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The System II (Yes with irony)

  • #801
  • Edited 8:22am Dec 29, 2008 8:13am | Edited 8:22am
Quoting acetrader
PistolDave,

For me PT is 20-30, but I am always gunning for more & will take 10 instead of a loss. Cutting losers short & trailing the winners to protect the gains.

Trailing stops are used to lock in those gains.

My sl will be 10 if tp @ 20. TP @ 30 sl @ 15. Sl will always be 1/2 of gains sought.

Estimating how far out to set profit targets......good question & I would like to get FEB'S view on that one, but I always observe how strong the move is when I enter & set targets accordingly. Strong move target 30 pips...Weak move 20 pips target....
Thanks for the advice, Ace.

I did not get your pm.

This system may seem very simple to most of you, and it really is, but don't forget I'm a recovering indicator-aholic. And I'm going through withdrawls.

Someday I will get the hang of this, I'm sure.

I would appreciate it if everyone would post some charts showing their good/bad trades to see the setups. I'm going to start doing that for your critique, if you don't mind. Anyone's comments would be helpful.

What do you think of the GBP/USD as a long if it breaks through resistance at 1.4618 ?

Also notice that I entered at a break of 1.4610 but that probably was not correct and would have already been stopped out if I had put the SL just below the pullback at 1.4597.
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  • #802
  • Dec 29, 2008 8:43am Dec 29, 2008 8:43am
Here is the result of that trade.

It was stopped out when it broke support at 1.4597.

I seem to have this happen often. I suppose either I'm not understanding when price is moving a certain direction, or I need to place the stops farther away to avoid being stopped out. Who knows?

Now it will probably keep going in the right direction...
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  • #803
  • Jan 2, 2009 3:50pm Jan 2, 2009 3:50pm
Quoting PistolDave
Here is the result of that trade.

It was stopped out when it broke support at 1.4597.

I seem to have this happen often. I suppose either I'm not understanding when price is moving a certain direction, or I need to place the stops farther away to avoid being stopped out. Who knows?

Now it will probably keep going in the right direction...
PD,

After Looking at your charts, here are some suggestions, and of course this just my opinion.

1) Why 3M time frame? If this is what you want use then smaller TP's.

2) If you are going to scalp, then scalp. Take the 15pips+
after you entered.

3) Holiday trading is unstable anyway. Wait till 1/05
  • #804
  • Edited 4:52pm Jan 3, 2009 3:47pm | Edited 4:52pm
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  • #805
  • Edited 4:46pm Jan 3, 2009 4:31pm | Edited 4:46pm
I use this method successfully together with other medium and long term methods which gives me a great range of trading opportunities. I notice that people are concerned about the stop loss and loosing. My attitude going into a trade is that I have a point of entry, a point where the trade will close off at a loss and a point where I take profit, my profit to loss is at least 2:1, thats it. Once this trade is finished, thats exactly what it is, finished, onto the next one. Look at a golfer or a basketball player who plays a shot some they win some they don't. Notice that they move onto the next play or position, the pro plays till the game is completed, they look at the result at half time to get an idea of how their game is going but the focus is the overall gameplan. My overall gameplan is based on short, medium and long term plays coming together, some win some don't but with my mix of plays and good profit to loss ratio it works out.

I've attached something you may find useful which can be applied on all time frames, also a good read is "Trading in the zone" by Mark Douglas.

To Feb, hope you're well and look forward to hearing back from you soon.

Regards and all the best for the new year

Alex
Attached File(s)
File Type: pdf Peaks_and_Troughs_Pring.pdf   181 KB | 1,168 downloads
File Type: pdf Trade_Breakouts.pdf   1.0 MB | 1,831 downloads
  • #806
  • Jan 3, 2009 5:51pm Jan 3, 2009 5:51pm
Thanks Alex....Trading in the Zone is a must.

I am wondering a little about how you are getting 2:1 r/r? For me trying to get a 20 pip tp with only a 10 pip sl I seem to get taken out alot in my backtesting. Maybe you nare using a larger/longer term tp? I believe it can be done but just wondering if you can elaborate a little.

Thanks
  • #807
  • Jan 3, 2009 6:37pm Jan 3, 2009 6:37pm
Quoting jflor100
Thanks Alex....Trading in the Zone is a must.

I am wondering a little about how you are getting 2:1 r/r? For me trying to get a 20 pip tp with only a 10 pip sl I seem to get taken out alot in my backtesting. Maybe you nare using a larger/longer term tp? I believe it can be done but just wondering if you can elaborate a little.

Thanks
Alex, Jflor,

That is the problem I have run into many times too. You end up mostly entering trades that have a risk/reward of 1:2 of say 20 pips SL/ 40 pips TP pips to see them only go into profit by 10 or 15 pips then retrace and stop you out for a loss. That's the example above I show. You better have a very high hitrate if you are taking 20 pip losses and only 10 pip gains.

The key (it would appear) is only taking setups that are more likely to produce the required 1:2 r/r ratio. I thought I understood the rules of how to do that, but obviously not. That is what I need to learn, to make this profitable for me.

What are the highest probability setups?
  • #808
  • Jan 3, 2009 8:12pm Jan 3, 2009 8:12pm
My medium and long term trades are at least 3:1 and higher ratio. Trades on the M5 using "Febs" method I'm looking for 2:1 at least. A few things to keep in mind for this time period;

1.The time of day you are trading ie. Frankfurt/London/New York
2.Seasonal risk such as holidays, fundamental releases
3.Other surprise risk such as large commercial orders, special announcements

This is important!!

I understand and accept completely that the market can and will move in whatever direction it wants to and it doesn't need my permission to do this. It will do this if I'm in a trade or not and it doesn't care about my risk!!!

Why did I mention this...

My trade plan consists of looking at the larger time frames down to the M5. "I see what I see" in other words I look for solid support and resistance, trendlines etc. I place my pending order together with stop loss and profit target locked in. I also have a very good feel for the movements in the currencies that I trade, If I see movement that doesn't fit I will set to break even or take profit.

If this is the case I am out, I have no risk and I'm looking for the next valid setup. I will not force a trade as the market will do what it wants to and it doesn't care if I'm in or out.

The more chart time you have the better, I started in 2004 and have square eyes..

All the best

Alex
  • #809
  • Jan 3, 2009 8:15pm Jan 3, 2009 8:15pm
Quoting PistolDave
Alex, Jflor,

That is the problem I have run into many times too. You end up mostly entering trades that have a risk/reward of 1:2 of say 20 pips SL/ 40 pips TP pips to see them only go into profit by 10 or 15 pips then retrace and stop you out for a loss. That's the example above I show. You better have a very high hitrate if you are taking 20 pip losses and only 10 pip gains.

The key (it would appear) is only taking setups that are more likely to produce the required 1:2 r/r ratio. I thought I understood the rules of how to do that,...

If I may:

Think about how little it takes to move 20 or 40 pips. Do the math. It's a tiny fraction of a percent in value of a currency.

Let me ask you this:

What if it were more like....I am risking 150 pips to gain 275? Do you think you could possibly see smoother returns? This lends itself to the argument for trading larger time frames.....I know boring, but seriously.....profit is profit. A penny a pip, a dime, a dollar....whatever. Compound interest is your best friend.

Sorry for butting in feb.....just saw this and spoke out loud again.

Clockwork
  • #810
  • Jan 4, 2009 4:24am Jan 4, 2009 4:24am
Quoting AlexFX
My medium and long term trades are at least 3:1 and higher ratio. Trades on the M5 using "Febs" method I'm looking for 2:1 at least. A few things to keep in mind for this time period;

1.The time of day you are trading ie. Frankfurt/London/New York
2.Seasonal risk such as holidays, fundamental releases
3.Other surprise risk such as large commercial orders, special announcements

This is important!!

I understand and accept completely that the market can and will move in whatever direction it wants to and it doesn't need my permission to do...
This post by Alex is a great post.

Clock, you will always be welcome . Your opinion is very valuable to me.

Dave, Clock has brought a very interesting line - 40-50 pips is just a fraction of a value in a currency move. That pretty much summarizes in a nutshell this "System II" concept. I could not say this is true scalping, well as I mentioned in another post, scalping is a generic word. But still is a high-frequency trading.

Just remember, the stop-loss/profit target I suggested at the beginning is just a guide. As a mentioned before, not to be written in stone.

I am a believer of the hard-stop concept.

Hard stop = A way for protection in case of unusual volatility base on momentum or any other unforeseen event.

Let's say you have a stop loss parked on 20 pips. As we already established this is a high frequency trading, having a 20 pips stop doesn't mean you'll be at the mercy of the market hoping 'n praying for your stop not to get hit. No way. The moment you don't feel good about a trade, the market stalls, or simple, are just coming back against you...please...Get Out.

I assure you, there will be more trades ahead, sometimes within minutes.

This is a hard pill to swallow for many traders. I know. I tell you this. The only reason I am a scalper is because I am in control of my trades. Therefore, I limit my risk exposure as much as possible, with the idea of be first in line when the opportunity comes. Think about that.

"Every trade begin as a scalp until it proves otherwise"




The "system II" is just an organized framework to be used as a guide for the trader, in order to have a better view and make his life easier. That's all.

Simply put, the concept takes advantage of the follow-thru that normally (usually) exist after a pullback. Please notice that you're not trading the pullback per se but the continuation of the move.

High frequency trading = Many trades during x period of time AKA scalping - In reality, are tiny moves within the normal flow of a currency exchange, as clockwork stated. Therefore, expect to be quick and nimble in your trade.

The logic of "system II" is the ability to exploit ebbs and flows that normally occurs at any time frame. Just that we pick 5 minutes as we just want to be quick in and out. The problems lies on, how many times we should exploit this common behavior (pattern if I might say) on the markets.?

I say, as much as possible. But then lies another problem..."oh I am pushing for the all-so-called 2 % risk on every trade."

That's wrong.

If 2% is within your comfort zone, instead of using it on every trade, why don't you stretch it out to the whole trading day? That way, you could exploit this "pattern" as much as possible, not to be burden out by your risk exposure.

People get stuck in 1 trade. That's nice if you're trading on higher time frames. But here, it won't work like that. If you get stopped in one way ie. long or short, then look at the other way. Maybe the market is telling you something. Follow the lead. Keep pumping that up 'til your fingers bleed. Have no mercy of the markets as it will have no mercy of you.

Don't leave that motha@#$% until you get Da bounty. After all, this is why you're here on the first place, aren't' you??

I have more to say, unfortunately the pain is annoying me a little now. Stick around. I am not going anywhere.
Peace
  • #811
  • Jan 4, 2009 7:37am Jan 4, 2009 7:37am
Feb, Clock, Alex...

Thanks for explaining. I starting to get it through my thick head a little at a time.

Feb, I hope you can get better soon.

-----

Quote
The more chart time you have the better, I started in 2004 and have square eyes..
.... I heard that Alex

Going back in for some more chart time right now. :nerd:
  • #812
  • Jan 4, 2009 7:57am Jan 4, 2009 7:57am
FEB,

It is good to see you back posting. I hope your getting better & keep the post flowing.
  • #813
  • Jan 4, 2009 10:02am Jan 4, 2009 10:02am
Quoting clockwork71
.... there is a huge amount of puts being lined up for 1.20 in March.
clockwork or anyone else that might know,

Is there a forex broker I can use to see the puts and calls without having to open a live account ??

Thanks,
It's NOT GAMBLING when the odds are in your favor
  • #814
  • Jan 5, 2009 2:41am Jan 5, 2009 2:41am
Hello,

Hope that everyone had an enjoyable holiday...

Thank you Feb for your last post ... even those of us who have been following this thread for a long time need to be reminded of the premise that System II is based on. It is soooo important to understand that with this approach you are an active price action trader! ...You are the predator...waiting for the right moment when the Market (prey) gives you an opportunity to strike. If you miss, you recoil and strike again ... and again...(not to be confused with overtrading out of emotion)

I have found that Feb's suggestion to trade during the start of a session(London and/or NY) gives me the best opportunity to be a predator.... like a grizzly by the stream waiting for the salmon heading upstream.

Thanks again Feb for your patience and guidance....it is penetrating my thick skull...
Unus pro omnibus, omnes pro uno
  • #815
  • Jan 5, 2009 2:52am Jan 5, 2009 2:52am
I hope you guys caught the euro/usd dive, the pair did a lower swing high then came down as you can see. I used this for a long term trade I want to be in for the euro/usd pair...

Cheers

Alex

PS I was happy risking $30 or two mini's on this set up.
  • #816
  • Jan 5, 2009 3:09am Jan 5, 2009 3:09am
Hello Feb and all,

I missed the E/U, but I ride the U/J.

r.
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  • #817
  • Jan 5, 2009 7:15am Jan 5, 2009 7:15am
Merry Christmas and Happy New Year to everyone-hope you all had a great time and drank too much (if you're English) or ate too much (everyone).
Feb, thanks once again for your thoughts, the insights into the reasoning behind the system really helps illuminate what is happening in the markets. Hope you have a happy, healthy and pain free New Year.

Missed the big move on the Eur/USD this morning thanks to my alarm not going off, but that's my fault so have to live with it-Murphy's law strikes again!

Then I missed the secondary move because my broker has moved to 5 decimal points on the Eur/USD and I can't read it quick enough to figure out the price (has it gone 20 pips or not? What's the actual price showing?), and last but not least the order I had put in to sell at 1.3654 was missed and it got filled at 1.3642. So I took a pip profit and got out because the gap down messed with my strategy+I couldn't tell what the hell the price was doing thanks to the 5 decimal point price so went for safety first. Think I might be a bit number dyslexic or something
On that note, can anyone recommend a futures broker for the Eur/USD? I'm not overly familiar with the area but have done a lot of research-currently have a demo account with Ampfx-ninja trader platform. As I understand it there's the market spread+a commission-if that's the case then why is it better than spot fx with a fixed spread-doesn't it cost more to trade in the long run? Sorry that this is a bit off topic but I'm sure some of you use futures (like Feb does I believe), and I've done loads of research on it over the Xmas period. A recommendation away/towards a certain company or companies would be a great help, but if suitably off topic then please ignore.
Happy trading everyone
  • #818
  • Jan 5, 2009 12:41pm Jan 5, 2009 12:41pm
Quoting bootsyjam
Merry Christmas and Happy New Year to everyone-hope you all had a great time and drank too much (if you're English) or ate too much (everyone).
Feb, thanks once again for your thoughts, the insights into the reasoning behind the system really helps illuminate what is happening in the markets. Hope you have a happy, healthy and pain free New Year.

Missed the big move on the Eur/USD this morning thanks to my alarm not going off, but that's my fault so have to live with it-Murphy's law strikes again!

Then I missed the secondary move because my broker...
Currency futures only work on commission. EuroFx is $12.50 per tick (pip)/contract Normally comish fluctuates around $4.50 per contract.

Assuming you traded 1 tick = $12.50 - $4.50 comish = $8.00 profit. Not endorsing 1 tick trading by the way. Just an example.

Contract = lots.

Currency futures provides many advantage for short term/high frecuency trading. Just on 1 tick you're already in profit. I personally believe the spread put limitation on your trading especially if you are a scalper.

Currency futures also has better platform, better execution, more capabilities.

You need to be capitalized on futures. This $250.00 minimum on capital do not apply on futures. There's no itty-bitty factional lots on futures. Actually, you need to be capitalized in order to make a living at any market . Period.

CME has a new product called EuroMiniFx or something like that. The tick moves at $6.25 and I believe comish is around half, not sure. Good for starters.
I sincerely hope not to be in violation of the rules here. I use Transact Futures for execution. I use Ninja Trader for charting. Also, Sierra charts are good, a bit faster than ninja in my view, only cost 26 bucks a month. I like Sierra graphics better. As for now, Transact has been good. I assure you, the minute I feel uncomfortable or getting a better deal somewhere else, I'll switch in a New York Minute. Don't get attached to any broker/platform. They're just to serve you. Make sure you get a good deal or go to the next one.

The trick about futures is, the more you trade, the better comish you'll have. Not endorsing overtrading here.

If you have limited capital, then stay on spot forex.
Peace
  • #819
  • Jan 5, 2009 5:23pm Jan 5, 2009 5:23pm
Hi FEB,

Tks for post #818 as I have been wondering about the curency futures market. Seems that might be worth looking into.
  • #820
  • Jan 6, 2009 6:35am Jan 6, 2009 6:35am
Feb, thanks for the detailed advice. I'm sorry if I've entrapped you into breaking forum rules, as usual I didn't think what I was doing
Yep the stakes are a lot higher in futures, but I don't think it's possible to trade this sysyem properly with MT4 as it's so slow if you want to move stops/TP levels, let alone if you just try to buy at market price. Thanks for the eurominifx heads up-will do some research to see if anyone offers it.
Happy trading everyone
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