because you have to have a clue about what's going on. Proper planning means being aware of basic fundamental conditions. Lack of proper planning is not even looking at it. Pretty basic stuff.....I wrote the other article about correlations to help newer traders that didnt understand how different markets interact....it should help a little I hope (that was the intention atleast! )
  • #4,779
  • Oct 27, 2008 3:11am Oct 27, 2008 3:11am
Quoting aarangio
Hi ya Smittens4212,

And I want to thank BRV for this excellent informative thread as well BRV and your web site is well appreciated to ..

Adrian
you got it
  • #4,780
  • Oct 27, 2008 3:12am Oct 27, 2008 3:12am
Quoting Knightz
Hi all, need some comments on my trade below... jus changed to metatrader 4 and think it is awesome! so much better than forex platform... anyway, i took 136 pips profit but jus wondering if i took the level right.. pls comment~

Looks decent - the level got burnt a little but you were in line with the trend and you hung in there - good stuff.
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