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Pattern Trading

  • #301
  • Edited 1:46am Dec 17, 2008 12:31am | Edited 1:46am
Quoting alex12
Would you please explain what you mean with putting a limit order.
You would place a limit order to allow the market to retest the zone to limit your risk on the entry. ie if you were looking to go short on the GBP and the Market had already moved in that direction you can place a limit order and wait for the market to retest the area and take you into the trade. Say the market has moved 50 pips short and you only want to risk 25 then you place your limit entry where you want to get into the market (so you are only risking 25 pips) and when the market moves back to that spot it takes you in short. Note though if you haven't been taken in after a few hours or the market has moved too far away then its unlikely you will get taken in and should cancell it out and wait the next set up.

Big Weir
  • #302
  • Dec 17, 2008 1:41am Dec 17, 2008 1:41am
Quoting Big Weir
You would place a limit order to allow the market to retest the zone to limit your risk on the entry. ie if you were looking to go short on the GBP and the Market had already moved in that direction you can place a limit order and wait the market to to retest the area and take you into the trade. Say the market has moved 50 pips short and you only want to risk 25 then you place your limit entry where you want to get into the market (so you are only risking 25 pips) and when the market moves back to the that spot it take you in short. Note though...
Ok. Thanks , I got it now .
  • #303
  • Edited 12:57pm Dec 18, 2008 12:13pm | Edited 12:57pm
These patterns should produce good fast moves away from the original reaction point when they don't be aware that they are more likely to fail! I would not really want to wait for the market to come back for a second attempt, also the longer the market remains at a point, like a reaction level the lower your chances of the pattern producing a good result.

Another great tip is only take patterns that are in the direction of the next time frame trend above. This will sharpen up your pattern trading no end. Patterns that fail will cost you money, but if you are in the direction of a larger time frame trend then, you have a higher probability anyway.

Good luck


Smalldog
  • #304
  • Dec 18, 2008 3:39pm Dec 18, 2008 3:39pm
Quoting smalldog2
We do not want a close above the 1.618 level, that is a definate no trade, if the price action stays below the 1.618 level all the better, then if you get a doji on the next bar then its a good set up, ideally no follow through is the best.
Though we didn't quite get the Doji candle it did give us a Daily Key Reversal where the market had a higher high and a lower close than the day before as you can see on my Daily Chart. On my hourly chart you will see I have a fib pulled for that day from the low to the high and the market has rallied to the 786 at the back side of the trend line. There is good resistance here and the candle formation was a pin or what I call a shooting star. These all put together gave us an excellent oportunaty to take a short trade.

which looked like this:

High = 15615
Stop = 15629
Entry = 15560 (69pips @ risk, yes this is alot but sticking to 3-5% equity, you just have less lots but as you will see it deos pay a good return)
Limit = 15400 (140 pips, I like to get 2x my risk for my first limit)
Limit = 15120 (420 pips, as it was a 786 retracement my final limit it 10pips off the 127 extension)

As you can see the trade was successful and went well through my second limit to the 1618 fib extension. The risk was 89 pips, the return was 140 + 420 = 560/2 limits = a total of 280 pips a 1:4 a Risk:Reward ratio.

hope you all picked some of them up.

Big Weir
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  • #305
  • Dec 18, 2008 5:31pm Dec 18, 2008 5:31pm
Hallo Patterners!

We have a bulish bat on the H1 GBPUSD that has already played out to the 23.6 fib line of the right wing.
Now I have a second trade in place for the break to the 38.2 that is normally reached by bats (approx. 90% of the time)

I will go to sleep now and hope to awake to green pips in the morning.

Ciao!
Gnat
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  • #306
  • Dec 18, 2008 6:14pm Dec 18, 2008 6:14pm
Quoting Big Weir
Though we didn't quite get the Doji candle it did give us a Daily Key Reversal where the market had a higher high and a lower close than the day before as you can see on my Daily Chart. On my hourly chart you will see I have a fib pulled for that day from the low to the high and the market has rallied to the 786 at the back side of the trend line. There is good resistance here and the candle formation was a pin or what I call a shooting star. These all put together gave us an excellent oportunaty to take a short trade.

which looked like this:...
Big Weir,
I very much appreciate you and the others coming back to continue this thread. I especially like your trade examples because you really go into depth to explain your thought process. Thank you!
Hi, my name is Barry and you can keep your doctor...
  • #307
  • Dec 18, 2008 6:58pm Dec 18, 2008 6:58pm
Quoting Big Weir
Though we didn't quite get the Doji candle it did give us a Daily Key Reversal where the market had a higher high and a lower close than the day before as you can see on my Daily Chart. On my hourly chart you will see I have a fib pulled for that day from the low to the high and the market has rallied to the 786 at the back side of the trend line. There is good resistance here and the candle formation was a pin or what I call a shooting star. These all put together gave us an excellent oportunaty to take a short trade.

which looked like this:...
I've been sitting here thinking about your trade example and how simplistic, yet beautiful it was. If I may, a few questions about it.

1- I know not every day is a key reversal day, but if you thought tomorrow the pound was going to continue to fall would you be looking for another trade like this one with an entry based on an appropriate candle?

2- If your trade today had not hit your projected profit would you have left it open to continue down? If so, would you have placed an appropriate protective stop loss to lock in profits in case of a reversal? Where would that stop have been placed?

Thanks
Hi, my name is Barry and you can keep your doctor...
  • #308
  • Dec 18, 2008 7:02pm Dec 18, 2008 7:02pm
Quoting cisco
Big Weir,
I very much appreciate you and the others coming back to continue this thread. I especially like your trade examples because you really go into depth to explain your thought process. Thank you!
Your welcome Cisco. I'm Glad that people are getting something out of my posts.

The Bullish Bat does look very good at the moment, though I did see this potential reversal I have held off placing a trade as it has not met my criteria, (I can be a bit fickle about these things) as it has not taken ourt the 886 of XA as yet and I haven't got a candle entry to confirm the revesal. I will wait to see if it does take out the 886 and give me a candle entry tonight. If I'm wrong then thats ok there will always be another opportunaty, And I'm in no rush to take another trade.

Good luck with your trade Gnat and I hope you've secured some profit and arer running risk free on it, (incase I'm correct in my analysis)

Big Weir
  • #309
  • Dec 18, 2008 7:13pm Dec 18, 2008 7:13pm
Quoting Gnat
Hallo Patterners!

We have a bulish bat on the H1 GBPUSD that has already played out to the 23.6 fib line of the right wing.
Now I have a second trade in place for the break to the 38.2 that is normally reached by bats (approx. 90% of the time)

I will go to sleep now and hope to awake to green pips in the morning.

Ciao!
Gnat
For what it's worth, I have a buddy who has a unique trading style. Every night at 5:00 pm eastern, U.S., he places a trade on all the majors to retrace 38% from the daily trend of the currencies. He doesn't use the yen, claims it's too inconsistent. He swears that 90% of the time the price does retrace to at least the 38% level. He must be right because he makes several hundred pips/week with this method.

I might try it one of these days.
Hi, my name is Barry and you can keep your doctor...
  • #310
  • Dec 18, 2008 7:25pm Dec 18, 2008 7:25pm
Quoting cisco
I've been sitting here thinking about your trade example and how simplistic, yet beautiful it was. If I may, a few questions about it.

1- I know not every day is a key reversal day, but if you thought tomorrow the pound was going to continue to fall would you be looking for another trade like this one with an entry based on an appropriate candle?

2- If your trade today had not hit your projected profit would you have left it open to continue down? If so, would you have placed an appropriate protective stop loss to lock in profits in case of...
To answer your first question, a couple of things about Key Reversals first. If the reversal is going with the current trend then it is good for a few days. If it is against the current trend then it is only good for that day. Now lets say the Bat pattern isn't there at the moment, and the move still looks good to continue short I would be looking for the market to rally to an new fib to give me an A,B and C, I would pull my fib from the B low to the A High this may but not necessarily be the low and High of the day before, and I would place my trade at the C and Trade it to just before the D, (Essentially the same as I did for the Key Reversal but as I said the fib is pulled from the Low's and High's not necessarily the daily Low and high).

As for your second Question, I would have left the trade on till I saw a setup that was going to go against my position. I always secure my trades, once I have obtained my first limit I move my stop to my buy in and run risk free to the final projection.

Hope this has been of help If I haven't clearly answered your first question look up my AB=CD, CD leg trade, it's how I trade with the trend.

Big Weir
  • #311
  • Dec 18, 2008 7:58pm Dec 18, 2008 7:58pm
this looks very nice
good job man
already loaded the flying bat

keep on the good work
congratulation friend
  • #312
  • Dec 19, 2008 3:28am Dec 19, 2008 3:28am
Quoting cisco
For what it's worth, I have a buddy who has a unique trading style. Every night at 5:00 pm eastern, U.S., he places a trade on all the majors to retrace 38% from the daily trend of the currencies. He doesn't use the yen, claims it's too inconsistent. He swears that 90% of the time the price does retrace to at least the 38% level. He must be right because he makes several hundred pips/week with this method.

I might try it one of these days.
Hallo cisco!

Sounds like something one should investigate. I will put that on my schedule for the christmas break and visually backtest that. It would be really nice, if this would work out.

Yesterdays pattern hit it right on the spot and as I got up (pretty late, hehehe) the 38.2 fib was reached and green pips received.

Have a good weekend!
Ciao!
Gnat
Attached Image (click to enlarge)
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  • #313
  • Dec 19, 2008 5:58am Dec 19, 2008 5:58am
Quoting Gnat
Hallo cisco!



Yesterdays pattern hit it right on the spot and as I got up (pretty late, hehehe) the 38.2 fib was reached and green pips received.

Have a good weekend!
Ciao!
Gnat
Congrats! good job
Hi, my name is Barry and you can keep your doctor...
  • #314
  • Dec 19, 2008 1:25pm Dec 19, 2008 1:25pm
Big Weir-I took your example of the ab=cd and put it to practical use. I used yesterday's PA on the pound as the AB leg. Then I used last night's retracement as the BC leg. I went short at 1.5161 (38.2% retracement area) and right now I'm +300 pips at the moment. I don't know whether to leave it open over the weekend or not. I guess I'll make that call near the close of the NY session.

Thanks for your guidance.
Hi, my name is Barry and you can keep your doctor...
  • #315
  • Dec 19, 2008 3:00pm Dec 19, 2008 3:00pm
Quoting cisco
Congrats! good job
Thanks Cisco!

And sometimes those patterns even go into overtime and spread their wings again. As you are getting confident with a retracement you can re-enter and chase it to the 23.6 once more. Let's see how this will work out early Monday.

Have a good weekend all!
Ciao!
Gnat
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  • #316
  • Dec 19, 2008 4:20pm Dec 19, 2008 4:20pm
Quoting cisco
Big Weir-I took your example of the ab=cd and put it to practical use. I used yesterday's PA on the pound as the AB leg. Then I used last night's retracement as the BC leg. I went short at 1.5161 (38.2% retracement area) and right now I'm +300 pips at the moment. I don't know whether to leave it open over the weekend or not. I guess I'll make that call near the close of the NY session.

Thanks for your guidance.
Great Work, I missed the entry on that one, be carefull trading over the weekend the market can gap and if it gaps against you, you can pay a price if it gaps above your stop it won't close you out at your stop but at the open of monday session. I only trade over the weekend if I am holding a long term CFD position on a larger trend time frame, as this allows me to keep trading the swings in both directions on FX.

Big Weir.

Again great work
  • #317
  • Dec 19, 2008 4:54pm Dec 19, 2008 4:54pm
Quoting Big Weir
Great Work, I missed the entry on that one, be carefull trading over the weekend the market can gap and if it gaps against you, you can pay a price if it gaps above your stop it won't close you out at your stop but at the open of monday session. I only trade over the weekend if I am holding a long term CFD position on a larger trend time frame, as this allows me to keep trading the swings in both directions on FX.

Big Weir.

Again great work
Thanks. I went ahead and closed it out shortly after I posted here. I only ended up with 285 pips, but that's okay with me. Pigs get fat, hogs get slaughtered. I'd rather be the pig!

I gave consideration to hedging the short position over the weekend, but I didn't know if that was a good idea.
Hi, my name is Barry and you can keep your doctor...
  • #318
  • Dec 19, 2008 8:11pm Dec 19, 2008 8:11pm
[quote=cisco;2431746]Thanks. I went ahead and closed it out shortly after I posted here. I only ended up with 285 pips, but that's okay with me. Pigs get fat, hogs get slaughtered. I'd rather be the pig!
quote]

I agree I always leave some cake on the table, And a 285 pip trade is a nice piece of the cake. That is great even if thats the only trade you get for the month thats still a 70 pip avg a week not bad in my book.

Well done, smart thinking. Keep it up. Be patient and remember over trading will lower your strike rate. I only place a few trades a week, sometimes one good one will do me (always looking for new oportunaties though). I remember reading somewhere that it's not the trades that a good trader takes that makes him sucessfull, but the trades he doesn't take.

Big weir
  • #319
  • Dec 20, 2008 1:43pm Dec 20, 2008 1:43pm
GBPUSD Blue fib is the complete wave sequence up, the market stopped at the 70.7 level, broke it by 23 pips, late on Friday night we saw the down trend reversed and some strong buying took place.
This level is also 1.618 of the Wave 1 or A down projected from B, its also at 50% of wave 3 projected from wave 4 of C, and also at the 127% extension of wave 4. So in terms of fib clustering in price we have three solid fib levels.

A break above Fridays high would have me targeting a min 38-50% correction to this move down, I have marked where the correction might complete in time and price, if we get a three wave move up then this would make the wave down an A wave, and the move this comming week a B wave, that means the GBP would have further to fall and could go to 1.42403 or lower.


Smalldog
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  • #320
  • Dec 20, 2008 1:44pm Dec 20, 2008 1:44pm
GBPUSD Blue fib is the complete wave sequence up, the market stopped at the 70.7 level, broke it by 23 pips, late on Friday night we saw the down trend reversed and some strong buying took place.
This level is also 1.618 of the Wave 1 or A down projected from B, its also at 50% of wave 3 projected from wave 4 of C, and also at the 127% extension of wave 4. So in terms of fib clustering in price we have three solid fib levels.

A break above Fridays high would have me targeting a min 38-50% correction to this move down, I have marked where the correction might complete in time and price, if we get a three wave move up then this would make the wave down an A wave, and the move this comming week a B wave, that means the GBP would have further to fall and could go to 1.42403 or lower.


Smalldog
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