Strat's Long Term Stress Free Trading

More from Al's Book..

"Incidentally, although pundits had been attributing the 2008 crash to the housing bubble and credit crisis, the housing market began it's crash almost 3 yrs earlier and the credit crisis had been simmering for the past couple of years. What did happen was that the real world realized that Obama would become president and that he would increase business regulations and increase the cost of labor, both of which would reduce corporate profitability. When companies earn less, their stock is worth less."

"All of the pundits seems to be saying on CNBC that the bottom is in and we are on the way to new highs, but the PA seems to be saying otherwise. Any time the market is going up they round up the bulls proclaming evidence of the next great bull run and every time is drops a couple of % they round up the bears who claim we are heading into depression. You should look at them with amusement as you don't trade their timeframe, and the predictions have nothing to do with your income (and nothing to do with what the PA is telling you)"

Major Reversals - "Major reversals reverse a trend that has been in effect for days or weeks. The best trend reversal entries have a break of a significant TL before the set-up, because you do not want to to enter counter-trend until you know the counter-trend traders have already shown some ability to control the market. Enter on a pullback that tests the trend's extreme. The pullback can undershoot (a lower high in a new bear or a higher low in a new bull) or it can overshoot (a higher high in a new bear or a lower low in a new bull) the old trend extreme, but if an overshoot goes much beyond a trend's extreme then the trend has resumed and you should wait for a new trendline break"

USDCAD shows and excellent trend reversal set-up in my view.

1. At point A we have a major TL break-out.
2. At B we have a doji that warned us the trend line BO could reverse; it did.
3. At point C we have a test of the low before the TL BO and a reversal candle PA

Remember the point from above- "The best trend reversal entries have a break of a significant TL before the set-up, because you do not want to to enter counter-trend until you know the counter-trend traders have already shown some ability to control the market.

So, we had a TL break then a test of the old trends extreme at point C. Depending in this week's candle then the bottom of the BEOB could be seen as an High 2 set-up (ie a higher low)

The market will try and do things in 2s or 3s. Most pushes down are in two waves and we have 2 pushes down from the 1.3000. As you can see this could be a test of the major TL from the Nov 2007 lows, but it all depends o where you draw your TLs from. In his book Al uses the candle wicks and not the closes - I think it's up to the individual.

All in all, I'll be looking at long usdcad should PA develop this week.

With all the above in mind I have pulled my nzdusd short this eve. I will now wait for a TL break (nr the black line?) and then a re-test of the TL break or the old trend's extreme. We need to see that the bears have control of the chart before we try and short. Trying to counter trend trade on the basis of a single candle is complete folly - I will use them in the future as an indication that a top may be in, but at least wait for the TL break.

Once you see this action you will see it all the time on your charts - have a weekend of F12 and amaze yourself over a few hundred hours of charts!

This is where I feel I have been going wrong over the years - not being patient and waiting for the market to show it's hand - always thinking I was better and knew above everyone else - silly fool!!

I agree with trend trading, Grim, but as we all know, the definition of a trend is a relative concept and changes depending on the time frame and look-back period we use.

The method I have tried to explain assumes a short-look back period on H4 and focuses short term trend changes on each swing high/low.

Thanks for extra info from Al's book.

I don't want to spoil the party but I feel we are in danger of being bombarded with an overload of too much information.

The most successful and profitable traders use very simple systems - PASR is about as complicated as I want it to get.

Danny, as much as we enjoy your interpretation of each new book, please remember it is only one person's opinion. Each author usually has two reasons for writing a book:

1) He wants to share his method/system/strategy/knowledge

or

2) He can't do it, so he makes money writing about it.

In the case of 1), the author usually has specialized and perfected his system so that he can do it with his eyes closed. This is true of any method - look at the number of successful traders who live and die by the Stochastic or MACD - they have studied every possible scenario and are in step with its each and every move.

As for 2), this is probably why 98% of these books are written - look at Van Tharp - a so called trading expert who can't trade his way out of a paper bag! - there are so many others and some who admit they can't practice what they teach.

Danny, you are a "sucker" (just like I was) for new information thinking you will discover the "next" inside secret. You are in danger of becoming a Jack of all trades, Master of none. Stay with PASR, focus all your energies on that and become the Master of PASR.

As much as I am tinkering with Momentum and Cycles and now this new stuff, it is all SECONDARY to PASR. My decision making is always, ALWAYS 100% based on PASR, the other stuff is to just help me make a decision.

For example, since you mentioned it, look at NZDUSD. I have had a cycle top since August 14 - did I sell it? Hell NO! Why? Because there is NO PASR! This new stuff is also showing a top - will I sell? NO! Not until I get PASR! NOT UNTIL IT STOPS GOING UP!

It looks to me like you are so absorbed in this book and the guy who wrote it that you missed a FREE "eye opener" from Blackeagle! Look at the post where he added "Dr. Joe" to my DSRI statements.

Now apply Dr. Joe to NZDUSD - has it stopped going up? Nothing else is needed - no fancy Momentum or Cycles or New Stuff - just what you see with your Mark I eyeball and apply it to the porridge between your ears.

It's SIMPLE - so SIMPLE that no one believes it and proceed to make it as complicated as they can.

Dr. Joe was a NASA Rocket Scientist who made $millions forgetting everything technical he knew and just BLINDLY following the market.

Nothing has changed, the markets go up, go down and go sideways - we are followers of the market with a choice of when we want to be on board or not.

Look at Nicola, apart from her excursions to the Darkside and Moon, she is, as far as I know, trading like there is no tomorrow using ONLY PASR.

PLEASE, let us all get back to PRICE ACTION at SUPPORT & RESISTANCE

Hey, "mate", had you read the thread you would know this is "tame and lame" to what I have previously written.

Strat, I've tried to compile that indicator but it's not working and I get an error. Do happen to have the mq4 version. Thanks!!

Let me run it myself and see if I can find where the problem is, then I will fix and re-post.

thanks

Works fine for me - can you describe the problem you are having with it?

It's a language issue in the first line "indicator_chart" if I recall...must be your accent.

Dr. Joe Indicator applied to NZDUSD Worker

Very clean......nice, simple...illustrative.....even the occassional misfire is not a killer and has an obvious protection level. Note to be made of the selectivity of each signal...no chasing here.

Granted is is a rather nice abrupt trend shift, though.

Just a thought - are you using the latest Build - 222 I think?

""In his book Al uses the candle wicks and not the closes - I think it's up to the individual"".

Danny boy - you change your colours depending on the one you're with!

I thought it was clear that the MOST IMPORTANT level on a candle/bar is the CLOSE.

If you need more proof, look at the charts I posted with the DSRI indicator - look at which level on the candle the indicator uses.

Look at Blackeagle's recent posts - again, look at which level on the candles the DSRI indicator uses.

If we used the wicks, we would be using a level of the candle/bar from some point in time during the candle/bar's formation. We couldn't give a rat's ass or monkey's dick where it went during the 24 hours it was forming - what we want to know is who is in control and what is the sentiment of that candle/bar- the close tells us that - that is the FOOTPRINT.

{I have to put candles/bar because Pizza Man is still in the Dark Ages - he hasn't heard of a candle yet, let alone seen one! (Ah, now I know why Nicola wanted to be a Darksider! Pizza Man, you rascal you!)}

If its still hard to grasp, think of a football game, take the Sunderland versus Blackburn Rovers match this week-end. Blackburn were winning 1-0 but at the CLOSE of the game, Sunderland won 2-1.

Now, you would tell everyone Blackburn won - right? because you didn't use the CLOSE.

Oh Danny boy, what has the RAF done to you? Nicola, leave the Pizza Man in his pink frock and get in there and sort Danny out!

http://www.geocities.com/capicornio/blog/error.gif

Haha, Darksider just means a pure price action trader Strat, and I thought it was a cool name for a bit.
I am only using PASR, my modification is that I select the pairs I like on daily/weekly setups and then look for 4hr/1hr entries for better R:R

I agree with everyone about GBPCHF, I am short since last Weds.

That said, I know no one really liked this pair but I am giving it another go this week:

Pulling up the NZDUSD gives us (me anyway) an opportunity to look at how to trade a trend reversal with LOW RISK.

At point A we are expecting our fun with selling to end because we have:

1)Hit MAJOR SUPPORT (psycho 0.5000)

and

2)We have a breakout and a test of our DSRI indicator (thin red line)

There is a Bond Hammer on March 3rd which when considered with all the candles around it testing and proving support, could have been used for a potential triple pip move up to our next DSRI indicator (thick red line).

I didn’t take this trade. I think I was concerned with the validity of the Bond Hammer and proof of support.

On March 18, price flew through our DSRI indicator with a vengeance! It did the same the following day through minor resistance. If ever you wanted a clue that the buyers were now back in control – this was it.

We now know we need to be positioned with the buyers since they have the control and so we start looking for LOW RISK areas to get on board.

The last thing we want to do is just jump on willy nilly without any PLAN. After those “vengeance” bars, the first thing we should be thinking is PROFIT. Where will the Big Boys and those who got in at the beginning be looking to take profit? Well the Italian Ice Cream man is no good since we took out his critical 61.8% sundae sherbert so where then?

We don’t know and we don’t care, we let PASR tell us. On March 26 we have our answer as we see a Mickey Mouse shooting star. This is the SIGNAL to exit longs – it is NOT a signal to enter a short!

OK before anyone questions this and inundates me with PMs, it is not a signal to go short because:

1)Our MAJOR DSRI indicator has been broken to the UPSIDE
2)Price has NOT stalled at RESISTANCE but somewhere floating in space
3)It is NOT a qualified shooting star

However, our little man will question us because technically we are still in a downtrend. We send him packing because we know we have a better test coming up later.

The Daily scalpers and counter trend traders WILL take this BUT we are not teaching that.

On March 31, we have a huge test. At this point, the thin blue line is not drawn so ignore it. She has just put in a very juicy BEOB so get out your shorts you would think. Hopefully not as you remember we are back at what was MINOR RESISTANCE – This is a DOUBLE TEST. The VERY LAST thing you EVER want to do is sell in to support or buy in to resistance.

If the buyers are as strong as they showed us earlier, this should be their platform for higher prices so we would expect a bounce and CONFIRMATION of what was once resistance as SUPPORT.

If the sellers gain control we know that they will smash through this which would change everything back to a bearish scenario.

So, on April Fools’ Day we do nothing except watch. This produces a bullish bar but nothing we can trade with LOW RISK. It is a NOTHING bar. It is neither a BUOB or BUEB and worse still, it didn’t even close above the open of the previous bar let alone its high. We are also very wary that MAJOR RESISTANCE around psycho 0.5900 is only a couple of hundred pips away and we don’t want to get caught in any reverberations around there. So again, on April 2nd we just watch and see a huge bullish bar smash through the Mickey Mouse shooting star and pivot. Again, the buyers have made their intentions perfectly clear.

Time to get out your wallet you think. Not tonight Josephine! Remember what I always expect after a big one? Well sure enough, there she is. More important than this is that big, thick, horrible red horizontal static line up above at psycho 0.5900 lurking like a huge dark rain cloud. What to do now, Gungadin? Just wait.

You’re tired of waiting you say, watching all these pips go by. Well waiting ready to pounce is what separates the guy with all the lolly from the guy who wants to be separated from all his lolly!

While we are waiting, we see a footprint and our new DSRI indicator appear on the April Fool candle. So now we have a benchmark for the buyers.

As expected, MAJOR RESISTANCE does its job and sends the buyers packing with a nice BEEB.

Now we are in NO MAN”S LAND! We are at the turning point. We are at the point where either the technicals change to an uptrend or they revert back to a downtrend. Do you want to be caught in the riptide? No way Jose!

The Daily scalpers and high risk traders will sell off the BEEB down to our DSRI indicator and beyond if it gets broken.
For low risk traders its back to waiting. On April 8th, our DSRI indicator confirms support as the bullish bar bounces off it. Right, you start to get your wallet out again as you are tired of waiting but at the last minute you remember that huge red cloud above and think again.

Again, the Daily scalpers and high risk traders will take the trade back up to resistance.

April 14 delivers very important information. Exactly where our DSRI meets MAJOR RESISTANCE, the buyers were sent home and the sellers took control with another juicy BEEB.

PASR at its finest if ever you wanted an example, Mrs. Robinson!

The moths fly out of my wallet (I’m half Scottish, don’t forget!) and I load up on a gravy train ride. This should need no further explanation and the target should be even more obvious. Even the Italian Ice Cream man helped with this!

On April 20, 21 and 22, we get three chances to get our wheel barrow out or call Securicor and take our haul to the bank.

So, what next? How about some more waiting. I have found that taking another trade straight after a fat, juicy trade only ends up with me giving back and I have done enough of that already thank you, Ma’am.

April 24 makes me wish I HAD taken a trade as we are obviously making another run for that huge red cloud but its too late and in any event, that Mickey Mouse shooting star may act as minor resistance.

Well the waiting paid off – IT ALWAYS DOES – April 28 produced a nice BUEB after a re-test and confirmation of SUPPORT.

Now, wait a minute, is that another footprint I see? Get out the DSRI indicator and sure enough it is. The DSRI indicator draws in our line after the close of the candle on April 28. It also drew one in on the close of the candle on April 23 but this was broken by the bearish candle on April 27 and I have left it out for purposes of clarity.

On April 29, the big fat wallet is out and we stare up at that huge red cloud again.

We watch as price “wobbles” at the Mickey Mouse shooting star high at psycho 0.5800 but we are undeterred because we are trading our PLAN.

As if price is following our script, it closes on 0.5919 on May 7, our huge red cloud, so we run (its very hard running with a wheel barrow full of cash but try your best) once more to the bank with our proceeds.

“”As if price is following our script””, read that again my beauty


OK, “”As if price is following our script””,

This is upside down, inside out and back to front – WE are following price’s script!!!

We are nothing but disciples and followers of The Almighty – ""PRICE""

Hopefully this floats your boat if you have been struggling with understanding PASR.

After we have done our deposit, we realise we are back in no man’s land except this time, we have our second DSRI indicator by our side.

May 8 opens a new door as we get a very bullish close above the huge dark red cloud and we know we have passed over into bullish territory.

Break out traders and the Turtles (of Richard Dennis and William Eckhardt and maybe even the folk rock sunshine pop band) wet their pants as their break out orders are filled.

But wait a minute, there is an even bigger and darker red cloud above at 0.6050, what to do Grasshopper? Tell the BO and Turtles to either get out or change their underwear – and fast!

Meanwhile, patient PASR traders expect a reaction and wait (again) to see what happens. On May 11, we get our answer in the form of a BEOB. Again, the Daily scalpers and high risk traders will trade this down to our DSRI indicator.

Low risk traders sit and wait – again – patiently.

Our patience is rewarded when on, May 18, we get a BUEB but wait, it is more than that!

It is bouncing off our DSRI indicator confirming DYNAMIC SUPPORT. Your local Italian Ice Cream man will also give you a half and half confluence double whipped cornet!

Well, I could go on and on and, as I say, write books on this but I have probably already bored the pants off most of you so I had better stop.

Hope this helps

Alexandra, my dear, I had no idea you were into it - Indicator coding I mean.

You are so right!

For some reason, <_window"> was missing off the one in my post

It should read:

//---- indicator settings
#property indicator_chart_window

Thank you Alexandra, you obviously fixed your own!

LOL
Thanks Strat for the TL concern - I only said others use the wicks -rest assured I'm still using the good old close as u can see from my charts.

I'm still very much using only PASR - but I'm concentrating on trying not to pick tops and bottoms. As far as I can see it, the most stress free trades come when the market has busted a long-term TL, then retested that break and given us some good old PASR. Then I'd like to be in for the long run with the occasional check to maybe move a stop to the last high/low depending if long or short. Look at my nzdusd short I was in last week - I had violated Dr Joe's rule because it was still going up!!

I have always been the schmuk on the other side of the counter trend moves, always trying too hard to pick the tops and bottoms! DR Joe's rule definitely applies and I'm living by that - just I'm trying to spot a more reliable way of doing so...

Last quote from his book then I'll shut up!

"Why is it important to recognise the existence of a trend? Because then most of your trades should be in that direction and you should look to take every with trend entry and rarely take counter trend ones. The earlier you see the trend the more money you stand to make. Focusing on counter-trend setups will likely make you miss the more profitable but often scarier with trend setups. The with trend entries are scary because the market always looks overdone and it's hard to imagine that selling near the low of an overdone bear or buying near the high of of an overdone bull could ever be profitable. However, that is exactly why it is! The market draws in Counter Trend traders and if you enter where they exit at a loss they will drive the market in your direction even though the market looks over extended."

Strat, I guess what I'm trying to say is that I have focussed on counter-trend candle-stick setups all my trading life and often been burnt because by their very nature they are counter trend. I know realise this; it's taken some time to sink in and I'm not sure why?
So, good old PASR but only in the direction of the major underlying trend, in concert with Dr Joe's sayings!